**EXHIBIT 3.1**

 

**SECOND ARTICLES OF AMENDMENT AND RESTATEMENT**

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**OF**

 

**BEHRINGER HARVARD OPPORTUNITY REIT II, INC.**

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**FIRST:**  BehringerHarvard Opportunity REIT II, Inc., a Maryland corporation, desires toamend and restate its charter as currently in effect and as hereinafteramended.

 

**SECOND**:  The followingprovisions are all the provisions of the charter currently in effect and ashereinafter amended:

 

# **ARTICLEI**NAME

 

Thename of the corporation is Behringer Harvard Opportunity REIT II, Inc.(the “**Company**”).  So far as may be practicable, the business ofthe Company shall be conducted and transacted under that name.  Under circumstances in which the Boarddetermines that the use of the name “Behringer Harvard Opportunity REIT II, Inc.”is not practicable, it may use any other designation or name for the Company.

# **ARTICLEIIPURPOSES AND POWERS**

 

Thepurposes for which the Company is formed are to engage in any lawful act oractivity (including, without limitation or obligation, qualifying as a realestate investment trust under Sections 856 through 860, or any successorsections, of the Internal Revenue Code of 1986, as amended (the “**Code**”)), for which corporations may be organized under theMGCL and the general laws of the State of Maryland as now or hereafter in force.

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# **ARTICLEIIIRESIDENT AGENT AND PRINCIPAL OFFICE**

 

Thename and address of the resident agent for service of process of the Company inthe State of Maryland is The Corporation Trust Incorporated, 300 East LombardStreet, Baltimore, Maryland 21202.  Theaddress of the Company’s principal office in the State of Maryland is c/o TheCorporation Trust Incorporated, 300 East Lombard Street, Baltimore, Maryland21202.  The Company may have such otheroffices and places of business within or outside the State of Maryland as theBoard may from time to time determine.

 

# **ARTICLEIVDEFINITIONS**

 

Asused in the Charter, the following terms, when capitalized, shall have thefollowing meanings unless the context otherwise requires:

 

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“**ACQUISITION EXPENSES**” means any and allexpenses incurred by the Company, the Advisor, or any Affiliate of either inconnection with the selection and acquisition of any Asset, whether or notacquired, including, without limitation, legal fees and expenses, travel andcommunications expenses, costs of appraisals, nonrefundable option payments onproperty not acquired, accounting fees and expenses, and title insurancepremiums.

 

“**ACQUISITION FEE**” means any and all feesand commissions, exclusive of Acquisition Expenses, paid by any Person to anyother Person (including any fees or commissions paid by or to any Affiliate ofthe Company or the Advisor) in connection with making or investing in Mortgagesor other loans or the purchase, development or construction of a Property,including, without limitation, real estate commissions, selection fees,Development Fees, Construction Fees, nonrecurring management fees, loan fees,points or any other fees of a similar nature. Excluded shall be DevelopmentFees and Construction Fees paid to any Person not affiliated with the Sponsorin connection with the actual development and construction of a project.

 

“**ADVISOR**” or “**ADVISORS**”means the Person or Persons, if any, appointed, employed or contracted with bythe Company pursuant to Section 8.1 hereof and responsible for directingor performing the day-to-day business affairs of the Company, including anyPerson to whom the Advisor subcontracts all or substantially all of thesefunctions.

 

“**ADVISORY MANAGEMENT AGREEMENT**” meansthe agreement between the Company and the Advisor pursuant to which the Advisorwill direct or perform the day-to-day business affairs of the Company.

 

“**ADVISORY MANAGEMENT AGREEMENT TERMINATION**”shall have the meaning as provided in Section 5.3(iii) herein.

 

“**AFFILIATE**” or “**AFFILIATED**”means, with respect to any Person, (i) any Person directly or indirectlyowning, controlling or holding, with the power to vote, 10% or more of theoutstanding voting securities of that other Person; (ii) any Person 10% ormore of whose outstanding voting securities are directly or indirectly owned,controlled or held, with the power to vote, by that other Person; (iii) anyPerson directly or indirectly controlling, controlled by or under commoncontrol with that other Person; (iv) any executive officer, director,trustee or general partner of that other Person; and (v) any legal entityfor which that Person acts as an executive officer, director, trustee orgeneral partner.

 

“**ASSET**” means any Property, Mortgage,loan, or other direct or indirect investment (other than investments in bankaccounts, money market funds or other current assets) owned by the Company,directly or indirectly through one or more of its Affiliates, and any otherinvestment made by the Company, directly or indirectly through one or more ofits Affiliates or Joint Ventures.

 

“**AVERAGE INVESTED ASSETS**” means, for aspecified period, the average of the aggregate book value of the Assets, beforededucting depreciation, bad debts or other non-cash reserves, computed bytaking the average of the values at the end of each month during the period.

 

“**BOARD**” means, collectively, theindividuals named in Section 6.1 of the Charter and any other individualswho may be duly elected and qualified to serve as Directors thereafter toreplace any such individual or fill a vacancy caused by the death, removal orresignation of any such individual or caused by an increase in the number ofDirectors.

 

“**BYLAWS**” means the bylaws of theCompany, as amended from time to time.

 

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“**CHANGEOF CONTROL**” means any (i) event (including, without limitation,issue, transfer or other disposition of Shares of capital stock of the Companyor equity interests in the Operating Partnership, merger, share exchange orconsolidation) after which any “person” (as that term is used in Sections 13(d) and14(d) of the Exchange Act) is or becomes the “beneficial owner” (asdefined in Rule 13d-3 of the Exchange Act), directly or indirectly, ofsecurities of the Company or the Operating Partnership representing greaterthan 50% of the combined voting power of the Company’s or the OperatingPartnership’s then outstanding securities, respectively; provided, that, aChange of Control shall not be deemed to occur as a result of any widelydistributed public offering of the Common Shares or (ii) direct orindirect sale, transfer, conveyance or other disposition (other than pursuantto clause (i)), in one or a series of related transactions, of all orsubstantially all of the properties or assets of the Company or the OperatingPartnership, taken as a whole, to any “person” (as that term is used inSections 13(d) and 14(d) of the Exchange Act).

 

“**CHARTER**” means theseSecond Articles of Amendment and Restatement and any Articles of Amendment, ArticlesSupplementary or other modification or amendment thereto.

 

“**CLOSING PRICE**” on any date shall meanthe last sale price for any class or series of the Common Shares, regular way,or, in case no sale takes place on that day, the average of the closing bid andasked prices, regular way, for the Common Shares, in either case as reported inthe principal consolidated transaction reporting system with respect to CommonShares Listed or, if such Common Shares are not Listed, the average of the highbid and low asked prices in the over-the-counter market, as reported by theprincipal automated quotation system or other quotation service that may thenbe in use or, if the Common Shares are not quoted by any such organization, theaverage of the closing bid and asked prices as furnished by a professionalmarket maker making a market in such Common Shares selected by the Board.

 

“**CODE**” shall have the meaning providedin Article II herein.

 

“**COMMENCEMENT OF THE INITIAL PUBLIC OFFERING**”shall mean the date that the Securities and Exchange Commission declareseffective the registration statement filed under the Securities Act for theInitial Public Offering.

 

“**COMMONSHARES**” shall have the meaning as provided in Section 5.1herein.

 

“**COMPANY**”shall have the meaning provided in Article I herein.

 

“**COMPANY VALUE**” shall mean the actualvalue of the Company as agoing concern based on the difference between (a) the actual value of all of its assets as determined in goodfaith by the Board, including a majority of the Independent Directors, and (b) allof its liabilities as set forth on its balance sheet for the period endedimmediately prior to the determination date, provided that (i) ifthe Company Value is being determined in connection with a Change of Controlthat establishes the Company’s net worth, then the Company Value shall be thenet worth established thereby and (ii) if the Company Value is beingdetermined in connection with a Listing, then the Company Value shall be equalto the number of outstanding Common Shares multiplied by the Closing Price of asingle Common Share averaged over aperiod of 30 trading days during which the Shares are listed or quoted fortrading after the date of Listing. For purposes hereof, a “trading day” shall be any day on which the NYSEis open for trading, whether or not the Common Shares are then listed on theNYSE and whether or not there is an actual trade of Common Shares on any suchday.  If the holder of Convertible Sharesdisagrees as to the Company Value as determined by the Board, then each of theholder of Convertible Shares and the Company shall name one appraiser and thetwo named appraisers shall promptly agree in good faith to the appointment ofone other appraiser whose determination of the Value shall be final and bindingon the parties as to the Company Value. The cost of such appraisal shall be split evenly between the Company andthe Advisor.

 

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“**COMPETITIVE REAL ESTATE COMMISSION**”means a real estate or brokerage commission paid (or, if no commission is paid,the amount that customarily would be paid) for the purchase or sale of aProperty that is reasonable, customary and competitive in light of the size,type and location of the Property (as determined by the Board, including amajority of the Independent Directors).

 

“**CONSTRUCTION FEE**” means a fee or otherremuneration for acting as general contractor and/or construction manager toconstruct improvements, supervise and coordinate projects or to provide majorrepairs or rehabilitations on a Property.

 

“**CONTRACT PURCHASE PRICE**”means (i) the amount actually paid and/or budgeted in respect of thepurchase, development, construction or improvement of a Property, (ii) theamount of funds advanced with respect to a Mortgage or other loan, or (iii) theamount actually paid and/or budgeted in respect of the purchase of otherAssets, in each case exclusive of Acquisition Fees and Acquisition Expenses butincluding any debt attributable to such acquired Assets.

 

“**CONVERSION PRODUCT**” means the lesser of(1) the product of 0.2 times the amount, if any, by which (A) the sumof the Company Value as of the date of the Triggering Event plus total Distributions paid toholders of Common Shares through the date of the Triggering Event, exceeds (B) thesum of Invested Capital plus the Stockholders’ 10% Return as of the date of theTriggering Event, or (2) the product of 0.15 times the amount, if any, bywhich (X) the sum of the Company Value as of the date of the TriggeringEvent plus total Distributionspaid to holders of Common Shares through the date of the Triggering Event,exceeds (Y) the sum of Invested Capital plus the Stockholders’ 6% Returnas of the date of the Triggering Event.

 

“**CONVERTIBLE SHARES**” shall have themeaning as provided in Section 5.1 herein.

 

“**DEVELOPMENT FEE**” means a fee for thepackaging of an Asset, including the negotiation and approval of plans, and anyassistance in obtaining zoning and necessary variances and financing for aspecific Property, either initially or at a later date.

 

“**DIRECTOR**” means a member of the Company’sBoard.

 

“**DISTRIBUTIONS**”means any dividends or other distributions of money or other property, pursuantto Section 5.2(iii) hereof, by the Company to owners of CommonShares, including distributions that may constitute a return of capital forfederal income tax purposes but excluding distributions that constitute theredemption of any Common Shares and excluding distributions on any CommonShares before their redemption.

 

“**EXCHANGE ACT**” means the SecuritiesExchange Act of 1934, as amended from time to time, or any successor statutethereto.  Reference to any provision ofthe Exchange Act shall mean the provision as in effect from time to time, as thesame may be amended, and any successor provision thereto, as interpreted by anyapplicable regulations as in effect from time to time.

 

“**INDEPENDENT APPRAISER**” means a Person with no materialcurrent or prior business or personal relationship with the Advisor or theDirectors and who is a qualified appraiser of Real Property of the type held bythe Company or of other Assets as determined by the Board.  Membership in a nationally recognizedappraisal society, such as the Appraisal Institute, shall be conclusiveevidence of such qualification as to Real Property.

 

“**INDEPENDENT DIRECTOR**” means a Directorwho is not on the date of determination, and within the last two years from thedate of determination has not been, directly or indirectly associated with theSponsor, the Advisor or any of their Affiliates by virtue of (i) ownershipof an interest in the Sponsor, the 

 

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Advisor or any of their Affiliates, other than the Company, (ii) employmentby the Company, the Sponsor, the Advisor or any of their Affiliates, (iii) serviceas an officer or director of the Sponsor, the Advisor or any of theirAffiliates, other than as a Director of the Company, (iv) performance ofservices for the Company, other than as a Director of the Company, (v) serviceas a director or trustee of more than three real estate investment trustsorganized by the Sponsor or advised by the Advisor, or (vi) maintenance ofa material business or professional relationship with the Sponsor, the Advisoror any of their Affiliates.  Consistentwith (v) above, serving as an independent director of or receivingindependent director fees from or owning an interest in a REIT or other realestate program organized by the Sponsor or advised or managed by the Advisor orits Affiliates shall not, by itself, cause a Director to be deemed associatedwith the Sponsor or the Advisor.  Abusiness or professional relationship is considered “material” if the aggregateannual gross revenue derived by the Director from the Sponsor, the Advisor andtheir Affiliates exceeds five percent of either the Director’s annual grossincome during either of the last two calendar years or the Director’s net worthon a fair market value basis.  Anindirect association with the Sponsor or the Advisor shall include circumstancesin which a Director’s spouse, parent, child, sibling, mother- or father-in-law,son- or daughter-in-law or brother- or sister-in-law is or has been associatedwith the Sponsor, the Advisor, any of their Affiliates or the Company.

 

“**INITIAL INVESTMENT**” means that portionof the initial capitalization of the Company contributed by the Sponsor or its 

Affiliates pursuant to Section 8.1 herein.

 

“**INITIAL PUBLIC OFFERING**” means thefirst Offering.

 

“**INVESTED CAPITAL**” means the amountcalculated by multiplying the total number of Common Shares issued by theCompany by the price paid for each Common Share, reduced by an amount equal tothe total number of Common Shares repurchased from Stockholders by the Company(pursuant to any Company plan to repurchase such Common Shares) multiplied bythe price paid for each such redeemed Common Share when initially purchasedfrom the Company.

 

“**JOINT VENTURE**” means a legalorganization formed to provide for the sharing of risks and rewards in anenterprise co-owned and operated for mutual benefit by two or more businesspartners and established to acquire or hold Assets.

 

“**LEVERAGE**” means the aggregate amount ofindebtedness of the Company on a consolidated basis for money borrowed(including purchase money mortgage loans) outstanding at any time, both securedand unsecured.

 

“**LISTING**” means the filing of a Form 8-Ato register the Common Shares on a national securities exchange and an originallisting application related thereto; provided that the Common Shares shall notbe deemed to be Listed until trading in the Common Shares shall have commencedon the relevant national securities exchange. Upon such Listing, the Shares shall be deemed Listed.

 

“**MGCL**” means the Maryland GeneralCorporation Law in effect on the date hereof, and as may be amended from timeto time.

 

“**MORTGAGES**” means, in connection withmortgage financing provided, invested in, participated in or purchased by theCompany, all of the notes, deeds of trust, security interests or other evidenceof indebtedness or obligations, which are secured or collateralized by RealProperty owned by the borrowers under the notes, deeds of trust, securityinterests or other evidences of indebtedness or obligations.

 

“**NASAA REIT GUIDELINES**” means theStatement of Policy Regarding Real Estate Investment Trusts adopted by theNorth American Securities Administrators Association on May 7, 2007, andin effect on the date that this Charter is filed with the SDAT.

 

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“**NET ASSETS**” means the total assets ofthe Company (other than intangibles) at cost, before deducting depreciation,reserves for bad debts or other non-cash reserves, less total liabilities,calculated quarterly by the Company on a basis consistently applied.

 

“**NET INCOME**” means for any period, theCompany’s total revenues applicable to the period, less the total expensesapplicable to the period other than additions to reserves for depreciation, baddebts or other similar non-cash reserves and excluding any gain from the Saleof the Assets.

 

“**NET SALES PROCEEDS**” means in the caseof a transaction described in clause (i)(A) of the definition of Sale, theproceeds of any such transaction less the amount of selling expenses incurredby or on behalf of the Company, including all real estate commissions, closingcosts and legal fees and expenses. In the case of a transaction described inclause (i) (B) of the definition, Net Sales Proceeds means theproceeds of any such transaction less the amount of selling expenses incurred byor on behalf of the Company, including any legal fees and expenses and otherselling expenses incurred in connection with such transaction. In the case of atransaction described in clause (i) (C) of the definition, Net SalesProceeds means the proceeds of any such transaction actually distributed to theCompany from the Joint Venture less the amount of any selling expenses,including legal fees and expenses incurred by or on behalf of the Company(other than those paid by the Joint Venture). In the case of a transaction or series of transactions described inclause (i) (D) of the definition of Sale, Net Sales Proceeds meansthe proceeds of any such transaction (including the aggregate of all paymentsunder a Mortgage or other loan or in satisfaction thereof other than regularlyscheduled interest payments) less the amount of selling expenses incurred by oron behalf of the Company, including all commissions, closing costs and legalfees and expenses.  In the case of atransaction described in clause (i)(E) of the definition, Net SalesProceeds means the proceeds of any such transaction less the amount of sellingexpenses incurred by or on behalf of the Company, including any legal fees andexpenses and other selling expenses incurred in connection with suchtransaction. In the case of a transaction described in clause (ii) of thedefinition of Sale, Net Sales Proceeds means the proceeds of such transactionor series of transactions less all amounts generated thereby which arereinvested in one or more Assets within 180 days thereafter and less the amountof any real estate commissions, closing costs, and legal fees and expenses andother selling expenses incurred by or allocated to the Company in connectionwith such transaction or series of transactions. Net Sales Proceeds shall alsoinclude any consideration (including non-cash consideration such as stock,notes or other property or securities) that the Company determines, in itsdiscretion, to be economically equivalent to proceeds of a Sale, valued in thereasonable determination of the Company. Net Sales Proceeds shall not include any reserves established by theCompany in its sole discretion.

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**“NYSE”**means theNew York Stock Exchange.

 

“**OFFERING**” means any public offering ofShares pursuant to an effective registration statement filed under theSecurities Act.

 

“**OPERATING PARTNERSHIP**” means BehringerHarvard Opportunity OP II, LP, a Delaware limited partnership, through whichthe Company may conduct operations and own Assets.

 

“**ORGANIZATION AND OFFERING EXPENSES**”means any and all costs and expenses incurred by and to be paid from the assetsof the Company in connection with preparing the Company for an Offering(including, with respect to the Initial Public Offering, the formation of theCompany and including the qualification and registration of the Offering), andthe marketing and distribution of Shares, including, without limitation: totalunderwriting and brokerage discounts and commissions (including fees of theunderwriters’ attorneys); expenses for printing, engraving, amendingregistration statements and supplementing prospectuses; mailing anddistributing costs; salaries of employees while engaged in sales activity, suchas preparing supplemental sales literature; telephone and other telecommunicationscosts; all advertising and marketing expenses (including the costs related toinvestor and broker-dealer 

 

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meetings); charges of transfer agents, registrars, trustees, escrowholders, depositories and experts; fees, expenses and taxes related to thefiling, registration and qualification of the Offering under federal and statelaws, including taxes and fees; and accountants’ and attorneys’ fees.

 

“**PERSON**” means an individual,corporation, association, business trust, estate, trust, partnership, limitedliability company or other legal entity.

 

“**PREFERREDSHARES**” shall have the meaning provided in Section 5.1herein.

 

“**PROPERTY**” or “**PROPERTIES**”means, as the context requires, any or all, respectively, of the Real Propertyacquired by the Company, either directly or indirectly (including through jointventure arrangements or other partnership or investment interests).

