Document:

Exhibit
10.35

LIMITED LIABILITY COMPANY AGREEMENT
OF

CHASE PARK PLAZA HOTEL, LLC

THIS LIMITED LIABILITY COMPANY AGREEMENT (“Agreement”)
is made and entered into effective as of the 1st day of December 2006, by and between BEHRINGER
HARVARD OPPORTUNITY OP I LP, a Texas limited partnership (“BH Investor”),
and KINGSDELL L.P.,a
Delaware limited partnership (“Smith Investor”).  The BH Investor and the Smith Investor,
together with any such additional parties as and when admitted to the Company
(as defined below) as members shall be individually a “Member” and,
collectively, the “Members”.

ARTICLE
I.

FORMATION,
NAME, PRINCIPAL PLACE OF BUSINESS - AGENT

PURPOSES, TERM AND DEFINITIONS

1.1          Formation.  For and in consideration of the mutual
covenants herein contained, the Members hereby form a limited liability company
(hereinafter the “Company”) under and pursuant to the Delaware Limited
Liability Company Act, as amended from time to time (the “Act”).  The Company shall be governed by the
Act.  The Certificate (as hereinafter
defined) has been or shall promptly be filed and recorded in such office and
places as is required by the Act.

1.2          Name.
The business of the Company shall be conducted under the name of “Chase Park
Plaza Hotel, LLC.”

1.3          Company
Office, Registered Office and Registered Agent.  The Company shall maintain its principal
office in the State of Texas at 15601 Dallas Parkway, Suite 600, Addison, Texas
75001, or at such other place as the BH Investor may from time to time
designate.  The Registered Office in the
State of Delaware is c/o of the Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, and the agent for service of process at such
address shall be the Corporation Trust Center. 
The Company may maintain such different or additional offices as the
Members may determine.

1.4          Purposes.  The nature and business of
the Company and the purposes to be conducted and promoted by the Company are to
engage solely in the following activities:

(a)           To acquire, improve, develop,
redevelop, renovate, construct, maintain, operate, manage, finance (including
pursuant to the Mortgage Loan, as hereinafter defined), lease, refinance, and
sell or exchange the Property (as hereinafter defined) and to make the Hotel
Loan; and

(b)           To exercise all powers enumerated in
the Act or this Agreement necessary or convenient to the conduct, promotion or
attainment of the business or purposes set forth in Section 1.4(a).

(c)           Notwithstanding anything in this
Agreement to the contrary, the Company shall not take, or refrain from taking,
any action which, in the judgment of BH Investor, in its sole and absolute
discretion, (i) could adversely affect the ability of Behringer Harvard
Opportunity REIT I, Inc., a Maryland corporation (“BH REIT”) to achieve
or maintain qualification as a real estate investment trust, (ii) could subject
BH REIT to any additional taxes under Section 857 or Section 4981 of the Code
or (iii) could violate any law or regulation of any governmental body or agency
having jurisdiction over BH REIT or its securities, unless such action (or
inaction) shall have been specifically consented to by BH REIT in writing.  Any such action or inaction in contravention
of Section 1.4 of this Agreement shall be void ab initio, and shall not
be given any effect.

 1
 

 

1.5          Term.  The Company shall continue
until December 31, 2056, unless earlier dissolved pursuant to the provisions of
this Agreement.

1.6          Definitions.  As used in this Agreement,
unless the context clearly requires otherwise, the following words and phrases
shall have the following meanings:

“Additional
BH Investor Contributions” means all amounts contributed to the Company as
additional Capital Contributions by the BH Investor pursuant to Section 3.2.

“Additional
Capital Contributions” means all amounts contributed (or deemed to be
contributed) to the Company as additional Capital Contributions by the Members
under Section 3.4.

“Additional
Scheduled Capital Contributions” means all amounts contributed to the
Company as additional Scheduled Capital Contributions by the Members under
Section 3.3.

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

“Affiliate”
means, with respect to any Person (a) any other Person, directly or indirectly
controlling, controlled by or under common control with such Person; (b) any
Person owning or controlling ten percent (10%) or more of the outstanding
voting securities of such specified Person; (c) any officer, director, partner,
member or trustee of such specified Person; and (d) if any Person who is an
Affiliate is an officer, director, partner, member or trustee of another
Person, such other Person.  The term
“control” shall mean the ability, directly or indirectly, to control the
management of an entity.

“Agreement”
means this Limited Liability Company Agreement.

“Apartment
Management Agreement” means that certain short term Operating Agreement
between Company and Manager pursuant to which Manager will manage floors 3-8 of
the Tower and the Company will pay a management fee to Manager for the services
set forth therein.

“Approval
by Company Vote” means approval by a Majority in Interest of the Members
pursuant to a Company Vote.  Any
determination made by Approval by Company Vote shall be binding on all Members
without further consent and approval.

“Asset
Management Fee” has the meaning set forth in Section 4.7(d).

“Assets”
means all of the assets of the Company (including, without limitation, the
Property).

“Capital
Account” means, with respect to each Member, the account established and
maintained on the books and records of the Company for each Member pursuant to
Section 3.5 below, adjusted as provided for therein.

“Capital
Contribution” means the amount of money and the Gross Asset Value of other
property or consideration contributed to the capital of the Company (net of
liabilities securing such property that the Company has assumed, or taken
subject to, under Section 752 of the Code, including, without limitation, the
Mortgage Loan and the Hotel Loan) by a Member.

“Capital
Transaction” means any transaction pursuant to which (i) the Company sells
all or substantially all of the Property; or (ii) the Company obtains permanent
mortgage financing with a term of five (5) years or more secured by all or
substantially all of the Property.  It is
expressly agreed that the 

 2
 

 

Mortgage Loan, any
mezzanine loan financing, any revolving credit loan, line of credit loan, or
similar lending arrangement made by the Company shall not be considered a
Capital Transaction.

“Cash
Needs” has the meaning set forth in Section 3.4.

“Certificate”
means the Certificate of Formation of the Company.

“Code”
means the Internal Revenue Code of 1986 as it may be amended or revised from
time to time, or any provision of succeeding law.

“Company” means Chase Park Plaza Hotel, LLC, a Delaware limited
liability company.

“Company Minimum Gain” has the meaning set forth in Section
1.704-2(d) of the Regulations.  Subject
to the foregoing, Company Minimum Gain shall equal the amount of gain, if any,
which would be recognized by the Company with respect to each nonrecourse
liability of the Company (or Property owner) if the Company were to Transfer
the Company property (or the Property owner were to Transfer the Property owner
property) which is subject to such nonrecourse liability in full satisfaction
thereof.

“Company Percentage” means initially (a) ninety-five percent
(95%) as to BH Investor, and (b) five percent (5%) as to Smith Investor,
subject to adjustment in accordance with the terms of this Agreement.

“Company Vote” shall mean a vote of the Members.  A Company Vote may be conducted at a meeting
of the Members, which meeting may take place by means of telephone conference,
video conference or similar communications equipment by means of which all
Persons participating therein can hear each other.  Alternatively, a Company Vote may be
conducted by notice sent by one of the Members, which notice shall set forth
the matter with respect to which the Company Vote is to be made. If a written
consent or consents setting forth the matter to be determined is signed by a
Majority in Interest of the Members, Approval by Company Vote shall be deemed
to have been obtained with respect to such matter.

“Condo Company” means The Private Residences, LLC, a Delaware
limited liability company.

“Condo
LLC Agreement” means that certain limited liability company agreement of
The Private Residences, LLC.

“Contribution
Agreement” means that certain Contribution Agreement between Smith
Investor, as transferor, and the Company, as transferee.

“Deemed
Tax Liability”  means for a Member
the product of (i) Company taxable income allocated or reasonably estimated by
a Majority in Interest to be allocated to such Member for a period and (ii) the
Deemed Tax Rate.

“Deemed
Tax Rate” means the highest marginal federal income tax rate and state
income tax rate that would apply to an individual residing in St. Louis,
Missouri, taking into account the character of the taxable income of the
Company.

“Depreciation”
means, with regard to any Company asset for any fiscal year or other period,
the depreciation, depletion or amortization, as the case may be, allowed or
allowable for federal 

 3
 

 

income tax
purposes; provided, however, that if there is a difference between the Gross
Asset Value and the adjusted tax basis of such asset, Depreciation shall mean
“book depreciation, depletion or amortization” as determined under
Section 1.704-1(b)(2)(iv)(g)(3) of the Regulations.

“Developer”
means IFC Inc., a Missouri corporation.

“Development
Agreements” means the Hotel Renovation Development Agreement and the New
Hotel Facilities Development Agreement.

“Development
Budget” means the budget for construction of the Improvements and the development
of the Property attached hereto as Exhibit C, as the same may be amended
with the approval of the Members.

“Distributable
Cash” means all cash, revenues, and funds received by the Company, and any
amounts released from Reserves to the extent the BH Investor deems that the
amount released is no longer required to be retained in Reserves, less the sum
of the following to the extent paid or set aside by the Company:  (a) all principal and interest payments on indebtedness
of the Company (including the Mortgage Loan) and all other sums paid to
lenders; (b) all cash expenditures incurred incident to the normal operation of
the Company business; (c) such amounts as may be added to Reserves as the BH
Investor deems reasonably necessary to the proper operation of the Company’s
business.

“Gross
Asset Value” means, except as set forth below, the adjusted basis of an
asset for federal income tax purposes:

(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 at the time of contribution, as determined by the BH
Investor, with the aggregate gross fair market value of the property
contributed to the Company by the Smith Investor on the date of this Agreement
being $65,251,500.00;

(b)           The Gross Asset Value of all Company
assets shall be adjusted to equal their respective gross fair market values, as
determined by the BH Investor, as of the following times: (i) the acquisition
of an additional interest in the Company by any new or existing Members in
exchange for more than a de minimis
Capital Contribution and any such other time as the BH Investor reasonably
determines that such adjustment is necessary or appropriate to reflect the
relative economic interest of the Members in the Company; (ii) the distribution
by the Company to a Member of more than a de
minimis amount of Company property as consideration for an interest
in the Company and any such other time as the BH Investor reasonably determines
that such adjustment is necessary or appropriate to reflect the relative
economic interests of the Members in the Company; and (iii) the liquidation of
the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);

(c)           The Gross Asset Value of any Company
asset distributed to any Member shall be the gross fair market value of such
asset on the date of distribution, as determined by the BH Investor; and

(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) as determined by the BH Investor, but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided, however, that Gross
Asset Values shall not be adjusted pursuant to this subsection (d) to the
extent the BH Investor determines that an adjustment pursuant to subsection (b)
hereof is necessary or appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant this subsection (d).

 4
 

 

(e)           After the Gross Asset Value of an
asset has been determined or adjusted pursuant to subsections (a), (b), or (d)
hereof, Gross Asset Value will be adjusted by the Depreciation taken into
account with respect to the asset for purposes of computing Profits or Losses.
If the Gross Asset Value of an asset has been determined or adjusted pursuant
to subsections (a), (b), (c) or (d) of this provision, such Gross Asset Value
shall thereafter be computed in accordance with Section 1.704-1(b)(2)(iv) of
the Regulations.

“Hotel”
means the Chase Park Plaza Hotel located at 212 N. Kingshighway Blvd, St.
Louis, Missouri and the basement and subbasement and floors 1-8, 16, a portion
of 28 and 29-30 of the Park Plaza Tower located at 232 N. Kingshighway Blvd.,
St. Louis, Missouri including the York Garage and the Tower Garage.

“Hotel
Loan” means that certain loan in the amount of $9,421,500.00 from the
Company to Smith Investor.

“Hotel
Management Agreement” means that certain Hotel Operating Agreement by and
between Manager and Tenant with respect to the Hotel (excluding floors 3-8 of
the Tower) and payment by the Tenant of a management fee to Manager as set
forth therein.

“Hotel
Renovation Development Agreement” means that certain Development Agreement
by and between the Company and Developer providing for the performance by
Developer of development services with respect to renovation of a portion of
the Property consisting of the building located at 212 N. Kingshighway Blvd. as
further set forth in the Hotel Renovation Development Agreement and payment by
the Company of a development fee to Developer, to be entered into, on behalf of
the Company, in accordance with the provisions of Section 4.7(a) hereof.

“Improvements”
means any improvements and related amenities now located or to be constructed
on the Property.

“Initial
Capital Contributions” means all amounts contributed (or deemed to be
contributed) to the Company as a Capital Contribution by the Members under
Section 3.1.

“IRR” means, as to a Member, the actual internal rate of return
on the aggregate investment in the Company and the Condo Company made by such
Member, as calculated by the BH Investor on a compounded monthly basis taking
into consideration the timing and the aggregate amount of the Capital
Contributions (for the purposes of this definition, as such term is defined
herein and in the Condo LLC Agreement) made by such Member to the Company and
the Condo Company, as well as the timing and amount of all aggregate
distributions received as a result of such investment in the Company and Condo
Company; provided, however, that (i) in the event the BH Investor in the
Company is different than the BH Investor in the Condo Company such computation
shall be made as if they are the same and (ii) in the event the Smith Investor
in the Company is different than the Smith Investor in the Condo Company such
computation shall be made as if they are the same. For purposes of calculating
the IRR, all Property (for the purposes of this definition, as such term is
defined herein and in the Condo LLC Agreement) owned by the Company and the
Condo Company shall be treated as a single investment and the income from the
Property owned by the Company and the Condo Company shall be treated as from a
single source. For purposes of calculating the IRR, the Capital Contributions
made by a Member to the Company and the Condo Company shall be deemed invested
on the date received by the Company and the Condo Company, respectively, and
all distributions shall be deemed to have been made on the date paid by the
Company or the Condo Company.

“Lender”
shall mean Massachusetts Mutual Life Insurance Company, the lender under the
Mortgage Loan.

 5
 

 

“Major Decision” has the meaning set forth in Section 4.3 of
this Agreement.

“Majority in Interest” shall mean Members owning more than fifty
percent (50%) of the Company Percentages.

“Management Agreements” means the Hotel Management Agreement and
the Apartment Management Agreement

“Manager” means CWE Hospitality Services, LLC, a Missouri
limited liability company

“Members” means each of BH Investor and Smith Investor, and any
other Person that is admitted as a member in the Company pursuant to the
provisions of Article VIII, and “Members” means collectively all of such
Members.

“Member Minimum Gain” means 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.

“Member Nonrecourse Debt” has the meaning set forth in Section
1.704-2(b)(4) of the Regulations.

“Member Nonrecourse Deductions” has the meaning set forth in
Section 1.704-2(i) of the Regulations. 
Subject to the foregoing, the amount of Member Nonrecourse Deductions
with respect to a Member Nonrecourse Debt for a Company fiscal year equals the
excess, if any, of the net increase, if any, in the amount of Member Minimum
Gain attributable to such Member Nonrecourse Debt during that fiscal year over
the aggregate amount of any distribution during that fiscal year to the Member
that bears the economic risk of loss for such Member Nonrecourse Debt to the
extent such distributions are from the proceeds of such Member Nonrecourse Debt
and are allocable to an increase in Member Minimum Gain attributable to such
Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i) of
the Regulations.

“Mortgage Loan” shall mean that certain existing mortgage loan
from Massachusetts Mutual Life Insurance Company encumbering the Property to be
assumed by the Company.

“New Hotel Facilities Development Agreement” means that certain
Development Agreement by and between the Company and Developer providing for
the performance by Developer of development services with respect to completing
new facilities on a portion of the Property comprised of the basement,
subbasement, floors 1-8, 16, a portion of 28 and 29-30 of the Tower, and the
York Garage and Tower Garage as set forth in the New Hotel Facilities
Development Agreement and payment by the Company of a development fee to
Developer, to be entered into on behalf of the Company, in accordance with the
provisions of Section 4.7(a) hereof.

“Nonrecourse Deductions” has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Regulations.  Subject to the preceding sentence, the amount
of Nonrecourse Deductions for a Company fiscal year equals the excess, if any,
of the net increase, if any, in the amount of Company Minimum Gain during the
fiscal year (determined under Section 1.704-2(d) of the Regulations) over the
aggregate amount of any distributions during the fiscal year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Company Minimum Gain
(determined under Section 1.704-2(h) of the Regulations).

 6
 

 

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

“Operating Budget” means the annual
budget, prepared by the Members and setting forth the estimated capital and
operating expenses of the Company for the then current or immediately succeeding
calendar year and for each month and each calendar quarter of such calendar
year, in such detail as determined by the Members.

“Operating Expenses” means all the cash expenditures made or
required to be made by the Company in connection with the operation of the
Company in the ordinary course of business, including without limitation, cash
expenditures made or required to be made by the Company in connection with the
development, ownership, management, improvement, operation, maintenance,
financing and upkeep of the Property, as well as debt service (principal and
interest) and capital expenditures of the Company; provided, however, Operating
Expenses shall not include (a) any overhead or general administrative costs or
expenses of the Members or salaries or other compensation paid to its
employees, officers, directors or shareholders (unless specifically provided
for in this Agreement); (b) any expenditures paid or payable from cash Reserves
of the Company (provided that to the extent any capital expenditures are made
in excess of any such Reserves established for such capital expenditures, such
excess amounts shall be included as an Operating Expense); and (c) non-cash
items such as depreciation and amortization.

“Owner Agreement” means that certain Owner Agreement by and
between the Company, Tenant and the Manager pursuant to which the Company
agrees to guarantee certain obligations of Tenant under the Hotel Management
Agreement.

“Partially Adjusted Capital Accounts” means, with respect to any
Member as of an Adjustment Date, the Capital Account of such Member as of the
beginning of the fiscal year ending on such Adjustment Date (where such Capital
Account does not reflect such Member’s share of either cumulative Member
Minimum Gain or cumulative Company Minimum Gain), after giving effect to all
allocations of items of income, gain, loss or deduction not included in Profits
and Losses and all Capital Contributions and distributions during such period,
but before giving effect to any allocations of Profits or Losses for such
period pursuant to Section 7.1 hereof, increased by (a) such Member’s share of
Company Minimum Gain as of the end of such fiscal year, and (b) such Member’s
share of Member’s Minimum Gain as of the end of such fiscal year.

