Document:

Exhibit 10.32

 

Execution Version

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

BH-JMIR KAUAI HOTEL OPERATOR, LLC

 

OCTOBER 20, 2010

 

THE LIMITED LIABILITY COMPANY INTERESTS REPRESENTED BY THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION AS PROVIDED IN THOSE STATUTES. THE SALE, ASSIGNMENT, TRANSFER, EXCHANGE, MORTGAGE, PLEDGE OR OTHER DISPOSITION OF ANY LIMITED LIABILITY COMPANY INTEREST IS RESTRICTED IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, AND THE EFFECTIVENESS OF ANY SUCH SALE OR OTHER DISPOSITION MAY BE CONDITIONED UPON, AMONG OTHER THINGS, RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS. BY ACQUIRING THE LIMITED LIABILITY COMPANY INTERESTS REPRESENTED BY THIS AGREEMENT, EACH MEMBER REPRESENTS THAT IT WILL NOT SELL OR OTHERWISE DISPOSE OF ITS LIMITED LIABILITY COMPANY INTERESTS WITHOUT REGISTRATION OR OTHER COMPLIANCE WITH THE AFORESAID STATUTES AND RULES AND REGULATIONS THEREUNDER AND THE TERMS AND PROVISIONS OF THIS AGREEMENT.

 

 

TABLE OF CONTENTS

 

	
 
  	
 
  	
Page
  
	
 
  	
 
  	
 
  
	
ARTICLE I
  	
ORGANIZATION
  	
1
  
	
 
  	
 
  	
 
  
	
SECTION 1.1
  	
Formation
  	
1
  
	
SECTION 1.2
  	
Name
  	
1
  
	
SECTION 1.3
  	
Principal Place of Business; Other Places of Business; and Registered Agent
  	
2
  
	
SECTION 1.4
  	
Purpose and Business
  	
2
  
	
SECTION 1.5
  	
Powers
  	
3
  
	
SECTION 1.6
  	
Term
  	
3
  
	
SECTION 1.7
  	
Partnership Status for Income Tax Purposes
  	
3
  
	
 
  	
 
  	
 
  
	
ARTICLE II
  	
DEFINED TERMS
  	
3
  
	
 
  	
 
  	
 
  
	
SECTION 2.1
  	
Defined Terms
  	
3
  
	
 
  	
 
  	
 
  
	
ARTICLE III
  	
CAPITAL CONTRIBUTIONS AND DEFAULT
  	
18
  
	
 
  	
 
  	
 
  
	
SECTION 3.1
  	
Initial Capital Contributions
  	
18
  
	
SECTION 3.2
  	
Additional Capital Contributions
  	
20
  
	
SECTION 3.3
  	
Intentionally Omitted
  	
21
  
	
SECTION 3.4
  	
Default; Remedy
  	
21
  
	
 
  	
 
  	
 
  
	
ARTICLE IV
  	
CAPITAL ACCOUNTS
  	
24
  
	
 
  	
 
  	
 
  
	
SECTION 4.1
  	
Capital Accounts
  	
24
  
	
SECTION 4.2
  	
Return of Capital
  	
25
  
	
SECTION 4.3
  	
Liability of Members
  	
25
  
	
 
  	
 
  	
 
  
	
ARTICLE V
  	
DISTRIBUTIONS
  	
25
  
	
 
  	
 
  	
 
  
	
SECTION 5.1
  	
Distributions Generally
  	
25
  
	
SECTION 5.2
  	
Direction of Distribution Proceeds
  	
26
  
	
SECTION 5.3
  	
Priority of Cash Flow Distributions
  	
26
  
	
SECTION 5.4
  	
Special Distributions
  	
26
  
	
SECTION 5.5
  	
Distributions Upon Liquidation
  	
27
  
	
SECTION 5.6
  	
Limitations on Distributions
  	
27
  
	
SECTION 5.7
  	
Tax Payments
  	
27
  
	
 
  	
 
  	
 
  
	
ARTICLE VI
  	
ALLOCATION OF PROFITS AND LOSSES
  	
28
  
	
 
  	
 
  	
 
  
	
SECTION 6.1
  	
General Allocation of Profits and Losses
  	
28
  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
 
  	
 
  	
Page
  
	
 
  	
 
  	
 
  
	
SECTION 6.2
  	
Regulatory Allocations
  	
28
  
	
SECTION 6.3
  	
Tax Allocations
  	
30
  
	
SECTION 6.4
  	
Other Provisions
  	
30
  
	
 
  	
 
  	
 
  
	
ARTICLE VII
  	
MANAGEMENT AND OPERATIONS
  	
31
  
	
 
  	
 
  	
 
  
	
SECTION 7.1
  	
Designation and General Authority of Manager
  	
31
  
	
SECTION 7.2
  	
Duties of Manager
  	
31
  
	
SECTION 7.3
  	
Reliance by Third Parties
  	
36
  
	
SECTION 7.4
  	
Major Decisions
  	
36
  
	
SECTION 7.5
  	
Annual Budget
  	
38
  
	
SECTION 7.6
  	
Expenses and Fees
  	
39
  
	
SECTION 7.7
  	
Duties and Conflicts
  	
40
  
	
SECTION 7.8
  	
Exculpation; Indemnification
  	
41
  
	
SECTION 7.9
  	
Certain Provisions Related to Security Agreement
  	
43
  
	
 
  	
 
  	
 
  
	
ARTICLE VIII
  	
BOOKS AND RECORDS; TAX MATTERS MEMBER
  	
43
  
	
 
  	
 
  	
 
  
	
SECTION 8.1
  	
Books of Account
  	
43
  
	
SECTION 8.2
  	
Financial and Operating Information
  	
44
  
	
SECTION 8.3
  	
Tax Matters Member
  	
46
  
	
SECTION 8.4
  	
The Company Accountant
  	
46
  
	
SECTION 8.5
  	
REIT Matters
  	
46
  
	
 
  	
 
  	
 
  
	
ARTICLE IX
  	
TRANSFERS OF COMPANY INTERESTS
  	
47
  
	
 
  	
 
  	
 
  
	
SECTION 9.1
  	
Transfers of Company Interests Generally
  	
47
  
	
SECTION 9.2
  	
Succession by Operation of Law and Permitted Transfers
  	
47
  
	
SECTION 9.3
  	
General Conditions Applicable to Transfers
  	
48
  
	
SECTION 9.4
  	
Allocations and Adjustments Upon Transfer
  	
50
  
	
SECTION 9.5
  	
Section 754 Election
  	
50
  
	
SECTION 9.6
  	
Single Member
  	
51
  
	
SECTION 9.7
  	
Bankruptcy or Dissolution of a Member
  	
51
  
	
 
  	
 
  	
 
  
	
ARTICLE X
  	
PUT OPTION; BUY/SELL RIGHTS
  	
51
  
	
 
  	
 
  	
 
  
	
SECTION 10.1
  	
Put Option
  	
51
  
	
SECTION 10.2
  	
Buy/Sell Rights
  	
52
  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
 
  	
 
  	
Page
  
	
 
  	
 
  	
 
  
	
ARTICLE XI
  	
DISSOLUTION, LIQUIDATION AND TERMINATION
  	
56
  
	
 
  	
 
  	
 
  
	
SECTION 11.1
  	
Dissolution
  	
56
  
	
SECTION 11.2
  	
Liquidation and Termination
  	
57
  
	
SECTION 11.3
  	
Adjustment of Distributions
  	
58
  
	
SECTION 11.4
  	
Date of Termination
  	
58
  
	
SECTION 11.5
  	
Liquidating Member
  	
58
  
	
SECTION 11.6
  	
Withdrawals
  	
58
  
	
SECTION 11.7
  	
Governance
  	
58
  
	
SECTION 11.8
  	
Return of Capital
  	
59
  
	
 
  	
 
  	
 
  
	
ARTICLE XII
  	
DEFAULT BY MEMBER
  	
59
  
	
 
  	
 
  	
 
  
	
SECTION 12.1
  	
Events of Default
  	
59
  
	
SECTION 12.2
  	
Effect of Event of Default
  	
60
  
	
 
  	
 
  	
 
  
	
ARTICLE XIII
  	
REPRESENTATIONS AND WARRANTIES OF THE MEMBERS
  	
60
  
	
 
  	
 
  	
 
  
	
SECTION 13.1
  	
Representations and Warranties of Members
  	
60
  
	
SECTION 13.2
  	
Member Indemnity
  	
63
  
	
SECTION 13.3
  	
Survival
  	
64
  
	
 
  	
 
  	
 
  
	
ARTICLE XIV
  	
MISCELLANEOUS
  	
64
  
	
 
  	
 
  	
 
  
	
SECTION 14.1
  	
Further Assurances
  	
64
  
	
SECTION 14.2
  	
Notices
  	
64
  
	
SECTION 14.3
  	
Governing Law
  	
65
  
	
SECTION 14.4
  	
Certain Rules of Construction
  	
65
  
	
SECTION 14.5
  	
Pronouns
  	
66
  
	
SECTION 14.6
  	
Successors and Assigns
  	
66
  
	
SECTION 14.7
  	
Extension Not a Waiver
  	
66
  
	
SECTION 14.8
  	
Severability
  	
66
  
	
SECTION 14.9
  	
Consents
  	
66
  
	
SECTION 14.10
  	
Entire Agreement
  	
66
  
	
SECTION 14.11
  	
Counterparts
  	
66
  
	
SECTION 14.12
  	
Creditors
  	
67
  
	
SECTION 14.13
  	
Ownership of Company Property
  	
67
  

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
 
  	
 
  	
Page
  
	
 
  	
 
  	
 
  
	
SECTION 14.14
  	
Time of the Essence
  	
67
  
	
SECTION 14.15
  	
Recalculation of Interest
  	
67
  
	
SECTION 14.16
  	
Waiver of Partition
  	
67
  
	
SECTION 14.17
  	
Calculation of Days
  	
67
  
	
SECTION 14.18
  	
Publicity
  	
67
  
	
SECTION 14.19
  	
Confidentiality
  	
68
  
	
SECTION 14.20
  	
Securities
  	
69
  
	
SECTION 14.21
  	
Venue
  	
69
  
	
SECTION 14.22
  	
WAIVER OF JURY TRIAL
  	
69
  
	
SECTION 14.23
  	
Prevailing Party Costs and Fees
  	
69
  
	
SECTION 14.24
  	
Force Majeure
  	
69
  
	
SECTION 14.25
  	
Third Party Beneficiaries
  	
70
  
	
SECTION 14.26
  	
Company Counsel
  	
70
  
	
 
  	
 
  	
 
  
	
ARTICLE XV
  	
PATRIOT ACT
  	
71
  
	
 
  	
 
  	
 
  
	
SECTION 15.1
  	
Compliance with International Trade Control Laws and OFAC Regulations
  	
71
  
	
SECTION 15.2
  	
Member’s Funds
  	
71
  
	
SECTION 15.3
  	
Member Compliance with Patriot Act
  	
72
  
	
SECTION 15.4
  	
Cooperation with Other Members
  	
72
  
	
SECTION 15.5
  	
Actions Taken Pursuant to Anti-Money Laundering Laws
  	
72
  
	
 
  	
 
  	
 
  
	
ARTICLE XVI
  	
JMIR GUARANTY
  	
72
  
	
 
  	
 
  	
 
  
	
SECTION 16.1
  	
Guaranty
  	
72
  

 

iv

 

LIST OF EXHIBITS AND SCHEDULES

 

	
Exhibit A
  	
 
  	
-
  	
 
  	
Guaranty Sharing Agreement
  
	
 
  	
 
  	
 
  	
 
  	
 
  
	
Exhibit B
  	
 
  	
-
  	
 
  	
Guaranty of Obligations of JMIR
  
	
 
  	
 
  	
 
  	
 
  	
 
  
	
Schedule 1
  	
 
  	
-
  	
 
  	
Approved Annual Budget for 2010
  
	
 
  	
 
  	
 
  	
 
  	
 
  
	
Schedule 2
  	
 
  	
-
  	
 
  	
Approved Renovations Budget
  
	
 
  	
 
  	
 
  	
 
  	
 
  
	
Schedule 3
  	
 
  	
-
  	
 
  	
Officers
  

 

v

 

LIMITED LIABILITY COMPANY AGREEMENT OF

BH-JMIR KAUAI HOTEL OPERATOR, LLC

 

THIS LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) is executed on and made effective as of October 20, 2010 (the “Effective Date”), by and between the KAUAI HOTEL SERIES OF JMIR INVESTMENTS III, LP,  a Delaware series limited partnership (“JMIR”), having an office at the address set forth in Section 14.2 hereof, BEHRINGER HARVARD KAUAI HOTEL TRS, Inc., a Delaware corporation (“Investor” and together with JMIR, the “Members,” with each being referred to, individually, as a “Member”), having an office at the address set forth in Section 14.2 hereof, and JMIR-PROJECT MANAGER LLC, a Delaware limited liability company (the “Manager”), having an office at the address set forth in Section 14.2 hereof, pursuant to the provisions of the Delaware Limited Liability Company Act, Title 6 of the Delaware Code, Section 18-101 et seq., as amended from time to time (“Delaware Act”).  Capitalized terms used herein are defined in Article II hereof or as elsewhere provided herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and for good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Members do hereby mutually covenant and agree as follows:

 

ARTICLE I

 

ORGANIZATION

 

SECTION 1.1                 Formation.

 

(a)           The Members hereby agree to form the Company as a limited liability company under the Delaware Act for the purposes and upon the terms and conditions hereinafter set forth. The rights and liabilities of the Members shall be as provided in the Delaware Act, except as otherwise expressly provided in this Agreement.  In the event of any inconsistency between any terms and conditions contained in this Agreement and any non-mandatory provisions of the Delaware Act, the terms and conditions contained in this Agreement shall govern.

 

(b)           The fact that the Certificate is on file in the office of the Secretary of State shall constitute notice that the Company is a limited liability company, pursuant to Section 18-207 of the Delaware Act.

 

(c)           The Manager is hereby authorized to file and record any amendments to the Certificate and such other documents as may be reasonably required or appropriate under the Delaware Act or the laws of any other jurisdiction in which the Company may conduct business or own property.

 

SECTION 1.2                 Name.  The name of the Company shall be “BH-JMIR KAUAI HOTEL OPERATOR, LLC.”  The Company may also conduct business at the same time 

 

 

through Subsidiaries of the Company or under one or more fictitious names determined by the Manager and Approved by the Investor.

 

SECTION 1.3                 Principal Place of Business; Other Places of Business; and Registered Agent.  The principal place of business of the Company is located at 15601 Dallas Parkway, Suite 600, Addison, Texas 75001, or such other place or places as the Manager may from time to time designate with the Approval of the Investor.  The Company may maintain offices and places of business at such other place or places as the Manager determines with the Approval of the Investor, which Approval shall not be unreasonably withheld.  So long as required by the Delaware Act, the Company shall continuously maintain a registered office and a registered agent for service of process on the Company in the State of Delaware.

 

SECTION 1.4                 Purpose and Business.

 

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

 

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

 

(ii)           directly or indirectly acquire, own or lease (as applicable), finance, pledge, encumber, redevelop, improve, renovate, reposition, operate, let or sublet (as applicable), manage, repair, dispose of and otherwise deal with the Property and Company Assets leased or acquired, as applicable, by the Company in accordance with the terms hereof; and

 

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

 

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

 

(c)           In order to facilitate the purposes of the Company, as set forth above, the Company may form or acquire one or more subsidiary special purpose entities to lease the Property or own all or any part of the Company Assets or to conduct a portion of the Company’s business (each a “Subsidiary”).  The Manager shall cause the Company to form a separate Subsidiary to acquire a leasehold interest in the Property pursuant to the Lease Agreement.  Unless otherwise determined by the Investor, the Manager shall perform the same or substantially identical services for each Subsidiary as the Manager performs for the Company.  In the connection therewith, the Manager agrees to perform such duties for and on behalf of each Subsidiary, and in such circumstances and with regard to such duties, the Manager is subject to the same standards of conduct and will have the same rights and obligations with regards to such duties performed or to be performed on behalf of any such Subsidiary as are set forth in this Agreement with regard to the same or substantially identical services to be performed for or on behalf of the Company (including, without limitation, the indemnification and exculpation rights and obligations of the Subsidiary and the removal or termination provisions, as set forth in this Agreement).

 

2

 

SECTION 1.5                 Powers.  In furtherance of its purposes and business, but subject to all of the provisions of this Agreement, the Company shall have and may exercise all of the powers and rights that can be conferred upon limited liability companies formed pursuant to the Delaware Act.

 

SECTION 1.6                 Term.  The term of the Company commenced on the filing of the Certificate with the Secretary of State of the State of Delaware, and shall continue until the Company is dissolved in accordance with Article XI.  Notwithstanding the dissolution of the Company, the existence of the Company shall continue as a separate legal entity until termination pursuant to this Agreement.

 

SECTION 1.7                 Partnership Status for Income Tax Purposes.  It is the intent of the Members that the Company shall always be characterized as a “partnership” for federal, state and, if applicable, local income tax purposes.  Such characterization is solely for such tax purposes, and does not create or imply a general partnership among the Members for state law or any other purpose. Investor shall make all applicable elections, determinations and other decisions under the Code and applicable Treasury Regulations, including, without limitation, the deductibility of a particular item of expense and the positions to be taken on the Company’s tax return, and shall approve the settlement or compromise of all audit matters raised by the Internal Revenue Service affecting the Members generally. JMIR shall take reporting positions on its federal, state and local income tax returns consistent with the positions determined for the Company by Investor.  The Tax Matters Member shall cause all federal, state and local income and other tax returns to be timely filed by the Company and shall be authorized to execute such returns (provided that the Tax Matters Member shall, for so long as it diligently performs its obligations hereunder, not be responsible for the delays of reputable accountants or auditors retained by the Manager or at the request of Investor on behalf of the Company).

 

ARTICLE II

 

DEFINED TERMS

 

SECTION 2.1                 Defined Terms.  For all purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires: (a) the terms defined in this Article II have the meanings assigned to them in this Article II and include the plural as well as the singular; (b)  all references in this Agreement to designated “Articles,” “Sections” and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement; (c) the word “including” shall have the same meaning as the phrase “including, without limitation,” and other phrases of similar import; and (d) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision.

 

“1940 Act” is defined in Section 9.3(a)(iii).

 

“Acquisition Date” shall mean the date that a Subsidiary acquires a leasehold interest in the Property, as provided by and as contemplated in the Lease Agreement.

 

3

 

“Adjusted Capital Account” shall mean, with respect to any Member, the balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

 

(a)           add to such Capital Account the following items:

 

(i)            the amount, if any, that such Member is obligated to contribute to the Company upon liquidation of such Member’s Company Interest; and

 

(ii)           the amount that such Member is obligated to restore or is deemed to be obligated to restore pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate sentences of each of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

 

(b)           subtract from such Capital Account such Member’s share of the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

“Adjusted Capital Account Deficit” shall mean, with respect to any Member, the deficit balance, if any, in such Member’s Adjusted Capital Account as of the end of the relevant Fiscal Year.

 

“Affiliate” shall mean with respect to any Person, any other Person directly or indirectly controlled by, controlling or under direct or indirect common control with the Person in question.  An “Affiliated” Person means an Affiliate.  For purposes of this definition and the definition of Subsidiary, “control” shall mean when used with respect to any specified Person, the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interest, by contract or otherwise; and the terms “controlling” and “controlled” have the meanings correlative to the foregoing. A Person which is under the joint control of more than one other Person (including through the exercise of major decision approvals or similar right) will be deemed to be under the control of each such jointly controlling Persons.

 

“Agreement” is defined in the Preamble, as it is amended from time to time.

 

“Annual Budget” is defined in Section 7.5(a).

 

“Annual Hotel Operations Budget” is defined in Section 7.5(a).

 

“Annual Company Budget” is defined in Section 7.5(a).

 

“Anti-Money Laundering Laws” shall mean those laws, regulations and sanctions, state and federal, criminal and civil, that (a) limit the use of and/or seek the forfeiture of proceeds from illegal transactions; (b) limit commercial transactions with designated countries or individuals believed to be terrorists, narcotics dealers or otherwise engaged in activities contrary

 

4

 

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

 

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

 

“Approved
Expenses” means any amount described in Sections 3.2(a)(i)(2), (3) or
(4).

 

“Approved Expense Shortfall”  is
defined in Section 3.2(a)(ii).

 

“Bankruptcy Event”
shall mean, the occurrence of any of the following events with respect to any
Person:  (a) the making by it of an
assignment by it for the benefit of its creditors; (b) the filing by it of
a voluntary petition in bankruptcy; (c) an adjudication that it is
bankrupt or insolvent unless such adjudication is stayed or dismissed within 90
days, or the entry against it of an order for relief in any bankruptcy or
insolvency proceeding unless such order is stayed or dismissed within 90 days;
(d) the filing by it of a petition or an answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation;
(e) the filing by it of an answer or other pleading admitting or failing
to contest the material allegations of the petition filed against it in any
proceeding of the nature described in the preceding clause (d); or (f) its
consenting to or acquiescing in the appointment of a trustee, receiver or
liquidator of it or of all or any substantial part of its properties.

 

“Business Day”
shall mean any day other than Saturday, Sunday or legally recognized public
holiday in the United States or the State of Texas or the State of Hawaii.

 

“Buy/Sell Deposit”
is defined in Section 10.2(d).

 

“Capital Account”
shall mean the Capital Account maintained for each Member pursuant to Section 4.1,
as the same may be credited or debited in accordance with the terms hereof.

 

“Capital Call”
is defined in Section 3.2(a).

 

“Capital Contribution”
shall mean with respect to any Member at any time, the aggregate amount of
money and the initial Gross Asset Value of any property (other than money)
contributed, or deemed contributed, by such Member to the Company as of such
time (net of any liabilities secured by such property or to which such property
is otherwise subject).

 

“Capital Default”
is defined in Section 3.4(a).

 

5

 

“Capital Expenditures”
shall mean for any period, the amount expended for items capitalized under
GAAP, except for such items as are otherwise classified under this Agreement.

 

“Capital Notice”
is defined in Section 3.2(b).

 

“Cash Flow”  shall mean, with respect to any period for
which such calculation is being made:

 

(a)           the sum, without duplication, of:

 

(i)            the Company’s Revenues for such period; and

 

(ii)           the amount of any Reserves that the Manager and the
Investor reasonably determined could be released during such period and
therefore became available for distribution;

 

(b)           less the sum,
without duplication, of:

 

(i)            all Debt Service Payments made during such period by the
Company, including the repayment of the outstanding principal balance of and
accrued interest on any Financing;

 

(ii)           all lease payments paid by the Company pursuant to the
Lease Agreement during such period;

 

(iii)          Capital Expenditures, including lease commissions and other
deferred costs, paid by the Company during such period;

 

(iv)          all other cash expenditures and payments made during such
period (including without limitation real estate taxes and assessments,
personal property taxes, sales taxes and all fees, commissions, expenses and
allowances  paid or reimbursed to any
Member or any of its Affiliates pursuant to any property management agreement
or otherwise as permitted herewith and any payments with respect to the
restoration or replacement of any Company Asset following a casualty or
condemnation) by the Company and reasonably relating to the operations of the
Company and/or the acquisition, ownership or leasing (as applicable),
development, renovation, maintenance, management, operation, sale, financing
and/or refinancing of the Property or any Company Assets, as applicable, during
such period contemplated by the then applicable Annual Budget or otherwise
approved (either prospectively or retroactively) by the Members from time to
time;

 

(v)           all amounts of Revenue deposited into the Reserves of the
Company (including working capital Reserves) during such period; and

 

(vi)          All expenditures related to any acquisition, sale,
disposition, financing, refinancing or securitization of any Company Assets; provided, however,
that to the extent the sources of funds used for such payment or expenditures
are not included in Revenues (e.g., Capital Contributions), or to the extent
such payment or expenditure is 

 

6

 

paid out of any Reserves
then such payment shall not be included in any deduction under this clause (v).

 

“Certificate”
shall mean the Certificate of Formation for the Company filed with the
Secretary of State of the State of Delaware, pursuant to Section 18-201 of
the Delaware Act, as the same has been or may hereafter be amended and
restated.

 

“Change in
Control” shall mean (a) with respect to JMIR, the first point
in time when Gregory W. Clay, John C. Kratzer, John J. Moores, Sr. or
their respective Affiliates, individually or collectively, no longer, directly
or indirectly, control JMIR, and (b) with respect to Investor, the first
point in time when Behringer Harvard Opportunity REIT II, Inc. or its
Affiliates, individually or collectively, no longer, directly or indirectly,
control Investor.  For purposes of this
definition, “control” shall have the meaning assigned to such term in the
definition of Affiliate.

 

“Code” shall
mean the Internal Revenue Code of 1986, as amended, or any corresponding
provision or provisions of prior or succeeding law.  Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.

 

“Company” shall
mean BH-JMIR KAUAI HOTEL OPERATOR, LLC, a limited liability company formed
under the laws of the State of Delaware and any successor limited liability
company.

 

“Company
Accountant” is defined in Section 8.4.

 

“Company Assets”
shall mean all direct and indirect assets and property, whether tangible or
intangible (including monies) and whether real, personal, or mixed, from time
to time owned by or held for the benefit of the Company, including all direct
or indirect leasehold interests in the Property and all assets and property
related thereto.

 

“Company Interest”
shall mean for any Member, such Member’s entire interest in the Company at any
particular time, together with the obligations of such Member to comply with
all of the terms and provisions of this Agreement.

 

“Company Minimum Gain”
shall mean “partnership minimum gain” as set forth in Treasury Regulations
Sections 1.704-2(b)(2) and 1.704-2(d)(1).

 

“Completion”
means the Renovations have been completed in substantial accordance with the
plans and specifications Approved by the Members except for any appropriate
punchlist items, and the Manager has delivered to the Company a Certificate of
Substantial Completion from an architect on the form promulgated by the AIA in
respect to the Renovations; provided that such certificate may include an
appropriate punchlist or items still to be completed after the date of issuance
of such certificate.

 

“Completion Documentation” means (a) a true and correct copy of an
affidavit or lien waiver from the General Contractor stating that: (A) the
General Contractor has been paid all amounts due for the work performed by or
through the General Contractor with respect to the 

 

7

 

Renovations; and (B) the
General Contractor has paid, or will pay, all of its subcontractors, suppliers
and other vendors all amounts due them for such work, or in the alternative will
indemnify and hold the Company and the Property harmless from and against any
claims that may be asserted by such subcontractors, suppliers or vendors
seeking such payment, or in the alternative to such an affidavit or lien
waiver, a true and correct copy of a settlement agreement or court order
resolving all claims that have been or could be asserted against the Company or
the Property by the General Contractor or any of its subcontractors, suppliers
or other vendors, seeking payment for work performed with respect to the
Renovations, and (b) evidence of completion of all punchlist items.

 

“Confidential
Information” is defined in Section 14.19(a).

 

“Construction Management
Fee” is defined in Section 7.6(b).

 

“Contributing Member”
is defined in Section 3.4(a).

 

“Contribution Shortfall”
is defined in Section 3.4(a).

 

“Debt Service Payments”
means all required principal and interest payments under any Financing
(including at maturity).

 

“Defaulting Member”
is defined in Section 3.4(a).

 

“Delaware Act”
is defined in the Preamble.

 

“Depreciation”
shall mean for each Fiscal Year or other period, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year or other period, except that if the
Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Fiscal Year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization, or
other cost recovery deduction for such Fiscal Year or other period bears to
such beginning adjusted tax basis.  If
any asset shall have a zero (-0-) adjusted basis for federal income tax
purposes, Depreciation shall be determined utilizing any reasonable method
selected by the Manager.

 

“Distribution
Equivalent Agreement” means that certain Distribution Equivalent
Agreement dated as of the date hereof among the Sister Company, JMIR and
Behringer Harvard Opportunity OP II LP.

 

“Effective Date”
is defined in the Preamble.

 

“Escrow Agent”
shall mean any reputable, nationally recognized and financially solvent title
insurance company designated by the Member purchasing a Company Interest.

 

“Event of Default”
is defined in Section 12.1.

 

“Failed
Contribution” is defined in Section 3.1(d).

 

8

 

“Financing”
shall mean any indebtedness, financing or refinancing by debt, bonds, sale and
leaseback or other form of financing relating to any Company Asset or any debt
or other similar monetary obligation of the Company or any Subsidiary (but
excluding trade payables incurred in the ordinary course of business).

 

“Financing Document”
shall mean any loan agreement, security agreement, mortgage, deed of trust,
indenture, bond, note, debenture, guaranty, indemnity agreement or other
instrument or agreement relating to or delivered in connection with any
Financing including the Security Agreement.

 

“Fiscal Year”
shall mean the period ending December 31 of each year, or such other
period as the Manager may designate as the Fiscal Year of the Company with the
Approval of the Investor, consistent with the requirements of the Code.

 

“For Cause Event”
is defined in Section 7.2(e).

 

“Franchise
Agreement” means any hotel franchise, license or similar agreement
entered into by the Company or one or more Subsidiaries with any Franchisor
with respect to all or any portion of the Property, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

 

“Franchisor”
means any franchisor, licensor or similar Person under any Franchise Agreement
entered into with respect to all or any portion of the Property, together with
their respective successors and permitted assigns in such capacity.

 

“Funding Deadline”
is defined in Section 3.2(b).

 

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

 

“Gross Asset Value”
shall mean, with respect to any asset, such asset’s adjusted basis for federal
income tax purposes, except as follows:

 

(a)           The initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value of such asset, as
determined by the mutual agreement of the Manager and the contributing Member
(as evidenced by this Agreement or an amendment hereto);

 

(b)           The Gross Asset Values of all Company Assets shall be
adjusted to equal their respective gross fair market values, as reasonably
determined by the Manager using such reasonable method of evaluation as it may
adopt and the Contributing Member shall Approve, as of the following times:

 

(i)            the acquisition of an interest or an additional interest
in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution or other consideration, if
the Manager reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Members in the
Company;

 

9

 

(ii)           the distribution by the Company to a Member of more than a
de minimis amount of Company Assets as
consideration for an interest in the Company if the Manager reasonably
determines that such adjustment is necessary or appropriate to reflect the
relative economic interests of the Members in the Company;

 

(iii)          in connection with the grant of an interest in the Company
(other than a de minimis interest) as
consideration for the performance of services to or for the benefit of the
Company by an existing Member acting in a capacity as a Member of the Company
or by a new Member acting in a capacity as Member of the Company or in
anticipation of being a member of the Company if the Manager reasonably
determines that such adjustment is necessary or appropriate to reflect the
relative economic interests of the Members in the Company;

 

(iv)          the liquidation of the Company within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g); and

 

(v)           at such other times as the Manager shall determine
necessary in order to comply with Regulations Sections 1.704-1(b) and
1.704-2;

 

(c)           The Gross Asset Value of any Company Asset distributed to
a Member shall be the gross fair market value of such asset on the date of
distribution as reasonably determined by the Manager using the method of
valuation Approved by such receiving Member;

 

(d)           The Gross Asset Values of Company Assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b),
but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m),
and clause (f) of the definition of Profits and Losses; provided, however, that Gross
Asset Values shall not be adjusted pursuant to this subparagraph (d) to
the extent an adjustment pursuant to subparagraph (b) hereof is
made in connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (d); and

 

(e)           If the Gross Asset Value of a Company Asset has been
determined or adjusted pursuant to subparagraph (a), subparagraph (b),
or subparagraph (d), such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such Company Asset for
purposes of computing Profits and Losses.

 

“Gross Value Amount”
is defined in Section 10.2(a).

 

“Guaranty Sharing
Agreement” means the agreement between JMIR Investments III, LP,
Behringer Harvard Kauai Hotel TRS, Inc., Behringer Harvard Opportunity
REIT II, Inc. and the Company attached hereto as Exhibit B.

 

“Hotel Management Agreement”
shall mean that certain hotel management agreement to be entered into by the
Company or one or more Subsidiaries as approved by the Members, as such
agreement may be amended, modified or replaced from time to time.

 

10

 

“Hotel Operator”
shall mean the Person engaged by the Company or one or more Subsidiaries from
time to time for the operation and management of the Property, in each case for
so long as such Person serves in such capacity.

 

“Imputed Closing
Costs” shall mean, with respect to the determination of Offeror
Value and Offeree Value pursuant to Section 10.2, an amount equal
to 2% of the Gross Value Amount, which represents the estimated closing costs
that would normally be incurred in connection with the purchase and sale of
Company Interests.

 

“Indemnified Party”
is defined in Section 7.8(a).

 

“Initial Capital
Contributions” is defined in Section 3.1(c).

 

“Investor” is
defined in the Preamble, together with its successors and permitted
assigns.

 

“IRR” shall
mean, as of any date, the internal rate of return (expressed as a percentage)
as of such date on the aggregate Capital Contributions (including Preferred
Contributions) made by the Members through such date (taking account of the
timing and amount of the aggregate distributions to the Members in respect of
such Capital Contributions pursuant to Sections 5.3 (other than
distributions under Section 5.3(d)(ii) and distributions
pursuant to Section 5.3(e)(ii)), 5.4 and 11.2(c) (other
than distributions pursuant to Section 5.3(d)(ii) and
distributions pursuant to Section 5.3(e)(ii) by virtue of Section 11.2(c))
through such date.  In determining the
IRR, the following shall apply:

 

(i) all
calculations shall be based upon the actual dates on which Capital
Contributions (including Preferred Contributions) are made by the Members (and
the amount thereof) and the actual dates on which distributions (other than
those excluded above) are paid to the Members;

 

(ii) all
distribution amounts shall be based on the amount of the gross distribution
prior to any withholding or deduction for any federal, state or local income
tax requirements; and

 

(iii) all
calculations shall employ the “XIRR” function (with annual compounding) as
calculated in Microsoft Excel using reasonable “guesses” based upon the
data  in clauses (i) and (ii) above.

 

“JMIR”  is defined in the Preamble, together with its
successors and permitted assigns.

 

“JMIR Manager”
is defined in Section 7.1.

 

“JMIR Parties”
is defined in Section 14.26(a).

 

“JMIR Series LP”
is defined in Section 7.8(c).

 

“Lease Agreement”
shall mean that certain lease agreement dated as of the date hereof by and
between Kauai Coconut Beach, LLC, as lessor, and Kauai Coconut Beach Operator,
LLC, as lessee.

 

11

 

“Liquidating Member”
is defined in Section 11.5(a).

 

“Major Decision”
is defined in Section 7.4.

 

“Manager”  is defined in the Preamble, together with its
successors and permitted assigns.  The
Manager is authorized to carry out the management of the business and affairs
of the Company pursuant to Article VII and in accordance with this
Agreement.

 

“Material Damage
or Loss” is a violation, breach or default which causes losses or
damages in excess of $200,000.

 

“Maximum Amount”
shall mean, with respect to the Investor, $12,000,000 less any Capital
Contributions (a) made by Investor’s Affiliate under the Sister Company LLC
Agreement, (b) made or deemed made by Investor’s Affiliate under the
Sister Company Guaranty Sharing Agreement, or (c) made or deemed made by
Investor under the Guaranty Sharing Agreement, and with respect to JMIR,
$3,000,000 less any Capital Contributions (x) made by JMIR under the
Sister Company LLC Agreement, (y) made or deemed made by JMIR under the
Sister Company Guaranty Sharing Agreement, or (z) made or deemed made by
JMIR under the Guaranty Sharing Agreement.

 

“Member” is
defined in the Preamble and further means, at any time, any Person admitted and then remaining as a
member of the Company pursuant to the terms of this Agreement.  As of the Effective Date, the Members of the
Company are JMIR and Investor.

 

“Member Minimum Gain”
shall mean “partnership minimum gain” as set forth in Treasury Regulations
Sections 1.704-2(b)(2) and 1.704-2(d)(1).

 

“Member Nonrecourse Debt”
shall mean “partner non-recourse
debt” as set forth in Treasury Regulations Section 1.704-2(b)(4).

 

“Member Nonrecourse Debt
Minimum Gain” shall mean
an amount, with respect to each Member Nonrecourse Debt, equal to the Company
Minimum Gain that would result if such Member Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Treasury Regulations Section 1.704-2(i)(2) and
(3) with respect to “partner minimum gain.”

 

“Member Nonrecourse
Deductions” shall mean
“partnership nonrecourse deductions” as set forth in Treasury Regulations Section 1.704-2(i)(2).  For any Fiscal Year, the amount of Member Nonrecourse
Deductions with respect to a Member Nonrecourse Debt equals the excess, if any,
of the net increase, if any, in the amount of the Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt over the aggregate
amount of any distributions during such Fiscal Year to the Member that bears
the economic risk of loss for such Member Nonrecourse Debt to the extent such
distributions are from proceeds of such Member Nonrecourse Debt and are
allocable to an increase in Member Nonrecourse Debt Minimum Gain, determined
according to the provisions of Treasury Regulations Section 1.704-2(i)(2).

 

“Mortgage Loan” shall mean any Financing secured by a mortgage,
deed of trust or similar security instrument encumbering the Property,
including that certain loan to be assumed 

 

12

 

by the Sister Company (or
one or more of the Sister Company’s subsidiaries) in the current principal
amount of $38,000,000.

 

“Necessary Expenses” defined in Section 7.2(b)(iii).

 

“Nonrecourse Deductions”
is defined in Treasury
Regulations Section 1.704-2(b)(1). 
The amount of Nonrecourse Deductions for a Fiscal Year equals the
excess, if any, of the net increase, if any, in the amount of Company Minimum
Gain during that Fiscal Year, over the aggregate amount of any distributions
during that Fiscal Year of proceeds of a Nonrecourse Liability that are
allocable to an increase in Company Minimum Gain, determined according to the
provisions of Treasury Regulations Section 1.704-2(c).

 

“Nonrecourse Liability”
is defined in Treasury Regulations Section 1.704-2(b)(3).

 

“Non - Withdrawing Member” is defined in Section 3.1(d).

 

“Notices” is defined in Section 14.2.

 

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

 

“Offer Notice” is defined in Section 10.2(a).

 

“Offeree” is defined in Section 10.2(a).

 

“Offeree Value”
is defined in Section 10.2(b).

 

“Offeror” is defined in Section 10.2(a).

 

“Offeror Value”
is defined in Section 10.2(b).

 

“Opt-Out Member”
is defined in Section 3.1(b)(ii).

 

“PCHS” is
defined in Section 14.26.

 

“Percentage Interest”
shall mean as of the Effective
Date, (a) as to Investor, 80% and (b) as to JMIR, 20%, which percentages
may change pursuant to and in accordance with the terms of this Agreement.

 

“Person” shall mean any individual,
corporation, partnership, limited liability company, association, trust or
other entity or organization.

 

“Preferred Regular
Contribution” is defined in Section 3.4(c).

 

“Preferred Return”
shall mean, with respect to each Member’s Unrecovered Capital Contributions
from time to time and as measured with respect to all or a portion of a single
Fiscal Year, a cumulative and quarterly compounding return on such Unrecovered
Capital Contributions for such Fiscal Year or portion thereof equal to 10% per
annum, taking account of 

 

13

 

the amount and timing of the making of such
Unrecovered Capital Contributions and the amount and timing of all
distributions made with respect to such Unrecovered Capital Contributions.

 

“Priority Capital Contribution” is defined in Section 3.4(a).

 

“Priority Preferred Return”
shall mean, with respect to each Member’s Unrecovered Priority Contributions
from time to time and as measured with respect to all or a portion of a single
Fiscal Year, a cumulative and quarterly compounding return on such Unrecovered
Priority Contributions for such Fiscal Year or portion thereof equal to 15% per
annum, taking account of the amount and timing of the making of such
Unrecovered Priority Contributions and the amount and timing of all
distributions made with respect to such Unrecovered Priority Contributions.

 

“Profits” and “Losses” shall mean,
for each Fiscal Year or other period, an amount equal to the Company’s
taxable income or loss for such Fiscal Year or period, determined in accordance
with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall
be included in taxable income or loss), with the following adjustments:

 

(a)           any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definitional Section shall be added to such taxable
income or loss;

 

(b)           any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Profits or Losses pursuant to this definitional
Section, shall be subtracted from such taxable income or loss;

 

(c)           in the event the Gross Asset Value of any Company Asset is
adjusted pursuant to subparagraph (b) or subparagraph (c) under
the definition of “Gross Asset Value,” the amount of such adjustment shall be
taken into account in the taxable year of such adjustment as gain or loss from
the disposition of such Company Asset for purposes of computing Profits or
Losses;

 

(d)           gain or loss resulting from any disposition of Company
Assets with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;

 

(e)           in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Fiscal Year or
other period, computed in accordance with the definition thereof;

 

(f)            to the extent an adjustment to the adjusted tax basis of
any Company Asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(4) to
be taken into account in determining Capital Accounts as a result of a
distribution other than in complete liquidation of a Member’s Company Interest,
the amount of such adjustment shall be treated as an item of gain (if the
adjustment

 

14

 

increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the asset
and shall be taken into account for purposes of computing Profits or Losses;
and

 

(g)           notwithstanding any other provision of this definition of
Profits and Losses, any items which are specially allocated under Section 6.2
or Section 6.4(b) of this Agreement shall not be taken into
account in computing Profits or Losses. 
The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Section 6.2 and Section 6.4(b) of
this Agreement shall be determined by applying rules analogous to those
set forth in this definition of Profits and Losses.

 

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

 

“Promote Percentage” shall mean, with respect to JMIR, its right to (a) 20% of
distributions under Section 5.3(d)(ii) and (b) 30% of
distributions under Section 5.3(e)(ii).

 

“Property”
shall mean the 311 room hotel which is located at 650 Aleka Loop, Kapaa, Hawaii
96746 on 10.4 acres of fee simple ocean front land on the island of Kauai,
Hawaii.  A Company Subsidiary is proposed
to acquire a leasehold interest in the Property pursuant to the Lease
Agreement.

 

“Pursuit Costs”
is defined in Section 3.1(b).

 

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

 

“Regulation D”
is defined in Section 13.1(k).

 

“Regulations” or
“Treasury Regulations” shall mean the Income Tax Regulations
promulgated under the Code as such regulations may be amended from time to time
(including Temporary Regulations).

 

“Regulatory Allocations”
is defined in Section 6.2(h).

 

“Rejected Portions”
is defined in Section 7.5(a).

 

15

 

“Renovations
Budget” means the budget attached hereto as Schedule 2 (which is
hereby Approved by the Members), as it may be amended from time to time in
accordance with this Agreement.

 

“Renovation Costs”
shall mean, with respect to any period for which such calculation is being
made, the total renovation costs spent or incurred in such period by or on
behalf of the Company in respect of the Property, including all soft costs
(other than financing costs) and all hard costs (including furniture, fixtures
and equipment, operating supplies and equipment, and systems).

 

“Renovations”
is defined in Section 7.6(b)(i).

 

“Reserves”
shall mean funds set aside or amounts allocated to reserves that shall be
maintained in amounts required under any Financing Documents or by the then
current Annual Budget and other amounts reasonably deemed necessary by the
Members.

 

“Revenue” shall
mean, with respect to any period for which such calculation is being made, the
gross cash received by the Company during such period, from all sources (other
than Capital Contributions) including all revenues of the Company from
(a) ownership, operation, use, leasing, and occupancy of any Company
Asset, (b) concessions to the Company which are in the nature of revenues,
(c) rent or business interruption insurance, and casualty and liability
insurance, if any, (d) funds made available to the extent such funds are
withdrawn from the Company’s or a third party’s reserve account and deposited
into the Company’s operating accounts, (e) proceeds from the sale or other
disposition of any Company Assets, (f) proceeds from the financing,
refinancing or securitization of any Company Assets, and (g) other
revenues and receipts realized by the Company.

 

“Rules” is defined in Section 14.26(b).

 

“Securities Act”
shall mean the United States Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Security Agreement” means that certain Security Agreement dated as of the date hereof by
Kauai Coconut Beach Operator, LLC to Wells Fargo Bank, N.A., as Trustee for the
Morgan Stanley Capital I Inc. Commercial Mortgage Pass-Through Certificates Series 2006
XLF.

 

“Shortfall”
is defined in Section 3.2(a)(i).

 

“Sister Company” means BH-JMIR Kauai Hotel, LLC, a Delaware limited liability company.

 

“Sister Company
Guaranty Sharing Agreement” means the agreement dated as of the date
hereof among JMIR Investments III, LP, JMI Realty LLC, Behringer Harvard Kauai
Hotel, LLC, Behringer Harvard Opportunity REIT II, Inc. and the Sister
Company.

 

“Sister Company LLC Agreement” means that certain limited liability company agreement of the Sister
Company dated as of the date hereof, as such agreement may be amended from time
to time.

 

16

 

“Subsidiary”
means any Affiliate of the Company which is directly or indirectly, through one
or more intermediaries, controlled by the Company.

 

“Tax Matters Member”
is defined in Section 8.3.

 

“Tax Payments” is defined in Section 5.7.

 

“Transfer” means
any sale, exchange, assignment, pledge, transfer, gift, hypothecation,
mortgage, encumbrance or other form of disposition, directly or indirectly, by
operation of law or otherwise.

 

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

 

“Unfunded Contribution
Shortfall” is defined in Section 3.4(d).

 

“Unrecovered Capital
Contribution” means, as of any date, a Member’s Capital
Contributions (other than Priority Capital Contributions) reduced (but not
below zero) by the amount of cash and the Gross Asset Value of any Company
Assets distributed to such Member pursuant to Section 5.3(c) (including
by operation of Section 11.2(c)). 
In the event a Member Transfers all or any portion of such Member’s
Company Interest in accordance with the terms of this Agreement, the Transferee
of such Company Interest shall succeed to the Unrecovered Capital Contribution
of the Transferor to the extent it relates to the Transferred Company Interest.

 

“Unrecovered Priority
Contribution” means, as of any date, a Member’s Priority Capital
Contributions reduced (but not below zero) by the amount of cash and the Gross
Asset Value of any Company Assets distributed to such Member pursuant to Section 5.3(a) (including
by operation of Section 11.2(c)). 
In the event a Member Transfers all or any portion of such Member’s
Company Interest in accordance with the terms of this Agreement, the Transferee
of such Company Interest shall succeed to the Unrecovered Priority
Contributions of the Transferor to the extent it relates to the Transferred
Company Interest.

 

“Withdrawal Event”
is defined in Section 9.7.

 

“Withdrawing
Member” is defined in Section 3.1(d).

 

“Withdrawn Member”
is defined in Section 9.7.

 

17

 

ARTICLE III

 

CAPITAL CONTRIBUTIONS AND
DEFAULT

 

SECTION 3.1                 Initial Capital
Contributions.

 

(a)           Intentionally Omitted.

 

(b)           Pursuit Costs. 
Prior to the date hereof, JMIR and the Investor and their respective
Affiliates, have incurred, and may hereafter incur prior to the Acquisition
Date third party out-of-pocket costs and expenses in connection with the
negotiation and closing of the Financing (subject to the exceptions set forth
in clauses (i)(2) — (i)(4) below, collectively, the “Pursuit Costs”).

 

(i)            Upon Closing. 
Upon the Company or one or more Subsidiaries acquiring a leasehold
interest in the Property pursuant to the Lease Agreement, then:

 

(1)           The Company shall pay or reimburse each Member for all
Pursuit Costs actually incurred by such Member in good faith pursuant to the
terms hereof (except as provided in clauses (2) through (4) below) to
the extent set forth in an Approved Annual Budget, or shall credit such amounts
against such Member’s Initial Capital Contribution as provided in Section 3.1(c) below,
so that each Member’s share of such costs shall be in proportion to their
respective Percentage Interests.  Except
as provided in clause (3) below, the Company’s reimbursement to Investor
for Pursuit Costs under this clause (1) shall not exceed $150,000 less any
amounts paid to Investor’s Affiliate under Section 3.1(b)(i)(1) of
the Sister Company LLC Agreement to reimburse the Investor’s Affiliate for its “Pursuit
Costs” (as defined in the Sister Company LLC Agreement).

 

(2)           Fees of legal counsel for the Members incurred in
connection with or related to the negotiation of this Agreement shall be borne
by each Member and shall not constitute “Pursuit Costs” which are reimbursable
by the Company.

 

(3)           Fees of legal counsel for the Investor in negotiating the
Hotel Management Agreement and Franchise Agreement shall constitute “Pursuit
Costs” to be reimbursed by the Company and shall not be subject to the $150,000
limitation set forth in clause (1) above.

 

(4)           Fees of legal counsel for the Hotel Operator shall be
borne by the Hotel Operator and shall not constitute “Pursuit Costs” which are
reimbursable by the Company.