 

“**PROSPECTUS**” has the meaning set forthin Section 2(10) of the Securities Act, including a preliminaryprospectus, an offering circular as described in Rule 253 of the General Rules andRegulations under the Securities Act, or, in the case of an intrastateoffering, any document by whatever name known, utilized for the purpose ofoffering and selling Securities to the public.

 

“**REAL PROPERTY**” or “**REAL ESTATE**”means land, rights in land (including leasehold interests), and any buildings,structures, improvements, furnishings, fixtures and equipment located on orused in connection with land and rights or interests in land.

 

“**REIT**” means a corporation, trust,association or other legal entity (other than a real estate syndication) thatis engaged primarily in investing in equity interests in real estate (includingfee ownership and leasehold interests) or in loans secured by real estate orboth as defined pursuant to the REIT Provisions of the Code.

 

“**REIT PROVISIONS OF THE CODE**” meansSections 856 through 860 of the Code and any successor or other provisions ofthe Code relating to real estate investment trusts (including provisions as tothe attribution of ownership of beneficial interests therein) and theregulations promulgated thereunder.

 

“**ROLL-UP ENTITY**” means a partnership,real estate investment trust, corporation, trust or similar entity that wouldbe created or would survive after the successful completion of a proposedRoll-Up Transaction.

 

“**ROLL-UP TRANSACTION**” means atransaction involving the acquisition, merger, conversion or consolidation,either directly or indirectly, of the Company and the issuance of securities ofa Roll-Up Entity to the holders of Common Shares.  The term does not include:

 

(i)                                     a transaction involving Securities of theCompany that have been Listed for at least 12 months; or

 

(ii)                                  a transaction involving the conversion tocorporate, trust or association form of only the Company, if, as a consequenceof the transaction, there will be no significant adverse change in any of thefollowing:

 

(a)                            voting rightsof the holders of Common Shares;

 

(b)                           the term ofexistence of the Company;

 

(c)                            Sponsor orAdvisor compensation; or

 

(d)                           the Company’sinvestment objectives.

 

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“**SALE**” or “**SALES**”means (i) any transaction or series of transactions whereby: (A) theCompany or the Operating Partnership directly or indirectly (except asdescribed in other subsections of this definition) sells, grants, transfers,conveys, or relinquishes its ownership of any Property or portion thereof,including the lease of any Property consisting of a building only, andincluding any event with respect to any Property which gives rise to asignificant amount of insurance proceeds or condemnation awards; (B) theCompany or the Operating Partnership directly or indirectly (except asdescribed in other subsections of this definition) sells, grants, transfers,conveys, or relinquishes its ownership of all or substantially all of theinterest of the Company or the Operating Partnership in any Joint Venture inwhich it is a co-venturer or partner; (C) any Joint Venture directly orindirectly (except as described in other subsections of this definition) inwhich the Company or the Operating Partnership as a co-venturer or partnersells, grants, transfers, conveys, or relinquishes its ownership of any Propertyor portion thereof, including any event with respect to any Property whichgives rise to insurance claims or condemnation awards; (D) the Company orthe Operating Partnership directly or indirectly (except as described in othersubsections of this definition) sells, grants, conveys or relinquishes itsinterest in any Mortgage or other loan or portion thereof (including withrespect to any Mortgage or other loan, all payments thereunder or insatisfaction thereof other than regularly scheduled interest payments) ofamounts owed pursuant to such Mortgage or other loan and any event with respectto a Mortgage or other loan which gives rise to a significant amount ofinsurance proceeds or similar awards; or (E) the Company or the OperatingPartnership directly or indirectly (except as described in other subsections ofthis definition) sells, grants, transfers, conveys, or relinquishes itsownership of any other Asset not previously described in this definition or anyportion thereof, but (ii) not including any transaction or series oftransactions specified in clause (i) (A) through (E) above inwhich the net proceeds of such transaction or series of transactions arereinvested in one or more Assets within 180 days thereafter.

 

“**SDAT**” shall have themeaning as provided in Section 5.5 herein.

 

“**SECURITIES**” means any of the followingissued by the Company, as the text requires: Shares, any other stock, shares or other evidences of equity orbeneficial or other interests, voting trust certificates, bonds, debentures,notes or other evidences of indebtedness, secured or unsecured, convertible,subordinated or otherwise, or in general any instruments commonly known as “securities”or any certificates of interest, shares or participations in, temporary orinterim certificates for, receipts for, guarantees of, or warrants, options orrights to subscribe to, purchase or acquire, any of the foregoing.

 

“**SECURITIES ACT**” means the SecuritiesAct of 1933, as amended from time to time, or any successor statutethereto.  Reference to any provision ofthe Securities Act shall mean the provision as in effect from time to time, asthe same may be amended, and any successor provision thereto, as interpreted byany applicable regulations as in effect from time to time.

 

“**SHARES**” means shares of capital stockof the Company of any class or series, including Common Shares, ConvertibleShares or Preferred Shares.

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**“SPONSOR”** means any Person directly orindirectly instrumental in organizing, wholly or in part, the Company or anyPerson who will control, manage or participate in the management of theCompany, and any Affiliate of any such Person. Not included is any Person whose only relationship with the Company isthat of an independent property manager and whose only compensation is assuch.  “Sponsor” does not include whollyindependent third parties such as attorneys, accountants and underwriters whoseonly compensation is for professional services. A Person may also be deemed a Sponsor of the Company by: (i) takingthe initiative, directly or indirectly, in founding or organizing the Company,either alone or in conjunction with one or more other Persons, (ii) receivinga material participation in the Company in connection with founding ororganizing the business of the Company, in consideration of services orproperty, or both services and property, (iii) has a substantial number ofrelationships and contacts with the Company, (iv) possessing significantrights to control Properties, (v) receiving fees for providing 

 

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services to the Company which are paid on a basis that is not customaryin the industry, or (vi) providing goods or services to the Company on abasis which was not negotiated at arm’s-length with the Company.

 

“**STOCKHOLDERS**” means the holders ofrecord of the Shares as maintained in the books and records of the Company orits transfer agent.

 

“**STOCKHOLDERS’6% RETURN**” means, as of any date, an aggregate amount equal to a 6%cumulative, non-compounded, annual return on Invested Capital (calculated likesimple interest on a daily basis based on a 365-day year); provided, however,that for purposes of calculating the Stockholders’ 6% Return, Invested Capitalshall be determined for each day during the period for which the Stockholders’6% Return is being calculated net of Distributions attributable to Net SalesProceeds but (consistent with the definition of Invested Capital) shall alwaysexclude an amount equal to the total number of Common Shares repurchased fromStockholders by the Company (pursuant to any Company plan to repurchase CommonShares) multiplied by the price paid for each such redeemed Common Share wheninitially purchased from the Company.

 

“**STOCKHOLDERS’10% RETURN**” means, as of any date, an aggregate amount equal to a10% cumulative, non-compounded, annual return on Invested Capital (calculatedlike simple interest on a daily basis based on a 365-day year); provided,however, that for purposes of calculating the Stockholders’ 10% Return,Invested Capital shall be determined for each day during the period for whichthe Stockholders’ 10% Return is being calculated net of Distributionsattributable to Net Sales Proceeds but (consistent with the definition ofInvested Capital) shall always exclude an amount equal to the total number ofCommon Shares repurchased from Stockholders by the Company (pursuant to anyCompany plan to repurchase Common Shares) multiplied by the price paid for eachsuch redeemed Common Share when initially purchased from the Company.

 

“**TERMINATION CONVERSION PRODUCT**” meansthe lesser of (1) the product of 0.2 times the amount, if any, by which (A) the sum of the Company Value as ofthe Termination Date plustotal Distributions paid to holders of Common Shares through the TerminationDate, exceeds (B) the sum of Invested Capital plus the Stockholders’ 10%Return as of the Termination Date, or (2) the product of 0.15 times theamount, if any, by which (A) thesum of the Company Value as of the Termination Date plus total Distributions paid to holdersof Common Shares through the Termination Date, exceeds (B) the sum ofInvested Capital plus the Stockholders’ 6% Return as of the Termination Date.

 

“**TERMINATION DATE**” means the date oftermination of the Advisory Management Agreement.

 

“**TERMINATION****OF THE INITIAL PUBLIC OFFERING**” shallmean the earlier of (i) the date on which the Initial Public Offeringexpires or is terminated by the Company, excluding an Offering of sharespursuant to the Reinvestment Plan (as defined below) or (ii) the date onwhich all shares offered in the Initial Public Offering are sold, excludingshares that may be sold pursuant to the Reinvestment Plan.

 

“**TOTAL****OPERATING EXPENSES**” means all costs and expenses paid orincurred by the Company (on a consolidated basis), as determined undergenerally accepted accounting principles, which are in any way related to theoperation of the Company or to 

Company business, including advisory fees, but excluding (i) theexpenses of raising capital such as Organization and Offering Expenses, legal,audit, accounting, underwriting, brokerage, listing, registration, and otherfees, printing and other such expenses and taxes incurred in connection withthe issuance, distribution, transfer, registration and Listing of the Shares, (ii) interestpayments, (iii) taxes, (iv) non-cash expenditures such asdepreciation, amortization and bad debt reserves, (v) incentive fees paidin compliance with Section 8.7 hereof, notwithstanding the next succeedingclause (vi); and (vi) Acquisition Fees and Acquisition Expenses, realestate commissions on the Sale of Property, and other fees and expensesconnected with the acquisition, operation, ownership 

 

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and disposition of real estate interests, mortgage loans or otherproperty (including the costs of foreclosure, insurance premiums, legalservices, maintenance, repair and improvement of property).

 

“**TRIGGERING EVENT**” shall have themeaning as provided in Section 5.3(iii)(a) herein.

 

“**UNIMPROVED REAL PROPERTY**” meansProperty in which the Company has an equity interest that was not acquired forthe purpose of producing rental or other operating income, that has nodevelopment or construction in process and for which no development orconstruction is planned, in good faith, to commence within one year.

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# **STOCK**

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## SECTION 5.1 AUTHORIZED SHARES.  The totalnumber of Shares that the Company shall have authority to issue is 400,001,000Shares, of which (i) 350,000,000 shall be designated as common stock,$0.0001 par value per Share (the “**Common Shares**”);(ii) 1,000 shall be designated as non-participating, non-voting,convertible stock, $0.0001 par value per share (the “**ConvertibleShares**”); and (iii) 50,000,000 shall be designated as preferredstock, $0.0001 par value per Share (the “**Preferred Shares**”).  The aggregate par value of all authorizedshares of stock having par value is $40,000.10. If shares of one class of stock are classified or reclassified intoshares of another class of stock pursuant to Section 5.2(ii) or Section 5.4of this Article V, the number of authorized shares of the former classshall be automatically decreased and the number of shares of the latter classshall be automatically increased, in each case by the number of shares soclassified or reclassified, as the case may be, so that the aggregate number ofShares of all classes that the Company has authority to issue shall not be morethan the total number of Shares set forth in the first sentence of thisArticle.  To the extent permitted byMaryland law, the Board, without any action by the Stockholders, may amend theCharter from time to time to (i) increase or decrease the aggregate numberof Shares that the Company has the authority to issue, (ii) increase ordecrease the number of Shares of any class or series that the Company hasauthority to issue, or (iii) classify or reclassify any unissued Shares bysetting or changing the preferences, conversion or other rights, restrictions,limitations as to dividends or other distributions, qualifications or terms andconditions of redemption of such Shares. The Company shall at all times reserve and keep available, out of itsauthorized but unissued Shares, such number of Shares as shall from time to timebe sufficient solely for the purpose of effecting the redemption, conversion orexchange of outstanding limited partnership interests of the OperatingPartnership, other than those owned by the Company, which are convertible orexchangeable into Shares.  The Companyshall issue Shares upon the redemption, conversion or exchange of such limitedpartnership interests in accordance with the terms of the partnership agreementof the Operating Partnership.

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## SECTION 5.2  COMMON SHARES.

 

(i)            COMMON SHARES SUBJECT TO TERMS OFPREFERRED SHARES.  The Common Sharesshall be subject to the express terms of any series of Preferred Shares.

 

(ii)           DESCRIPTION.  Subject to the provisions of Section 5.10hereof and except as may otherwise be specified in the terms of any class orseries of Common Shares, each Common Share shall entitle the holder thereof toone (1) vote per share on all matters upon which Stockholders are entitledto vote pursuant to Section 11.2 hereof. Shares of a particular class of Common Shares shall have equal dividend,distribution, liquidation and other rights, and shall have no preference,cumulative, preemptive, conversion or exchange rights.  The Board may classify or reclassify anyunissued Common Shares from time to time in one or more classes or series ofstock.

 

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(iii)          DISTRIBUTION RIGHTS. The Board from time to time may authorize and the Company may pay toStockholders the dividends or other distributions in cash or other property asthe Board in its discretion shall determine. The Board shall endeavor to authorize, and the Company shall pay to theextent authorized, such dividends and distributions as shall be necessary forthe Company to qualify as a REIT under the REIT Provisions of the Code unlessthe Board has determined, in its sole discretion, that qualification as a REITis not in the best interests of the Company; provided, however, Stockholdersshall have no right to any dividend or distribution unless and until authorizedby the Board and declared by the Company. The exercise of the powers and rights of the Board pursuant to thissection shall be subject to the provisions of any class or series of Shares atthe time outstanding.  The receipt by anyPerson in whose name any Shares are registered on the records of the Company orby his or her duly authorized agent shall be a sufficient discharge for alldividends or distributions payable or deliverable in respect of the Shares andfrom all liability to see to the application thereof.  Distributions in kind shall not be permitted,except for distributions of readily marketable securities, distributions ofbeneficial interests in a liquidating trust established for the dissolution ofthe Company and the liquidation of its assets in accordance with the terms ofthe Charter or distributions in which (a) the Board advises each holder ofCommon Shares of the risks associated with direct ownership of the property, (b) theBoard offers each holder of Common Shares the election of receiving suchin-kind distributions, and (c) in-kind distributions are made only to thoseholders of Common Shares that accept the offer.

 

(iv)          RIGHTS UPON LIQUIDATION.  In the event of any voluntary or involuntaryliquidation, dissolution or winding up, or any distribution of the assets ofthe Company, the aggregate assets available for distribution to holders of theCommon Shares shall be determined in accordance with the MGCL.  Each holder of Common Shares shall beentitled to receive, ratably with each other holder of Common Shares, thatportion of the aggregate assets available for distribution as the number ofoutstanding Common Shares held by the holder bears to the total number ofCommon Shares then outstanding.

 

(v)           VOTING RIGHTS. Except as may be provided otherwise in the Charter, and subject to theexpress terms of any series of Preferred Shares, the holders of the CommonShares shall have the exclusive right to vote on all matters (as to which aholder of Common Shares shall be entitled to vote pursuant to applicable law)at all meetings of the Stockholders of the Company.

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## SECTION 5.3  CONVERTIBLE SHARES.

 

(i)            DISTRIBUTION RIGHTS.  The holders of the outstanding ConvertibleShares shall not be entitled to receive dividends or other distributions on theConvertible Shares.

 

(ii)           VOTING RIGHTS.

 

(a)           Except for the voting rights expresslyconferred by this Section 5.3(ii), the holders of the outstandingConvertible Shares shall not be entitled (I) to vote on any matter, or (II) toreceive notice of, or to participate in, any meeting of Stockholders at whichthey are not entitled to vote.

 

(b)           The affirmative vote of the holders of atleast two-thirds of the outstanding Convertible Shares, voting together as asingle class for such purposes with each share entitled to one vote, shall berequired for the adoption of any amendment, alteration or repeal of anyprovision of the Charter that materially and adversely changes the preferences,conversion or other rights, voting powers, restrictions, limitations as todividends or other distributions, qualifications or terms and conditions of redemptionof the Convertible Shares (it being understood that an increase in the numberof Directors is not such a material and adverse change).

 

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(iii)          CONVERSION.

 

(a)           Each outstanding Convertible Share shallconvert into a number of Common Shares as set forth in paragraph (b) ofthis Section 5.3(iii), automatically and without any further actionrequired, upon the occurrence of any of the following events (each a “**Triggering Event**”): (A) the date when the Companyshall have paid total Distributions in an amount equal to or in excess of thesum of Invested Capital and the Stockholders’ 10% Return; or (B) Listing.  Each outstanding Convertible Share shallbecome convertible into a number of Common Shares as set forth in paragraph (c) ofthis Section 5.3(iii), automatically and without any further actionrequired, upon the occurrence of any of the following events (an “**Advisory Management Agreement Termination**”):  the termination or expiration without renewalof the Company’s Advisory Management Agreement with Behringer HarvardOpportunity Advisors II LP. Notwithstanding the foregoing, no Convertible Share shall convert orbecome convertible if at or prior to the time of the Triggering Event orAdvisory Management Agreement Termination the Advisory Management Agreementwith Behringer Harvard Opportunity Advisors II LP has terminated or expiredwithout renewal because of a material breach by Behringer Harvard OpportunityAdvisors II LP.

 

(b)           Upon the occurrence of a TriggeringEvent, each Convertible Share shall be converted into a number of Common Sharesequal to 1/1000 of the result of (I) the Conversion Product divided by (II) thequotient of the Company Value divided by the number of outstanding Common Shareson the date of the Triggering Event. Such conversion, in the case of conversion upon Listing, will not occuruntil the 31st trading day after the date of the Listing.  If, in the good faith judgment of the Board,full conversion of the Convertible Shares would jeopardize the Company’s statusas a REIT, then only such number of Convertible Shares (or fraction thereof)shall be converted into Common Shares such that the Company’s REIT status isnot jeopardized.  Each remainingConvertible Share shall convert as provided herein when the Board of Directorsdetermines that conversion of such Convertible Share would not jeopardize theCompany’s qualification as a REIT.  TheBoard of Directors shall consider whether it can make this determination atleast once per quarter following a Triggering Event.

 

(c)           Upon the occurrence of an AdvisoryManagement Agreement Termination prior to a Triggering Event, each ConvertibleShare will become convertible (but will not convert except as provided in thenext sentence) into a number of Common Shares equal to 1/1000 of the result of (I) theTermination Conversion Product divided by (II) the quotient of the CompanyValue divided by the number of outstanding Common Shares on the TerminationDate.  Thereafter, upon the occurrence of aTriggering Event each Convertible Share will automatically convert into thenumber of Common Shares determined pursuant to the preceding sentence; providedthat, if the Triggering Event is a Listing, the Convertible Shares will convertonly if the sum of the Company Value plus total Distributions paid to holdersof Common Shares through the date of the Listing exceeds the sum of InvestedCapital plus the Stockholders’ 10% Return. If, in the good faith judgment of the Board, full conversion of theConvertible Shares would jeopardize the Company’s status as a REIT, then onlysuch number of Convertible Shares (or fraction thereof) shall be converted intoCommon Shares such that the Company’s REIT status is not jeopardized.  Each remaining 

 

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Convertible Share shall convert as provided herein when the Board ofDirectors determines that conversion of such Convertible Share would notjeopardize the Company’s qualification as a REIT.  The Board of Directors shall consider whetherit can make the determination at least once per quarter following a TriggeringEvent.

 

(d)           As promptly as practicable after aTriggering Event, including a Triggering Event that causes the ConvertibleShares to automatically convert into Common Shares pursuant to paragraph (c) ofthis Section 5.3(iii), the Company shall issue and deliver to each holderof Convertible Shares a certificate or certificates representing the number ofCommon Shares into which his, her or its Convertible Shares were converted (orshall cause the issuance of the Common Shares to be reflected in the Company’sstock ledger, if the Common Shares are uncertificated).  The person in whose name the Common Sharesare issued shall be deemed to have become a Stockholder of record on the dateof conversion.