“Person” means any individual or entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of
such Person where the context so admits, and, unless the context otherwise
requires, the singular shall include the plural, and the masculine gender shall
include the feminine and the neuter and vice versa.

“Profits” and “Losses” means, for each fiscal year or other
period, an amount equal to the Company’s taxable income or loss for such 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 and Losses pursuant to this subsection (a) shall
be added to such taxable income or loss;

 7
 

 

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

(c)           In the event the
Gross Asset Value of any of the Company assets is adjusted pursuant to
subsections (b) or (c) of the definition of Gross Asset Value, the amount of
such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;

(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 computed in accordance with Section 1.704-1(b)(2)(iv)(g)
of the Regulations for such fiscal year or other period; and

(f)            Notwithstanding
anything contained herein to the contrary, any items which are specially
allocated pursuant to Sections 7.3(a), 7.3(b), 7.3(c), 7.3(d), 7.3(e) and
7.3(f) shall not be taken into account in computing Profits or Losses.

“Property” means the tract of land (and all rights and
appurtenances incident thereto) described in Exhibit A attached hereto
and all Improvements located, or to be constructed, or developed thereon
including the eleven story hotel building, the subbasement, basement, floors
1-8, 16, a portion of 28 and 29-30 of the Tower and the York Garage and the
Tower Garage.

“Regulations” means the federal income tax regulations,
including temporary regulations, promulgated under the Code, as such
regulations may be amended from time to time (including corresponding provisions
of succeeding regulations).

“REIT” means a real estate investment trust as such term is
defined in Section 856 of the Code.

“Reserves” means funds set aside or amounts allocated to
reserves for working capital, taxes, insurance, debt service or other costs and
expenses incident to the ownership, development and operation of the
Property.  The amount of funds to be set
aside in Reserves shall be determined by the BH Investor.

“Target Account” means, with respect to any Member as of any
Adjustment Date, a balance (which may be positive or negative) equal to the
hypothetical amount that such Member would receive upon the liquidation of the
Company, assuming that (a) all assets of the Company were sold for an amount
equal to their respective Gross Asset Values, (b) all liabilities of the
Company became due and were satisfied in accordance with their terms (limited
with respect to each non-recourse liability, to the Gross Asset Value of the
asset securing such liability), and (c) all net assets of the Company were
distributed pursuant to Section 6.2 hereof, computed after the Capital
Contributions have been made for the period ending on such Adjustment Date. The
Members shall determine Gross Asset Value as of each Adjustment Date.

 8
 

 

“Tenant” means that certain Tenant under the Lease dated as of
the date of this Agreement between the Company as Lessor and Kingsdell L.P. as
Lessee.

“Tower” means that building located at 232 N. Kingshighway
Blvd., St. Louis, Missouri consisting of a portion of the Hotel, the planned
corporate apartments and the planned condominiums.

“Tower Garage” means that garage located adjacent to and serving
the Tower.

“Transfer” means, with respect to a particular property, right
or interest, the assignment, sale, transfer, pledge, disposition,
hypothecation, mortgage, pledge or the grant of a lien or security interest in
such right or interest (or any part thereof), whether voluntarily,
involuntarily or by operation of law, and whether for consideration or no
consideration.

“York Garage” means that garage located off of York Street and
serving the Hotel.

ARTICLE
II.

MEMBERS

2.1          Members.  The names and address of
the Members are as follows:

	
  Name

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
  Behringer Harvard
  Opportunity OP I LP

  	
   

  	
  15601 Dallas Parkway, Suite 600

  Addison, Texas 75001

  Attn: Chief Legal Officer

  
	
   

  	
   

  	
   

  
	
  Kingsdell L.P.

  	
   

  	
  212 N. Kingshighway Blvd.

  St. Louis, Missouri 63108

  Attn: Jim Smith

  

 

ARTICLE
III.

CAPITAL

3.1          Initial
Capital Contributions.  The
Members shall each make an Initial Capital Contribution to the Company of cash
and/or property in the amount set forth on Exhibit B-1 attached hereto
and made a part hereof and in accordance with the schedule set forth in Exhibit
B-1 (it being agreed that time is of the essence with respect to the making
of such Initial Capital Contributions). 
The Smith Investor satisfied its Initial Capital Contribution by
contributing to the capital of the Company the Property and other assets
pursuant to the Contribution Agreement, subject to the Mortgage Loan and the
Hotel Loan.

3.2          Additional
BH Investor Contributions.  After the Initial Capital Contributions are
made, if the Company requires additional funds pursuant to the Development
Budget or other such matters approved by BH Investor, then BH Investor shall be
obligated to make additional contributions (the “Additional BH Investor
Contributions”) until the total of BH Investor’s Initial Capital Contribution
and the Additional BH Investor Contributions shall equal $15,770,000.00 which shall
constitute 95% of the total Capital Contributions to the Company.  BH Investor shall make an Additional BH
Investor 

 9
 

 

Contribution in
the amount of $3,050,955.00 on December 15, 2006 to comply in full with this
requirement.

3.3          Additional
Scheduled Capital Contributions.  After
the Initial Capital Contributions and the Additional BH Investor Contributions
are made, the parties agree that additional funds will be necessary pursuant to
the Development Budget and the parties agree that each party will make
Additional Scheduled Capital Contributions in the amounts set forth on Exhibit
B-2 attached hereto and made a part hereof on the 15th date of each
scheduled month.

3.4          Additional
Capital Contributions.

(a)           If at any time after the Initial
Capital Contributions, the Additional BH Investor Contributions and the
Additional Scheduled Capital Contributions are made, the BH Investor determines
that the Company requires (or will require) additional funds for any purpose (“Cash
Needs”), then the BH Investor shall use reasonable efforts to secure third
party or Member loans to fulfill such Cash Needs.  If such efforts to
secure third party or Member loans are unsuccessful, the BH Investor may send
written notice (“Additional Capital Notice”) requesting that the Members
contribute in cash such amounts as are necessary to satisfy such Cash Needs and
describing the purpose for which the funds are needed.  If so requested, each Member shall be obligated to make an Additional Capital
Contribution equal to the product of its Company Percentage and the amount of
the Cash Needs.  The time for the payment
of any Additional Capital Contribution to the Company shall be determined by
the BH Investor, but shall in no event be less than ten (10) days after the
delivery of the Additional Capital Notice.

(b)           If a Member fails to timely
contribute all or any portion of any Additional Capital Contribution required
of such Member, then such Member shall be considered a “Delinquent Member.”
The Company may, upon notice to a Delinquent Member, exercise the following
remedies:

(i)            permit the non-Delinquent Member(s)
to advance that portion of the Additional Capital Contribution that is in
default as a loan (a “Default Loan”) with the following results: (A) the
sum thus advanced shall constitute a loan to the Delinquent Member for which
the Delinquent Member will pledge its interests in the Company as security for
such loan; (B) such loan and all accrued unpaid interest thereon shall be due
on demand, or if no demand is made, twelve (12) months after such advance is
made; (C) the loan shall bear interest at the lesser of twelve percent (12%)
per annum or the highest rate permitted by applicable law, from the date made
until the date fully repaid compounding monthly; (D) all Company distributions
and other payments that otherwise would be made to the Delinquent Member
(whether before or after dissolution of the Company) under this Agreement
(including those under Article 6) shall be paid to the non-Delinquent Member
until the loan and all interest accrued thereon is paid in full (with all such
payments being applied first to accrued and unpaid interest and then to
principal and being deemed to be a distribution or payment (as may apply) to
the Delinquent Member, and, in turn, a payment by the Delinquent Member with
respect to the loan from the non-Delinquent Member); and (E) the non-Delinquent
Member may, in addition to the other rights granted herein, take such action as
the non-Delinquent Member may deem appropriate to obtain payment of the loan at
the expense of the Delinquent Member; or

(ii)           permit the non-Delinquent Member to
contribute that portion of the Additional Capital Contribution that is in
default as an Additional Capital Contribution made by the non-Delinquent
Member, in which case the non-Delinquent Member shall have its Company
Percentage increased and the Delinquent Member shall have its Company
Percentage decreased in the following manner: (A) the Company Percentage of the
non-Delinquent Member immediately following such Additional Capital
Contributions shall be increased by an amount equal to 150% x A/B, where ‘A’
equals the amount the non-Delinquent Member contributed in respect of the
Delinquent Member’s required 

 10

Additional Capital
Contribution, and ‘B’ equals the sum of all unreturned Capital Contributions
previously made to the Company after giving effect to the amounts advanced
under this Section 3.4(b)(ii) on behalf of the Delinquent Member; and (B) the
Company Percentage of the Delinquent Member shall be decreased by the increase
of the non-Delinquent Member’s Company Percentage.  An example of the operation of this Section
3.4(b)(ii) is set forth in Exhibit D attached hereto.

(c)           The exercise by the Company of the
remedies set forth in Section 3.4(b) above shall be determined by the
non-Delinquent Members in their sole discretion and not by any Delinquent
Member.

(d)           With respect to any efforts by the BH
Investor to obtain loans to the Company from a third party or a Member, the
financing terms must be substantially similar to (or more favorable than) loans
which the Company could obtain on a competitive arms-length basis. If the BH
Investor is unable to determine whether the financing terms are competitive on
an arms-length basis, the BH Investor may seek and rely upon the advice of an
independent expert in financing.  If any
Member makes any loan or loans to the Company or advances money on its behalf,
the amount of any loan or advance shall not be treated as a Capital
Contribution but shall be treated as a debt due from the Company to such
Member.

3.5          Capital
Accounts.  The
Company shall establish and maintain on its books and records for each Member a
capital account (collectively the “Capital Accounts”) in accordance with
Section 1.704-1(b)(2)(iv) of the Regulations.  Subject to the foregoing, each Member’s
Capital Account generally shall be:

(a)           increased by (i) the amount of money
contributed by such Member to the Company, including Company liabilities assumed
by such Member; (ii) the fair market value of property (net of liabilities
securing such property that the Company has assumed, or taken subject to, under
Section 752 of the Code), or other consideration contributed by such Member to
the Company; and (iii) allocations to such Member of Profits (and items
thereof, including certain tax exempt income) and income and gain described in
Section 1.704-1(b)(2)(iv)(g) of the Regulations; and

(b)           decreased by (i) the amount of money
distributed to such Member by the Company, including such Member’s individual
liabilities assumed by the Company; (ii) the fair market value of all property
distributed to such Member by the Company (net of liabilities that such Member
is considered to assume or take subject to under Section 752 of the Code); and
(iii) allocations to such Member of Losses and deductions, including expenses
described in Section 705(a)(2)(B) of the Code which are not deductible for tax
purposes.

(c)           Notwithstanding the foregoing, the
beginning Capital Account of Smith Investor after its contribution of the
Property to the Company is $830,000.00.

(d)           Any other Company item required or
authorized under Section 1.704-1(b) of the Regulations to be reflected in
Capital Accounts shall be so reflected.

3.6          Interest
on and Withdrawal of Capital Contributions. 
The Members shall not be entitled to receive any
interest on Capital Contributions, nor shall the Members be entitled to
withdraw or otherwise receive a return of their Capital Contributions from the
Company, except pursuant to the terms and conditions of this Agreement.  No Member shall be required to contribute or
lend any cash or property to the Company to enable the Company to return any
Member’s Capital Contributions.

3.7          Resignation;
Redemption.  Except
as otherwise expressly permitted by this Agreement, no Member may resign or
withdraw from the Company without Approval by Company Vote.  A 

 11
 

 

Member’s interest
in the Company may not be redeemed or purchased by the Company without prior
Approval by Company Vote.

3.8          Transfers.  If any interest in the Company is Transferred
in accordance with the terms of this Agreement, the Transferee will succeed to
the Capital Account of the Transferor to the extent it relates to the
Transferred interest.

ARTICLE
IV.

MANAGEMENT

4.1          General
Powers of the Members.  Except
as provided in Section 4.2 hereof, the day-to-day administrative management of
the Company and the implementation of the policy and decisions of the Company
(as approved by the requisite vote of the Members) shall be the obligation of
and rest with the Members, which shall have all the rights and powers as are
necessary, advisable or convenient to the management of the business and
affairs of the Company, subject to the limitations contained herein, including
those matters described in Section 4.2 below. The Members shall exercise sound
business judgment in managing the affairs of the Company.  Notwithstanding anything set forth to the
contrary in this Agreement, the Member holding the Majority in Interest of the
Company Percentages shall be the only Member entitled to bind the Company and
enter into agreements and sign on the Company’s behalf.  Notwithstanding the foregoing, the Member
holding the Majority in Interest of the Company Percentages may give express
written authorization, in its sole discretion, to the other Member, delegating
the authority to sign on the Company’s behalf. 
In addition, no Member (other than a Member holding a Majority in
Interest of the Company Percentages) may make or implement any decision set
forth in this Agreement to be made or implemented by the Members or give any
notices required to be given without the written approval of the Member holding
the Majority in Interest of the Company Percentages or pursuant to Approval by
Company Vote.

4.2          Major
Decisions.  All
“Major Decisions” (hereinafter defined) shall be made by the Members (subject
to Approval by Company Vote) in a timely manner with due regard for the
necessity of obtaining and evaluating the information necessary for making such
Major Decisions.  A “Major Decision”
as used in this Agreement means any decision with respect to the following
matters:

(a)           any merger or consolidation of the
Company with another entity;

(b)           any borrowing by the Company secured
by a deed of trust or lien against the Property or any guarantee of debt of any
other Person;

(c)           except for expenditures made and
obligations incurred pursuant to an Operating Budget, making any expenditure or
incurring any obligation by or for the Company, or approving any such
expenditure or obligation to be made or incurred by the Company, in excess of
105% of the amount set forth in an Operating Budget therefor (the “105%
Limitation”); provided, that the Member holding a Majority in Interest of
the Company Percentages may make expenditures that it reasonably determines are
necessary or appropriate that exceed such 105% Limitation provided that the
aggregate amount of such expenditures do not exceed the lesser of: (i) fifteen
percent (15%) of the Operating Budget, or (ii) Twenty Five Thousand Dollars
($25,000.00) in any 12-month period; provided, further, that if emergency
repairs to the Property are necessary to avoid imminent danger of injury to the
Property or to an individual, the Member holding a Majority in Interest of the
Company Percentages may make such expenditures as may be necessary to alleviate
such situation (without regard to the foregoing limitations) and shall promptly
notify the Members in writing of the event giving rise to such repairs and the
actions taken with respect thereto;

 12
 

 

(d)           causing the Company to file a
voluntarily bankruptcy petition, seeking or consenting to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar
official for the Company or a substantial portion of its assets, causing the
Company to file a petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation or similar relief under any
statute, law or regulation, causing the Company to file an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against it in any proceeding of this nature or to take any action in
furtherance of the foregoing;

(e)           causing the Company to file any
lawsuit, other than lawsuits arising from the normal day-to-day operation of
the Property, such as suits to collect unpaid rent and eviction suits;

(f)            any payment by the Company of any
compensation to a Member or an Affiliate of a Member, or any transaction
between the Company and any Member or Affiliate of a Member, except to the
extent that any payment to, or transaction with, a Member is set forth in an
approved Operating Budget or expressly authorized or approved pursuant to the
terms of this Agreement;

(g)           executing or approving any agreement
or contract with any Person to be an agent for the Company or to be other than
an independent contractor, or which permits any such Person to sign any
agreement or contract, including, without limitation, brokerage, listing or
commission agreements or service contracts, on behalf of the Company;

(h)           the dedication of any portion of the
Property to any federal, state or local government or political subdivision;

(i)            approval of a management,
development or leasing agreement related to the Property;

(j)            executing or approving any
agreement, contract, or arrangement, with a term of more than one year that is
not terminable with thirty (30) days notice without penalty;

(k)           assigning the Company’s rights in
specific Company property for other than Company purposes;

(l)            any act which would make it
substantially impractical to carry on the ordinary business of the Company,
other than a Transfer of all or substantially all of the assets of the Company;

(m)          any confession of a judgment against
the Company;

(n)           making, executing or delivering any
assignment for the benefit of creditors of the Company, or signing any bond,
confession of judgment, indemnity bond or surety bond by or on behalf of the
Company;

(o)           any Transfer (other than leases of the
Property executed in the ordinary course of business) of all or any part of (i)
the Property, or (ii) any other Company asset the value of which exceeds
$25,000;

(p)           any admission of any new Member to
the Company;

(q)           the dissolution or termination of the
Company

(r)            the approval of any tax election
that adversely affects a Member; and

 13
 

 

(s)           any other decision or action which by
the provisions of this Agreement is required to be authorized by the Members.

4.3          Operating
Budgets.  The
Company shall operate under annual Operating Budgets which shall be prepared by
or at the direction of the Members. 
After an annual Operating Budget has been the subject of Approval by
Company Vote, the Members shall implement it on behalf of the Company and may
cause the Company to incur the expenditures and obligations therein provided.

4.4          Payment
of Costs and Expenses.  The
Company will be responsible for paying all costs and expenses of forming and
continuing the Company, acquiring the Property, and conducting the business of
the Company, including, without limitation, accounting costs, legal expenses
and office supplies.  In the event any
such costs and expenses are incurred and paid by the Members on behalf of the
Company, then, except as expressly provided to the contrary in this Agreement,
such Member shall be entitled to be reimbursed for such payment so long as such
cost or expense was reasonably necessary and is reasonable in amount.  The Company may use the proceeds of any revenues
of the Company to reimburse a Member for any such costs and expenses so paid.

4.5          Transactions
with Affiliates. 
Any agreement whereby any service or activity to be performed for the
Company is to be performed by an Affiliate of a Member shall require Approval
by Company Vote. The Members hereby acknowledge and agree that Approval by
Company Vote has been obtained with respect to the Owner Agreement, Apartment
Management Agreement and the Development Agreements.