 

(ii)           Election. 
Notwithstanding the foregoing, (a) if either Member (or its
Affiliate, if applicable) elects to be an “Opt-Out Member” (as defined in the
Sister Company LLC Agreement) under the Sister Company LLC Agreement, and there
is only one such electing Member (or the Member that is an Affiliate of the
electing member under the Sister Company LLC Agreement) (an “Opt-Out Member”), then (1) the Opt-Out
Member shall withdraw from the Company and the other Member shall be the sole
Member of the Company, and (2) the Opt-Out Member shall not be entitled to
be reimbursed for any of its Pursuit Costs, and (b) if both Members (or
such Member’s Affiliate, if applicable) elect to be an “Opt-Out Member” (as
defined in the Sister Company LLC Agreement) under the Sister Company LLC
Agreement, then each 

 

18

 

Member shall (1) be
responsible for its Pursuit Costs with no reimbursement obligation of the
Company or any Member, and (b) fund its share (based on Percentage
Interests) of all dissolution costs of the Company.

 

(c)           Closing Contributions.  If neither Member elects to be an Opt-Out
Member, then on or before the Acquisition Date, the Members shall contribute in
cash (or be credited to the extent as provided in Section 3.1(a) or
Section 3.1(b)(i) with making cash contributions) to the capital
of the Company (the “Initial Capital
Contributions”) their pro rata share (based upon their relative
Percentage Interests) of a reasonable amount of initial working capital and
other Reserves (which shall include anticipated capital expenditures to be made
in the period following acquisition of the leasehold interest in the Property
as set forth in the initial Annual Budget for the Company attached hereto as
Schedule 1, Pursuit Costs and other amounts payable or reimbursable by the
Company under Section 3.1(b)(i)), as Approved by the Members.  Manager will deliver to the Members for
Approval a statement of sources and uses for the closing and a detailed
estimate of the Initial Capital Contributions. 
Amounts payable to the Company by a Member on the Acquisition Date may
be set off from amounts the Company owes to a Member and each Member shall
receive credits for payments made prior to the Acquisition Date for amounts
paid to a third party as set forth in such Approved closing statement.

 

(d)           Withdrawing Members.  Subject to the provisions of Section 3.1(c) and
this Section 3.1(d), if any Member (a “Withdrawing Member”) fails to timely make all or any portion
of its Initial Capital Contribution pursuant to this Section 3.1 (a
“Failed Contribution”), then one
or more of the other Members that is not an Affiliate of the Withdrawing Member
(the “Non -Withdrawing Member”)
may either pursue all of its rights and remedies at law and in equity, or elect
to make such Failed Contribution, in which case, as such Non -Withdrawing
Member’s sole and exclusive remedy with respect thereto (i) the
Withdrawing Member shall be automatically terminated as a Member for all
purposes hereunder (and if the Withdrawing Member is JMIR, JMIR Manager shall
be terminated as Manager) and (ii) the Company Interest of the Withdrawing
Member shall be deemed forfeited in its entirety and such Withdrawing Member
shall cease to have any Company Interest or any rights under this Agreement
with respect thereto.  If a Withdrawing
Member is terminated as a Member and forfeits its Company Interest as provided
above, such Withdrawing Member (or its Affiliate, if applicable) shall be
terminated as a Member of the Sister Company and shall forfeit its “Company
Interest” (as defined in the Sister Company LLC Agreement) in the Sister
Company (and if such Withdrawing Member is JMIR, JMIR Manager shall be
terminated as manager of the Sister Company). 
Each Member acknowledges and agrees that the other Members would not be
entering into this Agreement were it not for (i) the Members agreeing to
make the Initial Capital Contributions provided for in this Section 3.1,
and (ii) the remedy provisions set forth above in this Section 3.1(d).  Each Member acknowledges and agrees that in
the event any Member fails to make its Initial Capital Contribution pursuant to
this Agreement, the other Members will suffer substantial damages and the
remedy provisions set forth above are fair, just and equitable in all respects.

 

19

 

SECTION 3.2                 Additional Capital
Contributions.

 

(a)           Making of Capital Calls.

 

(i)            At any time and from time to time following the
contribution of all Initial Capital Contributions, the Manager may determine
that additional funds (a “Shortfall”)
are reasonably required:

 

(1)           for costs contemplated by the initial Annual Budget
attached hereto as Schedule 1 and the initial Renovations Budget attached
hereto as Schedule 2, including but not limited to costs of leasing or
renovating the Property (including capital improvements and other Renovation
Costs), startup costs or costs associated with working capital, but only to the
extent not covered by the Initial Capital Contributions, as adjusted, made
pursuant to Section 3.1;

 

(2)           to meet the ongoing obligations, liabilities, expenses or
reasonable business needs of the Company in accordance with the then applicable
Annual Budget to the extent not covered by the Initial Capital Contributions;

 

(3)           to pay Necessary Expenses whether or not provided for in
the then applicable Annual Budget; or

 

(4)           to pay costs (other than Necessary Expenses) which are not
provided for in the then applicable Annual Budget, but which are Approved by
the Members.

 

In
the event of a Shortfall, the Manager may make a capital call (a “Capital Call”) to the Members to contribute
their pro rata share (based on their relative Percentage Interests) of such
Shortfall in accordance with the provisions of this Section 3.2,
provided that the aggregate amount of capital that each of the Members is obligated
to contribute to the Company pursuant to Section 3.1, and this Section 3.2(a) (including
any Capital Contributions deemed to be made by the Members but specifically
excluding Capital Contributions for Approved Expense Shortfalls that are made
after such Member has made aggregate Capital Contributions equal to such Member’s
Maximum Amount) shall not exceed such Member’s Maximum Amount in the aggregate.

 

(ii)           In addition, if at any time or from time to time following
the contribution of all Initial Capital Contributions, any Member determines
that additional funds are reasonably required to fund Approved Expenses (“Approved Expenses Shortfall”) and the
Manager has failed to make a Capital Call to fund such Approved Expenses under Section 3.2(a)(i)(2),
(3) or (4) above, then either Member may (but shall not be
obligated to) send written notice to the Manager of such Approved Expense
Shortfall, and if, within five (5) Business Days after receiving the
notice, the Manager fails to make a Capital Call to fund such Approved Expense
Shortfall, such Member may (but shall not be obligated to) make a Capital Call
request that the Members contribute their pro rata share (based on their
relative Percentage Interests) of such Approved Expense Shortfall.

 

(iii)          If a Member fails to timely make any Capital Contributions
required to fund a Shortfall under Section 3.2(a)(i) or an
Approved Expense Shortfall under Section 3.2(a)(ii) from the
date hereof until such Member has made aggregate 

 

20

 

Capital Contributions (other
than Preferred Contributions) equal to its Maximum Amount, then any Member who
is not a Defaulting Member at such time may either pursue (a) all of its
rights and remedies at law and in equity (including, notwithstanding any
approval requirements in this Agreement to the contrary, causing the Company to
pursue such unfunded Capital Contributions) or (b) any remedies available
pursuant to Section 3.4. 
After a Member has made aggregate Capital Contributions (other than
Preferred Contributions) in excess of its Maximum Amount, then any additional
Capital Contributions will be made pursuant to Section 3.2(a)(i)(2),(3) or
(4) or Section 3.2(a)(ii) only, and the sole remedies
for such Member’s failure to make such additional Capital Contributions to fund
an Approved Expenses Shortfall shall be limited to those set forth in Section 3.4.

 

(b)           Capital Notice. 
The Manager shall make the Capital Call by providing to each Member a
Notice (the “Capital Notice”) of the required
Capital Contributions no later than 10 Business Days before the date on which
such Capital Contribution is required to be made to the Company (the “Funding Deadline”). 
Each Capital Notice shall set forth:

 

(i)            the aggregate amount of the required Capital
Contribution;

 

(ii)           the amount of such required Capital Contribution to be
made by each Member (which amount shall be in proportion to the Members’
respective Percentage Interests);

 

(iii)          the purpose(s) of such required Capital Contribution,
which purpose(s) will be classified into one of the four categories
described in Section 3.2(a) (and, if such Capital Call relates
to more than one of such four categories, the Capital Notice shall provide a
break down by dollar amount of each applicable category); and

 

(iv)          the Funding Deadline.

 

(c)           Funding Obligation. 
Upon receipt of a Capital Notice, each Member shall have the obligation
to make a Capital Contribution, in cash, by the Funding Deadline of its portion
of any Capital Contribution required pursuant to a Capital Call made in
accordance with Section 3.2(b).

 

SECTION 3.3                 Intentionally Omitted.

 

SECTION 3.4                 Default; Remedy.

 

(a)           If a Member (in such capacity, “Defaulting Member”) fails to fully and timely make a Capital
Contribution required of it by this Agreement other than pursuant to Section 3.1(c) where
the remedies set forth in Section 3.1(d) shall be the
exclusive remedies (a “Capital Default”, and any unfunded
amounts being referred to as the “Contribution Shortfall”), then the
other Member (so long as such other Member has fully and timely made its
required Capital Contributions pursuant to this Agreement) (in such capacity,
the “Contributing
Member”), may, but shall not be obligated to, make a Capital
Contribution to the Company in an amount equal to all or any portion of the
Contribution Shortfall (a “Preferred
Contribution”).  In such an
event, the Contributing Member may elect by written notice given 

 

21

 

within five (5) Business Days of making the
Preferred Contribution either (i) to treat the entire amount contributed
by the Contributing Member (including both the Contributing Member’s Capital
Contribution and its Preferred Contribution) as a Priority Capital Contribution
(a “Priority Capital Contribution”)
by such Contributing Member in accordance with Section 3.4(b) below,
or (ii) to treat the Preferred Contribution as a regular Capital
Contribution (the “Preferred Regular
Contribution”) in accordance with Section 3.4(c) below.

 

(b)           To the extent any Contributing Member elects to treat its
own Capital Contribution and such Preferred Contribution as a Priority Capital
Contribution, such Priority Capital Contribution shall be returned on a
priority basis together with a Priority Preferred Return thereon as provided in
Section 5.3(a).

 

(c)           If a Contributing Member elects to treat a Preferred
Contribution as a Preferred Regular Contribution, then the Percentage Interest
of the Contributing Member shall be adjusted to equal the percentage equivalent
of the quotient determined by dividing:

 

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

 

(1)           the sum of (I) one hundred percent (100%) of the
aggregate Capital Contributions (excluding Priority Capital Contributions and
Preferred Regular Contributions) then or theretofore made by such Member to the
Company, plus (II) one hundred percent (100%) of the aggregate “Capital
Contributions” (excluding “Priority Capital Contributions” and “Preferred
Regular Contributions”) (as each of those terms is defined in the Sister
Company LLC Agreement) then or theretofore made by such Member or its Affiliate
(if applicable) to the Sister Company, plus (III) two hundred percent
(200%) of the Preferred Regular Contributions then or theretofore made by such
Member to the Company, plus (IV) two hundred percent (200%) of the “Preferred
Regular Contributions” (as defined in the Sister Company LLC Agreement) then or
theretofore made by such Member or its Affiliate (if applicable) to the Sister
Company; minus

 

(2)           the sum of (I) the Preferred Regular Contributions
then or theretofore made by the other Member to the Company, plus (II) the
“Preferred Regular Contributions” (as defined in the Sister Company LLC
Agreement) then or theretofore made by the other Member or its Affiliate (if
applicable) to the Sister Company; by

 

(ii)           the sum of (I) one hundred percent (100%) of the
aggregate Capital Contributions (including, without limitation, Preferred
Regular Contributions but excluding Priority Capital Contributions) then or
theretofore made by all of the Members to the Company, plus (II) one
hundred percent (100%) of the aggregate “Capital Contributions” (including,
without limitation, “Preferred Regular Contributions” but excluding “Priority
Capital Contributions”) (as each of those terms is defined in the Sister
Company LLC Agreement) then or theretofore made by all of the members of the
Sister Company to the Sister Company.

 

22

 

and
the Percentage Interest of the Defaulting Member shall be reduced by the
percentage necessary to insure that the Percentage Interests add up to
100%.  At the same time, if JMIR is the
Defaulting Member, the Promote Percentage of JMIR shall be decreased in the
same proportion as the Percentage Interest of JMIR was adjusted pursuant to the
foregoing provisions (e.g., if JMIR’s Percentage Interest is reduced by half or
50%, then the Promote Percentage of JMIR  will
also be reduced by half or 50%), and the percentage share of Cash Flow of the
Members under Sections 5.3(d)(i) and 5.3(e)(i) will be
correspondingly increased.  In addition,
an amount of Unrecovered Capital Contributions shall be treated as having been
transferred from the Defaulting Member to the Contributing Member; the amount
so transferred shall equal the amount necessary to cause each Member to have
Unrecovered Capital Contributions in proportion to its adjusted Percentage
Interest after giving effect to such transfer. 
The Capital Accounts shall be adjusted accordingly.  At the same time as any adjustments are made
to “Percentage Interests” or “Promote Percentages” or to percentage share of “Cash
Flow” (as those terms are defined in the Sister Company LLC Agreement) under Section 3.4(c) of
the Sister Company LLC Agreement, the same proportional adjustments shall be
made to Percentage Interests, Promote Percentages or percentage share of Cash
Flow, as applicable, under this Agreement so that those percentages are the
same under both this Agreement and the Sister Company LLC Agreement.

 

Any
Defaulting Member shall have until seventy-five (75) days after the Capital
Default in order to cure such Capital Default by depositing into an account
designated by the Contributing Member an amount equal to the amount of the
Contribution Shortfall together with interest thereon at a fifteen percent
(15%) per annum rate from the due date established by the Manager until such
amount has been so deposited in full into such account, at which point such
amount shall promptly be distributed to the Contributing Member if and to the
extent the Contributing Member made a Preferred Regular Contribution on account
of the Contribution Shortfall.  If the
Defaulting Member makes such deposits as aforesaid, any adjustment to
Percentage Interest, dilution to Promote Percentages (and the distributions
affected thereby) and transfers of Unrecovered Capital Contributions caused by
its failure to make the applicable Capital Contribution shall be unwound, and
the payment, dilution and transfers described above shall not be reflected in the
Members’ Capital Accounts.

 

(d)           If a Preferred Contribution is not made, or if a Preferred
Contribution is made only with respect to a portion of the Contribution
Shortfall (any remaining unfunded amount of the Contribution Shortfall being
referred to as the “Unfunded Contribution
Shortfall”), then the Defaulting Member shall nevertheless remain
obligated to make a Capital Contribution equal to the Unfunded Contribution
Shortfall upon demand by the Contributing Member, provided that in no event
shall either Member (i) have recourse liability for any portion of a
Capital Contribution that would cause the aggregate Capital Contributions
(excluding Preferred Contributions to exceed such Member’s Maximum Amount, or (ii) be
required to contribute any portion of a Capital Contribution (other than for
Approved Expenses) that would cause the aggregate Capital Contributions
(excluding Preferred Contributions) to exceed such Member’s Maximum Amount.

 

(e)           If the Contributing Member does not elect to make any
Preferred Contribution within 10 days after the date the Capital Default in
question occurs, the Contributing Member may elect, within 20 days after the
date the Capital Default in question 

 

23

 

occurs, to have the Company return the Capital
Contribution advanced by the Contributing Member pursuant to the Capital Call
in respect of which the Defaulting Member defaulted and, promptly following
such election the Company shall return such Capital Contribution to the Contributing
Member.

 

(f)            Each Member acknowledges and agrees that the other
Members would not be entering into this Agreement were it not for (i) the
Members agreeing to make the Capital Contributions provided for in this Section 3.4,
and (ii) the remedy provisions set forth above in this Section 3.4.  Each Member acknowledges and agrees that in
the event any Member fails to make its Capital Contributions pursuant to this
Agreement, the other Members will suffer substantial damages and the remedy
provisions set forth above are fair, just and equitable in all respects.

 

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

 

ARTICLE IV

 

CAPITAL ACCOUNTS

 

SECTION 4.1                 Capital Accounts.  The Company shall establish and maintain a
separate Capital Account for each Member in accordance with the following
provisions:

 

(a)           To each Member’s Capital Account there shall be credited
such Member’s Capital Contributions, such Member’s allocable share of Profits,
and any other items in the nature of income or gain that are specially
allocated to such Member under this Agreement, and the amount of any Company
liabilities that are assumed by such Member in accordance with the terms hereof
(other than liabilities that are secured by any Company Assets distributed to
such Member).

 

(b)           To each Member’s Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any Company Assets distributed
to such Member pursuant to any provision of this Agreement (net of liabilities
secured by such distributed property that such Member is considered to assume
or take subject to under Code Section 752), such Member’s allocable share
of Losses, and any other items in the nature of expenses or losses that are
specially allocated to such Member under this Agreement, and the amount of any
liabilities of such Member that are assumed by the Company (other than
liabilities that are secured by any property contributed by such Member to the
Company).

 

(c)           In the event any Company Interest is Transferred in
accordance with the terms of this Agreement, the transferee shall succeed to
the Capital Account of the transferor to the extent it relates to the
Transferred Company Interest.

 

(d)           In determining the amount of any liability for purposes of
paragraphs (a) and (b) above, there shall be taken into account Code Section 752(c) and
the Treasury Regulations promulgated thereunder, and any other applicable
provisions of the Code and Regulations.

 

24

 

 

(e)           The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to
comply with Treasury Regulations Section 1.704-1(b) and 1.704-2, and
shall be interpreted and applied in a manner consistent with such Regulations.

 

In the event the Investor shall determine that it
is prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto are computed in order to comply with such Regulations, the
Investor may make such modification, provided that it does not have a material
adverse effect on the amounts distributable to any Member pursuant to Section 11.2
of this Agreement upon the dissolution of the Company.  The Investor also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital reflected on
the Company’s balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q),
and (ii) make any appropriate modifications in the event unanticipated
events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b) or
Section 1.704-2.

 

SECTION 4.2                 Return of Capital.  No Member shall be liable for the return of
the Capital Contributions (or any portion thereof) of any other Member, it
being expressly understood that any such return shall be made solely from the
Company Assets.  No Member shall be
required to pay to the Company or to any other Member any deficit in its
Capital Account upon dissolution of the Company or otherwise, and no Member
shall be entitled to withdraw any part of its Capital Contributions or Capital
Account, to receive interest on its Capital Contributions or Capital Account or
to receive any distributions from the Company, except as expressly provided for
in this Agreement or under any non-waivable provision of the Delaware Act as
then in effect (to the extent such non-waivable provision of the Delaware Act
overrides or supplements the provisions of this Agreement).

 

SECTION 4.3                 Liability of Members.  Except as otherwise required by any
non-waivable provision of the Delaware Act or other applicable law or pursuant
to any written agreement or instrument: 
(a) no Member (in its capacity as such, absent a separate written
agreement to the contrary) shall be personally liable in any manner whatsoever
for any debt, liability or other obligation of the Company, whether such debt,
liability or other obligation arises in contract, tort, or otherwise; and
(b) no Member (in its capacity as such, absent a separate written
agreement to the contrary) shall in any event have any liability whatsoever in
excess of the following (without duplication) (i) its share of any assets
and undistributed profits of the Company, and (ii) the amount of any
unconditional obligation of such Member to make (A) Capital Contributions
to the Company pursuant to this Agreement or (B) any other payment
expressly required by this Agreement.

 

ARTICLE V

 

DISTRIBUTIONS

 

SECTION 5.1                 Distributions Generally.  Cash Flow shall be distributed to the Members
as soon as reasonably practical (but no less often than monthly, if
appropriate), in accordance with the provisions of Article V.

 

25

 

SECTION 5.2                 Direction of Distribution
Proceeds.  All distributions made to
a Member pursuant to this Agreement shall be made via wire transfer pursuant to
instructions provided by such Member to the Manager from time to time in
writing.

 

SECTION 5.3                 Priority of Cash Flow
Distributions.  Subject to the other
provisions of this Article V (including Sections 5.4 and 5.5),
all distributions of Cash Flow in respect of a particular Fiscal Year shall be
made as soon as reasonably practical (but no less often than monthly, if
appropriate) in the following order and priority:

 

(a)           First, 100% to
the Members, pro rata in proportion to the sum of the Members’ relative amounts
of Unrecovered Priority Contributions and accrued and unpaid Priority Preferred
Return thereon as of the date of such distribution, until the amount
distributed to each such Member under this Section 5.3(a) equals
the sum of such Member’s Unrecovered Priority Contributions and accrued and
unpaid Priority Preferred Return thereon at such time (amounts distributed
under this Section 5.3(a) will be distributed in the reverse
order in which the Unrecovered Priority Contributions were made and shall be
applied first to the Priority Preferred Return and then to Unrecovered Priority
Contributions — that is, the most recent Unrecovered Priority Contributions and
the Priority Preferred Return thereon will be returned and paid first to the
Member having made such most recent Unrecovered Priority Contribution and then
the next most recent Unrecovered Priority Contribution and the Priority
Preferred Return thereon will be returned and paid to the Member having made
such next most recent Unrecovered Priority Contribution, etc.);

 

(b)           Second, 100% to
the Members, pro rata in proportion to the Members’ relative amounts of accrued
and unpaid Preferred Return as of the date of such distribution, until the
amount distributed to each such Member under this Section 5.3(b) equals
such Member’s accrued and unpaid Preferred Return at such time;

 

(c)           Third, 100% to
Members, pro rata in proportion to the Members’ relative amounts of Unrecovered
Capital Contributions as of the date of such distribution, until the amount
distributed to each such Member under this Section 5.3(c) equals
such Member’s Unrecovered Capital Contributions at such time;

 

(d)           Fourth, subject
to Section 3.4(c), (i) 80% to the Members in proportion to
their Percentage Interests and (ii) 20% to JMIR, but no distributions
shall be made pursuant to this Section 5.3(d)(ii) unless
aggregate distributions to the Members pursuant to Section 5.3(a), Section 5.3(b),
Section 5.3(c) and clause (i) of this Section 5.3(d) (or
pursuant to those sections by operation of Section 11.2(c)) results
in the IRR on the aggregate Capital Contributions equaling 15% or more; and

 

(e)           Thereafter,
subject to Section 3.4(c) (i) 70% to the Members in
proportion to their Percentage Interests and (ii) 30% to JMIR.

 

SECTION 5.4                 Special Distributions.

 

From
and after the time JMIR Manager shall have been terminated as the Manager under
this Agreement or under the Sister Company LLC Agreement due to a For Cause
Event (or a “For Cause Event” under the Sister Company LLC Agreement) or an
Event of Default (or an 

 

26

 

“Event
of Default” under the Sister Company LLC Agreement) by JMIR Manager (unless
such For Cause Event arises in connection with the death, disability or
incompetency of Gregory W. Clay, John J. Moores, Sr. or John C. Kratzer),
Cash Flow otherwise distributable under Section 5.3 shall not be
distributed as provided in such Section but rather shall be distributed as
provided pursuant to this Section 5.4, and, except as provided in Section 5.5,
the Company shall, as soon as reasonably practical (but no less often than
monthly, if appropriate), make distributions of such Cash Flow (i) first,
as provided in Section 5.3(a) and (ii) second, to the
Members in proportion to their respective Percentage Interests.

 

SECTION 5.5                 Distributions Upon
Liquidation.  (a) Notwithstanding the provisions of
this Article V, distributions made in conjunction with the
dissolution and final liquidation of the Company shall be applied or
distributed as provided in Article XI.  The proceeds of sale from such liquidation
and other assets of the Company distributable to the Members under
Section 11.2(c)(iv) shall be distributed, not later than the latest
time specified for such distributions pursuant to Treasury Regulation
Section 1.704-1(b)(2)(ii)(b)(2) to the Members as provided in Section 5.4
above.

 

(b)           With the approval of each Member, a pro rata portion of
the distributions that would otherwise be made to the Members under the
preceding provisions of this Section 5.5 may be distributed to a
trust reasonably established, for a reasonable period of time, for the benefit
of the Members for the purposes of liquidating Company assets, collecting
amounts owed to the Company, and paying any contingent or unforeseen
liabilities or obligations of the Company arising out of or in connection with
the Company.  The assets of any trust
established under this Section 5.5 will be distributed to the
Members from time to time by the trustee of the trust in the same proportions
as the amount would otherwise have been distributed by the Company to the
Members under this Agreement.

 

SECTION 5.6                 Limitations on Distributions. 
Notwithstanding any provision to the contrary contained in this
Agreement, neither the Company nor the Manager, on behalf of the Company, shall
be required to make a distribution to any Person in violation of the Delaware
Act or other applicable law.

 

SECTION 5.7                 Tax Payments.  To the extent that any taxes or withholding
taxes are due on behalf of or with respect to any Member and the Company is
required by law to withhold or to make such tax payments (“Tax Payments”),
the Company shall withhold such amounts and make such Tax Payments as so
required.  Each Tax Payment made on
behalf of or with respect to a Member shall be deemed a distribution of Cash
Flow in such amount to such Member, and any such deemed distribution shall be
deemed to have been paid to the Member on the earlier of the date when the
corresponding Tax Payment is made by the Company or the date that the
distributions, if any, giving rise to the obligation to make such Tax Payment
were made.  If
the Manager determines that the Company has insufficient liquid assets to
satisfy the Tax Payment applicable to a Member, the Manager shall notify such Member as to the extent of the amount of such
Tax Payment and such Member shall pay the Company such amount within
5 days of demand (and in no event shall such payment constitute a Capital
Contribution).  Any failure to timely
make such payment shall result in a fully recourse loan bearing interest at 15%
per annum until paid.  Each Member
will furnish the Manager  with such
information as may be requested by the Manager  from time to time to determine whether any Tax Payments are 

 

27

 

required for such Member, and each Member will
promptly notify the Manager  if such
Member determines at any time that it is subject to Tax Payments.

 

ARTICLE VI

 

ALLOCATION OF PROFITS AND
LOSSES

 

SECTION 6.1                 General Allocation of  Profits and Losses.

 

(a)           Generally. 
Profits and Losses shall be determined and allocated with respect to
each Fiscal Year or other period of the Company (i) as of the end of such
Fiscal Year or other period, (ii) at such times as the Gross Asset Value
of any Company Asset is adjusted pursuant to the definition thereof, and
(iii) at such other times as may be required or, in the Manager’s good
faith discretion, permitted pursuant to this Agreement or otherwise under the
Code.  Subject to the other provisions of
this Agreement, an allocation to a Member of a share of Profits or Losses shall
be treated as an allocation of the same share of each item of income, gain,
loss or deduction that is taken into account in computing Profits or Losses.

 

(b)           Allocation of Profits and Losses.  Except as otherwise required in this Article VI,
for purposes of adjusting the Capital Accounts of the Members, the Profits,
Losses and, to the extent necessary, individual items of income, gain, loss,
credit and deduction for any Fiscal Year or other period shall be allocated
among the Members in a manner such that the Adjusted Capital Account of each
Member, immediately after making such allocation, is, as nearly as possible,
equal (proportionately) to the distributions that would be made to such member
if the Company were dissolved, its affairs wound up and its assets sold for
cash equal to their Gross Asset Value, all Company liabilities were satisfied
(limited with respect to each nonrecourse liability to the Gross Asset Value of
the asset securing such liability), and the net assets of the Company were
distributed in accordance with Section 5.3 to the Members
immediately after making such allocation. 
For the avoidance of doubt, the hypothetical sale of the Company’s
assets in the preceding sentence for cash equal to their Gross Asset Value
shall not in and of itself create the need to adjust the Gross Asset Value of
the Company’s Assets.

 

SECTION 6.2                 Regulatory Allocations. 
Notwithstanding the foregoing provisions of this Article VI,
the following special allocations shall be made in the following order of
priority:

 

(a)           If there is a net decrease in Company Minimum Gain during
a Company taxable year, then each Member shall be allocated items of Company
income and gain for such taxable year (and, if necessary, for subsequent years)
in an amount equal to such Member’s share of the net decrease in Company
Minimum Gain, determined in accordance with Treasury Regulations
Section 1.704-2(g)(2).  This Section 6.2(a) is
intended to comply with the minimum gain chargeback requirement of Treasury
Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.

 

(b)           If there is a net decrease in Member Minimum Gain
attributable to a Member Nonrecourse Debt during any Company taxable year, each
Member who has a share of the Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations
Section 1.704-2(i)(5), shall be specially allocated items of 

 

28

 

Company income and gain for such taxable year (and,
if necessary, subsequent years) in an amount equal to such Member’s share of
the net decrease in Member Minimum Gain attributable to such Member Nonrecourse
Debt, determined in a manner consistent with the provisions of Regulations
Section 1.704-2(g)(2).  This Section 6.2(b) is
intended to comply with the partner nonrecourse debt minimum gain chargeback
requirement of Treasury Regulations Section 1.704-2(i)(4) and shall
be interpreted consistently therewith.

 

(c)           If any Member unexpectedly receives an adjustment,
allocation, or distribution of the type contemplated by Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or
(6), items of income and gain
shall be allocated to all such Members (in proportion to the amounts of their
respective Adjusted Capital Account Deficits) in an amount and manner
sufficient to eliminate the Adjusted Capital Account Deficit of such Member as
quickly as possible.  It is intended that
this Section 6.2(c) qualify and be construed as a “qualified
income offset” within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(d).

 

(d)           If the allocation of Loss (or items of loss or deduction)
to a Member as provided in Section 6.1 would create or increase an
Adjusted Capital Account Deficit, there shall be allocated to such Member only
that amount of Loss as will not create or increase an Adjusted Capital Account
Deficit.  The Loss that would, absent the
application of the preceding sentence, otherwise be allocated to such Member
shall be allocated to the other Members in accordance with their relative Percentage
Interests, subject to the limitations of this Section 6.2(d).

 

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

 

(f)            The Nonrecourse Deductions for each taxable year of the
Company shall be allocated to the Members in accordance with their respective
Percentage Interests.

 

(g)           The Member Nonrecourse Deductions shall be allocated each
year to the Member that bears the economic risk of loss (within the meaning of
Treasury Regulations Section 1.752-2) for the Member Nonrecourse Debt to
which such Member Nonrecourse Deductions are attributable.

 

(h)           The allocations set forth in Sections 6.2(a) through
(g), inclusive, (the “Regulatory Allocations”)
are intended to comply with certain requirements of Treasury Regulations
Sections 1.704-1(b) and 1.704-2(i). 
Notwithstanding the provisions of Section 6.1(b), the
Regulatory Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Members so that, to the extent
possible, the net 

 

29

 

amount of such allocations of other items and the
Regulatory Allocations to each Member shall be equal to the net amount that
would have been allocated to each such Member if the Regulatory Allocations had
not occurred.

 

SECTION 6.3                 Tax Allocations.

 

(a)           Except as provided in Section 6.3(b), for
income tax purposes under the Code and the Treasury Regulations each Company
item of income, gain, loss and deduction shall be allocated between the Members
as its correlative item of “book” income, gain, loss or deduction is allocated
pursuant to this Article VI.

 

(b)           Tax items with respect to Company Assets that are
contributed to the Company with a Gross Asset Value that varies from its basis
in the hands of the contributing Member immediately preceding the date of
contribution shall be allocated between the Members for income tax purposes
pursuant to Regulations promulgated under Code Section 704(c) so as
to take into account such variation.  The
Company shall account for such variation under any method approved under Code Section 704(c) and
the applicable Regulations as chosen by the Tax Matters Member.  If the Gross Asset Value of any Company Asset
is adjusted pursuant to the definition of “Gross Asset Value” in Article II,
subsequent allocations of income, gain, loss and deduction with respect to such
Company Asset shall take account of any variation between the adjusted basis of
such Company Asset for federal income tax purposes and its Gross Asset Value in
the same manner as under Code Section 704(c) and the Treasury
Regulations promulgated thereunder under any method approved under Code
Section 704(c) and the applicable Treasury Regulations as chosen by
the Tax Matters Member.  Allocations
pursuant to this Section 6.3(b) are solely for purposes of
federal, state and local taxes and shall not affect, or in any way be taken
into account in computing, any Member’s Capital Account or share of Profits,
Losses and any other items or distributions pursuant to any provision of
this Agreement.

 

SECTION 6.4                 Other Provisions.

 

(a)           For any Fiscal Year or other period during which any part
of a Company Interest is transferred between the Members or to another Person,
the portion of the Profits, Losses and other items of income, gain, loss,
deduction and credit that are allocable with respect to such part of a Company
Interest shall be apportioned between the transferor and the transferee under
any method allowed pursuant to Section 706 of the Code and the applicable
Treasury Regulations as determined by the Manager.

 

(b)           In the event that the Code or any Treasury Regulations
require allocations of items of income, gain, loss, deduction or credit
different from those set forth in this Article VI, the Investor  is hereby authorized to make new
allocations in reliance on the Code and such Treasury Regulations, and no such
new allocation shall give rise to any claim or cause of action by any Member.

 

(c)           The Members acknowledge and are aware of the income tax
consequences of the allocations made by this Article VI and hereby
agree to be bound by the provisions of this Article VI in reporting
their shares of Profits, Losses and other items of income, gain, loss,
deduction and credit for federal, state and local income tax purposes.

 

30

 

(d)           For purposes of determining a Member’s proportional share
of the Company’s “excess nonrecourse liabilities” within the meaning of
Treasury Regulations Section 1.752-3(a)(3), each Member’s interest in
Profits shall be such Member’s Percentage Interest.

 

(e)           All matters concerning the allocations and other
determinations provided for in this Article VI and any accounting
procedures not expressly provided for in this Agreement shall be determined by
the Investor in a manner consistent with the terms and intent of this
Agreement.

 

ARTICLE VII

 

MANAGEMENT AND OPERATIONS

 

SECTION 7.1                 Designation and General
Authority of Manager.  The Members
have designated and hereby appoint JMIR-Project Manager LLC, a Delaware limited
liability company (“JMIR Manager”),
as the Manager of the Company.  Except to
the extent expressly limited by the provisions of Section 7.4 or
otherwise in this Agreement, the business and affairs of the Company shall be
vested in and controlled by the Manager, and the Manager shall have all powers
necessary, convenient or appropriate to carry out the purposes, conduct the
business and exercise the powers of the Company.  The Members and Company hereby delegate to
the Manager the power and authority to act on behalf of and in the name of the
Company, without obtaining the consent of or consulting with any other Person
(except as provided in Section 7.4 hereof or elsewhere in this
Agreement), to take any and all actions (which the Company has authority to
perform) on behalf of the Company set forth in this Agreement, including in Section 1.5.  The Members, by mutual Approval, may from
time to time designate officers of the Company and delegate to such officers
such authority and duties as the Manager may deem advisable so long as in
compliance with this Agreement.  Unless
the Manager directs otherwise in writing, if the title assigned to any officer
is one commonly used for officers of a business corporation formed under the
Delaware General Corporation Law, the assignment of such title shall constitute
the delegation to such person of the authorities and duties that are normally
associated with that office.  As of the
date of this Agreement, the officers of the Company shall be as set forth on
Schedule 3.

 

SECTION 7.2                 Duties of Manager.

 

(a)           The Manager shall, as a Company expense to the extent
provided in Section 7.6(a), use commercially reasonable efforts to
implement the Annual Budget and shall otherwise perform those duties set forth
below, and shall have the authority to perform the duties described in this Section 7.2
or as otherwise specifically set forth herein, in each instance subject to the
requirement of receiving the prior approval of Investor, if and when required
by the terms hereof.  Specifically, the
Manager shall:

 

(i)            subject to there being adequate Company funds therefor,
conduct the business of the Company on a day-to-day basis, and use diligent
efforts to cause such operations to be conducted in accordance with the then
applicable Annual Budget, which 

 

31

 

duties may be discharged by
delegating the same to Hotel Operator pursuant to the Hotel Management
Agreement;

 

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

 

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

 

Subject to any right provided to the Manager to be
reimbursed for Company expenses pursuant to Section 7.6(a), and
subject further to the fees authorized pursuant to the provisions of Section 7.6(b),
the Manager shall not otherwise be entitled to receive any fees or other
compensation in respect of any duties or services, and will not receive
reimbursement for compensation payable to any of its employees or other direct
or indirect overhead which may be attributable to such duties and services.

 

(b)           Notwithstanding anything to the contrary contained in Section 7.4(a),
if at the beginning of any calendar year the Annual Budget or any item or
portion thereof shall not have been Approved by Investor, then:

 

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

 

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

 

(iii)          the Manager shall be entitled to, and, subject to there
being adequate Company funds therefor, shall, expend funds in respect of Debt
Service Payments on the Company’s or any Subsidiary’s Financing (including the
expense of curing any defaults thereunder), utilities, real estate taxes and
assessments, insurance 

 

32

 

premiums, emergency repairs,
any annual or other periodic costs, fees, dues or other amounts required to be
paid pursuant to the Hotel Management Agreement or pursuant to the Franchise
Agreement, regardless of whether the Annual Budget has been approved or whether
such expenditures exceed the amounts provided for in the applicable Annual
Budget (all of the foregoing described in this clause (iii), collectively, “Necessary Expenses”).

 

(c)           Subject to the availability of adequate funds therefor
from Revenues from operations, Capital Contributions or other sources, and
subject further, in any event, to the provisions of Section 7.4 and
any other relevant provisions hereof, in addition to and without limiting any
other duties set forth in this Agreement, the Manager shall, as a Company
expense to the extent provided in Section 7.6(a):

 

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

 

(ii)           take all proper and necessary actions reasonably required
to cause the Company and the Subsidiaries at all times (A) to perform and
comply with the terms and provisions (including without limitation, any
provisions requiring the expenditure of funds by the Company) of the
Transaction Documents and any mortgage, lease, or other contract, instrument or
agreement to which the Company or any Subsidiary is a party or is bound, or
which affects all or any portion of the Company Assets or the operation thereof
and (B) to enforce the terms of such agreements against third parties
unless in either case of (A) or (B) such failure to perform, comply
or enforce arises at the express written direction of Investor or with the
prior Approval of Investor;

 

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

 

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

 

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

 

(vi)          if and to the extent the Manager delegates to Hotel
Operator, any loan servicer or property manager (previously Approved by
Investor) or subcontracts 

 

33

 

with any third party or Affiliate
for the performance of any of the services to be performed by the Manager,
supervise and oversee the performance of the services performed by such third
parties or Affiliates and use commercially reasonable efforts to cause the same
to be performed in the manner required hereunder; and

 

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

 

(viii)        to implement all decisions (including
Major Decisions) approved by the Members 
(to the extent such approval is required hereunder);

 

(ix)           to negotiate and execute all Financing Documents in
connection with a Financing, and to negotiate and execute such documents as
necessary to prepay in whole or in part, refinance, recast, increase, modify or
extend any such Financing affecting the Company or the Company Assets, provided
that no guaranties or credit enhancements can be required from any Member or
its Affiliates without such party’s consent (however, in connection with the
Company entering into the Franchise Agreement, the Guaranty Sharing Agreement
shall be executed);

 

(x)            to hold assets of the Company in the name of one or more
trustees, nominees, other agents, or directly or indirectly through one or more
entities owned in whole or in part, directly or indirectly, by the Company,
including through Subsidiaries;

 

(xi)           to open and maintain separate bank accounts (or authorize
the Hotel Operator to open and maintain the same) for funds of the Company and
its Subsidiaries in the name of the Company (or its Subsidiaries) and designate
the Persons authorized on behalf of the Company (or its Subsidiaries) to make
deposits therein (including all receipts from operations of the Company Assets)
and withdrawals therefrom, and not commingle any funds in such accounts with any
other funds or accounts of Manager (or Hotel Operator, if applicable);

 

(xii)          to obtain and maintain such insurance as the Manager deems
appropriate or as required by Investor to protect the Company Assets and the
Indemnified Parties and otherwise as may be necessary to satisfy the Annual
Budget and any contractual undertakings of the Company and pay all non disputed
taxes, assessments, charges and fees payable in connection with the ownership,
use and occupancy of the Company Assets;

 

(xiii)         to establish and maintain Reserves
identified in the Annual Budget (or as otherwise approved by the Members),
including to fund improvements and leasing costs and non-recurring Capital
Expenditures and to meet indemnity and other obligations, and to fund such
Reserves with Company Assets or borrowed funds (or as otherwise approved by the
Members); and

 

34

 

 

(xiv)        to take any other action in furtherance of the Company’s
stated purpose under this Agreement unless consent of one or more of the
Members is otherwise expressly required hereunder and has not been given.

 

If
any of the Manager’s duties set forth herein are to be performed by the Hotel
Operator under the Hotel Management Agreement, then the Manager’s obligation
with respect to such duties shall be limited to using commercially reasonable
efforts to enforce the terms of the Hotel Management Agreement (subject to this
Agreement) unless such failure to enforce arises (1) solely at the
express written direction of Investor or (2) with the prior Approval of
Investor.

 

(d)           Notwithstanding anything to the contrary contained in this
Agreement, Investor shall have the absolute right, power and authority at
any time upon and after (i) the occurrence of any For Cause Event (as set
forth in Section 7.2(e) below), (ii) the occurrence of
any “For Cause Event” (as defined in the Sister Company LLC Agreement), (iii) the
occurrence of any Event of Default (as set forth in Article XII),
or (iv) the occurrence of any “Event of Default” (as defined in the Sister
Company LLC Agreement) by JMIR or JMIR Manager to remove JMIR Manager as the
Manager and appoint or designate a replacement.

 

(e)           Upon and after the occurrence of any For Cause Event as
described in this Section 7.2(e), or Section 7.2(e) of
the Sister Company LLC Agreement or any Event of Default with respect to JMIR
or JMIR Manager under this Agreement or the Sister Company LLC Agreement, Investor
shall have the right in its sole and absolute discretion to terminate JMIR
Manager as the Manager by the delivery of written notice and, upon any such
termination (i) Investor may designate a successor Manager (which may be
itself or an Affiliate of Investor), (ii) if such For Cause Event did not
arise in connection with the death, disability or incompentency of Gregory W.
Clay, John J. Moores, Sr. or John C. Kratzer, any distributions to the
Members under Section 5.3 shall no longer be made under Section 5.3
hereof and from that time forward shall be made instead under Section 5.4
hereof, and (iii) Investor may deliver an Offer Notice under Section 10.2(a) and,
notwithstanding anything to the contrary contained in this Agreement, Investor
shall have the unilateral right and authority to make all decisions on behalf
of the Company and cause the Company to take any and all actions which
Investor, in its sole discretion, may determine.  For the purposes of this Agreement, a “For Cause Event” shall mean any of the
following:

 

(i)            any actions or omissions on the part of JMIR or JMIR
Manager or any representative of either entity, or by any other Person at the
explicit direction of any of the foregoing which amounts to fraud, willful
misconduct or gross negligence; provided,
however, that such event shall
not constitute a “For Cause Event” if (I) such event is caused solely by a
single individual who did not act at the direction of JMIR or JMIR Manager,
(II) JMIR or JMIR Manager removes such Person from performing any services
for the Company and its Subsidiaries, and (III) JMIR or JMIR Manager
reimburses the Company for any actual damages incurred by the Company or its
Subsidiaries as a result of such action or omission undertaken by JMIR’s or
JMIR Manager’s representative, or such other Person’s officer, employee, agent
or representative;

 

35

 

(ii)           any Change in Control of JMIR or JMIR Manager occurs,
unless Approved by Investor; or

 

(iii)          (I) the filing of any voluntary petition in bankruptcy
or the consenting to the filing of any involuntary petition in bankruptcy
against JMIR or JMIR Manager, (II) the filing by JMIR or JMIR Manager of
the foregoing of any petition seeking, or consenting to, the reorganization or
relief under any applicable federal or state law relating to bankruptcy or
insolvency against or with respect to JMIR or JMIR Manager, (III) the
filing by any other Person of any petition seeking, or consenting to, the reorganization
or relief under any applicable federal or state law relating to bankruptcy or
insolvency with respect to JMIR or JMIR Manager, upon the same not being
discharged, stayed or dismissed within one hundred and twenty (120) days, (IV) the
consenting by JMIR or JMIR Manager to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) over
their respective assets, (V) the making of any assignment for the benefit
of creditors by JMIR or JMIR Manager, (VI) the admission by JMIR or JMIR
Manager in writing of their respective inability to pay their respective debts
generally as they become due, or (VII) the taking of any action by JMIR or
JMIR Manager in furtherance of any such action. 
If any of the foregoing events in this Section 7.2(e)(iii) occurs
with respect to JMIR Manager and JMIR appoints a JMIR-controlled Person
reasonably acceptable to Investor as a substitute Manager, then such event
shall not constitute a For Cause Event.

 

(iv)          a “For Cause Event” (as defined in the Sister Company LLC
Agreement) occurs with respect to JMIR or JMIR Manager (or their Affiliates)
under the Sister Company LLC Agreement.

 

(f)            JMIR Manager’s appointment as the Manager shall
automatically terminate if JMIR (or a permitted transferee thereof) is no
longer a Member of the Company or the Sister Company.  Any Manager appointed by Investor shall
automatically terminate if Investor (or a permitted transferee thereof) is no
longer a Member of the Company or the Sister Company.

 

SECTION 7.3                 Reliance by Third Parties.  Any third party dealing with the Company or
the Manager may, without any inquiry, rely upon any agreement,
contract, document or instrument executed and delivered by
the Manager on behalf of the Company as constituting the binding act and deed
of the Company.

 

SECTION 7.4                 Major Decisions.  Notwithstanding the provisions of Section 7.1
and Section 7.2, and except as otherwise expressly provided in this
Agreement, without the prior written consent of all of the Members in each
instance (a “Major Decision”), the
Company shall not, and JMIR Manager as Manager, shall not:

 

(a)           adopt any Annual Budget or make any amendments or
modifications thereto (as contemplated by and as further described in Section 7.5)
or adopt any supplemental budget, operating plan or other proposal relating to
any development and/or renovation of any portion of the Property or any Company
Asset and any amendment or modifications thereto; or make or incur any
expenditure which is not included or contemplated in an Annual Budget (other 

 

36

 

than Necessary Expenses or as provided in Section 7.2(b))
or if included or contemplated in an Annual Hotel Operations Budget, such
expenditure, individually or in the aggregate during the applicable Fiscal
Year, exceeds $10,000 or 10%, whichever is greater, of the aggregate Annual
Hotel Operations Budget; or if included or contemplated in an Annual Company
Budget, such expenditure exceeds the amount set forth in the applicable line
item of such Annual Company Budget by more than the greater of $10,000 and 10%
of the line item, or 5% of the total Annual Budget, whichever is less);

 

(b)           enter into any Financing or any amendment, renewal,
extension or refinancing thereof; provided that no guaranties or credit
enhancements can be required from any Member or its Affiliates without such
party’s consent;

 

(c)           sell or otherwise Transfer any material portion of the
Company Assets (other than tangible personal property that may be disposed of
or replaced due to wear and tear or obsolescence or otherwise in the ordinary
course of business);

 

(d)           enter into or renew any material lease, materially modify
or terminate the same or waive any material monetary default thereunder;

 

(e)           designate, terminate or replace the Hotel Operator (provided that pursuant to the Hotel Management Agreement,
the Manager may delegate to the Hotel Operator any decisions otherwise
permitted to be made by the Manager under this Agreement, and any such
decisions so delegated shall not be Major Decisions hereunder);

 

(f)            enter into the Hotel Management Agreement or make any
material modifications, amendments or extensions thereto;

 

(g)           enter into any Franchise Agreement or make any material
modifications, amendments or extensions thereto;

 

(h)           enter into the Lease Agreement or make any material
modifications, amendments or extensions thereto;

 

(i)            commence or institute any litigation or arbitration by
the Company against any Person, provided,
however, if Investor does not
Approve any litigation regarding enforcement of a third-party obligation, then
Manager shall not be obligated to enforce such third party obligation to the
extent such enforcement requires litigation but Manager shall use commercially
reasonable efforts to use any other reasonable method to resolve such dispute;

 

(j)            (1) file, or consent to or solicit the filing of, a
bankruptcy, reorganization or insolvency petition or action (voluntary or
involuntary), (2) consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Company or a
substantial part of its property, (3) make any assignment for the benefit
of creditors, (4) admit in writing to the Company’s inability to pay its
debts generally as they become due, (5) otherwise institute insolvency
proceedings or (6) take any action in furtherance of such action, in each
case, with respect the Company, its Subsidiaries, the Property or any other
substantial portion of the Company Assets;

 

37

 

(k)           be dissolved (other than as provided in Section 11.1);

 

(l)            admit any new member in the Company or issue or authorize
the issuance of additional Company Interests;

 

(m)          the establishment of Reserves;

 

(n)           lending funds belonging to the Company or the Members to
any Person or extending any Person credit on behalf of the Company or the
Members other than what reasonable persons would consider to be within the
ordinary course of business of the Company;

 

(o)           entering into or consummating any transaction or
arrangement with any Affiliate of JMIR, which shall require the Approval of
Investor notwithstanding anything contained herein to the contrary;

 

(p)           approve the plans and specifications for any improvement,
renovation, development, rehabilitation, alteration, repair or completion of
construction of the Property or any Company Asset whose cost exceeds $25,000,
or taking any action relating thereto which burdens or encumbers the Property
or any Company Asset;

 

(q)           approve any direct or indirect Transfers of Company
Interests (as contemplated by and as further described in Article IX);

 

(r)            cause the Company to merge with or into, or otherwise
enter into any other business combination with, any other Person; and

 

(s)           make or incur any expenditure which is not included or
contemplated in the Renovations Budget or, if included or contemplated in the
Renovations Budget, such expenditure exceeds the amount set forth in the
applicable line item of the Renovations Budget by more than (i) the
greater of $10,000 and 10% of the line item or (ii) 5% of the total the
total Renovations Budget, whichever is less.