 

(e)           The issuance of Common Shares onconversion of outstanding Convertible Shares shall be made by the Companywithout charge for expenses or for any tax in respect of the issuance of theCommon Shares.

 

(f)            In the event of any reclassification orrecapitalization of the outstanding Common Shares (except a change in parvalue, or from no par value to par value, or subdivision or other split orcombination of shares), or in case of any consolidation or merger to which theCompany is a party, except a merger in which the Company is the survivingcorporation and which does not result in any reclassification orrecapitalization, the Company or the successor or purchasing business entityshall provide that the holder of each Convertible Share then outstanding shallthereafter have the right to convert the Convertible Shares into the kind andamount of stock and other securities and property receivable, upon thereclassification, recapitalization, consolidation or merger, by a holder of thenumber of Common Shares of the Company into which the Convertible Shares mighthave been converted.  The provisions ofthis paragraph (f) of this Section 5.3(iii) shall similarlyapply to successive reclassifications, recapitalizations, consolidations ormergers.

 

(g)           Common Shares issued on conversion ofConvertible Shares shall be issued as fully paid shares and shall benonassessable by the Company. The Company shall, at all times, reserve and keepavailable, for the purpose of effecting the conversion of the outstandingConvertible Shares, the number of its duly authorized Common Shares as shall besufficient to effect the conversion of all of the outstanding ConvertibleShares.

 

(h)           Convertible Shares converted as providedherein shall become authorized but unissued Common Shares.

 

(iv)          EXCEPTED HOLDER LIMIT FOR HOLDER OFCONVERTIBLE SHARES.  For purposes of Section 5.10hereof, the holder of the Convertible Shares shall have an Excepted HolderLimit (as such term is defined in Section 5.10) of a 20% interest (invalue or number of as-converted shares, whichever is more restrictive) of theaggregate of the outstanding Common Shares of the Company, subject toadjustment pursuant to Section 5.10(ii)(g), including any adjustmentapproved by the Board.

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## SECTION 5.4   PREFERRED SHARES.  The Board is hereby expressly granted theauthority to authorize from time to time the issuance of one or more series ofPreferred Shares.  Prior to the issuanceof each such class or series, the Board, by resolution, shall fix the number ofshares to be included in each series, and the designation, preferences, terms,rights, restrictions, limitations, qualifications and terms and conditions ofredemption of the shares of each class or series, if any.  The authority of the Board with respect toeach series shall include, but not be limited to, determination of thefollowing:

 

(i)            The designation of the series, which may be bydistinguishing number, letter or title.

 

(ii)           The dividend rate on the shares of the series, if any,whether any dividends shall be cumulative and, if so, from which date or dates,and the relative rights of priority, if any, of payment of dividends on sharesof the series.

 

(iii)          The redemption rights, including conditions and theprice or prices, if any, for shares of the series.

 

(iv)          The terms and amounts of any sinking fund for thepurchase or redemption of shares of the series.

 

(v)           The rights of the shares of the series in the event ofany voluntary or involuntary liquidation, dissolution or winding up of theaffairs of the Company, and the relative rights of priority, if any, of paymentof shares of the series.

 

(vi)          Whether the shares of the series shall be convertibleinto shares of any other class or series or any other security of the Companyor any other corporation or other entity, and, if so, the specification of suchother class or series of such other security, the conversion price or prices orrate or rates, any adjustments thereof, the date or dates on which such sharesshall be convertible and all other terms and conditions upon which suchconversion may be made.

 

(vii)         Restrictions on the issuance of shares of the sameseries or of any other class or series.

 

(viii)        The voting rights of the holders of shares of theseries subject to the limitations contained in this Section 5.4; provided,however, that, when a privately issued Preferred Share is entitled to vote on amatter with the holders of Common Shares, the relationship between the numberof votes per privately issued Preferred Share and the consideration paid to theCompany for each privately offered Preferred Share shall not exceed therelationship between the number of votes per any publicly offered Share and the book value per outstanding Common Share.

 

(ix)           Any other relative rights, preferences and limitationson that series, subject to the express provisions of any other series ofPreferred Shares then outstanding. Notwithstanding any other provision of the Charter, the Board mayincrease or decrease (but not below the number of shares of such series thenoutstanding) the number of shares, or alter the designation or classify orreclassify any unissued shares of a particular series of Preferred Shares, byfixing or altering, in one or more respects, from time to time before issuingthe shares, the terms, rights, restrictions and qualifications of the shares ofany such series of Preferred Shares.

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## SECTION 5.5  CLASSIFIED OR RECLASSIFIED SHARES.  Prior to issuance of classified orreclassified shares of any class or series, the Board by resolution shall:  (a) designate that class or series todistinguish it from all other classes and series of stock of the Company; (b) specifythe number of shares to be included in the class or series; (c) set orchange, subject to the provisions of Section 5.10 and subject to theexpress terms of any class or series of stock outstanding at the time, thepreferences, conversion or other rights, voting powers, restrictions, limitationsas to dividends or other distributions, qualifications 

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## and terms and conditionsof redemption for each class or series; and (d) cause the Company to filearticles supplementary with the State Department of Assessments and Taxation ofMaryland (“**SDAT**”).  Any of the terms of any class or series ofstock set or changed pursuant to clause (c) of this Section 5.5 maybe made dependent upon facts or events ascertainable outside the Charter(including determinations by the Board or other facts or events within thecontrol of the Company) and may vary among holders thereof, provided that themanner in which such facts, events or variations shall operate upon the termsof such class or series of stock is clearly and expressly set forth in thearticles supplementary filed with the SDAT.

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## SECTION 5.6  CHARTER AND BYLAWS.  The rights of all Stockholders and the termsof all Shares are subject to the provisions of the Charter and the Bylaws.

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## SECTION 5.7   GENERAL NATURE OF SHARES.  All Shares shall be personal propertyentitling the Stockholders only to those rights provided in the Charter, theMGCL or the resolution creating any class or series of Shares.  The legal ownership of the Company’s assetsand the right to conduct the business of the Company are vested exclusively inthe Board; the Stockholders shall have no interest therein other than thebeneficial interest in the Company conferred by their Shares and shall have noright to compel any partition, division, dividend or distribution of theCompany or any of the Company’s assets. The death of a Stockholder shall not terminate the Company or give hisor her legal representative any rights against other Stockholders, the Board,the Company or the Company’s assets, except the right, exercised in accordancewith applicable provisions of the Bylaws, to require the Company to reflect onits books the change in ownership of the Shares.  Holders of Shares shall not have any preemptiveor other right to purchase or subscribe for any class of Securities of theCompany that the Company may at any time issue or sell.

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## SECTION 5.8   NO ISSUANCE OF SHARE CERTIFICATES.  Until Listing, the Company shall not issueshare certificates to holders of Common Shares. A Stockholder’s investment shall be recorded on the books of theCompany.  To transfer his or her Shares,a Stockholder shall submit an executed form to the Company, which form shall beprovided by the Company upon request. Such transfer will also be recorded on the books of the Company.  Upon issuance or transfer of Shares, theCompany will provide the Stockholder with information concerning his or herrights with regard to such stock, as required by the Bylaws and the MGCL or otherapplicable law. The Board may authorize the issuance of Preferred Shares orConvertible Shares without certificates.

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## SECTION 5.9   SUITABILITY OF STOCKHOLDERS.  Upon the Commencement of the Initial PublicOffering and until Listing, the following provisions shall apply:

 

(i)            INVESTOR SUITABILITY STANDARDS.  To purchase Common Shares, if suchprospective Stockholder is an individual (including an individual beneficiaryof a purchasing Individual Retirement Account), or if the prospectiveStockholder is a fiduciary (such as a trustee of a trust or corporate pensionor profit sharing plan, or other tax-exempt organization, or a custodian undera Uniform Gifts to Minors Act), the individual or fiduciary, as the case maybe, must represent to the Company, among other requirements as the Company mayrequire from time to time:

 

(a)           that the individual (or, in the case of a fiduciary,that the beneficiary, fiduciary account or the grantor or donor who directly orindirectly supplies the funds to purchase the Shares if the grantor or donor isthe fiduciary) has a minimum annual gross income of $70,000 and a net worth(excluding home, furnishings and automobiles) of not less than $70,000; or

 

(b)           that the individual (or, in the case of a fiduciary,that the beneficiary, fiduciary account or the grantor or donor who directly orindirectly supplies the funds to 

 

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purchase the Shares if the grantor or donoris the fiduciary) has a net worth (excluding home, furnishings and automobiles)of not less than $250,000.

 

The Company may requirehigher or lower suitability standards from purchasers residing in a particularjurisdiction at the request or with the permission of the official or agencyadministering the securities laws of the jurisdiction.

 

(ii)           DETERMINATION OF SUITABILITY OF SALE.  The Sponsor and each Person selling CommonShares on behalf of the Sponsor or the Company shall make every reasonableeffort to determine that the purchase of Common Shares is a suitable andappropriate investment for each Stockholder. In making this determination, the Sponsor or each Person selling CommonShares on behalf of the Sponsor or the Company shall ascertain that theprospective Stockholder:  (a) meetsthe minimum income and net worth standards established for the Company; (b) canreasonably benefit from the Company based on the prospective Stockholder’soverall investment objectives and portfolio structure; (c) is able to bearthe economic risk of the investment based on the prospective Stockholder’soverall financial situation; and (d) has apparent understanding of (1) thefundamental risks of the investment; (2) the risk that the Stockholder maylose the entire investment; (3) the lack of liquidity of the CommonShares; (4) the restrictions on transferability of the Common Shares; (5) thebackground and qualifications of the Sponsor or the Advisor; and (6) thetax consequences of the investment.

 

TheSponsor or each Person selling Common Shares on behalf of the Sponsor or theCompany shall make this determination on the basis of information it hasobtained from a prospective Stockholder. Relevant information for this purpose will include at least the age,investment objectives, investment experience, income, net worth, financialsituation, and other investments of the prospective Stockholder, as well as anyother pertinent factors.

 

TheSponsor or each Person selling Common Shares on behalf of the Sponsor or theCompany shall cause to be maintained for at least six years records of theinformation used to determine that an investment in Shares is suitable andappropriate for a Stockholder.

 

TheSponsor and each Person selling Common Shares on behalf of the Sponsor or theCompany may each rely, for satisfaction of all of its obligations under this Section 5.9(ii),upon (i) the Person directly selling such Shares if that Person is anFINRA member broker dealer which has entered into a selling agreement with theSponsor or the Company or their Affiliates or (ii) a registered investmentadviser that has entered into an agreement with the Sponsor or the Company ortheir Affiliates to make suitability determinations with respect to the clientsof the registered investment adviser who may purchase Shares.

 

(iii)          MINIMUM INVESTMENT AND TRANSFER.  Until the Common Shares are Listed, eachissuance or transfer of Common Shares shall comply with the requirementsregarding minimum initial and subsequent cash investment amounts set forth inCompany’s registration statement filed under the Securities Act for the InitialPublic Offering as such registration statement has been amended or supplementedas of the date of such issuance or transfer.

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## SECTION 5.10  RESTRICTIONS ON OWNERSHIP AND TRANSFER.

 

(i)            DEFINITIONS. For purposes of Section 5.10, the following terms shall have thefollowing meanings:

 

“**BENEFICIAL OWNERSHIP**” means ownership ofShares by a Person, whether the interest in the Shares is held directly orindirectly (including by a nominee), and shall include interests that would betreated as owned through the application of Section 544 of the Code, asmodified by Section 856(h)(1)(B) 

 

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of theCode.  The terms “Beneficial Owner,” “BeneficiallyOwns” and “Beneficially Owned” shall have the correlative meanings.

 

“**BUSINESS DAY**” means any day, other than aSaturday or Sunday, that is neither a legal holiday nor a day on which bankinginstitutions in New York City are authorized or required by law, regulation orexecutive order to close.

 

“**CHARITABLE BENEFICIARY**” means one or more beneficiariesof the Trust as determined pursuant to Section 5.10(iii)(f), provided that eachsuch organization must be described in Section 501(c)(3) of the Codeand contributions to each such organization must be eligible for deductionunder each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

 

“**COMMON SHARE OWNERSHIP LIMIT**” means notmore than 9.8% (in value or in number of shares, whichever is more restrictive)of the aggregate of the outstanding Common Shares of the Company.

 

“**CONSTRUCTIVE OWNERSHIP**” means ownership ofShares by a Person, whether the interest in the Shares is held directly orindirectly (including by a nominee), and shall include interests that would betreated as owned through the application of Section 318(a) of theCode, as modified by Section 856(d)(5) of the Code.  The terms “Constructive Owner,” “ConstructivelyOwns” and “Constructively Owned” shall have the correlative meanings.

 

“**EXCEPTED HOLDER**” means a Stockholder forwhom an Excepted Holder Limit is created by this Charter (including pursuant toSection 5.3(iv) hereof) or by the Board pursuant to Section 5.10(ii)(g).

 

“**EXCEPTED HOLDER LIMIT**” means, provided thatthe affected Excepted Holder agrees to comply with the requirements establishedby the Board pursuant to Section 5.10(ii)(g), the percentage limitestablished by the Board pursuant to Section 5.10(ii)(g).

 

“**MARKET PRICE**” on any date means, withrespect to any class or series of outstanding Shares, the Closing Price forsuch Shares on such date or, in the event that no Closing Price is availablefor such Shares, the fair market value of the Shares, as determined in goodfaith by the Board.

 

“**PERSON**” means an individual, corporation,partnership, estate, trust (including a trust qualified under Sections 401(a) or501(c)(17) of the Code), a portion of a trust permanently set aside for or tobe used exclusively for the purposes described in Section 642(c) ofthe Code, association, private foundation within the meaning of Section 509(a) ofthe Code, joint stock company or other entity and also includes a group as thatterm is used for purposes of Section 13(d)(3) of the Exchange Act,and a group to which an Excepted Holder Limit applies.

 

“**PREFERRED SHARE OWNERSHIP LIMIT**” means notmore than 9.8% (in value or in number of shares, whichever is more restrictive)of the aggregate of the outstanding Preferred Shares of the Company.

 

“**PROHIBITED OWNER**” means, with respect toany purported Transfer, any Person who, but for the provisions of Section 5.10(ii)(a),would Beneficially Own or Constructively Own Shares, and if appropriate in thecontext, shall also mean any Person who would have been the record owner of theShares that the Prohibited Owner would have so owned.

 

“**RESTRICTION TERMINATION DATE**” means thefirst day after the Commencement of the Initial Public Offering on which theCompany determines pursuant to Section 7.2(ii) of the Charter 

 

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thatit is no longer in the best interests of the Company to attempt to, or continueto, qualify as a REIT or that compliance with the restrictions and limitationson Beneficial Ownership, Constructive Ownership and Transfers of Shares setforth herein is no longer required in order for the Company to qualify as aREIT.

 

“**TRANSFER**” means any issuance, sale,transfer, gift, assignment, devise or other disposition, as well as any otherevent that causes any Person to acquire Beneficial Ownership or ConstructiveOwnership, or any agreement to take any such actions or cause any such events,of Shares or the right to vote or receive dividends on Shares, including (a) thegranting or exercise of any option (or any disposition of any option), (b) anydisposition of any Securities or rights convertible into or exchangeable forShares or any interest in Shares or any exercise of any such conversion orexchange right and (c) Transfers of interests in other entities thatresult in changes in Beneficial or Constructive Ownership of Shares; in eachcase, whether voluntary or involuntary, whether owned of record, ConstructivelyOwned or Beneficially Owned and whether by operation of law or otherwise.  The terms “Transferring” and “Transferred”shall have the correlative meanings.

 

“**TRUST**” means any trust provided for in Section 5.10(iii)(a).

 

“**TRUSTEE**”means the Person, unaffiliated with the Company or a Prohibited Owner, that isappointed by the Company to serve as trustee of the Trust.

 

(ii)           SHARES.

 

(a)         OWNERSHIP LIMITATIONS.  During the period commencing on the date ofthe Company’s qualification as a REIT and prior to the Restriction TerminationDate, but subject to Section 5.11 hereof:

 

(I)          BASIC RESTRICTIONS.

 

(A) (1) No Person, other than an ExceptedHolder, shall Beneficially Own or Constructively Own Common Shares in excess ofthe Common Share Ownership Limit, (2) no Person, other than an ExceptedHolder, shall Beneficially Own or Constructively Own Preferred Shares in excessof the Preferred Share Ownership Limit and (3) no Excepted Holder shallBeneficially Own or Constructively Own Shares in excess of the Excepted HolderLimit for such Excepted Holder.

 

(B) No Person shall Beneficially orConstructively Own Shares to the extent that the Beneficial or ConstructiveOwnership of Shares would result in the Company being “closely held” within themeaning of Section 856(h) of the Code (without regard to whether theownership interest is held during the last half of a taxable year), orotherwise failing to qualify as a REIT (including, but not limited to,Beneficial or Constructive Ownership that would result in the Company owning(actually or Constructively) an interest in a tenant that is described in Section 856(d)(2)(B) ofthe Code if the income derived by the Company from the tenant would cause theCompany to fail to satisfy any of the gross income requirements of Section 856(c) ofthe Code).

 

(C) Any Transfer of Shares that, if effective,would result in Shares being beneficially owned by less than 100 Persons(determined under the principles of Section 856(a)(5) of the Code)shall be void *ab initio*, and theintended transferee shall acquire no rights in such Shares.

 

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(II)         TRANSFER IN TRUST. If any Transfer of Shares occurs which, if effective, would result inany Person Beneficially Owning or Constructively Owning Shares in violation of Section 5.10(ii)(a)(I)(A)or (B),

 

(A) then that number of Shares the Beneficial orConstructive Ownership of which otherwise would cause such Person to violate Section 5.10(ii)(a)(I)(A) or(B) (rounded to the nearest whole share) shall be automaticallytransferred to a Trust for the benefit of a Charitable Beneficiary, asdescribed in Section 5.10(iii), effective as of the close of business onthe Business Day prior to the date of the Transfer, and such Person shallacquire no rights in the shares; or

 

(B) if the transfer to the Trust described inclause (A) of this sentence would not be effective for any reason toprevent the violation of Section 5.10(ii)(a)(I)(A) or (B), then theTransfer of that number of Shares that otherwise would cause any Person toviolate Section 5.10(ii)(a)(I)(A) or (B) shall be void *ab initio*, and the intended transfereeshall acquire no rights in the Shares.

 

(b)         REMEDIES FOR BREACH. If the Board or any duly authorized committee thereof shall at any timedetermine in good faith that a Transfer or other event that has purported tohave taken place that would result in a violation of Section 5.10(ii)(a) orthat a Person intends to acquire or has attempted to acquire Beneficial orConstructive Ownership of any Shares in violation of Section 5.10(ii)(a) (whetheror not the violation is intended), the Board or a committee thereof shall takesuch action as it deems advisable to refuse to give effect to or to prevent theTransfer or other event, including, without limitation, causing the Company toredeem shares, refusing to give effect to the Transfer on the books of theCompany or instituting proceedings to enjoin the Transfer or other event;provided, however, that any Transfer or attempted Transfer or other event inviolation of Section 5.10(ii)(a) shall automatically result in thetransfer to the Trust described above, and, where applicable, the Transfer (orother event) shall be void *ab initio*as provided above irrespective of any action (or non-action) by the Board or acommittee thereof.