4.6          No
Employees.  The
Company shall have no employees.

4.7          Fees
Payable by the Company.

(a)           The Company shall enter into the
Owner Agreement, attached hereto as Exhibit E, with Manager and Tenant
pursuant to which the Company will guarantee certain obligations of Tenant
under the Hotel Management Agreement attached hereto as Exhibit F, as
more specifically set forth in the Owner Agreement.

(b)           The Company shall enter into the
Apartment Management Agreement, attached hereto as Exhibit G, with
Manager to perform management services in respect of floors 3-8 of the Tower,
pursuant to which the Manager will receive such management fees as more
specifically set forth in the Apartment Management Agreement.

(c)           The Company shall enter into the
Development Agreements attached hereto as Exhibit
H-1 and Exhibit H-2, with Developer to perform development
services in respect of the Hotel, pursuant to which the Developer will receive
a development fee from the Company as more specifically set forth in the
Development Agreements.

(d)           The Company shall pay to Behringer
Harvard Opportunity Advisors LP, an affiliate of BH Investor (“BH Advisors”),
an annual asset management fee (the “Asset Management Fee”) equal to
$500,000.00 annually.  The Asset
Management Fee will be payable in monthly installments on the first of the
month and shall be payable from cash flow generated by the Property after the
payment of all debt service, management fees and FF&E reserve fund
deposits.  To the extent that Property
cash flows are insufficient for the payments of the Asset Management Fee, such
fee will accrue and be added to the next installment payable.

 14
 

 

(e)           Upon the sale of Property and
improvements thereon, and the related operating components of the Property, the
Company shall pay to BH Advisors a fee equal to 0.75%. of the gross selling
price, to be paid out of the proceeds of the sale.

4.8          Other
Compensation.         Except
as provided in this Agreement, no Member or its Affiliate shall be entitled to
any compensation unless Approval by Company Vote is obtained with respect
thereto.

4.9          Construction
Requirements.  The
completion or renovation of improvements which are to be constructed on the
Property shall be guaranteed at the price contracted either by an adequate
completion bond or by other assurances satisfactory to the Members, which
assurances shall include one or more (at the discretion of the Members) of the
following: (a) a written personal guarantee of one or more of the general
contractor’s principals accompanied by the financial statements of such
guarantor indicating a substantial net worth; (b) a written fixed price
contract with a general contractor that has a substantial net worth; (c) a
retention of a reasonable portion of construction costs as a potential offset
to such construction costs in the event the general contractor does not perform
in accordance with the construction contract; or (d) a program of disbursements
control which provides for direct payments to subcontractors and suppliers. The
Company shall make no periodic progress or other advance payments to the
general contractor or any subcontractor unless the Company has first received
an architect’s certification as to the percentage of the improvements which has
been completed and as to the dollar amount of the construction then completed.

ARTICLE
V.

RIGHTS
AND POWERS OF MEMBERS

5.1          Limitation of Liability of Members.  The Members shall not be
bound by, or personally liable for, obligations or liabilities of the Company
to outside third parties beyond the amount of their Capital Contributions to
the Company, and the Members shall not be required to contribute any capital to
the Company for any obligations to third parties in excess of the Capital
Contributions actually made under Sections 3.1, 3.2, 3.3 and 3.4 hereof.  The
Members (including its members, officers, directors, agents, employees and representatives)
shall not be liable or responsible in damages or otherwise to the Company or
any Member for any liability or loss relating to the performance or
nonperformance of any act concerning the business of the Company, provided the
Member was not guilty of gross negligence or willful misconduct.

5.2          Indemnification.

(a)           The Members (including their members,
partners, officers, directors, agents, employees and representatives) shall be
indemnified by the Company to the fullest extent permitted by law, against any
losses, judgments, liabilities, expenses and amounts paid in settlement of any
claims sustained by it or any of them in connection with the Company, provided
that the Member has determined in good faith that such course of conduct was
in, and not opposed to, the best interests of the Company and such liability or
loss was not the result of gross negligence or willful misconduct, or a
material breach of this Agreement on the part of the Member or such person, and
(2) any such indemnification will only be recoverable from the assets of the
Company and the Members shall not have any liability on account thereof.  All rights to indemnification permitted
herein and payment of associated expenses shall not be affected by the
dissolution or other cessation of the existence of the any Member, or the
withdrawal, adjudication of bankruptcy or insolvency of any Member.

(b)           Expenses incurred in defending a
threatened or pending civil, administrative or criminal action, suit or
proceeding against any person who may be entitled to indemnification pursuant
to 

 15
 

 

this Section 5.2 may be paid
by the Company in advance of the final disposition of such action, suit or
proceeding, if (i) the legal action relates to the performance of duties or
services by such person on behalf of the Company, (ii) the legal action is
initiated by a third party who is not a Member, and (iii) such person
undertakes to repay the advanced funds to the Company in cases in which it is
not entitled to indemnification under this Section 5.2.

5.3          Other
Business Activities.  Subject
to the other express provisions of this Agreement, each Member and any
Affiliate thereof may engage in and possess interests in other business
ventures of any and every type and description, independently or with others,
including ones in direct or indirect competition with the Company, with no
obligation to offer to the Company or any other Member the right to participate
therein or to account therefor. 
Notwithstanding the foregoing, Smith Investor and its affiliates shall
not own an interest in any hotel or condominium property located within an
eight mile radius of the Property.

5.4          Information.  In addition to the other rights specifically
set forth in this Agreement, each Member is entitled to the following information:
(a) true and full information regarding the status of the business and
financial condition of the Company; (b) promptly after becoming available, a
copy of the Company’s federal, state and local income tax returns for each
year; (c) a current list of the name and last known business, residence or
mailing address of each Member; (d) a copy of this Agreement, the Certificate,
and all amendments to such documents; and (e) other information regarding the
affairs of the Company to which that Member is entitled pursuant to the Act.

5.5          Press
Releases.  No
public announcement, press release or other similar public disclosure of the
terms of this Agreement, the activities of the Company, or the plans of the
Company will be made unless same is authorized in writing by the BH Investor.
However, notwithstanding the preceding sentence, any Member shall have the
right, without obtaining the consent of any other Member, to make such
disclosures as may, in the reasonable judgment of such Member’s counsel, be
required by applicable law.  Furthermore,
it is agreed that the foregoing provisions of this Section 5.5 shall not
prohibit a Member from disclosing such information to the accountants,
attorneys, consultants, lenders and vendors of the Company as is necessary to
allow such parties to provide services, funds or goods to the Company. The
Members have agreed that if a Member breaches the obligation set forth in the
first sentence of this Section 5.5 (the “Non-Disclosure Obligation”),
the actual damages that will be incurred by the other Members as a result of
such breach would be extremely difficult or impracticable to determine.  Therefore, the Members agree that if a Member
or any Affiliate of a Member breaches the Non-Disclosure Obligation, such
Member shall pay to each of the other Members liquidated damages (the “Liquidated
Damages”) in the amount of Fifty Thousand Dollars ($50,000) for each such
breach, such amount having been agreed upon, after negotiation, as the Members’
reasonable estimate of the damages that will be suffered by reason of a breach
of the Non-Disclosure Obligation. Any Liquidated Damages becoming payable
pursuant to this Section 5.5 shall be paid within ten (10) days after the
breach of the Non-Disclosure Obligation giving rise to the Liquidated Damages.
If not paid within such ten (10) day period, the Liquidated Damages shall
thereafter bear interest at the lesser of twelve percent (12%) per annum or the
highest rate permitted by applicable law. All Company distributions and other
payments that otherwise would be made to the Member that is liable for
Liquidated Damages shall be paid to the other Members until the Liquidated
Damages and all interest accrued thereon are paid in full (with all such
payments being applied first to accrued and unpaid interest and then to the
Liquidated Damages).

 16
 

 

ARTICLE
VI.

DISTRIBUTIONS/ALLOCATIONS
OF PROFITS AND LOSSES

6.1          Distributions
of Distributable Cash from Operations. 
Within twenty (20) days following the end of each
calendar quarter, the Company shall distribute Distributable Cash (other than
Distributable Cash arising from a Capital Transaction) in the following order
of priority:

(a)           First, to the Members, in proportion
to their respective Company Percentages, until each Member has received the
return of its total Capital Contributions and distributions resulting from its
investment in the Company sufficient to provide an IRR of eighteen percent
(18%);

(b)           Second, ninety percent (90%) to BH
Investor and ten percent (10%) to Smith Investor until each of the Members
shall have received distributions resulting from its investment in the Company
sufficient to provide an IRR of twenty-three percent (23%);

(c)           Third, eighty percent (80%) to BH
Investor and twenty percent (20%) to Smith Investor until each of the Members
shall have received distributions resulting from its investment in the Company
sufficient to provide an IRR of twenty-eight percent (28%);

(d)           Fourth, sixty-five percent (65%) to
BH Investor and thirty-five percent (35%) to Smith Investor until each of the
Members shall have received distributions resulting from its investment in the
Company sufficient to provide an IRR of thirty-three percent (33%);

(e)           Fifth, fifty percent (50%) to BH
Investor and fifty percent (50%) to Smith Investor.

(f)            Notwithstanding anything to the
contrary set forth above, no distributions will be made to the Smith Investor
to the extent of any amounts owing to the Company under the Lease; provided,
however, that such amounts will be deemed for purposes of this Agreement to be
first distributed to the Smith Investor and then paid to the Company by the
lessee pursuant to the Lease.

(g)           Notwithstanding anything to the
contrary set forth above, if any Member’s Company Percentage has been diluted
by failure to make an Additional Capital Contribution pursuant to Section 3.4,
then the distribution percentage with respect to the Delinquent Member set
forth in paragraphs (b), (c), (d) and (e) above shall be reduced by the same
percentage as such Member’s Company Percentage has been reduced as a result of
the dilution and the percentage of the non-diluted Member shall be increased by
the same amount.

6.2          Distributions
of Distributable Cash from a Capital Transaction. As soon
as reasonably practicable after the occurrence of a Capital Transaction, the
Company shall distribute Distributable Cash resulting from such Capital
Transaction in the following order of priority:

(a)           First, to the Members, in proportion
to their respective Company Percentages, until each Member has received the
return of its total Capital Contributions and distributions resulting from its
investment in the Company sufficient to provide an IRR of eighteen percent
(18%);

(b)           Second, ninety percent (90%) to BH
Investor and ten percent (10%) to Smith Investor until each of the Members
shall have received distributions resulting from its investment in the Company
sufficient to provide an IRR of twenty-three percent (23%);

 17
 

 

(c)           Third, eighty percent (80%) to BH
Investor and twenty percent (20%) to Smith Investor until each of the Members
shall have received distributions resulting from its investment in the Company
sufficient to provide an IRR of twenty-eight percent (28%);

(d)           Fourth, sixty-five percent (65%) to
BH Investor and thirty-five percent (35%) to Smith Investor until each of the
Members shall have received distributions resulting from its investment in the
Company sufficient to provide an IRR of thirty-three percent (33%);

(e)           Fifth, fifty percent (50%) to BH
Investor and fifty percent (50%) to Smith Investor.

(f)            Notwithstanding anything to the
contrary set forth above, no distributions will be made to the Smith Investor
to the extent of any amounts owing to the Company under the Lease; provided,
however, that such amounts will be deemed for purposes of this Agreement to be
first distributed to the Smith Investor and then paid to the Company by the
lessee pursuant to the Lease.

(g)           Notwithstanding anything to the
contrary set forth above, if any Member’s Company Percentage has been diluted
by failure to make an Additional Capital Contribution pursuant to Section 3.4,
then the distribution percentage with respect to the Delinquent Member set
forth in paragraphs (b), (c), (d) and (e) above shall be reduced by the same
percentage as the Member’s Company Percentage has been reduced as a result of
the dilution and the percentage of the non-diluted Member shall be increased by
the same amount.

6.3          Tax
Distributions. The Company anticipates distributing cash
to each Member in an amount at least sufficient to pay the Deemed Tax Liability
of such Member.  Tax distributions may be
made on a quarterly or other basis as determined by the Company to enable each
Member to satisfy both estimated and final tax payment requirements.  The amount of any tax distributions made to
each Member pursuant to this Section 6.3 (i) shall be considered advance
distributions and shall be deducted from the amount of any future distributions
that would otherwise be paid to such Member pursuant to Section 6.1 or Section
6.2 and (ii) shall be taken into account in all computations of IRR under
Section 6.1 and Section 6.2.

ARTICLE
VII.

ALLOCATION
OF PROFITS AND LOSSES

7.1          Allocation
of Profits and Losses.  After
application of Section 7.3 hereof, Profits and Losses for each fiscal year or a
portion thereof shall be allocated among the Members as of each Adjustment Date
so as to reduce, proportionately, in the case of any Profits, the difference
between their respective Target Accounts and Partially Adjusted Capital
Accounts as of each Adjustment Date and, in the case of Losses, the difference
between their respective Partially Adjusted Capital Accounts and Target
Accounts as of each Adjustment Date.  To
the extent that, in the fiscal year in which all or substantially all of the
Company’s assets are disposed of, or in the fiscal year in which the Company is
liquidated, the allocation of Profit or Loss set forth in the preceding
sentence does not cause each Member’s Partially Adjusted Capital Account
balance to equal the balance of its Target Account, items of income or gain
will be reallocated to any Member with a Partially Adjusted Capital Account
which is less than its Target Account, and items of loss, deduction or expense
will be reallocated to any Member with a Partially Adjusted Capital Account
that is greater than its Target Account in such manner as to reduce, to the
greatest extent possible, the difference between each Member’s respective
balance in its Target Account and its Partially Adjusted Capital Account
balance.

 18
 

 

7.2          Limitation on Loss Allocations.  Notwithstanding anything in
this Agreement to the contrary, no Losses or item of deduction shall be
allocated to a Member if such allocation would cause the Capital Account of
such Member to have a deficit in excess of the sum of (a) the amount of additional
capital such Member would be required to contribute to the Company if the
Company were to dissolve on the last day of the accounting period to which such
allocation relates, if any, plus (b) such Member’s distributive share of
Company Minimum Gain as of the last day of such accounting period, determined
pursuant to Regulations Section 1.704-2(g)(1), plus (c) such Member’s share of
Member Minimum Gain as of the last day of such year, determined pursuant to
Regulation Section 1.704-2(i)(5).  Any
amounts not allocated to a Member pursuant to the limitations set forth in this
paragraph shall be allocated to
the other Members to the extent possible without violating the limitations set
forth in this paragraph. For purposes of the foregoing provisions, the balance
of a Member’s Capital Account shall be determined after reducing such Capital
Account by (i) all anticipated allocations of loss or deduction pursuant to
Sections 704(e)(2) and 706(d) of the Code, and Section 1.751-1(b)(2)(ii) of the
Regulations, and (ii) anticipated distributions to such Member to the extent
such anticipated distributions exceed anticipated increases to such Member’s
Capital Account during or prior to the year of distribution (other than
increases which may not be taken into account pursuant to Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations).

7.3          Special Allocations.  The following special
allocations shall be made in the following order:

(a)           Minimum Gain Chargeback. 
Except as otherwise provided in Section 1.704-2(f) of the Regulations,
in the event there is a net decrease in Company Minimum Gain during a Company
taxable year, each Member shall be allocated (before any other allocation is
made pursuant to this Section 7.3) items of income and gain for such year (and,
if necessary, for subsequent years) equal to that Member’s share of the net
decrease in Company Minimum Gain. The determination of a Member’s share of the
net decrease in Company Minimum Gain shall be determined in accordance with
Regulations Section 1.704-2(g). The items to be specially allocated to the
Members in accordance with this Section 7.3(a) shall be determined in
accordance with Regulation Section 1.704-2(f)(6). This Section 7.3(a) is
intended to comply with the Minimum Gain chargeback requirement set forth in
Section 1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.

(b)           Member Minimum Gain Chargeback. 
Except as otherwise provided in Section 1.704-2(i)(4), in the event
there is a net decrease in Member Minimum Gain during a Company taxable year,
each Member who has a share of that Member Minimum Gain as of the beginning of
the year, to the extent required by Regulation Section 1.704-2(i)(4), shall be
specially allocated items of Company income and gain for such year (and, if necessary,
subsequent years) equal to that Member’s share of the net decrease in Member
Minimum Gain. Allocations pursuant to this subparagraph (b) shall be made in
accordance with Regulation Section 1.704-2(i)(4). This Section 7.3(b) is
intended to comply with the requirement set forth in Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.

(c)           Qualified Income Offset
Allocation.  In
the event any Member unexpectedly receives any adjustments, allocations or
distributions described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) or which would
cause the negative balance in such Member’s Capital Account to exceed the sum
of (i) his obligation to restore a Capital Account deficit upon liquidation of
the Company, plus (ii) his share of Company Minimum Gain determined pursuant to
Regulation Section 1.704-2(g)(1), plus (iii) such Member’s share of Member
Minimum Gain determined pursuant to Regulation Section 1.704-2(i)(5),
items of Company income and gain shall be specially allocated to such Member in
an amount and manner sufficient to eliminate such excess negative balance in
his Capital Account as quickly as possible. 
This Section 7.3(c) is intended to 

 19
 

 

comply
with the alternative test for economic effect set forth in Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

(d)           Gross Income Allocation.  In
the event any Member has a deficit Capital Account at the end of any Company
fiscal year which is in excess of the sum of (i) any amounts such Member is
obligated to restore pursuant to this Agreement, plus (ii) such Member’s
distributive share of Minimum Gain as of such date, plus such Member’s share of
Member Minimum Gain determined pursuant to Regulation Section 1.704-2(i)(5),
each such Member shall be specially allocated items of Company income and gain
in the amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 7.3(d) shall be made only if and to the
extent that such Member would have a deficit Capital Account in excess of such
sum after all other allocations provided for in this Section 7.3 have been
made, except assuming that Section 7.3(c) above and this Section 7.3(d) were
not contained in this Agreement.