 

SECTION 7.5                 Annual Budget.

 

(a)           The Manager shall prepare a proposed annual budget and
operating plan for the Property and Company Assets for each Fiscal Year (which
shall include a budget for costs and expenses related to operation and
maintenance of the Property under the Hotel Management Agreement (the “Annual Hotel Operations Budget”) and a
budget applicable to other Company costs and expenses (including a contingency
line item), the “Annual Company Budget”)
within fifteen (15) days after the Hotel Operator delivers to Manager the
proposed “Asset Development Plan” for the applicable Fiscal Year, and the
Manager shall deliver five (5) year forward projections (collectively with
the Annual Hotel Operations Budget and the Annual Company Budget, the “Annual Budget”) of each of the Annual Hotel
Operations Budget and the Annual Company Budget within five (5) days after
receipt thereof from Hotel Operator (provided if the Manager should fail to
timely prepare and submit a proposed form of Annual Budget, Investor shall
be authorized to prepare such Annual Budget).  Each Annual Budget must
be Approved by all of the Members.  All
portions of the proposed Annual Budget which are objected to by the Members
shall be deemed “Rejected Portions.”  The Members and the 

 

38

 

Manager shall work in good faith to agree upon
revisions to the Rejected Portions that would result in the proposed Annual Budget being approved by all of
the Members.  In formulating the
comprehensive Annual Budget, to the extent reasonably feasible at the time of
preparation thereof, the Manager will develop (for Approval by the Members)
proposed strategies regarding (i) plans for renovation, leasing,
financing, and rehabilitation of the Property and any other real property and
proposed reductions to operating expenses and other Company costs and expenses
and increases in Revenues, (ii) preparation and release of all promotional
and advertising relating to, and a marketing plan for, the Company Assets or
concerning the Company, (iii) terms for any proposed sale or disposition
of any Company Asset, or acquisition of additional Company Assets, and (iv) selection
of legal counsel, accountants, appraisers and other consultants for the Company
to efficiently implement the Annual Budget. 
The Manager will also consider and make recommendations to the extent it
deems the same appropriate regarding the financing, amendment, modification,
alteration, change, cancellation, or prepayment of any Financing affecting any
Company Assets, and procurement of title insurance and other insurance for the
Company, or decrease or vary the insurance carried by or on behalf of the
Company and any other matters affecting the Company’s business.  The Members and the Manager may from time to
time review the Annual Budget and make such amendments or modifications thereto
as they shall jointly determine to be appropriate or necessary; provided,
however, that the Manager, acting
alone, may approve changes from time to time to the Annual Hotel Operations
Budget that do not, individually or in the aggregate during the applicable
Fiscal Year, exceed $10,000 or 10%, whichever is greater, of the aggregate
Annual Hotel Operations Budget.  In
addition, the Manager, acting alone, may apply or re-allocate amounts included
in the “contingency” line item of the Annual Company Budget to other line items
in the applicable budget for such Fiscal Year. 
Nothing in this Agreement shall affect the budget provisions of the
Hotel Management Agreement.

 

(b)           The Members hereby approve the Annual Budget for the
remainder of Fiscal Year 2010, a copy of which  is
attached hereto as Schedule 1.

 

SECTION 7.6                 Expenses and Fees.

 

(a)           Expense Payment and Reimbursement.  From and after the Acquisition Date, the
Company shall pay directly, or, to the extent incurred by the Manager or its
Affiliates, shall reimburse the Manager and its Affiliates (as applicable) for,
the following (to the extent such items and amounts are provided in the then
applicable Annual Budget or otherwise approved by the Members):

 

(i)            all reasonable costs and expenses related to the
ownership, operation, management, Financing or Transfer of the Company Assets,
including taxes, fees of auditors and legal counsel, insurance, litigation and
indemnification expenses and administrative and accounting expenses (excluding
those associated with the Manager’s preparation and distribution of reports to
the Members; provided that reasonable third party costs (including copying,
postage, audit and legal) incurred in connection with same shall be at Company’s
expense);

 

39

 

(ii)           the reasonable charges and expenses of maintaining the
Company  bank accounts and of any
banks, custodians or depositories appointed for the safekeeping of the Company
Assets, including the costs of bookkeeping and accounting services;

 

(iii)          all reasonable travel, due diligence, deal pursuit
(including attorneys’ and accountants’ fees) and other reasonable out-of-pocket
expenses of the Manager or any Affiliate incurred in connection with the
Property and other Company Assets; and

 

(iv)          all other reasonable expenses not specifically provided for
in this Section 7.6(a) that are incurred by the Company, the
Manager or its Affiliates in connection with operating or managing the Company
or any of the Company Assets, or performing the duties of the Manager under
this Agreement, but specifically excluding general overhead and similar costs
and expenses of the Manager (or its Affiliates).

 

(b)           Recurring Development and Construction Management Fee.  Provided the Company or one or more
Subsidiaries acquires the Property, from and after the Acquisition Date until
completion of the renovations to the Property provided for in the Renovations
Budget (the “Renovations”), in
consideration of the services to be provided under this Agreement, the Company
shall pay to the Manager (or its designee) a monthly development and
construction management fee (the “Construction Management
Fee”).  The Construction
Management Fee shall (i) begin to accrue as of the Acquisition Date,
(ii) be paid monthly in arrears, (iii) be calculated as of the last
Business Day of each calendar month following the Acquisition Date (and be paid
within a reasonable time thereafter) and (iv) equal to 3.5% of the
aggregate Renovation Costs of the Property for the applicable calendar month.  Notwithstanding anything contained in this Section 7.6(b) to
the contrary, twenty-five percent (25%) of the Construction Management Fee, but
no more than $50,000, shall be withheld until such time as all Completion
Documentation has been delivered to the Company, and upon receipt of all
Completion Documentation, the Company shall promptly pay to the Manager (or its
designee) such withheld amount.

 

SECTION 7.7                 Duties and Conflicts.

 

(a)           The Manager and the Members and their respective officers,
employees, and Affiliates, in connection with their respective duties and
responsibilities hereunder, shall devote such time to the Company business as
they deem necessary or desirable in connection with their respective duties and
obligations hereunder.

 

(b)           Notwithstanding the provisions of Section 7.7(a),
each Member recognizes that the Manager, the other Members and their respective
Affiliates, employees, agents and representatives have or may have in the
future other business interests, activities and investments, some of which may
be in conflict or competition with the business of the Company and that the
Manager, such other Member and their respective Affiliates, employees, agents
and representatives are entitled to carry on such other business interests,
activities and investments.  The Manager,
any Member or any Affiliate, employee, agent or representative thereof may
engage in or possess an interest in any other business ventures of any nature
or description, independently or with others, similar or dissimilar to the
business of the Company without any 

 

40

 

obligation to offer any interest in such activities
to the Company or to the other Members, and neither the Company nor any Member
shall have any rights by virtue of this Agreement or the relationship created
hereby in or to any other ventures or activities engaged in by the Manager or
any Member (or any Affiliate, employee, agent or representative of the Manager
or any Member) or to the income or proceeds derived therefrom, and the pursuit of
such ventures or activities by the Manager or any Member (or their respective
Affiliates, employees, agents or representatives) shall not be deemed wrongful
or improper, even to the extent the same are competitive with the business
activities of the Company.  Neither the
Manager, any Member nor Affiliate, employee, agent or representative thereof
shall be obligated to present any particular investment opportunity to the
Company even if such opportunity is of a character that, if presented to the
Company, could be taken by the Company, and the Manager, any Member and any
Affiliate, employee, agent or representative thereof shall have the right to
take for its own account (individually or as a partner, member or fiduciary) or
to recommend to others any such particular investment opportunity.

 

SECTION 7.8                 Exculpation; Indemnification.

 

(a)           Exculpation. 
Except as required by any non-waivable provision of applicable law,
neither the Manager, any Member nor any of its respective successors, assigns,
transferees or any of their respective shareholders, partners, managers,
members, officers, trustees, directors, employees, Affiliates, agents or
representatives (each of whom is an “Indemnified
Party”) shall be liable, responsible or accountable in damages or
otherwise to the other Members or the Company for any act performed by such
Indemnified Party in good faith, which act was reasonably believed by such
Indemnified Party to be in the best interests of the Company and was within the
scope of the authority conferred upon it by this Agreement, or for any failure
or refusal by such Indemnified Party to perform any act, which failure or
refusal was taken in good faith and was reasonably believed by such Indemnified
Party to be in the best interests of the Company, unless such act or failure or
refusal to act constitutes willful misconduct, gross negligence, bad faith or
fraud in the performance of the Indemnified Party’s obligations to the Company
or the Members.  The doing of any act or
the failure to do any act by any Indemnified Party, the effect of which may
cause or result in loss or damage to the Company or the other Members, shall
not subject the Indemnified Party to any liability under this Agreement if done
or omitted pursuant to a favorable opinion of law issued by counsel of
recognized standing engaged by the Company and experienced in the matters at
issue.  No general or limited partner of
any Member, Manager, shareholder, partner, member or other holder of an equity
interest in such Member, Manager or manager, officer of director of any of the
foregoing shall be personally liable for the performance of any such Member’s
or Manager’s obligations under this Agreement, but the foregoing shall not
relieve any such partner, shareholder or member of any Member or Manager from
its obligations to such Member or Manager.

 

(b)           Indemnification. 
(1) To the fullest extent permitted by the Delaware Act or other
applicable law, the Company shall indemnify, defend and hold harmless each
Indemnified Party from and against any direct claim, action, suit or proceeding
brought or threatened against such Indemnified Party and from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, proceedings, costs, expenses and disbursements of any kind or
nature whatsoever (including all reasonable costs and expenses 

 

41

 

of attorneys, defense, appeal and settlement of any
and all suits, actions or proceedings instituted or threatened against such
Indemnified Party or the Company) and all costs of investigation in connection
therewith incurred by such Indemnified Party by reason of any act performed, or
failure or refusal to act, by him or it for and on behalf of the Company, provided, however, that,
in each case the act or failure or refusal to act was taken in good faith, was
reasonably believed by the applicable Indemnified Party to be in the best
interests of the Company, was within the scope of authority granted to such
Indemnified Person and did not constitute willful misconduct, gross negligence,
bad faith or fraud.  The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendre or
its equivalent, shall not, of itself, create a presumption that the Person did
not act in good faith and in a manner which he or it reasonably believed to be
in or not opposed to the best interests of the Company.  Expenses (including reasonable out-of-pocket
attorneys’ fees and direct expenses) incurred by an Indemnified Party in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such Indemnified Party to repay such amount if it shall ultimately be
determined that he or it is not entitled to be indemnified by the Company as
authorized in this Section 7.8(b). 
Any indemnity under this Section 7.8(b) shall be paid
solely out of and to the extent of Company assets and shall not be a personal
obligation of any Member and in no event will any Member be required, or
permitted without the Approval of all of the Members, to contribute additional
capital under Section 3.2 to enable the Company to satisfy any
obligation under this Section 7.8. 
All judgments against the Company and the Members, or any one or more
thereof, wherein such Member (or Members) is entitled to indemnification, must
first be satisfied from Company Assets.

 

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

 

(3)           The provisions of this Section 7.8(b) shall
survive for a period of four years from the date of dissolution of the Company,
provided that, if at the end of such period there are any actions, proceedings
or investigations then pending, any Indemnified Party may so notify the Company
and the other Members at such time (which notice shall include a brief
description of each such action, proceeding or investigation and the
liabilities asserted therein) and the provisions of this Section 7.8(b) shall
survive with respect to each such action, proceeding or investigation set forth
in such notice (or any related action, 

 

42

 

proceeding or investigation
based upon the same or similar claim) until such date that such action,
proceeding or investigation is finally resolved.

 

(4)           Notwithstanding anything to the contrary contained in this
Agreement, the obligations of the Company or any Member under this Section 7.8(b) shall
(i) be in addition to any liability which the Company or such Member may
otherwise have and (ii) inure to the benefit of such Indemnified Party,
its Affiliates and their respective members, partners, shareholders, managers,
directors, officers, employees, agents and Affiliates and any successors,
assigns, heirs and personal representatives of such Persons.

 

(5)           Notwithstanding any of the preceding provisions of this Section 7.8(b),
in no event shall the Company have any obligation under this Section 7.8(b) that
is prohibited by Section 12.3(iii) of the charter of Behringer Harvard
Opportunity REIT II, Inc.

 

(c)           Separate Series. 
The Members (other than JMIR) acknowledge that they have been advised
that JMIR is a separate series of JMIR Investments III, LP, a Delaware series
limited partnership (“JMIR Series LP”),
and that JMIR has been established as provided in Section 17-218 of the
Delaware Revised Uniform Limited Partnership Act; accordingly, subject to Section 16.1,
the debts, liabilities and obligations incurred, contracted for, otherwise
existing with respect to JMIR shall be enforceable only against the separate
assets of JMIR and not against the assets of JMIR Series LP generally or
any other series thereof. 
Notwithstanding anything contained in this Agreement other than Section 16.1,
each Member agrees to such limitation on liability, and further agrees that (i) it
shall look solely to the assets of JMIR as a separate series for the
satisfaction of any debt, liability or obligation arising under, or out of the
transactions contemplated by, this Agreement, (ii) it shall have no
recourse to any assets of JMIR Series LP or any other series established
by JMIR Series LP for the satisfaction of any such debts, liabilities or
obligations, and (iii) it waives and relinquishes any right to pursue any
assets of JMIR Series LP (or any other series already or hereafter
established) for the satisfaction of any debts, liabilities or obligations; in
each case, regardless of whether separate books and records have been or
hereafter are kept for one or more of the series of JMIR Series LP.

 

SECTION 7.9                 Certain Provisions Related
to Security Agreement.  The Members
hereby acknowledge and agree that, notwithstanding anything to the contrary in
this Agreement, so long as any Security Agreement exists, neither Member shall
be entitled to take any action or otherwise exercise any remedies provided for
in this Agreement if such action or remedy would violate any applicable “transfer”
restrictions set forth in the Security Agreement or any other loan document
related thereto, unless and to the extent that the consent of the lender or
servicer under such Security Agreement or other loan document has been
obtained.

 

ARTICLE VIII

 

BOOKS AND RECORDS; TAX
MATTERS MEMBER

 

SECTION 8.1                 Books of Account.  The Investor shall keep or cause to be kept,
at the expense of the Company, accurate and complete books of account and
records showing the 

 

43

 

assets and liabilities, operations, transactions and
financial condition of the Company and the Company Assets in a manner customary
and consistent with good accounting principles, practices and procedures.  Each and every financial transaction with
respect to the leasing or ownership, as applicable, and operation of the
Property and Company Assets shall be entered fully and accurately in the books
of account and records of the Company, the Property and the other Company
Assets which shall at all times be maintained at the principal office of the
Company or at the offices of the Hotel Operator and shall be and remain the
property of the Company.  Bills, receipts
and vouchers shall be maintained on file by the Investor.  The Investor shall maintain or cause to be
maintained said books and accounts in a safe manner and separate from any
records not having to do directly with the Company, any Subsidiary, the
Property or any Company Asset.  Each
Member or its duly authorized representative, at its own expense, shall at all
reasonable times and for purposes reasonably related to the Member’s Company
Interest have access to, and may inspect and make copies of, such books and
accounts and any other records and such other information of the Company at the
office of the Company or other Person maintaining the same upon reasonable
prior Notice to the Investor. 
Additionally, upon request of a Member, all professionals given access
to any such books or records shall be directed to provide such books or records
to such Member.  The books of the Company
shall be kept on the accrual basis in accordance with GAAP and on a tax basis
and the Company shall report its operations for tax purposes on the accrual
method. Notwithstanding the foregoing, the Members acknowledge that all books
and records relating to the Property operations (but excluding any
organizational documents) shall be maintained by the Hotel Operator pursuant to
the Hotel Management Agreement and Investor’s duty with respect to such books
and records shall be limited to using diligent and commercially reasonable
efforts to enforce Hotel Operator’s obligations with respect thereto.

 

SECTION 8.2                 Financial and Operating
Information.

 

(a)           Within thirty (30) days after receiving the quarterly
reports required under Section 10.2 of the Hotel Management Agreement
(other than the last quarter of such Fiscal Year), at the Company’s expense,
the Investor shall forward or cause to be forwarded to each Member in each case
certified by the Investor as being true and correct.  (A) an unaudited balance sheet of the
Company and each Subsidiary dated as of the end of such fiscal quarter, (B) an
unaudited related income statement of the Company and each Subsidiary for such
fiscal quarter, (C) an unaudited statement of each Member’s Capital
Account for such fiscal quarter, (D) an unaudited statement of cash flows
of the Company and each Subsidiary for such fiscal quarter, and (E) a
reconciliation of actual operating expenses and Revenues during such period
compared with the Annual Budget amounts for such items, and (F) a
quarterly explanation of the discrepancies; and

 

(b)           Within three (3) business days after receiving the
monthly reports required under Section 10.2 of the Hotel Management
Agreement, Investor shall forward or cause to be forwarded to each Member
a status report of the Company’s activities during such calendar month,
including summary descriptions of additions to, dispositions of and leasing and
occupancy of the Property and Company Assets and any material legal issues such
as claims filed or threatened against the Company, material claims of the
Company and each Subsidiary against other parties and developments in any then
pending legal actions affecting the Company during such month.

 

44

 

(c)           Within sixty (60) days after receiving the annual reports
required under Section 10.6 of the Hotel Management Agreement for a Fiscal
Year, the Investor will prepare, or cause to be prepared, on an accrual basis
in accordance with GAAP and on a tax basis, at the expense of the Company, and
furnish to each Member the following, all of which shall be certified by the
Investor as being true and correct:

 

(i)            an unaudited balance sheet of the Company and each
Subsidiary dated as of the end of such Fiscal Year;

 

(ii)           an unaudited related income statement of the Company and
each Subsidiary for such Fiscal Year;

 

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

 

(iv)          an unaudited statement of cash flows of the Company and
each Subsidiary as of the end of the Fiscal Year; and

 

(v)           such other supporting schedules, reports and backup
information as are reasonably requested by Investor.

 

(d)           The Investor shall, as a Company expense, at least once
every calendar year have the Company’s books and records audited by the Company
Accountant.  In addition, the Investor
shall have the right but not the obligation (unless reasonably requested by the
Manager) to prepare, at the expense of the Company, and furnish to each Member
within forty-five (45) calendar days after the end of each Fiscal Year, the
final audited amount of net income of the Company for such Fiscal Year and,
within sixty (60) calendar days after the end of such taxable year, each of the
following, all of which shall be certified by the Investor as being true and
correct and all of which shall be certified in the customary manner by the
Company Accountant (which firm shall provide such balance sheet, income
statement and statement of Capital Account in draft form to the Members for
review prior to finalization and certification thereof) (i) an audited
balance sheet of the Company dated as of the end of such taxable year; (ii) an
audited related income statement of the Company for such taxable year; (iii) an
audited statement of cash flows for such taxable year; and (iv) an audited
statement of each Member’s Capital Account for such taxable year.

 

(e)           No later than March 1st of the year following the
Fiscal Year, the Investor shall, as a Company expense, furnish or cause to be furnished
to each Member with copies of the Company’s federal partnership Return of
Income and other income tax returns, together with each Member’s Schedule K-1
or analogous schedule.

 

(f)            All schedules of book income shall be prepared on a GAAP
basis.  Promptly after the end of each
Fiscal Year, the Investor will cause the Company Accountant to prepare and
deliver to each Member a report setting forth in sufficient detail all such
additional information and data with respect to business transactions effected
by or involving the Company during the Fiscal Year as will enable the Company
and each Member to timely prepare its federal, state and local income tax
returns in accordance with applicable laws, rules and regulations.  The Tax Matters Member will use its diligent
commercially reasonable efforts to 

 

45

 

cause the Company Accountant to prepare all federal,
state and local tax returns required of the Company, submit those returns to
the other Members for their approval not later than March 1st of the year
following such Fiscal Year and will file the tax returns after they have been
Approved by Investor.

 

(g)           The Investor shall prepare, or cause to be prepared, at
Company expense, such additional financial reports and other information as
Manager may reasonably request.  The
Investor and Manager will furnish to each Member upon request, at the expense
of the Company, copies of all reports, statements, notices and other material
written information received by the Company, Manager or the Investor from, or
delivered by or on behalf of the Company to, any third party lender.  Subject to the provisions of Section 14.19,
each Member shall be permitted to deliver to any of its Affiliates or to any of
its direct or indirect members, partners or investors, a copy of any of the
reports and statements provided to such Member pursuant to this Section 8.2.

 

(h)           All decisions as to accounting principles shall be made by
the Investor, subject to the provisions of this Agreement.

 

SECTION 8.3                 Tax Matters Member.  Investor is hereby designated as the “tax matters partner” under Code Section 6231(a)(7) (in
such capacity, the “Tax Matters Member”).  The Tax Matters Member shall manage audits of
the Company conducted by the Internal Revenue Service or any other taxing
authority pursuant to the audit procedures under the Code and the Treasury
Regulations promulgated thereunder or other applicable law.  The Tax Matters Member shall keep the Members
informed, from time to time, as to the status of any audit of the Company.

 

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

 

SECTION 8.5                 REIT Matters.  Notwithstanding anything to the contrary in
this Agreement, (a) neither the Company nor any Member nor Manager (acting
on the Company’s behalf) shall take any action (or permit the Hotel Operator to
take any action) which would cause Investor (or its REIT affiliates) to (i) fail
to qualify as a “real estate investment trust” (as defined under Sections 856 &
857 of the Code) or (ii) incur any additional taxes under Section 857
or Section 4981 of the Code (or any successor provisions), and (b) the
Company shall conduct its business affairs in a manner so as to avoid incurring
income that would not qualify under Sections 856(c)(2) and 856(c)(3) of
the Code and will not acquire assets that would cause a violation of the asset
test as described in Section 856(c)(4) of the Code, unless any events
described in clauses (a) and (b) above are in accordance with the
terms of this Agreement or any other agreement entered into as contemplated or
authorized by this Agreement or arise at the express written direction of
Investor or with the prior Approval of Investor.  The Members and Manager shall periodically
consult with the other Members (or their designee) to ensure that any
prospective transaction undertaken by the Company, or a Member acting on behalf
of the Company, shall not cause Investor (or its REIT affiliates) to fail to
qualify as a REIT.  If the Members
disagree as to whether any transaction will cause Investor (or its REIT
affiliates) to fail to qualify as a REIT (as defined under Sections 856 and 857
of the Code) or incur any additional 

 

46

 

taxes under Section 857 or Section 4981 of
the Code (or any successor provisions), the reasonable determination of
Investor shall be final.

 

ARTICLE IX

 

TRANSFERS OF COMPANY
INTERESTS

 

SECTION 9.1                 Transfers of Company
Interests Generally.  Except as
permitted in this Article IX or pursuant to Article X
hereof, no Member shall Transfer all or any part of its Company Interest
without the consent of the other Member. 
Each Member agrees that, to the extent it desires that its Company
Interest be at any time held by any other Person, such Member will Transfer its
Company Interest or part thereof to such Person only through a direct Transfer
in the manner contemplated in this Article IX.  The approval by any Member to Transfer in any
one or more instances shall not limit or waive the requirement to obtain
approval in any other or future instance. 
To the fullest extent permitted by applicable law, any Transfer of a
Company Interest in contravention of this Article IX shall be null
and void ab initio and shall be deemed a material
default of this Agreement, and the other Members shall have all the rights and
remedies available under this Agreement and applicable law.  Nothing in this Article IX (except Section 9.3(a)(i) or
otherwise provided in this sentence) is meant to or will be interpreted to
restrict in any way the ability of any equityholder in Behringer Harvard
Opportunity REIT II, Inc. BHO II, Inc., BHO Business Trust II or
Behringer Harvard Opportunity OP II, LP and/or their constituent owners from
transferring securities issued by such entities, provided no such transfer will
be permitted if it would cause the Company to be taxed as a corporation for
federal or state tax purposes.

 

SECTION 9.2                 Succession by Operation of
Law and Permitted Transfers.

 

(a)           Except as permitted in this Article IX, in the
event of the merger, consolidation, dissolution or liquidation of any Member,
all of such Member’s rights to distributions and allocations by the Company,
shall pass to such Member’s legal successor, but such legal successor shall not
become a Member of the Company without the prior written consent of the
Members.

 

(b)           Notwithstanding anything in this Agreement to the
contrary, but subject to the satisfaction of the conditions set forth in this Article IX,
the following Transfers shall be permitted:

 

(i)            Transfers by a Member of all or any portion such Member’s
Company Interest with the prior written consent of the other Member, which
consent may be given or withheld in the other Member’s sole and absolute
discretion;

 

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

 

47

 

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

 

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

 

Concurrent
with any Transfer by JMIR under this Section 9.2(b), JMIR shall
Transfer an equal percentage of its interest in the Sister Company in accordance
with the terms of the Sister Company LLC Agreement.

 

SECTION 9.3                 General Conditions
Applicable to Transfers.

 

(a)           Notwithstanding anything in this Agreement to the
contrary, no Transfer shall be made, recognized or consented to by the Members
(except as provided in clause (iv) below) or deemed effective
if such Transfer:

 

(i)            would violate any of the covenants or restrictions of the
Franchise Agreement or the Mortgage Loan;

 

(ii)           would constitute or result in  a material violation or default under any
contract or other obligation legally binding upon the Company, any of its
Subsidiaries, any of the other Company Assets or the Members;

 

(iii)          would cause the Company, any of its Subsidiaries, the
Company Assets or any Member to be in violation of or result in the any
applicable law, order, rule, regulation or court order;

 

(iv)          would require the Company to be registered as an “investment
company” pursuant to Section 3 of the Investment Company Act of 1940, as
amended (the “1940 Act”), and the rules and
regulations of the Securities and Exchange Commission thereunder;

 

48

 

(v)           would result in the termination of the Company under the
Code, the Company being unable to qualify for one or more the “safe harbors”
set forth in Treasury Regulations Section 1.7704-1 (or such other guidance
subsequently published by the Internal Revenue Service setting forth safe
harbors under which interests will not be treated as “readily tradable on a
secondary market (or the substantial equivalent thereof)” within the meaning of
Section 7704 of the Code), or could otherwise cause the Company to be
treated as a “publicly traded partnership” for federal income tax purposes,
without in each instance the prior approval of the Members, which approval may
be given or withheld in each Member’s sole and absolute discretion;

 

(vi)          could require the registration of such Transferred Company
Interest or other Company Interests pursuant to any applicable federal or state
securities laws; or

 

(vii)         could subject the Company, the Manager or its or their
Affiliates to regulation under the Investment Advisers Act of 1940, as amended.

 

(b)           In the event that any filing, application, approval or
consent is required in connection with any Transfer, whether by any
governmental entity or other third-party, except to the extent otherwise
expressly provided herein, the transferring Member shall promptly make such
filing or application or obtain such approval or consent, at its sole expense.

 

(c)           Notwithstanding anything to the contrary contained in this
Agreement, no Transfer of all or any portion of any Member’s Company Interest
shall be binding upon the other Members or the Company, and the Company shall
be entitled to treat the record owner of any Company Interest as the absolute
owner thereof in all respect, unless and until all required approvals have been
received and:

 

(i)            true copies of the instruments of transfer executed and
delivered pursuant to or in connection with such Transfer shall have been delivered
to such other Members and the Company;

 

(ii)           the transferee shall have delivered to such other Members
and the Company an executed and acknowledged assumption agreement pursuant to
which the transferee assumes all the obligations of the transferor arising and
accruing from and after the date of such Transfer under, and agrees to be bound
by all the provisions of, this Agreement;

 

(iii)          the transferee shall have executed, acknowledged and
delivered any instruments required under any applicable laws to effect such
Transfer and, if applicable, its admission to the Company; and

 

(iv)          the transferee shall have executed and delivered such other
instruments, documents and agreements reasonably required by the
non-transferring Members in connection with such Transfer which are consistent
with the other terms hereof.

 

49

 

Upon compliance with the provisions of this
Agreement, any Person who acquires a Company Interest in a transaction
permitted by this Article IX shall, unless otherwise provided in
this Agreement, be admitted as a Member.

 

(d)           Except as otherwise expressly provided herein, all
reasonable costs and expenses incurred by the Company in connection with any
Transfer of a Company Interest and, if applicable, the admission of a new
Person as a Member hereunder, shall be paid by the transferor.  Upon compliance with all provisions hereof
applicable to any transferee of a Company Interest becoming a Member, all
Members hereby agree to execute and deliver such reasonable amendments hereto
as are necessary to constitute such Person as a Member of the Company.

 

(e)           To the fullest extent permitted by applicable law, if any
Person acquires all or any part of the Company Interest of a Member in
violation of this Article IX whether by operation of law, judicial
proceeding, or other manner not expressly permitted hereunder, such Person
shall have no rights under this Agreement with respect to the Company Interest
so acquired.

 

(f)            The Members shall cooperate with each other in good faith
in connection with any Transfer permitted by the terms of this Article IX.

 

(g)           As additional conditions to the direct Transfer of any
Company Interests to any unaffiliated Person, (1) at the written request
of the non-transferring Member, the transferring Member, at the transferring
Member’s sole cost and expense, shall deliver an opinion in form and substance
and from counsel reasonably satisfactory to the non-transferring Member, to the
effect that (A) such Transfer will not result in a violation of the
registration requirements of the Securities Act or other applicable state
securities laws, (B) such transferee has the legal right, power and
capacity to own the Company Interest proposed to be transferred, and
(C) if applicable, such Transfer does not violate any provision of any
Financing Document, loan commitment or any mortgage, deed of trust or other
security instrument encumbering all or any portion of the Company Assets and (2) concurrently
with such Transfer, the transferring Member (or its Affiliate, if applicable)
shall Transfer an equal percentage of its interest in the Sister Company in
accordance with the terms of the Sister Company LLC Agreement.

 

SECTION 9.4                 Allocations and Adjustments
Upon Transfer.  In the event of a Transfer
of all or any Company Interest in the Company in accordance with this
Agreement, at any time other than at the end of the Company’s Fiscal Year, the
profits, gains, losses, deductions and credits of the Company for such Fiscal
Year shall be allocated between or among the respective parties or the Members,
as the case may be, in such manner as determined by the Investor to be
consistent with the provisions of Code Section 706(d) or any
applicable successor thereto.

 

SECTION 9.5                 Section 754 Election.  In the event of a Transfer of all or part of
the Company Interest of a Member, at the request of the transferee or if
required by the Code, or if otherwise in the best interests of the Company (as
determined by the Investor), the Company shall elect pursuant to Section 754
of the Code to adjust the basis of Company Assets as provided by Sections 734
and 743 of the Code, and any cost of such election or cost of 

 

50

 

administering or accounting for such election shall
be at the sole cost and expense of the requesting transferee.

 

SECTION 9.6                 Single Member.  For the purposes of this Article IX,
if a Member transfers less than its entire Company Interest in the Company to
any Person in accordance with this Agreement and such Person shall become a new
or substituted Member, such Member and such new or substitute Member(s) shall
be considered a single Member for purposes of this Agreement, and any election,
decision, action or approval required to be made by such Member shall be made
by such Member and such new or substitute Member(s), jointly, and any conflict
or dispute between or among such Member and such new or substitute Member(s) shall
be resolved pursuant to a separate written agreement between such Member and such
new or substitute Member(s).

 

SECTION 9.7                 Bankruptcy or Dissolution of
a Member.  Upon the occurrence of a
Bankruptcy Event or any other occurrence with respect to a Member (or its
Affiliate, if such Affiliate is a member of the Sister Company) of any event
which under the Delaware Act causes the Member (or its Affiliate, if such
Affiliate is a member of the Sister Company) to cease to be a member of a
limited liability company (a “Withdrawal Event”),
the Member affected by such Withdrawal Event shall, unless the other Member
shall otherwise consent within 90 days of such Withdrawal Event, be deemed to
have withdrawn as a Member on the expiration of such 90 day period.  In the event that a Member is deemed to have
withdrawn from the Company pursuant to this Section 9.7, then such
Member (a “Withdrawn Member”) shall continue
to have the rights of an assignee of its Company Interest that was not admitted
as a Member and shall not be entitled to participate in the management of the
Company or to vote, approve or consent to any matter for which the vote,
approval or consent of any Members is required (other than: (i) any
voting, approval or consent rights that would affect such Member’s right or
obligation to make Capital Contributions to the Company; (ii) such Member’s
right to approve any amendment to this Agreement that could have a material
adverse effect on such Member; or (iii) such Member’s right to approve any
restructuring of the Company or any change in the tax treatment of the
Company).  Unless the Members (other than
the Withdrawn Member) otherwise agree, the Company shall not terminate or
dissolve upon the occurrence of a Bankruptcy Event or any other occurrence
which under the Delaware Act causes a Member to cease to be a member of the
Company.

 

ARTICLE X

 

PUT OPTION; BUY/SELL
RIGHTS

 

SECTION 10.1               Put Option.

 

If
any Member (or its Affiliate, if applicable) in its capacity as member of the
Sister Company purchases or sells any interest in the Sister Company pursuant
to Section 10.1 of the Sister Company LLC Agreement, each such member (or
its Affiliate, if applicable) shall concurrently purchase or sell, as
applicable, in accordance with the terms and provisions of Section 10.1
of the Sister Company LLC Agreement a portion of its Company Interests equivalent
to the portion of the interests in the Sister Company being sold or purchased,
as applicable, in such transaction in connection with the closing of any such
purchase and sale made 

 

51

 

pursuant
to Section 10.1 of the Sister Company LLC Agreement, and the books and
records of the Company shall be revised accordingly to reflect such purchase
and sale.

 

SECTION 10.2               Buy/Sell Rights.

 

(a)           Generally. 
Subject to the terms and conditions of this Article X, at
any time following the second anniversary of the Acquisition Date, either
Member shall have the right to trigger the provisions of this Section 10.2
as hereinafter provided (such Member being referred to herein as the “Offeror”), or, if earlier, at any time
following (1) an Event of Default or a For Cause Event with respect to any
Member (and in the case of JMIR, JMIR Manager) or (2) an “Event of Default”
or a “For Cause Event” (as such terms are defined in the Sister Company LLC
Agreement) with respect to any member of the Sister Company (or in the case of
JMIR, JMIR Manager), in which event the non-breaching Member may be the
Offeror, by delivering Notice (the “Offer Notice”)
to the other Member (“Offeree”)
invoking the provisions of this Section 10.2.  The Offer Notice shall (i) contain the
Offeror’s determination, in its sole discretion, of value of the Company
Assets, as if such assets were free and clear of all liens, claims and
encumbrances (that can be discharged or removed with the payment of money),
(ii) disclose all liabilities and potential liabilities of the Company
known to the Offeror and a good faith estimate of the monetary amount of such
liabilities, and (iii) disclose the terms and details of any financing,
refinancing, proposed sale, or other monetization event that the Offeror has
initiated, negotiated or discussed during the prior one hundred eighty (180)
calendar days with a third party for all or any portion of the Company Assets (“Gross Value Amount”).

 

(b)           A copy of the Offer Notice must be delivered to the
Offeree and to the Company Accountant who shall, within ten (10) Business
Days of the Offer Notice, determine and notify the Members of the amount the
Offeree would receive (the “Offeree Value”)
and the amount the Offeror would receive (the “Offeror Value”) on account of its respective Company Interest
if (i) all Company Assets were sold for the aggregate Gross Value Amount,
(ii) the Company had immediately paid all Company debts and liabilities
(including all Financing), (iii) the Company had paid all Imputed Closing
Costs, and (iv) the Company had distributed the net proceeds of such
hypothetical sale and any other liquid assets of the Company in accordance with
the provisions of Section 11.2(c) (without regard to any other
costs of liquidation or the establishment of Reserves).

 

(c)           Offeree Election. 
Within 30 calendars days after receipt of the Offer Notice given
pursuant to Section 10.2(a), Offeree shall then be obligated to
elect to either:

 

(1)           purchase the entire Company Interest of Offeror for cash
at a price equal to the Offeror Value; or

 

(2)           sell to Offeror its entire Company Interest for cash at a
price equal to the Offeree Value.

 

Failure of Offeree to give Offeror Notice within
such time shall be deemed an election under clause (2) above.

 

(d)           Buy/Sell Deposit; Escrow Agent.  Contemporaneously with Offeree’s election or
deemed election under Section 10.2(b), the purchasing Member shall
deposit in cash 

 

52

 

an amount equal to 5% of the purchase price to be
paid in connection with such purchase (“Buy/Sell Deposit”)
with the Escrow Agent.  If the purchasing
Member shall fail to deposit the Buy/Sell Deposit contemporaneously with its
election or deemed election under Section 10.2(b), purchasing
Member shall be in material default hereunder, the selling Member shall have
all remedies available at law or in equity and shall have the right,
exercisable by delivery of Notice to the purchasing Member within 10 Business
Days of such default, to purchase (pursuant to the terms of this Section 10.2)
the entire Company Interest of the purchasing Member for cash at a price equal
to 82.5% of the Offeror Value or Offeree Value, as applicable.  The charges of the Escrow Agent shall be a Company
expense.  The Escrow Agent shall hold the
Buy/Sell Deposit in an interest bearing account pursuant to a written agreement
among the Offeror, the Offeree and the Escrow Agent, which agreement shall be
satisfactory to such parties in the exercise of their respective reasonable
discretion and shall provide, among other things, that the Escrow Agent shall
not commingle the Buy/Sell Deposit with any other funds.  In the event of a closing pursuant to the
terms of this Section 10.2(d), the Buy/Sell Deposit, together with
any interest earned thereon, shall be credited against the Offeror Value or
Offeree Value, as applicable, and paid to the selling Member.  In the event of a default by the purchasing
Member (or its Affiliate, if applicable) in its obligation to purchase the
selling Member’s (or selling Member’s Affiliate’s, if applicable) Company
Interest (or interest in the Sister Company, if applicable) pursuant to, and in
accordance with, the terms of this Section 10.2(d) (other than
a default of its obligation set forth in Section 10.2(e)(vii), in
which case the purchasing Member shall be fully excused from performing under
this Section 10.2):

 

(i)            the purchasing Member (or its Affiliate if applicable)
shall have no right to make any future Offer Notice hereunder or under the
Sister Company LLC Agreement;

 

(ii)           the Buy/Sell Deposit, and any interest thereon, shall be
paid to the selling Member by the Escrow Agent promptly as liquidated damages;

 

(iii)          the purchasing Member (or its Affiliate, if applicable) will
immediately and without further action cease to have any right to provide any “Put
Notice” (as defined in the Sister Company LLC Agreement) or otherwise trigger
or initiate the provisions set forth in Section 10.1 of the Sister
Company LLC Agreement; and

 

(iv)          the selling Member shall have the right, exercisable by
delivery of Notice to the purchasing Member at anytime within 30 days following
the purchasing Member’s default hereunder, to purchase (pursuant to the terms
of this Section 10.2) the entire Company Interest of the purchasing
Member for cash at a price equal to 82.5% of the Offeror Value or Offeree
Value, as applicable.

 

If the selling Member or its Affiliate, if
applicable, shall default in any of its obligations under this Section 10.2(d) or
Section 10.2(d) of the Sister Company LLC Agreement in any
material respect, the Buy/Sell Deposit, and any interest earned thereon, shall
be returned to the purchasing Member, and the relevant Offer Notice shall be
treated as never having been given.  Either
Member will be entitled to enforce its rights under this Section 10.2
by specific performance.

 

53

 

(e)           Closing.  The
closing of the transactions contemplated by this Section 10.2 shall
be held at a location designated by the purchasing Member by Notice to the
selling Member (or, at either Member’s election, pursuant to escrow arrangement
acceptable to each Member in the exercise of their reasonable judgment).  Such closing shall occur on a Business Day selected
by the purchasing Member not less than 45 days after Offeror’s receipt of the
Offeree’s election pursuant to Section 10.2(c) and not more
than 75 days after the original delivery of the Offer Notice.  At the closing:

 

(i)            the purchasing Member shall pay the Offeror Value or
Offeree Value, as applicable, (less the Buy/Sell Deposit and any interest
earned thereon) by wire transfer of immediately available federal funds to an
account designated in writing by the selling Member;

 

(ii)           the selling Member shall deliver to the purchasing Member
or its designee an assignment of all of the selling Member’s Company Interest,
which such assignment shall be free and clear of all legal and equitable claims
(other than the legal and equitable claims, if any, of the purchasing Member
pursuant to this Agreement) and all liens and encumbrances (other than liens
and encumbrances under this Agreement and Financing Documents that shall remain
in full force and effect following the closing);

 

(iii)          the purchasing Member shall deliver to the selling Member
an assumption of the selling Member’s obligations under this Agreement arising
from and after the date of such assignment;

 

(iv)          the selling Member and the purchasing Member shall execute
an agreement acceptable to each such Member in the exercise of their reasonable
judgment whereby (x) each Member shall represent and warrant to the other
that each is duly organized, validly existing, has the necessary power and
authority to consummate the subject transactions and requires no consents which
have not been obtained, and (y) the selling Member shall represent to the
purchasing Member that the selling Member is the owner of its Company Interest
free and clear of all liens and encumbrances (other than liens and encumbrances
under this Agreement and Financing Documents that shall remain in full force
and effect following the closing) and that the Transfer is being made free and
clear of all legal and equitable claims (other than the legal and equitable
claims of the purchasing Member pursuant to this Agreement);

 

(v)           the Company shall do an interim closing of the books of
the Company as of the closing date, and all items of the Company’s income and
expense shall be apportioned in calculating Cash Flow (for the avoidance of
doubt, the calculation of Cash Flow shall not include any expense treated as a
liability in calculating the Offeree Value and Offeror Value) as of 11:59 p.m.
local time in Hawaii of the day preceding the closing date, and any Cash Flow
that would have been allocable to the seller had it been distributed on the
closing date shall be paid to seller within 30 days after the books have been
closed;

 

54

 

(vi)          the Members shall execute all amendments to fictitious
name, limited liability company or similar certificates necessary to effect and
evidence the withdrawal of the selling Member from the Company; and

 

(vii)         the purchasing Member shall obtain a release of the selling
Member from all liability, direct or contingent, by all holders of all Company
debts, obligations or claims for which the selling Member may be personally
liable (including any guarantees of non-recourse carve-outs).

 

(f)            Costs and Expenses.  Each party shall pay its own costs and
expenses in connection with the conveyance of the selling Member’s Company
Interest to the purchasing Member pursuant to this Section 10.2.  All expenses of the Company in connection
with such Transfer (including any transfer, deed, documentary stamp or other
tax) shall be paid be paid by, and deemed to be an expense of, the
Company.  In addition, any prepayment
premium or lender transfer fees due with respect to any Financing and in
connection with a Transfer pursuant to this Section 10.2 shall be
paid by, and deemed to be an expense of, the Company.  Prior to Closing, the purchasing Member shall
be responsible for and shall use good faith efforts to obtain any required
consents or approvals, if any, to such Transfer required under any contract to
which the Company is a party.

 

(g)           Assignment. 
The purchasing Member may, at its option, cause the selling Member’s
Company Interest to be acquired by one or more of the purchasing Member’s
Affiliates or a designee; provided, however,
that any assignment of the purchasing Member’s rights hereunder for purposes of
accomplishing such purchase by any such Affiliate (or designee) shall not
relieve the purchasing Member of any obligation or liability with respect
thereto.

 

(h)           Further Assurances. 
Each Member agrees that it shall be reasonable and cooperate with the
other Member, including executing any documents which may be reasonably
required, in order to consummate the transactions contemplated by this Section 10.2.

 

(i)            Priority. 
In the event any rights under this Section 10.2 shall be
exercised prior in time to the exercise of any rights under Section 10.1,
the rights under this Section 10.2 shall supersede any right
existing pursuant to Section 10.1.

 

(j)            Termination.  If a purchase and sale of Company Interests
under this Section 10.2 is completed, all agreements between the
Company and a Member or its Affiliates related to the Company Assets will (at
the election of the purchasing party) be terminated on the date such Company
Interest is purchased without payment of any penalty or termination fee.

 

(k)           Attorney in Fact. 
In the event that the Offeror or Offeree shall have failed or refused,
within five calendar days after receipt of a notice from the other requesting such
party to execute, acknowledge and deliver such documents, or cause the same to
be done, as shall be required to effectuate the provisions of Section 10.2
hereof, then the non-defaulting party may execute, acknowledge and deliver such
documents for, on behalf of and in the stead of the defaulting party or on
behalf of and in the name of the Company, as applicable, and such execution,
acknowledgment and delivery by the non-defaulting party shall be for all
purposes effective against and binding upon the defaulting party or the
Company, as applicable, as though 

 

55

 

such execution, acknowledgment and delivery had been
by the defaulting party or the Company, as applicable.  Each of the Members does hereby irrevocably
constitute and appoint the other Members as the true and lawful attorney in
fact of such appointing Member, in the name, place and stead of such appointing
Member, as the case may be, to execute, acknowledge and deliver such documents
under the circumstances contemplated by this Section 10.2(k).  It is expressly understood, intended and
agreed by each Member, that the grant of the power of attorney to the other
Members pursuant to this Section 10.2(k) is coupled with an
interest, is irrevocable and shall survive the death, dissolution, termination
or legal incompetency of such appointing Member, as the case may be.

 

(l)            Coordination. 
Notwithstanding anything to the contrary in this Agreement, (1) concurrent
with any Offer Notice provided by any Member under this Section 10.2, such
Offeror (or its Affiliate, if applicable) shall provide an “Offer Notice” (as
defined in the Sister Company LLC Agreement) in accordance with the Sister
Company LLC Agreement, (2) concurrent with Offeree’s election made under Section 10.2(c) of
this Agreement, such Offeree (or its Affiliate) shall make the same election
under Section 10.2(c) of the Sister Company LLC Agreement, (3) the
purchasing Member and the selling Member under this Agreement (or their
respective Affiliate, if applicable) shall be the purchasing Member or selling
Member, as applicable, under Section 10.2 
of the Sister Company LLC Agreement and comply with the terms thereof,
and (4) concurrent with the closing of the transactions contemplated by Section 10.2(e),
each of purchasing Member and selling Member (or their respective Affiliate, if
applicable) shall close on the purchase and sale in accordance with the terms
of Section 10.2(e) of the Sister Company LLC Agreement.

 

ARTICLE XI

 

DISSOLUTION, LIQUIDATION
AND TERMINATION

 

SECTION 11.1               Dissolution.  The Company shall be dissolved and its
business wound up upon the happening of any of the following events, whichever
shall first occur:

 

(a)           the unanimous vote of the Members to dissolve, wind-up and
liquidate the Company;

 

(b)           the sale, condemnation or other disposition of all or
substantially all of the Company Assets and the receipt of all consideration
therefor except that if non-monetary consideration is received upon such
disposition the Company shall not be dissolved pursuant to this clause until
such consideration is converted into money or money equivalent;

 

(c)           at any time there are no members of the Company unless the
business of the Company is continued in accordance with the Delaware Act; or

 

(d)           the entry of a decree of judicial dissolution under Section 18-802
of the Delaware Act.

 

Any dissolution of the Company other than as
provided in this Section 11.1 shall be a dissolution in
contravention of this Agreement.

 

56

 

SECTION 11.2               Liquidation and Termination.  If the Company is dissolved and not
reconstituted, the business of the Company shall be wound-up and the Company
terminated as promptly as practicable thereafter, and each of the following shall
be accomplished:

 

(a)           The Liquidating Member shall cause to be prepared
(i) statements setting forth the assets and liabilities of the Company as
of the date of dissolution and as of the date of complete liquidation, a copy
of such statements shall be furnished to all of the Members and (ii) a
report in reasonable detail of the manner or disposition of assets.