 

(c)         NOTICE OF RESTRICTED TRANSFER.  Any Person who acquires or attempts orintends to acquire Beneficial Ownership or Constructive Ownership of Sharesthat will or may violate Section 5.10(ii)(a)(I) or any Person whowould have owned Shares that resulted in a transfer to the Trust pursuant tothe provisions of Section 5.10(ii)(a)(II) shall immediately givewritten notice to the Company of the event, or in the case of a proposed orattempted transaction, give at least 15 days prior written notice, and shallprovide to the Company the other information as the Company may request inorder to determine the effect, if any, of the Transfer on the Company’s statusas a REIT.

 

(d)         OWNERS REQUIRED TO PROVIDE INFORMATION.  From the Commencement of the Initial PublicOffering and prior to the Restriction Termination Date:

 

(I)          every owner of more than five percent (or such lowerpercentage as required by the Code or the Treasury Regulations promulgatedthereunder) of the outstanding Shares, within 30 days after the end of eachtaxable year, shall give written notice to the Company stating the name andaddress of the owner, the number of Shares Beneficially Owned and a descriptionof the manner in which the Shares are held. Each such owner shall provide to the 

 

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Company the additional information as the Company mayrequest in order to determine the effect, if any, of such Beneficial Ownershipon the Company’s status as a REIT and to ensure compliance with the CommonShare Ownership Limit and Preferred Share Ownership Limit; and

 

(II)         each Person who is a Beneficial or Constructive Ownerof Shares and each Person (including the stockholder of record) who is holdingShares for a Beneficial or Constructive Owner shall provide to the Company theinformation as the Company may request, in good faith, in order to determinethe Company’s status as a REIT and to comply with requirements of any taxingauthority or governmental authority or to determine such compliance.

 

(e)         REMEDIES NOT LIMITED.  Subject to Section 7.2(ii) of theCharter, nothing contained in this Section 5.10(ii)(e) shall limitthe authority of the Board to take any other action as it deems necessary oradvisable to protect the Company and the interests of its stockholders inpreserving the Company’s status as a REIT.

 

(f)          AMBIGUITY.  Inthe case of an ambiguity in the application of any of the provisions of this Section5.10(ii), Section 5.10(iii), or any definition contained in Section 5.10(i),the Board shall have the power to determine the application of the provisionsof this Section 5.10(ii) or Section 5.10(iii) or any suchdefinition with respect to any situation based on the facts known to it.  In the event Section 5.10(ii) or (iii) requiresan action by the Board and the Charter fails to provide specific guidance withrespect to such action, the Board shall have the power to determine the actionto be taken so long as such action is not contrary to the provisions of Section 5.10.

 

(g)         EXCEPTIONS.

 

(I)          Subject to Section 5.10(ii)(a)(I)(B), the Board,in its sole discretion, may exempt (prospectively or retroactively) a Personfrom the Common Share Ownership Limit and the Preferred Share Ownership Limit,as the case may be, and may establish or increase an Excepted Holder Limit forsuch Person if:

 

(A) the Board obtains the representations andundertakings from the Person as are reasonably necessary to ascertain that noindividual’s Beneficial or Constructive Ownership of such Shares will violate Section 5.10(ii)(a)(I)(A) or(B);

 

(B) the Person does not and represents that itwill not own, actually or Constructively, an interest in a tenant of theCompany (or a tenant of any entity owned or controlled by the Company) thatwould cause the Company to own, actually or Constructively, more than a 9.9%interest (as set forth in Section 856(d)(2)(B) of the Code) in suchtenant and the Board obtains such additional representations and undertakingsfrom such Person as are reasonably necessary to ascertain this fact (for thispurpose, a tenant from whom the Company (or an entity owned or controlled bythe Company) derives (and is expected to continue to derive) a sufficientlysmall amount of revenue such that, in the opinion of the Board, rent from thetenant would not adversely affect the Company’s ability to qualify as a REIT,shall not be treated as a tenant of the Company); and

 

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(C) the Person agrees that any violation orattempted violation of the representations or undertakings (or other actionwhich is contrary to the restrictions contained in Section 5.10(ii)(a) throughSection 5.10(ii)(f)) will result in such Shares being automaticallytransferred to a Trust or in the purported Transfer of such Shares being void *ab initio*in accordance with Section 5.10(ii)(a) andSection 5.10(iii).

 

(II)         Prior to granting any exception pursuant to Section 5.10(ii)(g)(I),the Board may require a ruling from the Internal Revenue Service, or an opinionof counsel, in either case in form and substance satisfactory to the Board inits sole discretion, as it may deem necessary or advisable in order todetermine or ensure the Company’s status as a REIT.  Notwithstanding the receipt of any ruling oropinion, the Board may impose the conditions or restrictions as it deemsappropriate in connection with granting such exception.

 

(III)       Subject to Section 5.10(ii)(a)(I)(B), anunderwriter which participates in an Offering or a private placement of Shares(or Securities convertible into or exchangeable for Shares) may BeneficiallyOwn or Constructively Own Shares (or Securities convertible into orexchangeable for Shares) in excess of the Common Share Ownership Limit, thePreferred Share Ownership Limit or both such limits, but only to the extentnecessary to facilitate the Offering or private placement.

 

(IV)       The Board may only reduce the Excepted Holder Limitfor an Excepted Holder: (1) with the written consent of such ExceptedHolder at any time, or (2) pursuant to the terms and conditions of theagreements and undertakings entered into with such Excepted Holder inconnection with the establishment of the Excepted Holder Limit for thatExcepted Holder.  No Excepted HolderLimit shall be reduced to a percentage that is less than the Common ShareOwnership Limit or the Preferred Share Ownership Limit.

 

(h)         NOTICE TO STOCKHOLDERS UPON ISSUANCE ORTRANSFER.  Upon issuance or Transfer ofShares prior to the Restriction Termination Date, the Company shall provide therecipient with a notice containing information about the Shares purchased orotherwise Transferred, in lieu of issuance of a Share certificate, in a formsubstantially similar to the following:

 

The securities of Behringer HarvardOpportunity REIT II, Inc. are subject to restrictions on Beneficial andConstructive Ownership and Transfer for the purpose of the Company’smaintenance of its status as a real estate investment trust under the InternalRevenue Code of 1986, as amended. Subject to certain further restrictions and except as expressly providedin this Charter, (i) no Person may Beneficially or Constructively OwnCommon Shares of the Company in excess of 9.8% (in value or number of Shares)of the outstanding Common Shares of the Company unless the Person is anExcepted Holder (in which case the Excepted Holder Limit shall be applicable); (ii) noPerson may Beneficially or Constructively Own Preferred Shares of the Companyin excess of 9.8% (in value or number of Shares) of the outstanding PreferredShares of the Company unless the Person is an Excepted Holder (in which casethe Excepted Holder Limit shall be applicable); (iii) no Person may 

 

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Beneficially or Constructively Own Sharesthat would result in the Company being “closely held” under Section 856(h) ofthe Code or otherwise cause the Company to fail to qualify as a REIT; and (iv) noPerson may Transfer Shares if the Transfer would result in the Shares of theCompany being owned by fewer than 100 Persons. Any Person who Beneficially or Constructively Owns or attempts toBeneficially or Constructively Own Shares that cause or will cause a Person toBeneficially or Constructively Own Shares in excess or in violation of theabove limitations must immediately notify the Company.  If any of the restrictions on transfer orownership are or would be violated, the Shares will be deemed to haveautomatically transferred to a Trustee of a Trust for the benefit of one ormore Charitable Beneficiaries upon such transfer.  In addition, the Company may redeem Sharesupon the terms and conditions specified by the Board in its sole discretion ifthe Board determines that ownership or a Transfer or other event may violatethe restrictions described above. Furthermore, upon the occurrence of certain events, attempted Transfersin violation of the restrictions described above may be void *ab initio*.

 

Until the Common Shares are Listed, topurchase Common Shares, the purchaser must represent to the Company:  (i) that the purchaser (or, in the caseof sales to fiduciary accounts, that the beneficiary, fiduciary account or grantoror donor who directly or indirectly supplies the funds to purchase the sharesif the grantor or donor is the fiduciary) has a minimum annual gross income of$70,000 and a net worth (excluding home, furnishings and automobiles) of notless than $70,000; or (ii) that the purchaser (or, in the case of salesto  fiduciary accounts, that thebeneficiary, fiduciary account or grantor or donor who directly or indirectlysupplies the funds to purchase the shares if the grantor or donor is thefiduciary) has a net worth (excluding home, furnishings and automobiles) of notless than $250,000.  Until the CommonShares are Listed, each issuance or transfer of Common Shares shall comply withthe requirements regarding minimum initial and subsequent cash investmentamounts set forth in Company’s registration statement filed under theSecurities Act for the Initial Public Offering as such registration statementhas been amended or supplemented as of the date of such issuance or transfer.

 

All capitalized terms in this notice have themeanings defined in the Charter of the Company, as the same may be amended fromtime to time, a copy of which, including the restrictions on transfer andownership, will be furnished to each holder of Shares of the Company on requestand without charge.

 

Instead of the foregoing notice,at the time of issue or transfer of shares without certificates, the Companymay send the Stockholder a written statement indicating that the Company willfurnish information about the restrictions on transfer to the Stockholder onrequest and without charge.  If theCompany issues Shares with certificates, each certificate shall either containthe notice set forth above or shall 

 

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state that the Company willfurnish information about the restrictions on transfer to the Stockholder onrequest and without charge.

 

(iii)          TRANSFER OF SHARES IN TRUST.

 

(a)         OWNERSHIP IN TRUST. Upon any purported Transfer or other event described in Section 5.10(ii)(a)(II) thatwould result in a transfer of Shares to a Trust, such Shares shall be deemed tohave been transferred to the Trustee as trustee of a Trust for the exclusivebenefit of one or more Charitable Beneficiaries.  Such transfer to the Trustee shall be deemedto be effective as of the close of business on the Business Day prior to thepurported Transfer or other event that results in the transfer to the Trustpursuant to Section 5.10(ii)(a)(II). The Trustee shall be appointed by the Company and shall be a Person unaffiliatedwith the Company and any Prohibited Owner. Each Charitable Beneficiary shall be designated by the Company asprovided in Section 5.10(iii)(f).

 

(b)         STATUS OF SHARES HELD BY THE TRUSTEE.  Shares held by the Trustee shall be issuedand outstanding Shares of the Company. The Prohibited Owner shall have no rights in the Shares held by theTrustee.  The Prohibited Owner shall notbenefit economically from ownership of any Shares held in trust by the Trustee,shall have no rights to dividends or other distributions and shall not possessany rights to vote or other rights attributable to the Shares held in theTrust.

 

(c)         DIVIDEND AND VOTING RIGHTS.  The Trustee shall have all voting rights andrights to dividends or other distributions with respect to Shares held in theTrust, which rights shall be exercised for the exclusive benefit of theCharitable Beneficiary.  Any dividend orother distribution paid prior to the discovery by the Company that the Shareshave been transferred to the Trustee shall be paid by the recipient of thedividend or distribution to the Trustee upon demand and any dividend or otherdistribution authorized but unpaid shall be paid when due to the Trustee.  Any dividend or distribution so paid to theTrustee shall be held in trust for the Charitable Beneficiary.  The Prohibited Owner shall have no votingrights with respect to Shares held in the Trust and, subject to Maryland law,effective as of the date that the Shares have been transferred to the Trustee,the Trustee shall have the authority (at the Trustee’s sole discretion) (i) torescind as void any vote cast by a Prohibited Owner prior to the discovery bythe Company that the Shares have been transferred to the Trustee and (ii) torecast the vote in accordance with the desires of the Trustee acting for thebenefit of the Charitable Beneficiary; provided, however, that if the Companyhas already taken irreversible corporate action, then the Trustee shall nothave the authority to rescind and recast the vote.  Notwithstanding the provisions of this Section 5.10,until the Company has received notification that Shares have been transferredinto a Trust, the Company shall be entitled to rely on its share transfer andother stockholder records for purposes of preparing lists of Stockholdersentitled to vote at meetings, determining the validity and authority of proxiesand otherwise conducting votes of Stockholders.

 

(d)         SALE OF SHARES BY TRUSTEE.  Within 20 days of receiving notice from theCompany that Shares have been transferred to the Trust, the Trustee of theTrust shall sell the Shares held in the Trust to a person, designated by theTrustee, whose ownership of the Shares will not violate the ownershiplimitations set forth in Section 5.10(ii)(a)(I).  Upon such sale, the interest of theCharitable Beneficiary in 

 

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the Shares sold shall terminate and theTrustee shall distribute the net proceeds of the sale to the Prohibited Ownerand to the Charitable Beneficiary as provided in this Section 5.10(iii)(d).  The Prohibited Owner shall receive the lesserof (1) the price paid by the Prohibited Owner for the Shares or, if theProhibited Owner did not give value for the Shares in connection with the eventcausing the Shares to be held in the Trust (e.g., in the case of a gift, deviseor other such transaction), the Market Price of the Shares on the day of theevent causing the Shares to be held in the Trust and (2) the price perShare received by the Trustee from the sale or other disposition of the Sharesheld in the Trust.  The Trustee mayreduce the amount payable to the Prohibited Owner by the amount of dividendsand distributions which have been paid to the Prohibited Owner and are owed bythe Prohibited Owner to the Trustee pursuant to Section 5.10(iii)(c).  Any net sales proceeds in excess of theamount payable to the Prohibited Owner shall be immediately paid to theCharitable Beneficiary.  If, prior to thediscovery by the Company that Shares have been transferred to the Trustee, theShares are sold by a Prohibited Owner, then (i) the Shares shall be deemedto have been sold on behalf of the Trust and (ii) to the extent that theProhibited Owner received an amount for the Shares that exceeds the amount thatthe Prohibited Owner was entitled to receive pursuant to this Section 5.10,the excess shall be paid to the Trustee upon demand.

 

(e)         PURCHASE RIGHT IN STOCK TRANSFERRED TO THETRUSTEE.   Shares transferred to theTrustee shall be deemed to have been offered for sale to the Company, or itsdesignee, at a price per Share equal to the lesser of (i) the price perShare in the transaction that resulted in the transfer to the Trust (or, in thecase of a devise or gift, the Market Price at the time of the devise or gift)and (ii) the Market Price on the date the Company, or its designee,accepts such offer.  The Company mayreduce the amount payable to the Prohibited Owner by the amount of dividendsand distributions which has been paid to the Prohibited Owner and are owed bythe Prohibited Owner to the Trustee pursuant to Section 5.10(iii)(c).  The Company may pay the amount of thereduction to the Trustee for the benefit of the Charitable Beneficiary.  The Company shall have the right to acceptsuch offer until the Trustee has sold the Shares held in the Trust pursuant to Section5.10(iii)(d).  Upon such a sale to theCompany, the interest of the Charitable Beneficiary in the Shares sold shallterminate and the Trustee shall distribute the net proceeds of the sale to theProhibited Owner.

 

(f)          DESIGNATION OF CHARITABLE BENEFICIARIES.  By written notice to the Trustee, the Companyshall designate one or more nonprofit organizations to be the CharitableBeneficiary of the interest in the Trust such that (i) the Shares held inthe Trust would not violate the restrictions set forth in Section 5.10(ii)(a)(I) inthe hands of the Charitable Beneficiary and (ii) each such organizationmust be described in Section 501(c)(3) of the Code and contributionsto each such organization must be eligible for deduction under each of Sections170(b)(1)(A), 2055 and 2522 of the Code.

##  

## SECTION 5.11  SETTLEMENTS. Nothing in Section 5.10 shall preclude the settlement of anytransaction with respect to the Common Shares entered into through thefacilities of the NYSE or other national securities exchange on which theCommon Shares are Listed.  The fact thatthe settlement of any transaction occurs shall not negate the effect of anyprovision of Section 5.10, and any transfer in such a transaction shall besubject to all of the provisions and limitations set forth in Section 5.10.

##  

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## SECTION 5.12  SEVERABILITY. If any provision of Section 5.10 or any application of any suchprovision is determined to be void, invalid or unenforceable by any courthaving jurisdiction over the issue, the validity and enforceability of theremaining provisions of Section 5.10 shall not be affected and otherapplications of such provision shall be affected only to the extent necessary tocomply with the determination of the court.

##  

## SECTION 5.13  ENFORCEMENT. The Company is authorized specifically to seek equitable relief,including injunctive relief, to enforce the provisions of Section 5.10.

##  

## SECTION 5.14  NON-WAIVER. No delay or failure on the part of the Company or the Board inexercising any right hereunder shall operate as a waiver of any right of theCompany or the Board, as the case may be, except to the extent specificallywaived in writing.

##  

## SECTION 5.15  REPURCHASE OF SHARES.  The Board may establish, from time to time, aprogram or programs by which the Company voluntarily repurchases Shares fromits Stockholders; provided, however, that such repurchase does not impair thecapital or operations of the Company as determined by the Board.  The Sponsor, Advisor, members of the Board orany Affiliates thereof may not receive any fees arising out of the repurchaseof Shares by the Company.

##  

## SECTION 5.16  DISTRIBUTION REINVESTMENT PLANS.  The Board may establish, from time to time, adistribution reinvestment plan or plans (each, a “**Reinvestment Plan**”).  Under any such Reinvestment Plan, (i) allmaterial information regarding distributions to the holders of Common Sharesand the effect of reinvesting such distributions, including the taxconsequences thereof, shall be provided to the holders of Common Shares notless often than annually, and (ii) each holder of Common Sharesparticipating in such Reinvestment Plan shall have a reasonable opportunity towithdraw from the Reinvestment Plan not less often than annually after receiptof the information required in clause (i) above.

# ** **

# **ARTICLEVI**

# ** **

# **BOARDOF DIRECTORS**

##  

## SECTION 6.1   NUMBER OF DIRECTORS.  The number of Directors of the Company shallbe five (5).  Except as otherwise setforth herein, the number of Directors may be increased or decreased from timeto time pursuant to the Bylaws by the affirmative vote of a majority of themembers then serving on the Board; provided, however, that such number shall benot more than 15 nor less than three (3). A majority of the seats on the Board shall be for IndependentDirectors.  Any vacancies, includingthose which arise by reason of an increase in the number of Directors, may befilled by the affirmative vote of a majority of the remaining Directors, thoughless than a quorum.  Unless these arevacancies in all Independent Director seats, Independent Directors shallnominate replacements for vacancies in the Independent Director positions.  No reduction in the number of Directors shallcause the removal of any Director from office prior to the expiration of histerm, except as may otherwise be provided in the terms of any Preferred Sharesissued by the Company.  For the purposesof voting for Directors, each Share of stock may be voted for as manyindividuals as there are Directors to be elected and for whose election theShare is entitled to be voted. Cumulative voting for Directors is prohibited.

 

Thenames of the five Directors who shall serve on the Board until the next annualmeeting of the Stockholders and until their successors are duly elected andqualified, subject to the filling of vacancies or an increase in the number ofDirectors prior to the next annual meeting of the Stockholders, are:

##  

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|   | Robert M. Behringer |
|--------|---------------------|
|   | Robert S. Aisner    |
|   | Andreas K. Bremer   |
|   | Cynthia Pharr Lee   |
|   | Jeffrey P. Mayer    |

##  

## SECTION 6.2   EXPERIENCE. Each Director, other than Independent Directors, shall have at leastthree years of relevant experience demonstrating the knowledge and experiencerequired to successfully acquire and manage the type of assets being acquiredby the Company.  At least one of theIndependent Directors shall have three years of relevant real estate experience.