(e)           Allocation of Nonrecourse
Deductions. 
Nonrecourse Deductions shall be allocated to the Members in accordance
with their respective Company Percentages.

(f)            Allocation of Member Nonrecourse
Deductions. 
Member Nonrecourse Deductions shall be allocated as prescribed by the
Regulations.

(g)           Basis Adjustment under Section
754.  To
the extent an adjustment to the adjusted tax basis of any Company assets
pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, 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 a manner consistent
with the manner in which their Capital Accounts are required to be adjusted
pursuant to such Section of the Regulations.

7.4          Built-In Gain or Loss/Section
704(c) Tax Allocations.  In
the event that the Capital Accounts of the Members are credited with or
adjusted to reflect the Gross Asset Value of the Company’s property and assets,
the Members’ distributive shares of depreciation, depletion, amortization, and
gain or loss, as computed for tax purposes, with respect to such property,
shall be determined pursuant to Section 704(c) of the Code and the Regulations
thereunder, so as to take account of the variation between the adjusted tax
basis and Gross Asset Value of such property in a manner determined by Approval
by Company Vote.  The Members recognize
that the contribution of the Property to the Company by Smith Investor shall be
governed by this Section 7.4 and the Members recognize that there has been approval
by Company Vote to utilize the “traditional method with curative allocations”
method of accounting for the book-tax difference attributable to such
contribution, as described in Section 1.704-3(c) of the Regulations.  Any deductions, income, gain or loss
specially allocated pursuant to this Section 7.4 shall not be taken into
account for purposes of determining Profits or Losses or for purposes of
adjusting a Member’s Capital Account.

7.5          Recapture.  Ordinary
income arising from the recapture of depreciation and unrecaptured Section 1250
gain shall be allocated to the Members in the manner that is prescribed by the
Regulations, or if the Regulations do not prescribe a manner in which
depreciation is to be recaptured, then depreciation shall be recaptured in the
same manner as such depreciation was allocated to the Members.

7.6          Retention of Section 751 Assets.  Upon the occurrence of an
event which would otherwise cause a reduction in a Member’s respective interest
in the Company’s Section 751 assets (“substantially appreciated inventory” and
“unrealized receivables” as defined in Section 751 of the Code), such as the
admission of new Members or otherwise, no such reduction shall occur with
respect to 

 20
 

 

Members who were Members
immediately preceding such event and who continue to be Members after the
occurrence of such event but, rather, each such Member shall retain his
respective interest in the Company’s Section 751 assets existing immediately
prior to such event.

7.7          Prohibition Against Retroactive Allocations.  Notwithstanding anything in
this Agreement to the contrary, no Member shall be allocated any loss, credit
or income attributable to a period prior to his admission to the Company.  In the event that a Member Transfers all or a
portion of his Company interest, or if there is a reduction in a Member’s
Company Percentage due to the admission of new Members or otherwise, each
Member’s distributive share of Company items of income, loss, credit, etc.,
shall be determined by taking into account each Member’s varying interests in
the Company during the Company’s taxable year. 
For this purpose, each Member’s distributive share shall be estimated by
taking the pro rata portion of the distributive share such Member would have
included in his taxable income had he maintained his Company Percentage
throughout the Company year.  Such
proration shall be based upon the portion of the year during which such Member
held the Company, except that extraordinary, nonrecurring items shall be
allocated to the persons holding Company interests at the time such
extraordinary items occur.

7.8          Allocation of Nonrecourse
Liabilities.  The
“excess nonrecourse liabilities” of the Company (within the meaning of Section
1.752-3(a)(3) of the Regulations) shall be allocated to the Members in
accordance with their respective Company Percentage.

ARTICLE
VIII.

TRANSFER
OF COMPANY INTEREST

8.1          General Prohibition Against
Transfers of Member’s Interest.  A
Member may not Transfer any or all of such Member’s interest in the Company
except as permitted in Section 8.4 or 8.6; provided, however, that BH Investor
may Transfer all or any portion of its interest in the Company to an Affiliate
without the consent of any other Member. 
Notwithstanding the foregoing, at any time after the completion of the
Development Agreements, Smith Investor may Transfer all or any portion of its
interest in the Company to any entity owned or controlled by either James L.
Smith or Marcia Smith-Niedringhaus (the “Smith Group”) as long as such entity
has a net worth equal to or greater than the net worth of Smith Investor at the
time of the Transfer.  As used herein,
“controlled by the Smith Group” shall mean the Smith Group owns not less than
fifty-one percent of the equity in the proposed transferee.  Any act in violation of this Article shall be
null and void as against the Company and the Members, except as otherwise
provided by law.

8.2          Conditions Upon Transfers by a
Member.  A Member
may Transfer all or any part of such Member’s interest in the Company only with
the written consent of the Members (as Approved by Company Vote); provided,
however, that the Members’ written consent shall not be given unless:

(i)            the Members are
satisfied that the proposed Transfer will not have any adverse effect upon the
Company or the Members under federal income tax laws then in effect or cause
any default in any loan documents of the Company or the Property owner;

(ii)           the Members have
received, if requested, an opinion from counsel for the Company to the effect
that such Transfer will not violate federal or state securities laws or
regulations;

(iii)          the person, firm or
entity to acquire such interest agrees to comply with all terms of this
Agreement, including without limitation Section 8.5 below; and

 21

(iv)          the Members confirm
with tax counsel for BH REIT that such transfer will not adversely impact the
REIT status of BH REIT.

8.3          Substitution of Assignee.  Except as otherwise permitted herein, no
Transferee of the whole or any portion of a Member’s interest in the Company
shall have the right to be admitted to the Company and become a Member unless
and until all of the Members in their absolute discretion consent and all of
the following conditions are satisfied:

(a)           the Transferor and
Transferee execute and acknowledge a written instrument of assignment, together
with such other instruments as the Members may deem necessary or desirable to
effect the admission of the Transferee as a substitute Member; and

(b)           an instrument
specifically Transferring such interest, signed by both assignor and assignee,
shall be filed with the remaining Member, and until such instrument is so
filed, the Company shall not recognize any Transfer of interest for the
purposes of making payments of profits, income or any other distribution with
respect to such interest.

8.4          Buy-Sell Agreement.

(a)           Any Member that is
not a Delinquent Member (the “Offeror”) may make an offer in writing
(the “Offer”) to the other Members (the “Offeree”), which shall
state an amount (the “Buy-Sell Value”) determined in the sole and
absolute discretion of the Offeror.  The
Buy-Sell Value shall be the amount that (i) if the Offeror is initiating the
Buy-Sell as a result of an event of default under this Agreement, the
Development Agreements or the Management Agreements or as a result of deadlock
between the Members (“Cause”), shall equal the value of the Assets and
the Assets of the Condo Company (as defined in that certain limited liability
company agreement of The Condo Company) (the “Total Assets”) and (ii) if
the Offeror is initiating the Buy-Sell for any reason other than for Cause,
shall equal the value of the Total Assets plus (i) any Termination Fee (as
defined in the Development Agreements) plus (ii)any Termination Fee (as defined
in the Hotel Management Agreement) required pursuant to the Hotel Management
Agreement (such Termination Fees set forth in (i) and (ii) above to be paid
only if the Member selling its interests in the Company is Smith
Investor).  An offer made pursuant to
this Section 8.4 shall constitute an irrevocable offer by the Offeror to the
Offeree either (i) to sell all, but not less than all, of the Offeror’s
interests in the Company and the Condo Company (including any interests held
by, or Transferred to, its Affiliates), or (ii) to purchase all, but not less
than all, of the Offeree’s interests in the Company and the Condo Company
(including any interests held by or Transferred to its Affiliates).

(b)           If the Offeree
believes in good faith that the Buy-Sell Value represents an amount that is
less than the fair market value of the Total Assets (plus any Termination Fees,
as appropriate), then Offeree may, within ten (10) days of receipt of the
Offer, deliver a written notice to the Offeror indicating that that an
appraisal shall be required to determine the Buy-Sell Value.  If Offeree does not deliver such a notice
within the ten (10) day period, then Offeree will be deemed to have accepted
the Buy-Sell Value.  Both Offeror and
Offeree shall each select an appraiser from a nationally recognized business
valuation services firm qualified to perform hotel/condominium business
valuation appraisals within ten (10) days after receipt by Offeror of written
notice that an appraisal shall be required. 
The two appraisers shall determine the Buy-Sell Value within thirty (30)
days after the expiration of the ten (10) day appraiser selection period.  If the two appraisers can not agree on the
Buy-Sell Value within the 30 day period (the “Initial Appraisal Period”),
then the appraisers shall jointly select a third appraiser with similar
qualifications within five (5) business days after the end of the Initial
Appraisal Period and such appraiser shall determine the Buy-Sell Value within
thirty (30) days after the 

 22
 

 

end
of the five (5) day appraiser selection period (the “Additional Appraisal
Period”).  The determination of the
Buy-Sell Value by the third appraiser shall be final.

(c)           The Offeree shall
have sixty (60) days after the later of (i) receipt of an Offer made pursuant
to Section 8.4(a) or (ii) the expiration of the Initial Appraisal Period (or,
if necessary, the Additional Appraisal Period), if necessary, to elect either
(A) to sell its interests in the Company and the Condo Company at a price equal
to the amount the Offeree would have received pursuant to a liquidation of the
Company and the Condo Company if the Total Assets had been sold to a third
party for the Buy-Sell Value and the proceeds therefrom had been applied and
distributed in accordance with Section 12.2 (assuming that all allocations
resulting from the sale had been made and no reserves are established); or (B)
to buy the Offeror’s interest in the Company and the Condo Company at a price
equal to the amount the Offeror would have received pursuant to a liquidation
of the Company and the Condo Company if the Total Assets had been sold to a
third party for the Buy-Sell Value and the proceeds therefrom had been applied
and distributed in accordance with Section 12.2 (assuming that all allocations
resulting from the sale had been made and no reserves are established) (the “Buy-Sell
Election Period”).  If the Offeree
fails to make such an election during the Buy-Sell Election Period,  the Offeree shall be deemed to have elected
to sell its interests in the Company. In any case in which there is more than
one purchasing Member, the purchasing Members shall determine the proportions
of the interests in the Company and the Condo Company to be purchased by each
such Member.

(d)           Closing shall occur
at the offices of the Company no later than ninety (90) days following the date
after the expiration of the Buy-Sell Election Period. It is understood and
agreed that if a portion of the Total Assets are sold between the time that the
Offeror initiates the procedure set forth Section 8.4(a) above and closing, the
proceeds of such sale shall be retained by the Company and/or the Condo Company
and not distributed to the Members. At the closing, the applicable interests in
the Company and the Condo Company shall be duly conveyed, free of all liens and
encumbrances, and the purchase price shall be paid by wire transfer of
immediately available federal funds. At the election of the purchasing Member,
the applicable interests in the Company and the Condo Company to be purchased
may be acquired in the name of a nominee (whether or not such nominee is an
Affiliate of the Purchasing Member), provided, that the Purchasing Member shall
have designated such nominee by written notice prior to the date of purchase.
It shall be a condition of the selling Member’s obligation to proceed with any
such purchase that the purchasing Member shall have obtained releases of any
guaranties of indebtedness of the Company executed by the selling Member or any
Affiliates of (or principals in) such selling Member. The purchasing Member, in
addition to paying at the closing the purchase price, shall be obligated to
loan to the Company and the Condo Company an amount sufficient to discharge at
the closing all outstanding and unpaid obligations of the Company and the Condo
Company to the selling Member as of such time.

(e)           Upon receipt of the
purchase price, the selling Member shall execute and deliver all documents
reasonably required to transfer the interest in the Company and the Condo
Company being sold.  The selling Member
shall also execute such resignations and other documents as may be reasonably
required by counsel for the Company to accomplish the withdrawal of the selling
Member as a Member of the Company and the purchasing Member shall assume all of
the selling Member’s obligations to the Company and any of its creditors under
any loans to the Company permitted by this Agreement, such assumptions to be in
form reasonably satisfactory to counsel for the selling Member.

(f)            It is expressly
agreed that the remedy at law for breach of any of the obligations set forth in
this Section 8.6 is inadequate in view of (i) the complexities and
uncertainties in measuring the actual damages that would be sustained by reason
of the failure of a Member to comply fully with each of said obligations, and
(ii) the uniqueness of the Company business and Members’ relationship. 

 23
 

 

Accordingly,
each of the aforesaid obligations shall be, and is hereby expressly made,
enforceable by specific performance.

8.5          Cost and Expense of Transfer;
Allocation of Profits and Losses.  All
costs and expenses incurred by the Company in connection with any disposition
of a Member’s interest, including any filing, recording and publishing costs
and the fees and disbursements of counsel, shall be paid by the Member disposing
of such interest.  If an interest in the
Company is disposed of pursuant to this Article VIII, the selling Member shall
nevertheless be entitled to a portion of the profits and be charged with a
portion of the losses allocated to such interest or part thereof for the fiscal
year of the Company in which such disposition occurs, consistent with Section
7.7 above.

ARTICLE
IX.

OWNERSHIP
OF COMPANY PROPERTY

All
real or personal property, including all improvements placed or located
thereon, acquired by the Company shall be owned by and in the name of the
Company, such ownership being subject to the other terms and provisions of this
Agreement.

ARTICLE
X.

FISCAL
MATTERS

10.1        Fiscal Year.  The fiscal year of the Company shall be the
calendar year.

10.2        Records; Financial Statements.

(a)           Proper books and
records shall be kept with reference to all Company transactions at the
principal place of business of the Company, and each Member shall at all
reasonable times during business hours have access thereto.  The books shall be kept in such manner of
accounting as shall properly reflect the actions of the Company in accordance
with accounting principles generally accepted within the industry and
consistently applied on such basis as will, in the opinion of the Company’s
accountants, be most advantageous to the Company.  The books and records shall include the
designation and identification of any property in which the Company owns a
beneficial interest.  The books and
records of the Company shall be reviewed annually at the expense of the Company
by an independent certified public accountant selected by the BH Investor, who
shall prepare and deliver to the Company, for filing, the appropriate federal
Company income tax return(s) before March 31 of each year. Each Member shall
receive a copy of the Company income tax return at least ten (10) business days
prior to filing such return. The Company shall report its operations for tax
purposes on the accrual basis.

(b)           The BH Investor
shall, at Company expense, furnish (or request the manager of the Property to
furnish) to the Members (i) on or before the twentieth (20th) day of each calendar quarter, an unaudited statement setting forth
and describing in reasonable detail the receipts and expenditures of the
Company during the preceding calendar quarter and comparing the results of
operations of the Company for such calendar quarter and for the year to date to
the appropriate Operating Budget, (ii) on or before one hundred twenty (120)
days after the end of each fiscal year, a balance sheet of the Company dated as
of the end of such fiscal year, a statement of the Members’ Capital Accounts, a
statement of Distributable Cash, and a statement setting forth the Profits and
Losses for such fiscal year, audited by an independent firm of certified public
accountants as determined by approval by the Members, and

 24
 

 

(iii)
from time to time, all other information relating to the Company and the
business and its affairs reasonably requested by any Member.

10.3        Accounts.  All funds of the Company shall be deposited
in its name in an account or accounts maintained at a bank designated by the BH
Investor or with an agent designated by the Members.  Checks shall be drawn upon the Company
account or accounts only for purposes of the Company and shall be signed by the
Member holding a Majority in Interest of the Company Percentages.

10.4        Federal Tax Elections.  All elections for federal tax purposes,
including but not limited to an election to adjust the basis of the assets of
the Company pursuant to Section 754 of the Code, and the adoption of
accelerated depreciation or cost recovery methods required or permitted to be
made by the Company under the Code shall be determined by the BH Investor.

10.5        Tax Audits.  BH Investor shall be designated as the “tax
matters member” of the Company as defined in Sections 6221 et seq, of
the Code and, in the event of an audit of the Company by the Internal Revenue
Service (“IRS”), BH Investor, at Company expense, shall have the
exclusive right to conduct all negotiations with the Internal Revenue Service
on behalf of the Company, and the attorneys and accountants selected by the
Members to conduct such negotiations are hereby specifically authorized by the
Members to act on behalf of the Company in such negotiations, and each Member
will execute such further authority as the IRS may require to permit BH
Investor and its selected attorneys and accountants to so represent the
Members; provided BH Investor shall not take any action take any action
contemplated by Sections 6222 through 6232 of the Code without Approval by
Company Vote.  This provision is not
intended to authorize BH Investor to take any action left to the determination
of an individual Member under Sections 6222 through 6232 of the Code.

ARTICLE
XI.

AMENDMENT

This
Agreement may not be altered or amended except by a written instrument signed
by the Members holding a Majority in Interest of the Company Percentages,
provided that no amendment may reduce a Member’s economic interest in the
Company without the Member’s prior written consent

ARTICLE
XII.

DISSOLUTION
OF THE COMPANY

12.1        Dissolution.

(a)           It
is the intention of the Members that the Company shall be continued by the
Members, or those remaining, pursuant to the provisions of this Agreement,
notwithstanding the occurrence of any event which would otherwise result in a
dissolution of the Company pursuant to the law of the State of Delaware, and no
Member shall be released or relieved of any duty or obligation hereunder by
reason of any such dissolution; provided, however, that the Company shall be
terminated, its affairs wound up and its property and assets distributed on the
earlier of:

(i)            expiration of the
Company term as provided in Section 1.5 hereof;

(ii)           the written consent
of the Members;

 25
 

 

(iii)          the disposition
(including condemnation or casualty loss) of all or substantially all of the
property and assets of the Company and receipt of the proceeds from such sale
of other disposition (except under circumstances where (x) all or a portion of
the purchase price is payable after the closing of the sale or other
disposition, or (y) the Company retains a material economic or ownership
interest in the entity to which all or substantially all of its assets are
Transferred); or

(iv)          dissolution by law or
appropriate judicial decree.