 

(b)           The property and assets of the Company shall be liquidated
by the Liquidating Member as promptly as possible, but in an orderly, businesslike
and commercially reasonable manner and subject to the provisions of the Annual
Budget then in effect or a liquidity plan Approved by Members.  The Liquidating Member may, in the exercise
of its business judgment and if commercially reasonable, determine to defer the
sale of all or any portion of the property and assets of the Company if deemed
necessary or appropriate to realize the fair market value of any such property
or assets; provided, however,
that such liquidation shall comply in all events with the timing requirements
of Treasury Regulations Section 1.704-1(b)(2)(ii)(b).

 

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

 

(i)            First, to the
payment of (A) the debts and liabilities of the Company (including any
outstanding amounts due on any recourse Financing encumbering the Company
Assets (or any part thereof)) and (B) the expenses of liquidation; then

 

(ii)           Second, subject
to Approval by Investor, to the establishment of any Reserves that the
Liquidating Member shall determine in its commercially reasonable judgment to
be reasonably necessary for contingent, unliquidated or unforeseen liabilities
or obligations of the Company or the Members arising out of or in connection
with the Company.  Such Reserves may, in
the commercially reasonable discretion of the Liquidating Member, be paid over
to a national bank or national trust company selected by the Members and
authorized to conduct business as an escrowee to be held by such bank or trust
company as escrowee for the purposes of disbursing such Reserves to satisfy the
liabilities and obligations described above, and at the expiration of such
period distributing any remaining balance as provided hereinafter in this Section 11.2(c);
provided, however, that, to the extent that it shall
have been necessary, by reason of applicable law or regulation, to create any
Reserves prior to any and all distributions which would otherwise have been
made under Section 11.2(c)(i) and, by reason thereof, a distribution
under Section 11.2(c)(i) has not been made, then any balance
remaining shall first be distributed pursuant to Section 11.2(c)(i); then

 

(iii)          Third, to the
repayment of any liabilities or debts of the Company to any of the Members pro rata to the respective outstanding balances of such
liabilities; and then

 

57

 

(iv)          Fourth, to the
Members, in accordance with Section 5.3.

 

(d)           The Liquidating Member shall cause the filing of the
Certificate of Cancellation pursuant to Section 18-203 of the Delaware Act
and shall take all such other actions as may be necessary to terminate the
Company.

 

SECTION 11.3               Adjustment of Distributions.  The Members intend that the allocations of
Profit and Loss pursuant to this Agreement will result in the Capital Account
balances of the Members being such that all distributions upon dissolution will
be the same as if such distributions were made pursuant to Section 5.3.  However, if the Liquidating Member reasonably
determines that there is a reasonable possibility that this result would not
occur, the Liquidating Member, may adjust the allocations of Profit and Loss
(or items thereof) otherwise provided for herein in order to attempt to achieve
such result.  The Members agree to amend
this Agreement to reflect such adjustments, if required by the Liquidating
Member.

 

SECTION 11.4               Date of Termination.  The Company shall be liquidated and
terminated when all Company Assets have been converted into cash, all
promissory notes or other evidences of indebtedness derived by the Company from
such conversion of the Company Assets have been collected or otherwise
converted into cash, and all such cash has been applied and distributed in
accordance with the provisions of Section 11.2.  The establishment of any Reserves shall not
have the effect of extending the term of the Company, but such Reserves shall
be distributed in accordance with Section 11.2 and in the manner
and within the time period as the Liquidating Member deems advisable and
appropriate.

 

SECTION 11.5               Liquidating Member.

 

(a)           The term “Liquidating Member”
shall mean the Person designated by the Manager and Approved by Investor.

 

(b)           Without limiting the foregoing, the Liquidating Member
shall, upon the dissolution and upon completion of the winding-up of the
affairs of the Company, file appropriate certificate(s) to such effect in
the proper governmental office or offices under the Delaware Act as then in
effect.  Notwithstanding the foregoing,
each Member, upon the request of the Liquidating Member, shall promptly
execute, acknowledge and deliver all such documents, certificates and other
instruments as the Liquidating Member shall reasonably request to effectuate the
proper dissolution and termination of the Company, including the winding up of
the business of the Company.

 

SECTION 11.6               Withdrawals.  Except as otherwise expressly provided in
this Agreement, the Members do hereby covenant and agree that they shall not
withdraw or retire from the Company except as a result of a permitted Transfer
of their entire respective Company Interests, or as otherwise expressly
permitted pursuant to Article IX or Article X, and that
they shall carry out their duties and responsibilities hereunder while Members
and until the Company is terminated, liquidated, and dissolved under this Article XI.

 

SECTION 11.7               Governance.  Notwithstanding a dissolution of the Company,
until the termination of the business of the Company, the affairs of the
Members, as such, shall continue to be governed by this Agreement.  The Liquidating Member shall be subject to
the same 

 

58

 

restrictions on transactions with related parties or
involving conflicts of interest as applied prior to the dissolution of the
Company, including to the consent requirements set forth herein of any such
transaction.  The Liquidating Member
shall be required to perform its duties under this Agreement using the same
standard of care that would be required of the Liquidating Member if the
Liquidating Member were acting as the Manager.

 

SECTION 11.8               Return of Capital.  No Member shall have any right to receive the
return of its Capital Contribution or to seek or obtain partition of assets of
the Company, other than as provided in this Agreement.

 

ARTICLE XII

 

DEFAULT BY MEMBER

 

SECTION 12.1               Events of Default.

 

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

 

(a)           Such Member or its Affiliates shall (1) violate any
material term, breach any material provision or default in the performance of
any of its duties or material covenant applicable to such Member as set forth
in this Agreement (excluding a failure to make Initial Capital Contributions or
Capital Contributions, the exclusive remedy for which is set forth in Sections 3.1
and 3.2, respectfully) and (i) such violation, breach or default
causes Material Damage or Loss to the Company, any Subsidiary, or any of its
Members or their respective Affiliates, and (ii) such violation, breach or
default is not cured (including without limitation, by the breaching Member
reimbursing the Company or the affected Subsidiary or Member for the resulting
material damage or loss) within a Reasonable Period or (2) commit an “Event
of Default” (as defined in the Sister Company LLC Agreement) under Section 12.1
of the Sister Company LLC Agreement.

 

(b)           An “Event of Default” shall occur and be continuing under
any material agreement that the Company or an Subsidiary enters into with a
Member or any of its Affiliates, and (i) such violation, breach or default
causes Material Damage or Loss to the Company, any Subsidiary or any of its
Members or their respective Affiliates, and (ii) such violation, breach or
default is not cured (including without limitation, by the breaching Member
reimbursing the Company or the affected Subsidiary or Member for the resulting
Material Damage or Loss) within a Reasonable Period.

 

Notwithstanding the foregoing provisions of this Section 12.1,
(x) a failure by any Member to make any Capital Contribution to the extent
required or requested hereunder shall not constitute an Event of Default by
such Member and (y) the events described in clauses (a) and (b) above
shall not constitute an “Event of Default” by (i) JMIR or JMIR Manager if
such event arises solely at the express written direction of Investor or with
the prior Approval of Investor or (ii) Investor if such event arises
solely with the prior Approval of JMIR.

 

59

 

SECTION 12.2       Effect of Event of Default.

 

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

 

ARTICLE XIII

 

REPRESENTATIONS AND
WARRANTIES OF THE MEMBERS

 

SECTION 13.1               Representations and Warranties
of Members.  Each Member (solely on
behalf of itself and not with respect to any other Member) hereby represents,
warrants, covenants and acknowledges as follows:

 

(a)           Such Member is duly incorporated, organized or formed (in
the event such Member is not a corporation), validly existing and in good
standing under the laws of its state or country of incorporation, organization
or formation (as the case may be).  Such
Member has the requisite power and authority to own its property and to carry
on its business as now conducted, to the extent material to its rights and
obligations under this Agreement.

 

(b)           Such Member has all requisite power and authority to enter
into this Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder in accordance with the terms and provisions
hereof.

 

(c)           All acts and other proceedings required to be taken by
such Member to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
properly taken.

 

(d)           This Agreement has been duly executed and delivered by
such Member and constitutes the valid and binding obligation of such Member,
enforceable against it in accordance with its terms, except as enforceability
may be affected by: (i) the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of
creditors; (ii) the effect of general
principles of equity and the limitation of certain remedies by certain
equitable principles of general applicability; and (iii) the fact that the
rights to indemnification hereunder may be limited by federal or state
securities laws.

 

(e)           The execution, delivery and performance by such Member of
this Agreement and the transactions contemplated hereby will not constitute a
material breach of any term or provision of, or a material default under
(i) any outstanding indenture, mortgage, loan agreement or other similar
contract or agreement to which such Member or any of its Affiliates is a party
or by which it or any of its Affiliates or its or their property is bound; (ii) its
certificate or articles of incorporation or bylaws or other governing
documents; (iii) any material applicable law, rule or regulation; or (iv) any
material order, writ, judgment or decree having applicability to it.

 

(f)            Such Member has obtained all approvals and consents
required to be obtained by it in connection with the execution and delivery of
this Agreement and the 

 

60

 

consummation of the transactions contemplated to
occur on the Effective Date from all Persons having approval or consent rights,
to the extent that the failure to obtain consent from any such Person would
have a material adverse affect on the Company or the Company Assets.

 

(g)           Such Member has obtained all approvals and consents if
any, and has made all material filings and registrations, required from or by
any governmental body, authority, bureau or agency in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

 

(h)           Such Member has not incurred any obligation to a broker or
finder for payment of any commission or fee in connection with in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including its admission as a Member.

 

(i)            Such Member is acquiring its Company Interest for its own
account and not for the account of any other Person.  Such Member is acquiring its Company Interest
solely for investment and not with a view to, or for resale in connection with,
the distribution or other disposition thereof either
currently or after the passage of a fixed or determinable period of time or
upon the occurrence or non-occurrence of any predetermined event or
circumstance in violation of the Securities Act.  Such Member understands that the sale and
issuance of the Company Interests has not been registered under the Securities
Act, applicable state securities laws or the securities or similar laws of any
other jurisdiction whatsoever, and, therefore, the Company Interests cannot be
Transferred otherwise disposed of unless they are subsequently registered under
the securities and similar laws of each applicable jurisdiction, or unless
exemptions from such registration requirements are available.  Such Member understands that Transfers and
dispositions of its Company Interest can be made only (i) as explicitly
permitted or contemplated under the terms of this Agreement and (ii) in
compliance with the Securities Act and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder and all applicable
state securities and “blue sky” laws; and such Member understands that the
Company is under no obligation to register the offer or sale of any Company
Interests in any jurisdiction whatsoever or to assist such Member in complying
with any exemption from registration under the securities or similar laws of
any jurisdiction whatsoever.

 

(j)            Such Member understands and is able to bear the economic
risk of an investment in the Company and can afford to sustain a total loss on
such investment.  Such Member further
acknowledges that there are substantial risks in the investment (including loss
of the entire amount of such investment), that such Member is capable of
evaluating the merits and risks of the investment in the Company and such
Member has evaluated such risks and determined that the Company Interest is a
suitable investment for such Member. 
Such Member has such knowledge and experience in business, financial and
tax matters, including experience in investing in non-listed and non-registered
securities, and is a sophisticated investor capable of utilizing the
information made available to it in connection with its investment in the
Company Interest to evaluate the merits and risks of its investment in the
Company, to make an informed investment decision with respect thereto and to
protect its interests in connection with such investment.

 

61

 

(k)           Such Member, or each beneficial owner (within the meaning
of Rule 501 of Regulation D promulgated under the Securities Act (“Regulation D”)) of such Member, (i) is
an “accredited investor” as such term is defined in Rule 501 of Regulation
D and (ii) is a partnership, corporation, limited liability company, trust
or estate with total assets in excess of $5,000,000 and has not been formed for
the specific purpose of acquiring the Company Interest unless each beneficial
owner of such entity is qualified as an accredited investor within the meaning
of Rule 501 of Regulation D.  Such
Member, or each beneficial owner of such Member, is a “qualified purchaser” as
such term is defined in the 1940 Act.

 

(l)            Such Member and its legal, tax, accounting and financial
advisers have been provided an opportunity to ask questions of and receive
information from a person or persons acting on behalf of the Company (including
the Manager) concerning the investment in the Company, the Company Assets, the
Company, and such other matters as such Member and any of its advisors have
deemed necessary or desirable.

 

(m)          Such Member has consulted
and been advised by its own legal counsel and tax advisor in connection with,
and acknowledges that no representations as to potential profit, tax
consequences of any sort (including the tax consequences resulting from forming
or operating the Company, conducting the business of the Company, executing
this Agreement, consummating the transactions provided for herein, making a
Capital Contributions, being admitted to the Company, receiving or not
receiving distributions from the Company, or being allocated Profits and
Losses), cash flows or funds from operations or yield, if any, in respect of
the Company have been made by the Company, any Member or any Affiliate of any
Member or any employee or representative thereof, and that projections and any
other financial information and documentation that may have been in any manner
submitted to such Member from any source shall not constitute any
representation or warranty of any kind or nature, express or implied and such Member is not relying on any representations or
warranties of any other Person in connection therewith, including the Company
or any other Member, including the Manager.

 

(n)           None of the Capital Contributions of the Member will
consist in whole or in part of “plan assets,” as that term is defined in 29
C.F.R. Section 2510.3-101, and the Member’s Company Interest is not “plan
assets,” as defined in 29 C.F.R. Section 2510.3-101.  This representation and warranty shall be
deemed made on a continuous basis by each Member at all times that such Member
owns a Company Interest.

 

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

 

(p)           Such Member has taken, and shall continue to take, such
measures as are required by applicable law to assure that the funds used to pay
sellers and lessors under the Transaction Documents are derived: (i) from
transactions that do not violate United States law 

 

62

 

nor, to the extent such funds originate outside the
United States, do not violate the laws of the jurisdiction in which they
originated; and (ii) from permissible sources under United States law and
to the extent such funds originate outside the United States, under the laws of
the jurisdiction in which they originated.

 

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

 

(r)            Without in anyway limiting
the foregoing, such Member acknowledges and agrees that:

 

(i)            neither the Company, any
Member nor any Affiliate of any Member nor any employee or other representative
of the foregoing, except as specifically made herein, has at any time made any
warranties or representations of any kind or character, express or implied,
with respect to the Property or other Company Assets, including any warranties
or representations as to habitability, merchantability or fitness for a
particular purpose, and that the Company shall own and hold its direct or
indirect interests in the Company Assets “AS IS, WHERE IS, WITH ALL
FAULTS;”

 

(ii)           except with respect to the
representations and warranties expressly made by any Member in this Agreement,
such Member has not relied and will not rely on, and neither the Company nor
any Member or Affiliate of Member is or shall be liable for or bound by, any
express or implied warranties, guaranties, statements, representations or
information pertaining to the Property or relating thereto (including
specifically, without limitation, offering packages distributed with respect to
the Property or the potential investment in the Company) made or furnished by
the Company, any Member, any Affiliate of a Member, the manager(s) of the
Property or any other Person, to whomever made or given, directly or
indirectly, orally or in writing; and

 

(iii)          all materials, data and
information delivered to any Member by any Person relating to the Property have
been provided to such Member as a convenience only and any reliance on or use
of such materials, data or information by such Member shall be at the sole risk
of such Member, except to the extent otherwise expressly set forth in Section 13.2.

 

SECTION 13.2               Member Indemnity.  Each Member agrees to indemnify, defend and
hold harmless the Company, the other Members, each officer, director, agent and
Affiliate of the Company and the other Members, and each other Person, if any,
who controls any of the foregoing within the meaning of Section 15 of the
Securities Act, against any and all losses, claims, demands, costs, damages,
liabilities (joint and several), expenses of any nature (including reasonable
attorneys’ fees and disbursements and other costs of litigation, whether
pending or threatened), judgments, fines, settlements and other amounts arising
from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, in which such Person may be
involved, or threatened to be involved as a party or otherwise, arising out of
or based upon any false representation or warranty made by such Member herein
or in any other document or certificate delivered to the Company by such Member
in connection with such Member’s acquisition of its Company Interest.

 

63

 

SECTION 13.3               Survival.  Notwithstanding anything to the contrary in
this Agreement, the provisions of this Article XIII shall survive
the expiration or sooner termination of this Agreement.

 

ARTICLE XIV

 

MISCELLANEOUS

 

SECTION 14.1               Further Assurances.  Each Member agrees to execute, acknowledge,
deliver, file, record and publish such further reasonable certificates,
amendments to certificates, instruments and documents, and do all such other
reasonable acts and things as may be required by law, or as may be required to
carry out the intent and purposes of this Agreement so long as any of the foregoing
do not materially increase any Member’s obligations hereunder or materially
decrease any Member’s rights hereunder.

 

SECTION 14.2               Notices.  All notices, demands, consents, approvals,
requests or other communication required or permitted to be given hereunder
(collectively, “Notices” and each, a “Notice”)
shall be in writing and may be served personally or by U.S. Mail.  If served by U.S. Mail, it shall be addressed
to the recipient as set forth below.  Any
Notice that is personally served shall be effective upon the date of service;
any Notice given by U.S. Mail shall be deemed effectively given, if deposited
in the United States Mail, registered or certified with return receipt
requested, postage prepaid and addressed as provided above, on the date of
receipt, refusal or non-delivery indicated on the return receipt.  In lieu of Notice by U.S. Mail, either party
may send Notices by facsimile to the number specified for the recipient below
or by a nationally recognized overnight courier service which provides written
proof of delivery (such as U.P.S. or Federal Express).  Any Notice sent by facsimile shall be
effective upon confirmation of receipt in legible form, provided that an
original of such facsimile is also sent to the intended addressee by another
method approved in this Section 14.2, and any Notice sent by a
nationally recognized overnight courier shall be effective on the date of
delivery to the recipient at its address set forth below as set forth in the
courier’s delivery receipt.

 

	
   

  	
  (i)

  	
  If to the Investor, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Behringer Harvard Kauai Hotel TRS, Inc

  
	
   

  	
   

  	
  15601 Dallas Parkway, Suite 600

  
	
   

  	
   

  	
  Addison, TX 75001

  
	
   

  	
   

  	
  Attn:

  	
  Executive Vice President of Real Estate

  
	
   

  	
   

  	
  Fax:

  	
  (214) 655-1610

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Behringer Harvard Opportunity REIT II, Inc.

  
	
   

  	
   

  	
  15601 Dallas Parkway, Suite 600

  
	
   

  	
   

  	
  Addison, TX 75001

  
	
   

  	
   

  	
  Attn:

  	
  Chief Legal Officer

  
	
   

  	
   

  	
  Fax:

  	
  (214) 655-1610

  

 

64

 

	
   

  	
  (ii)

  	
  If to the Company or JMIR, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o JMI Realty LLC

  
	
   

  	
   

  	
  111 Congress Avenue, Suite 2600

  
	
   

  	
   

  	
  Austin, TX 78701

  
	
   

  	
   

  	
  Attention: C. Brian Strickland

  
	
   

  	
   

  	
  Fax No.: (512)
  539-3601

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Procopio, Cory, Hargreaves & Savitch LLP

  
	
   

  	
   

  	
  525 B Street, Suite 2200

  
	
   

  	
   

  	
  San Diego, CA 92101

  
	
   

  	
   

  	
  Attention: David C. Boatwright, Esq.

  
	
   

  	
   

  	
  Fax Number: (619) 744-5482

  

 

Any Member may designate another addressee (and/or
change its address or facsimile number) for Notices hereunder by a Notice given
pursuant to this Section 14.2. 
Copies of all Notices required to be sent by a Member to the Company
under the terms of this Agreement shall also be sent to each Member in
accordance with the terms hereof.

 

SECTION 14.3               Governing Law.  This Agreement, the rights and obligations of
the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to any otherwise governing conflicts or choice of laws
provisions that would cause the application of the domestic substantive laws of
any other jurisdiction.

 

SECTION 14.4               Certain Rules of
Construction.  To the fullest extent
permitted by law, the parties hereto intend that any ambiguities shall be
resolved without reference to which party may have drafted this Agreement.  All Article or Section titles or
other captions in this Agreement are for convenience only, and they shall not
be deemed part of this Agreement and in no way define, limit, extend or
describe the scope or intent of any provisions hereof.  Unless the context otherwise requires:
(a) a term has the meaning assigned to it; (b) “or” is not exclusive;
(c)  provisions apply to successive events and transactions; (d) any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms; (e) the word “extent” in the phrase “to the
extent” shall mean the degree to which a subject or other thing extends, and
such phrase shall not mean simply “if”; (f) references to “$” or “dollars”
shall mean United States dollars; (g) unless otherwise expressly provided
herein, any agreement, instrument or statute defined or referred to herein or
in any agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein; and
(h) all references to any Member shall mean and include such Member and
any Person duly admitted as a member of the Company in substitution therefor in
accordance with this Agreement, unless the context otherwise requires.

 

65

 

SECTION 14.5               Pronouns.  All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, and neuter, singular and plural,
as the identity of the party or parties may require.

 

SECTION 14.6               Successors and Assigns.  This Agreement shall be binding upon the
parties hereto and their respective executors, administrators, legal
representatives, heirs, successors and permitted assigns, and shall inure to
the benefit of the parties hereto and, except as otherwise provided herein,
their respective executors, administrators, legal representatives, heirs,
successors and permitted assigns.

 

SECTION 14.7               Extension Not a Waiver.  No delay or omission in the exercise of any
power, remedy or right herein provided or otherwise available to a Member or
the Company shall impair or affect the right of such Member or the Company
thereafter to exercise the same.  Any
extension of time or other indulgence granted to a Member hereunder shall not otherwise
alter or affect any power, remedy or right of any other Member or of the
Company, or the obligations of the Member to whom such extension or indulgence
is granted.

 

SECTION 14.8               Severability.  If any provision of this Agreement as applied
to any party or any circumstances is determined by any court having
jurisdiction to be void, unenforceable or inoperative as a matter of law, then
the Members agree that such provision shall be modified to the greatest extent
legally possible so that the intent of this Agreement may be legally carried
out.  If any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held void, unenforceable or inoperative as a matter of law in any respect or
for any reason, then the validity, enforceability and operation of any such
provision in every other respect and of the remaining provisions hereof shall
not be in any way impaired or affected, it being intended that all of the
Members’ rights and privileges shall be enforceable to the fullest extent
permitted by law.

 

SECTION 14.9               Consents.  Except as otherwise expressly provided
herein, any consent or approval to any act or matter required under this
Agreement must be in writing and shall apply only with respect to the
particular act or matter to which such consent or approval is given, and shall
not relieve any Member from the obligation to obtain the consent or approval,
as applicable, wherever required under this Agreement to any other act or
matter.

 

SECTION 14.10             Entire Agreement.  This Agreement and the agreements referred to
herein or contemplated hereby, including the Guaranty Sharing Agreement, the
Sister Company Guaranty Sharing Agreement, the Distribution Equivalent
Agreement, the Sister Company LLC Agreement and the Franchise Agreement,
contain the entire agreement between the parties relating to the subject matter
hereof and all prior agreements relative hereto which are not contained herein
or therein are terminated.  Amendments, variations,
modifications or changes herein may be made effective and binding upon the
parties by, and only by, the setting forth of same in a document duly executed
by each party, and any alleged amendment, variation, modification or change
herein which is not so documented shall not be effective as to any party.

 

SECTION 14.11             Counterparts.  This Agreement may be executed in any number
of counterparts, and each such counterpart will for all purposes be deemed an
original, and all such counterparts shall constitute one and the same
instrument.

 

66

 

SECTION 14.12             Creditors.  None of the provisions of this Agreement
shall be for the benefit of or enforceable by any creditor of any Member or of
the Company.

 

SECTION 14.13             Ownership of Company Property.
 The interest of each Member in the
Company shall be personal property for all purposes.  All real and other property owned by the
Company shall be deemed owned by the Company as Company Assets.  No Member, individually, shall have any
direct ownership of such property and title to such property shall be held in
the name of the Company.

 

SECTION 14.14             Time of the Essence.  Except as otherwise expressly provided in
this Agreement, time shall be of the essence with respect to all time periods
set forth in this Agreement.

 

SECTION 14.15             Recalculation of Interest.

 

If any applicable law is ever judicially
interpreted so as to deem any distribution, contribution, payment or other
amount received by any Member or the Company under this Agreement as interest
and so as to render any such amount in excess of the maximum rate or amount of
interest permitted by applicable law, then it is the express intent of the
Members and the Company that all amounts in excess of the highest lawful rate
or amount theretofore collected be credited against any other distributions,
contributions, payments or other amounts to be paid by the recipient of the
excess amount or refunded to the appropriate Person, and the provisions of this
Agreement immediately be deemed reformed, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the payment of the fullest amount otherwise required
hereunder.  All sums paid or agreed to be
paid that are judicially determined to be interest shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the term of such obligation so that the rate or amount of interest
on account of such obligation does not exceed the maximum rate or amount of
interest permitted under applicable law.

 

SECTION 14.16             Waiver of Partition.  Except as otherwise expressly provided for in
this Agreement, no Member shall, either directly or indirectly, take any action
to require partition or appraisement of the Company or any of its assets or
properties or cause the sale of any Company assets or property, and
notwithstanding any provisions of applicable law to the contrary, each Member
(for itself and its legal representatives, successors and assigns) hereby
irrevocably waives any and all right to partition, or to maintain any action
for partition, or to compel any sale with respect to its interest in, or with
respect to, any assets or properties of the Company, except as expressly
provided in this Agreement.

 

SECTION 14.17             Calculation of Days.  The provisions of this Agreement relative to
number of days shall be deemed to refer to calendar days, unless otherwise
specified.  When the date for performance
of any monetary obligation of any Member falls on a non-Business Day, such obligation
need not be performed until the next-following Business Day.

 

SECTION 14.18             Publicity.

 

The parties agree that no Member shall issue any
press release or otherwise publicize or disclose the terms of this Agreement or
the proposed terms of any acquisition of the Company 

 

67

 

Assets, without the consent of each of the other
Members, except as such disclosure may be made in the course of normal
reporting practices by any Member to its members, shareholders or partners or
as otherwise required by law, rule, or regulation.

 

SECTION 14.19             Confidentiality.

 

(a)           The terms of this Agreement, the identity of any person
with whom the Company or any Subsidiary may be holding discussions with respect
to any investment, acquisition, disposition or other transaction, and all other
business, financial, or other information relating directly to the conduct of
the business and affairs of the Company, any Subsidiary, the Company Assets or
the relative or absolute rights or interests of any of the Members
(collectively, the “Confidential Information”)
that is not already publicly available (including in any SEC filings) or that
has not been publicly disclosed pursuant to authorization by all of the Members
is confidential and proprietary information of the Company, the disclosure of
which would cause irreparable harm to the Company and the Members.  Accordingly, each Member represents that it
has not and agrees that it will not and will direct its shareholders, members,
partners, directors, officers, agents, advisors and Affiliates not to, disclose
in violation of this Agreement to any Person any Confidential Information or
confirm in violation of this Agreement any statement made by third Persons
regarding Confidential Information until the Company has publicly disclosed the
Confidential Information pursuant to authorization by all of the Members; provided, however,
that any Member (or its Affiliates) may disclose such Confidential Information
if required by law (it being specifically understood and agreed that anything
set forth in a registration statement or any other document filed pursuant to
law will be deemed required by law), if necessary for it to perform any of its
duties or obligations hereunder or in any property management agreement to
which it is a party covering any Company Assets, or to market the Company
Assets or any Company Interests as permitted by the terms of this Agreement,
and to its attorneys and advisors who agree to maintain a similar confidence.  Notwithstanding anything to the contrary in
this Agreement, in connection with efforts to raise invested funds from time to
time, (1) JMIR and its Affiliates shall be permitted to disclose the
identity of the Members and their Affiliates, investment returns, internal
underwriting and other material facts regarding the Project in any offering
materials containing confidentiality provisions, in each case with the prior
Approval of Investor (not to be unreasonably withheld), provided JMIR shall be liable for any
disclosure of such information in violation of this clause (1) of Section 14.19
by any of JMIR’s or its Affiliates’ agents, consultants, financial advisors,
attorneys, accountants and any other outside advisors as and to the same extent
as if the disclosure was made by JMIR or its Affiliates, and (2) Investor
and its Affiliates shall be permitted to disclose the identity of the Members
and their Affiliates, investment returns, internal underwriting and other
material facts regarding the Project in any offering materials containing
confidentiality provisions, in each case without the consent of any Member, provided Investor shall be liable for any
disclosure of such information in violation of this clause (2) of Section 14.19
by any of Investor’s or its Affiliates’ agents, consultants, financial
advisors, attorneys, accountants and any other outside advisors as and to the
same extent as if the disclosure was made by Investor or its Affiliates.

 

(b)           Subject to the provisions of Section 14.19(a),
each Member agrees not to disclose any Confidential Information to any Person
(other than a Person (including without limitation an attorney or advisor)
agreeing to maintain all Confidential Information in strict 

 

68

 

confidence or a judge, magistrate or referee in any
action, suit or proceeding relating to or arising out of this Agreement or
otherwise), and to keep confidential all documents (including without
limitation, responses to discovery requests) containing any Confidential
Information.  Each Member hereby consents
in advance to any motion for any protective order brought by any other Member
represented as being intended by the movant to implement the purposes of this Section 14.19,
provided that, if a Member receives a request to disclose any Confidential
Information under the terms of a valid and effective order issued by a court or
governmental agency and the order was not sought by or on behalf of or
consented to by such Member, then such Member may disclose the Confidential
Information to the extent required if the Member as promptly as practicable (i) notifies
each of the other Members of the existence, terms and circumstances of the
order, (ii) consults in good faith with each of the other Members on the
advisability of taking legally available steps to resist or to narrow the
order, and (iii) if disclosure of the Confidential Information is
required, exercises its best efforts to obtain a protective order or other
reliable assurance that confidential treatment will be accorded to the portion
of the disclosed Confidential Information that any other Member
designates.  The cost (including without
limitation, attorneys’ fees and expenses) of obtaining a protective order
covering Confidential Information designated by such other Member will be borne
by the Company.

 

(c)           The covenants contained in this Section 14.19
shall expire on the earlier of (1) the Transfer of all of Investor’s
Company Interest to a non-Affiliate of Investor, and (2) one year
following the termination of the Company.

 

SECTION 14.20             Securities.  Solely for purposes of the Uniform Commercial
Code as in effect in the State of Delaware, the Members acknowledge and agree
that the limited liability company interests are securities governed by Article VIII
of the Uniform Commercial Code as in effect in the State of Delaware.

 

SECTION 14.21             Venue.  Each of the Members consents to the
jurisdiction of any court in Dallas, Texas for any action arising out of
matters related to this Agreement.  Each
of the Members waives the right to commence an action in connection with this
Agreement in any court outside of Dallas, Texas.

 

SECTION 14.22             WAIVER OF JURY TRIAL.  EACH OF THE MEMBERS HEREBY WAIVES TRIAL BY
JURY IN ANY ACTION ARISING OUT OF MATTERS RELATED TO THIS AGREEMENT, WHICH
WAIVER IS INFORMED AND VOLUNTARY.

 

SECTION 14.23             Prevailing Party Costs and Fees.  In any judicial action between the parties to
enforce any of the provisions of this Agreement or any right of any party under
this Agreement, in addition to any other remedy, the unsuccessful party shall
pay to the prevailing party all costs and expenses, including reasonable
attorneys’ fees and expenses, incurred therein by the prevailing party in
connection with such action.

 

SECTION 14.24             Force Majeure.  The parties to this Agreement shall be excused
from performance of their obligations under this Agreement where they are
prevented from so performing by revolutions, terrorism or similar disorders,
wars, acts of enemies, strikes, fires, floods, acts of God, or, without
limiting the foregoing, by any cause not within the control of the party whose
performance is interfered with, and which, by the exercise of reasonable
diligence, 

 

69

 

the party is unable to prevent.  All parties shall perform such parts or
aspects of their obligations as are not interfered with by these causes.

 

SECTION 14.25             Third Party Beneficiaries. 
Each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any Person other than
the parties hereto and, solely with respect to Section 7.9 the
Indemnified Parties.

 

SECTION 14.26             Company Counsel.  The Manager has retained Procopio, Cory,
Hargreaves & Savitch LLP (“PCHS”)
to prepare this Agreement.

 

(a)           In General. 
Each Member is advised that it is entitled to be represented by
independent counsel of its choice with respect to becoming a Member of the
Company, and each Member or potential Member should seek advice from its own
independent counsel in regard to its investment in the Company and execution of
this Agreement.  Each Member acknowledges
that it has sought advice from its own separate legal counsel in this regard or
has chosen not to do so.  Each Member
further acknowledges and agrees that PCHS has represented, continues to
represent and may in the future represent the Manager, JMIR and their
respective Affiliates (collectively, the “JMIR Parties”)
in matters related and unrelated to the Company.  Each Member acknowledges that PCHS has not
undertaken any and has no duty or obligation of any kind to any Member (other
than JMIR) in connection with this Agreement or any other document contemplated
by this Agreement.  In no event does or
will an attorney-client relationship exist between PCHS, on the one hand, and
any Member (or any of its Affiliates), on the other hand (other than JMIR), in
the absence of an express written engagement agreement between such Member (or
any of its Affiliates) and PCHS.  Each
party hereto hereby waives all conflicts of interest relating to the
representation by PCHS from time to time of the JMIR Parties and, upon the
request of PCHS, agrees to execute a conflict of interest waiver with PCHS
regarding the same.

 

(b)           Legal Advice to Company.  From time to time, subject to the Rules of
Professional Conduct of the State Bar of California (the “Rules”),
PCHS shall be permitted to render legal advice and to provide legal services to
the Company, the Manager, the Members and their respective Affiliates with respect
to the Company and otherwise.  Each
Member agrees that such representation, including any representation of the
Company by PCHS, from time to time, shall not disqualify PCHS from providing
legal advice and legal services to the JMIR Parties, as set forth in Section 14.26(a),
at any time in the future.

 

(c)           Company Representation.  Each Member shall at all times continue to
engage and consult with its own separate legal counsel, if any, in connection
with matters and affairs relating to the Company.  If any dispute or controversy arises between
any Member, on one hand, and any one or more of the Company, the Manager, the
Members or any of their respective Affiliates, on the other hand, then each
Member agrees that PCHS may represent either the Company, the Manager, the
Members, any of their respective Affiliates or all of them in any such dispute
or controversy to the extent permitted by the Rules or similar rules in
any other jurisdiction and each Member hereby consents to such
representation.  Without limiting the
generality of the foregoing, if PCHS represents the Company on various matters
from time to time, and if conflicts of interest or other controversies develop
between a JMIR Party, on the one hand, and any one or more of the Members or
the Company, on the other hand, PCHS may 

 

70

 

withdraw as counsel to the Company and may represent
the JMIR Party in such a dispute to the fullest extent permitted under the Rules or
similar rules in any other jurisdiction and each Member hereby consents to
such representation.

 

ARTICLE XV

 

PATRIOT ACT

 

SECTION 15.1               Compliance with International
Trade Control Laws and OFAC Regulations.

 

Each Member represents, warrants and covenants to
the other that:

 

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

 

(b)           No Member and no Person who owns a direct interest in a
Member is now nor shall be at any time during the term of this Agreement a
Person with whom a U.S. Person, including a financial institution, is
prohibited from transacting business of the type contemplated by this
Agreement, whether such prohibition arises under U.S. law, regulation,
executive orders and lists published by the OFAC (including those executive
orders and lists published by OFAC with respect to Specially Designated
Nationals and Blocked Persons) or otherwise.

 

SECTION 15.2               Member’s Funds.

 

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

 

(b)           Each Member further represents, warrants and covenants to
the other Member that, to the best of its knowledge after making due inquiry,
neither the Member, nor any Affiliate, nor any holder of a direct interest in
such Member, nor any Person providing funds to such Member (i) is under
investigation by any governmental authority for, or has been charged with, or
convicted of, money laundering, drug trafficking, terrorist related activities,
any crimes which in the United States would be predicate crimes to money
laundering, or any violation of any Anti-Money Laundering Laws; (ii) has been
assessed civil or criminal penalties under any Anti-Money Laundering Laws; (iii) has
been convicted of any crimes involving moral turpitude or tax fraud; and (iv) has
had any of its funds seized or forfeited in any action under any Anti-Money
Laundering Laws.

 

71

 

SECTION 15.3               Member Compliance with Patriot
Act.

 

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

 

SECTION 15.4               Cooperation with Other Members.

 

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

 

SECTION 15.5               Actions Taken Pursuant to
Anti-Money Laundering Laws.

 

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

 

ARTICLE XVI

 

JMIR GUARANTY

 

SECTION 16.1               Guaranty.

 

Notwithstanding
anything to the contrary herein, the obligations of JMIR to make Capital
Contributions shall be guarantied up to an aggregate amount not to exceed
$2,100,000 pursuant to the Guaranty attached as Exhibit C hereto by
the person listed thereon.

 

(Signature Page Follows)

 

72

 

IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first above written.

 

	
  “JMIR”

  	
  JMIR INVESTMENTS III, LP,

  a Delaware series limited partnership,

  in respect of the
  Kauai Hotel Series thereof

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bryant W. Burke

  
	
   

  	
  Name:

  	
  Bryant W. Burke

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  “INVESTOR”

  	
  BEHRINGER HARVARD KAUAI HOTEL TRS, INC.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary S. Bresky

  
	
   

  	
  Name:

  	
  Gary S. Bresky

  
	
   

  	
  Title:

  	
  Executive President, Chief Financial Officer and
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  “MANAGER”

  	
  JMIR-PROJECT MANAGER LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bryant W. Burke

  
	
   

  	
  Name:

  	
  Bryant W. Burke

  
	
   

  	
  Title:

  	
  Vice President

  

 

S-1

 

EXHIBIT A

 

GUARANTY SHARING AGREEMENT

 

A-1

 

EXHIBIT B

 

GUARANTY OF OBLIGATIONS OF JMIR

 

Guaranty

 

For good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and for the purpose of
inducing Investor to enter into this Limited Liability Company Agreement, the
undersigned joins in the execution of this Limited Liability Company Agreement
for the purpose of unconditionally and absolutely guarantying JMIR’s obligation
to make Capital Contributions up to an aggregate amount not to exceed
$2,100,000 less any capital contributions (a) made by JMIR under the Sister
Company LLC Agreement, (b) made or deemed made by JMIR under the Sister Company
Guaranty Sharing Agreement, or (c) made or deemed made by JMIR under the
Guaranty Sharing Agreement (the “Guaranty Cap”),
and once JMIR has made Capital Contributions under this Limited Liability
Company Agreement and the Sister Company LLC Agreement (including any payments
made by the undersigned under this guaranty and payments made under the
guaranty related to the Sister Company LLC Agreement) equal to $2,100,000, this
guaranty shall expire and be of no further force and effect (the “Expiration”).  Subject to the Guaranty Cap and Expiration,
this guaranty is an absolute, unconditional, irrevocable and continuing
guaranty of payment and performance and not a guaranty of collection.  Subject to the Guaranty Cap and Expiration,
the obligations under this guaranty shall not be released, diminished,
impaired, reduced or adversely affected, and the undersigned hereby waives any
common law, equitable, statutory or other rights that it may otherwise have, as
a result of the invalidity, illegality or unenforceability of all or any part
of this Limited Liability Company Agreement, for any reason whatsoever.

 

This separate signature page shall be considered a
part of the attached Limited Liability Company Agreement as fully as if and
with the same force and effect as if the provisions hereof had been included
therein in full.

 

	
   

  	
  JMIR INVESTMENTS III, LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bryant W. Burke

  
	
   

  	
  Name:

  	
  Bryant W. Burke

  
	
   

  	
  Title:

  	
  Vice President

  

 

B-1

 

SCHEDULE 1

 

APPROVED ANNUAL BUDGET FOR 2010

 

See attached.

 

Schedule 1 - 1

 

SCHEDULE 2

 

APPROVED RENOVATIONS BUDGET

 

See attached.

 

Schedule 2 - 1

 

SCHEDULE 3

 

OFFICERS

 

	
   

  	
  Robert S. Aisner

  	
  President & Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Gary S. Bresky

  	
  Executive Vice President, Chief Financial Officer
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  Samuel A. Gillespie

  	
  Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  M. Jason Mattox

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Gerald J. Reihsen, III

  	
  Executive Vice President — Corporate Development
  & Legal and Assistant Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  Andrew J. Bruce

  	
  Senior Vice President — Capital Markets

  
	
   

  	
   

  	
   

  
	
   

  	
  Kymberlyn Janney

  	
  Senior Vice President — Financial Administration

  
	
   

  	
   

  	
   

  
	
   

  	
  James D. Fant

  	
  Senior Vice President — Real Estate

  
	
   

  	
   

  	
   

  
	
   

  	
  Richard K. Frank

  	
  Senior Vice President — Hotel Investments

  
	
   

  	
   

  	
   

  
	
   

  	
  Albert J. Palamara

  	
  Senior Vice President — Portfolio Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  John C. Kratzer

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  C. Brian Strickland

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Bryant W. Burke

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Gregory W. Clay

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Terri Warren Reynolds

  	
  Secretary

  

 

Schedule 3 - 1Exhibit 10.33

 

Execution Version

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

BH-JMIR KAUAI HOTEL, LLC

 

OCTOBER 20, 2010

 

THE LIMITED LIABILITY COMPANY INTERESTS REPRESENTED
BY THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION AS PROVIDED IN THOSE STATUTES.  THE SALE, ASSIGNMENT, TRANSFER, EXCHANGE,
MORTGAGE, PLEDGE OR OTHER DISPOSITION OF ANY LIMITED LIABILITY COMPANY INTEREST
IS RESTRICTED IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, AND THE
EFFECTIVENESS OF ANY SUCH SALE OR OTHER DISPOSITION MAY BE CONDITIONED UPON,
AMONG OTHER THINGS, RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE OR OTHER DISPOSITION
CAN BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS. BY ACQUIRING THE LIMITED LIABILITY
COMPANY INTERESTS REPRESENTED BY THIS AGREEMENT, EACH MEMBER REPRESENTS THAT IT
WILL NOT SELL OR OTHERWISE DISPOSE OF ITS LIMITED LIABILITY COMPANY INTERESTS
WITHOUT REGISTRATION OR OTHER COMPLIANCE WITH THE AFORESAID STATUTES AND RULES
AND REGULATIONS THEREUNDER AND THE TERMS AND PROVISIONS OF THIS AGREEMENT.

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
  ARTICLE I             ORGANIZATION

  	
  1

  
	
   

  	
   

  
	
  SECTION 1.1

  	
  Formation

  	
  1

  
	
  SECTION 1.2

  	
  Name

  	
  1

  
	
  SECTION 1.3

  	
  Principal Place of Business; Other
  Places of Business; and Registered Agent

  	
  2

  
	
  SECTION 1.4

  	
  Purpose and Business

  	
  2

  
	
  SECTION 1.5

  	
  Powers

  	
  3

  
	
  SECTION 1.6

  	
  Term

  	
  3

  
	
  SECTION 1.7

  	
  Partnership Status for Income Tax
  Purposes

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE II           DEFINED
  TERMS

  	
  3

  
	
   

  	
   

  
	
  SECTION 2.1

  	
  Defined Terms

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE III         CAPITAL
  CONTRIBUTIONS AND DEFAULT

  	
  18

  
	
   

  	
   

  
	
  SECTION 3.1

  	
  Initial Capital Contributions

  	
  18

  
	
  SECTION 3.2

  	
  Additional Capital Contributions

  	
  21

  
	
  SECTION 3.3

  	
  Letters of Credit

  	
  22

  
	
  SECTION 3.4

  	
  Default; Remedy

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV          CAPITAL
  ACCOUNTS

  	
  26

  
	
   

  	
   

  
	
  SECTION 4.1

  	
  Capital Accounts

  	
  26

  
	
  SECTION 4.2

  	
  Return of Capital

  	
  27

  
	
  SECTION 4.3

  	
  Liability of Members

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE V           DISTRIBUTIONS

  	
  28

  
	
   

  	
   

  
	
  SECTION 5.1

  	
  Distributions Generally

  	
  28

  
	
  SECTION 5.2

  	
  Direction of Distribution Proceeds

  	
  28

  
	
  SECTION 5.3

  	
  Priority of Cash Flow
  Distributions

  	
  28

  
	
  SECTION 5.4

  	
  Special Distributions

  	
  29

  
	
  SECTION 5.5

  	
  Distributions Upon Liquidation

  	
  29

  
	
  SECTION 5.6

  	
  Limitations on Distributions

  	
  29

  
	
  SECTION 5.7

  	
  Tax Payments

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI          ALLOCATION
  OF PROFITS AND LOSSES

  	
  30

  
	
   

  	
   

  
	
  SECTION 6.1

  	
  General Allocation of  Profits and Losses

  	
  30

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 6.2

  	
  Regulatory Allocations

  	
  30

  
	
  SECTION 6.3

  	
  Tax Allocations

  	
  32

  
	
  SECTION 6.4

  	
  Other Provisions

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII        MANAGEMENT
  AND OPERATIONS

  	
  33

  
	
   

  	
   

  
	
  SECTION 7.1

  	
  Designation and General Authority
  of Manager

  	
  33

  
	
  SECTION 7.2

  	
  Duties of Manager

  	
  34

  
	
  SECTION 7.3

  	
  Reliance by Third Parties

  	
  38

  
	
  SECTION 7.4

  	
  Major Decisions

  	
  38

  
	
  SECTION 7.5

  	
  Annual Budget

  	
  40

  
	
  SECTION 7.6

  	
  Expenses and Fees

  	
  41

  
	
  SECTION 7.7

  	
  Duties and Conflicts

  	
  42

  
	
  SECTION 7.8

  	
  Exculpation; Indemnification

  	
  42

  
	
  SECTION 7.9

  	
  Certain Provisions Related to
  Mortgage Loans

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII      BOOKS
  AND RECORDS; TAX MATTERS MEMBER

  	
  45

  
	
   

  	
   

  
	
  SECTION 8.1

  	
  Books of Account

  	
  45

  
	
  SECTION 8.2

  	
  Financial and Operating
  Information

  	
  45

  
	
  SECTION 8.3

  	
  Tax Matters Member

  	
  47

  
	
  SECTION 8.4

  	
  The Company Accountant

  	
  47

  
	
  SECTION 8.5

  	
  REIT Matters

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX          TRANSFERS
  OF COMPANY INTERESTS

  	
  48

  
	
   

  	
   

  
	
  SECTION 9.1

  	
  Transfers of Company Interests
  Generally

  	
  48

  
	
  SECTION 9.2

  	
  Succession by Operation of Law and
  Permitted Transfers

  	
  48

  
	
  SECTION 9.3

  	
  General Conditions Applicable to
  Transfers

  	
  49

  
	
  SECTION 9.4

  	
  Allocations and Adjustments Upon
  Transfer

  	
  51

  
	
  SECTION 9.5

  	
  Section 754 Election

  	
  52

  
	
  SECTION 9.6

  	
  Single Member

  	
  52

  
	
  SECTION 9.7

  	
  Bankruptcy or Dissolution of a
  Member

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE X           PUT
  OPTION; BUY/SELL RIGHTS

  	
  53

  
	
   

  	
   

  
	
  SECTION 10.1

  	
  Put Option

  	
  53

  
	
  SECTION 10.2

  	
  Buy/Sell Rights

  	
  57

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI          DISSOLUTION,
  LIQUIDATION AND TERMINATION

  	
  61

  
	
   

  	
   

  
	
  SECTION 11.1

  	
  Dissolution

  	
  61

  
	
  SECTION 11.2

  	
  Liquidation and Termination

  	
  62

  
	
  SECTION 11.3

  	
  Adjustment of Distributions

  	
  63

  
	
  SECTION 11.4

  	
  Date of Termination

  	
  63

  
	
  SECTION 11.5

  	
  Liquidating Member

  	
  63

  
	
  SECTION 11.6

  	
  Withdrawals

  	
  63

  
	
  SECTION 11.7

  	
  Governance

  	
  64

  
	
  SECTION 11.8

  	
  Return of Capital

  	
  64

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII        DEFAULT
  BY MEMBER

  	
  64

  
	
   

  	
   

  
	
  SECTION 12.1

  	
  Events of Default

  	
  64

  
	
  SECTION 12.2

  	
  Effect of Event of Default

  	
  65

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII      REPRESENTATIONS
  AND WARRANTIES OF THE MEMBERS

  	
  65

  
	
   

  	
   

  
	
  SECTION 13.1

  	
  Representations and Warranties of
  Members

  	
  65

  
	
  SECTION 13.2

  	
  Member Indemnity

  	
  68

  
	
  SECTION 13.3

  	
  Survival

  	
  69

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV       MISCELLANEOUS

  	
  69

  
	
   

  	
   

  
	
  SECTION 14.1

  	
  Further Assurances

  	
  69

  
	
  SECTION 14.2

  	
  Notices

  	
  69

  
	
  SECTION 14.3

  	
  Governing Law

  	
  70

  
	
  SECTION 14.4

  	
  Certain Rules of Construction

  	
  70

  
	
  SECTION 14.5

  	
  Pronouns

  	
  71

  
	
  SECTION 14.6

  	
  Successors and Assigns

  	
  71

  
	
  SECTION 14.7

  	
  Extension Not a Waiver

  	
  71

  
	
  SECTION 14.8

  	
  Severability

  	
  71

  
	
  SECTION 14.9

  	
  Consents

  	
  71

  
	
  SECTION 14.10

  	
  Entire Agreement

  	
  71

  
	
  SECTION 14.11

  	
  Counterparts

  	
  72

  
	
  SECTION 14.12

  	
  Creditors

  	
  72

  
	
  SECTION 14.13

  	
  Ownership of Company Property

  	
  72

  

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 14.14

  	
  Time of the Essence

  	
  72

  
	
  SECTION 14.15

  	
  Recalculation of Interest

  	
  72

  
	
  SECTION 14.16

  	
  Waiver of Partition

  	
  72

  
	
  SECTION 14.17

  	
  Calculation of Days

  	
  73

  
	
  SECTION 14.18

  	
  Publicity

  	
  73

  
	
  SECTION 14.19

  	
  Confidentiality

  	
  73

  
	
  SECTION 14.20

  	
  Securities

  	
  74

  
	
  SECTION 14.21

  	
  Venue

  	
  74

  
	
  SECTION 14.22

  	
  WAIVER OF JURY TRIAL

  	
  75

  
	
  SECTION 14.23

  	
  Prevailing Party Costs and Fees

  	
  75

  
	
  SECTION 14.24

  	
  Force Majeure

  	
  75

  
	
  SECTION 14.25

  	
  Third Party Beneficiaries

  	
  75

  
	
  SECTION 14.26

  	
  Company Counsel

  	
  75

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV        PATRIOT
  ACT

  	
  76

  
	
   

  	
   

  
	
  SECTION 15.1

  	
  Compliance with International
  Trade Control Laws and OFAC Regulations

  	
  76

  
	
  SECTION 15.2

  	
  Member’s Funds

  	
  76

  
	
  SECTION 15.3

  	
  Member Compliance with Patriot Act

  	
  77

  
	
  SECTION 15.4

  	
  Cooperation with Other Members

  	
  77

  
	
  SECTION 15.5

  	
  Actions Taken Pursuant to
  Anti-Money Laundering Laws

  	
  77

  
	
   

  	
   

  	
   

  
	
  ARTICLE XVI       JMIR
  GUARANTY

  	
  78

  
	
   

  	
   

  
	
  SECTION 16.1

  	
  Guaranty

  	
  78

  

 

iv

 

LIST
OF EXHIBITS AND SCHEDULES

 

	
  Exhibit
  A

  	
  -

  	
  Form of Purchase and Sale Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit
  B

  	
  -

  	
  Guaranty Sharing Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit
  C

  	
  -

  	
  Guaranty of Obligations of JMIR

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule
  1

  	
  -

  	
  Approved Annual Budget for 2010

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule
  2

  	
  -

  	
  Officers

  	
   

  

 

v

 

LIMITED LIABILITY COMPANY AGREEMENT OF

BH-JMIR KAUAI HOTEL, LLC

 

THIS LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”) is executed on and made effective as of October
20, 2010 (the “Effective Date”), by and between
the KAUAI HOTEL SERIES OF JMIR INVESTMENTS III, LP,  a Delaware series limited partnership (“JMIR”),
having an office at the address set forth in Section 14.2 hereof, BEHRINGER HARVARD KAUAI HOTEL, LLC, a Delaware limited
liability company (“Investor” and
together with JMIR, the “Members,” with
each being referred to, individually, as a “Member”),
having an office at the address set forth in Section 14.2 hereof, and JMIR-PROJECT MANAGER LLC, a Delaware limited liability
company (the “Manager”), having an office at the
address set forth in Section 14.2 hereof, pursuant to the provisions of
the Delaware Limited Liability Company Act, Title 6 of the Delaware Code,
Section 18-101 et seq., as amended from time to
time (“Delaware Act”).  Capitalized terms used herein are defined in Article
II hereof or as elsewhere provided herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises
and the mutual covenants herein contained and for good and valuable consideration
the receipt and adequacy of which are hereby acknowledged, the Members do
hereby mutually covenant and agree as follows:

 

ARTICLE I

 

ORGANIZATION

 

SECTION 1.1               Formation.