##  

## SECTION 6.3   COMMITTEES. Subject to the MGCL, the Board may establish committees as it deemsappropriate, in its discretion, provided that the majority of the members ofeach committee are Independent Directors.

##  

## SECTION 6.4   TERM. Each Director shall hold office for one year, until the next annualmeeting of Stockholders and until his or her successor is duly elected andqualifies.  Directors may be elected toan unlimited number of successive terms.

##  

## SECTION 6.5   FIDUCIARY OBLIGATIONS.  The Directors serve in a fiduciary capacityto the Company and the holders of Common Shares.  The Directors also have a fiduciary duty tothe holders of Common Shares to supervise the relationship of the Company withthe Advisor.

##  

## SECTION 6.6   RESIGNATION, REMOVAL OR DEATH.  Any Director may resign by written notice tothe Board, effective upon execution and delivery to the Company of the writtennotice or upon any future date specified in the notice. A Director may beremoved from office with or without cause only at a meeting of the Stockholderscalled for that purpose, by the affirmative vote of the holders of not lessthan a majority of the Common Shares then outstanding and entitled to votegenerally in the election of directors, subject to the rights of any PreferredShares to vote for the Directors. The notice of the meeting shall indicate thatthe purpose, or one of the purposes, of the meeting is to determine if aDirector should be removed.

##  

## SECTION 6.7   RATIFICATION OF CHARTER BY INDEPENDENTDIRECTORS.  This Charter shall bereviewed and ratified by the Board, including by a majority of the IndependentDirectors, at the first meeting of the Board following the date that the Boardconsists of a majority of Independent Directors.

# **ARTICLEVII**

# ** **

# **POWERSOF THE BOARD OF DIRECTORS**

##  

## SECTION 7.1  GENERAL. The business and affairs of the Company shall be managed under thedirection of the Board, and the Board shall have full, exclusive and absolutepower, control and authority over the Company’s assets and over the business ofthe Company as if it, in its own right, was the sole owner thereof, except asotherwise limited by this Charter.  Inaccordance with the policies on investments and borrowing set forth in this Article VIIand Article IX hereof, the Board shall monitor the administrativeprocedures, investment operations and performance of the Company and theAdvisor to assure that the policies are carried out.  The Board may take any action that, in itssole judgment and discretion, is necessary or desirable to conduct the businessof the Company.  The Charter shall beconstrued with a presumption in favor of the grant of power and authority tothe Board.  Any construction of theCharter or determination made in good faith by the Board concerning its powersand authority hereunder shall be conclusive.

##  

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##  

## SECTION 7.2   SPECIFIC POWERS AND AUTHORITY.  Subject only to the express limitations setforth herein, and in addition to all other powers and authority conferred bythe Charter by law, the Board, without any vote, action or consent by theStockholders, shall have and may exercise, at any time or times, in the name ofthe Company or on its behalf the following powers and authorities:

##  

(i)            INVESTMENTS.  The Board shall have the power and authorityto invest in, purchase or otherwise acquire and to hold real, personal ormixed, tangible or intangible, property of any kind wherever located, or rightsor interests therein or in connection therewith, all without regard to whetherthe property, interests or rights are authorized by law for the investment offunds held by trustees or other fiduciaries, or whether obligations the Companyacquires have a term greater or lesser than the term of office of the Directorsor the possible termination of the Company, for such consideration as the Boardmay deem proper (including cash, property of any kind or Securities of theCompany).

 

(ii)           REIT QUALIFICATION.  The Board shall use its best efforts to causethe Company and its Stockholders to qualify for U.S. federal income taxtreatment in accordance with the REIT Provisions of the Code, unless the Board,in its sole discretion, determines at any time, due to changes in taxlegislation or otherwise, that qualification as a REIT is not in the bestinterests of the Company.  Following REITqualification, the Board shall use its commercially reasonable best efforts totake the actions as are necessary, and may take the actions as it deemsdesirable (in its sole discretion) to preserve the status of the Company as aREIT; provided, however, that in the event that the Board determines that it nolonger is in the best interests of the Company to qualify as a REIT, the Boardmay revoke or otherwise terminate the Company’s REIT election pursuant to Section 856(g) ofthe Code.  The Board also may determinethat compliance with any restriction or limitation set forth in this Charterwhich is intended to preserve the status of the Company as a REIT, including,without limitation, the restrictions and limitations on stock ownership andtransfers in Section 5.10 hereof, is no longer required for REITqualification and may waive compliance with any restriction or limitationduring any period in which the Board has determined not to pursue or preservethe Company’s status as a REIT.

 

(iii)          SALE, DISPOSITION AND USE OF COMPANYASSETS.  The Board shall have the powerand authority to (A) sell, rent, lease, hire, exchange, release,partition, assign, mortgage, grant security interests in, encumber, negotiate,dedicate, grant easements in and options with respect to, convey, transfer(including transfers to entities wholly or partially owned by the Company orany Director) any or all of the Company’s assets, (B) dispose of any orall of the Company’s assets by deeds (including deeds in lieu of foreclosurewith or without consideration), trust deeds, assignments, bills of sale,transfers, leases, mortgages, financing statements, security agreements andother instruments for any of the purposes executed and delivered for and onbehalf of the Company or the Board by one or more of the Directors or by a dulyauthorized officer, employee, agent or nominee of the Company, on the terms asit deems appropriate, (C) give consents and make contracts relating to theCompany’s assets and their use or other property or matters, (D) develop,improve, manage, use, alter or otherwise deal with the Company’s assets, and (E) rent,lease or hire from others property of any kind; provided, however, that theCompany may not use or apply land for any purposes not permitted by applicablelaw.  This clause (iii) shallin no way limit the voting rights of stockholders set forth in Section 11.2.

 

(iv)          FINANCINGS.  The Board shall have the power and authority (a) toborrow or, in any other manner, raise money for the purposes and on the termsit determines, which terms (1) may include evidencing the same by issuanceof Securities of the Company and (2) may have such provisions as the Boardmay determine; (b) to reacquire such Securities; (c) to enter intoother contracts or obligations on behalf of the Company to guarantee, indemnifyor act as surety with respect to payment or performance of obligations of anyPerson (d) to mortgage, pledge, assign, grant security interests in orotherwise encumber the Company’s assets to secure any such Securities of theCompany, contracts or obligations (including guarantees, indemnifications andsuretyships); and (e) to renew, modify, release, compromise, extend,consolidate or cancel, in whole or in part, any obligation to or of the Companyor participate in 

 

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anyreorganization of obligors to the Company; provided, however, that the Company’sLeverage shall be limited by the provisions of Section 9.4(viii) hereof.

 

(v)           LENDING.  Subject to all applicable limitations in theCharter, including without limitation Section 10.3 hereof, the Board shallhave the power and authority to lend money or other assets of the Company onthe terms, for the purposes and to the Persons as it may determine.

 

(vi)          ISSUANCE OF SECURITIES.  Subject to the provisions of Article Vhereof, the Board may authorize the issuance from time to time of Shares of anyclass or series, whether now or hereafter authorized, or other Securities,whether now or hereafter authorized, for such consideration as the Board maydeem advisable (or without consideration in the case of a stock split or stockdividend), subject to the restrictions or limitations, if any, as may be setforth in the Charter or the Bylaws.

 

(vii)         EXPENSES AND TAXES.  The Board shall have the power and authority (A) topay any charges, expenses or liabilities necessary or desirable, in the solediscretion of the Board, for carrying out the purposes of the Charter andconducting the business of the Company, including (1) compensation or feesto Directors, officers, employees and agents of the Company, and to Personscontracting with the Company and (2) any taxes, levies, charges andassessments of any kind imposed upon or chargeable against the Company, theCompany’s assets or the Directors in connection therewith and (B) toprepare and file any tax returns, reports or other documents and take any otherappropriate action relating to the payment of any charges, expenses orliabilities.

 

(viii)        COLLECTION AND ENFORCEMENT.  The Board shall have the power and authorityto collect, sue for and receive money or other property due to the Company; toconsent to extensions of time for the payment, or to the renewal, of anySecurities or obligations; to engage or to intervene in, prosecute, defend,compound, enforce, compromise, release, abandon or adjust any actions, suits,proceedings, disputes, claims, demands, security interests or things relatingto the Company, the Company’s assets or the Company’s affairs; and to exerciseany rights and enter into any agreements and take any other action necessary ordesirable in connection with the foregoing.

 

(ix)           DEPOSITS.  The Board shall have the power and authorityto deposit funds or Securities constituting part of the Company’s assets inbanks, trust companies, savings and loan associations, financial institutionsand other depositories, whether or not the deposits will draw interest, subjectto withdrawal on the terms and in the manner as the Board may determine.

 

(x)            VALUATION OF ASSETS.  The Board shall have the power and authorityto determine the value of all or any part of the Company’s assets and of anyservices, Securities, property or other consideration to be furnished to oracquired by the Company, and to revalue all or any part of the Company’sassets, all in accordance with such appraisals or other information as arereasonable and necessary, in its sole judgment.

 

(xi)           OWNERSHIP AND VOTING POWERS.  The Board shall have the power and authorityto exercise all of the rights, powers, options and privileges pertaining to theownership of any of the Company’s assets to the same extent that an individualowner might, including without limitation to vote or give any consent, requestor notice or waive any notice, either in person or by proxy or power ofattorney, which proxies and powers of attorney may be for any general orspecial meetings or action, and may include the exercise of discretionarypowers.

 

(xii)          OFFICERS, ETC.; DELEGATION OFPOWERS.  The Board shall have the powerand authority to elect, appoint or employ the officers for the Company and thecommittees of the Board with the powers and duties as the Board may determine,the Company’s Bylaws provide or the MGCL requires; to engage, employ orcontract with and pay compensation to any Person (including any Director 

 

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andany Person who is an Affiliate of any Director) as agent, representative,Advisor, member of an advisory board, employee or independent contractor(including advisors, consultants, transfer agents, registrars, underwriters,accountants, attorneys-at-law, real estate agents, property and other managers,appraisers, brokers, architects, engineers, construction managers, generalcontractors or otherwise) in one or more capacities, to perform such serviceson the terms as the Board may determine; to delegate to one or more Directors,officers or other Persons engaged or employed as aforesaid or to committees ofthe Board or to the Advisor, the performance of acts or other things (includinggranting of consents), the making of decisions and the execution of such deeds,contracts, leases or other instruments, either in the names of the Company, theBoard or as their attorneys or otherwise, as the Board may determine; and toestablish committees as it deems appropriate.

 

(xiii)         ASSOCIATIONS.  The Board shall have the power and authorityto cause the Company to enter into Joint Ventures, general or limitedpartnerships, participation or agency arrangements or any other lawfulcombinations, relationships or associations of any kind.

 

(xiv)        REORGANIZATIONS, ETC.  The Board shall have the power and authorityto cause to be organized or assist in organizing any Person under the laws ofany jurisdiction to acquire all or any part of the Company’s assets, carry on anybusiness in which the Company shall have an interest or otherwise exercise thepowers the Board deems necessary, useful or desirable to carry on the businessof the Company or to carry out the provisions of the Charter, to merge orconsolidate the Company with any Person; to sell, rent, lease, hire, convey,negotiate, assign, exchange or transfer all or any part of the Company’s assetsto or with any Person in exchange for Securities of such Person or otherwise;and to lend money to, subscribe for and purchase the Securities of, and enterinto any contracts with, any Person in which the Company holds, or is about toacquire, securities or any other interests.

 

(xv)         INSURANCE.  The Board shall have the power and authorityto purchase and pay for out of the Company’s assets insurance policies insuringthe Stockholders, the Company and the Company’s assets against any and allrisks, and insuring the Directors, officers, Advisors and Affiliates of theCompany, individually (each an “**Insured**”) against all claims andliabilities of every nature arising by reason of each Insured holding or havingheld any such status, office or position or by reason of any action alleged tohave been taken or omitted by the Insured in such capacity, whether or not theCompany would have the power to indemnify against the claim or liability,provided that the indemnification be limited to that permitted by Section 12.3hereof in regard to any liability or loss resulting from negligence, grossnegligence, misconduct, willful misconduct or an alleged violation of federalor state securities laws.  Nothingcontained herein shall preclude the Company from purchasing and paying for thetypes of insurance, including extended coverage liability and casualty andworkers’ compensation, as would be customary for any Person owning comparableassets and engaged in a similar business, or from naming the Insured as anadditional insured party thereunder, provided that the addition does not add tothe premiums payable by the Company.  TheBoard’s power to purchase and pay for such insurance policies shall be limitedto policies that comply with all applicable federal and state laws and theNASAA REIT Guidelines.

 

(xvi)        DISTRIBUTIONS.  The Board shall have the power and authorityto authorize dividends for declaration and payment by the Company or otherdistributions to Stockholders.

 

(xvii)       DISCONTINUE OPERATIONS; BANKRUPTCY.  The Board shall have the power and authorityto discontinue the operations of the Company; to petition or apply for reliefunder any provision of federal or state bankruptcy, insolvency orreorganization laws or similar laws for the relief of debtors; to permit anyProperty to be foreclosed upon without raising any legal or equitable defensesthat may be available to the Company or the Directors or otherwise defending orresponding to the foreclosure; to confess judgment against the Company (ashereinafter defined); or to take such other action with respect 

 

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toindebtedness or other obligations of the Directors, the Company’s assets or theCompany as the Board, in such capacity, and in its discretion may determine.

 

(xviii)      FISCAL YEAR.  Subject to the Code, the Board shall have thepower and authority to adopt, and from time to time to change, the fiscal yearfor the Company.

 

(xix)         SEAL. The Board shall have the power and authority to adopt and use a seal,but the use of a seal shall not be required for the execution of instruments orobligations of the Company.

 

(xx)          BYLAWS.  The Board shall have the exclusive power andauthority to adopt, implement and from time to time alter, amend or repeal theBylaws.

 

(xxi)         LISTING SHARES.  The Board shall have the power and authorityto cause the Listing of the Common Shares at any time after completion of theInitial Public Offering.

 

(xxii)        FURTHER POWERS.  The Board shall have the power and authorityto do all other acts and things and execute and deliver all instrumentsincident to the foregoing powers, and to exercise all powers that it deemsnecessary, useful or desirable to carry on the business of the Company or tocarry out the provisions of the Charter, even if the powers are notspecifically provided hereby.

 

## SECTION 7.3  DETERMINATION BY BOARD OF BEST INTEREST OFCOMPANY.  The determination as to any ofthe following matters, made in good faith by or pursuant to the direction ofthe Board consistent with the Charter, shall be final and conclusive and shallbe binding upon the Company and every Stockholder:  (a) the amount of the Net Income of theCompany for any period and the amount of assets at any time legally availablefor the payment of dividends, redemption of its stock or the payment of otherdistributions; (b) the amount of paid-in surplus, net assets, othersurplus, annual or other cash flow, funds from operations, net profit, netassets in excess of capital, undivided profits or excess of profits over losseson sales of assets; (c) the amount, purpose, time of creation, increase ordecrease, alteration or cancellation of any reserves or charges and thepropriety thereof (whether or not any obligation or liability for which suchreserves or charges shall have been created shall have  been paid or discharged); (d) anyinterpretation of a provision of this Charter, including the terms,preferences, conversion or other rights, voting powers or rights, restrictions,limitations as to dividends or distributions, qualifications or terms orconditions of redemption of any class or series of Shares; (e) the fairvalue, or any sale, bid or ask price to be applied in determining the fairvalue, of any asset owned or held by the Company or of any Shares; (f) thenumber of Shares of any class; (g) any matter relating to the acquisition,holding and disposition of any assets by the Company; (h) any matterrelating to the qualification of the Company as a REIT or election of adifferent tax status for the Company; or (i) any other matter relating tothe business and affairs of the Company or required or permitted by applicablelaw, the Charter or Bylaws or otherwise to be determined by the Board.

##  

## SECTION 7.4  BOARD ACTION WITH RESPECT TO CERTAINMATTERS.  A majority of the IndependentDirectors must approve any Board action to which the following sections of theNASAA REIT Guidelines apply: II.A., II.C., II.F., II.G., IV.A.,IV.B., IV.C., IV.D., IV.E., IV.F., IV.G., V.E., V.H., V.J., VI.A., VI.B.4, andVI.G.

##  

# **ARTICLEVIII**

# ** **

# **ADVISOR**

# ** **

## SECTION 8.1  APPOINTMENT AND INITIAL INVESTMENT OFADVISOR.  The Board is responsible forsetting the general policies of the Company and for the general supervision ofits business conducted by officers, agents, employees, advisors or independentcontractors of the Company.  

 

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## However, the Board is notrequired personally to conduct the business of the Company, and it may (butneed not) appoint, employ or contract with any Person (including a PersonAffiliated with any Director) as an Advisor and may grant or delegate theauthority to the Advisor as the Board may, in its sole discretion, deemnecessary or desirable.  The term ofretention of any Advisor shall not exceed one year, although there is no limitto the number of times that a particular Advisor may be retained.  Prior to the sale of a Share in the InitialPublic Offering, the Company shall require that the initial Advisor or itsAffiliate make an initial investment of at least $200,000 in the Company.  The Company shall restrict the transfer ofthis initial investment while the Advisor remains a Sponsor except fortransfers to Affiliates of the Advisor.

##  

## SECTION 8.2  SUPERVISION OF ADVISOR.  The Board shall review and evaluate thequalifications of the Advisor before entering into an Advisory ManagementAgreement and shall evaluate the performance of the Advisor before renewing anAdvisory Management Agreement, and the criteria used in such evaluation shallbe reflected in the minutes of the meetings of the Board.  The Board may exercise broad discretion inallowing the Advisor to administer and regulate the operations of the Company,to act as agent for the Company, to execute documents on behalf of the Companyand to make executive decisions that conform to general policies and principlesestablished by the Board.  The Boardshall monitor the Advisor to assure that the administrative procedures,operations and programs of the Company are in the best interests of theStockholders and are fulfilled.  TheIndependent Directors are responsible for reviewing the fees and expenses ofthe Company at least annually and with sufficient frequency to determine thatthe expenses incurred are reasonable in light of the investment performance ofthe Company, its Net Assets, its Net Income and the fees and expenses of othercomparable unaffiliated REITs. Each such determination shall be reflected inthe minutes of the meetings of the Board. The Independent Directors also will be responsible for reviewing, fromtime to time and at least annually, the performance of the Advisor and determiningthat the compensation to be paid to the Advisor is reasonable in relation tothe nature and quality of services performed and that such compensation iswithin the limits prescribed by the Charter. The Independent Directors shall also supervise the performance of theAdvisor and the compensation paid to the Advisor by the Company to determinethat the provisions of the Advisory Management Agreement are being carriedout.  Specifically, the IndependentDirectors will consider factors such as (i) the amount of the fee paid tothe Advisor in relation to the size, composition and performance of the Assets,(ii) the success of the Advisor in generating opportunities that meet theinvestment objectives of the Company, (iii) rates charged to other REITsand to investors other than REITs by advisors performing the same or similarservices, (iv) additional revenues realized by the Advisor and itsAffiliates through their relationship with the Company, including loanadministration, underwriting or broker commissions, servicing, engineering,inspection and other fees, whether paid by the Company or by others with whomthe Company does business, (v) the quality and extent of service andadvice furnished by the Advisor, (vi) the performance of the Assets,including income, conservation or appreciation of capital, frequency of probleminvestments and competence in dealing with distress situations, and (vii) thequality of the Assets relative to the investments generated by the Advisor forits own account.  The IndependentDirectors may also consider all other factors that they deem relevant, and thefindings of the Independent Directors on each of the factors considered shallbe recorded in the minutes of the Board. The Board shall determine whether any successor Advisor possessessufficient qualifications to perform the advisory function for the Company andwhether the compensation provided for in its contract with the Company isjustified.