(b)           Dissolution of the
Company shall be effective on December 31, 2056 or the day on which the event
occurs giving rise to the dissolution, but the Company shall not terminate
until the Certificate shall have been canceled and the assets of the Company
shall have been distributed as provided below. 
Notwithstanding the dissolution of the Company, prior to the termination
of the Company as aforesaid, the business of the Company and the affairs of the
Members shall continue to be governed by this Agreement.

(c)           The bankruptcy,
insolvency, dissolution, or adjudication of incompetency of a Member shall not
cause the dissolution of the Company.  In
the event of the bankruptcy, or incompetency of a Member, its administrators or
representatives (“Successor”) shall have the same rights that such Member would
have had if it had not become bankrupt, except that, in the event of
bankruptcy, such Successor shall have no right to participate in the management
of the Company or vote on any Company matter unless such Successor is admitted
to the Company as a Member pursuant to Section 8.5, and the interest of such
Member in the Company shall, until the termination of the Company, otherwise be
subject to the terms, provisions and conditions of this Agreement as if such
Member had not become bankrupt.  In the
event of any other withdrawal of a Member, the Member shall only be entitled to
Company distributions distributable to it but not actually paid to it prior to
such withdrawal and shall not have any right to have its interest in the
Company purchased or paid for.

(d)           Notwithstanding
anything in this Agreement to the contrary, upon a sale of all or substantially
all of the assets of the Company in a single transaction (a “Single Sale
Transaction”) where all or any portion of the consideration payable to the
Company is to be received by the Company more than ninety (90) days after the
date on which such Single Sale Transaction occurs, the Company shall continue
for purposes of collecting the deferred payments and making distributions to
the Members.  In such event (i) gain
recognized and cash distributed in any year as a result of such Single Sale
Transaction shall be allocated and distributed among the Members in the same
proportion as such gain and cash would have been allocated and distributed were
the entire gain resulting from such Single Sale Transaction required to be
recognized for Federal income tax purposes in the year in which such Single
Sale Transaction occurred; and (ii) income attributable to interest on deferred
payments shall be allocated among, and such interest shall be distributed to,
the Members as if the deferred payment obligations received by the Company had
been distributed to the Members pursuant to Section 6.1.

12.2        Wind-Up of Affairs.  As expeditiously as
possible following the occurrence of an event giving rise to a termination of
the Company pursuant to Section 12.1 above, a liquidator appointed by BH
Investor (such liquidator is referred to herein as the “Liquidator”) shall
liquidate the assets of the Company, apply and distribute the proceeds thereof
as contemplated by this Agreement and cause the cancellation of the
Certificate.  As soon as possible after
the dissolution of the Company, a full account of the assets and liabilities of
the Company shall be taken, and a statement shall be prepared by the
independent accountants then acting for the Company setting forth the assets
and liabilities of the Company.  A copy
of such statement shall be furnished to each of the Members within ninety (90)
days after such dissolution.  Thereafter,
the Liquidator shall wind up the affairs of the Company and distribute the
Company assets in the following order of priority:

 26
 

 

(a)           to creditors
(including Members who are creditors) in satisfaction of the liabilities of the
Company, other than liabilities to existing and former Members for
distributions from the Company;

(b)           to the establishment
of any reserves which the Liquidator deems reasonably necessary for any
contingencies or unforeseen liabilities or obligations of the Company.  Such reserves shall be paid over by the
Liquidator to an escrow agent or shall be held by the Liquidator for the
purpose of disbursing such reserves in payment of any of such
contingencies.  At the expiration of such
period as the Liquidator deems advisable, the balance thereof shall be
distributed in the manner and order provided in this Section;

(c)           to existing and
former Members in satisfaction of any liabilities to them, if any, for
distributions from the Company;

(d)           to the Members in
accordance with Section 6.2 above.

Notwithstanding anything to the contrary, in the event the Company is
“liquidated” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) and
an event described in Section 12.1(a) shall have occurred, liquidating
distributions shall be made pursuant to this Section 12.2 by the end of the
taxable year in which the Company is liquidated, or, if later, within ninety
(90) days after the date of such liquidation. 
Distributions pursuant to the preceding sentence may be made to a trust
for the purpose of an orderly liquidation of the Company by the trust in
accordance with the Act.

12.3        Compliance with Treasury Regulations.  It is the intent of the Members that the
allocations provided in Section 7.1 result in distributions required pursuant
to Section 12.2(d) being in accordance with positive Capital Accounts as
provided for in the Treasury Regulations under Code Section 704(b).  However, if after giving hypothetical effect
to the allocations required by Section 7.1, the Capital Accounts of the Members
are in such ratios or balances that distributions pursuant to Section 12.2(d)
would not be in accordance with the positive Capital Accounts of the Members as
required by the Treasury Regulations under Code Section 704(b), such failure
shall not affect or alter the distributions required by Section 12.2(d).  Rather, the liquidator will have the
authority to make other allocations of Profits and Losses (or items thereof)
among the Members which, to the extent possible, will result in the Capital
Accounts of each Members having a balance prior to distribution equal to the
amount of distributions to be received by such Members pursuant to Section
12.2(d).

12.4        No Deficit Capital Account Obligation.  Notwithstanding anything else to the contrary
in this Agreement, upon a liquidation within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations, if any Member has a deficit Capital
Account (after giving effect to all contributions, distributions, allocations
and other Capital Account adjustments for all taxable years, including the year
during which such liquidation occurs), such Member shall have no obligation to
make any Capital Contribution, and the negative balance of such Member’s
Capital Account shall not be considered a debt owed by such Member to the
Company or to any other Person for any purpose whatsoever.

12.5        Distribution in Kind.  If any assets of the
Company are to be distributed in kind, the net fair market value of such assets
as of the date of dissolution shall be determined by independent appraisal or
by agreement of the Members.  Prior to
distribution, such assets shall be deemed to have been sold for their fair
market values and the Capital Accounts of the Members shall be adjusted
pursuant to the terms of this Agreement to reflect the allocation of gain or
loss which would have resulted from such deemed sale.

 27
 

 

12.6        Cancellation of Certificate.  Upon the dissolution and
the final liquidation of the Company, there shall be filed for record as
provided by Delaware law a Certificate of Cancellation executed by the Member
holding the Majority in Interest of the Company Percentages.

12.7        Return of Contribution Nonrecourse to
Other Members.  Except
as provided by law or as expressly provided in this Agreement, upon dissolution
each Member shall look solely to the assets of the Company for the return of
its Capital Contribution.  If the Company
property remaining after the payment or discharge of the debts and liabilities
of the Company is insufficient to return the cash contribution of one or more
Members, such Member or Members shall have no recourse against any other
Member.

ARTICLE
XIII.

MISCELLANEOUS
PROVISIONS

13.1        Key Man Insurance.  The parties acknowledge and agree that Jim
Smith, a principal of the Smith Investor, has key knowledge and experience that
the parties are relying on in connection with the transactions contemplated
herein.  Jim Smith hereby acknowledges
and agrees that BH Investor, at its option, may procure “key man insurance” on
Jim Smith for the sole benefit of BH Investor at BH Investor’s cost.  Jim Smith agrees to cooperate with BH
Investor and any insurance provider in such a manner to cause the issuance of
such a policy to BH Investor.

13.2        Notices.  Except as may be otherwise
specifically provided in this Agreement, all notices required or permitted
hereunder shall be in writing and shall be deemed to be delivered on the
earlier of (i) when delivered in person, or (ii) when delivered by commercial
courier such as Federal Express, Express Mail or other overnight delivery
service where delivery is evidenced by written receipt, addressed to the
appropriate party at the addresses set forth in Article II, or such other
address of the party as may have been changed as provided herein.  Any party may change the address to which
notices will be given by giving notice of such change to the other parties, in
accordance with the provisions of this Section 14.1.

13.3        Governing Law.  This Agreement shall be
construed under and in accordance with the laws of the State of Delaware,
excluding any conflicts of law rule or principle which might refer such
construction to the laws of another state or country.

13.4        Execution of Other Agreements.  The parties hereto covenant
and agree that they will execute such other further instruments and documents
as are or may become necessary or convenient to effectuate and carry out the
Company created by this Agreement.

13.5        No Action for Partition.  No Member shall be entitled
to bring an action for partition against the Company, and each Member hereby
irrevocably waives, during the term of the Company and during the period of its
liquidation following any dissolution, any right to maintain an action for
partition with respect to any of the assets of the Company.

13.6        Paragraph Headings.  The headings used in this
Agreement are used for administrative purposes only and do not constitute
substantive matter to be considered in construing the terms of this Agreement.

13.7        Binding Effect and Benefit.  This Agreement is binding
on, and shall inure to the benefit of, all of the parties hereto and to their
respective heirs, executors, administrators, legal representatives, and
successors and assigns where permitted by this Agreement.

 28
 

 

13.8        Severability.  In case any one or more of
the provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

13.9        Counterparts.  This Agreement may be
executed in any number of counterparts, all of which together shall constitute
a single contract, and each of such counterparts shall for all purposes be
deemed to be an original.  This Agreement
may be executed and delivered by fax (telecopier); any original signatures that
are initially delivered by fax shall be physically delivered with reasonable promptness
thereafter.  This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.

13.10      Gender.  Wherever the context so
requires, all words herein in the neuter gender shall be deemed to include the
feminine or masculine genders, and vice versa, all singular words shall include
the plural, and all plural words shall include the singular.

13.11      Entire Agreement.  This Agreement, together
with all Exhibits hereto and all other documents referred to herein,
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof, and supersedes all prior and contemporaneous agreements,
understanding, inducements or conditions, express or implied, oral or written.

13.12      Validity.  In the event that all or
any portion of any provision of this Agreement shall be held to be invalid, the
same shall not affect in any respect whatsoever the validity of the remainder
of this Agreement.

13.13      Indulgences, Etc.  Neither the failure nor any
delay on the part of any party hereto to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege preclude
any other or further exercise of the same or any other right, remedy, power or
privilege; nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrence be construed as a waiver of such right, remedy, power
or privilege with respect to any other occurrence.  No waiver shall be effective unless it is in
writing and signed by the party asserted to have granted such waiver.

13.14      Remedies.  In the event of any breach
of this Agreement by any Member or default by any Member in connection with
performing any obligation of such Member under this Agreement, the Company’s
and the non-defaulting Member’s rights and remedies contained herein or in any
other agreement shall be cumulative and shall not be exclusive of any other
rights or remedies which the Company or the non-defaulting Member may have at
law or in equity.

13.15      Interpretation.  No provision of this
Agreement is to be interpreted for or against either party because that party
or that party’s legal representative drafted such provision.

13.16      Time of Essence.  TIME IS OF THE ESSENCE in
connection with this Agreement.

13.17      Dispute Resolution.  The Members have agreed to submit disputes to
mandatory arbitration in accordance with the provisions of this Section
13.17  Each Member waives the right to
commence an action in connection with this Agreement in any court and expressly
agrees to be bound by the decision of the arbitrator determined in this Section
13.17; provided, however, the waiver in this Section 13.17 will not prevent any
Member from commencing an action in any court for the sole purposes of
enforcing the obligation of another Member to submit to binding arbitration or
the enforcement of an award granted by arbitration herein.  Notwithstanding the foregoing, prior to
submitting any dispute 

 29
 

 

hereunder to arbitration,
the Members shall first attempt in good faith, for thirty (30) days after the
first notice given under this Agreement regarding such dispute, to resolve any
such dispute promptly by negotiation between executives of each party who have
authority to settle the dispute, which shall include an in-person meeting
between such executives in Dallas, Texas.

(a)           Any dispute between the Members as to
the interpretation of any provision of this Agreement or the rights and
obligations of any party hereunder shall be resolved through binding
arbitration as hereinafter provided in Dallas, Texas.

 

(b)           If arbitration is
required to resolve a dispute between the Members, a panel of three (3)
arbitrators shall be convened.  Each of
BH Investor and Smith Investor shall each select one (1) arbitrator with at
least five (5) years experience in commercial real estate in general and hotel operation
in particular, and those two (2) arbitrators shall by agreement select a third
arbitrator having recognized expertise and at least five (5) years experience
in commercial real estate in general and hotel operation in particular.

(c)           The arbitrators
selected pursuant to Section 13.17(b) above will establish the rules for
proceeding with the arbitration of the dispute, which will be binding upon all
parties to the arbitration proceeding. The arbitrators may use the rules of the
American Arbitration Association for commercial arbitration but are encouraged
to adopt the rules the arbitrators deem appropriate to accomplish the
arbitration in the quickest and least expensive manner possible. Accordingly,
the arbitrators may (i) dispense with any formal rules of evidence and
allow hearsay testimony so as to limit the number of witnesses required,
(ii) minimize discovery procedures as the arbitrators deem appropriate,
(iii) limit the time for presentation of any party’s case as well as the
amount of information or number of witnesses to be presented in connection with
any hearing, and (iv) impose any other rules which the arbitrators believe
appropriate to effect a resolution of the dispute as quickly and inexpensively
as possible. In any event, the arbitrators (A) shall permit each side no more than
two (2) depositions (including any deposition of experts), which depositions
may not exceed four (4) hours each, one set of 10 interrogatories (inclusive of
sub-parts) and one set of five (5) document requests (inclusive of sub-parts);
(B) shall not permit any requests for admissions; (C) shall limit the hearing,
if any, to two (2) days; and (D) shall render their decision within sixty (60)
days of the filing of the arbitration.

(d)           The arbitrators will
have the exclusive authority to determine and award costs of arbitration and
the costs incurred by any party for its attorneys, advisors and consultants.

(e)           Any award made by
the arbitrators shall be binding on the Members and all parties to the
arbitration and shall be enforceable to the fullest extent of the law.

(f)            In reaching any
determination or award, the arbitrators will apply the laws of the state of
Delaware.  Except as permitted under
Section 13.17(d) above, the arbitrators’ award will be limited to actual
damages and will not include consequential, special, punitive or exemplary
damages. Nothing. contained in this Agreement will be deemed to give the
arbitrators any authority, power or right to alter, change, amend, modify, add
to or subtract from any of the provisions of this Agreement. All privileges
under state and federal law, including, without limitation, attorney-client,
work product and party communication privileges, shall be preserved and
protected. All experts engaged by a party must be disclosed to the other party
within fourteen (14) days after the date of notice and demand for arbitration
is given.

(g)           Notwithstanding any
provision of this Agreement to the contrary, any party may seek injunctive
relief or other form of ancillary relief at any time from any court of
competent jurisdiction in Dallas County, Texas. In the event that a dispute or
controversy requires emergency relief before the matter may be resolved under
the arbitration procedures of this Section 13.17, notwithstanding the fact

 30
 

 

that
any court of competent jurisdiction may enter an order providing for injunctive
or other form of ancillary relief, the parties expressly agree that such
arbitration procedures will still govern the ultimate resolution of that
portion of the dispute or controversy not resolved pursuant to said court
order.

13.18      NOTICE OF INDEMNIFICATION.  THE PARTIES TO THIS AGREEMENT HEREBY
ACKNOWLEDGE AND AGREE THAT THIS AGREEMENT CONTAINS CERTAIN INDEMNIFICATION
PROVISIONS PURSUANT TO SECTION 5.2.

ARTICLE
XIV.

SECURITIES
LAW CONSIDERATIONS

14.1        No Registration/Restriction on Sale.  THE COMPANY INTERESTS HAVE
NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, NOR HAVE THEY BEEN REGISTERED WITH THE
SECURITIES COMMISSION OF ANY OTHER APPLICABLE STATE, INCLUDING WITHOUT
LIMITATION THE STATE OF DELAWARE.  THE
COMPANY INTERESTS MAY BE ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE
WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT AND IN A TRANSACTION WHICH IS
EITHER EXEMPT FROM REGISTRATION UNDER SUCH ACTS OR PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACTS.

14.2        Compliance with Securities Laws.  The Members acknowledge and
confirm that their Member interests have not been registered under any federal
or state securities laws by virtue of exemptions from the registration
provisions thereof and consequently cannot be sold except pursuant to
appropriate registration or exemption from registration as applicable.  No Transfer of all or any part of a Member
interest (except a Transfer upon the death, incapacity or bankruptcy of a
Member to his personal representative and beneficiaries), including, without
limitation, any Transfer of a right to distributions, profits and/or losses to
a person who does not become a Member, may be made unless the Company is
provided with an opinion of counsel acceptable to the Members (both as to the
identity of the counsel and the substance of the opinion) to the effect that
such offer or assignment (a) may be effected without registration under the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, and (b) does not violate any applicable federal or state securities
laws (including any investment suitability standards) applicable to the Company
or the Members.

14.3        Access to Information.  Each of the Members
represents to the Company that before determining to enter into this Agreement
and to invest in the Company, each Member made an independent investigation
into the Company and that it received whatever information it deemed necessary
or relevant in order to decide whether to enter into this Agreement or invest
in the Company.  Each Member acknowledges
that the financial materials provided to the Members are only estimates of
expected future operations based on assumptions about future markets and there
is no assurance that such projections will be realized.

14.4        Limitations of Fees.  Reference is made to that certain Amended and
Restated Agreement of Limited Partnership of Behringer Harvard Opportunity OP I
LP dated as of November 24, 2004 (together with all amendments thereto, the “BH
Investor Agreement”) in respect of BH Investor.  Notwithstanding anything contained in this
Agreement to the contrary, if any fee paid by the Company to any general
partner in BH Investor or any Affiliate of any such general partner (each a “BH
Investor Manager Party”) results in BH Investor paying, through its
interest in the Company, fees in excess of those fees permitted to be paid to
such BH Investor Manager Party under the terms of the BH Investor

 31
 

 

Agreement or any other
related agreement, then such BH Investor Manager Party shall reimburse directly
to BH Investor its allocable share of such fee to the extent necessary to
comply with the terms of the BH Investor Agreement or any other related
agreement. In the event that a BH Investor Manager Party receives from the
Company a fee whose retention by such BH Investor Manager Party is, under the
terms of the BH Investor Agreement or any other related agreement, contingent
upon the happening of future events, such BH Investor Manager Party shall hold
BH Investor’s allocable share of such fee until the applicable contingencies
are resolved, and shall thereafter dispose of BH Investor’s allocable share of
such fee in accordance with the BH Investor Agreement or any other related
agreement. It is understood and agreed that the limitations and provisions set
forth in this Section 14.4 are for the sole benefit of BH Investor, and,
accordingly, no other party shall be entitled to a refund of fees paid by the
Company under this Agreement or any other benefit set forth in this Section
14.4.  Furthermore, it is understood and
agreed that the limitations and other provisions set forth in this Section 14.4
shall not be applicable at such time as BH Investor no longer owns a direct or
indirect interest in the Company.