 

(a)           The Members hereby agree to form the Company as a limited
liability company under the Delaware Act for the purposes and upon the terms
and conditions hereinafter set forth. 
The rights and liabilities of the Members shall be as provided in the
Delaware Act, except as otherwise expressly provided in this Agreement.  In the event of any inconsistency between any
terms and conditions contained in this Agreement and any non-mandatory
provisions of the Delaware Act, the terms and conditions contained in this
Agreement shall govern.

 

(b)           The fact that the Certificate is on file in the office of
the Secretary of State shall constitute notice that the Company is a limited
liability company, pursuant to Section 18-207 of the Delaware Act.

 

(c)           The Manager is hereby authorized to file and record any
amendments to the Certificate and such other documents as may be reasonably
required or appropriate under the Delaware Act or the laws of any other
jurisdiction in which the Company may conduct business or own property.

 

SECTION 1.2               Name.  The name of the Company shall be “BH-JMIR
KAUAI HOTEL, LLC.”  The Company may also conduct business at the
same time through Subsidiaries 

 

 

of the Company or under one or more fictitious names
determined by the Manager and Approved by the Investor.

 

SECTION 1.3               Principal Place of Business;
Other Places of Business; and Registered Agent.  The principal place of
business of the Company is located at 15601 Dallas Parkway, Suite 600, Addison,
Texas 75001, or such other place or places as the Manager may from time to time
designate with the Approval of the Investor. 
The Company may maintain offices and places of business at such other
place or places as the Manager determines with the Approval of the Investor,
which Approval shall not be unreasonably withheld.  So long as required by the Delaware Act, the
Company shall continuously maintain a registered office and a registered agent
for service of process on the Company in the State of Delaware.

 

SECTION 1.4               Purpose and Business.

 

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

 

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

 

(ii)           directly or indirectly acquire, own, finance, pledge,
encumber, redevelop, improve, renovate, reposition, operate, let, manage,
repair, dispose of and otherwise deal with the Property and Company Assets
acquired by the Company in accordance with the terms hereof; and

 

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

 

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

 

(c)           In order to facilitate the purposes of the Company, as set
forth above, the Company may form or acquire one or more subsidiary special
purpose entities to own all or any part of the Property or Company Assets or to
conduct a portion of the Company’s business (each a “Subsidiary”).  The
Manager shall cause the Company to form a separate Subsidiary to acquire the
fee title to the Property which the Company shall acquire pursuant to the
Purchase and Sale Agreement.  Unless
otherwise determined by the Investor, the Manager shall perform the same or
substantially identical services for each Subsidiary as the Manager performs
for the Company.  In the connection
therewith, the Manager agrees to perform such duties for and on behalf of each
Subsidiary, and in such circumstances and with regard to such duties, the
Manager is subject to the same standards of conduct and will have the same
rights and obligations with regards to such duties performed or to be performed
on behalf of any such Subsidiary as are set forth in this Agreement with regard
to the same or substantially identical services to be performed for or on
behalf of the Company (including, without limitation, the indemnification and
exculpation rights and obligations of the Subsidiary and the removal or
termination provisions, as set forth in this Agreement).

 

2

 

SECTION 1.5               Powers.  In furtherance of its purposes and business,
but subject to all of the provisions of this Agreement, the Company shall have
and may exercise all of the powers and rights that can be conferred upon
limited liability companies formed pursuant to the Delaware Act.

 

SECTION 1.6               Term.  The term of the Company commenced on the
filing of the Certificate with the Secretary of State of the State of Delaware,
and shall continue until the Company is dissolved in accordance with Article
XI.  Notwithstanding the dissolution
of the Company, the existence of the Company shall continue as a separate legal
entity until termination pursuant to this Agreement.

 

SECTION 1.7               Partnership Status for Income
Tax Purposes.  It is the intent of
the Members that the Company shall always be characterized as a “partnership”
for federal, state and, if applicable, local income tax purposes.  Such characterization is solely for such tax
purposes, and does not create or imply a general partnership among the Members
for state law or any other purpose. 
Investor shall make all applicable elections, determinations and other
decisions under the Code and applicable Treasury Regulations, including,
without limitation, the deductibility of a particular item of expense and the
positions to be taken on the Company’s tax return, and shall approve the
settlement or compromise of all audit matters raised by the Internal Revenue
Service affecting the Members generally. 
JMIR shall take reporting positions on its federal, state and local
income tax returns consistent with the positions determined for the Company by
Investor.  The Tax Matters Member shall
cause all federal, state and local income and other tax returns to be timely
filed by the Company and shall be authorized to execute such returns (provided
that the Tax Matters Member shall, for so long as it diligently performs its
obligations hereunder, not be responsible for the delays of reputable
accountants or auditors retained by the Manager or at the request of Investor
on behalf of the Company).

 

ARTICLE II

 

DEFINED TERMS

 

SECTION 2.1               Defined
Terms.  For all purposes of this
Agreement, except as otherwise expressly provided herein or unless the context
otherwise requires: (a) the terms defined in this Article II have
the meanings assigned to them in this Article II and include the plural
as well as the singular; (b)  all references in this Agreement to
designated “Articles,” “Sections” and other subdivisions are to the designated
Articles, Sections and other subdivisions of this Agreement; (c) the word “including”
shall have the same meaning as the phrase “including, without limitation,” and
other phrases of similar import; and (d) the words “herein,” “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision.

 

“1940 Act” is
defined in Section 9.3(a)(iii).

 

“Acquisition Date”
shall mean the date that the Company or one or more Subsidiaries acquires the
Property, as provided by and as contemplated in the Purchase and Sale
Agreement.

 

3

 

“Adjusted Capital
Account” shall mean, with respect to any Member, the balance, if
any, in such Member’s Capital Account as of the end of the relevant Fiscal
Year, after giving effect to the following adjustments:

 

(a)           add to such Capital Account the following items:

 

(i)            the amount, if any, that such Member is obligated to
contribute to the Company upon liquidation of such Member’s Company Interest;
and

 

(ii)           the amount that such Member is obligated to restore or is
deemed to be obligated to restore pursuant to Treasury Regulations
Section 1.704-1(b)(2)(ii)(c) or the penultimate
sentences of each of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and

 

(b)           subtract from such Capital Account such Member’s share of
the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

The foregoing definition of Adjusted Capital
Account is intended to comply with the provisions of Treasury Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.

 

“Adjusted Capital
Account Deficit” shall mean, with respect to any Member, the deficit
balance, if any, in such Member’s Adjusted Capital Account as of the end of the
relevant Fiscal Year.

 

“Affiliate”
shall mean with respect to any Person, any other Person directly or indirectly
controlled by, controlling or under direct or indirect common control with the
Person in question.  An “Affiliated” Person means an Affiliate.  For purposes of this definition and the
definition of Subsidiary, “control” shall
mean when used with respect to any specified Person, the power to direct or
cause the direction of the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities or other
beneficial interest, by contract or otherwise; and the terms “controlling” and “controlled”
have the meanings correlative to the foregoing. 
A Person which is under the joint control of more than one other Person
(including through the exercise of major decision approvals or similar right)
will be deemed to be under the control of each such jointly controlling
Persons.

 

“Agreement” is
defined in the Preamble, as it is amended from time to time.

 

“Annual Budget”
is defined in Section 7.5(a).

 

“Anti-Money
Laundering Laws” shall mean those laws, regulations and sanctions,
state and federal, criminal and civil, that (a) limit the use of and/or
seek the forfeiture of proceeds from illegal transactions; (b) limit
commercial transactions with designated countries or individuals believed to be
terrorists, narcotics dealers or otherwise engaged in activities contrary to
the interests of the United States; (c) require identification and
documentation of the parties with whom a financial institution conducts
business; or (d) are designed to disrupt the flow of funds to terrorist
organizations.  Such laws, regulations
and sanctions shall be deemed to include the Patriot Act, the Bank Secrecy Act
, the Trading with the Enemy Act, 50 U.S.C. App.

 

4

 

Section 1 et seq., the International Emergency
Economic Powers Act, 50 U.S.C. Section 1701 et seq., and the sanction
regulations promulgated pursuant thereto by the OFAC, as well as laws relating
to prevention and detection of money laundering in 18 U.S.C. Sections 1956 and
1957.

 

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

 

“Approved
Expenses” means any amount described in Sections 3.2(a)(i)(2), (3) or
(4).

 

“Approved Expense Shortfall”  is
defined in Section 3.2(a)(ii).

 

“Asset Management Fee”
is defined in Section 7.6(c).

 

“Bankruptcy Event”
shall mean, the occurrence of any of the following events with respect to any
Person:  (a) the making by it of an
assignment by it for the benefit of its creditors; (b) the filing by it of
a voluntary petition in bankruptcy; (c) an adjudication that it is
bankrupt or insolvent unless such adjudication is stayed or dismissed within 90
days, or the entry against it of an order for relief in any bankruptcy or
insolvency proceeding unless such order is stayed or dismissed within 90 days;
(d) the filing by it of a petition or an answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation;
(e) the filing by it of an answer or other pleading admitting or failing
to contest the material allegations of the petition filed against it in any
proceeding of the nature described in the preceding clause (d); or (f) its
consenting to or acquiescing in the appointment of a trustee, receiver or
liquidator of it or of all or any substantial part of its properties.

 

“Business Day”
shall mean any day other than Saturday, Sunday or legally recognized public
holiday in the United States or the State of Texas or the State of Hawaii.

 

“Buyer”
is defined in Section 10.1(a).

 

“Buy/Sell Deposit”
is defined in Section 10.2(d).

 

“Capital Account”
shall mean the Capital Account maintained for each Member pursuant to Section 4.1,
as the same may be credited or debited in accordance with the terms hereof.

 

“Capital Call”
is defined in Section 3.2(a).

 

“Capital Contribution”
shall mean with respect to any Member at any time, the aggregate amount of
money and the initial Gross Asset Value of any property (other than money)
contributed, or deemed contributed, by such Member to the Company as of such
time (net of any liabilities secured by such property or to which such property
is otherwise subject).

 

“Capital Default”
is defined in Section 3.4(a).

 

5

 

“Capital Expenditures”
shall mean for any period, the amount expended for items capitalized under
GAAP, except for such items as are otherwise classified under this Agreement.

 

“Capital Improvement LOC”
is defined in Section 3.3(a).

 

“Capital Notice”
is defined in Section 3.2(b).

 

“Cash Collateral Account” is defined in Section 3.3(a).

 

“Cash Flow”  shall mean, with respect to any period for
which such calculation is being made:

 

(a)           the sum, without duplication, of:

 

(i)            the Company’s Revenues for such period; and

 

(ii)           the amount of any Reserves that the Manager and the
Investor reasonably determined could be released during such period and
therefore became available for distribution;

 

(b)           less the sum,
without duplication, of:

 

(i)            all Debt Service Payments made during such period by the
Company, including the repayment of the outstanding principal balance of and
accrued interest on any Financing;

 

(ii)           Capital Expenditures, including lease commissions and
other deferred costs, paid by the Company during such period;

 

(iii)          all other cash expenditures and payments made during such
period (including without limitation real estate taxes and assessments,
personal property taxes, sales taxes and all fees, commissions, expenses and
allowances  paid or reimbursed to any
Member or any of its Affiliates pursuant to any property management agreement
or otherwise as permitted herewith and any payments with respect to the
restoration or replacement of any Company Asset following a casualty or
condemnation) by the Company and reasonably relating to the operations of the
Company and/or the acquisition, ownership, development, renovation,
maintenance, management, operation, sale, financing and/or refinancing of the
Property or any Company Assets during such period contemplated by the then
applicable Annual Budget or otherwise approved (either prospectively or
retroactively) by the Members from time to time;

 

(iv)          all amounts of Revenue deposited into the Reserves of the
Company (including working capital Reserves) during such period; and

 

(v)           All expenditures related to any acquisition, sale,
disposition, financing, refinancing or securitization of any Company Assets; provided, however,
that to the extent the sources of funds used for such payment or expenditures
are not included in Revenues (e.g., Capital Contributions), or to the extent
such payment or expenditure is 

 

6

 

paid out of any Reserves
then such payment shall not be included in any deduction under this clause (v).

 

“Certificate”
shall mean the Certificate of Formation for the Company filed with the
Secretary of State of the State of Delaware, pursuant to Section 18-201 of
the Delaware Act, as the same has been or may hereafter be amended and
restated.

 

“Change in
Control” shall mean (a) with respect to JMIR, the first point
in time when Gregory W. Clay, John C. Kratzer, John J. Moores, Sr. or
their respective Affiliates, individually or collectively, no longer, directly
or indirectly, control JMIR, and (b) with respect to Investor, the first
point in time when Behringer Harvard Opportunity REIT II, Inc. or its
Affiliates, individually or collectively, no longer, directly or indirectly,
control Investor.   For purposes of this
definition, “control” shall have the meaning assigned to such term in the
definition of Affiliate.

 

“Code” shall
mean the Internal Revenue Code of 1986, as amended, or any corresponding
provision or provisions of prior or succeeding law.  Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.

 

“Company” shall
mean BH-JMIR KAUAI HOTEL, LLC, a limited liability company formed under the
laws of the State of Delaware and any successor limited liability company.

 

“Company
Accountant” is defined in Section 8.4.

 

“Company Assets”
shall mean all direct and indirect assets and property, whether tangible or
intangible (including monies) and whether real, personal, or mixed, from time
to time owned by or held for the benefit of the Company, including all direct
or indirect interests in the Property.

 

“Company Interest”
shall mean for any Member, such Member’s entire interest in the Company at any
particular time, together with the obligations of such Member to comply with
all of the terms and provisions of this Agreement.

 

“Company Minimum Gain”
shall mean “partnership minimum gain” as set forth in Treasury Regulations
Sections 1.704-2(b)(2) and 1.704-2(d)(1).

 

“Confidential
Information” is defined in Section 14.19(a).

 

“Contributing Member”
is defined in Section 3.4(a).

 

“Contribution Shortfall”
is defined in Section 3.4(a).

 

“Deadlock”
is defined in Section 10.1(b).

 

“Debt Service Payments”
means all required principal and interest payments under any Financing
(including at maturity).

 

7

 

“Defaulting Member”
is defined in Section 3.4(a).

 

“Defaulting Party”
is defined in Section 10.1(e).

 

“Delaware Act”
is defined in the Preamble.

 

“Deposit”
is defined in Section 3.1(a).

 

“Depreciation”
shall mean for each Fiscal Year or other period, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year or other period, except that if the
Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Fiscal Year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization, or
other cost recovery deduction for such Fiscal Year or other period bears to
such beginning adjusted tax basis.  If
any asset shall have a zero (-0-) adjusted basis for federal income tax
purposes, Depreciation shall be determined utilizing any reasonable method
selected by the Manager.

 

“Distribution
Equivalent Agreement” means that certain Distribution Equivalent
Agreement dated as of the date hereof among the Company, JMIR and Behringer
Harvard Opportunity OP II LP.

 

“Draw Down Amount”
is defined in Section 3.3(b)(i).

 

“Draw Down Notice”
is defined in Section 3.3(b)(i).

 

“Effective Date”
is defined in the Preamble.

 

“Escrow Agent”
shall mean any reputable, nationally recognized and financially solvent title
insurance company designated by the Member purchasing a Company Interest.

 

“Event of Default”
is defined in Section 12.1.

 

“Failed
Contribution” is defined in Section 3.1(d).

 

“Financing”
shall mean any indebtedness (including any Mortgage Loan), financing or
refinancing by debt, bonds, sale and leaseback or other form of financing
relating to any Company Asset or any debt or other similar monetary obligation
of the Company or any Subsidiary (but excluding trade payables incurred in the
ordinary course of business).

 

“Financing Document”
shall mean any loan agreement, security agreement, mortgage, deed of trust,
indenture, bond, note, debenture, guaranty, indemnity agreement or other
instrument or agreement relating to or delivered in connection with any
Financing.

 

“Fiscal Year”
shall mean the period ending December 31 of each year, or such other
period as the Manager may designate as the Fiscal Year of the Company with the
Approval of the Investor, consistent with the requirements of the Code.

 

8

 

“For Cause Event”
is defined in Section 7.2(e).

 

“Franchise
Agreement” means any hotel franchise, license or similar agreement
entered into by the Sister Company or one or more of its subsidiaries with any
Franchisor with respect to all or any portion of the Property, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to
time.

 

“Franchisor”
means any franchisor, licensor or similar Person under any Franchise Agreement
entered into with respect to all or any portion of the Property, together with
their respective successors and permitted assigns in such capacity.

 

“Funding Deadline”
is defined in Section 3.2(b).

 

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

 

“Gross Asset Value”
shall mean, with respect to any asset, such asset’s adjusted basis for federal
income tax purposes, except as follows:

 

(a)           The initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value of such asset, as
determined by the mutual agreement of the Manager and the contributing Member
(as evidenced by this Agreement or an amendment hereto);

 

(b)           The Gross Asset Values of all Company Assets shall be
adjusted to equal their respective gross fair market values, as reasonably
determined by the Manager using such reasonable method of evaluation as it may
adopt and the Contributing Member shall Approve, as of the following times:

 

(i)            the acquisition of an interest or an additional interest
in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution or other consideration, if
the Manager reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the Members in the
Company;

 

(ii)           the distribution by the Company to a Member of more than a
de minimis amount of Company Assets as
consideration for an interest in the Company if the Manager reasonably
determines that such adjustment is necessary or appropriate to reflect the
relative economic interests of the Members in the Company;

 

(iii)          in connection with the grant of an interest in the Company
(other than a de minimis interest) as
consideration for the performance of services to or for the benefit of the
Company by an existing Member acting in a capacity as a Member of the Company
or by a new Member acting in a capacity as Member of the Company or in
anticipation of being a member of the Company if the Manager reasonably
determines that such adjustment is necessary or appropriate to reflect the
relative economic interests of the Members in the Company;

 

9

 

(iv)          the liquidation of the Company within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g); and

 

(v)           at such other times as the Manager shall determine
necessary in order to comply with Regulations Sections 1.704-1(b) and
1.704-2;

 

(c)           The Gross Asset Value of any Company Asset distributed to
a Member shall be the gross fair market value of such asset on the date of distribution
as reasonably determined by the Manager using the method of valuation Approved
by such receiving Member;

 

(d)           The Gross Asset Values of Company Assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b),
but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m),
and clause (f) of the definition of Profits and Losses; provided, however, that
Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to
the extent an adjustment pursuant to subparagraph (b) hereof is
made in connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (d); and

 

(e)           If the Gross Asset Value of a Company Asset has been
determined or adjusted pursuant to subparagraph (a), subparagraph (b),
or subparagraph (d), such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such Company Asset for
purposes of computing Profits and Losses.

 

“Gross Value Amount”
is defined in Section 10.2(a).

 

“Guaranty Sharing
Agreement” means the agreement between JMIR Investments III, LP, JMI
Realty LLC, Behringer Harvard Kauai Hotel, LLC, Behringer Harvard Opportunity
REIT II, Inc. and the Company attached hereto as Exhibit B.

 

“Hawaii Tax
Payments” means any payments made by the Company for Hawaii Taxes
(as such term is defined in the True-Up Agreement).

 

“Imputed Closing
Costs” shall mean, with respect to the determination of the Put
Price pursuant to Section 10.1, an amount equal to 2% of the
Proposed Sales Price, which represents the estimated closing costs that would
normally be incurred by the Company or its Subsidiaries for title insurance
premiums, survey costs, brokerage commissions, and other customary closing
costs if the Property were sold, and with respect to the determination of
Offeror Value and Offeree Value pursuant to Section 10.2, an amount
equal to 2% of the Gross Value Amount, which represents the estimated closing
costs that would normally be incurred in connection with the purchase and sale
of Company Interests.

 

“Indemnified Party”
is defined in Section 7.8(a).

 

“Initial Capital
Contributions” is defined in Section 3.1(c).

 

“Investor” is
defined in the Preamble, together with its successors and permitted
assigns.

 

10

 

“IRR” shall
mean, as of any date, the internal rate of return (expressed as a percentage)
as of such date on the aggregate Capital Contributions (including Preferred
Contributions) made by the Members through such date (taking account of the
timing and amount of the aggregate distributions to the Members in respect of
such Capital Contributions pursuant to Sections 5.3 (other than
distributions under Section 5.3(d)(ii) and distributions
pursuant to Section 5.3(e)(ii)), 5.4 and 11.2(c) (other
than distributions pursuant to Section 5.3(d)(ii) and
distributions pursuant to Section 5.3(e)(ii) by virtue of Section 11.2(c) and,
for purposes of this calculation, any Hawaii Tax Payments made by the Company
through such date shall be deemed to be distributed to the Members under Section 5.3
(other than distributions under Section 5.3(d)(ii) and
distributions pursuant to Section 5.3(e)(ii)), 5.4 and 11.2(c) (other
than distributions pursuant to Section 5.3(d)(ii) and
distributions pursuant to Section 5.3(e)(ii) by virtue of Section 11.2(c)).  In determining the IRR, the following shall
apply:

 

(i) all
calculations shall be based upon the actual dates on which Capital
Contributions (including Preferred Contributions) are made by the Members (and
the amount thereof) and the actual dates on which distributions (other than
those excluded above) are paid to the Members and the date on which the Hawaii
Tax Payments are made by the Company;

 

(ii) all
distribution amounts shall be based on the amount of the gross distribution
prior to any withholding or deduction for any federal, state or local income
tax requirements, and all Hawaii Tax Payments shall be the exact amounts paid
by the Company for such taxes; and

 

(iii) all
calculations shall employ the “XIRR” function (with annual compounding) as
calculated in Microsoft Excel using reasonable “guesses” based upon the
data  in clauses (i) and (ii) above.

 

“JMIR”  is defined in the Preamble, together with its
successors and permitted assigns.

 

“JMIR Manager”
is defined in Section 7.1.

 

“JMIR Parties”
is defined in Section 14.26(a).

 

“JMIR Series LP”
is defined in Section 7.8(c).

 

“Letters of Credit”
is defined in Section 3.3(a).

 

“Lease Agreement”
shall mean that certain lease agreement dated as of the date hereof by and
between Kauai Coconut Beach, LLC, as lessor, and Kauai Coconut Beach Operator,
LLC, as lessee.

 

“Liquidating Member”
is defined in Section 11.5(a).

 

“Major Decision”
is defined in Section 7.4.

 

11

 

“Manager”  is defined in the Preamble, together with its
successors and permitted assigns.  The
Manager is authorized to carry out the management of the business and affairs
of the Company pursuant to Article VII and in accordance with this
Agreement.

 

“Material Damage
or Loss” is a violation, breach or default which causes losses or
damages in excess of $200,000.

 

“Maximum Amount”
shall mean, with respect to the Investor, $12,000,000 less any Capital
Contributions (a) made by Investor’s Affiliate under the Sister Company
LLC Agreement, (b) made or deemed made by Investor’s Affiliate under the
Sister Company Guaranty Sharing Agreement, or (c) made or deemed made by
Investor under the Guaranty Sharing Agreement, and with respect to JMIR,
$3,000,000 less any Capital Contributions (x) made by JMIR under the
Sister Company LLC Agreement, (y) made or deemed made by JMIR under the
Sister Company Guaranty Sharing Agreement, or (z) made or deemed made by
JMIR under the Guaranty Sharing Agreement.

 

“Member” is
defined in the Preamble and further means, at any time, any Person admitted and then remaining as a
member of the Company pursuant to the terms of this Agreement.  As of the Effective Date, the Members of the
Company are JMIR and Investor.

 

“Member Minimum Gain”
shall mean “partnership minimum gain” as set forth in Treasury Regulations Sections
1.704-2(b)(2) and 1.704-2(d)(1).

 

“Member Nonrecourse Debt”
shall mean “partner non-recourse
debt” as set forth in Treasury Regulations Section 1.704-2(b)(4).

 

“Member Nonrecourse Debt
Minimum Gain” shall mean
an amount, with respect to each Member Nonrecourse Debt, equal to the Company
Minimum Gain that would result if such Member Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Treasury Regulations Section 1.704-2(i)(2) and
(3) with respect to “partner minimum gain.”

 

“Member Nonrecourse
Deductions” shall mean
“partnership nonrecourse deductions” as set forth in Treasury Regulations Section 1.704-2(i)(2).  For any Fiscal Year, the amount of Member
Nonrecourse Deductions with respect to a Member Nonrecourse Debt equals the
excess, if any, of the net increase, if any, in the amount of the Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt over
the aggregate amount of any distributions during such Fiscal Year to the Member
that bears the economic risk of loss for such Member Nonrecourse Debt to the
extent such distributions are from proceeds of such Member Nonrecourse Debt and
are allocable to an increase in Member Nonrecourse Debt Minimum Gain,
determined according to the provisions of Treasury Regulations Section 1.704-2(i)(2).

 

“Mortgage Loan”
shall mean any Financing secured by a mortgage, deed of trust or similar
security instrument encumbering the Property, including that certain loan to be
assumed by the Company (or one or more Subsidiaries) in the current principal
amount of $38,000,000.

 

“Mortgagee”
shall mean the lender of a Mortgage Loan.

 

“Necessary Expenses” defined in Section 7.2(b)(iii).

 

12

 

“Nonrecourse Deductions”
is defined in Treasury
Regulations Section 1.704-2(b)(1). 
The amount of Nonrecourse Deductions for a Fiscal Year equals the
excess, if any, of the net increase, if any, in the amount of Company Minimum
Gain during that Fiscal Year, over the aggregate amount of any distributions
during that Fiscal Year of proceeds of a Nonrecourse Liability that are
allocable to an increase in Company Minimum Gain, determined according to the
provisions of Treasury Regulations Section 1.704-2(c).

 

“Nonrecourse Liability”
is defined in Treasury Regulations Section 1.704-2(b)(3).

 

“Non - Withdrawing Member” is defined in Section 3.1(d).

 

“Notices” is defined in Section 14.2.

 

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

 

“Offer Notice” is defined in Section 10.2(a).

 

“Offeree” is defined in Section 10.2(a).

 

“Offeree Value”
is defined in Section 10.2(b).

 

“Offeror” is defined in Section 10.2(a).

 

“Offeror Value”
is defined in Section 10.2(b).

 

“Operating Capital”
shall mean any capital of the Company to fund operating shortfalls of the
Company including to make Debt Service Payments as provided for in the then
applicable Annual Budget.

 

“Operating Capital LOC”
is defined in Section 3.3(a).

 

“Opt-Out Event”
is defined in Section 3.1(b)(ii).

 

“Opt-Out Member”
is defined in Section 3.1(b)(ii).

 

“PCHS” is
defined in Section 14.26.

 

“Percentage Interest”
shall mean as of the Effective
Date, (a) as to Investor, 80% and (b) as to JMIR, 20%, which
percentages may change pursuant to and in accordance with the terms of this
Agreement.

 

“Person” shall mean any individual,
corporation, partnership, limited liability company, association, trust or
other entity or organization.

 

“Preferred Regular Contribution”
is defined in Section 3.4(c).

 

“Preferred Return”
shall mean, with respect to each Member’s Unrecovered Capital Contributions
from time to time and as measured with respect to all or a portion of a single
Fiscal 

 

13

 

Year, a cumulative and quarterly compounding return
on such Unrecovered Capital Contributions for such Fiscal Year or portion
thereof equal to 10% per annum, taking account of the amount and timing of the
making of such Unrecovered Capital Contributions and the amount and timing of
all distributions made with respect to such Unrecovered Capital Contributions.

 

“Priority Capital Contribution” is defined in Section 3.4(a).

 

“Priority Preferred Return”
shall mean, with respect to each Member’s Unrecovered Priority Contributions
from time to time and as measured with respect to all or a portion of a single
Fiscal Year, a cumulative and quarterly compounding return on such Unrecovered
Priority Contributions for such Fiscal Year or portion thereof equal to 15% per
annum, taking account of the amount and timing of the making of such
Unrecovered Priority Contributions and the amount and timing of (a) all
distributions made with respect to such Unrecovered Priority Contributions and (b) and
such Member’s pro rata share (based on Percentage Interests on the date such
Hawaii Tax Payments are made) of Hawaii Tax Payments.

 

“Profits” and “Losses” shall mean,
for each Fiscal Year or other period, an amount equal to the Company’s
taxable income or loss for such Fiscal Year or period, determined in accordance
with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall
be included in taxable income or loss), with the following adjustments:

 

(a)           any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definitional Section shall be added to such taxable
income or loss;

 

(b)           any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Profits or Losses pursuant to this definitional
Section, shall be subtracted from such taxable income or loss;

 

(c)           in the event the Gross Asset Value of any Company Asset is
adjusted pursuant to subparagraph (b) or subparagraph (c) under
the definition of “Gross Asset Value,” the amount of such adjustment shall be
taken into account in the taxable year of such adjustment as gain or loss from
the disposition of such Company Asset for purposes of computing Profits or
Losses;

 

(d)           gain or loss resulting from any disposition of Company
Assets with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;

 

(e)           in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Fiscal Year or
other period, computed in accordance with the definition thereof;

 

14

 

 

(f)            to the extent an adjustment to the adjusted tax basis of
any Company Asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(4) to
be taken into account in determining Capital Accounts as a result of a
distribution other than in complete liquidation of a Member’s Company Interest,
the amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment decreases
the basis of the asset) from the disposition of the asset and shall be taken
into account for purposes of computing Profits or Losses; and

 

(g)           notwithstanding any other provision of this definition of
Profits and Losses, any items which are specially allocated under Section 6.2
or Section 6.4(b) of this Agreement shall not be taken into
account in computing Profits or Losses. 
The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Section 6.2 and Section 6.4(b) of
this Agreement shall be determined by applying rules analogous to those
set forth in this definition of Profits and Losses.

 

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

 

“Promote Percentage” shall mean, with respect to JMIR, its right to (a) 20% of
distributions under Section 5.3(d)(ii) and (b) 30% of
distributions under Section 5.3(e)(ii).

 

“Property”
shall mean the 311 room hotel which is located at 650 Aleka Loop, Kapaa, Hawaii
96746 on 10.4 acres of fee simple ocean front land on the island of Kauai,
Hawaii.  The Property is proposed to be
acquired by the Company or a Company Subsidiary pursuant to the Purchase and
Sale Agreement.

 

“Property  Improvement Capital” shall mean any capital of the Company
expended for capital improvement relating to the Property as provided for in
the then applicable Annual Budget.

 

“Proposed Sales
Price” is defined in Section 10.1(a).

 

“Purchase and Sale
Agreement” shall mean that certain Purchase and Sale Agreement,
dated as of June 17, 2010, by and between Waipouli Owner, LLC, as seller,
and JMI Realty, LLC, as purchaser, pursuant to which a Subsidiary shall take an
assignment of JMI Realty, LLC’s interest to purchase the Property, as the same
may be amended, restated, replaced, supplemented or otherwise modified from
time to time, in the form attached hereto as Exhibit A.

 

“Pursuit Costs”
is defined in Section 3.1(b).

 

“Pursuit Member”
as defined in Section 3.1(b)(ii)(2).

 

15

 

“Put Notice”
is defined in Section 10.1(a).

 

“Put Price”
is defined in Section 10.1(c).

 

“Put Right”
is defined in Section 10.1(a).

 

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

 

“Regulation D”
is defined in Section 13.1(k).

 

“Regulations” or
“Treasury Regulations” shall mean the Income Tax Regulations
promulgated under the Code as such regulations may be amended from time to time
(including Temporary Regulations).

 

“Regulatory Allocations”
is defined in Section 6.2(h).

 

“Rejected Portions”
is defined in Section 7.5(a).

 

“Reserves”
shall mean funds set aside or amounts allocated to reserves that shall be
maintained in amounts required under any Financing Documents or by the then
current Annual Budget and other amounts reasonably deemed necessary by the
Members.

 

“Revenue” shall
mean, with respect to any period for which such calculation is being made, the
gross cash received by the Company during such period, from all sources (other
than Capital Contributions) including all revenues of the Company from (a) the
lease payments received pursuant to the Lease Agreement, (b) ownership,
operation, use, leasing, and occupancy of any Company Asset,
(c) concessions to the Company which are in the nature of revenues,
(d) rent or business interruption insurance, and casualty and liability
insurance, if any, (e) funds made available to the extent such funds are
withdrawn from the Company’s or a third party’s reserve account and deposited
into the Company’s operating accounts, (f) proceeds from the sale or other
disposition of any Company Assets, (g) proceeds from the financing,
refinancing or securitization of any Company Assets, and (h) other
revenues and receipts realized by the Company.

 

“Rules” is defined in Section 14.26(b).

 

“Securities Act”
shall mean the United States Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Seller”
is defined in Section 10.1(a).

 

16

 

“Shortfall”
is defined in Section 3.2(a)(i).

 

“Sister Company” means BH-JMIR Kauai Hotel Operator, LLC, a Delaware limited liability
company.

 

“Sister Company
Guaranty Sharing Agreement” means the agreement dated as of the date
hereof among JMIR Investments III, LP, Behringer Harvard Kauai Hotel TRS, Inc.,
Behringer Harvard Opportunity REIT II, Inc. and the Sister Company.

 

“Sister Company LLC Agreement” means that certain limited liability company agreement of the Sister
Company dated as of the date hereof, as such agreement may be amended from time
to time.

 

“Subsidiary”
means any Affiliate of the Company which is directly or indirectly, through one
or more intermediaries, controlled by the Company.

 

“Tax Matters Member”
is defined in Section 8.3.

 

“Tax Payments” is defined in Section 5.7.

 

“Transfer” means
any sale, exchange, assignment, pledge, transfer, gift, hypothecation,
mortgage, encumbrance or other form of disposition, directly or indirectly, by
operation of law or otherwise.

 

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

 

“True-Up
Agreement” means the agreement of even date herewith among the
Members, Behringer Harvard Opportunity REIT II, Inc. and the Company
regarding true-up payments to JMIR to account for certain costs.

 

“Unfunded Contribution
Shortfall” is defined in Section 3.4(d).

 

“Unrecovered Capital
Contribution” means, as of any date, a Member’s Capital
Contributions (other than Priority Capital Contributions) reduced (but not
below zero) by the amount of cash and the Gross Asset Value of any Company
Assets distributed to such Member pursuant to (i) Section 3.3(b)(iv) and
(ii) Section 5.3(c) (including by operation of Section 11.2(c)).  In the event a Member Transfers all or any
portion of such Member’s Company Interest in accordance with the terms of this
Agreement, the Transferee of such Company Interest shall succeed to the
Unrecovered Capital Contribution of the Transferor to the extent it relates to
the Transferred Company Interest.

 

17

 

“Unrecovered Priority
Contribution” means, as of any date, a Member’s Priority Capital
Contributions reduced (but not below zero) by the amount of cash and the Gross
Asset Value of any Company Assets distributed to such Member pursuant to Section 5.3(a) (including
by operation of Section 11.2(c)). 
In the event a Member Transfers all or any portion of such Member’s
Company Interest in accordance with the terms of this Agreement, the Transferee
of such Company Interest shall succeed to the Unrecovered Priority
Contributions of the Transferor to the extent it relates to the Transferred
Company Interest.

 

“Withdrawal Event”
is defined in Section 9.7.

 

“Withdrawing
Member” is defined in Section 3.1(d).

 

“Withdrawn Member”
is defined in Section 9.7.

 

ARTICLE III

 

CAPITAL CONTRIBUTIONS AND
DEFAULT

 

SECTION 3.1                 Initial Capital
Contributions.

 

(a)           Deposits Under the Purchase and Sale Agreement.  It is acknowledged that, on or prior to the
date hereof, one or more of the Members (or their Affiliates) has paid all or a
portion of the deposits required under the Purchase and Sale Agreement (the “Deposit”). 
On the date the Investor elects in a written notice from Investor to
Manager, Manager or an Affiliate will cause the Purchase and Sale Agreement to
be assigned to and assumed by one or more Subsidiaries in consideration of a
credit by the Company to the Capital Account of the applicable Member equal to
the portion of the Deposit paid by such Member.

 

(b)           Pursuit Costs. 
Prior to the date hereof, JMIR and the Investor and their respective
Affiliates, have incurred, and may hereafter incur prior to the Acquisition
Date third party out-of-pocket costs and expenses in connection with the
negotiation and closing of the Purchase and Sale Agreement and the Financing
and their respective due diligence analyses and other evaluations of the
Property (including, without limitation, costs of environmental and engineering
and other feasibility reports and studies, costs related to analyzing the
Property (including, without limitation, travel costs) and costs (including,
without limitation, reasonable attorneys’ fees) incurred by the Members in
reviewing and analyzing work conducted by JMI Realty, LLC or its agents) and
costs to complete an audit of the financial statements in respect of the
Property in compliance with certain laws and regulations applicable to the
Investor and/or its Affiliates and any additional deposits required under the
Purchase and Sale Agreement (subject to the exceptions set forth in clause (i)(2) below,
collectively, the “Pursuit Costs”).

 

(i)            Upon Closing. 
If the Company or one or more Subsidiaries acquires the Property
pursuant to the Purchase and Sale Agreement, then:

 

(1)           The Company shall return the Deposit to the Members who
delivered the Deposit and shall pay or reimburse each Member for all Pursuit
Costs actually incurred by such Member in good faith pursuant to the terms
hereof (except as provided in clauses (2) through (4) below) to the
extent set forth 

 

18

 

in an Approved Annual
Budget, or shall credit such amounts against such Member’s Initial Capital
Contribution as provided in Section 3.1(c) below, so that each
Member’s share of such costs shall be in proportion to their respective
Percentage Interests.  The Company’s
reimbursement to Investor for Pursuit Costs under this clause (1) shall
not exceed $150,000 less any amounts paid to Investor’s Affiliate under Section 3.1(b)(i)(1) of
the Sister Company LLC Agreement to reimburse the Investor’s Affiliate for its “Pursuit
Costs” (as defined in the Sister Company LLC Agreement).

 

(2)           Fees of legal counsel for the Members incurred in
connection with or related to the negotiation of this Agreement shall be borne
by each Member and shall not constitute “Pursuit Costs” which are reimbursable
by the Company.

 

(ii)           Election not to Close.  Notwithstanding the foregoing, either Member
(an “Opt-Out Member”) may elect
not to proceed with the acquisition of the Property if any of the following
events occurs (an “Opt-Out Event”):  (a) the terms and conditions of the
existing Mortgage Loan are not restructured in a manner reasonably acceptable
to such Member; or (b) a casualty or condemnation occurs with respect to
the Property or the Seller defaults under the Purchase and Sale Agreement, in
any such case, that would permit the purchaser under the Purchase and Sale
Agreement to terminate such agreement and receive the Deposit.  A Member must make such election, if at all,
by delivering written notice of its election not to proceed with the
acquisition of the Property to the other Member within ten (10) days after
the occurrence of the Opt-Out Event.

 

(1)           If the Opt-Out Event occurs and there is only one Opt-Out
Member, then (a) the Opt-Out Member shall withdraw from the Company and
the other Member shall be the sole Member of the Company, and (b) the
Opt-Out Member shall not be entitled to be reimbursed for any of its Pursuit
Costs or any portion of the Deposit funded by the Opt-Out Member (or its
Affiliate) unless the Company or an Affiliate of the remaining Member acquires
the Property, in which case, only the portion of the Deposit funded by the
Opt-Out Member shall be reimbursed to the Opt-Out Member, within five (5) days
after such acquisition.

 

(2)           If the Opt-Out Event occurs and both Members elect to be
Opt-Out Members, then each Member shall (a) be responsible for its Pursuit
Costs with no reimbursement obligation of the Company or any Member, and (b) fund
its share (based on Percentage Interests) of all dissolution costs of the
Company, including, without limitation, any costs incurred in pursuing a
release of any refundable portion of the Deposit under the Purchase and Sale
Agreement, provided all Members Approve pursuing such release.  If one Member elects to pursue the release of
all or any portion of the Deposit (the “Pursuit
Member”) and the other Member does not Approve of such pursuit, then
the Pursuit Member may, at its expense, pursue the release of the Deposit and
shall be entitled to receive all of the released Deposit.

 

19

 

(c)           Closing Contributions.  If neither Member elects to be an Opt-Out
Member, then on or before the Acquisition Date, the Members shall contribute in
cash (or be credited to the extent as provided in Section 3.1(a) or
Section 3.1(b)(i) with making cash contributions) to the
capital of the Company (the “Initial Capital
Contributions”) their pro rata share (based upon their relative
Percentage Interests) of the sum of (x) the amount reasonably necessary to
close the acquisition of the Property assuming the Deposit will be returned to
the Members who delivered the Deposit and taking into account the Financing,
closing costs, Pursuit Costs, other amounts payable or reimbursable by the
Company under Section 3.1(b)(i) and (y) a reasonable
amount of initial working capital and other Reserves (which shall include
anticipated capital expenditures to be made in the period following acquisition
of the Property as set forth in the initial Annual Budget for the Company
attached hereto as Schedule 1), as Approved by the Members.  Manager will deliver to the Members for Approval
a statement of sources and uses for the closing and a detailed estimate of the
Initial Capital Contributions.  Amounts
payable to the Company by a Member on the Acquisition Date may be set off from
amounts the Company owes to a Member and each Member shall receive credits for
payments made prior to the Acquisition Date for amounts paid to a third party
as set forth in such Approved closing statement.

 

(d)           Withdrawing Members.  Subject to the provisions of Section 3.1(c) and
this Section 3.1(d), if any Member (a “Withdrawing Member”) fails to timely make all or any portion
of its Initial Capital Contribution pursuant to this Section 3.1 (a
“Failed Contribution”), then one
or more of the other Members that is not an Affiliate of the Withdrawing Member
(the “Non -Withdrawing Member”)
may either pursue all of its rights and remedies at law and in equity, or elect
to make such Failed Contribution, in which case, as such Non -Withdrawing
Member’s sole and exclusive remedy with respect thereto (i) the
Withdrawing Member shall be automatically terminated as a Member for all
purposes hereunder (and if the Withdrawing Member is JMIR, JMIR Manager shall
be terminated as Manager) and (ii) the Company Interest of the Withdrawing
Member (and its share of the Deposit) shall be deemed forfeited in its entirety
and such Withdrawing Member shall cease to have any Company Interest or any
rights under this Agreement with respect thereto.  If a Withdrawing Member is terminated as a
Member and forfeits its Company Interest as provided above, such Withdrawing
Member (or its Affiliate, if applicable) shall be terminated as a Member of the
Sister Company and shall forfeit its “Company Interest” (as defined in the
Sister Company LLC Agreement) in the Sister Company (and if such Withdrawing
Member is JMIR, JMIR Manager shall be terminated as manager of the Sister
Company).  Each Member acknowledges and
agrees that the other Members would not be entering into this Agreement were it
not for (i) the Members agreeing to make the Initial Capital Contributions
provided for in this Section 3.1, and (ii) the remedy
provisions set forth above in this Section 3.1(d).  Each Member acknowledges and agrees that in
the event any Member fails to make its Initial Capital Contribution pursuant to
this Agreement, the other Members will suffer substantial damages and the
remedy provisions set forth above are fair, just and equitable in all respects.

 

20

 

SECTION 3.2                 Additional Capital
Contributions.

 

(a)           Making of Capital Calls.

 

(i)            At any time and from time to time following the
contribution of all Initial Capital Contributions, the Manager may determine
that additional funds (a “Shortfall”)
are reasonably required:

 

(1)           for costs contemplated by the initial Annual Budget
attached hereto as Schedule 1, including but not limited to, costs associated
with due diligence, costs of acquiring or renovating the Property (including
capital improvements), startup costs or costs associated with working capital,
but only to the extent not covered by the Initial Capital Contributions, as
adjusted, made pursuant to Section 3.1;

 

(2)           to meet the ongoing obligations, liabilities, expenses or
reasonable business needs of the Company in accordance with the then applicable
Annual Budget to the extent not covered by the Initial Capital Contributions;

 

(3)           to pay Necessary Expenses whether or not provided for in
the then applicable Annual Budget; or

 

(4)           to pay costs (other than Necessary Expenses) which are not
provided for in the then applicable Annual Budget, but which are Approved by
the Members.