##  

## SECTION 8.3  FIDUCIARY OBLIGATIONS.  The Advisor shall have a fiduciary duty andresponsibility to the Company and to the holders of Common Shares.

##  

## SECTION 8.4  AFFILIATION AND FUNCTIONS.  The Board, by resolution or in the Bylaws,may provide guidelines, provisions or requirements concerning the affiliationand functions of the Advisor.

 

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##  

## SECTION 8.5  TERMINATION. Either a majority of the Independent Directors or the Advisor mayterminate the Advisory Management Agreement on 60 days’ written notice withoutcause or penalty, and, in that event, the Advisor will cooperate with theCompany and the Board in making an orderly transition of the advisory function.

##  

## SECTION 8.6  COMMISSION ON SALE OF ASSETS.  The Company may pay the Advisor or anAffiliate thereof a disposition fee upon the Sale of one or more Assets, in anamount equal to the lesser of (i) one-half (1/2) of the Competitive RealEstate Commission (including the disposition fee paid to the Advisor or itsAffiliate), or (ii) three percent (3%) of the sales price of suchAsset.  Payment of such fee may be madeonly if the Advisor provides a substantial amount of services in connectionwith the Sale of a Property or Properties or Asset or Assets, as determined bya majority of the Independent Directors. In addition, the amount paid when added to all other real estatecommissions paid to unaffiliated parties in connection with such Sale shall notexceed the lesser of the Competitive Real Estate Commission or an amount equalto 6% of the sales price of such Asset.

##  

## SECTION 8.7  INCENTIVE FEES.  The Company may pay the Advisor an interestin the gain from the Sale of Assets, for which full consideration is not paidin cash or property of equivalent value, provided the amount or percentage ofthe interest is reasonable.  Such an interestin gain from the Sale of Assets shall be considered presumptively reasonable ifit does not exceed 15% of the net proceeds remaining after payment to holdersof Common Shares, in the aggregate, of an amount equal to 100% of the InvestedCapital, plus an amount equal to the Stockholders’ 6% Return.  In the case of multiple Advisors, suchAdvisor and any of their Affiliates shall be allowed such fees provided suchfees are distributed by a proportional method reasonably designed to reflectthe value added to the Assets by each respective Advisor or any Affiliate.

##  

## SECTION 8.8  ACQUISITION FEES.  The Company shall not purchase an Asset ifthe Acquisition Fees and Acquisition Expenses incurred in connection therewithare not reasonable or if they exceed an amount equal to 6% of the Contract PurchasePrice, or, in the case of a Mortgage, 6% of the funds advanced, provided,however, that a majority of the Directors (including a majority of theIndependent Directors) not otherwise interested in the transaction may approvefees and expenses in excess of this limit if they determine the transaction tobe commercially competitive, fair and reasonable to the Company.

##  

## SECTION 8.9  REIMBURSEMENT FOR TOTAL OPERATINGEXPENSES.  The Independent Directorsshall have the responsibility of limiting Total Operating Expenses to amountsthat do not exceed the greater of 2% of Average Invested Assets or 25% of NetIncome (the “**2%/25% Guidelines**”) for the four consecutive fiscalquarters then ended unless they have made a finding that, based on such unusualand non-recurring factors that they deem sufficient, a higher level of expenses(an “**Excess Amount**”) isjustified.  After the end of any fiscalquarter of the Company for which there is an Excess Amount for the fourconsecutive fiscal quarters then ended, such fact shall be disclosed in thenext quarterly report of the Company or shall be disclosed in writing and sentto the holders of Common Shares within 60 days of such quarter-end, togetherwith an explanation of the factors the Independent Directors considered indetermining that such Excess Amount was justified.  Any such finding and the reasons in supportthereof shall be reflected in the minutes of the meetings of the Board.  In the event that the Independent Directorsdo not determine that excess expenses are justified, the Advisor shallreimburse the Company the amount by which the expenses exceeded the 2%/25%Guidelines.  Reimbursement by the Companyof the Advisor for all or any portion of the Total Operating Expenses thatexceed the limitation of the 2%/25% Guidelines may, at the option of theAdvisor, be deferred without interest and may be reimbursed in any subsequentperiod where such limitation would permit such reimbursement if the TotalOperating Expenses were incurred during such period.

 

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## SECTION 8.10  CORPORATE OPPORTUNITIES.  For so long as the Company is externallyadvised by the Advisor, the Company has no interest in any opportunity known tothe Advisor or an Affiliate thereof unless it has been recommended to theCompany by the Advisor.  The precedingsentence shall be of no consequence except in connection with the applicationof the corporate opportunity doctrine.

##  

# **ARTICLE IX**

# ** **

# **INVESTMENTPOLICIES AND LIMITATIONS**

# ** **

## SECTION 9.1  INVESTMENT POLICIES.  The Board shall establish written policies oninvestments and borrowings and shall monitor the administrative procedures,investment operations and performance of the Company and the Advisor to ensuresuch policies are carried out. Independent Directors shall review the investment policies of theCompany with sufficient frequency (and, upon Commencement of the Initial PublicOffering, not less often than annually) to determine that the policies beingfollowed by the Company are in the best interests of its holders of CommonShares.  Each determination and the basistherefor shall be set forth in the minutes of the meetings of the Board.

##  

## SECTION 9.2  LIMITATIONS ON JOINT VENTURES.  The Company may invest in Joint Ventures withthe Sponsor, Advisor, one or more Directors or any Affiliate, only if amajority of Directors (including a majority of Independent Directors) nototherwise interested in the transaction, approve such investment as being fairand reasonable to the Company and on substantially the same terms andconditions as those received by the other joint venturers.

##  

## SECTION 9.3LIMITATIONS ON INVESTMENTS IN EQUITY SECURITIES.  The Company may invest in equity securitiesonly if a majority of Directors (including a majority of Independent Directors)not otherwise interested in the transaction approve such investment as beingfair, competitive and commercially reasonable; provided, that investments inequity securities in “publicly traded entities” that are otherwise approved bya majority of Directors (including a majority of Independent Directors) shallbe deemed fair, competitive and commercially reasonable if the Company acquiresthe equity securities through a trade that is effected in a recognizedsecurities market.  For these purposes, a“publicly traded entity” shall mean any entity having securities listed on anational securities exchange or included for quotation on an inter-dealerquotation system.  This provision is notintended to limit (i) real estate acquisitions effected through thepurchase of all of the equity securities of an existing entity, (ii) theinvestment in wholly owned subsidiaries of the Company or (iii) investmentsin mortgage-backed securities.

##  

## SECTION 9.4  OTHER INVESTMENT LIMITATIONS.  In addition to other investment restrictionsimposed by the Board from time to time, consistent with the Company’s objectiveof qualifying as a REIT, the following shall apply to the Company’sinvestments:

##  

(i)            Not more than 10% of the Company’stotal assets shall be invested in Unimproved Real Property or mortgage loans onUnimproved Real Property.

 

(ii)           The Company shall not invest incommodities or commodity future contracts. This limitation is not intended to apply to futures contracts, when usedsolely for hedging purposes in connection with the Company’s ordinary businessof investing in Assets.

 

(iii)          The Company shall not invest in ormake any Mortgage unless an appraisal is obtained concerning the underlyingproperty except for those loans insured or guaranteed by a government orgovernment agency.  In cases in which amajority of Independent Directors so determine, and in all cases in which thetransaction is with the Advisor, Sponsor, Directors, or any Affiliates thereof,the appraisal of 

 

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theunderlying property must be obtained from an Independent Appraiser.  The appraisal shall be maintained in theCompany’s records for at least five years and shall be available for inspectionand duplication by any holder of Common Shares. In addition to the appraisal, a mortgagee’s or owner’s title insurancepolicy or commitment as to the priority of the mortgage or condition of thetitle must be obtained.

 

(iv)          The Company shall not make or investin any Mortgage, including a construction loan, on any one property if theaggregate amount of all mortgage loans outstanding on the property, includingthe loans of the Company, would exceed an amount equal to 85% of the appraisedvalue of the property as determined by appraisal unless substantialjustification exists because of the presence of other underwritingcriteria.  For purposes of thissubsection, the “aggregate amount of all mortgage loans outstanding on theproperty, including the loans of the Company” shall include all interest (excludingcontingent participation in income and/or appreciation in value of themortgaged property), the current payment of which may be deferred pursuant tothe terms of such loans, to the extent that deferred interest on each loanexceeds 5% per annum of the principal balance of the loan.

 

(v)           The Company shall not invest inindebtedness secured by a mortgage on Real Property which is subordinate to themortgage or equity interest of the Advisor, any Director, the Sponsor or anyAffiliate of the Company.

 

(vi)          The Company shall not issue (A) equitySecurities redeemable solely at the option of the holder (except thatStockholders may offer their Common Shares to the Company pursuant to anyredemption plan adopted by the Board on terms outlined in the Prospectusrelating to any Offering, as such plan is thereafter amended in accordance withits terms); (B) debt Securities unless the historical debt servicecoverage (in the most recently completed fiscal year) as adjusted for knownchanges is sufficient to properly service that higher level of debt asdetermined by the Board or a duly authorized officer of the Company; (C) equitySecurities on a deferred payment basis or under similar arrangements; or (D) optionsor warrants to purchase Shares of the Company to the Advisor, Directors,Sponsor or any Affiliate thereof except on the same terms as the options orwarrants are sold to the general public. Options or warrants may be issued to persons other than the Advisor,Directors, Sponsor or any Affiliate thereof, but not at exercise prices lessthan the fair market value of the underlying Securities on the date of grantand not for consideration (which may include services) that in the judgment ofthe Independent Directors has a market value less than the value of the optionor warrant on the date of grant.  Optionsor warrants issuable to the Advisor, Directors, Sponsor or any Affiliatethereof shall not exceed ten percent (10%) of the outstanding Common Shares onthe date of grant.

 

(vii)         A majority of the Directors shallauthorize the consideration to be paid for each Asset, ordinarily****based on the fair market value of theAsset.  If a majority of the IndependentDirectors determine, or if the Asset is acquired from the Advisor, a Director,the Sponsor or their Affiliates, the fair market value shall be determined by aqualified Independent Appraiser selected by the Independent Directors.

 

(viii)        The aggregate Leverage shall bereasonable in relation to the Net Assets and shall be reviewed by the Board atleast quarterly.  The maximum amount ofthe Leverage shall not exceed 300% of the Net Assets as of the date of anyborrowing.  Notwithstanding theforegoing, Leverage may exceed such limit if any excess in borrowing over the300% level is approved by a majority of the Independent Directors.  Any such excess borrowing shall be disclosedto Stockholders in the next quarterly report of the Company following theborrowing, along with justification for the excess.

 

(ix)           The Company shall not invest in realestate contracts of sale unless the contracts of sale are in recordable formand appropriately recorded in the chain of title.

 

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# ** **

# **ARTICLE X**

# ** **

# **CONFLICTS OFINTEREST**

# ** **

## SECTION 10.1  SALES AND LEASES TO COMPANY.  The Company may purchase or lease Assets fromthe Sponsor, the Advisor, a Director or any Affiliate thereof upon a finding bya majority of Directors (including a majority of Independent Directors) nototherwise interested in the transaction that the transaction is fair andreasonable to the Company and at a price to the Company no greater than thecost of the Asset to the Sponsor, Advisor, Director or Affiliate, or, if theprice to the Company is in excess of such cost, that substantial justificationfor the excess exists and the excess is reasonable.  In no event shall the purchase price to theCompany of any Property purchased from the Sponsor, the Advisor, a Director orany Affiliate exceed its current appraised value.

##  

## SECTION 10.2  SALES AND LEASES TO THE SPONSOR, ADVISOR,DIRECTORS OR AFFILIATES.  An Advisor,Sponsor, Director or Affiliate thereof may purchase or lease Assets from theCompany if a majority of Directors (including a majority of IndependentDirectors) not otherwise interested in the transaction determine that thetransaction is fair and reasonable to the Company.

##  

## SECTION 10.3  OTHER TRANSACTIONS.

##  

(i)            Any transaction between the Companyand a Sponsor, the Advisor, a Director or an Affiliate thereof, the approval ofwhich is not the subject of another provision of this Charter, may be effectedonly if a majority of the Directors (including a majority of the IndependentDirectors) not otherwise interested in such transaction approve suchtransaction as fair and reasonable to the Company and on terms and conditionsnot less favorable to the Company than those available from unaffiliated thirdparties.

 

(ii)           The Company shall not make loans tothe Sponsor, Advisor, Directors or any Affiliates thereof except as providedunder Section 9.4(iii)-(v) hereof or loans to wholly ownedsubsidiaries of the Company.  The Companymay not borrow money from the Sponsor, Advisor, Directors and any Affiliatesthereof unless approved by a majority of the Directors (including a majority ofthe Independent Directors) not otherwise interested in such transaction asfair, competitive, and commercially reasonable, and no less favorable to theCompany than comparable loans between unaffiliated parties under the samecircumstances.  These restrictions onloans apply to advances of cash that are commonly viewed as loans, asdetermined by the Board.  By way ofexample only, the prohibition on loans shall not restrict advances of cash forlegal expenses or other costs incurred as a result of any legal action forwhich indemnification is being sought nor shall the prohibition limit theCompany’s ability to advance reimbursable expenses incurred by Directors orofficers of the Advisor or its Affiliates, or the Advisor itself.

 

# **ARTICLEXI**

# ** **

# **STOCKHOLDERS**

# ** **

## SECTION 11.1  MEETINGS OF STOCKHOLDERS.  There shall be an annual meeting of theStockholders, to be held at such time and place as shall be determined by or inthe manner prescribed in the Bylaws, at which the Directors shall be electedand any other proper business may be conducted. The annual meeting will be held on a date that is a reasonable period oftime following the distribution of the Company’s annual report to Stockholdersbut not less than thirty (30) days after delivery of such report; theDirectors, including the Independent Directors, shall take reasonable effortsto ensure that this requirement is met. A majority of the Common Shares present in person or by proxy at anannual meeting at which a quorum is present, may, without the necessity forconcurrence by the Board, vote to elect the Directors.  A quorum shall be the presence in person orby proxy of Stockholders entitled to cast 

 

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## fifty percent (50%) ofall of the votes entitled to be cast at the meeting.  Special meetings of Stockholders may becalled in the manner provided in the Bylaws, including by the president or by amajority of the Directors or a majority of the Independent Directors, and shallbe called by an officer of the Company upon written request of Stockholdersholding in the aggregate not less than ten percent (10%) of the outstandingCommon Shares entitled to be voted on any issue proposed to be considered at anysuch special meeting.  Notice of anyspecial meeting of Stockholders shall be given as provided in the Bylaws, andthe special meeting shall be held not less than 15 days nor more than 60 daysafter the delivery of such notice.  Ifthe meeting is called by written request of Stockholders as described in this Section 11.1,notice of the special meeting shall be sent to all Stockholders within ten (10) daysof the receipt of the written request, and the special meeting shall be held atthe time and place specified in the Stockholder request; provided, however,that if none is so specified, at such time and place convenient to the holdersof Common Shares.  If there are noDirectors, the officers of the Company shall promptly call a special meeting ofthe Stockholders entitled to vote for the election of successor Directors.  Any meeting may be adjourned and reconvenedas the Board may determine or as otherwise provided in the Bylaws.

##  

## SECTION 11.2  VOTING RIGHTS OF HOLDERS OF COMMONSTOCK.  Subject to the provisions of anyclass or series of Shares then outstanding and the mandatory provisions of anyapplicable laws or regulations, the holders of Common Shares shall be entitledto vote only on the following matters: (i) election or removal ofDirectors, without the necessity for concurrence by the Board, as provided inSections 11.1 and 6.6 hereof; (ii) an amendment of the Charter, withoutthe necessity for concurrence by the Board; (iii) the Company being aparty to a merger, consolidation, share exchange or a transfer of all orsubstantially all of its assets, notwithstanding that the MGCL may not requirethe approval of the holders of Common Shares; (iv) dissolution of theCompany, without the necessity for concurrence by the Board; and (v) suchother matters with respect to which the Board has adopted a resolutiondeclaring that a proposed action is advisable and declaring that the matter besubmitted to the holders of Common Shares for approval or ratification.  Except with respect to the foregoing matters,no action taken by the holders of Common Shares at any meeting shall in any waybind the Board.  Further, except asprovided by Section 13.1 hereof, none of the actions in (ii), (iii) or(iv) above may be taken without the affirmative vote of the holders of notless than a majority of the Common Shares then outstanding and entitled to voteon the matter.

##  

## SECTION 11.3  VOTING LIMITATIONS ON SHARES HELD BY THEADVISOR, DIRECTORS AND AFFILIATES. Following the sale of any Common Shares in the Initial Public Offering,with respect to Shares owned by the Advisor, any Director, or any of theirAffiliates, neither the Advisor, nor such Director(s), nor any of theirAffiliates may vote or consent on matters submitted to the holders of CommonShares regarding the removal of the Advisor, such Director(s) or any oftheir Affiliates or any transaction between the Company and any of them,provided the preceding restriction shall only apply to Directors with aninterest in the matter submitted to the holders of Common Shares for avote.  In determining the requisitepercentage in interest of Shares necessary to approve a matter on which theAdvisor, such interested Director(s) and any of their Affiliates may notvote or consent, any Shares owned by any of them shall not be included.

##  

## SECTION 11.4  RIGHT OF INSPECTION.  Any holder of Common Shares and anydesignated representative thereof shall be permitted access to the records ofthe Company to which it is entitled under the MGCL at all reasonable times, andmay inspect and copy any of them for a reasonable charge.  Inspection of the Company books and recordsby the office or agency administering the securities laws of a jurisdictionshall be provided upon reasonable notice and during normal business hours.

##  

## SECTION 11.5  ACCESS TO STOCKHOLDER LIST.  An alphabetical list of the names, addressesand telephone numbers of the holders of Common Shares, along with the number ofCommon Shares held by each of them (the “**Stockholder****List**”),shall be maintained as part of the books and records of the Company and shallbe available for inspection by a holder of Common shares or such 

 

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## holder’s agent at thehome office of the Company in accordance with Maryland law.  The Stockholder List shall be updated atleast quarterly to reflect changes in the information contained therein.  A copy of such list shall be mailed to anyholder of Common Shares so requesting within ten (10) days of receipt bythe Company of the request, and  the copyof the Stockholder List shall be printed in alphabetical order, on white paper,and in a readily readable type size (in no event smaller than 10-pointtype).  The Company may impose areasonable charge for expenses incurred in reproduction pursuant to the Stockholderrequest.  A holder of Common Shares mayrequest a copy of the Stockholder List in connection with matters relating toStockholders’ voting rights, the exercise of Stockholder rights under federalproxy laws or for any other proper and legitimate purpose.  Each Stockholder who receives a copy of theStockholder List shall keep such list confidential and shall sign aconfidentiality agreement to the effect that such Stockholder will keep theStockholder List confidential and share such list only with its employees,representatives or agents who agree in writing to maintain the confidentialityof the Stockholder List.