14.5        Amendments to Agreement.
Notwithstanding anything contained herein to the contrary, in the event that
legal counsel for BH Investor reasonably determines that an amendment to this
Agreement is necessary or advisable in order for this Agreement to comply with
applicable securities laws, the BH Investor Agreement, or NASAA Guidelines (as
such term is defined in the BH Investor Agreement), then each Member shall,
within ten (10) days after request from BH Investor, execute such an amendment;
provided, however, that no such amendment may reduce a Member’s economic
interest in the Company or increase a Member’s liabilities or obligations under
this Agreement without such Member’s prior written consent.

14.6        Limitation on Liability of BH
Investor. Notwithstanding anything contained in this
Agreement to the contrary, any liability of BH Investor arising under this
Agreement or in respect of the Company shall be satisfied solely from the
interest of BH Investor in the Company, and each Member and any other Person
having the right to enforce such liability shall look solely to the interest of
BH Investor in the Company for the satisfaction of such liability and shall
have no claim or recourse against any other asset of BH Investor.  In no event shall any of the partners,
officers, directors, agents or advisors of BH Investor be held to any personal
liability whatsoever or be liable for any of the obligations of BH Investor,
nor shall the property of any such Persons be subject to the payment of any
obligations of BH Investor arising under this Agreement or in respect of the
Company.

ARTICLE
XV.

SPECIAL
PURPOSE ENTITY REQUIREMENTS

15.1        Requirements.  The Company has not and, so long as the
Mortgage Loan is in place, will not:

(a)           engage in any
business or activity other than the acquisition, ownership, operation,
renovation, development and maintenance of the Property, and activities
incidental thereto;

(b)           acquire or own any
material asset other than the Property and such incidental personal property as
may be necessary for the operation of the Property;

(c)           merge into or
consolidate with any Person or dissolve, terminate or liquidate in whole or in
part, transfer or otherwise dispose of all or substantially all of its assets
or change its legal structure, without in each case obtaining the prior consent
of Lender;

 32
 

 

(d)           fail to preserve its
existence as an entity duly organized, validly existing and in good standing
(if applicable) under the laws of the jurisdiction of its organization or
formation, or without the prior consent of Lender, amend, modify, terminate or
fail to comply with the provisions of Borrower’s formation documents;

(e)           own any subsidiary
or make any investment in or acquire the obligations or securities of any other
Person without the prior consent of Lender;

(f)            commingle its
assets with the assets of any of its shareholders, partners, members,
principals, affiliates, or any shareholder, partner, member, principal or
affiliate thereof, or of any other Person or transfer any assets to any such
Person other than distributions on account of equity interests in Borrower
permitted hereunder and properly accounted for;

(g)           incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than the Mortgage Loan without the prior consent of Lender,
except reasonable and customary trade payables and operational debt incurred
with trade creditors in the ordinary course of its business of owning and
operating the Property in such amounts as are normal and reasonable under the
circumstances that will be satisfied within 60 days of incurrence, provided
that such debt is not evidenced by a note and is paid when due;

(h)           allow any Person to
pay its debts and liabilities (except a guarantor or indemnitor of the Mortgage
Loan) or fail to pay its debts and liabilities solely from its own assets;

(i)            fail to maintain
its records, books of account and bank accounts separate and apart from those
of its shareholders, partners, members, principals and affiliates, or any
shareholder, partner, member, principal or affiliate thereof, and any other
Person or fail to prepare and maintain its own financial statements in
accordance with generally accepted accounting principles and susceptible to
audit, or if such financial statements are consolidated fail to cause such
financial statements to contain footnotes disclosing that the Property is
actually owned by the Company;

(j)            enter into any
contract or agreement with any of its shareholders, partners, members,
principals or affiliates, any guarantor or indemnitor of all or a portion of
the Loan or any shareholder, partner, member, principal or affiliate thereof,
except upon terms and conditions that are intrinsically fair and substantially
similar to those that would be available on an arms-length basis with
third parties;

(k)           fail to correct any
known misunderstandings regarding the separate identity of the Company;

(l)            share any common
logo with or hold itself out as or be considered as a department or division of
any of its shareholders, partners, members, principals or affiliates, or any
shareholder, partner, member, principal or affiliate thereof, or any other
Person or allow any Person to identify the Company as a department or division
of that Person;

(m)          hold itself out to be
responsible or pledge its assets or credit worthiness for the debts of another
Person or allow any Person to hold itself out to be responsible or pledge its
assets or credit worthiness for the debts of the Company (except for a
guarantor or indemnitor of the Mortgage Loan);

(n)           make any loans or
advances to any third party, including any of its shareholders, partners,
members, principals or affiliates, or any shareholder, partner, member,
principal or affiliate thereof;

 33
 

 

(o)           fail to use separate
contracts, purchase orders, stationery, invoices and checks;

(p)           fail either to hold
itself out to the public as a legal entity separate and distinct from any other
Person or to conduct its business solely in its own name in order not: (A) to
mislead others as to the entity with which such other party is transacting
business; or (B) to suggest that the Company is responsible for the debts of any
third party (including any of its shareholders, partners, members, principals
or affiliates, or any shareholder, partner, member, principal or affiliate
thereof);

(q)           fail to allocate
fairly and reasonably among Company and any third party (including any guarantor
or indemnitor of the Mortgage Loan) any overhead for shared office space or
other overhead and administrative expenses;

(r)            allow any Person to
pay the salaries of its own employees or fail to maintain a sufficient number
of employees for its contemplated business operations;

(s)           fail to maintain
adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;

(t)            seek dissolution or
winding up in whole or in part;

(u)           file a voluntary
petition or otherwise initiate proceedings to have Company adjudicated bankrupt
or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against Company, or file a petition seeking or consenting to
reorganization or relief of Company as debtor under any applicable federal or
state law relating to bankruptcy, insolvency, or other relief for debtors with
respect to Company; or seek or consent to the appointment of any trustee,
receiver, conservator, assignee, sequestrator, custodian, liquidator (or other
similar official) of Company or of all or any substantial part of the
properties and assets of Company, or make any general assignment for the
benefit of creditors of Company, or admit in writing the inability of Company
to pay its debts generally as they become due or declare or effect a moratorium
on Company debt or take any action in furtherance of any such action; and

(v)           conceal assets from
any creditor, or enter into any transaction with the intent to hinder, delay or
defraud creditors of Company or the creditors of any other Person.

[Signatures Follow
on Next Page]

 34

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement of Limited
Liability Company as of the date first above written.

	
   

  	
  MEMBER:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD OPPORTUNITY OP I LP,

  
	
   

  	
  a Texas limited partnership

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Behringer Harvard Opportunity REIT I, Inc.,

  
	
   

  	
   

  	
   

  	
  a Maryland corporation

  
	
   

  	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Gerald J. Reihsen, III

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Gerald J.
  Reihsen, III

  
	
   

  	
   

  	
   

  	
   

  	
  Executive Vice
  President

  

 

 1
 

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement of Limited
Liability Company as of the date first above written.

	
  

  	
   

  	
  MEMBER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KINGSDELL L.P.,

  a Delaware limited partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  IFC, INC., a Missouri corporation,

  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ James L. Smith

  
	
   

  	
   

  	
   

  	
   

  	
  James L. Smith,
  President

  

 

 2

Exhibit B-1

COMPANY
PERCENTAGES AND CAPITAL CONTRIBUTIONS

	
  Members

  	
   

  	
  Company Percentage

  	
   

  	
  Initial Capital

  Contribution

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Behringer
  Harvard Opportunity OP I LP

  	
   

  	
  95.0

  	
  %

  	
  $

  	
  12,719,045.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kingsdell L.P.

  	
   

  	
  5.0

  	
  %

  	
  $

  	
  830,000.00

  	
   

  

 

 B-1-1

Exhibit B-2

ADDITIONAL
SCHEDULED CAPITAL CONTRIBUTIONS

	
   

  	
   

  	
  Closing

  	
   

  	
  Dec

  	
   

  	
  Jan

  	
   

  	
  Feb

  	
   

  	
  Mar

  	
   

  	
  Apr

  	
   

  	
  Total

  	
   

  	
   

  	
   

  
	
  Behringer
  Harvard Equity

  	
   

  	
  12,719,045

  	
   

  	
  3,682,365

  	
  *

  	
  1,759,748

  	
   

  	
  2,857,699

  	
   

  	
  1,430,719

  	
   

  	
  1,258,575

  	
   

  	
  23,708,152

  	
   

  	
  95

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jim Smith Equity

  	
   

  	
  830,000

  	
   

  	
  33,233

  	
   

  	
  92,618

  	
   

  	
  150,405

  	
   

  	
  75,301

  	
   

  	
  66,241

  	
   

  	
  1,247,798

  	
   

  	
  5

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Equity

  	
   

  	
  13,549,045

  	
   

  	
  3,715,598

  	
   

  	
  1,852,367

  	
   

  	
  3,008,105

  	
   

  	
  1,506,020

  	
   

  	
  1,324,816

  	
   

  	
  24,995,950

  	
   

  	
   

  	
   

  

 

* Total amount due from
BH Investor for December.  Number
includes $3,050,955.00 to be paid by BH Investor as the Additional BH Investor
Contributions.

 B-2-1Exhibit
10.36

LIMITED LIABILITY COMPANY
AGREEMENT OF

THE PRIVATE RESIDENCES, LLC

THIS LIMITED LIABILITY
COMPANY AGREEMENT (“Agreement”) is made and entered into
effective as of the 1st day of December 2006, by and between BEHRINGER
HARVARD OPPORTUNITY OP I LP, a Texas limited partnership (“BH
Investor”), and KINGSDELL L.P.,a Delaware
limited partnership (“Smith Investor”).  The BH Investor and the Smith Investor,
together with any such additional parties as and when admitted to the Company
(as defined below) as members shall be individually a “Member” and,
collectively, the “Members”.

ARTICLE I.

FORMATION, NAME, PRINCIPAL PLACE OF BUSINESS - AGENT

PURPOSES, TERM AND DEFINITIONS

1.1                               Formation.  For
and in consideration of the mutual covenants herein contained, the Members
hereby form a limited liability company (hereinafter the “Company”)
under and pursuant to the Delaware Limited Liability Company Act, as amended
from time to time (the “Act”). 
The Company shall be governed by the Act.  The Certificate (as hereinafter defined) has
been or shall promptly be filed and recorded in such office and places as is
required by the Act.

1.2                               Name. The business of the Company shall be
conducted under the name of “The Private Residences, LLC.”

1.3                               Company Office, Registered
Office and Registered Agent.  The Company shall maintain its principal
office in the State of Texas at 15601 Dallas Parkway, Suite 600, Addison, Texas
75001, or at such other place as the BH Investor may from time to time
designate.  The Registered Office in the
State of Delaware is c/o of the Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, and the agent for service of process at such
address shall be the Corporation Trust Center. 
The Company may maintain such different or additional offices as the Members
may determine.

1.4                               Purposes.  The nature and business of the Company and the purposes to be conducted
and promoted by the Company are to engage solely in the following activities:

(a)                                  To acquire, improve, develop, redevelop,
renovate, construct, maintain, operate, manage, finance, lease, refinance, and
sell or exchange the Property (as hereinafter defined) and to make the Condo
Loan; and

(b)                                 To exercise all powers enumerated in the Act
or this Agreement necessary or convenient to the conduct, promotion or
attainment of the business or purposes set forth in Section 1.4(a).

(c)                                  Notwithstanding anything in this Agreement to
the contrary, the Company shall not take, or refrain from taking, any action
which, in the judgment of BH Investor, in its sole and absolute discretion, (i)
could adversely affect the ability of Behringer Harvard Opportunity REIT I,
Inc., a Maryland corporation (“BH REIT”) to achieve or maintain
qualification as a real estate investment trust, (ii) could subject BH REIT to
any additional taxes under Section 857 or Section 4981 of the Code or (iii)
could violate any law or regulation of any governmental body or agency having
jurisdiction over BH REIT or its securities, unless such action (or inaction)
shall have been specifically consented to by BH REIT in writing.  Any such action or inaction in contravention
of Section 1.4 of this Agreement shall be void ab initio,
and shall not be given any effect. 
Notwithstanding any indication in this Agreement to the

 1
 

 

contrary, in the event that BH Investor transfers its interest in the
Company to a TRS of BH REIT, the Company shall not take any action or fail to
take any action that could cause the Company to (i) directly or indirectly
(through its subsidiaries or otherwise) operate or manage (including, without
limitation, self-management or self-operation) a lodging facility (as such term
is defined in Section 856(d)(9)(D)(ii) of the Code), (ii) directly or
indirectly (through its subsidiaries or otherwise) operate or manage
(including, without limitation, self-management or self-operation) a health
care facility (as such term is defined in Section 856(e)(6)(D)(ii) of the Code)
or (iii) directly or indirectly (through its subsidiaries or otherwise) provide
to any other person (under a franchise, license or otherwise) rights to a brand
name under which any lodging facility (as such term is defined in Section
856(d)(9)(D)(ii) of the Code) or health care facility (as defined in Section
856 (e)(6)(d)(ii) of the Code) is operated. 
Any such action or inaction in contravention of this Section 1.4 of this
Agreement shall be void ab initio and
shall not be given any effect.

1.5                               Term.  The Company shall continue until December 31, 2056, unless earlier
dissolved pursuant to the provisions of this Agreement.

1.6                               Definitions.  As used in this Agreement, unless the context clearly requires
otherwise, the following words and phrases shall have the following meanings:

“Additional BH Investor
Contributions” means all amounts contributed to the Company as additional
Capital Contributions by the BH Investor pursuant to Section 3.2.

“Additional Capital
Contributions” means all amounts contributed (or deemed to be contributed)
to the Company as additional Capital Contributions by the Members under Section
3.4.

“Additional Scheduled
Capital Contributions” means all amounts contributed to the Company as
additional Scheduled Capital Contributions by the Members under Section 3.3.

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

“Affiliate” means,
with respect to any Person (a) any other Person, directly or indirectly
controlling, controlled by or under common control with such Person; (b) any
Person owning or controlling ten percent (10%) or more of the outstanding
voting securities of such specified Person; (c) any officer, director, partner,
member or trustee of such specified Person; and (d) if any Person who is an Affiliate
is an officer, director, partner, member or trustee of another Person, such
other Person.  The term “control” shall
mean the ability, directly or indirectly, to control the management of an
entity.

“Agreement” means
this Limited Liability Company Agreement.

“Approval by Company Vote”
means approval by a Majority in Interest of the Members pursuant to a Company
Vote.  Any determination made by Approval
by Company Vote shall be binding on all Members without further consent and
approval.

“Assets” means all of
the assets of the Company (including, without limitation, the Property).

“Capital Account”
means, with respect to each Member, the account established and maintained on
the books and records of the Company for each Member pursuant to Section 3.5
below, adjusted as provided for therein.

 2
 

 

“Capital Contribution”
means the amount of money and the Gross Asset Value of other property or
consideration contributed to the capital of the Company (net of liabilities
securing such property that the Company has assumed, or taken subject to, under
Section 752 of the Code, including, without limitation, the Condo Loan) by a Member.

“Capital Transaction” means any
transaction pursuant to which (i) the Company sells
all or substantially all of the Property; or (ii) the Company obtains permanent
mortgage financing with a term of five (5) years or more secured by all or
substantially all of the Property.  It is
expressly agreed that the Mortgage Loan, any mezzanine loan financing, any
revolving credit loan, line of credit loan, or similar lending arrangement made
by the Company shall not be considered a Capital Transaction.

“Cash Needs” has the meaning set forth
in Section 3.4.

“Certificate” means the Certificate of
Formation of the Company.

“Code” means the Internal Revenue Code
of 1986 as it may be amended or revised from time to time, or any provision of
succeeding law.

“Company”
means The Private Residences, LLC, a Delaware limited liability company.

“Company
Minimum Gain” has the meaning set forth in Section 1.704-2(d) of the
Regulations.  Subject to the foregoing,
Company Minimum Gain shall equal the amount of gain, if any, which would be
recognized by the Company with respect to each nonrecourse liability of the
Company (or Property owner) if the Company were to Transfer the Company
property (or the Property owner were to Transfer the Property owner property)
which is subject to such nonrecourse liability in full satisfaction thereof.

“Company
Percentage” means initially (a) ninety-five percent (95%) as to BH Investor,
and (b) five percent (5%) as to Smith Investor, subject to adjustment in
accordance with the terms of this Agreement.

“Company
Vote” shall mean a vote of the Members. 
A Company Vote may be conducted at a meeting of the Members, which
meeting may take place by means of telephone conference, video conference or
similar communications equipment by means of which all Persons participating
therein can hear each other. 
Alternatively, a Company Vote may be conducted by notice sent by one of
the Members, which notice shall set forth the matter with respect to which the
Company Vote is to be made. If a written consent or consents setting forth the
matter to be determined is signed by a Majority in Interest of the Members,
Approval by Company Vote shall be deemed to have been obtained with respect to
such matter.

“Condo
Loan” means that certain loan in the amount of $29,078,500.00 from the
Company to Smith Investor.

“Contribution
Agreement” means that certain Contribution Agreement between Smith
Investor, as transferor, and the Company, as transferee.