 

In
the event of a Shortfall, the Manager may make a capital call (a “Capital Call”) to the Members to contribute
their pro rata share (based on their relative Percentage Interests) of such
Shortfall in accordance with the provisions of this Section 3.2,
provided that the aggregate amount of capital that each of the Members is
obligated to contribute to the Company pursuant to Section 3.1,
this Section 3.2(a) and Section 3.3 (including any
Capital Contributions deemed to be made by the Members but specifically
excluding Capital Contributions for Approved Expense Shortfalls that are made
after such Member has made aggregate Capital Contributions equal to such Member’s
Maximum Amount) shall not exceed such Member’s Maximum Amount in the aggregate.

 

(ii)           In addition, if at any time or from time to time following
the contribution of all Initial Capital Contributions, any Member determines
that additional funds are reasonably required to fund Approved Expenses (“Approved Expenses Shortfall”) and the
Manager has failed to make a Capital Call to fund such Approved Expenses under Section 3.2(a)(i)(2),
(3) or (4) above, then either Member may (but shall not be
obligated to) send written notice to the Manager of such Approved Expense Shortfall,
and if, within five (5) Business Days after receiving the notice, the
Manager fails to make a Capital Call to fund such Approved Expense Shortfall,
such Member may (but shall not be obligated to) make a Capital Call request
that the Members contribute their pro rata share (based on their relative
Percentage Interests) of such Approved Expense Shortfall.

 

(iii)          If a Member fails to timely make any Capital Contributions
required to fund a Shortfall under Section 3.2(a)(i) or an
Approved Expense Shortfall under Section 3.2(a)(ii) from the
date hereof until such Member has made aggregate 

 

21

 

Capital Contributions (other
than Preferred Contributions and Capital Contributions that are reimbursed to
such Member on or prior to the date of such Capital Contribution by
distributions under Section 3.3(b)) equal to its Maximum Amount, then any
Member who is not a Defaulting Member at such time may either pursue (a) all
of its rights and remedies at law and in equity (including, notwithstanding any
approval requirements in this Agreement to the contrary, causing the Company to
pursue such unfunded Capital Contributions) or (b) any remedies available
pursuant to Section 3.4. 
After a Member has made aggregate Capital Contributions (other than
Preferred Contributions and Capital Contributions that are reimbursed to such
Member on or prior to the date of such Capital Contribution by distributions
under Section 3.3(b)), in excess of its Maximum Amount, then any
additional Capital Contributions will be made pursuant to Section 3.2(a)(i)(2),(3) or
(4) or Section 3.2(a)(ii) only, and the sole remedies
for such Member’s failure to make such additional Capital Contributions to fund
an Approved Expenses Shortfall shall be limited to those set forth in Section 3.4.

 

(b)           Capital Notice. 
The Manager shall make the Capital Call by providing to each Member a
Notice (the “Capital Notice”) of the required
Capital Contributions no later than 10 Business Days before the date on which
such Capital Contribution is required to be made to the Company (the “Funding Deadline”). 
Each Capital Notice shall set forth:

 

(i)            the aggregate amount of the required Capital
Contribution;

 

(ii)           the amount of such required Capital Contribution to be made
by each Member (which amount shall be in proportion to the Members’ respective
Percentage Interests);

 

(iii)          the purpose(s) of such required Capital Contribution,
which purpose(s) will be classified into one of the four categories
described in Section 3.2(a) (and, if such Capital Call relates
to more than one of such four categories, the Capital Notice shall provide a
break down by dollar amount of each applicable category); and

 

(iv)          the Funding Deadline.

 

(c)           Funding Obligation. 
Upon receipt of a Capital Notice, each Member shall have the obligation
to make a Capital Contribution, in cash, by the Funding Deadline of its portion
of any Capital Contribution required pursuant to a Capital Call made in
accordance with Section 3.2(b).

 

SECTION 3.3                 Letters of Credit.

 

(a)           Letters of Credit. 
Following the Effective Date, Investor will cause a financial
institution acceptable to the Mortgagee to post for the benefit of the
Mortgagee (i) a letter of credit on behalf of Investor in the amount of
$1,000,000 in respect of Operating Capital (the “Operating
Capital LOC”), which Operating Capital LOC shall remain available
for draw down by the Mortgagee for two (2) years following the Effective
Date, and (ii) a letter of credit on behalf of Investor in the amount of $7,500,000
in respect of Property Improvement Capital (the “Capital
Improvement LOC” and, together with the Operating Capital LOC, the “Letters of Credit”), which Capital Improvement LOC shall
remain available for draw down by the 

 

22

 

Mortgagee until all capital improvement and
renovation obligations required under the Mortgage Loan have been
completed.  In lieu of Letters of Credit, Investor
may deposit cash in a collateral account established at a financial institution
acceptable to the Mortgagee for the benefit of Mortgagee (a “Cash Collateral Account”) which shall
remain available for draw down by the Mortgagee for the same period of the
applicable Letter of Credit as provided above.

 

(b)           Draw Downs on Letters of Credit or Cash Collateral
Account.  If the Mortgagee draws down
on either Letter of Credit (or if applicable, Cash Collateral Account), then:

 

(i)            The Investor shall deliver to Manager and JMIR written
notice thereof;

 

(ii)           the Manager shall provide to each Member Notice of such
draw down (the “Draw Down Notice”), which notice
shall specify the nature and amount of such draw down (the “Draw Down Amount”);

 

(iii)          the Investor shall be deemed to have made a Capital
Contribution to the Company (which shall be credited to Investor’s Capital
Account) of an amount equal to the Draw Down Amount, effective as of the date
the Mortgagee drew down on the Letter of Credit (or if applicable, Cash
Collateral Account);

 

(iv)          within 10 Business Days following JMIR’s receipt of the
Draw Down Notice, JMIR shall make a Capital Contribution to the Company (which
shall be credited to JMIR’s Capital Account), in cash, of an amount equal to
JMIR’s Percentage Interest (as of the date the Mortgagee drew down on the
Letter of Credit or Cash Collateral Account, as applicable) of the Draw Down
Amount; and

 

(v)           upon receipt of JMIR’s Capital Contribution pursuant to Section 3.3(b)(iii),
the Company shall promptly make a distribution to Investor (which shall be
debited to Investor’s Capital Account) in an amount equal to such JMIR Capital
Contribution.

 

SECTION 3.4                 Default; Remedy.

 

(a)           If a Member (in such capacity, “Defaulting Member”) fails to fully and timely make a Capital
Contribution required of it by this Agreement other than pursuant to Section 3.1(c) where
the remedies set forth in Section 3.1(d) shall be the
exclusive remedies (a “Capital Default”, and any unfunded
amounts being referred to as the “Contribution Shortfall”), then the
other Member (so long as such other Member has fully and timely made its
required Capital Contributions pursuant to this Agreement) (in such capacity,
the “Contributing
Member”), may, but shall not be obligated to, make a Capital
Contribution to the Company in an amount equal to all or any portion of the
Contribution Shortfall (a “Preferred
Contribution”); provided, if JMIR fails to timely make any Capital
Contribution required under Section 3.3(b)(iii), then Investor will
be deemed to have made a Preferred Contribution equal to the amount that JMIR
failed to contribute under Section 3.3(b)(iii).  In such an event, the Contributing Member may
elect by written notice given within five (5) Business Days of making the
Preferred Contribution either (i) to treat the entire amount contributed
by the Contributing 

 

23

 

Member (including both the Contributing Member’s
Capital Contribution and its Preferred Contribution) as a Priority Capital
Contribution (a “Priority Capital
Contribution”) by such Contributing Member in accordance with Section 3.4(b) below,
or (ii) to treat the Preferred Contribution as a regular Capital
Contribution (the “Preferred Regular
Contribution”) in accordance with Section 3.4(c) below.  With respect to Section 3.3(b) only,
if JMIR fails to timely make any Capital Contribution required under Section 3.3(b)(iii),
then, Investor may either (x) pursue its rights under clause (i) or
clause (ii) of this Section 3.4(a), or (y) pursue all of
its rights and remedies at law and in equity to recover the amount of the
Investor’s deemed Preferred Contribution.

 

(b)           To the extent any Contributing Member elects to treat its
own Capital Contribution and such Preferred Contribution as a Priority Capital
Contribution, such Priority Capital Contribution shall be returned on a
priority basis together with a Priority Preferred Return thereon as provided in
Section 5.3(a).

 

(c)           If a Contributing Member elects to treat a Preferred
Contribution as a Preferred Regular Contribution, then the Percentage Interest of
the Contributing Member shall be adjusted to equal the percentage equivalent of
the quotient determined by dividing:

 

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

 

(1)           the sum of (I) one hundred percent (100%) of the
aggregate Capital Contributions (excluding Priority Capital Contributions and
Preferred Regular Contributions) then or theretofore made by such Member to the
Company, plus (II) one hundred percent (100%) of the aggregate “Capital
Contributions” (excluding “Priority Capital Contributions” and “Preferred
Regular Contributions”) (as each of those terms is defined in the Sister
Company LLC Agreement) then or theretofore made by such Member or its Affiliate
(if applicable) to the Sister Company, plus (III) two hundred percent
(200%) of the Preferred Regular Contributions then or theretofore made by such
Member to the Company, plus (IV) two hundred percent (200%) of the “Preferred
Regular Contributions” (as defined in the Sister Company LLC Agreement) then or
theretofore made by such Member or its Affiliate (if applicable) to the Sister
Company; minus

 

(2)           the sum of (I) the Preferred Regular Contributions
then or theretofore made by the other Member to the Company, plus (II) the
“Preferred Regular Contributions” (as defined in the Sister Company LLC
Agreement) then or theretofore made by the other Member or its Affiliate (if
applicable) to the Sister Company; by

 

(ii)           the sum of (I) one hundred percent (100%) of the
aggregate Capital Contributions (including, without limitation, Preferred
Regular Contributions but excluding Priority Capital Contributions) then or
theretofore made by all of the Members to the Company, plus (II) one
hundred percent (100%) of the aggregate “Capital Contributions” (including,
without limitation, “Preferred Regular Contributions” but excluding “Priority
Capital Contributions”) (as each of those terms is defined in the Sister

 

24

 

 

Company LLC Agreement) then
or theretofore made by all of the members of the Sister Company to the Sister
Company.

 

and
the Percentage Interest of the Defaulting Member shall be reduced by the
percentage necessary to insure that the Percentage Interests add up to
100%.  At the same time, if JMIR is the
Defaulting Member, the Promote Percentage of JMIR shall be decreased in the
same proportion as the Percentage Interest of JMIR was adjusted pursuant to the
foregoing provisions (e.g., if JMIR’s Percentage Interest is reduced by half or
50%, then the Promote Percentage of JMIR  will
also be reduced by half or 50%), and the percentage share of Cash Flow of the
Members under Sections 5.3(d)(i) and 5.3(e)(i) will be
correspondingly increased.  In addition,
an amount of Unrecovered Capital Contributions shall be treated as having been
transferred from the Defaulting Member to the Contributing Member; the amount
so transferred shall equal the amount necessary to cause each Member to have
Unrecovered Capital Contributions in proportion to its adjusted Percentage
Interest after giving effect to such transfer. 
The Capital Accounts shall be adjusted accordingly.  At the same time as any adjustments are made
to “Percentage Interests” or “Promote Percentages” or to percentage share of “Cash
Flow” (as those terms are defined in the Sister Company LLC Agreement) under Section
3.4(c) of the Sister Company LLC Agreement, the same proportional
adjustments shall be made to Percentage Interests, Promote Percentages, or
percentage share of Cash Flow, as applicable, under this Agreement so that
those percentages are the same under both this Agreement and the Sister Company
LLC Agreement.

 

Any
Defaulting Member shall have until seventy-five (75) days after the Capital
Default in order to cure such Capital Default by depositing into an account
designated by the Contributing Member an amount equal to the amount of the
Contribution Shortfall together with interest thereon at a fifteen percent
(15%) per annum rate from the due date established by the Manager until such
amount has been so deposited in full into such account, at which point such
amount shall promptly be distributed to the Contributing Member if and to the
extent the Contributing Member made a Preferred Regular Contribution on account
of the Contribution Shortfall.  If the
Defaulting Member makes such deposits as aforesaid, any adjustment to
Percentage Interest, dilution to Promote Percentages (and the distributions
affected thereby) and transfers of Unrecovered Capital Contributions caused by
its failure to make the applicable Capital Contribution shall be unwound, and
the payment, dilution and transfers described above shall not be reflected in
the Members’ Capital Accounts.

 

(d)           If a Preferred Contribution is not made, or if a Preferred
Contribution is made only with respect to a portion of the Contribution
Shortfall (any remaining unfunded amount of the Contribution Shortfall being
referred to as the “Unfunded Contribution
Shortfall”), then the Defaulting Member shall nevertheless remain
obligated to make a Capital Contribution equal to the Unfunded Contribution
Shortfall upon demand by the Contributing Member, provided that in no event
shall either Member (i) have recourse liability for any portion of a Capital
Contribution that would cause the aggregate Capital Contributions (excluding
Preferred Contributions and Capital Contributions reimbursed to such Member by
distributions under Section 3.3(b)) to exceed such Member’s Maximum Amount, or
(ii) be required to contribute any portion of a Capital Contribution (other
than for Approved Expenses) that would cause the aggregate Capital
Contributions (excluding Preferred Contributions and Capital 

 

25

 

Contributions reimbursed to such Member by
distributions under Section 3.3(b)) to exceed such Member’s Maximum Amount.

 

(e)           If the Contributing Member does not elect to make any
Preferred Contribution within 10 days after the date the Capital Default in
question occurs, the Contributing Member may elect, within 20 days after the
date the Capital Default in question occurs, to have the Company return the
Capital Contribution advanced by the Contributing Member pursuant to the
Capital Call in respect of which the Defaulting Member defaulted and, promptly
following such election the Company shall return such Capital Contribution to
the Contributing Member.

 

(f)            Each Member acknowledges and agrees that the other
Members would not be entering into this Agreement were it not for (i) the Members
agreeing to make the Capital Contributions provided for in this Section 3.4,
and (ii) the remedy provisions set forth above in this Section 3.4.  Each Member acknowledges and agrees that in
the event any Member fails to make its Capital Contributions pursuant to this
Agreement, the other Members will suffer substantial damages and the remedy
provisions set forth above are fair, just and equitable in all respects.

 

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

 

ARTICLE IV

 

CAPITAL ACCOUNTS

 

SECTION 4.1                 Capital Accounts.  The Company shall establish and maintain a
separate Capital Account for each Member in accordance with the following
provisions:

 

(a)           To each Member’s Capital Account there shall be credited
such Member’s Capital Contributions, such Member’s allocable share of Profits,
and any other items in the nature of income or gain that are specially
allocated to such Member under this Agreement, and the amount of any Company
liabilities that are assumed by such Member in accordance with the terms hereof
(other than liabilities that are secured by any Company Assets distributed to
such Member).

 

(b)           To each Member’s Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any Company Assets distributed
to such Member pursuant to any provision of this Agreement (net of liabilities
secured by such distributed property that such Member is considered to assume
or take subject to under Code Section 752), such Member’s allocable share of
Losses, and any other items in the nature of expenses or losses that are
specially allocated to such Member under this Agreement, and the amount of any
liabilities of such Member that are assumed by the Company (other than
liabilities that are secured by any property contributed by such Member to the
Company).

 

(c)           In the event any Company Interest is Transferred in
accordance with the terms of this Agreement, the transferee shall succeed to
the Capital Account of the transferor to the extent it relates to the
Transferred Company Interest.

 

26

 

(d)           In determining the amount of any liability for purposes of
paragraphs (a) and (b) above, there shall be taken into account Code Section
752(c) and the Treasury Regulations promulgated thereunder, and any other
applicable provisions of the Code and Regulations.

 

(e)           The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to
comply with Treasury Regulations Section 1.704-1(b) and 1.704-2, and shall be
interpreted and applied in a manner consistent with such Regulations.

 

In the event the Investor shall determine that it
is prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto are computed in order to comply with such Regulations, the
Investor may make such modification, provided that it does not have a material
adverse effect on the amounts distributable to any Member pursuant to Section
11.2 of this Agreement upon the dissolution of the Company.  The Investor also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital reflected on
the Company’s balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q),
and (ii) make any appropriate modifications in the event unanticipated
events might otherwise cause this Agreement not to comply with Regulations
Section 1.704-1(b) or Section 1.704-2.

 

SECTION 4.2                 Return of Capital.  No Member shall be liable for the return of
the Capital Contributions (or any portion thereof) of any other Member, it
being expressly understood that any such return shall be made solely from the
Company Assets.  No Member shall be
required to pay to the Company or to any other Member any deficit in its
Capital Account upon dissolution of the Company or otherwise, and no Member
shall be entitled to withdraw any part of its Capital Contributions or Capital
Account, to receive interest on its Capital Contributions or Capital Account or
to receive any distributions from the Company, except as expressly provided for
in this Agreement or under any non-waivable provision of the Delaware Act as
then in effect (to the extent such non-waivable provision of the Delaware Act
overrides or supplements the provisions of this Agreement).

 

SECTION 4.3                 Liability of Members.  Except as otherwise required by any
non-waivable provision of the Delaware Act or other applicable law or pursuant
to any written agreement or instrument: 
(a) no Member (in its capacity as such, absent a separate written
agreement to the contrary) shall be personally liable in any manner whatsoever
for any debt, liability or other obligation of the Company, whether such debt,
liability or other obligation arises in contract, tort, or otherwise; and
(b) no Member (in its capacity as such, absent a separate written
agreement to the contrary) shall in any event have any liability whatsoever in
excess of the following (without duplication) (i) its share of any assets
and undistributed profits of the Company, and (ii) the amount of any
unconditional obligation of such Member to make (A) Capital Contributions
to the Company pursuant to this Agreement or (B) any other payment
expressly required by this Agreement.

 

27

 

ARTICLE V

 

DISTRIBUTIONS

 

SECTION 5.1                 Distributions Generally.  Cash Flow shall be distributed to the Members
as soon as reasonably practical (but no less often than monthly, if
appropriate), in accordance with the provisions of Article V.

 

SECTION 5.2                 Direction of Distribution
Proceeds.  All distributions made to
a Member pursuant to this Agreement shall be made via wire transfer pursuant to
instructions provided by such Member to the Manager from time to time in
writing.

 

SECTION 5.3                 Priority of Cash Flow
Distributions.  Subject to the other
provisions of this Article V (including Sections 5.4 and 5.5),
all distributions of Cash Flow in respect of a particular Fiscal Year shall be
made as soon as reasonably practical (but no less often than monthly, if
appropriate) in the following order and priority:

 

(a)           First, 100% to
the Members, pro rata in proportion to the sum of the Members’ relative amounts
of Unrecovered Priority Contributions and accrued and unpaid Priority Preferred
Return thereon as of the date of such distribution, until the amount
distributed to each such Member under this Section 5.3(a) equals the sum
of such Member’s Unrecovered Priority Contributions and accrued and unpaid
Priority Preferred Return thereon at such time (amounts distributed under this Section 5.3(a)
will be distributed in the reverse order in which the Unrecovered Priority Contributions
were made and shall be applied first to the Priority Preferred Return and then
to Unrecovered Priority Contributions — that is, the most recent Unrecovered
Priority Contributions and the Priority Preferred Return thereon will be
returned and paid first to the Member having made such most recent Unrecovered
Priority Contribution and then the next most recent Unrecovered Priority
Contribution and the Priority Preferred Return thereon will be returned and
paid to the Member having made such next most recent Unrecovered Priority
Contribution, etc.);

 

(b)           Second, 100% to
the Members, pro rata in proportion to the Members’ relative amounts of accrued
and unpaid Preferred Return as of the date of such distribution, until the
amount distributed to each such Member under this Section 5.3(b) and
such Member’s pro rata share (based on Percentage Interests on the date such
Hawaii Tax Payments are made) of Hawaii Tax Payments made by the Company equals
such Member’s accrued and unpaid Preferred Return at such time;

 

(c)           Third, 100% to
Members, pro rata in proportion to the Members’ relative amounts of Unrecovered
Capital Contributions as of the date of such distribution, until the amount
distributed to each such Member under this Section 5.3(c) equals such
Member’s Unrecovered Capital Contributions at such time;

 

(d)           Fourth, subject
to Section 3.4(c), (i) 80% to the Members in proportion to their
Percentage Interests and (ii) 20% to JMIR, but no distributions shall be
made pursuant to this Section 5.3(d)(ii) unless aggregate (1)
distributions to the Members pursuant to Section 5.3(a), Section
5.3(b), Section 5.3(c) and clause (i) of this Section
5.3(d) (or pursuant to those 

 

28

 

sections by operation of Section 11.2(c)) and
(2) Hawaii Tax Payments made by the Company results in the IRR on the aggregate
Capital Contributions equaling 15% or more; and

 

(e)           Thereafter,
subject to Section 3.4(c) (i) 70% to the Members in proportion to
their Percentage Interests and (ii) 30% to JMIR.

 

SECTION 5.4                 Special Distributions.

 

From
and after the time JMIR Manager shall have been terminated as the Manager under
this Agreement or under the Sister Company LLC Agreement due to a For Cause
Event (or a “For Cause Event” under the Sister Company LLC Agreement) or an
Event of Default (or an “Event of Default” under the Sister Company LLC
Agreement) by JMIR Manager (unless such For Cause Event arises in connection
with the death, disability or incompetency of Gregory W. Clay, John J. Moores,
Sr. or John C. Kratzer), Cash Flow otherwise distributable under Section 5.3
shall not be distributed as provided in such Section but rather shall be
distributed as provided pursuant to this Section 5.4, and, except as
provided in Section 5.5, the Company shall, as soon as reasonably
practical (but no less often than monthly, if appropriate), make distributions
of such Cash Flow (i) first, as provided in Section 5.3(a) and
(ii) second, to the Members in proportion to their respective Percentage
Interests.

 

SECTION 5.5                 Distributions Upon
Liquidation.  (a) Notwithstanding the provisions of this Article
V, distributions made in conjunction with the dissolution and final
liquidation of the Company shall be applied or distributed as provided in Article
XI.  The proceeds of sale from such
liquidation and other assets of the Company distributable to the Members under
Section 11.2(c)(iv) shall be distributed, not later than the latest time
specified for such distributions pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2)
to the Members as provided in Section 5.4 above.

 

(b)           With the approval of each Member, a pro rata portion of
the distributions that would otherwise be made to the Members under the
preceding provisions of this Section 5.5 may be distributed to a
trust reasonably established, for a reasonable period of time, for the benefit
of the Members for the purposes of liquidating Company assets, collecting
amounts owed to the Company, and paying any contingent or unforeseen
liabilities or obligations of the Company arising out of or in connection with
the Company.  The assets of any trust
established under this Section 5.5 will be distributed to the
Members from time to time by the trustee of the trust in the same proportions
as the amount would otherwise have been distributed by the Company to the
Members under this Agreement.

 

SECTION 5.6                 Limitations on Distributions. 
Notwithstanding any provision to the contrary contained in this
Agreement, neither the Company nor the Manager, on behalf of the Company, shall
be required to make a distribution to any Person in violation of the Delaware
Act or other applicable law.

 

SECTION 5.7                 Tax Payments.  To the extent that any taxes or withholding
taxes are due on behalf of or with respect to any Member and the Company is
required by law to withhold or to make such tax payments (“Tax Payments”),
the Company shall withhold such amounts and make such Tax Payments as so
required.  Each Tax Payment made on
behalf of or with 

 

29

 

respect to a Member shall be deemed a distribution
of Cash Flow in such amount to such Member, and any such deemed distribution
shall be deemed to have been paid to the Member on the earlier of the date when
the corresponding Tax Payment is made by the Company or the date that the
distributions, if any, giving rise to the obligation to make such Tax Payment
were made.  If
the Manager determines that the Company has insufficient liquid assets to
satisfy the Tax Payment applicable to a Member, the Manager shall notify such Member as to the extent of the amount of such
Tax Payment and such Member shall pay the Company such amount within
5 days of demand (and in no event shall such payment constitute a Capital
Contribution).  Any failure to timely make
such payment shall result in a fully recourse loan bearing interest at 15% per
annum until paid.  Each Member
will furnish the Manager  with such
information as may be requested by the Manager  from time to time to determine whether any Tax Payments are
required for such Member, and each Member will promptly notify the Manager  if such Member determines at any time
that it is subject to Tax Payments.

 

ARTICLE VI

 

ALLOCATION OF PROFITS AND
LOSSES

 

SECTION 6.1                 General Allocation of  Profits and Losses.

 

(a)           Generally. 
Profits and Losses shall be determined and allocated with respect to
each Fiscal Year or other period of the Company (i) as of the end of such
Fiscal Year or other period, (ii) at such times as the Gross Asset Value
of any Company Asset is adjusted pursuant to the definition thereof, and
(iii) at such other times as may be required or, in the Manager’s good
faith discretion, permitted pursuant to this Agreement or otherwise under the
Code.  Subject to the other provisions of
this Agreement, an allocation to a Member of a share of Profits or Losses shall
be treated as an allocation of the same share of each item of income, gain,
loss or deduction that is taken into account in computing Profits or Losses.

 

(b)           Allocation of Profits and Losses.  Except as otherwise required in this Article
VI, for purposes of adjusting the Capital Accounts of the Members, the
Profits, Losses and, to the extent necessary, individual items of income, gain,
loss, credit and deduction for any Fiscal Year or other period shall be
allocated among the Members in a manner such that the Adjusted Capital Account
of each Member, immediately after making such allocation, is, as nearly as
possible, equal (proportionately) to the distributions that would be made to
such member if the Company were dissolved, its affairs wound up and its assets
sold for cash equal to their Gross Asset Value, all Company liabilities were
satisfied (limited with respect to each nonrecourse liability to the Gross
Asset Value of the asset securing such liability), and the net assets of the
Company were distributed in accordance with Section 5.3 to the Members
immediately after making such allocation. 
For the avoidance of doubt, the hypothetical sale of the Company’s
assets in the preceding sentence for cash equal to their Gross Asset Value
shall not in and of itself create the need to adjust the Gross Asset Value of
the Company’s Assets.

 

SECTION 6.2                 Regulatory Allocations. 
Notwithstanding the foregoing provisions of this Article VI, the
following special allocations shall be made in the following order of priority:

 

30

 

(a)           If there is a net decrease in Company Minimum Gain during
a Company taxable year, then each Member shall be allocated items of Company income
and gain for such taxable year (and, if necessary, for subsequent years) in an
amount equal to such Member’s share of the net decrease in Company Minimum
Gain, determined in accordance with Treasury Regulations
Section 1.704-2(g)(2).  This Section
6.2(a) is intended to comply with the minimum gain chargeback requirement
of Treasury Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.

 

(b)           If there is a net decrease in Member Minimum Gain
attributable to a Member Nonrecourse Debt during any Company taxable year, each
Member who has a share of the Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Treasury Regulations
Section 1.704-2(i)(5), shall be specially allocated items of Company
income and gain for such taxable year (and, if necessary, subsequent years) in
an amount equal to such Member’s share of the net decrease in Member Minimum
Gain attributable to such Member Nonrecourse Debt, determined in a manner
consistent with the provisions of Regulations Section 1.704-2(g)(2).  This Section 6.2(b) is intended
to comply with the partner nonrecourse debt minimum gain chargeback requirement
of Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.

 

(c)           If any Member unexpectedly receives an adjustment,
allocation, or distribution of the type contemplated by Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5)
or (6), items of income and gain
shall be allocated to all such Members (in proportion to the amounts of their
respective Adjusted Capital Account Deficits) in an amount and manner
sufficient to eliminate the Adjusted Capital Account Deficit of such Member as
quickly as possible.  It is intended that
this Section 6.2(c) qualify and be construed as a “qualified income
offset” within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(d).

 

(d)           If the allocation of Loss (or items of loss or deduction)
to a Member as provided in Section 6.1 would create or increase an
Adjusted Capital Account Deficit, there shall be allocated to such Member only
that amount of Loss as will not create or increase an Adjusted Capital Account
Deficit.  The Loss that would, absent the
application of the preceding sentence, otherwise be allocated to such Member
shall be allocated to the other Members in accordance with their relative
Percentage Interests, subject to the limitations of this Section 6.2(d).

 

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

 

31

 

(f)            The Nonrecourse Deductions for each taxable year of the
Company shall be allocated to the Members in accordance with their respective
Percentage Interests.

 

(g)           The Member Nonrecourse Deductions shall be allocated each
year to the Member that bears the economic risk of loss (within the meaning of
Treasury Regulations Section 1.752-2) for the Member Nonrecourse Debt to
which such Member Nonrecourse Deductions are attributable.

 

(h)           The allocations set forth in Sections 6.2(a)
through (g), inclusive, (the “Regulatory Allocations”)
are intended to comply with certain requirements of Treasury Regulations
Sections 1.704-1(b) and 1.704-2(i). 
Notwithstanding the provisions of Section 6.1(b), the
Regulatory Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Members so that, to the extent
possible, the net amount of such allocations of other items and the Regulatory
Allocations to each Member shall be equal to the net amount that would have
been allocated to each such Member if the Regulatory Allocations had not
occurred.

 

SECTION 6.3                 Tax Allocations.

 

(a)           Except as provided in Section 6.3(b), for income
tax purposes under the Code and the Treasury Regulations each Company item of
income, gain, loss and deduction shall be allocated between the Members as its
correlative item of “book” income, gain, loss or deduction is allocated pursuant
to this Article VI.

 

(b)           Tax items with respect to Company Assets that are
contributed to the Company with a Gross Asset Value that varies from its basis
in the hands of the contributing Member immediately preceding the date of
contribution shall be allocated between the Members for income tax purposes
pursuant to Regulations promulgated under Code Section 704(c) so as to
take into account such variation.  The
Company shall account for such variation under any method approved under Code
Section 704(c) and the applicable Regulations as chosen by the Tax Matters
Member.  If the Gross Asset Value of any
Company Asset is adjusted pursuant to the definition of “Gross Asset Value” in Article
II, subsequent allocations of income, gain, loss and deduction with respect
to such Company Asset shall take account of any variation between the adjusted
basis of such Company Asset for federal income tax purposes and its Gross Asset
Value in the same manner as under Code Section 704(c) and the Treasury
Regulations promulgated thereunder under any method approved under Code
Section 704(c) and the applicable Treasury Regulations as chosen by the
Tax Matters Member.  Allocations pursuant
to this Section 6.3(b) are solely for purposes of federal, state
and local taxes and shall not affect, or in any way be taken into account in
computing, any Member’s Capital Account or share of Profits, Losses and any
other items or distributions pursuant to any provision of this Agreement.

 

SECTION 6.4                 Other Provisions.

 

(a)           For any Fiscal Year or other period during which any part
of a Company Interest is transferred between the Members or to another Person,
the portion of the Profits, Losses and other items of income, gain, loss,
deduction and credit that are allocable with respect to such part of a Company
Interest shall be apportioned between the transferor and the transferee 

 

32

 

under any method allowed pursuant to
Section 706 of the Code and the applicable Treasury Regulations as determined
by the Manager.

 

(b)           In the event that the Code or any Treasury Regulations
require allocations of items of income, gain, loss, deduction or credit
different from those set forth in this Article VI, the Investor  is hereby authorized to make new allocations
in reliance on the Code and such Treasury Regulations, and no such new
allocation shall give rise to any claim or cause of action by any Member.

 

(c)           The Members acknowledge and are aware of the income tax
consequences of the allocations made by this Article VI and hereby agree
to be bound by the provisions of this Article VI in reporting their
shares of Profits, Losses and other items of income, gain, loss, deduction and
credit for federal, state and local income tax purposes.

 

(d)           For purposes of determining a Member’s proportional share
of the Company’s “excess nonrecourse liabilities” within the meaning of
Treasury Regulations Section 1.752-3(a)(3), each Member’s interest in
Profits shall be such Member’s Percentage Interest.

 

(e)           All matters concerning the allocations and other
determinations provided for in this Article VI and any accounting
procedures not expressly provided for in this Agreement shall be determined by
the Investor in a manner consistent with the terms and intent of this Agreement.

 

ARTICLE VII

 

MANAGEMENT AND OPERATIONS

 

SECTION 7.1                 Designation and General
Authority of Manager.  The Members
have designated and hereby appoint JMIR-Project Manager LLC, a Delaware limited
liability company (“JMIR Manager”),
as the Manager of the Company.  Except to
the extent expressly limited by the provisions of Section 7.4 or
otherwise in this Agreement, the business and affairs of the Company shall be
vested in and controlled by the Manager, and the Manager shall have all powers
necessary, convenient or appropriate to carry out the purposes, conduct the
business and exercise the powers of the Company.  The Members and Company hereby delegate to
the Manager the power and authority to act on behalf of and in the name of the
Company, without obtaining the consent of or consulting with any other Person
(except as provided in Section 7.4 hereof or elsewhere in this
Agreement), to take any and all actions (which the Company has authority to
perform) on behalf of the Company set forth in this Agreement, including in Section 1.5.  The Members, by mutual Approval, may from
time to time designate officers of the Company and delegate to such officers
such authority and duties as the Manager may deem advisable so long as in
compliance with this Agreement.  Unless
the Manager directs otherwise in writing, if the title assigned to any officer
is one commonly used for officers of a business corporation formed under the
Delaware General Corporation Law, the assignment of such title shall constitute
the delegation to such person of the authorities and duties that are normally
associated with that office.  As of the
date of this Agreement, the officers of the Company shall be as set forth on
Schedule 2.

 

33

 

SECTION
7.2                 Duties of Manager.

 

(a)           The Manager shall, as a Company expense to the extent
provided in Section 7.6(a), use commercially reasonable efforts to
implement the Annual Budget and shall otherwise perform those duties set forth
below, and shall have the authority to perform the duties described in this Section
7.2 or as otherwise specifically set forth herein, in each instance subject
to the requirement of receiving the prior approval of Investor, if and when
required by the terms hereof. 
Specifically, the Manager shall:

 

(i)            subject to there being adequate Company funds therefor,
conduct the business of the Company on a day-to-day basis, and use diligent
efforts to cause such operations to be conducted in accordance with the then
applicable Annual Budget;

 

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

 

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

 

Subject to any right provided to the Manager to be
reimbursed for Company expenses pursuant to Section 7.6(a), and subject
further to the fees authorized pursuant to the provisions of Section 7.6(c),
the Manager shall not otherwise be entitled to receive any fees or other
compensation in respect of any duties or services, and will not receive
reimbursement for compensation payable to any of its employees or other direct
or indirect overhead which may be attributable to such duties and services.

 

(b)           Notwithstanding anything to the contrary contained in Section
7.4(a), if at the beginning of any calendar year the Annual Budget or any
item or portion thereof shall not have been Approved by Investor, then:

 

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

 

(ii)           with respect to the Annual Budget, the Manager shall be
entitled to, and, subject to there being adequate Company funds therefor, shall
(to the extent necessary), expend, in respect of non-capital, recurring
expenses in any month of the then-current calendar year, an amount equal to the
budgeted amount for the corresponding month of the immediately preceding
calendar year, as set forth on the immediately preceding calendar year Annual
Budget after giving effect to any dispositions or other material changes to the
Company Assets during the prior or current

 

34

 

year; provided, however,
that if any contract Approved by Investor or entered into pursuant to the
provisions hereof provides for an automatic increase in costs thereunder after
the beginning of the then current calendar year, then the Manager shall be entitled
to expend the amount of such increase; and

 

(iii)          the Manager shall be entitled to, and, subject to there
being adequate Company funds therefor, shall, expend funds in respect of Debt
Service Payments on the Company’s or any Subsidiary’s Financing (including the
expense of curing any defaults thereunder), utilities, real estate taxes and
assessments, insurance premiums or emergency repairs, regardless of whether the
Annual Budget has been approved or whether such expenditures exceed the amounts
provided for in the applicable Annual Budget (all of the foregoing described in
this clause (iii), collectively, “Necessary
Expenses”).

 

(c)           Subject to the availability of adequate funds therefor
from Revenues from operations, Capital Contributions or other sources, and
subject further, in any event, to the provisions of Section 7.4 and any
other relevant provisions hereof, in addition to and without limiting any other
duties set forth in this Agreement, the Manager shall, as a Company expense to
the extent provided in Section 7.6(a):

 

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

 

(ii)           take all proper and necessary actions reasonably required
to cause the Company and the Subsidiaries at all times (A) to perform and
comply with the terms and provisions (including without limitation, any
provisions requiring the expenditure of funds by the Company) of the
Transaction Documents and any other mortgage, lease, or other contract,
instrument or agreement to which the Company or any Subsidiary is a party or is
bound, or which affects all or any portion of the Company Assets or the
operation thereof and (B) to enforce the terms of such agreements against third
parties unless in either case of (A) or (B) such failure to perform, comply or
enforce arises at the express written direction of Investor or with the prior
Approval of Investor;

 

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

 

(iv)          deliver to the other Members promptly upon the receipt or
sending thereof, copies of all material notices, reports and communications
(other than routine, usual and customary notices and other standard
communications) between the Company and the Subsidiaries and any lender,
manager, governmental agencies, franchisor, neighboring property owners,
community groups and other relevant third parties affecting all or any portion
of any Company Assets, or any of such other parties, which relates to 

 

35

 

 

any existing or pending
default thereunder or to any financial or operational information required by
such Person;

 

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

 

(vi)          if and to the extent the Manager delegates to any loan
servicer or property manager (previously Approved by Investor) or subcontracts
with any third party or Affiliate for the performance of any of the services to
be performed by the Manager, supervise and oversee the performance of the
services performed by such third parties or Affiliates and use commercially
reasonable efforts to cause the same to be performed in the manner required
hereunder; and

 

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

 

(viii)        to implement all decisions (including
Major Decisions) approved by the Members 
(to the extent such approval is required hereunder);

 

(ix)           to negotiate and execute all Financing Documents in
connection with a Financing, and to negotiate and execute such documents as
necessary to prepay in whole or in part, refinance, recast, increase, modify or
extend any such Financing affecting the Company or the Company Assets, provided
that no guaranties or credit enhancements can be required from any Member or
its Affiliates without such party’s consent (however, in connection with the
assumption of the existing Mortgage Loan, (a) Investor or an Affiliate
thereof acceptable to the lender of such Mortgage Loan shall execute a
non-recourse carve-out guaranty agreement required by such lender in a form
reasonably approved by Investor and (b) the Guaranty Sharing Agreement
shall be executed);

 

(x)            to hold assets of the Company in the name of one or more
trustees, nominees, other agents, or directly or indirectly through one or more
entities owned in whole or in part, directly or indirectly, by the Company,
including through Subsidiaries;

 

(xi)           to open and maintain separate bank accounts for funds of
the Company and its Subsidiaries in the name of the Company (or its
Subsidiaries) and designate the Persons authorized on behalf of the Company (or
its Subsidiaries) to make deposits therein (including all receipts from
operations of the Company Assets) and withdrawals therefrom, and not commingle
any funds in such accounts with any other funds or accounts of Manager;

 

(xii)          to obtain and maintain such insurance as the Manager deems
appropriate or as required by Investor to protect the Company Assets and the
Indemnified Parties and otherwise as may be necessary to satisfy the Annual
Budget and any contractual undertakings of the Company and pay all non disputed
taxes, assessments, 

 

36

 

charges and fees payable in
connection with the ownership, use and occupancy of the Company Assets;

 

(xiii)         to establish and maintain Reserves
identified in the Annual Budget (or as otherwise approved by the Members),
including to fund improvements and leasing costs and non-recurring Capital
Expenditures and to meet indemnity and other obligations, and to fund such
Reserves with Company Assets or borrowed funds (or as otherwise approved by the
Members); and

 

(xiv)        to take any other action in furtherance of the Company’s
stated purpose under this Agreement unless consent of one or more of the
Members is otherwise expressly required hereunder and has not been given.

 

(d)           Notwithstanding anything to the contrary contained in this
Agreement, Investor shall have the absolute right, power and authority at any
time upon and after (i) the occurrence of any For Cause Event (as set
forth in Section 7.2(e) below), (ii) the occurrence of any “For
Cause Event” (as defined in the Sister Company LLC Agreement), (iii) the
occurrence of any Event of Default (as set forth in Article XII) or (iv)
the occurrence of any “Event of Default” (as defined in the Sister Company LLC
Agreement) by JMIR or JMIR Manager to remove JMIR Manager as the Manager and
appoint or designate a replacement.

 

(e)           Upon and after the occurrence of any For Cause Event as
described in this Section 7.2(e) or Section 7.2(e) of the Sister
Company LLC Agreement or any Event of Default with respect to JMIR or JMIR
Manager under this Agreement or the Sister Company LLC Agreement, Investor
shall have the right in its sole and absolute discretion to terminate JMIR
Manager as the Manager by the delivery of written notice and, upon any such
termination (i) Investor may designate a successor Manager (which may be
itself or an Affiliate of Investor), (ii) if such For Cause Event did not
arise in connection with the death, disability or incompentency of Gregory W.
Clay, John J. Moores, Sr. or John C. Kratzer, any distributions to the Members
under Section 5.3 shall no longer be made under Section 5.3
hereof and from that time forward shall be made instead under Section 5.4
hereof, and (iii) Investor may deliver (I) a Put Notice under Section
10.1(a), or (II) an Offer Notice under Section 10.2(a) and,
notwithstanding anything to the contrary contained in this Agreement, Investor
shall have the unilateral right and authority to make all decisions on behalf
of the Company and cause the Company to take any and all actions which
Investor, in its sole discretion, may determine.  For the purposes of this Agreement, a “For Cause Event” shall mean any of the
following:

 

(i)            any actions or omissions on the part of JMIR or JMIR
Manager or any representative of either entity, or by any other Person at the
explicit direction of any of the foregoing which amounts to fraud, willful
misconduct or gross negligence; provided,
however, that such event shall
not constitute a “For Cause Event” if (I) such event is caused solely by a
single individual who did not act at the direction of JMIR or JMIR Manager,
(II) JMIR or JMIR Manager removes such Person from performing any services
for the Company and its Subsidiaries, and (III) JMIR or JMIR Manager
reimburses the Company for any actual damages incurred by the Company or its
Subsidiaries as a result of such action or omission undertaken by JMIR’s or
JMIR 

 

37

 

Manager’s representative, or
such other Person’s officer, employee, agent or representative;

 

(ii)           any Change in Control of JMIR or JMIR Manager occurs,
unless Approved by Investor; or

 

(iii)          (I) the filing of any voluntary petition in bankruptcy or
the consenting to the filing of any involuntary petition in bankruptcy against
JMIR or JMIR Manager, (II) the filing by JMIR or JMIR Manager of the foregoing
of any petition seeking, or consenting to, the reorganization or relief under
any applicable federal or state law relating to bankruptcy or insolvency
against or with respect to JMIR or JMIR Manager, (III) the filing by any other
Person of any petition seeking, or consenting to, the reorganization or relief
under any applicable federal or state law relating to bankruptcy or insolvency
with respect to JMIR or JMIR Manager, upon the same not being discharged,
stayed or dismissed within one hundred and twenty (120) days, (IV) the
consenting by JMIR or JMIR Manager to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) over
their respective assets, (V) the making of any assignment for the benefit of
creditors by JMIR or JMIR Manager, (VI) the admission by JMIR or JMIR Manager
in writing of their respective inability to pay their respective debts
generally as they become due, or (VII) the taking of any action by JMIR or JMIR
Manager in furtherance of any such action. 
If any of the foregoing events in this Section 7.2(e)(iii) occurs
with respect to JMIR Manager and JMIR appoints a JMIR-controlled Person
reasonably acceptable to Investor as a substitute Manager, then such event
shall not constitute a For Cause Event.

 

(iv)          a “For Cause Event” (as defined in the Sister Company LLC
Agreement) occurs with respect to JMIR or JMIR Manager (or their Affiliates)
under the Sister Company LLC Agreement.

 

(f)            JMIR Manager’s appointment as the Manager shall
automatically terminate if JMIR (or a permitted transferee thereof) is no
longer a Member of the Company or the Sister Company.  Any Manager appointed by Investor shall
automatically terminate if Investor (or a permitted transferee thereof) is no
longer a Member of the Company or the Sister Company.

 

SECTION 7.3                 Reliance by Third Parties.  Any third party dealing with the Company or
the Manager may, without any inquiry, rely upon any agreement,
contract, document or instrument executed and delivered by
the Manager on behalf of the Company as constituting the binding act and deed
of the Company.

 

SECTION 7.4                 Major Decisions.  Notwithstanding the provisions of Section
7.1 and Section 7.2, and except as otherwise expressly provided in
this Agreement, without the prior written consent of all of the Members in each
instance (a “Major Decision”), the
Company shall not, and JMIR Manager as Manager, shall not:

 

(a)           adopt any Annual Budget or make any amendments or modifications
thereto (as contemplated by and as further described in Section 7.5) or
adopt any supplemental 

 

38

 

budget, operating plan or other proposal relating to
any development and/or renovation of any portion of the Property or any Company
Asset and any amendment or modifications thereto; or make or incur any
expenditure which is not included or contemplated in an Annual Budget (other
than Necessary Expenses or as provided in Section 7.2(b));

 

(b)           enter into any Financing or any amendment, renewal,
extension or refinancing thereof; provided that no guaranties or credit
enhancements can be required from any Member or its Affiliates without such
party’s consent;

 

(c)           sell or otherwise Transfer the Property or any material
portion of the Company Assets (other than tangible personal property that may
be disposed of or replaced due to wear and tear or obsolescence or otherwise in
the ordinary course of business);

 

(d)           enter into or renew any material lease, materially modify
or terminate the same or waive any material monetary default thereunder;

 

(e)           enter into the Lease Agreement or make any material
modifications, amendments or extensions thereto;

 

(f)            commence or institute any litigation or arbitration by
the Company against any Person, provided,
however, if Investor does not
Approve any litigation regarding enforcement of a third-party obligation, then
Manager shall not be obligated to enforce such third party obligation to the
extent such enforcement requires litigation but Manager shall use commercially
reasonable efforts to use any other reasonable method to resolve such dispute;

 

(g)           (1) file, or consent to or solicit the filing of, a
bankruptcy, reorganization or insolvency petition or action (voluntary or involuntary),
(2) consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or a
substantial part of its property, (3) make any assignment for the benefit of
creditors, (4) admit in writing to the Company’s inability to pay its debts
generally as they become due, (5) otherwise institute insolvency
proceedings or (6) take any action in furtherance of such action, in each
case, with respect the Company, its Subsidiaries, the Property or any other
substantial portion of the Company Assets;

 

(h)           be dissolved (other than as provided in Section 11.1);

 

(i)            admit any new member in the Company or issue or authorize
the issuance of additional Company Interests;

 

(j)            the establishment of Reserves;

 

(k)           lending funds belonging to the Company or the Members to
any Person or extending any Person credit on behalf of the Company or the
Members other than what reasonable persons would consider to be within the
ordinary course of business of the Company;

 

(l)            entering into or consummating any transaction or
arrangement with any Affiliate of JMIR, which shall require the Approval of
Investor notwithstanding anything contained herein to the contrary;

 

39

 

(m)          approve the plans and specifications for any improvement,
renovation, development, rehabilitation, alteration, repair or completion of
construction of the Property or any Company Asset whose cost exceeds $25,000,
or taking any action relating thereto which burdens or encumbers the Property
or any Company Asset;

 

(n)           approve any direct or indirect Transfers of Company
Interests (as contemplated by and as further described in Article IX);
and

 

(o)           cause the Company to merge with or into, or otherwise
enter into any other business combination with, any other Person.

 

SECTION 7.5                 Annual Budget.