##  

If theAdvisor or the Board neglects or refuses to exhibit, produce or mail a copy ofthe Stockholder List as requested, the Advisor and/or the Board, as the casemay be, shall be liable to any holder of Common Shares requesting the list forthe costs, including reasonable attorneys’ fees, incurred by that Stockholderfor compelling the production of the Stockholder List, and for actual damagessuffered by any holder of Common Shares by reason of such refusal orneglect.  It shall be a defense that theactual purpose and reason for the requests for inspection or for a copy of theStockholder List is to secure such list of Stockholders or other informationfor the purpose of selling such list or copies thereof, or of using the same tosolicit the acquisition of Shares or for another commercial purpose other thanin the interest of the applicant as a Stockholder relative to the affairs of theCompany.  The Company may require theStockholder requesting the Stockholder List to represent that the list is notrequested for a commercial purpose unrelated to the Stockholder’s interest inthe Company.  The remedies providedhereunder to holders of Common Shares requesting copies of the Stockholder Listare in addition, to and shall not in any way limit, other remedies available toStockholders under federal law, or the laws of any state.

 

## SECTION 11.6  REPORTS. The Directors, including the Independent Directors, shall takereasonable steps to ensure that the Company shall cause to be prepared andmailed or delivered to each holder of Common Shares as of a record date afterthe end of the fiscal year and each holder of other publicly held Securitieswithin one hundred twenty (120) days after the end of the fiscal year to whichit relates an annual report for each fiscal year ending after the Commencementof the Initial Public Offering that shall include: (i) financialstatements prepared in accordance with generally accepted accounting principleswhich are audited and reported on by independent certified public accountants; (ii) theratio of the costs of raising capital during the period to the capital raised; (iii) theaggregate amount of advisory fees and the aggregate amount of other fees paidto the Advisor and any Affiliate of the Advisor by the Company and includingfees or charges paid to the Advisor and any Affiliate of the Advisor by thirdparties doing business with the Company; (iv) the Total Operating Expensesof the Company, stated as a percentage of Average Invested Assets and as apercentage of its Net Income; (v) a report from the Independent Directorsthat the policies being followed by the Company are in the best interests ofits holders of Common Shares and the basis for such determination; and (vi) separatelystated, full disclosure of all material terms, factors and circumstancessurrounding any and all transactions involving the Company, Directors,Advisors, Sponsors and any Affiliate thereof occurring in the year for whichthe annual report is made, and the Independent Directors shall be specificallycharged with a duty to examine and comment in the report on the fairness ofsuch transactions.  Alternatively, suchinformation may be provided in a proxy statement delivered with the annualreport.  The annual report may bedelivered by any reasonable means, including through an electronic medium, tothe extent consistent with any then-applicable rules of the Securities andExchange Commission.

 

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## SECTION 11.7  PROXY TO LIQUIDATE.  After six (6) years****following the Termination of the InitialPublic Offering, if the Company is not then Listed, in the process of Listingor making an orderly liquidation and sale of the Company’s assets, and unlesssuch date is extended by the majority vote of the Directors, including amajority of the Independent Directors, (i) the Board shall adopt aresolution that declares a proposed liquidation (within 30 months ofStockholder approval thereof) is advisable on substantially the terms andconditions set forth in the resolution and directs that the proposedliquidation be submitted for consideration at a meeting of the Stockholders and(ii) the Company shall formally proxy the Stockholders holding Sharesentitled to vote thereon to determine whether the Company should be liquidated(the “**Proxy to Liquidate**”) as soonas reasonably practicable following the receipt of independent appraisals ofthe Company’s assets, which the Company shall obtain as part of this proxyprocess, and the filing with and review of such Proxy to Liquidate by theSecurities and Exchange Commission if the Company’s securities are thenregistered with the Commission under the Exchange Act.  Notwithstanding the required Boardresolution, the Proxy to Liquidate need not state the Board’s ongoing supportof the liquidation proposal if the Board does not support the proposal as ofthe date of the Proxy to Liquidate.  Toensure that Stockholders are adequately informed when casting their votes, theProxy to Liquidate furnished to each Stockholder holding Shares entitled tovote thereon shall include financial information setting forth per Share proforma tax and financial projections that assume that all of the Company’sassets will be sold immediately at prices consistent with their appraisedvalues, or such other information as the Company deems appropriate andinformative, provided in all such cases that the furnishing of such informationto Stockholders shall not contravene applicable law or applicable rules andregulations of the Securities and Exchange Commission regarding thesolicitation of proxies, if such rules are applicable.  The Proxy to Liquidate shall set a meeting ofthe Stockholders holding Shares entitled to vote thereon no earlier thanforty-five (45) days after notice thereof, and the actual voting results shallbe tabulated by the Company’s independent accountants or an independent agent,who will receive the votes directly from the Stockholders holding Sharesentitled to vote thereon.  The Companyshall disclose the complete voting results for the Proxy to Liquidate in theCompany’s next annual or quarterly report sent to the Stockholders for theperiod following the date on which voting was completed.  Under no circumstances, however, shall theBoard direct the Operating Partnership to make distributions “in kind” of anyassets to the Stockholders under any dissolution conducted pursuant to thisSection.

##  

Aftertwo years following the Stockholder vote called for above, if the liquidationproposal shall fail to be approved by the Stockholders, then upon receipt bythe Secretary of the Company of written requests from Stockholders holding tenpercent (10%) or more of the outstanding Common Shares the Board and theCompany shall repeat the process described in the preceding paragraph.  The Company shall not be required to sendProxies to Liquidate to Stockholders more frequently than once during every two(2) year period.

 

SECTION 11.8  TENDER OFFERS.  If any Stockholder makes a tender offer,including, without limitation, a “mini-tender” offer, such Stockholder mustcomply with all of the provisions set forth in Regulation 14D of the ExchangeAct, including, without limitation, disclosure and notice requirements, thatwould be applicable if the tender offer was for more than 5% of the outstandingSecurities of the Company, provided, however, that such documents are notrequired to be filed with the Securities and Exchange Commission.  In addition, any such Stockholder mustprovide notice to the Company at least ten (10) business days prior toinitiating any such tender offer.  If anyStockholder initiates a tender offer without complying with the provisions setforth above (a “**Non-Compliant Tender Offer**”), theCompany, in its sole discretion, shall have the right to redeem suchnon-compliant Stockholder’s Shares and any Shares acquired in such tender offer(collectively, the “**Tendered Shares**”)at the lesser of (i) the price then being paid per Share of Common Stockpurchased in the Company’s latest Offering at full purchase price (notdiscounted for commission reductions nor for reductions in sale price permittedpursuant to the distribution reinvestment plan), (ii) the fair market valueof the Shares as determined by an independent valuation obtained by the Companyor (iii) the lowest tender offer price offered in such Non-CompliantTender Offer.  The Company may purchasesuch Tendered Shares upon delivery of the 

 

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purchase price to the Stockholder initiating suchNon-Compliant Tender Offer, and, upon such delivery, the Company may instructany transfer agent to transfer such purchased Shares to the Company.  In addition, any Stockholder who makes aNon-Compliant Tender Offer shall be responsible for all expenses incurred bythe Company in connection with the enforcement of the provisions of this Section 11.8,including, without limitation, expenses incurred in connection with the reviewof all documents related to such tender offer and expenses incurred inconnection with any purchase of Tendered Shares by the Company.  The Company maintains the right to offset anysuch expenses against the dollar amount to be paid by the Company for thepurchase of Tendered Shares pursuant to this Section 11.8.  In addition to the remedies provided herein,the Company may seek injunctive relief, including, without limitation, atemporary or permanent restraining order, in connection with any Non-CompliantTender Offer.  This Section 11.8shall be of no force or effect with respect to any Shares that are then Listed.

 

## SECTION 11.9  RIGHTS OF OBJECTING STOCKHOLDERS.  Holders of Shares shall not be entitled toexercise any rights of an objecting stockholder provided for under Title 3,Subtitle 2 of the MGCL unless the Board, upon the affirmative vote of amajority of the Board, shall determine that such rights apply, with respect toall or any classes or series of stock, to one or more transactions or all transactionsoccurring after the date of such determination in connection with which holdersof such Shares would otherwise be entitled to exercise such rights.

 

SECTION 11.10  UNSOLICITEDTAKEOVER STATUTE.  Until such time as theCommon Shares are Listed, the Company may not elect to be governed by theprovisions of Title 3, Subtitle 8 of the MGCL.

 

# **ARTICLE XII**

# ** **

# **LIABILITY OFSTOCKHOLDERS, DIRECTORS, ADVISORS AND AFFILIATES;**TRANSACTIONS BETWEEN AFFILIATES AND THE COMPANY

# ** **

## SECTION 12.1  LIMITATION OF STOCKHOLDER LIABILITY.  No Stockholder shall be liable for any debt,claim, demand, judgment or obligation of any kind of, against or with respectto the Company by reason of his being a Stockholder, nor shall any Stockholderbe subject to any personal liability whatsoever, in tort, contract orotherwise, to any Person in connection with the Company’s assets or the affairsof the Company by reason of his being a Stockholder.  The Common Shares shall be non-assessable bythe Company upon receipt by the Company of the consideration for which theBoard authorized their issuance.

##  

## SECTION 12.2  LIMITATION OF DIRECTOR AND OFFICERLIABILITY.  Except as otherwise limitedin this Section 12.2, no Director or officer of the Company shall beliable to the Company or to any Stockholder to the extent that Maryland law, ineffect from time to time, and the NASAA REIT Guidelines permit the limitationof the liability of directors and officers of a corporation.  Notwithstanding the foregoing, no Director orofficer of the Company shall be held harmless for any loss or liabilitysuffered by the Company and may be liable to the Company and to any Stockholderfor money damages unless: (i) the Director or officer of the Company hasdetermined, in good faith, that the course of conduct that caused the loss orliability was in the best interests of the Company; (ii) the Director orofficer of the Company was acting on behalf of or performing services for theCompany; (iii) such liability or loss was not the result of negligence ormisconduct, except that in the event the Director is or was an IndependentDirector, the liability or loss was not the result of gross negligence orwillful misconduct by the Independent Director; and (iv) the agreement tohold harmless is recoverable only out of net assets and not from theStockholders.

 

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## SECTION 12.3  INDEMNIFICATION.

### ** **

### **(i)           Exceptas prohibited by paragraphs (ii), or (iii) of this Section 12.3 or bySection 12.4, the Company shall indemnify and, without requiring apreliminary determination of the ultimate entitlement to indemnification, payor reimburse reasonable expenses in advance of final disposition of aproceeding to (a) any individual who is a present or former Director,officer or employee of the Company and who is made or threatened to be made aparty to the proceeding by reason of his or her service in that capacity, (b) anyindividual who, while a Director or officer of the Company and at the requestof the Company, serves or has served as a director, officer, partner or trusteeof another corporation, real estate investment trust, partnership, jointventure, trust, employee benefit plan or other entity and who is made orthreatened to be made a party to the proceeding by reason of his or her servicein that capacity or (c) the Advisor, any of its Affiliates or employees ofany of the foregoing acting as an agent of the Company.  The Company may, with the approval of theBoard or any duly authorized committee thereof, provide such indemnificationand advance for expenses to a person who served a predecessor of the Company inany of the capacities described in (a) or (b) above and to anyemployee or agent of the Company or a predecessor of the Company.  The Board may take such action as is necessaryto carry out this Section 12.3(i). No amendment of the Charter or repeal of any of its provisions shalllimit or eliminate the right of indemnification or advancement of expensesprovided hereunder with respect to acts or omissions occurring prior to suchamendment or repeal.**

### ** **

### **(ii)          Notwithstandingthe foregoing, the Company shall not provide for indemnification of a Director,the Advisor or any Affiliate of the Advisor (the “Indemnitee”) for anyliability or loss suffered by any of them, nor shall any of them be heldharmless for any loss or liability suffered by the Company, unless all of thefollowing conditions are met:**

#### ** **

#### **(a)            TheIndemnitee has determined, in good faith, that the course of conduct thatcaused the loss or liability was in the best interests of the Company.**

 

#### **(b)            TheIndemnitee was acting on behalf of or performing services for the Company.**

 

(c)           Such liability orloss was not the result of (1) negligence or misconduct, in the case thatthe Indemnitee is a Director (other than an Independent Director), the Advisoror an Affiliate of the Advisor or (2) gross negligence or willfulmisconduct, in the case that the Indemnitee is an Independent Director.

 

(d)           Such indemnificationor agreement to hold harmless is recoverable only out of net assets and notfrom the Stockholders.

 

### **(iii)         Notwithstandingthe foregoing, the Company shall not provide indemnification for any loss,liability or expense arising from or out of an alleged violation of federal orstate securities laws by a Director, the Advisor or its Affiliates or anyPerson acting as a broker-dealer unless one or more of the following conditionsare met: (a) there has been a successful adjudication on the merits ofeach count involving alleged material securities law violations as to theparticular indemnitee, (b) such claims have been dismissed with prejudiceon the merits by a court of competent jurisdiction as to the Indemnitee; or (c) acourt of competent jurisdiction approves a settlement of the claims against theparticular indemnitee and finds that indemnification of the settlement and therelated costs should be made, and the court considering the request forindemnification has been advised of the position of the Securities and ExchangeCommission and of the published position of any state securities regulatoryauthority in which Securities were offered or sold as to indemnification forviolations of securities laws.**

### ** **

## SECTION 12.4  PAYMENT OF EXPENSES.  The Company shall pay or reimburse reasonablelegal expenses and other costs incurred by an Indemnitee in advance of finaldisposition of a proceeding 

 

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## only if all of thefollowing are satisfied:  (i) theproceeding relates to acts or omissions with respect to the performance of dutiesor services on behalf of the Company, (ii) the Indemnitee provides theCompany with written affirmation of the Indemnitee’s good faith belief that theIndemnitee has met the standard of conduct necessary for indemnification by theCompany as authorized by Section 12.3 hereof, (iii) the legalproceeding was initiated by a third party who is not a Stockholder or, if by aStockholder of the Company acting in his or her capacity as such, a court ofcompetent jurisdiction approves such advancement, and (iv) the Indemniteeprovides the Company with a written agreement to repay the amount paid orreimbursed by the Company, together with the applicable legal rate of interestthereon, if it is ultimately determined that the Indemnitee did not comply withthe requisite standard of conduct and is not entitled to indemnification.  Any indemnification payment or reimbursementof expenses will be furnished in accordance with the procedures in Section 2-418(e)(2) through(4) of the MGCL or any successor statute.

##  

## SECTION 12.5  EXPRESS EXCULPATORY CLAUSES ININSTRUMENTS.  Neither the Stockholdersnor the Directors, officers, employees or agents of the Company shall be liableunder any written instrument creating an obligation of the Company by reason oftheir being Stockholders, Directors, officers, employees or agents of theCompany, and all Persons shall look solely to the Company’s assets for thepayment of any claim under or for the performance of that instrument.  The omission of the foregoing exculpatorylanguage from any instrument shall not affect the validity or enforceability ofsuch instrument and shall not render any Stockholder, Director, officer,employee or agent liable thereunder to any third party, nor shall the Directorsor any officer, employee or agent of the Company be liable to anyone as aresult of such omission.

##  

# **ARTICLEXIIIAMENDMENT; ROLLUP TRANSACTIONS; EXTRAORDINARY ACTIONS**

# ** **

## SECTION 13.1 AMENDMENT.  The Company reservesthe right from time to time to make any amendment to its Charter, now or hereafterauthorized by law, including any amendment altering the terms or contractrights, as expressly set forth in the Charter, of any Shares of outstandingstock.  All rights and powers conferredby the Charter on Stockholders, Directors and officers are granted subject tothis reservation.  Notwithstandinganything to the contrary contained herein, a majority of the entire Board(including a majority of the Independent Directors) without the vote or consentof the Stockholders may at any time amend the Charter (a) to increase ordecrease the number of aggregate Shares of the Company or the number of Sharesof any class or series that the Company has the right to issue, (b) tochange the name of the Company, or (c) to change the designation ofclasses or series of unissued Shares; provided, however, that an amendment ofthe Charter that adversely affects the rights, preferences andprivileges of holders of Common Shares shall require the concurrence of theholders of a majority of the outstanding Common Shares.

##  

## SECTION 13.2  ROLL-UP TRANSACTIONS.  In connection with any proposed Roll-UpTransaction, an appraisal of all of the Company’s assets shall be obtained froma competent Independent Appraiser.  TheCompany’s assets shall be appraised on a consistent basis, and the appraisalshall be based on the evaluation of all relevant information and shall indicatethe value of the assets as of a date immediately prior to the announcement ofthe proposed Roll-Up Transaction.  Theappraisal shall assume an orderly liquidation of the assets over a 12-monthperiod.  The terms of the engagement ofthe Independent Appraiser shall clearly state that the engagement is for thebenefit of the Company and the Stockholders. A summary of the appraisal, indicating all material assumptionsunderlying the appraisal, shall be included in a report to Stockholders inconnection with a proposed Roll-Up Transaction. In connection with a proposed Roll-Up Transaction, the Person sponsoringthe Roll-Up Transaction shall offer to holders of Common Shares who voteagainst the proposed Roll-Up Transaction the choice of:

 

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(i)            accepting the securities of aRoll-Up Entity offered in the proposed Roll-Up Transaction; or

 

(ii)           one of the following:

 

(a) remaining as Stockholders of theCompany and preserving their interests therein on the same terms and conditionsas existed previously; or

 

(b) receiving cash in an amount equal tothe Stockholder’s pro rata share of the appraised value of the Net Assets ofthe Company.

 

TheCompany is prohibited from participating in any proposed Roll-Up Transaction:

 

(i)            that would result in the holders ofCommon Shares having voting****rights in aRoll-Up Entity that are less than the rights provided for in Sections 11.1,11.2, 11.3, 11.6 and 12.1 hereof;

 

(ii)           that includes provisions that wouldoperate as a material impediment to, or frustration of, the accumulation ofShares by any purchaser of the securities of the Roll-Up Entity (except to theminimum extent necessary to preserve the tax status of the Roll-Up Entity), orwhich would limit the ability of an investor to exercise the voting rights ofits securities of the Roll-Up Entity on the basis of the number of Shares heldby that investor;

 

(iii)          in which investor’s rights to accessof records of the Roll-Up Entity will be less than those described in Sections11.4 and 11.5 hereof; or

 

(iv)          in which any of the costs of theRoll-Up Transaction would be borne by the Company if the Roll-Up Transaction isnot approved by the holders of Common Shares.

 

## SECTION 13.3 EXTRAORDINARY ACTIONS. Notwithstanding any provision of law permitting or requiring any actionto be taken or approved by the affirmative vote of the holders of shares entitledto cast a greater number of votes, any such action shall be effective and validif taken or approved by the affirmative vote of holders of shares entitled tocast a majority of all the votes entitled to be cast on the matter.

##  

# **ARTICLEXIVMISCELLANEOUS**

# ** **

## SECTION 14.1  GOVERNING LAW.  These Articles of Amendment and Restatementare executed by the individual named below and delivered in the State ofMaryland with reference to the laws thereof, and the rights of all parties andthe validity, construction and effect of every provision hereof shall besubject to and construed according to the MGCL without regard to conflicts oflaws provisions thereof; provided that the foregoing choice of law shall notrestrict the application of any state’s securities laws to the sale ofsecurities to its residents or within such state.  The provisions of this Section 14.1shall cease to have any effect on the earlier of the date upon which (i) theCompany shall have a class of security that is a “covered security,” as definedin the Securities Act or (ii) the Company is no longer subject to theNASAA REIT Guidelines.