“Deemed
Tax Liability”  means for a Member
the product of (i) Company taxable income allocated or reasonably estimated by
a Majority in Interest to be allocated to such Member for a period and (ii) the
Deemed Tax Rate.

 3
 

 

“Deemed
Tax Rate” means the highest marginal federal income tax rate and state
income tax rate that would apply to an individual residing in St. Louis,
Missouri, taking into account the character of the taxable income of the
Company.

“Depreciation” means, with regard to
any Company asset for any fiscal year or other period, the depreciation,
depletion or amortization, as the case may be, allowed or allowable for federal
income tax purposes; provided, however, that if there is a difference between
the Gross Asset Value and the adjusted tax basis of such asset, Depreciation
shall mean “book depreciation, depletion or amortization” as determined under
Section 1.704-1(b)(2)(iv)(g)(3) of the Regulations.

“Developer” means IFC Inc., a Missouri
corporation.

“Development Agreement” means the Development
Agreement (Residences Condominium Project) between the Company and the
Developer for the proposed condominium development.

“Development Budget” means the budget
for construction of the Improvements and the development of the Property
attached hereto as Exhibit C, as the same may be amended with the
approval of the Members.

“Distributable Cash” means all cash,
revenues, and funds received by the Company, and any amounts released from
Reserves to the extent the BH Investor deems that the amount released is no
longer required to be retained in Reserves, less the sum of the following to
the extent paid or set aside by the Company: (a) all principal and interest
payments on indebtedness of the Company (including the Mortgage Loan) and all
other sums paid to lenders; (b) all cash expenditures incurred incident to the
normal operation of the Company business; (c) such amounts as may be added to
Reserves as the BH Investor deems reasonably necessary to the proper operation
of the Company’s business.

“Gross Asset Value” means, except as
set forth below, the adjusted basis of an asset for federal income tax
purposes:

(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 at the time of contribution, as
determined by the BH Investor, with the aggregate gross fair market value of
the property contributed to the Company by the Smith Investor on the date of
this Agreement being $30,748,500.00;

(b)                                 The Gross Asset Value
of all Company assets shall be adjusted to equal their respective gross fair
market values, as determined by the BH Investor, as of the following times: (i)
the acquisition of an additional interest in the Company by any new or existing
Members in exchange for more than a de minimis
Capital Contribution and any such other time as the BH Investor reasonably
determines that such adjustment is necessary or appropriate to reflect the
relative economic interest of the Members in the Company; (ii) the distribution
by the Company to a Member of more than a de minimis
amount of Company property as consideration for an interest in the Company and
any such other time as the BH Investor reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Members in the Company; and (iii) the liquidation of the Company
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);

(c)                                  The Gross Asset Value
of any Company asset distributed to any Member shall be the gross fair market
value of such asset on the date of distribution, as determined by the BH
Investor; and

 4
 

 

(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) as determined by the BH Investor, but only to the extent that
such adjustments are taken into account in determining Capital Accounts
pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided, however,
that Gross Asset Values shall not be adjusted pursuant to this subsection (d)
to the extent the BH Investor determines that an adjustment pursuant to
subsection (b) hereof is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant this
subsection (d).

(e)                                  After the Gross Asset
Value of an asset has been determined or adjusted pursuant to subsections (a),
(b), or (d) hereof, Gross Asset Value will be adjusted by the Depreciation
taken into account with respect to the asset for purposes of computing Profits
or Losses. If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subsections (a), (b), (c) or (d) of this provision, such Gross
Asset Value shall thereafter be computed in accordance with Section
1.704-1(b)(2)(iv) of the Regulations.

“Hotel” means the
Chase Park Plaza Hotel located at 212 N. Kingshighway Blvd, St. Louis, Missouri
and the basement and subbasement and floors 1-8, 16, a portion of 28 and 29-30 of
the Park Plaza Tower located at 232 N. Kingshighway Blvd., St. Louis, Missouri
including the York Garage and the Tower Garage.

“Hotel Company” means
Chase Park Plaza Hotel, LLC, a Delaware limited liability company.

“Hotel LLC Agreement”
means that certain limited liability company agreement of Chase Park Plaza
Hotel, LLC.

“Improvements” means
any improvements and related amenities now located or to be constructed on the
Property.

“Initial Capital
Contributions” means all amounts contributed (or deemed to be contributed)
to the Company as a Capital Contribution by the Members under Section 3.1.

“IRR”
means, as to a Member, the actual internal rate of return on the aggregate investment
in the Company and the Hotel Company made by such Member, as calculated by BH
Investor on a compounded monthly basis taking into consideration the timing and
the aggregate amount of the Capital Contributions (for the purposes of this
definition, as such term is defined herein and in the Hotel LLC Agreement) made
by such Member to the Company and the Hotel Company, as well as the timing and
amount of all aggregate distributions received as a result of such investment
in the Company and Hotel Company; provided, however, that (i) in the event the
BH Investor in the Company is different than the BH Investor in the Hotel
Company such computation shall be made as if they are the same and (ii) in the
event the Smith Investor in the Company is different than the Smith Investor in
the Hotel Company such computation shall be made as if they are the same.  For purposes of calculating the IRR, all
Property (for the purposes of this definition, as such term is defined herein
and in the Hotel LLC Agreement) owned by the Company and the Hotel Company
shall be treated as a single investment and the income from the Property owned
by the Company and the Hotel Company shall be treated as from a single source.
For purposes of calculating the IRR, the Capital Contributions made by a Member
to the Company and the Hotel Company shall be deemed invested on the date
received by the Company and the Hotel Company, respectively, and all
distributions shall be deemed to have been made on the date paid by the Company
or the Hotel Company.

 5
 

 

“Lender”
shall mean Massachusetts Mutual Life Insurance Company, the lender under the
Mortgage Loan.

“Major
Decision” has the meaning set forth in Section 4.3 of this Agreement.

“Majority
in Interest” shall mean Members owning more than fifty percent (50%) of the
Company Percentages.

“Management
Agreement” means that certain Residential Apartment Agreement between
Manager and the Company.

“Manager”
means CWE Hospitality Services, LLC, a Missouri limited liability company.

“Members”
means each of BH Investor and Smith Investor, and any other Person that is
admitted as a member in the Company pursuant to the provisions of Article VIII,
and “Members” means collectively all of such Members.

“Member
Minimum Gain” means 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.

“Member
Nonrecourse Debt” has the meaning set forth in Section 1.704-2(b)(4) of the
Regulations.

“Member
Nonrecourse Deductions” has the meaning set forth in Section 1.704-2(i) of
the Regulations.  Subject to the
foregoing, the amount of Member Nonrecourse Deductions with respect to a Member
Nonrecourse Debt for a Company fiscal year equals the excess, if any, of the
net increase, if any, in the amount of Member Minimum Gain attributable to such
Member Nonrecourse Debt during that fiscal year over the aggregate amount of
any distribution during that fiscal year to the Member that bears the economic
risk of loss for such Member Nonrecourse Debt to the extent such distributions
are from the proceeds of such Member Nonrecourse Debt and are allocable to an
increase in Member Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Section 1.704-2(i) of the Regulations.

“Mortgage
Loan” shall mean that certain existing mortgage loan from Massachusetts
Mutual Life Insurance Company encumbering the Property for which the Company
will be jointly and severally liable with the Hotel Company.

“Nonrecourse
Deductions” has the meaning set forth in Sections 1.704-2(b)(1) and 1.704-2(c)
of the Regulations.  Subject to the
preceding sentence, the amount of Nonrecourse Deductions for a Company fiscal
year equals the excess, if any, of the net increase, if any, in the amount of Company
Minimum Gain during the fiscal year (determined under Section 1.704-2(d) of the
Regulations) over the aggregate amount of any distributions during the fiscal
year of proceeds of a Nonrecourse Liability that are allocable to an increase
in Company Minimum Gain (determined under Section 1.704-2(h) of the Regulations).

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

“Operating
Budget” means the annual budget, prepared by the Members and setting forth
the estimated capital and operating expenses of the Company for the then
current or immediately

 6
 

 

succeeding
calendar year and for each month and each calendar quarter of such calendar
year, in such detail as determined by the Members.

“Operating
Expenses” means all the cash expenditures made or required to be made by
the Company in connection with the operation of the Company in the ordinary
course of business, including without limitation, cash expenditures made or
required to be made by the Company in connection with the development, ownership,
management, improvement, operation, maintenance, financing and upkeep of the
Property, as well as debt service (principal and interest) and capital
expenditures of the Company; provided, however, Operating Expenses shall not
include (a) any overhead or general administrative costs or expenses of the Members
or salaries or other compensation paid to its employees, officers, directors or
shareholders (unless specifically provided for in this Agreement); (b) any
expenditures paid or payable from cash Reserves of the Company (provided that
to the extent any capital expenditures are made in excess of any such Reserves
established for such capital expenditures, such excess amounts shall be
included as an Operating Expense); and (c) non-cash items such as depreciation
and amortization.

“Partially
Adjusted Capital Accounts” means, with respect to any Member as of an
Adjustment Date, the Capital Account of such Member as of the beginning of the
fiscal year ending on such Adjustment Date (where such Capital Account does not
reflect such Member’s share of either cumulative Member Minimum Gain or
cumulative Company Minimum Gain), after giving effect to all allocations of
items of income, gain, loss or deduction not included in Profits and Losses and
all Capital Contributions and distributions during such period, but before
giving effect to any allocations of Profits or Losses for such period pursuant
to Section 7.1 hereof, increased by (a) such Member’s share of Company Minimum
Gain as of the end of such fiscal year, and (b) such Member’s share of Member’s
Minimum Gain as of the end of such fiscal year.

“Person”
means any individual or entity, and the heirs, executors, administrators, legal
representatives, successors and assigns of such Person where the context so
admits, and, unless the context otherwise requires, the singular shall include
the plural, and the masculine gender shall include the feminine and the neuter
and vice versa.

“Profits”
and “Losses” means, for each fiscal year or other period, an amount equal
to the Company’s taxable income or loss for such 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 and Losses pursuant to this subsection (a) shall be added to
such taxable income or loss;

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

(c)                                  In the event the
Gross Asset Value of any of the Company assets is adjusted pursuant to
subsections (b) or (c) of the definition of Gross Asset Value, the amount of
such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;

 7
 

 

(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 computed in accordance with Section 1.704-1(b)(2)(iv)(g)
of the Regulations for such fiscal year or other period; and

(f)                                    Notwithstanding
anything contained herein to the contrary, any items which are specially
allocated pursuant to Sections 7.3(a), 7.3(b), 7.3(c), 7.3(d), 7.3(e) and
7.3(f) shall not be taken into account in computing Profits or Losses.

“Property”
means the tract of land (and all rights and appurtenances incident thereto)
described in Exhibit A attached hereto and all Improvements located, or
to be constructed, or developed thereon on floors 9-15 (excluding floor 13),
17-27 and a portion of floor 28 of the Tower.

“Regulations”
means the federal income tax regulations, including temporary regulations,
promulgated under the Code, as such regulations may be amended from time to
time (including corresponding provisions of succeeding regulations).

“REIT”
means a real estate investment trust as such term is defined in Section 856 of
the Code.

“Reserves”
means funds set aside or amounts allocated to reserves for working capital,
taxes, insurance, debt service or other costs and expenses incident to the
ownership, development and operation of the Property.  The amount of funds to be set aside in
Reserves shall be determined by the BH Investor.

“Target
Account” means, with respect to any Member as of any Adjustment Date, a
balance (which may be positive or negative) equal to the hypothetical amount
that such Member would receive upon the liquidation of the Company, assuming
that (a) all assets of the Company were sold for an amount equal to their
respective Gross Asset Values, (b) all liabilities of the Company became due
and were satisfied in accordance with their terms (limited with respect to each
non-recourse liability, to the Gross Asset Value of the asset securing such
liability), and (c) all net assets of the Company were distributed pursuant to
Section 6.2 hereof, computed after the Capital Contributions have been made for
the period ending on such Adjustment Date. The Members shall determine Gross
Asset Value as of each Adjustment Date.

“Tower”
means that building located at 232 N. Kingshighway Blvd., St. Louis, Missouri
consisting of a portion of the Hotel, the planned corporate apartments and the
planned condominiums.

“Tower
Garage” means that garage located adjacent to and serving the Tower.

“Transfer”
means, with respect to a particular property, right or interest, the
assignment, sale, transfer, pledge, disposition, hypothecation, mortgage,
pledge or the grant of a lien or security interest in such right or interest
(or any part thereof), whether voluntarily, involuntarily or by operation of
law, and whether for consideration or no consideration.

“TRS”
means a taxable REIT subsidiary, as such term is defined in Section 856(l) of
the Code.

 8
 

 

“York
Garage” means that garage located off of York Street and serving the Hotel.

ARTICLE II.

MEMBERS

2.1                               Members.  The names and address of the Members are
as follows:

	
  Name

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  
	
  Behringer
  Harvard Opportunity OP I LP

  	
   

  	
  15601 Dallas Parkway,
  Suite 600

  Addison, Texas 75001

  Attn: Chief Legal Officer

  
	
   

  	
   

  	
   

  
	
  Kingsdell L.P.

  	
   

  	
  212 N. Kingshighway
  Blvd.

  St. Louis, Missouri 63108

  Attn: Jim Smith

  

 

ARTICLE III.

CAPITAL

3.1                               Initial Capital Contributions. 
The Members shall each make
an Initial Capital Contribution to the Company of cash and/or property in the
amount set forth on Exhibit B-1 attached hereto and made a part hereof
and in accordance with the schedule set forth in Exhibit B-1 (it being
agreed that time is of the essence with respect to the making of such Initial
Capital Contributions).  The Smith
Investor satisfied its Initial Capital Contribution by contributing to the
capital of the Company the Property and other assets pursuant to the
Contribution Agreement, subject to the Condo Loan.

3.2                               Additional BH Investor
Contributions.  After the Initial Capital Contributions are
made, if the Company requires additional funds pursuant to the Development
Budget or such other matters as approved by BH Investor, then BH Investor shall
be obligated to make additional contributions (the “Additional BH Investor
Contributions”) until the total of BH Investor’s Initial Capital Contribution
and the Additional BH Investor Contributions shall equal $31,730,000.00 which
shall constitute 95% of the total Capital Contributions to the Company.  BH Investor shall make an Additional BH
Investor Contribution in the amount of $855,486.00 on December 15, 2006 and an
Additional BH Investor Contribution in the amount of $166,218.00 on January 15,
2007 to comply in full with this requirement.

3.3                               Additional Scheduled Capital
Contributions.  After the Initial Capital Contributions and
the Additional BH Investor Contributions are made, the parties agree that
additional funds will be necessary pursuant to the Development Budget and the
parties agree that each party will make Additional Scheduled Capital Contributions
in the amounts set forth on Exhibit B-2 attached hereto and made a part
hereof on the 15th day of
each scheduled month.

3.4                               Additional Capital
Contributions.

(a)                                  If at any time after the Initial Capital
Contributions, the Additional BH Investor Contributions and the Additional
Scheduled Capital Contributions are made, the BH Investor determines that the Company
requires (or will require) additional funds for any purpose (“Cash Needs”),
then the BH Investor shall use reasonable efforts to secure third party or Member
loans to fulfill such Cash Needs.  If such efforts to secure third party
or Member loans are unsuccessful, the BH Investor may send written notice (“Additional
Capital Notice”) requesting that the Members contribute in cash such amounts
as are necessary to satisfy such Cash Needs and describing the purpose for
which the funds are needed.  If so

 9
 

 

requested, each Member shall be
obligated to make an Additional Capital Contribution equal to the product of
its Company Percentage and the amount of the Cash Needs.  The time for the payment of any Additional
Capital Contribution to the Company shall be determined by the BH Investor, but
shall in no event be less than ten (10) days after the delivery of the
Additional Capital Notice.

(b)                                 If a Member fails to
timely contribute all or any portion of any Additional Capital Contribution
required of such Member, then such Member shall be considered a “Delinquent Member.”
The Company may, upon notice to a Delinquent Member, exercise the following remedies:

(i)                                     permit the
non-Delinquent Member(s) to advance that portion of the Additional Capital
Contribution that is in default as a loan (a “Default Loan”) with the
following results: (A) the sum thus advanced shall constitute a loan to the
Delinquent Member for which the Delinquent Member will pledge its interests in
the Company as security for such loan; (B) such loan and all accrued unpaid
interest thereon shall be due on demand, or if no demand is made, twelve (12)
months after such advance is made; (C) the loan shall bear interest at the
lesser of twelve percent (12%) per annum or the highest rate permitted by
applicable law, from the date made until the date fully repaid compounding
monthly; (D) all Company distributions and other payments that otherwise would
be made to the Delinquent Member (whether before or after dissolution of the Company)
under this Agreement (including those under Article 6) shall be paid to the
non-Delinquent Member until the loan and all interest accrued thereon is paid
in full (with all such payments being applied first to accrued and unpaid
interest and then to principal and being deemed to be a distribution or payment
(as may apply) to the Delinquent Member, and, in turn, a payment by the
Delinquent Member with respect to the loan from the non-Delinquent Member); and
(E) the non-Delinquent Member may, in addition to the other rights granted
herein, take such action as the non-Delinquent Member may deem appropriate to
obtain payment of the loan at the expense of the Delinquent Member; or

(ii)                                  permit the
non-Delinquent Member to contribute that portion of the Additional Capital
Contribution that is in default as an Additional Capital Contribution made by
the non-Delinquent Member, in which case the non-Delinquent Member shall have
its Company Percentage increased and the Delinquent Member shall have its Company
Percentage decreased in the following manner: (A) the Company Percentage of the
non-Delinquent Member immediately following such Additional Capital
Contributions shall be increased by an amount equal to 150% x A/B, where ‘A’
equals the amount the non-Delinquent Member contributed in respect of the
Delinquent Member’s required Additional Capital Contribution, and ‘B’ equals
the sum of all unreturned Capital Contributions previously made to the Company
after giving effect to the amounts advanced under this Section 3.4(b)(ii) on
behalf of the Delinquent Member; and (B) the Company Percentage of the
Delinquent Member shall be decreased by the increase of the non-Delinquent Member’s
Company Percentage.  An example of the operation of this Section
3.4(b)(ii) is set forth in Exhibit D attached hereto.