 

(a)           The Manager shall prepare a proposed annual budget and
operating plan for the Property and Company Assets for each Fiscal Year
together with five (5) year forward projections (which shall include a budget
applicable to Company costs and expenses (including a contingency line item),
the “Annual Budget”) at least 60
days prior to the commencement of such Fiscal Year  for the applicable Fiscal Year (provided if the Manager should
fail to timely prepare and submit a proposed form of Annual Budget, Investor
shall be authorized to prepare such Annual Budget).  Each Annual Budget must
be Approved by all of the Members.  All
portions of the proposed Annual Budget which are objected to by the Members
shall be deemed “Rejected Portions.”  The Members and the Manager shall work in
good faith to agree upon revisions to the Rejected Portions that would result
in the proposed Annual Budget being
approved by all of the Members.  In
formulating the comprehensive Annual Budget, to the extent reasonably feasible
at the time of preparation thereof, the Manager will develop (for Approval by
the Members) proposed strategies regarding (i) plans for renovation,
leasing, financing, sale and rehabilitation of the Property and any other real
property and proposed reductions to operating expenses and other Company costs
and expenses and increases in Revenues, (ii) preparation and release of
all promotional and advertising relating to, and a marketing plan for, the
Company Assets or concerning the Company, (iii) terms for any proposed
sale or disposition of any Company Asset, or acquisition of additional Company
Assets, and (iv) selection of legal counsel, accountants, appraisers and other
consultants for the Company to efficiently implement the Annual Budget.  The Manager will also consider and make
recommendations to the extent it deems the same appropriate regarding the
financing, amendment, modification, alteration, change, cancellation, or
prepayment of any Financing affecting any Company Assets, and procurement of
title insurance and other insurance for the Company, or decrease or vary the
insurance carried by or on behalf of the Company and any other matters
affecting the Company’s business.  The
Members and the Manager may from time to time review the Annual Budget and make
such amendments or modifications thereto as they shall jointly determine to be
appropriate or necessary; provided, however,
that the Manager, acting alone, may apply or re-allocate amounts included in
the “contingency” line item of the Annual Budget to other line items in the
applicable budget for such Fiscal Year.

 

(b)           The Members hereby approve the Annual Budget for the
remainder of Fiscal Year 2010, a copy of which  is
attached hereto as Schedule 1.

 

40

 

SECTION 7.6                 Expenses and Fees.

 

(a)           Expense Payment and Reimbursement.  From and after the Acquisition Date, the
Company shall pay directly, or, to the extent incurred by the Manager or its
Affiliates, shall reimburse the Manager and its Affiliates (as applicable) for,
the following (to the extent such items and amounts are provided in the then
applicable Annual Budget or otherwise approved by the Members):

 

(i)            all reasonable costs and expenses related to the
ownership, operation, management, Financing or Transfer of the Company Assets,
including taxes, fees of auditors and legal counsel, insurance, litigation and
indemnification expenses and administrative and accounting expenses (excluding
those associated with the Manager’s preparation and distribution of reports to
the Members; provided that reasonable third party costs (including copying,
postage, audit and legal) incurred in connection with same shall be at Company’s
expense);

 

(ii)           the reasonable charges and expenses of maintaining the
Company  bank accounts and of any
banks, custodians or depositories appointed for the safekeeping of the Company
Assets, including the costs of bookkeeping and accounting services;

 

(iii)          all reasonable travel, due diligence, deal pursuit
(including attorneys’ and accountants’ fees) and other reasonable out-of-pocket
expenses of the Manager or any Affiliate incurred in connection with the
Property and other Company Assets; and

 

(iv)          all other reasonable expenses not specifically provided for
in this Section 7.6(a) that are incurred by the Company, the
Manager or its Affiliates in connection with operating or managing the Company
or any of the Company Assets, or performing the duties of the Manager under
this Agreement, but specifically excluding general overhead and similar costs
and expenses of the Manager (or its Affiliates).

 

(b)           Intentionally Omitted.

 

(c)           Recurring Asset Management Fee.  Provided the Company acquires the Property,
from and after the Acquisition Date, the Company shall pay to each Member (or
its designee) a monthly asset management fee (the “Asset
Management Fee”).  The Asset
Management Fee shall (i) begin to accrue as of the Acquisition Date,
(ii) be paid monthly in arrears, (iii) be calculated as of the last
Business Day of each calendar month following the Acquisition Date (and be paid
within a reasonable time thereafter) and (iv) equal to 1.0% of the
aggregate Revenue, as defined in the Sister Company LLC Agreement (excluding
clauses (d), (e) and (f) of the definition thereof, any casualty insurance
proceeds, or interest earned on funds in an account maintained for the Sister
Company) of the Sister Company for the applicable calendar month.

 

(d)           One-Time Acquisition Fee.  Provided the Company acquires the Property,
in consideration of the services provided by each Member in connection with the
acquisition of the Property by the Company, within three (3) days of the
Acquisition Date, the Company shall pay to each Member (or its designee) an
acquisition fee equal to $190,000.

 

41

 

SECTION 7.7                 Duties and Conflicts.

 

(a)           The Manager and the Members and their respective officers,
employees, and Affiliates, in connection with their respective duties and
responsibilities hereunder, shall devote such time to the Company business as
they deem necessary or desirable in connection with their respective duties and
obligations hereunder.

 

(b)           Notwithstanding the provisions of Section 7.7(a),
each Member recognizes that the Manager, the other Members and their respective
Affiliates, employees, agents and representatives have or may have in the
future other business interests, activities and investments, some of which may
be in conflict or competition with the business of the Company and that the
Manager, such other Member and their respective Affiliates, employees, agents
and representatives are entitled to carry on such other business interests,
activities and investments.  The Manager,
any Member or any Affiliate, employee, agent or representative thereof may
engage in or possess an interest in any other business ventures of any nature
or description, independently or with others, similar or dissimilar to the
business of the Company without any obligation to offer any interest in such
activities to the Company or to the other Members, and neither the Company nor
any Member shall have any rights by virtue of this Agreement or the
relationship created hereby in or to any other ventures or activities engaged
in by the Manager or any Member (or any Affiliate, employee, agent or
representative of the Manager or any Member) or to the income or proceeds
derived therefrom, and the pursuit of such ventures or activities by the
Manager or any Member (or their respective Affiliates, employees, agents or
representatives) shall not be deemed wrongful or improper, even to the extent
the same are competitive with the business activities of the Company.  Neither the Manager, any Member nor
Affiliate, employee, agent or representative thereof shall be obligated to
present any particular investment opportunity to the Company even if such
opportunity is of a character that, if presented to the Company, could be taken
by the Company, and the Manager, any Member and any Affiliate, employee, agent
or representative thereof shall have the right to take for its own account
(individually or as a partner, member or fiduciary) or to recommend to others
any such particular investment opportunity.

 

SECTION 7.8                 Exculpation; Indemnification.

 

(a)           Exculpation. 
Except as required by any non-waivable provision of applicable law,
neither the Manager, any Member nor any of its respective successors, assigns,
transferees or any of their respective shareholders, partners, managers,
members, officers, trustees, directors, employees, Affiliates, agents or
representatives (each of whom is an “Indemnified
Party”) shall be liable, responsible or accountable in damages or
otherwise to the other Members or the Company for any act performed by such Indemnified
Party in good faith, which act was reasonably believed by such Indemnified
Party to be in the best interests of the Company and was within the scope of
the authority conferred upon it by this Agreement, or for any failure or
refusal by such Indemnified Party to perform any act, which failure or refusal
was taken in good faith and was reasonably believed by such Indemnified Party
to be in the best interests of the Company, unless such act or failure or
refusal to act constitutes willful misconduct, gross negligence, bad faith or
fraud in the performance of the Indemnified Party’s obligations to the Company
or the Members.  The doing of any act or
the failure to do any act by any Indemnified Party, the effect of which may
cause or result in loss or damage to the Company or the other Members, shall
not subject the Indemnified Party to any liability under this Agreement if done
or omitted pursuant to a favorable opinion of law issued by counsel of 

 

42

 

recognized standing engaged by the Company and
experienced in the matters at issue.  No
general or limited partner of any Member, Manager, shareholder, partner, member
or other holder of an equity interest in such Member, Manager or manager,
officer of director of any of the foregoing shall be personally liable for the
performance of any such Member’s or Manager’s obligations under this Agreement,
but the foregoing shall not relieve any such partner, shareholder or member of
any Member or Manager from its obligations to such Member or Manager.

 

(b)           Indemnification. 
(1) To the fullest extent permitted by the Delaware Act or other
applicable law, the Company shall indemnify, defend and hold harmless each
Indemnified Party from and against any direct claim, action, suit or proceeding
brought or threatened against such Indemnified Party and from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, proceedings, costs, expenses and disbursements of any kind or
nature whatsoever (including all reasonable costs and expenses of attorneys,
defense, appeal and settlement of any and all suits, actions or proceedings
instituted or threatened against such Indemnified Party or the Company) and all
costs of investigation in connection therewith incurred by such Indemnified
Party by reason of any act performed, or failure or refusal to act, by him or
it for and on behalf of the Company, provided, however, that, in each case the act or failure or refusal to
act was taken in good faith, was reasonably believed by the applicable
Indemnified Party to be in the best interests of the Company, was within the
scope of authority granted to such Indemnified Person and did not constitute
willful misconduct, gross negligence, bad faith or fraud.  The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendre or its equivalent, shall
not, of itself, create a presumption that the Person did not act in good faith
and in a manner which he or it reasonably believed to be in or not opposed to
the best interests of the Company. 
Expenses (including reasonable out-of-pocket attorneys’ fees and direct
expenses) incurred by an Indemnified Party in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such Indemnified Party to
repay such amount if it shall ultimately be determined that he or it is not
entitled to be indemnified by the Company as authorized in this Section
7.8(b).  Any indemnity under this Section
7.8(b) shall be paid solely out of and to the extent of Company assets and
shall not be a personal obligation of any Member and in no event will any
Member be required, or permitted without the Approval of all of the Members, to
contribute additional capital under Section 3.2 to enable the Company to
satisfy any obligation under this Section 7.8.  All judgments against the Company and the
Members, or any one or more thereof, wherein such Member (or Members) is
entitled to indemnification, must first be satisfied from Company Assets.

 

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

 

43

 

representations and
warranties made under any Transaction Document, which breach was the result of
information or matters relating to such Member, or (iv) any denial of an
insurance claim by the Company based on an intentional misstatement or
intentional withholding of information by any Member.

 

(3)           The provisions of this Section 7.8(b) shall survive
for a period of four years from the date of dissolution of the Company,
provided that, if at the end of such period there are any actions, proceedings
or investigations then pending, any Indemnified Party may so notify the Company
and the other Members at such time (which notice shall include a brief
description of each such action, proceeding or investigation and the
liabilities asserted therein) and the provisions of this Section 7.8(b)
shall survive with respect to each such action, proceeding or investigation set
forth in such notice (or any related action, proceeding or investigation based
upon the same or similar claim) until such date that such action, proceeding or
investigation is finally resolved.

 

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

 

(5)           Notwithstanding any of the preceding provisions of this Section
7.8(b), in no event shall the Company have any obligation under this Section
7.8(b) that is prohibited by Section 12.3(iii) of the charter of Behringer
Harvard Opportunity REIT II, Inc.

 

(c)           Separate Series. 
The Members (other than JMIR) acknowledge that they have been advised
that JMIR is a separate series of JMIR Investments III, LP, a Delaware series
limited partnership (“JMIR Series LP”),
and that JMIR has been established as provided in Section 17-218 of the
Delaware Revised Uniform Limited Partnership Act; accordingly, subject to Section
16.1, the debts, liabilities and obligations incurred, contracted for,
otherwise existing with respect to JMIR shall be enforceable only against the
separate assets of JMIR and not against the assets of JMIR Series LP generally
or any other series thereof. 
Notwithstanding anything contained in this Agreement other than Section
16.1, each Member agrees to such limitation on liability, and further
agrees that (i) it shall look solely to the assets of JMIR as a separate series
for the satisfaction of any debt, liability or obligation arising under, or out
of the transactions contemplated by, this Agreement, (ii) it shall have no
recourse to any assets of JMIR Series LP or any other series established by
JMIR Series LP for the satisfaction of any such debts, liabilities or
obligations, and (iii) it waives and relinquishes any right to pursue any
assets of JMIR Series LP (or any other series already or hereafter established)
for the satisfaction of any debts, liabilities or obligations; in each case,
regardless of whether separate books and records have been or hereafter are
kept for one or more of the series of JMIR Series LP.

 

44

 

SECTION 7.9                 Certain Provisions Related
to Mortgage Loans.  The Members
hereby acknowledge and agree that, notwithstanding anything to the contrary in
this Agreement, so long as any Mortgage Loan is outstanding, neither Member
shall be entitled to take any action or otherwise exercise any remedies
provided for in this Agreement if such action or remedy would violate any
applicable “transfer” restrictions set forth in any mortgage securing such
Mortgage Loan, unless and to the extent that the consent of the lender or
servicer under such Mortgage Loan has been obtained.

 

ARTICLE VIII

 

BOOKS AND RECORDS; TAX
MATTERS MEMBER

 

SECTION 8.1                 Books of Account.  The Investor shall keep or cause to be kept,
at the expense of the Company, accurate and complete books of account and
records showing the assets and liabilities, operations, transactions and
financial condition of the Company and the Company Assets in a manner customary
and consistent with good accounting principles, practices and procedures.  Each and every financial transaction with
respect to the ownership and operation of the Property and Company Assets shall
be entered fully and accurately in the books of account and records of the
Company, the Property and the other Company Assets which shall at all times be
maintained at the principal office of the Company and shall be and remain the
property of the Company.  Bills, receipts
and vouchers shall be maintained on file by the Investor.  The Investor shall maintain or cause to be
maintained said books and accounts in a safe manner and separate from any
records not having to do directly with the Company, any Subsidiary, the
Property or any Company Asset.  Each
Member or its duly authorized representative, at its own expense, shall at all
reasonable times and for purposes reasonably related to the Member’s Company
Interest have access to, and may inspect and make copies of, such books and
accounts and any other records and such other information of the Company at the
office of the Company or other Person maintaining the same upon reasonable
prior Notice to the Investor. 
Additionally, upon request of a Member, all professionals given access
to any such books or records shall be directed to provide such books or records
to such Member.  The books of the Company
shall be kept on the accrual basis in accordance with GAAP and on a tax basis
and the Company shall report its operations for tax purposes on the accrual
method.

 

SECTION 8.2                 Financial and Operating
Information.

 

(a)           No later than 60 days after the end of each quarter of the
Company’s Fiscal Year (other than the last quarter of such Fiscal Year), at the
Company’s expense, the Investor shall forward or cause to be forwarded to each
Member in each case certified by the Investor as being true and correct.  (A) an unaudited balance sheet of the Company
and each Subsidiary dated as of the end of such fiscal quarter, (B) an
unaudited related income statement of the Company and each Subsidiary for such
fiscal quarter, (C) an unaudited statement of each Member’s Capital Account for
such fiscal quarter, (D) an unaudited statement of cash flows of the Company
and each Subsidiary for such fiscal quarter, and (E) a reconciliation of actual
operating expenses and Revenues during such period compared with the Annual
Budget amounts for such items, and (F) a quarterly explanation of the
discrepancies; and

 

45

 

(b)           Within 60 days after the end of each calendar month, the
Investor will prepare, or cause to be prepared, at the expense of the Company,
a status report of the Company’s activities during such calendar month,
including summary descriptions of additions to, dispositions of and leasing and
occupancy of the Property and Company Assets and any material legal issues such
as claims filed or threatened against the Company, material claims of the
Company and each Subsidiary against other parties and developments in any then
pending legal actions affecting the Company during such month.

 

(c)           The Investor will prepare, or cause to be prepared, on an
accrual basis in accordance with GAAP and on a tax basis, at the expense of the
Company, and furnish to each Member no later than 120 days after the end of
each Fiscal Year of the Company the following, all of which shall be certified
by the Investor as being true and correct:

 

(i)            an unaudited balance sheet of the Company and each
Subsidiary dated as of the end of such Fiscal Year;

 

(ii)           an unaudited related income statement of the Company and
each Subsidiary for such Fiscal Year;

 

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

 

(iv)          an unaudited statement of cash flows of the Company and
each Subsidiary as of the end of the Fiscal Year; and

 

(v)           such other supporting schedules, reports and backup information
as are reasonably requested by Investor.

 

(d)           The Investor shall, as a Company expense, at least once
every calendar year have the Company’s books and records audited by the Company
Accountant.  In addition, the Investor
shall have the right but not the obligation (unless reasonably requested by the
Manager) to prepare, at the expense of the Company, and furnish to each Member
within forty-five (45) calendar days after the end of each Fiscal Year, the
final audited amount of net income of the Company for such Fiscal Year and,
within sixty (60) calendar days after the end of such taxable year, each of the
following, all of which shall be certified by the Investor as being true and
correct and all of which shall be certified in the customary manner by the
Company Accountant (which firm shall provide such balance sheet, income
statement and statement of Capital Account in draft form to the Members for
review prior to finalization and certification thereof) (i) an audited balance
sheet of the Company dated as of the end of such taxable year; (ii) an audited
related income statement of the Company for such taxable year; (iii) an audited
statement of cash flows for such taxable year; and (iv) an audited statement of
each Member’s Capital Account for such taxable year.

 

(e)           No later than March 1st of the year following the Fiscal
Year, the Investor shall, as a Company expense, furnish or cause to be
furnished to each Member with copies of the Company’s federal partnership
Return of Income and other income tax returns, together with each Member’s
Schedule K-1 or analogous schedule.

 

46

 

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

 

(g)           The Investor shall prepare, or cause to be prepared, at
Company expense, such additional financial reports and other information as
Manager may reasonably request.  The
Investor and Manager will furnish to each Member upon request, at the expense
of the Company, copies of all reports, statements, notices and other material
written information received by the Company, Manager or the Investor from, or
delivered by or on behalf of the Company to, any third party lender.  Subject to the provisions of Section 14.19,
each Member shall be permitted to deliver to any of its Affiliates or to any of
its direct or indirect members, partners or investors, a copy of any of the
reports and statements provided to such Member pursuant to this Section 8.2.

 

(h)           All decisions as to accounting principles shall be made by
the Investor, subject to the provisions of this Agreement.

 

SECTION 8.3                 Tax Matters Member.  Investor is hereby designated as the “tax matters partner” under Code Section
6231(a)(7) (in such capacity, the “Tax Matters Member”).  The Tax Matters Member shall manage audits of
the Company conducted by the Internal Revenue Service or any other taxing
authority pursuant to the audit procedures under the Code and the Treasury Regulations
promulgated thereunder or other applicable law. 
The Tax Matters Member shall keep the Members informed, from time to
time, as to the status of any audit of the Company.

 

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

 

SECTION 8.5                 REIT Matters.  Notwithstanding anything to the contrary in
this Agreement, (a) neither the Company nor any Member nor Manager (acting on
the Company’s behalf) shall take any action which would cause Investor (or its
REIT affiliates) to (i) fail to qualify as a “real estate investment trust” (as
defined under Sections 856 & 857 of the Code) or (ii) incur any additional
taxes under Section 857 or Section 4981 of the Code (or any successor
provisions), and (b) the Company shall conduct its business affairs in a manner
so as to avoid incurring income that would not qualify under Sections 856(c)(2)
and 856(c)(3) of the Code and will not acquire assets that would cause a
violation of the asset test as described in Section 856(c)(4) of the Code,
unless any events described in clauses (a) and (b) above are in accordance with
the terms of this Agreement or any other agreement entered into as contemplated
or 

 

47

 

authorized by this Agreement or arise at the express
written direction of Investor or with the prior Approval of Investor.  The Members and Manager shall periodically
consult with the other Members (or their designee) to ensure that any
prospective transaction undertaken by the Company, or a Member acting on behalf
of the Company, shall not cause Investor (or its REIT affiliates) to fail to
qualify as a REIT.  If the Members
disagree as to whether any transaction will cause Investor (or its REIT
affiliates) to fail to qualify as a REIT (as defined under Sections 856 and 857
of the Code) or incur any additional taxes under Section 857 or Section 4981 of
the Code (or any successor provisions), the reasonable determination of
Investor shall be final.

 

ARTICLE IX

 

TRANSFERS OF COMPANY
INTERESTS

 

SECTION 9.1                 Transfers of Company
Interests Generally.  Except as
permitted in this Article IX or pursuant to Article X
hereof, no Member shall Transfer all or any part of its Company Interest
without the consent of the other Member. 
Each Member agrees that, to the extent it desires that its Company
Interest be at any time held by any other Person, such Member will Transfer its
Company Interest or part thereof to such Person only through a direct Transfer
in the manner contemplated in this Article IX.  The approval by any Member to Transfer in any
one or more instances shall not limit or waive the requirement to obtain
approval in any other or future instance. 
To the fullest extent permitted by applicable law, any Transfer of a
Company Interest in contravention of this Article IX shall be null and
void ab initio and shall be deemed a material
default of this Agreement, and the other Members shall have all the rights and
remedies available under this Agreement and applicable law.  Nothing in this Article IX (except Section 9.3(a)(i)
or otherwise provided in this sentence) is meant to or will be interpreted to
restrict in any way the ability of any equityholder in Behringer Harvard
Opportunity REIT II, Inc. BHO II, Inc., BHO Business Trust II or Behringer
Harvard Opportunity OP II, LP and/or their constituent owners from transferring
securities issued by such entities, provided no such transfer will be permitted
if it would cause the Company to be taxed as a corporation for federal or state
tax purposes.

 

SECTION 9.2                 Succession by Operation of
Law and Permitted Transfers.

 

(a)           Except as permitted in this Article IX, in the
event of the merger, consolidation, dissolution or liquidation of any Member,
all of such Member’s rights to distributions and allocations by the Company,
shall pass to such Member’s legal successor, but such legal successor shall not
become a Member of the Company without the prior written consent of the
Members.

 

(b)           Notwithstanding anything in this Agreement to the
contrary, but subject to the satisfaction of the conditions set forth in this Article
IX, the following Transfers shall be permitted:

 

(i)            Transfers by a Member of all or any portion such Member’s
Company Interest with the prior written consent of the other Member, which
consent may be given or withheld in the other Member’s sole and absolute
discretion;

 

48

 

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

 

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

 

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

 

Concurrent
with any Transfer by JMIR under this Section 9.2(b), JMIR shall Transfer
an equal percentage of its interest in the Sister Company in accordance with
the terms of the Sister Company LLC Agreement.

 

SECTION 9.3                 General Conditions
Applicable to Transfers.

 

(a)           Notwithstanding anything in this Agreement to the
contrary, no Transfer shall be made, recognized or consented to by the Members
(except as provided in clause (iv) below) or deemed effective if
such Transfer:

 

(i)            would violate any of the covenants or restrictions of the
Mortgage Loan or Franchise Agreement;

 

(ii)           would constitute or result in  a material violation or default under any
contract or other obligation legally binding upon the Company, any of its
Subsidiaries, any of the other Company Assets or the Members;

 

49

 

(iii)          would cause the Company, any of its Subsidiaries, the
Company Assets or any Member to be in violation of or result in the any
applicable law, order, rule, regulation or court order;

 

(iv)          would require the Company to be registered as an “investment
company” pursuant to Section 3 of the Investment Company Act of 1940, as
amended (the “1940 Act”), and the rules and
regulations of the Securities and Exchange Commission thereunder;

 

(v)           would result in the termination of the Company under the
Code, the Company being unable to qualify for one or more the “safe harbors”
set forth in Treasury Regulations Section 1.7704-1 (or such other guidance
subsequently published by the Internal Revenue Service setting forth safe
harbors under which interests will not be treated as “readily tradable on a
secondary market (or the substantial equivalent thereof)” within the meaning of
Section 7704 of the Code), or could otherwise cause the Company to be treated
as a “publicly traded partnership” for federal income tax purposes, without in
each instance the prior approval of the Members, which approval may be given or
withheld in each Member’s sole and absolute discretion;

 

(vi)          could require the registration of such Transferred Company
Interest or other Company Interests pursuant to any applicable federal or state
securities laws; or

 

(vii)         could subject the Company, the Manager or its or their
Affiliates to regulation under the Investment Advisers Act of 1940, as amended.

 

(b)           In the event that any filing, application, approval or
consent is required in connection with any Transfer, whether by any
governmental entity or other third-party, except to the extent otherwise
expressly provided herein, the transferring Member shall promptly make such
filing or application or obtain such approval or consent, at its sole expense.

 

(c)           Notwithstanding anything to the contrary contained in this
Agreement, no Transfer of all or any portion of any Member’s Company Interest
shall be binding upon the other Members or the Company, and the Company shall
be entitled to treat the record owner of any Company Interest as the absolute
owner thereof in all respect, unless and until all required approvals have been
received and:

 

(i)            true copies of the instruments of transfer executed and
delivered pursuant to or in connection with such Transfer shall have been
delivered to such other Members and the Company;

 

(ii)           the transferee shall have delivered to such other Members
and the Company an executed and acknowledged assumption agreement pursuant to
which the transferee assumes all the obligations of the transferor arising and
accruing from and after the date of such Transfer under, and agrees to be bound
by all the provisions of, this Agreement;

 

50

 

(iii)          the transferee shall have executed, acknowledged and
delivered any instruments required under any applicable laws to effect such
Transfer and, if applicable, its admission to the Company; and

 

(iv)          the transferee shall have executed and delivered such other
instruments, documents and agreements reasonably required by the
non-transferring Members in connection with such Transfer which are consistent
with the other terms hereof.

 

Upon compliance with the provisions of this
Agreement, any Person who acquires a Company Interest in a transaction
permitted by this Article IX shall, unless otherwise provided in this
Agreement, be admitted as a Member.

 

(d)           Except as otherwise expressly provided herein, all
reasonable costs and expenses incurred by the Company in connection with any
Transfer of a Company Interest and, if applicable, the admission of a new
Person as a Member hereunder, shall be paid by the transferor.  Upon compliance with all provisions hereof
applicable to any transferee of a Company Interest becoming a Member, all
Members hereby agree to execute and deliver such reasonable amendments hereto
as are necessary to constitute such Person as a Member of the Company.

 

(e)           To the fullest extent permitted by applicable law, if any
Person acquires all or any part of the Company Interest of a Member in
violation of this Article IX whether by operation of law, judicial
proceeding, or other manner not expressly permitted hereunder, such Person
shall have no rights under this Agreement with respect to the Company Interest
so acquired.

 

(f)            The Members shall cooperate with each other in good faith
in connection with any Transfer permitted by the terms of this Article IX.

 

(g)           As additional conditions to the direct Transfer of any
Company Interests to any unaffiliated Person, (1) at the written request of the
non-transferring Member, the transferring Member, at the transferring Member’s
sole cost and expense, shall deliver an opinion in form and substance and from
counsel reasonably satisfactory to the non-transferring Member, to the effect
that (A) such Transfer will not result in a violation of the registration
requirements of the Securities Act or other applicable state securities laws,
(B) such transferee has the legal right, power and capacity to own the
Company Interest proposed to be transferred, and (C) if applicable, such
Transfer does not violate any provision of any Financing Document, loan
commitment or any mortgage, deed of trust or other security instrument
encumbering all or any portion of the Company Assets, and (2) concurrently with
such Transfer, the transferring Member (or its Affiliate, if applicable) shall
Transfer an equal percentage of its interest in the Sister Company in
accordance with the terms of the Sister Company LLC Agreement.

 

SECTION 9.4                 Allocations and Adjustments
Upon Transfer.  In the event of a
Transfer of all or any Company Interest in the Company in accordance with this
Agreement, at any time other than at the end of the Company’s Fiscal Year, the
profits, gains, losses, deductions and credits of the Company for such Fiscal
Year shall be allocated between or among 

 

51

 

the respective parties or the Members, as the case
may be, in such manner as determined by the Investor to be consistent with the
provisions of Code Section 706(d) or any applicable successor thereto.

 

SECTION 9.5                 Section 754 Election.  In the event of a Transfer of all or part of
the Company Interest of a Member, at the request of the transferee or if required
by the Code, or if otherwise in the best interests of the Company (as
determined by the Investor), the Company shall elect pursuant to Section 754 of
the Code to adjust the basis of Company Assets as provided by Sections 734 and
743 of the Code, and any cost of such election or cost of administering or
accounting for such election shall be at the sole cost and expense of the
requesting transferee.

 

SECTION 9.6                 Single Member.  For the purposes of this Article IX,
if a Member transfers less than its entire Company Interest in the Company to
any Person in accordance with this Agreement and such Person shall become a new
or substituted Member, such Member and such new or substitute Member(s) shall
be considered a single Member for purposes of this Agreement, and any election,
decision, action or approval required to be made by such Member shall be made
by such Member and such new or substitute Member(s), jointly, and any conflict
or dispute between or among such Member and such new or substitute Member(s)
shall be resolved pursuant to a separate written agreement between such Member
and such new or substitute Member(s).

 

SECTION 9.7                 Bankruptcy or Dissolution of
a Member.  Upon the occurrence of a
Bankruptcy Event or any other occurrence with respect to a Member (or its
Affiliate, if such Affiliate is a member of the Sister Company) of any event
which under the Delaware Act causes the Member (or its Affiliate, if such
Affiliate is a member of the Sister Company) to cease to be a member of a
limited liability company (a “Withdrawal Event”),
the Member affected by such Withdrawal Event shall, unless the other Member
shall otherwise consent within 90 days of such Withdrawal Event, be deemed to
have withdrawn as a Member on the expiration of such 90 day period.  In the event that a Member is deemed to have
withdrawn from the Company pursuant to this Section 9.7, then such
Member (a “Withdrawn Member”) shall continue
to have the rights of an assignee of its Company Interest that was not admitted
as a Member and shall not be entitled to participate in the management of the
Company or to vote, approve or consent to any matter for which the vote,
approval or consent of any Members is required (other than: (i) any
voting, approval or consent rights that would affect such Member’s right or
obligation to make Capital Contributions to the Company; (ii) such Member’s
right to approve any amendment to this Agreement that could have a material
adverse effect on such Member; or (iii) such Member’s right to approve any
restructuring of the Company or any change in the tax treatment of the
Company).  Unless the Members (other than
the Withdrawn Member) otherwise agree, the Company shall not terminate or
dissolve upon the occurrence of a Bankruptcy Event or any other occurrence which
under the Delaware Act causes a Member to cease to be a member of the Company.

 

52

 

ARTICLE X

 

PUT OPTION; BUY/SELL
RIGHTS

 

SECTION 10.1               Put Option.

 

(a)           Generally. 
Subject to the provisions of this Article X, at any time
following the earlier of (x) the third anniversary of the Acquisition Date, (y)
an Event of Default or a For Cause Event with respect to any Member (and in the
case of JMIR, JMIR Manager) or (z) an “Event of Default” or a “For Cause Event”
(as such terms are defined in the Sister Company LLC Agreement) with respect to
any member of the Sister Company (or in the case of JMIR, JMIR Manager), then
in any such case in the event of a Deadlock (as described in Section 10.1(b)
below), a Member that desires to cause the Company to sell the Property (“Seller”) may declare that it intends to
cause the other Member (and its Affiliate, if applicable) (“Buyer”) to purchase all, but not less than
all, of Seller’s Company Interest and Seller’s (or its Affiliate’s) interest in
the Sister Company (the “Put Right”)
for a cash payment equal to the Put Price (as defined below) by delivering to
Buyer Notice (the “Put Notice”)
specifying the price at which Seller proposes the Company sell the Property and
the operation thereof (the “Proposed Sales
Price”) and otherwise in accordance with this Section 10.1.  In the case of clause (y) above, only the
non-breaching Member may exercise the Put Right and deliver a Put Notice.

 

(b)           Deadlock; Delivery of Put Notice.  As used in this Agreement, a “Deadlock” shall mean a situation in which
one Member desires to cause the Company to sell the Property and the operation
thereof to an unrelated third party for cash in an amount equal to or greater
than the Proposed Sales Price and the other Member does not agree to market and
sell the Property and the operation thereof on such terms, which disagreement
on the sales price or whether to sell the Property and the operation thereof
continues for a period of 30 days following the date that a Member delivers
Notice to the other Member that such Member desires to sell the Property and
the operation thereof and specifying the Proposed Sales Price.  Following such 30-day period, the Member that
desires to sell the Property and the operation thereof may deliver to the other
Member a Put Notice, thereby triggering the provisions of this Section 10.1.  Following the Seller’s delivery of a Put
Notice to Buyer, Buyer shall have a period of 15 days to deliver Notice to the
Seller that Buyer agrees to market and sell the Property and the operation
thereof for cash for an amount equal to or greater than the Proposed Sales
Price.  In the event of Buyer’s agreement
to market the Property and the operation thereof and acceptance of the Proposed
Sales Price prior to the expiration of such 15-day period, Seller’s exercise of
the Put Right and the Put Notice shall be deemed rescinded.  Upon delivery of the Put Notice and
expiration of such 15-day period without Buyer’s delivery of Notice of
agreement to market the Property and the operation thereof and acceptance of
the Proposed Sales Price, Seller’s exercise of the Put Right shall be
irrevocable (subject to Section 10.1(e)), and Buyer shall be required to
purchase all of Seller’s Company Interest and Seller’s or its Affiliate’s
interest in the Sister Company in accordance with this Section 10.1 and Section
10.1 of the Sister Company LLC Agreement. 
In the event the Property and the operation thereof is not sold within
ten(10) months of the Buyer’s agreement to market the Property and the
operation thereof and acceptance of the Proposed Sales Price for a price that
is not less than 95% of the Proposed Sales Price, the Buyer by notice to Seller
may require the Seller to cease marketing the Property and the operation
thereof and the 

 

53

 

Property and the operation thereof may not be sold
without initiating the provisions of this Section 10.1 again.

 

(c)           Calculation of Put Price.  The “Put
Price” shall be the amount Seller (and its Affiliate, if applicable)
would receive if, as of the date of the Put Notice, (i) the Property and the
operation thereof were sold at the Proposed Sales Price, (ii) the Company and
the Sister Company had immediately paid all Company and Sister Company debts
and liabilities (including all Financing), (iii) the Company and the Sister
Company had paid all Imputed Closing Costs, (iv) the Company had distributed to
Seller the net proceeds of such hypothetical sale allocated by the parties to the
fee ownership of the Property and any other liquid assets of the Company in
accordance with the provisions of Section 11.2(c) (without regard to any
other costs of liquidation or the establishment of Reserves) and (v) the Sister
Company had distributed to Seller (or its Affiliate) the net proceeds of such
hypothetical sale allocated by the parties to the operations of the Property
and any other liquid assets of the Sister Company in accordance with the
provisions of Section 11.2 of the Sister Company LLC Agreement (without
regard to any other costs of liquidation or the establishment of reserves under
the Sister Company LLC Agreement).  Any
disputes as to the calculation of the Put Price shall be resolved by the Company’s
Accountant (and if the Company’s Accountant is unable or unwilling to resolve
such dispute, then by another reputable accounting firm Approved by the
Members), the decision of which shall be final and conclusive.  The Members agree to promptly provide the
Company’s Accountant (or other reputable accounting firm Approved by the
Members, if applicable) with all information necessary to resolve such dispute
and shall instruct the firm to resolve such dispute as expeditiously as
possible.

 

(d)           Put Closing. 
The closing of the transactions contemplated by this Section 10.1
shall be held at a location designated by Buyer by Notice to Seller (or, at
either Member’s election, pursuant to escrow arrangement acceptable to each
Member in the exercise of their reasonable judgment).  Such closing shall occur on a Business Day
selected by Buyer not less than 45 days and not more than 75 days after Buyer’s
receipt of the Put Notice.  At the
closing:

 

(i)            Buyer shall pay to Seller the Put Price by wire transfer
of immediately available federal funds to an account designated in writing by
Seller;

 

(ii)           Seller shall deliver to Buyer (or its designee) an
assignment of all of Seller’s Company Interest, which such assignment shall be
free and clear of all legal and equitable claims (other than the legal and equitable
claims, if any, of Buyer pursuant to this Agreement) and all liens and
encumbrances (other than liens and encumbrances under this Agreement and
Financing Documents that shall remain in full force and effect following such
closing);

 

(iii)          Buyer shall deliver to Seller an assumption of Seller’s
obligations under this Agreement arising from and after the date of such
assignment;

 

(iv)          Seller and Buyer shall execute an agreement acceptable to
Seller and Buyer in the exercise of their reasonable judgment whereby (A) each
of Seller and Buyer shall represent and warrant to the other that each is duly
organized, validly existing, has the necessary power and authority to
consummate the subject transactions

 

54

 

 

and requires no consents
which have not been obtained, and (B) Seller shall represent to Buyer that
Seller is the owner of its Company Interest free and clear of all liens and
encumbrances (other than liens and encumbrances under this Agreement and Financing
Documents that shall remain in full force and effect following the closing) and
that the Transfer is being made free and clear of all legal and equitable
claims (other than the legal and equitable claims of Buyer pursuant to this
Agreement);

 

(v)           the Company shall do an interim closing of the books of
the Company as of the closing date, and all items of the Company’s income and
expense shall be apportioned in calculating Cash Flow (for the avoidance of
doubt, the calculation of Cash Flow shall not include any expense treated as a
liability in calculating the Put Price) as of 11:59 p.m. local time in
Hawaii of the day preceding the closing date, and any Cash Flow that would have
been allocable to the Seller had it been distributed on the closing date shall
be paid to Seller within 30 days after the books have been closed; and

 

(vi)          the Members shall execute all amendments to fictitious
name, limited liability company or similar certificates necessary to effect and
evidence the withdrawal of Seller from the Company.

 

(vii)         Buyer shall obtain a release of Seller from all liability,
direct or contingent, by all holders of all Company debts, obligations or
claims for which the Seller may be personally liable (including any guarantees
of non-recourse carve-outs).

 

The obligations of Buyer and Seller under this Section 10.1(d) shall
apply in the same manner to Buyer and Seller and their Affiliates, if
applicable, with respect to their interests in the Sister Company.

 

(e)           Default.  In
the event Buyer shall default (in such capacity, the “Defaulting Party”) in any of its
obligations under this Section 10.1 (other than its obligation set
forth in Section 10.1(d)(vii), in which case Buyer shall be fully
excused from performing under this Section 10.1), then:

 

(i)            the Defaulting Party shall no longer have any Put Right;

 

(ii)           Seller shall have the right (but not the obligation) to
revoke the exercise of the Put Right;

 

(iii)          the Defaulting Party (and its Affiliate, if applicable)
will immediately and without any further action cease to have any right to
provide any Offer Notice or otherwise trigger or initiate the provisions set
forth in Section 10.2 or under Section 10.2 of the
Sister Company LLC Agreement; and

 

(iv)          Seller shall have the right (but not the obligation) to
elect one of the following options:

 

(1)           Seller may cause the Company to sell the Property and
operation thereof, in which case Seller shall be deemed to be the “Manager” of
the Company for all purposes reasonably related to such sale, provided that the

 

55

 

actual sales price of the
Property and operation thereof pursuant to any such sale shall not be less than
82.5% of the Proposed Sale Price; or

 

(2)           Seller may purchase all of the Defaulting Party’s Company’s
Interest and the Defaulting Party’s or its Affiliate’s interest in the Sister
Company for a cash payment equal to 82.5% of the Put Price (calculated in
accordance with Section 10.1(c) above, assuming that the
Defaulting Party is the “Seller” thereunder) and otherwise in accordance with
the provisions of this Section 10.1 assuming in all cases that the
Defaulting Party is the “Seller” hereunder and that the Seller is the “Buyer”
hereunder.

 

(f)            Costs and Expenses.  Each party shall pay its own costs and
expenses in connection with the conveyance of Seller’s Company Interest and
Seller’s or its Affiliate’s interest in the Sister Company to Buyer pursuant to
this Section 10.1.  All
expenses of the Company in connection with such Transfer (including any
transfer, deed, documentary stamp or other tax) shall be paid by, and deemed to
be an expense of, the Company.

 

(g)           Assignment. 
Buyer may, at its option, cause Seller’s Company Interest  and Seller’s or its Affiliate’s interest in
the Sister Company to be purchased by one or more of Buyer’s Affiliates or a
designee; provided, however, that
any assignment of Buyer’s rights hereunder for purposes of accomplishing such
purchase by any such Affiliate (or designee) shall not relieve Buyer of any
obligation or liability with respect thereto.

 

(h)           Further Assurances. 
Each Member agrees that it shall be reasonable and cooperate with the
other Member, including executing any documents which may be reasonably
required, in order to consummate the transactions contemplated by this Section 10.1.

 

(i)            Priority. 
In the event any rights under this Section 10.1 shall be
exercised prior in time to the exercise of any rights under Section 10.2,
the rights under this Section 10.1 shall supersede any other right
existing pursuant to Section 10.2.

 

(j)            Material Decisions.  If the Members agree to market the Property
and the operation thereof at the Proposed Sales Price, then all material
decisions relating to the marketing and sale of the Property shall be jointly
Approved by the Members acting in good faith including the selection of a
marketing agent and the terms of any purchase and sale agreement, until the
Property is either sold or the ten (10) month period in which to sell the
Property expires.

 

(k)           Termination. 
If a purchase and sale of Seller’s Company Interests and Seller’s or its
Affiliate’s interest in the Sister Company under this Section 10.1
and Section 10.1 of the Sister Company LLC Agreement is completed,
all agreements between the Company and Seller or its Affiliates related to the
Company Assets will (at the election of the Buyer) be terminated on the date
such Seller Company Interest is purchased without payment of any penalty or
termination fee.

 

(l)            Attorney in Fact. 
In the event that the Buyer or Seller shall have failed or refused,
within five calendar days after receipt of a notice from the other requesting
such party to execute, acknowledge and deliver such documents, or cause the
same to be done, as shall be 

 

56

 

required to effectuate the provisions of Section 10.1
hereof and Section 10.1 of the Sister Company LLC Agreement, then
the non-defaulting party may execute, acknowledge and deliver such documents
for, on behalf of and in the stead of the defaulting party or on behalf of and
in the name of the Company, as applicable, and such execution, acknowledgment
and delivery by the non-defaulting party shall be for all purposes effective
against and binding upon the defaulting party or the Company, as applicable, as
though such execution, acknowledgment and delivery had been by the defaulting
party or the Company, as applicable. 
Each of the Members does hereby irrevocably constitute and appoint the
other Members as the true and lawful attorney in fact of such appointing
Member, in the name, place and stead of such appointing Member, as the case may
be, to execute, acknowledge and deliver such documents under the circumstances
contemplated by this Section 10.1(l).  It is expressly understood, intended and agreed
by each Member, that the grant of the power of attorney to the other Members
pursuant to this Section 10.1(l) is coupled with an interest,
is irrevocable and shall survive the death, dissolution, termination or legal
incompetency of such appointing Member, as the case may be.

 

SECTION 10.2               Buy/Sell Rights.

 

(a)           Generally. 
Subject to the terms and conditions of this Article X, at
any time following the second anniversary of the Acquisition Date, either
Member shall have the right to trigger the provisions of this Section 10.2
as hereinafter provided (such Member being referred to herein as the “Offeror”), or, if earlier, at any time
following (1) an Event of Default or a For Cause Event with respect to any
Member (and in the case of JMIR, JMIR Manager) or (2) an “Event of Default”
or a “For Cause Event” (as such terms are defined in the Sister Company LLC
Agreement) with respect to any member of the Sister Company (or in the case of
JMIR, JMIR Manager), in which event the non-breaching Member may be the Offeror,
by delivering Notice (the “Offer Notice”)
to the other Member (“Offeree”)
invoking the provisions of this Section 10.2.  The Offer Notice shall (i) contain the
Offeror’s determination, in its sole discretion, of value of the Company
Assets, as if such assets were free and clear of all liens, claims and
encumbrances (that can be discharged or removed with the payment of money),
(ii) disclose all liabilities and potential liabilities of the Company
known to the Offeror and a good faith estimate of the monetary amount of such
liabilities, and (iii) disclose the terms and details of any financing,
refinancing, proposed sale, or other monetization event that the Offeror has
initiated, negotiated or discussed during the prior one hundred eighty (180)
calendar days with a third party for all or any portion of the Company Assets (“Gross Value Amount”).

 

(b)           A copy of the Offer Notice must be delivered to the
Offeree and to the Company Accountant who shall, within ten (10) Business
Days of the Offer Notice, determine and notify the Members of the amount the
Offeree would receive (the “Offeree Value”)
and the amount the Offeror would receive (the “Offeror Value”) on account of its respective Company Interest
if (i) all Company Assets were sold for the aggregate Gross Value Amount,
(ii) the Company had immediately paid all Company debts and liabilities
(including all Financing), (iii) the Company had paid all Imputed Closing
Costs, and (iv) the Company had distributed the net proceeds of such hypothetical
sale and any other liquid assets of the Company in accordance with the
provisions of Section 11.2(c) (without regard to any other
costs of liquidation or the establishment of Reserves).

 

57

 

(c)           Offeree Election. 
Within 30 calendars days after receipt of the Offer Notice given
pursuant to Section 10.2(a), Offeree shall then be obligated to
elect to either:

 

(1)           purchase the entire Company Interest of Offeror for cash
at a price equal to the Offeror Value; or

 

(2)           sell to Offeror its entire Company Interest for cash at a
price equal to the Offeree Value.

 

Failure of Offeree to give Offeror Notice within
such time shall be deemed an election under clause (2) above.

 

(d)           Buy/Sell Deposit; Escrow Agent.  Contemporaneously with Offeree’s election or
deemed election under Section 10.2(b), the purchasing Member shall
deposit in cash an amount equal to 5% of the purchase price to be paid in
connection with such purchase (“Buy/Sell Deposit”)
with the Escrow Agent.  If the purchasing
Member shall fail to deposit the Buy/Sell Deposit contemporaneously with its
election or deemed election under Section 10.2(b), purchasing
Member shall be in material default hereunder, the selling Member shall have
all remedies available at law or in equity and shall have the right,
exercisable by delivery of Notice to the purchasing Member within 10 Business
Days of such default, to purchase (pursuant to the terms of this Section 10.2)
the entire Company Interest of the purchasing Member for cash at a price equal
to 82.5% of the Offeror Value or Offeree Value, as applicable.  The charges of the Escrow Agent shall be a
Company expense.  The Escrow Agent shall
hold the Buy/Sell Deposit in an interest bearing account pursuant to a written
agreement among the Offeror, the Offeree and the Escrow Agent, which agreement
shall be satisfactory to such parties in the exercise of their respective
reasonable discretion and shall provide, among other things, that the Escrow
Agent shall not commingle the Buy/Sell Deposit with any other funds.  In the event of a closing pursuant to the
terms of this Section 10.2(d), the Buy/Sell Deposit, together with
any interest earned thereon, shall be credited against the Offeror Value or
Offeree Value, as applicable, and paid to the selling Member.  In the event of a default by the purchasing
Member (or its Affiliate, if applicable) in its obligation to purchase the
selling Member’s (or selling Member’s Affiliate’s, if applicable) Company
Interest (or interest in the Sister Company, if applicable) pursuant to, and in
accordance with, the terms of this Section 10.2(d) (other than
a default of its obligation set forth in Section 10.2(e)(vii), in
which case the purchasing Member shall be fully excused from performing under
this Section 10.2):

 

(i)            the purchasing Member (or its Affiliate, if applicable)
shall have no right to make any future Offer Notice hereunder or under the
Sister Company LLC Agreement;

 

(ii)           the Buy/Sell Deposit, and any interest thereon, shall be
paid to the selling Member by the Escrow Agent promptly as liquidated damages;

 

(iii)          the purchasing Member will immediately and without further
action cease to have any right to provide any Put Notice or otherwise trigger
or initiate the provisions set forth in Section 10.1; and

 

58

 

(iv)          the selling Member shall have the right, exercisable by
delivery of Notice to the purchasing Member at anytime within 30 days following
the purchasing Member’s default hereunder, to purchase (pursuant to the terms
of this Section 10.2) the entire Company Interest of the purchasing
Member for cash at a price equal to 82.5% of the Offeror Value or Offeree
Value, as applicable.

 

If the selling Member or its Affiliate, if
applicable, shall default in any of its obligations under this Section 10.2(d) or
Section 10.2(d) of the Sister Company LLC Agreement in any
material respect, the Buy/Sell Deposit, and any interest earned thereon, shall
be returned to the purchasing Member, and the relevant Offer Notice shall be
treated as never having been given. 
Either Member will be entitled to enforce its rights under this Section 10.2
by specific performance.