##  

## SECTION 14.2  RELIANCE BY THIRD PARTIES.  Any certificate shall be final and conclusiveas to any persons dealing with the Company if executed by an individual who,according to the records of the Company or of any recording office in whichthis Charter may be recorded, appears to be the Secretary or an AssistantSecretary of the Company or a Director, and if certifying to: (i) thenumber or 

 

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## identity of Directors,officers of the Company or Stockholders; (ii) the due authorization of theexecution of any document; (iii) the action or vote taken, and theexistence of a quorum, at a meeting of the Board or Stockholders; (iv) acopy of the Charter or of the Bylaws as a true and complete copy as then inforce; (v) an amendment to this Charter; (vi) the dissolution of theCompany; or (vii) the existence of any fact or facts that relate to theaffairs of the Company.  No purchaser,lender, transfer agent or other person shall be bound to make any inquiryconcerning the validity of any transaction purporting to be made on behalf ofthe Company by the Board or by any duly authorized officer, employee or agentof the Company.

##  

## SECTION 14.3  PROVISIONS IN CONFLICT WITH LAW ORREGULATIONS.

##  

(i)            The provisions ofthis Charter are severable, and if the Board shall determine that any one ormore of such provisions impermissibly conflict with the NASAA REIT Guidelinesor are in conflict with the REIT Provisions of the Code, or other applicablefederal or state laws, the conflicting provisions shall be deemed never to haveconstituted a part of this Charter, even without any amendment of this Charter;provided, however, that such determination by the Board shall not affect orimpair any of the remaining provisions of this Charter or render invalid orimproper any action taken or omitted prior to such determination.  No Director shall be liable for making orfailing to make such a determination.

 

(ii)           If any provision of this Chartershall be held invalid or unenforceable in any jurisdiction, such holding shallnot in any manner affect or render invalid or unenforceable such provision inany other jurisdiction or any other provision of this Charter in any jurisdiction.

 

## SECTION 14.4  CONSTRUCTION. In this Charter, unless the context otherwise requires, words used inthe singular or in the plural include both the plural and singular and wordsdenoting any gender include both genders. The title and headings of different parts are inserted for convenienceand shall not affect the meaning, construction or effect of this Charter.  In defining or interpreting the powers andduties of the Company and its Directors and officers, reference may be made, tothe extent appropriate, to the Code and to Titles 1 through 3 of the MGCL.

##  

## SECTION 14.5  RECORDATION. These Articles of Amendment and Restatement and any amendment heretoshall be filed for record with the State Department of Assessments and Taxationof Maryland and may also be filed or recorded in such other places as the Boarddeems appropriate, but failure to file for record these Articles or anyamendment hereto in any office other than in the State of Maryland shall notaffect or impair the validity or effectiveness of these Articles or anyamendment hereto.  Any Articles ofAmendment and Restatement shall, upon filing, be conclusive evidence of allamendments contained therein and may thereafter be referred to in lieu of theoriginal Articles of Incorporation and the various amendments thereto.

 

**THIRD**: The Second Articles of Amendment and Restatement of the Charter ashereinabove set forth were duly advised the Board of Directors of the Companyand approved by the sole stockholder of the Company as required by the MGCL.

 

**FOURTH:** The current address of the principal office of the Company is as setforth in Article III of the foregoing Second Articles of Amendment andRestatement of the Charter.

 

**FIFTH: **The name and address of the Company’s current residentagent are as set forth in Article III of the foregoing Second Articles ofAmendment and Restatement of the Charter.

 

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**SIXTH:**  As of the date of the filing ofthe foregoing Second Articles of Amendment and Restatement of the Charter, thenumber of directors of the Company and the names of those currently in officeare as set forth in Section 6.1 of the foregoing Second Articles ofAmendment and Restatement of the Charter.

 

[SIGNATURES ON FOLLOWING PAGE]

 

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INWITNESS WHEREOF, Behringer Harvard Opportunity REIT II, Inc. has causedthese Second Articles of Amendment and Restatement to be signed in its name andon its behalf by its President, and attested by its Secretary, on this 29th dayof November, 2007.

 

 
|       | By:        | /s/ Robert S.  Aisner            |
|------------|------------|----------------------------------|
|       |       | Robert S. Aisner                 |
|       |       | President                        |
|       |       |                             |
|       |       |                             |
| ** ** | **ATTEST** |
| ** ** | ** ** |
| ** ** | ** ** |
|       | By:        | /s/ Gerald J.  Reihsen, III |
|       |       | Gerald J.  Reihsen, III     |
|       |       | Secretary                        |

 

THE UNDERSIGNED,President of Behringer Harvard Opportunity REIT II, Inc., who executed onbehalf of said Company the foregoing Second Articles of Amendment andRestatement, of which this certificate is made a part, hereby acknowledges theforegoing Second Articles of Amendment and Restatement to be the corporate actof said Company and, as to all matters or facts required to be verified underoath, further acknowledges that, to the best of his knowledge, information andbelief, these matters and facts are true in all material respects and that thisstatement is made under the penalties of perjury.

 

 
|   | By:    | /s/ Robert S.  Aisner |
|--------|--------|-----------------------|
|   |   | Robert S. Aisner      |
|   |   | President             |

 

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**FIRST ARTICLES OF AMENDMENT**

** **

**OF**

** **

**BEHRINGERHARVARD OPPORTUNITY REIT II, INC.**

 

**THIS IS TO CERTIFY THAT:**

 

**FIRST:**  Pursuant to Section 2-604of the Maryland General Corporation Law (the “MGCL”) Behringer HarvardOpportunity REIT II, Inc., a Maryland corporation, desires to amend itscharter as currently in effect and as hereinafter amended.

** **

**SECOND**:  The SecondAmended and Restated Articles of Incorporation shall be amended as follows:

 

1.               The definition of “Listing” in Article IVis hereby replaced with the following:

 

“**LISTING**” means the effective date ofthe Form 8-A (or any successor form) filed with the Securities andExchange Commission to register the Common Shares on a national securitiesexchange and the commencement of trading of the Common Shares on the relevantnational securities exchange.  Upon suchListing, the Common Shares shall be deemed Listed.  A Listing shall also be deemed to occur onthe effective date of a merger in which the consideration received by theholders of Common Shares is securities of another issuer that are listed on anational securities exchange.

 

2.               Section 5.3(iii) is replacedwith the following:

 

CONVERSION.

 

(a)                                  Each outstanding Convertible Share shallbecome convertible into a number of Common Shares as and at the time set forthin paragraph (b) of this Section 5.3(iii), automatically and withoutany further action required, upon the occurrence of the first to occur of anyof the following events (the “**Triggering Event**”):(A) the date when the Company shall have paid total Distributions in anamount equal to or in excess of the sum of Invested Capital and theStockholders’ 10% Return; or (B) Listing. Each outstanding Convertible Share shall become convertible into anumber of Common Shares as set forth in paragraph (d) of this Section 5.3(iii),automatically and without any further action required, upon the occurrence ofan Advisory Management AgreementTermination (as defined below).

 

(b)                                 Upon the occurrence of a TriggeringEvent, each Convertible Share shall be converted into a number of Common Sharesequal to 1/1000 of the result of (I) the Conversion Product divided by (II) thequotient of the Company Value divided by the number of outstanding CommonShares on the date of the conversion. Such conversion, in the case of conversion upon Listing, will not occuruntil the 31st trading day after the date of the Listing.

 

(c)                                  An “Advisory Management AgreementTermination” shall mean a termination or expiration without renewal (except tothe extent of a termination or expiration with the Company followed by theadoption of the same or substantially similar Advisory Management Agreementwith a successor, whether by merger, consolidation, sale of all orsubstantially all of the assets of the Company, or 

 

----

 

                                                otherwise) of the Company’s AdvisoryManagement Agreement with Behringer Harvard Opportunity Advisors II LP for anyreason except for a termination or expiration without renewal due to a materialbreach by Behringer Harvard Opportunity Advisors II LP of the Advisory ManagementAgreement.

 

(d)                                 Upon the occurrence of an AdvisoryManagement Agreement Termination prior to a Triggering Event, each ConvertibleShare will become convertible (but will not convert except as provided in thenext sentence) into a number of Common Shares equal to 1/1000 of the result of (I) theTermination Conversion Product divided by (II) the quotient of the CompanyValue divided by the number of outstanding Common Shares on the TerminationDate.  Thereafter, upon the occurrence of aTriggering Event each Convertible Share will automatically convert into thenumber of Common Shares determined pursuant to the preceding sentence; providedthat, if the Triggering Event is a Listing, the Convertible Shares will convertonly if the sum of the Company Value plus total Distributions paid to holdersof Common Shares through the date of the Listing exceeds the sum of InvestedCapital plus the Stockholders’ 10% Return.

 

(e)                                  If, in the good faith judgment of theBoard, full conversion of the Convertible Shares would jeopardize the Company’sstatus as a REIT, then only such number of Convertible Shares (or fractionthereof) shall be converted into Common Shares such that the Company’s REITstatus is not jeopardized.  Eachremaining Convertible Share shall convert as provided herein when the Board ofDirectors determines that conversion of such Convertible Share would notjeopardize the Company’s qualification as a REIT.  The Board of Directors shall consider whetherit can make this determination at least once per quarter following a TriggeringEvent.

 

(f)                                    As promptly as practicable after aTriggering Event, including a Triggering Event that causes the ConvertibleShares to automatically convert into Common Shares pursuant to paragraph (d) ofthis Section 5.3(iii), the Company shall issue and deliver to each holderof Convertible Shares a certificate or certificates representing the number ofCommon Shares into which his, her or its Convertible Shares were converted (orshall cause the issuance of the Common Shares to be reflected in the Company’sstock ledger, if the Common Shares are uncertificated).  The person in whose name the Common Sharesare issued shall be deemed to have become a Stockholder of record on the dateof conversion.

 

(g)                                 The issuance of Common Shares onconversion of outstanding Convertible Shares shall be made by the Companywithout charge for expenses or for any tax in respect of the issuance of theCommon Shares.

 

(h)                                 In the event of any reclassification orrecapitalization of the outstanding Common Shares (except a change in parvalue, or from no par value to par value, or subdivision or other split orcombination of shares), or in case of any consolidation or merger to which theCompany is a party, except a merger in which the Company is the survivingcorporation and which does not result in any reclassification orrecapitalization, the Company or the successor or purchasing business entityshall provide that the holder of each Convertible Share then outstanding shallthereafter continue to have the right, with as nearly the same economic rightsand effects as possible, to convert, upon a Triggering Event, the ConvertibleShares into the kind and amount of stock and other securities and 

 

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                                                property received by holders of theCommon Shares of the Company in connection with the reclassification,recapitalization, consolidation or merger. The provisions of this paragraph (h) of this Section 5.3(iii) shallsimilarly apply to successive reclassifications, recapitalizations,consolidations or mergers.

 

 (i)                                  Common Shares issued on conversion of ConvertibleShares shall be issued as fully paid shares and shall be nonassessable by theCompany. The Company shall, at all times, reserve and keep available, for thepurpose of effecting the conversion of the outstanding Convertible Shares, thenumber of its duly authorized Common Shares as shall be sufficient to effectthe conversion of all of the outstanding Convertible Shares.

 

(j)                                     Convertible Shares converted as providedherein shall become authorized but unissued Common Shares.

 

**THIRD**:  The First Articles of Amendment ashereinabove set forth were duly advised the Board of Directors of the Companyand approved by the sole stockholder of the Company as required by the MGCL.

 

 

[SIGNATURES ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, Behringer Harvard Opportunity REIT II, Inc.has caused these First Articles of Amendment to be signed in its name and onits behalf by its President, and attested by its Secretary, on this 27 day ofMarch, 2008.

 

 
|       |       |                     |
|------------|------------|--------------------------|
|       | By:        | /s/ Robert S.  Aisner    |
|       |       | Robert S. Aisner         |
|       |       | President                |
|       |       |                     |
| ** ** | **ATTEST** |
| ** ** | ** ** | ** **               |
|       | By:        | /s/ Telisa Webb  Schelin |
|       |       | Telisa Webb  Schelin     |
|       |       | Secretary                |

 

THE UNDERSIGNED,President of Behringer Harvard Opportunity REIT II, Inc., who executed onbehalf of said Company the foregoing First Articles of Amendment, of which thiscertificate is made a part, hereby acknowledges the foregoing First Articles ofAmendment to be the corporate act of said Company and, as to all matters orfacts required to be verified under oath, further acknowledges that, to thebest of his knowledge, information and belief, these matters and facts are truein all material respects and that this statement is made under the penalties ofperjury.

 

 
|   | By:    | /s/ Robert S.  Aisner |
|--------|--------|-----------------------|
|   |   | Robert S. Aisner      |
|   |   | President             |

 

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**SECOND ARTICLES OF AMENDMENT**

** **

**OF**

** **

**BEHRINGERHARVARD OPPORTUNITY REIT II, INC.**

** **

**THIS IS TO CERTIFY THAT:**

 

**FIRST:**  Pursuant to Section 2-604of the Maryland General Corporation Law (the “MGCL”) Behringer HarvardOpportunity REIT II, Inc., a Maryland corporation, desires to amend itscharter as currently in effect and as hereinafter amended.

** **

**SECOND**:  The SecondAmended and Restated Articles of Incorporation as amended by the First Articlesof Amendment shall be amended as follows:

 

1.               The definition of “Termination ConversionProduct” is hereby deleted in Article IV.

 

2.               The following definition is herebyinserted in the appropriate alphabetical location in Article IV:

 

“**PRORATED TERM**” means the quotient, the numerator ofwhich is the number of days from and including the effective date of theInitial Public Offering through and including the date of the Advisory ManagementAgreement Termination and the denominator of which is the number of dayselapsed from and including the effective date of the Initial Public Offeringthrough and including the date of the Triggering Event.

 

3.               Section 5.3(iii) is replacedwith the following:

 

(iii)                               CONVERSION.

 

(a)                                  Each outstanding Convertible Share shallbecome convertible  into a number ofCommon Shares as and at the time set forth in paragraph (b) of this Section 5.3(iii),automatically and without any further action required, upon the occurrence ofthe first to occur of any of the following events (the “**TriggeringEvent**”): (A) the date when the Company shall have paidtotal Distributions in an amount equal to or in excess of the sum of InvestedCapital and the Stockholders’ 10% Return; or (B) Listing.

 

(b)                                 If the Triggering Event occurs prior toan Advisory Management Agreement Termination (as defined below), eachConvertible Share shall be converted into a number of Common Shares equal to1/1000 of the result of (I) the Conversion Product divided by (II) thequotient of the Company Value divided by the number of outstanding CommonShares on the date of the conversion. Such conversion, in the case of conversion upon Listing, will not occuruntil the 31st trading day after the date of the Listing.  If the Triggering Event occurs after anAdvisory Management Agreement Termination, then each Convertible Share shall beconverted into that number of Common Shares as set forth above multiplied bythe Prorated Term.

 

(c)                                  An “Advisory Management AgreementTermination” shall mean a termination or expiration without renewal (except tothe extent of a termination or expiration with the Company followed by theadoption of the same or substantially similar Advisory Management Agreementwith a successor, whether by merger, 

 

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consolidation, sale of all or substantially all of the assets of theCompany, or otherwise) of the Company’s Advisory Management Agreement withBehringer Harvard Opportunity Advisors II LP for any reason except for atermination or expiration without renewal due to a material breach by BehringerHarvard Opportunity Advisors II LP of the Advisory Management Agreement.

 

(d)                                 If, in the good faith judgment of theBoard, full conversion of the Convertible Shares would jeopardize the Company’sstatus as a REIT, then only such number of Convertible Shares (or fractionthereof) shall be converted into Common Shares such that the Company’s REITstatus is not jeopardized.  Eachremaining Convertible Share shall convert as provided herein when the Board ofDirectors determines that conversion of such Convertible Share would notjeopardize the Company’s qualification as a REIT.  The Board of Directors shall consider whetherit can make this determination at least once per quarter following a TriggeringEvent.

 

(e)                                  As promptly as practicable after aTriggering Event, the Company shall issue and deliver to each holder ofConvertible Shares a certificate or certificates representing the number ofCommon Shares into which his, her or its Convertible Shares were converted (orshall cause the issuance of the Common Shares to be reflected in the Company’sstock ledger, if the Common Shares are uncertificated).  The person in whose name the Common Sharesare issued shall be deemed to have become a Stockholder of record on the dateof conversion.

 

(f)                                    The issuance of Common Shares onconversion of outstanding Convertible Shares shall be made by the Companywithout charge for expenses or for any tax in respect of the issuance of theCommon Shares.

 

(g)                                 In the event of any reclassification orrecapitalization of the outstanding Common Shares (except a change in parvalue, or from no par value to par value, or subdivision or other split orcombination of shares), or in case of any consolidation or merger to which theCompany is a party, except a merger in which the Company is the survivingcorporation and which does not result in any reclassification orrecapitalization, the Company or the successor or purchasing business entityshall provide that the holder of each Convertible Share then outstanding shallthereafter continue to have the right, with as nearly the same economic rightsand effects as possible, to convert, upon a Triggering Event, the ConvertibleShares into the kind and amount of stock and other securities and propertyreceived by holders of the Common Shares of the Company in connection with thereclassification, recapitalization, consolidation or merger.  The provisions of this paragraph (g) ofthis Section 5.3(iii) shall similarly apply to successivereclassifications, recapitalizations, consolidations or mergers.

 

 (h)                              Common Shares issued on conversion of ConvertibleShares shall be issued as fully paid shares and shall be nonassessable by theCompany. The Company shall, at all times, reserve and keep available, for thepurpose of effecting the conversion of the outstanding Convertible Shares, thenumber of its duly authorized Common Shares as shall be sufficient to effectthe conversion of all of the outstanding Convertible Shares.

 

(i)                                     Convertible Shares converted as providedherein shall become authorized but unissued Common Shares.

 

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**THIRD**:  The Second Articles of Amendment ashereinabove set forth were duly advised the Board of Directors of the Companyand approved by the sole stockholder of the Company as required by the MGCL.

 

[SIGNATURES ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, Behringer Harvard Opportunity REIT II, Inc.has caused these Second Articles of Amendment to be signed in its name and onits behalf by its President, and attested by its Secretary, on this 11th day ofNovember, 2008.

 

 
|       | By:        | /s/ Robert S.  Aisner |
|------------|------------|-----------------------|
|       |       | Robert S. Aisner      |
|       |       | President             |
|       |       |                  |
| ** ** | ** ** | **ATTEST**            |
| ** ** | ** ** | ** **            |
|       | By:        | /s/ Terri  Reynolds   |
|       |       | Terri Reynolds        |
|       |       | Secretary             |

 

THE UNDERSIGNED,President of Behringer Harvard Opportunity REIT II, Inc., who executed onbehalf of said Company the foregoing Second Articles of Amendment, of whichthis certificate is made a part, hereby acknowledges the foregoing SecondArticles of Amendment to be the corporate act of said Company and, as to allmatters or facts required to be verified under oath, further acknowledges that,to the best of his knowledge, information and belief, these matters and factsare true in all material respects and that this statement is made under thepenalties of perjury.

 

 
|   | By:    | /s/ Robert S.  Aisner |
|--------|--------|-----------------------|
|   |   | Robert S. Aisner      |
|   |   | President             |

 

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