 

(e)           Closing.  The
closing of the transactions contemplated by this Section 10.2 shall
be held at a location designated by the purchasing Member by Notice to the
selling Member (or, at either Member’s election, pursuant to escrow arrangement
acceptable to each Member in the exercise of their reasonable judgment).  Such closing shall occur on a Business Day
selected by the purchasing Member not less than 45 days after Offeror’s receipt
of the Offeree’s election pursuant to Section 10.2(c) and not
more than 75 days after the original delivery of the Offer Notice.  At the closing:

 

(i)            the purchasing Member shall pay the Offeror Value or
Offeree Value, as applicable, (less the Buy/Sell Deposit and any interest
earned thereon) by wire transfer of immediately available federal funds to an
account designated in writing by the selling Member;

 

(ii)           the selling Member shall deliver to the purchasing Member
or its designee an assignment of all of the selling Member’s Company Interest,
which such assignment shall be free and clear of all legal and equitable claims
(other than the legal and equitable claims, if any, of the purchasing Member
pursuant to this Agreement) and all liens and encumbrances (other than liens
and encumbrances under this Agreement and Financing Documents that shall remain
in full force and effect following the closing);

 

(iii)          the purchasing Member shall deliver to the selling Member
an assumption of the selling Member’s obligations under this Agreement arising
from and after the date of such assignment;

 

(iv)          the selling Member and the purchasing Member shall execute
an agreement acceptable to each such Member in the exercise of their reasonable
judgment whereby (x) each Member shall represent and warrant to the other
that each is duly organized, validly existing, has the necessary power and
authority to consummate the subject transactions and requires no consents which
have not been obtained, and (y) the selling Member shall represent to the
purchasing Member that the selling Member is the owner of its Company Interest
free and clear of all liens and encumbrances (other than liens and encumbrances
under this Agreement and Financing Documents that shall remain in full force
and effect following the closing) and that the Transfer is being made free and
clear of all legal and equitable claims (other than the legal and equitable
claims of the purchasing Member pursuant to this Agreement);

 

59

 

(v)           the Company shall do an interim closing of the books of
the Company as of the closing date, and all items of the Company’s income and
expense shall be apportioned in calculating Cash Flow (for the avoidance of
doubt, the calculation of Cash Flow shall not include any expense treated as a
liability in calculating the Offeree Value and Offeror Value) as of 11:59 p.m.
local time in Hawaii of the day preceding the closing date, and any Cash Flow
that would have been allocable to the seller had it been distributed on the
closing date shall be paid to seller within 30 days after the books have been
closed;

 

(vi)          the Members shall execute all amendments to fictitious name,
limited liability company or similar certificates necessary to effect and
evidence the withdrawal of the selling Member from the Company; and

 

(vii)         the purchasing Member shall obtain a release of the selling
Member from all liability, direct or contingent, by all holders of all Company
debts, obligations or claims for which the selling Member may be personally
liable (including any guarantees of non-recourse carve-outs).

 

(f)            Costs and Expenses.  Each party shall pay its own costs and
expenses in connection with the conveyance of the selling Member’s Company
Interest to the purchasing Member pursuant to this Section 10.2.  All expenses of the Company in connection
with such Transfer (including any transfer, deed, documentary stamp or other
tax) shall be paid be paid by, and deemed to be an expense of, the
Company.  In addition, any prepayment
premium or lender transfer fees due with respect to any Financing and in
connection with a Transfer pursuant to this Section 10.2 shall be
paid by, and deemed to be an expense of, the Company.  Prior to Closing, the purchasing Member shall
be responsible for and shall use good faith efforts to obtain any required
consents or approvals, if any, to such Transfer required under any contract to
which the Company is a party.

 

(g)           Assignment. 
The purchasing Member may, at its option, cause the selling Member’s
Company Interest to be acquired by one or more of the purchasing Member’s
Affiliates or a designee; provided, however,
that any assignment of the purchasing Member’s rights hereunder for purposes of
accomplishing such purchase by any such Affiliate (or designee) shall not
relieve the purchasing Member of any obligation or liability with respect
thereto.

 

(h)           Further Assurances. 
Each Member agrees that it shall be reasonable and cooperate with the
other Member, including executing any documents which may be reasonably
required, in order to consummate the transactions contemplated by this Section 10.2.

 

(i)            Priority. 
In the event any rights under this Section 10.2 shall be
exercised prior in time to the exercise of any rights under Section 10.1,
the rights under this Section 10.2 shall supersede any right
existing pursuant to Section 10.1.

 

(j)            Termination. 
If a purchase and sale of Company Interests under this Section 10.2
is completed, all agreements between the Company and a Member or its Affiliates
related to the Company Assets will (at the election of the purchasing party) be
terminated on the date such Company Interest is purchased without payment of
any penalty or termination fee.

 

60

 

(k)           Attorney in Fact. 
In the event that the Offeror or Offeree shall have failed or refused,
within five calendar days after receipt of a notice from the other requesting
such party to execute, acknowledge and deliver such documents, or cause the
same to be done, as shall be required to effectuate the provisions of Section 10.2
hereof, then the non-defaulting party may execute, acknowledge and deliver such
documents for, on behalf of and in the stead of the defaulting party or on
behalf of and in the name of the Company, as applicable, and such execution,
acknowledgment and delivery by the non-defaulting party shall be for all
purposes effective against and binding upon the defaulting party or the
Company, as applicable, as though such execution, acknowledgment and delivery
had been by the defaulting party or the Company, as applicable.  Each of the Members does hereby irrevocably
constitute and appoint the other Members as the true and lawful attorney in
fact of such appointing Member, in the name, place and stead of such appointing
Member, as the case may be, to execute, acknowledge and deliver such documents
under the circumstances contemplated by this Section 10.2(k).  It is expressly understood, intended and
agreed by each Member, that the grant of the power of attorney to the other
Members pursuant to this Section 10.2(k) is coupled with an
interest, is irrevocable and shall survive the death, dissolution, termination
or legal incompetency of such appointing Member, as the case may be.

 

(l)            Coordination. 
Notwithstanding anything to the contrary in this Agreement, (1) concurrent
with any Offer Notice provided by any Member under this Section 10.2, such
Offeror (or its Affiliate, if applicable) shall provide an “Offer Notice” (as
defined in the Sister Company LLC Agreement) in accordance with the Sister
Company LLC Agreement, (2) concurrent with Offeree’s election made under Section 10.2(c) of
this Agreement, such Offeree (or its Affiliate) shall make the same election
under Section 10.2(c) of the Sister Company LLC Agreement, (3) the
purchasing Member and the selling Member under this Agreement (or their
respective Affiliate, if applicable) shall be the purchasing Member or selling
Member, as applicable, under Section 10.2 
of the Sister Company LLC Agreement and comply with the terms thereof,
and (4) concurrent with the closing of the transactions contemplated by Section 10.2(e),
each of purchasing Member and selling Member (or their respective Affiliate, if
applicable) shall close on the purchase and sale in accordance with the terms
of Section 10.2(e) of the Sister Company LLC Agreement.

 

ARTICLE XI

 

DISSOLUTION, LIQUIDATION
AND TERMINATION

 

SECTION 11.1               Dissolution.  The Company shall be dissolved and its
business wound up upon the happening of any of the following events, whichever
shall first occur:

 

(a)           the unanimous vote of the Members to dissolve, wind-up and
liquidate the Company;

 

(b)           the sale, condemnation or other disposition of the
Property or all or substantially all of the Company Assets and the receipt of
all consideration therefor except that if non-monetary consideration is
received upon such disposition the Company shall not be dissolved pursuant to
this clause until such consideration is converted into money or money
equivalent;

 

61

 

(c)           at any time there are no members of the Company unless the
business of the Company is continued in accordance with the Delaware Act; or

 

(d)           the entry of a decree of judicial dissolution under Section 18-802
of the Delaware Act.

 

Any dissolution of the Company other than as
provided in this Section 11.1 shall be a dissolution in
contravention of this Agreement.

 

SECTION 11.2               Liquidation and Termination.  If the Company is dissolved and not
reconstituted, the business of the Company shall be wound-up and the Company
terminated as promptly as practicable thereafter, and each of the following
shall be accomplished:

 

(a)           The Liquidating Member shall cause to be prepared
(i) statements setting forth the assets and liabilities of the Company as
of the date of dissolution and as of the date of complete liquidation, a copy
of such statements shall be furnished to all of the Members and (ii) a
report in reasonable detail of the manner or disposition of assets.

 

(b)           The property and assets of the Company shall be liquidated
by the Liquidating Member as promptly as possible, but in an orderly,
businesslike and commercially reasonable manner and subject to the provisions
of the Annual Budget then in effect or a liquidity plan Approved by
Members.  The Liquidating Member may, in
the exercise of its business judgment and if commercially reasonable, determine
to defer the sale of all or any portion of the property and assets of the
Company if deemed necessary or appropriate to realize the fair market value of
any such property or assets; provided, however, that such liquidation shall comply in all events
with the timing requirements of Treasury Regulations Section 1.704-1(b)(2)(ii)(b).

 

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

 

(i)            First, to the
payment of (A) the debts and liabilities of the Company (including any
outstanding amounts due on any recourse Financing encumbering the Company
Assets (or any part thereof)) and (B) the expenses of liquidation; then

 

(ii)           Second, subject
to Approval by Investor, to the establishment of any Reserves that the
Liquidating Member shall determine in its commercially reasonable judgment to
be reasonably necessary for contingent, unliquidated or unforeseen liabilities
or obligations of the Company or the Members arising out of or in connection
with the Company.  Such Reserves may, in
the commercially reasonable discretion of the Liquidating Member, be paid over
to a national bank or national trust company selected by the Members and
authorized to conduct business as an escrowee to be held by such bank or trust
company as escrowee for the purposes of disbursing such Reserves to satisfy the
liabilities and obligations described above, and at the expiration of such
period distributing any remaining balance as provided hereinafter in this Section 11.2(c);
provided, however, that, to the extent that it shall
have been necessary, by reason of applicable law or regulation, to create any
Reserves prior to any and all distributions 

 

62

 

which would otherwise have
been made under Section 11.2(c)(i) and, by reason thereof, a
distribution under Section 11.2(c)(i) has not been made, then any
balance remaining shall first be distributed pursuant to
Section 11.2(c)(i); then

 

(iii)          Third, to the
repayment of any liabilities or debts of the Company to any of the Members pro rata to the respective outstanding balances of such
liabilities; and then

 

(iv)          Fourth, to the
Members, in accordance with Section 5.3.

 

(d)           The Liquidating Member shall cause the filing of the
Certificate of Cancellation pursuant to Section 18-203 of the Delaware Act
and shall take all such other actions as may be necessary to terminate the
Company.

 

SECTION 11.3               Adjustment of Distributions.  The Members intend that the allocations of
Profit and Loss pursuant to this Agreement will result in the Capital Account
balances of the Members being such that all distributions upon dissolution will
be the same as if such distributions were made pursuant to Section 5.3.  However, if the Liquidating Member reasonably
determines that there is a reasonable possibility that this result would not
occur, the Liquidating Member, may adjust the allocations of Profit and Loss
(or items thereof) otherwise provided for herein in order to attempt to achieve
such result.  The Members agree to amend
this Agreement to reflect such adjustments, if required by the Liquidating
Member.

 

SECTION 11.4               Date of Termination.  The Company shall be liquidated and
terminated when all Company Assets have been converted into cash, all
promissory notes or other evidences of indebtedness derived by the Company from
such conversion of the Company Assets have been collected or otherwise
converted into cash, and all such cash has been applied and distributed in
accordance with the provisions of Section 11.2.  The establishment of any Reserves shall not
have the effect of extending the term of the Company, but such Reserves shall
be distributed in accordance with Section 11.2 and in the manner
and within the time period as the Liquidating Member deems advisable and
appropriate.

 

SECTION 11.5               Liquidating Member.

 

(a)           The term “Liquidating Member”
shall mean the Person designated by the Manager and Approved by Investor.

 

(b)           Without limiting the foregoing, the Liquidating Member
shall, upon the dissolution and upon completion of the winding-up of the
affairs of the Company, file appropriate certificate(s) to such effect in
the proper governmental office or offices under the Delaware Act as then in
effect.  Notwithstanding the foregoing,
each Member, upon the request of the Liquidating Member, shall promptly
execute, acknowledge and deliver all such documents, certificates and other
instruments as the Liquidating Member shall reasonably request to effectuate
the proper dissolution and termination of the Company, including the winding up
of the business of the Company.

 

SECTION 11.6               Withdrawals.  Except as otherwise expressly provided in
this Agreement, the Members do hereby covenant and agree that they shall not
withdraw or retire 

 

63

 

from the Company except as a result of a permitted
Transfer of their entire respective Company Interests, or as otherwise
expressly permitted pursuant to Article IX or Article X,
and that they shall carry out their duties and responsibilities hereunder while
Members and until the Company is terminated, liquidated, and dissolved under
this Article XI.

 

SECTION 11.7               Governance.  Notwithstanding a dissolution of the Company,
until the termination of the business of the Company, the affairs of the
Members, as such, shall continue to be governed by this Agreement.  The Liquidating Member shall be subject to
the same restrictions on transactions with related parties or involving
conflicts of interest as applied prior to the dissolution of the Company,
including to the consent requirements set forth herein of any such
transaction.  The Liquidating Member
shall be required to perform its duties under this Agreement using the same
standard of care that would be required of the Liquidating Member if the
Liquidating Member were acting as the Manager.

 

SECTION 11.8               Return of Capital.  No Member shall have any right to receive the
return of its Capital Contribution or to seek or obtain partition of assets of
the Company, other than as provided in this Agreement.

 

ARTICLE XII

 

DEFAULT BY MEMBER

 

SECTION 12.1               Events of Default.

 

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

 

(a)           Such Member or its Affiliates shall (1) violate any
material term, breach any material provision or default in the performance of
any of its duties or material covenant applicable to such Member as set forth
in this Agreement (excluding a failure to make Initial Capital Contributions or
Capital Contributions, the exclusive remedy for which is set forth in Sections 3.1
and 3.2, respectfully) and (i) such violation, breach or default
causes Material Damage or Loss to the Company, any Subsidiary, or any of its
Members or their respective Affiliates, and (ii) such violation, breach or
default is not cured (including without limitation, by the breaching Member
reimbursing the Company or the affected Subsidiary or Member for the resulting
material damage or loss) within a Reasonable Period or (2) commit an “Event
of Default” (as defined in the Sister Company LLC Agreement) under Section 12.1
of the Sister Company LLC Agreement.

 

(b)           An “Event of Default” shall occur and be continuing under
any material agreement that the Company or an Subsidiary enters into with a
Member or any of its Affiliates, and (i) such violation, breach or default
causes Material Damage or Loss to the Company, any Subsidiary or any of its
Members or their respective Affiliates, and (ii) such violation, breach or
default is not cured (including without limitation, by the breaching Member
reimbursing the Company or the affected Subsidiary or Member for the resulting
Material Damage or Loss) within a Reasonable Period.

 

64

 

 

Notwithstanding the foregoing provisions of this Section 12.1,
(x) a failure by any Member to make any Capital Contribution to the extent
required or requested hereunder shall not constitute an Event of Default by
such Member and (y) the events described in clauses (a) and (b) above
shall not constitute an “Event of Default” by (i) JMIR or JMIR Manager if
such event arises solely at the express written direction of Investor or with
the prior Approval of Investor or (ii) Investor if such event arises
solely with the prior Approval of JMIR.

 

SECTION 12.2       Effect of Event of Default.

 

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

 

ARTICLE XIII

 

REPRESENTATIONS AND
WARRANTIES OF THE MEMBERS

 

SECTION 13.1               Representations and Warranties
of Members.  Each Member (solely on
behalf of itself and not with respect to any other Member) hereby represents,
warrants, covenants and acknowledges as follows:

 

(a)           Such Member is duly incorporated, organized or formed (in
the event such Member is not a corporation), validly existing and in good
standing under the laws of its state or country of incorporation, organization
or formation (as the case may be).  Such
Member has the requisite power and authority to own its property and to carry
on its business as now conducted, to the extent material to its rights and
obligations under this Agreement.

 

(b)           Such Member has all requisite power and authority to enter
into this Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder in accordance with the terms and provisions
hereof.

 

(c)           All acts and other proceedings required to be taken by
such Member to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and properly taken.

 

(d)           This Agreement has been duly executed and delivered by
such Member and constitutes the valid and binding obligation of such Member,
enforceable against it in accordance with its terms, except as enforceability
may be affected by: (i) the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of
creditors; (ii) the effect of general
principles of equity and the limitation of certain remedies by certain
equitable principles of general applicability; and (iii) the fact that the
rights to indemnification hereunder may be limited by federal or state
securities laws.

 

(e)           The execution, delivery and performance by such Member of
this Agreement and the transactions contemplated hereby will not constitute a
material breach of any 

 

65

 

term or provision of, or a material default under
(i) any outstanding indenture, mortgage, loan agreement or other similar
contract or agreement to which such Member or any of its Affiliates is a party
or by which it or any of its Affiliates or its or their property is bound; (ii) its
certificate or articles of incorporation or bylaws or other governing
documents; (iii) any material applicable law, rule or regulation; or (iv) any
material order, writ, judgment or decree having applicability to it.

 

(f)            Such Member has obtained all approvals and consents
required to be obtained by it in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated to occur
on the Effective Date from all Persons having approval or consent rights, to
the extent that the failure to obtain consent from any such Person would have a
material adverse affect on the Company or the Company Assets.

 

(g)           Such Member has obtained all approvals and consents if
any, and has made all material filings and registrations, required from or by
any governmental body, authority, bureau or agency in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

 

(h)           Such Member has not incurred any obligation to a broker or
finder for payment of any commission or fee in connection with in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, including its admission as a Member.

 

(i)            Such Member is acquiring its Company Interest for its own
account and not for the account of any other Person.  Such Member is acquiring its Company Interest
solely for investment and not with a view to, or for resale in connection with,
the distribution or other disposition thereof either
currently or after the passage of a fixed or determinable period of time or
upon the occurrence or non-occurrence of any predetermined event or
circumstance in violation of the Securities Act.  Such Member understands that the sale and
issuance of the Company Interests has not been registered under the Securities
Act, applicable state securities laws or the securities or similar laws of any
other jurisdiction whatsoever, and, therefore, the Company Interests cannot be
Transferred otherwise disposed of unless they are subsequently registered under
the securities and similar laws of each applicable jurisdiction, or unless
exemptions from such registration requirements are available.  Such Member understands that Transfers and
dispositions of its Company Interest can be made only (i) as explicitly
permitted or contemplated under the terms of this Agreement and (ii) in
compliance with the Securities Act and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder and all applicable
state securities and “blue sky” laws; and such Member understands that the
Company is under no obligation to register the offer or sale of any Company
Interests in any jurisdiction whatsoever or to assist such Member in complying
with any exemption from registration under the securities or similar laws of
any jurisdiction whatsoever.

 

(j)            Such Member understands and is able to bear the economic
risk of an investment in the Company and can afford to sustain a total loss on
such investment.  Such Member further
acknowledges that there are substantial risks in the investment (including loss
of the entire amount of such investment), that such Member is capable of
evaluating the merits and risks of the investment in the Company and such
Member has evaluated such risks and 

 

66

 

determined that the Company Interest is a suitable
investment for such Member.  Such Member
has such knowledge and experience in business, financial and tax matters,
including experience in investing in non-listed and non-registered securities,
and is a sophisticated investor capable of utilizing the information made
available to it in connection with its investment in the Company Interest to
evaluate the merits and risks of its investment in the Company, to make an
informed investment decision with respect thereto and to protect its interests
in connection with such investment.

 

(k)           Such Member, or each beneficial owner (within the meaning
of Rule 501 of Regulation D promulgated under the Securities Act (“Regulation D”)) of such Member, (i) is
an “accredited investor” as such term is defined in Rule 501 of Regulation
D and (ii) is a partnership, corporation, limited liability company, trust
or estate with total assets in excess of $5,000,000 and has not been formed for
the specific purpose of acquiring the Company Interest unless each beneficial
owner of such entity is qualified as an accredited investor within the meaning
of Rule 501 of Regulation D.  Such
Member, or each beneficial owner of such Member, is a “qualified purchaser” as
such term is defined in the 1940 Act.

 

(l)            Such Member and its legal, tax, accounting and financial
advisers have been provided an opportunity to ask questions of and receive
information from a person or persons acting on behalf of the Company (including
the Manager) concerning the investment in the Company, the Company Assets, the
Company, and such other matters as such Member and any of its advisors have
deemed necessary or desirable.

 

(m)          Such Member has consulted
and been advised by its own legal counsel and tax advisor in connection with,
and acknowledges that no representations as to potential profit, tax
consequences of any sort (including the tax consequences resulting from forming
or operating the Company, conducting the business of the Company, executing
this Agreement, consummating the transactions provided for herein, making a
Capital Contributions, being admitted to the Company, receiving or not
receiving distributions from the Company, or being allocated Profits and
Losses), cash flows or funds from operations or yield, if any, in respect of
the Company have been made by the Company, any Member or any Affiliate of any
Member or any employee or representative thereof, and that projections and any
other financial information and documentation that may have been in any manner
submitted to such Member from any source shall not constitute any
representation or warranty of any kind or nature, express or implied and such Member is not relying on any representations or
warranties of any other Person in connection therewith, including the Company
or any other Member, including the Manager.

 

(n)           None of the Capital Contributions of the Member will
consist in whole or in part of “plan assets,” as that term is defined in 29
C.F.R. Section 2510.3-101, and the Member’s Company Interest is not “plan
assets,” as defined in 29 C.F.R. Section 2510.3-101.  This representation and warranty shall be
deemed made on a continuous basis by each Member at all times that such Member
owns a Company Interest.

 

(o)           Neither such Member nor, to such Member’s knowledge, any
Person who holds any interest in such Member, is a Prohibited Person nor a
Person with whom a U.S. Person, including a “financial institution” as defined
in 31 U.S.C. 5312 (a)(z), as amended, is prohibited from transacting
business of the type contemplated by this Agreement or any 

 

67

 

Transaction Document, whether such prohibition
arises under United States law, regulation, executive orders and lists
published by the OFAC (including those executive orders and lists published by
OFAC with respect to Specially Designated Nationals and Blocked Persons) or
otherwise.

 

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

 

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

 

(r)            Without in anyway limiting
the foregoing, such Member acknowledges and agrees that:

 

(i)            neither the Company, any
Member nor any Affiliate of any Member nor any employee or other representative
of the foregoing, except as specifically made herein, has at any time made any
warranties or representations of any kind or character, express or implied,
with respect to the Property or other Company Assets, including any warranties
or representations as to habitability, merchantability or fitness for a
particular purpose, and that the Company shall own and hold its direct or
indirect interests in the Property and other Company Assets “AS IS, WHERE IS, WITH ALL FAULTS;”

 

(ii)           except with respect to the
representations and warranties expressly made by any Member in this Agreement,
such Member has not relied and will not rely on, and neither the Company nor
any Member or Affiliate of Member is or shall be liable for or bound by, any
express or implied warranties, guaranties, statements, representations or
information pertaining to the Property or relating thereto (including
specifically, without limitation, offering packages distributed with respect to
the Property or the potential investment in the Company) made or furnished by
the Company, any Member, any Affiliate of a Member, the manager(s) of the
Property or any other Person, to whomever made or given, directly or
indirectly, orally or in writing; and

 

(iii)          all materials, data and
information delivered to any Member by any Person relating to the Property have
been provided to such Member as a convenience only and any reliance on or use
of such materials, data or information by such Member shall be at the sole risk
of such Member, except to the extent otherwise expressly set forth in Section 13.2.

 

SECTION 13.2               Member Indemnity.  Each Member agrees to indemnify, defend and
hold harmless the Company, the other Members, each officer, director, agent and
Affiliate of the Company and the other Members, and each other Person, if any,
who controls any of the 

 

68

 

foregoing within the meaning of Section 15 of
the Securities Act, against any and all losses, claims, demands, costs,
damages, liabilities (joint and several), expenses of any nature (including
reasonable attorneys’ fees and disbursements and other costs of litigation,
whether pending or threatened), judgments, fines, settlements and other amounts
arising from any and all claims, demands, actions, suits or proceedings, civil,
criminal, administrative or investigative, in which such Person may be
involved, or threatened to be involved as a party or otherwise, arising out of
or based upon any false representation or warranty made by such Member herein
or in any other document or certificate delivered to the Company by such Member
in connection with such Member’s acquisition of its Company Interest.

 

SECTION 13.3               Survival.  Notwithstanding anything to the contrary in
this Agreement, the provisions of this Article XIII shall survive
the expiration or sooner termination of this Agreement.

 

ARTICLE XIV

 

MISCELLANEOUS

 

SECTION 14.1               Further Assurances.  Each Member agrees to execute, acknowledge,
deliver, file, record and publish such further reasonable certificates,
amendments to certificates, instruments and documents, and do all such other
reasonable acts and things as may be required by law, or as may be required to
carry out the intent and purposes of this Agreement so long as any of the
foregoing do not materially increase any Member’s obligations hereunder or
materially decrease any Member’s rights hereunder.

 

SECTION 14.2               Notices.  All notices, demands, consents, approvals,
requests or other communication required or permitted to be given hereunder
(collectively, “Notices” and each, a “Notice”)
shall be in writing and may be served personally or by U.S. Mail.  If served by U.S. Mail, it shall be addressed
to the recipient as set forth below.  Any
Notice that is personally served shall be effective upon the date of service;
any Notice given by U.S. Mail shall be deemed effectively given, if deposited
in the United States Mail, registered or certified with return receipt
requested, postage prepaid and addressed as provided above, on the date of
receipt, refusal or non-delivery indicated on the return receipt.  In lieu of Notice by U.S. Mail, either party
may send Notices by facsimile to the number specified for the recipient below
or by a nationally recognized overnight courier service which provides written
proof of delivery (such as U.P.S. or Federal Express).  Any Notice sent by facsimile shall be
effective upon confirmation of receipt in legible form, provided that an
original of such facsimile is also sent to the intended addressee by another
method approved in this Section 14.2, and any Notice sent by a
nationally recognized overnight courier shall be effective on the date of
delivery to the recipient at its address set forth below as set forth in the
courier’s delivery receipt.

 

	
   

  	
  (i)

  	
  If to the Investor, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Behringer Harvard Kauai Hotel, LLC

  15601 Dallas Parkway, Suite 600

  Addison, TX  75001

  

 

69

 

	
   

  	
   

  	
  Attn:

  	
  Executive Vice President of Real Estate

  
	
   

  	
   

  	
  Fax:

  	
  (214) 655-1610

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Behringer Harvard Opportunity REIT II, Inc.

  15601 Dallas Parkway, Suite 600

  Addison, TX  75001

  
	
   

  	
   

  	
  Attn:

  	
  Chief Legal Officer

  
	
   

  	
   

  	
  Fax:

  	
  (214) 655-1610

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
  If to the Company or JMIR, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o JMI Realty LLC

  111 Congress Avenue, Suite 2600

  Austin, TX 78701

  Attention:  C. Brian Strickland

  Fax No.:  (512) 539-3601

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Procopio, Cory, Hargreaves & Savitch LLP

  525 B Street, Suite 2200

  San Diego, CA  92101

  Attention:  David C. Boatwright, Esq.

  Fax Number:  (619) 744-5482

  

 

Any Member may designate another addressee (and/or
change its address or facsimile number) for Notices hereunder by a Notice given
pursuant to this Section 14.2. 
Copies of all Notices required to be sent by a Member to the Company
under the terms of this Agreement shall also be sent to each Member in
accordance with the terms hereof.

 

SECTION 14.3               Governing Law.  This Agreement, the rights and obligations of
the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of Delaware
without giving effect to any otherwise governing conflicts or choice of laws
provisions that would cause the application of the domestic substantive laws of
any other jurisdiction.

 

SECTION 14.4               Certain Rules of
Construction.  To the fullest extent
permitted by law, the parties hereto intend that any ambiguities shall be
resolved without reference to which party may have drafted this Agreement.  All Article or Section titles or
other captions in this Agreement are for convenience only, and they shall not
be deemed part of this Agreement and in no way define, limit, extend or
describe the scope or intent of any provisions hereof.  Unless the context otherwise requires:
(a) a term has the meaning assigned to it; (b) “or” is not exclusive;
(c)  provisions apply to successive events and transactions; (d) any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms; (e) the word “extent” in the phrase “to the
extent” shall mean the degree to which a subject or other thing extends, and
such phrase shall not mean simply “if”; (f) references to “$” or “dollars”
shall mean 

 

70

 

United States dollars; (g) unless otherwise
expressly provided herein, any agreement, instrument or statute defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and instruments
incorporated therein; and (h) all references to any Member shall mean and
include such Member and any Person duly admitted as a member of the Company in
substitution therefor in accordance with this Agreement, unless the context
otherwise requires.

 

SECTION 14.5               Pronouns.  All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, and neuter, singular and plural,
as the identity of the party or parties may require.

 

SECTION 14.6               Successors and Assigns.  This Agreement shall be binding upon the
parties hereto and their respective executors, administrators, legal representatives,
heirs, successors and permitted assigns, and shall inure to the benefit of the
parties hereto and, except as otherwise provided herein, their respective
executors, administrators, legal representatives, heirs, successors and
permitted assigns.

 

SECTION 14.7               Extension Not a Waiver.  No delay or omission in the exercise of any
power, remedy or right herein provided or otherwise available to a Member or
the Company shall impair or affect the right of such Member or the Company
thereafter to exercise the same.  Any
extension of time or other indulgence granted to a Member hereunder shall not
otherwise alter or affect any power, remedy or right of any other Member or of
the Company, or the obligations of the Member to whom such extension or indulgence
is granted.

 

SECTION 14.8               Severability.  If any provision of this Agreement as applied
to any party or any circumstances is determined by any court having
jurisdiction to be void, unenforceable or inoperative as a matter of law, then
the Members agree that such provision shall be modified to the greatest extent
legally possible so that the intent of this Agreement may be legally carried
out.  If any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held void, unenforceable or inoperative as a matter of law in any respect or
for any reason, then the validity, enforceability and operation of any such
provision in every other respect and of the remaining provisions hereof shall
not be in any way impaired or affected, it being intended that all of the
Members’ rights and privileges shall be enforceable to the fullest extent
permitted by law.

 

SECTION 14.9               Consents.  Except as otherwise expressly provided
herein, any consent or approval to any act or matter required under this
Agreement must be in writing and shall apply only with respect to the
particular act or matter to which such consent or approval is given, and shall
not relieve any Member from the obligation to obtain the consent or approval,
as applicable, wherever required under this Agreement to any other act or
matter.

 

SECTION 14.10             Entire Agreement.  This Agreement and the agreements referred to
herein or contemplated hereby, including the True-Up Agreement, the Guaranty
Sharing Agreement, the Sister Company Guaranty Sharing Agreement, the
Distribution Equivalent 

 

71

 

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

 

SECTION 14.11             Counterparts.  This Agreement may be executed in any number
of counterparts, and each such counterpart will for all purposes be deemed an
original, and all such counterparts shall constitute one and the same
instrument.

 

SECTION 14.12             Creditors.  None of the provisions of this Agreement
shall be for the benefit of or enforceable by any creditor of any Member or of
the Company.

 

SECTION 14.13             Ownership of Company Property.  The interest of each Member in the Company
shall be personal property for all purposes. 
All real and other property owned by the Company shall be deemed owned
by the Company as Company Assets.  No
Member, individually, shall have any direct ownership of such property and
title to such property shall be held in the name of the Company.

 

SECTION 14.14             Time of the Essence.  Except as otherwise expressly provided in
this Agreement, time shall be of the essence with respect to all time periods
set forth in this Agreement.

 

SECTION 14.15             Recalculation of Interest.

 

If any applicable law is ever judicially
interpreted so as to deem any distribution, contribution, payment or other
amount received by any Member or the Company under this Agreement as interest
and so as to render any such amount in excess of the maximum rate or amount of
interest permitted by applicable law, then it is the express intent of the
Members and the Company that all amounts in excess of the highest lawful rate
or amount theretofore collected be credited against any other distributions,
contributions, payments or other amounts to be paid by the recipient of the
excess amount or refunded to the appropriate Person, and the provisions of this
Agreement immediately be deemed reformed, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the payment of the fullest amount otherwise required
hereunder.  All sums paid or agreed to be
paid that are judicially determined to be interest shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the term of such obligation so that the rate or amount of interest
on account of such obligation does not exceed the maximum rate or amount of
interest permitted under applicable law.

 

SECTION 14.16             Waiver of Partition.  Except as otherwise expressly provided for in
this Agreement, no Member shall, either directly or indirectly, take any action
to require partition or appraisement of the Company or any of its assets or
properties or cause the sale of any Company assets or property, and
notwithstanding any provisions of applicable law to the contrary, each Member
(for itself and its legal representatives, successors and assigns) hereby
irrevocably 

 

72

 

waives any and all right to partition, or to
maintain any action for partition, or to compel any sale with respect to its
interest in, or with respect to, any assets or properties of the Company,
except as expressly provided in this Agreement.

 

SECTION 14.17             Calculation of Days.  The provisions of this Agreement relative to
number of days shall be deemed to refer to calendar days, unless otherwise
specified.  When the date for performance
of any monetary obligation of any Member falls on a non-Business Day, such
obligation need not be performed until the next-following Business Day.

 

SECTION 14.18             Publicity.

 

The parties agree that no Member shall issue any
press release or otherwise publicize or disclose the terms of this Agreement or
the proposed terms of any acquisition of the Company Assets, without the
consent of each of the other Members, except as such disclosure may be made in
the course of normal reporting practices by any Member to its members,
shareholders or partners or as otherwise required by law, rule, or regulation.

 

SECTION 14.19             Confidentiality.

 

(a)           The terms of this Agreement, the identity of any person
with whom the Company or any Subsidiary may be holding discussions with respect
to any investment, acquisition, disposition or other transaction, and all other
business, financial, or other information relating directly to the conduct of
the business and affairs of the Company, any Subsidiary, the Company Assets or
the relative or absolute rights or interests of any of the Members
(collectively, the “Confidential Information”)
that is not already publicly available (including in any SEC filings) or that
has not been publicly disclosed pursuant to authorization by all of the Members
is confidential and proprietary information of the Company, the disclosure of
which would cause irreparable harm to the Company and the Members.  Accordingly, each Member represents that it
has not and agrees that it will not and will direct its shareholders, members,
partners, directors, officers, agents, advisors and Affiliates not to, disclose
in violation of this Agreement to any Person any Confidential Information or
confirm in violation of this Agreement any statement made by third Persons
regarding Confidential Information until the Company has publicly disclosed the
Confidential Information pursuant to authorization by all of the Members; provided, however,
that any Member (or its Affiliates) may disclose such Confidential Information
if required by law (it being specifically understood and agreed that anything
set forth in a registration statement or any other document filed pursuant to
law will be deemed required by law), if necessary for it to perform any of its
duties or obligations hereunder or in any property management agreement to
which it is a party covering any Company Assets, or to market the Company
Assets or any Company Interests as permitted by the terms of this Agreement,
and to its attorneys and advisors who agree to maintain a similar
confidence.  Notwithstanding anything to
the contrary in this Agreement, in connection with efforts to raise invested
funds from time to time, (1) JMIR and its Affiliates shall be permitted to
disclose the identity of the Members and their Affiliates, investment returns,
internal underwriting and other material facts regarding the Project in any
offering materials containing confidentiality provisions, in each case with the
prior Approval of Investor (not to be unreasonably withheld), provided JMIR shall be liable for any
disclosure of such information in violation of this clause (1) of Section 14.19
by any of JMIR’s or its Affiliates’ agents, consultants, financial advisors,
attorneys, 

 

73

 

accountants and any other outside advisors as and to
the same extent as if the disclosure was made by JMIR or its Affiliates, and (2) Investor
and its Affiliates shall be permitted to disclose the identity of the Members
and their Affiliates, investment returns, internal underwriting and other
material facts regarding the Project in any offering materials containing
confidentiality provisions, in each case without the consent of any Member, provided Investor shall be liable for any
disclosure of such information in violation of this clause (2) of Section 14.19
by any of Investor’s or its Affiliates’ agents, consultants, financial
advisors, attorneys, accountants and any other outside advisors as and to the
same extent as if the disclosure was made by Investor or its Affiliates.

 

(b)           Subject to the provisions of Section 14.19(a),
each Member agrees not to disclose any Confidential Information to any Person
(other than a Person (including without limitation an attorney or advisor)
agreeing to maintain all Confidential Information in strict confidence or a
judge, magistrate or referee in any action, suit or proceeding relating to or
arising out of this Agreement or otherwise), and to keep confidential all
documents (including without limitation, responses to discovery requests)
containing any Confidential Information. 
Each Member hereby consents in advance to any motion for any protective
order brought by any other Member represented as being intended by the movant
to implement the purposes of this Section 14.19, provided that, if
a Member receives a request to disclose any Confidential Information under the
terms of a valid and effective order issued by a court or governmental agency
and the order was not sought by or on behalf of or consented to by such Member,
then such Member may disclose the Confidential Information to the extent
required if the Member as promptly as practicable (i) notifies each of the
other Members of the existence, terms and circumstances of the order, (ii) consults
in good faith with each of the other Members on the advisability of taking
legally available steps to resist or to narrow the order, and (iii) if
disclosure of the Confidential Information is required, exercises its best
efforts to obtain a protective order or other reliable assurance that
confidential treatment will be accorded to the portion of the disclosed
Confidential Information that any other Member designates.  The cost (including without limitation,
attorneys’ fees and expenses) of obtaining a protective order covering
Confidential Information designated by such other Member will be borne by the
Company.

 

(c)           The covenants contained in this Section 14.19
shall expire on the earlier of (1) the Transfer of all of Investor’s
Company Interest to a non-Affiliate of Investor, and (2) one year
following the termination of the Company.

 

SECTION 14.20             Securities.  Solely for purposes of the Uniform Commercial
Code as in effect in the State of Delaware, the Members acknowledge and agree
that the limited liability company interests are securities governed by Article VIII
of the Uniform Commercial Code as in effect in the State of Delaware.

 

SECTION 14.21             Venue.  Each of the Members consents to the
jurisdiction of any court in Dallas, Texas for any action arising out of
matters related to this Agreement.  Each
of the Members waives the right to commence an action in connection with this
Agreement in any court outside of Dallas, Texas.

 

74

 

SECTION 14.22             WAIVER OF JURY TRIAL.  EACH OF THE MEMBERS HEREBY WAIVES TRIAL BY
JURY IN ANY ACTION ARISING OUT OF MATTERS RELATED TO THIS AGREEMENT, WHICH
WAIVER IS INFORMED AND VOLUNTARY.

 

SECTION 14.23             Prevailing Party Costs and Fees.  In any judicial action between the parties to
enforce any of the provisions of this Agreement or any right of any party under
this Agreement, in addition to any other remedy, the unsuccessful party shall
pay to the prevailing party all costs and expenses, including reasonable
attorneys’ fees and expenses, incurred therein by the prevailing party in
connection with such action.

 

SECTION 14.24             Force Majeure.  The parties to this Agreement shall be
excused from performance of their obligations under this Agreement where they are
prevented from so performing by revolutions, terrorism or similar disorders,
wars, acts of enemies, strikes, fires, floods, acts of God, or, without
limiting the foregoing, by any cause not within the control of the party whose
performance is interfered with, and which, by the exercise of reasonable
diligence, the party is unable to prevent. 
All parties shall perform such parts or aspects of their obligations as
are not interfered with by these causes.

 

SECTION 14.25             Third Party Beneficiaries. 
Each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any Person other than
the parties hereto and, solely with respect to Section 7.9 the
Indemnified Parties.

 

SECTION 14.26             Company Counsel.  The Manager has retained Procopio, Cory,
Hargreaves & Savitch LLP (“PCHS”)
to prepare this Agreement.

 

(a)           In General. 
Each Member is advised that it is entitled to be represented by
independent counsel of its choice with respect to becoming a Member of the Company,
and each Member or potential Member should seek advice from its own independent
counsel in regard to its investment in the Company and execution of this
Agreement.  Each Member acknowledges that
it has sought advice from its own separate legal counsel in this regard or has
chosen not to do so.  Each Member further
acknowledges and agrees that PCHS has represented, continues to represent and
may in the future represent the Manager, JMIR and their respective Affiliates
(collectively, the “JMIR Parties”)
in matters related and unrelated to the Company.  Each Member acknowledges that PCHS has not
undertaken any and has no duty or obligation of any kind to any Member (other
than JMIR) in connection with this Agreement or any other document contemplated
by this Agreement.  In no event does or
will an attorney-client relationship exist between PCHS, on the one hand, and
any Member (or any of its Affiliates), on the other hand (other than JMIR), in
the absence of an express written engagement agreement between such Member (or
any of its Affiliates) and PCHS.  Each
party hereto hereby waives all conflicts of interest relating to the
representation by PCHS from time to time of the JMIR Parties and, upon the
request of PCHS, agrees to execute a conflict of interest waiver with PCHS
regarding the same.

 

(b)           Legal Advice to Company.  From time to time, subject to the Rules of
Professional Conduct of the State Bar of California (the “Rules”),
PCHS shall be permitted to render legal advice and to provide legal services to
the Company, the Manager, the Members and their respective Affiliates with
respect to the Company and otherwise. 
Each Member agrees that 

 

75

 

 

such representation, including any representation of
the Company by PCHS, from time to time, shall not disqualify PCHS from
providing legal advice and legal services to the JMIR Parties, as set forth in Section 14.26(a),
at any time in the future.

 

(c)           Company Representation.  Each Member shall at all times continue to
engage and consult with its own separate legal counsel, if any, in connection
with matters and affairs relating to the Company.  If any dispute or controversy arises between
any Member, on one hand, and any one or more of the Company, the Manager, the
Members or any of their respective Affiliates, on the other hand, then each
Member agrees that PCHS may represent either the Company, the Manager, the
Members, any of their respective Affiliates or all of them in any such dispute
or controversy to the extent permitted by the Rules or similar rules in
any other jurisdiction and each Member hereby consents to such
representation.  Without limiting the
generality of the foregoing, if PCHS represents the Company on various matters
from time to time, and if conflicts of interest or other controversies develop
between a JMIR Party, on the one hand, and any one or more of the Members or
the Company, on the other hand, PCHS may withdraw as counsel to the Company and
may represent the JMIR Party in such a dispute to the fullest extent permitted
under the Rules or similar rules in any other jurisdiction and each
Member hereby consents to such representation.

 

ARTICLE XV

 

PATRIOT ACT

 

SECTION 15.1       Compliance with International Trade
Control Laws and OFAC Regulations.

 

Each Member represents, warrants and covenants to
the other that:

 

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

 

(b)           No Member and no Person who owns a direct interest in a
Member is now nor shall be at any time during the term of this Agreement a
Person with whom a U.S. Person, including a financial institution, is prohibited
from transacting business of the type contemplated by this Agreement, whether
such prohibition arises under U.S. law, regulation, executive orders and lists
published by the OFAC (including those executive orders and lists published by
OFAC with respect to Specially Designated Nationals and Blocked Persons) or
otherwise.

 

SECTION 15.2       Member’s Funds.

 

(a)           Each Member represents, warrants and covenants to the
other Member that it has taken, and shall continue to take during the term of
this Agreement, such measures as are required by law to assure that the funds
invested in the Company and/or used to make payments in connection therewith
are derived (i) from transactions that do not violate U.S. law 

 

76

 

nor, to the extent such funds originate outside the
United States, do not violate the laws of the jurisdiction in which they
originated; and (ii) from permissible sources under U.S. law or to the
extent such funds originate outside the United States, under the laws of the
jurisdiction in which they originated.

 

(b)           Each Member further represents, warrants and covenants to
the other Member that, to the best of its knowledge after making due inquiry,
neither the Member, nor any Affiliate, nor any holder of a direct interest in
such Member, nor any Person providing funds to such Member (i) is under
investigation by any governmental authority for, or has been charged with, or
convicted of, money laundering, drug trafficking, terrorist related activities,
any crimes which in the United States would be predicate crimes to money
laundering, or any violation of any Anti-Money Laundering Laws; (ii) has
been assessed civil or criminal penalties under any Anti-Money Laundering Laws;
(iii) has been convicted of any crimes involving moral turpitude or tax
fraud; and (iv) has had any of its funds seized or forfeited in any action
under any Anti-Money Laundering Laws.

 

SECTION 15.3       Member Compliance with Patriot Act.

 

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

 

SECTION 15.4       Cooperation with Other Members.

 

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

 

SECTION 15.5       Actions Taken Pursuant to Anti-Money
Laundering Laws.

 

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

 

77

 

ARTICLE XVI

 

JMIR GUARANTY

 

SECTION 16.1               Guaranty.

 

Notwithstanding
anything to the contrary herein, the obligations of JMIR to make Capital
Contributions shall be guarantied up to an aggregate amount not to exceed
$2,100,000 pursuant to the Guaranty attached as Exhibit C hereto by
the person listed thereon.

 

(Signature Page Follows)

 

78

 

IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the day and year first above written.

 

	
  “JMIR”

  	
  JMIR INVESTMENTS III, LP,

  a Delaware series limited partnership,

  in respect of the
  Kauai Hotel Series thereof

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bryant W. Burke

  
	
   

  	
  Name:

  	
  Bryant W. Burke

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  “INVESTOR”

  	
  BEHRINGER HARVARD KAUAI HOTEL, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary S. Bresky

  
	
   

  	
  Name:

  	
  Gary S. Bresky

  
	
   

  	
  Title:

  	
  Executive President, Chief Financial Officer and
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  “MANAGER”

  	
  JMIR-PROJECT MANAGER LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bryant W. Burke

  
	
   

  	
  Name:

  	
  Bryant W. Burke

  
	
   

  	
  Title:

  	
  Vice President

  

 

S-1

 

EXHIBIT A

 

FORM OF PURCHASE AND SALE
AGREEMENT

 

See attached.

 

A-1

 

EXHIBIT B

 

GUARANTY SHARING AGREEMENT

 

B-1

 

EXHIBIT C

 

GUARANTY OF OBLIGATIONS OF JMIR

 

Guaranty

 

For good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and for the purpose of
inducing Investor to enter into this Limited Liability Company Agreement, the
undersigned joins in the execution of this Limited Liability Company Agreement
for the purpose of unconditionally and absolutely guarantying JMIR’s obligation
to make Capital Contributions up to an aggregate amount not to exceed
$2,100,000 less any capital contributions (a) made by JMIR under the
Sister Company LLC Agreement, (b) made or deemed made by JMIR under the
Sister Company Guaranty Sharing Agreement, or (c) made or deemed made by
JMIR under the Guaranty Sharing Agreement (the “Guaranty Cap”), and once JMIR has made Capital Contributions
under this Limited Liability Company Agreement and the Sister Company LLC
Agreement (including any payments made by the undersigned under this guaranty
and payments made under the guaranty related to the Sister Company LLC
Agreement) equal to $2,100,000, this guaranty shall expire and be of no further
force and effect (the “Expiration”).  Subject to the Guaranty Cap and Expiration,
this guaranty is an absolute, unconditional, irrevocable and continuing
guaranty of payment and performance and not a guaranty of collection.  Subject to the Guaranty Cap and Expiration,
the obligations under this guaranty shall not be released, diminished,
impaired, reduced or adversely affected, and the undersigned hereby waives any
common law, equitable, statutory or other rights that it may otherwise have, as
a result of the invalidity, illegality or unenforceability of all or any part
of this Limited Liability Company Agreement, for any reason whatsoever.

 

This separate signature page shall be
considered a part of the attached Limited Liability Company Agreement as fully
as if and with the same force and effect as if the provisions hereof had been
included therein in full.

 

	
   

  	
  JMIR INVESTMENTS III, LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bryant W. Burke

  
	
   

  	
  Name:

  	
  Bryant W. Burke

  
	
   

  	
  Title:

  	
  Vice President

  

 

C-1

 

SCHEDULE 1

 

APPROVED ANNUAL BUDGET FOR 2010

 

See attached.

 

Schedule 1 - 1

 

SCHEDULE 2

 

OFFICERS

 

	
   

  	
  Robert S. Aisner

  	
  President & Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Gary S. Bresky

  	
  Executive Vice President, Chief Financial Officer
  and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  Samuel A. Gillespie

  	
  Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  M. Jason Mattox

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Gerald J. Reihsen, III

  	
  Executive Vice President — Corporate
  Development & Legal and Assistant Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  Andrew J. Bruce

  	
  Senior Vice President — Capital Markets

  
	
   

  	
   

  	
   

  
	
   

  	
  Kymberlyn Janney

  	
  Senior Vice President — Financial Administration

  
	
   

  	
   

  	
   

  
	
   

  	
  James D. Fant

  	
  Senior Vice President — Real Estate

  
	
   

  	
   

  	
   

  
	
   

  	
  Richard K. Frank

  	
  Senior Vice President — Hotel Investments

  
	
   

  	
   

  	
   

  
	
   

  	
  Albert J. Palamara

  	
  Senior Vice President — Portfolio Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  John C. Kratzer

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  C. Brian Strickland

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Bryant W. Burke

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Gregory W. Clay

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Terri Warren Reynolds

  	
  Secretary

  

 

Schedule 2 - 1

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