(c)                                  The exercise by the Company
of the remedies set forth in Section 3.4(b) above shall be determined by the
non-Delinquent Members in their sole discretion and not by any Delinquent Member.

(d)                                 With respect to any
efforts by the BH Investor to obtain loans to the Company from a third party or
a Member, the financing terms must be substantially similar to (or more
favorable than) loans which the Company could obtain on a competitive
arms-length basis. If the BH Investor is unable to determine whether the
financing terms are competitive on an arms-length basis, the BH Investor may
seek and rely upon the advice of an independent expert in financing.  If any Member makes any loan or loans to the Company
or advances money on its behalf, the amount of any loan or advance shall not be
treated as a Capital Contribution but shall be treated as a debt due from the Company
to such Member.

 

 10

 

3.5                               Capital
Accounts.  The Company shall
establish and maintain on its books and records for each Member a capital
account (collectively the “Capital Accounts”) in accordance with Section
1.704-1(b)(2)(iv) of the Regulations. 
Subject to the foregoing, each Member’s Capital Account generally shall
be:

(a)                                  increased by (i) the amount of money
contributed by such Member to the Company, including Company liabilities
assumed by such Member; (ii) the fair market value of property (net of
liabilities securing such property that the Company has assumed, or taken
subject to, under Section 752 of the Code), or other consideration contributed
by such Member to the Company; and (iii) allocations to such Member of Profits
(and items thereof, including certain tax exempt income) and income and gain
described in Section 1.704-1(b)(2)(iv)(g) of the Regulations; and

(b)                                 decreased by (i) the amount of money
distributed to such Member by the Company, including such Member’s individual
liabilities assumed by the Company; (ii) the fair market value of all property
distributed to such Member by the Company (net of liabilities that such Member
is considered to assume or take subject to under Section 752 of the Code); and
(iii) allocations to such Member of Losses and deductions, including expenses
described in Section 705(a)(2)(B) of the Code which are not deductible for tax
purposes.

(c)                                  Notwithstanding the foregoing, the beginning
Capital Account of Smith Investor after its contribution of the Property to the
Company is $1,670,000.00.

(d)                                 Any other Company item required or authorized
under Section 1.704-1(b) of the Regulations to be reflected in Capital Accounts
shall be so reflected.

3.6                               Interest on and Withdrawal
of Capital Contributions.  The Members shall not be entitled to receive
any interest on Capital Contributions, nor shall the Members be entitled to
withdraw or otherwise receive a return of their Capital Contributions from the Company,
except pursuant to the terms and conditions of this Agreement.  No Member shall be required to contribute or
lend any cash or property to the Company to enable the Company to return any Member’s
Capital Contributions.

3.7                               Resignation; Redemption. 
Except as otherwise expressly permitted by this Agreement, no Member may
resign or withdraw from the Company without Approval by Company Vote.  A Member’s interest in the Company may not be
redeemed or purchased by the Company without prior Approval by Company Vote.

3.8                               Transfers.  If
any interest in the Company is Transferred in accordance with the terms of this
Agreement, the Transferee will succeed to the Capital Account of the Transferor
to the extent it relates to the Transferred interest.

ARTICLE IV.

MANAGEMENT

4.1                               General Powers of the Members.  Except as provided in Section 4.2 hereof, the day-to-day
administrative management of the Company and the implementation of the policy
and decisions of the Company (as approved by the requisite vote of the Members)
shall be the obligation of and rest with the Members, which shall have all the
rights and powers as are necessary, advisable or convenient to the management
of the business and affairs of the Company, subject to the limitations
contained herein, including those matters described in Section 4.2 below. The Members
shall exercise sound business judgment in managing the affairs of the Company.  Notwithstanding anything set forth to the
contrary in this Agreement, the Member holding the Majority in Interest of the
Company Percentages shall be the

 11
 

 

only Member entitled to bind the Company and
enter into agreements and sign on the Company’s behalf.  Notwithstanding the foregoing, the Member
holding the Majority in Interest of the Company Percentages may give express
written authorization, in its sole discretion, to the other Member, delegating
the authority to sign on the Company’s behalf. 
In addition, no Member (other than a Member holding a Majority in
Interest of the Company Percentages) may make or implement any decision set
forth in this Agreement to be made or implemented by the Members or give any
notices required to be given without the written approval of the Member holding
the Majority in Interest of the Company Percentages or pursuant to Approval by
Company Vote.

4.2                               Major Decisions. 
All “Major Decisions”
(hereinafter defined) shall be made by the Members (subject to Approval by
Company Vote) in a timely manner with due regard for the necessity of obtaining
and evaluating the information necessary for making such Major Decisions.  A “Major Decision” as used in this
Agreement means any decision with respect to the following matters:

(a)                                  any merger or consolidation of the Company
with another entity;

(b)                                 any borrowing by the Company secured by a
deed of trust or lien against the Property or any guarantee of debt of any
other Person;

(c)                                  except for expenditures made and obligations
incurred pursuant to an Operating Budget, making any expenditure or incurring
any obligation by or for the Company, or approving any such expenditure or
obligation to be made or incurred by the Company, in excess of 105% of the
amount set forth in an Operating Budget therefor (the “105% Limitation”);
provided, that the Member holding a Majority in Interest of the Company
Percentages may make expenditures that it reasonably determines are necessary
or appropriate that exceed such 105% Limitation provided that the aggregate
amount of such expenditures do not exceed the lesser of: (i) fifteen percent
(15%) of the Operating Budget, or (ii) Twenty Five Thousand Dollars ($25,000.00)
in any 12-month period; provided, further, that if emergency repairs to the
Property are necessary to avoid imminent danger of injury to the Property or to
an individual, the Member holding a Majority in Interest of the Company
Percentages may make such expenditures as may be necessary to alleviate such
situation (without regard to the foregoing limitations) and shall promptly
notify the Members in writing of the event giving rise to such repairs and the
actions taken with respect thereto;

(d)                                 causing the Company to file a voluntarily
bankruptcy petition, seeking or consenting to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any similar official
for the Company or a substantial portion of its assets, causing the Company to
file a petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation, causing the Company to file an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against it in any proceeding of this nature or to take any action in
furtherance of the foregoing;

(e)                                  causing the Company to file any lawsuit,
other than lawsuits arising from the normal day-to-day operation of the
Property, such as suits to collect unpaid rent and eviction suits;

(f)                                    any payment by the Company of any
compensation to a Member or an Affiliate of a Member, or any transaction
between the Company and any Member or Affiliate of a Member, except to the
extent that any payment to, or transaction with, a Member is set forth in an
approved Operating Budget or expressly authorized or approved pursuant to the
terms of this Agreement;

(g)                                 executing or approving any agreement or
contract with any Person to be an agent for the Company or to be other than an
independent contractor, or which permits any such Person to sign

 12
 

 

any agreement or contract, including, without limitation, brokerage,
listing or commission agreements or service contracts, on behalf of the Company;

(h)                                 the dedication of any portion of the Property
to any federal, state or local government or political subdivision;

(i)                                     approval of a management, development or
leasing agreement related to the Property;

(j)                                     executing or approving any agreement,
contract, or arrangement, with a term of more than one year that is not
terminable with thirty (30) days notice without penalty;

(k)                                  assigning the Company’s rights in specific Company
property for other than Company purposes;

(l)                                     any act which would make it substantially
impractical to carry on the ordinary business of the Company, other than a
Transfer of all or substantially all of the assets of the Company;

(m)                               any confession of a judgment against the Company;

(n)                                 making, executing or delivering any
assignment for the benefit of creditors of the Company, or signing any bond,
confession of judgment, indemnity bond or surety bond by or on behalf of the Company;

(o)                                 any Transfer (other than leases of the
Property executed in the ordinary course of business) of all or any part of (i)
the Property, or (ii) any other Company asset the value of which exceeds
$25,000;

(p)                                 any admission of any new Member to the Company;

(q)                                 the dissolution or termination of the Company

(r)                                    the approval of any tax election that
adversely affects a Member; and

(s)                                  any other decision or action which by the
provisions of this Agreement is required to be authorized by the Members.

4.3                               Operating Budgets. 
The Company shall
operate under annual Operating Budgets which shall be prepared by or at the
direction of the Members.  After an
annual Operating Budget has been the subject of Approval by Company Vote, the Members
shall implement it on behalf of the Company and may cause the Company to incur
the expenditures and obligations therein provided.

4.4                               Payment of Costs and Expenses. 
The Company will be
responsible for paying all costs and expenses of forming and continuing the Company,
acquiring the Property, and conducting the business of the Company, including,
without limitation, accounting costs, legal expenses and office supplies.  In the event any such costs and expenses are
incurred and paid by the Members on behalf of the Company, then, except as
expressly provided to the contrary in this Agreement, such Member shall be
entitled to be reimbursed for such payment so long as such cost or expense was
reasonably necessary and is reasonable in amount.  The Company may use the proceeds of any
revenues of the Company to reimburse a Member for any such costs and expenses
so paid.

4.5                               Transactions with Affiliates.  Any
agreement whereby any service or activity to be performed for the Company is to
be performed by an Affiliate of a Member shall require Approval by

 13
 

 

Company Vote. The Members hereby acknowledge and agree that Approval by
Company Vote has been obtained with respect to the Owner Agreement, Apartment Management
Agreement and the Development Agreements.

4.6                               No Employees.  The Company
shall have no employees.

4.7                               Fees Payable by the Company.

(a)                                  The Company shall enter into the Management
Agreement, attached hereto as Exhibit E, with Manager to perform
management services in respect of floors 9-15 (excluding floor 13), 17-27 and a
portion of floor 28 of the Tower, pursuant to which the Manager will receive such
management fees as more specifically set forth in the Management Agreement.

(b)                                 The Company shall enter into the Development
Agreement attached hereto as Exhibit
F with Developer to perform
development services in respect of floors 9-15 (excluding floor 13), 17-27 and
a portion of floor 28 of the Tower, pursuant to which the Developer will receive
a development fee from the Company as more specifically set forth in the
Development Agreements.

(c)                                  Upon the sale of Property and improvements
thereon, and the related operating components of the Property, the Company shall
pay to Behringer Harvard Opportunity Advisors LP (“BH Advisors”) a fee equal to
0.75%. of the gross selling price, to be paid out of the proceeds of the sale.

4.8                               Other Compensation.  Except
as provided in this Agreement, no Member or its Affiliate shall be entitled to
any compensation unless Approval by Company Vote is obtained with respect
thereto.

4.9                               Construction Requirements.  The completion or renovation of improvements which are to be
constructed on the Property shall be guaranteed at the price contracted either
by an adequate completion bond or by other assurances satisfactory to the Members,
which assurances shall include one or more (at the discretion of the Members)
of the following: (a) a written personal guarantee of one or more of the general
contractor’s principals accompanied by the financial statements of such
guarantor indicating a substantial net worth; (b) a written fixed price
contract with a general contractor that has a substantial net worth; (c) a
retention of a reasonable portion of construction costs as a potential offset
to such construction costs in the event the general contractor does not perform
in accordance with the construction contract; or (d) a program of disbursements
control which provides for direct payments to subcontractors and suppliers. The
Company shall make no periodic progress or other advance payments to the
general contractor or any subcontractor unless the Company has first received
an architect’s certification as to the percentage of the improvements which has
been completed and as to the dollar amount of the construction then completed.

ARTICLE V.

RIGHTS AND POWERS OF MEMBERS

5.1                               Limitation of Liability of Members.  The Members shall not be bound by, or
personally liable for, obligations or liabilities of the Company to outside
third parties beyond the amount of their Capital Contributions to the Company,
and the Members shall not be required to contribute any capital to the Company
for any obligations to third parties in excess of the Capital Contributions actually
made under Sections 3.1, 3.2, 3.3 and 3.4 hereof.  The Members (including its members,
officers, directors, agents, employees and representatives) shall not be liable
or responsible in damages or otherwise to the Company or any Member for any
liability or loss relating to the performance or nonperformance of any act
concerning the business of the Company, provided the Member was not guilty of
gross negligence or willful misconduct.

 14
 

 

5.2                               Indemnification.

(a)                                  The Members (including their members, partners,
officers, directors, agents, employees and representatives) shall be
indemnified by the Company to the fullest extent permitted by law, against any
losses, judgments, liabilities, expenses and amounts paid in settlement of any
claims sustained by it or any of them in connection with the Company, provided
that the Member has determined in good faith that such course of conduct was
in, and not opposed to, the best interests of the Company and such liability or
loss was not the result of gross negligence or willful misconduct, or a
material breach of this Agreement on the part of the Member or such person, and
(2) any such indemnification will only be recoverable from the assets of the Company
and the Members shall not have any liability on account thereof.  All rights to indemnification permitted
herein and payment of associated expenses shall not be affected by the
dissolution or other cessation of the existence of the any Member, or the
withdrawal, adjudication of bankruptcy or insolvency of any Member.

(b)                                 Expenses incurred in defending a threatened
or pending civil, administrative or criminal action, suit or proceeding against
any person who may be entitled to indemnification pursuant to this Section 5.2
may be paid by the Company in advance of the final disposition of such action,
suit or proceeding, if (i) the legal action relates to the performance of
duties or services by such person on behalf of the Company, (ii) the legal
action is initiated by a third party who is not a Member, and (iii) such person
undertakes to repay the advanced funds to the Company in cases in which it is
not entitled to indemnification under this Section 5.2.

5.3                               Other Business Activities. 
Subject to the other
express provisions of this Agreement, each Member and any Affiliate thereof may
engage in and possess interests in other business ventures of any and every
type and description, independently or with others, including ones in direct or
indirect competition with the Company, with no obligation to offer to the Company
or any other Member the right to participate therein or to account
therefor.  Notwithstanding the foregoing,
Smith Investor and its affiliates shall not own an interest in any hotel or condominium
property located within an eight mile radius of the Property.

5.4                               Information.  In
addition to the other rights specifically set forth in this Agreement, each Member
is entitled to the following information: (a) true and full information
regarding the status of the business and financial condition of the Company; (b)
promptly after becoming available, a copy of the Company’s federal, state and
local income tax returns for each year; (c) a current list of the name and last
known business, residence or mailing address of each Member; (d) a copy of this
Agreement, the Certificate, and all amendments to such documents; and (e) other
information regarding the affairs of the Company to which that Member is
entitled pursuant to the Act.

5.5                               Press Releases.  No public announcement, press release or other similar public disclosure
of the terms of this Agreement, the activities of the Company, or the plans of
the Company will be made unless same is authorized in writing by the BH
Investor. However, notwithstanding the preceding sentence, any Member shall
have the right, without obtaining the consent of any other Member, to make such
disclosures as may, in the reasonable judgment of such Member’s counsel, be
required by applicable law.  Furthermore,
it is agreed that the foregoing provisions of this Section 5.5 shall not
prohibit a Member from disclosing such information to the accountants,
attorneys, consultants, lenders and vendors of the Company as is necessary to
allow such parties to provide services, funds or goods to the Company. The Members
have agreed that if a Member breaches the obligation set forth in the first
sentence of this Section 5.5 (the “Non-Disclosure Obligation”), the
actual damages that will be incurred by the other Members as a result of such
breach would be extremely difficult or impracticable to determine.  Therefore, the Members agree that if a Member or
any Affiliate of a Member breaches the Non-Disclosure Obligation, such Member
shall pay to each of the other Members liquidated damages (the

 15
 

 

“Liquidated Damages”) in the amount of Fifty Thousand Dollars ($50,000)
for each such breach, such amount having been agreed upon, after negotiation,
as the Members’ reasonable estimate of the damages that will be suffered by
reason of a breach of the Non-Disclosure Obligation. Any Liquidated Damages
becoming payable pursuant to this Section 5.5 shall be paid within ten (10)
days after the breach of the Non-Disclosure Obligation giving rise to the Liquidated
Damages. If not paid within such ten (10) day period, the Liquidated Damages shall
thereafter bear interest at the lesser of twelve percent (12%) per annum or the
highest rate permitted by applicable law. All Company distributions and other
payments that otherwise would be made to the Member that is liable for
Liquidated Damages shall be paid to the other Members until the Liquidated Damages
and all interest accrued thereon are paid in full (with all such payments being
applied first to accrued and unpaid interest and then to the Liquidated Damages).

ARTICLE VI.

DISTRIBUTIONS/ALLOCATIONS OF PROFITS AND LOSSES

6.1                               Distributions of Distributable
Cash from Operations.  Within twenty (20) days following the end of each calendar quarter, the
Company shall distribute Distributable Cash (other than Distributable Cash
arising from a Capital Transaction) in the following order of priority:

(a)                                  First, to the Members, in proportion to their
respective Company Percentages, until each Member has received the return of
its total Capital Contributions and distributions resulting from its investment
in the Company sufficient to provide an IRR of eighteen percent (18%);

(b)                                 Second, ninety percent (90%) to BH Investor
and ten percent (10%) to Smith Investor until each of the Members shall have
received distributions resulting from its investment in the Company sufficient
to provide an IRR of twenty-three percent (23%);

(c)                                  Third, eighty percent (80%) to BH Investor
and twenty percent (20%) to Smith Investor until each of the Members shall have
received distributions resulting from its investment in the Company sufficient
to provide an IRR of twenty-eight percent (28%);

(d)                                 Fourth, sixty-five percent (65%) to BH
Investor and thirty-five percent (35%) to Smith Investor until each of the
Members shall have received distributions resulting from its investment in the
Company sufficient to provide an IRR of thirty-three percent (33%);

(e)                                  Fifth, fifty percent (50%) to BH Investor and
fifty percent (50%) to Smith Investor.

(f)                                    Notwithstanding anything to the contrary set
forth above, no distributions will be made to the Smith Investor to the extent
of any amounts owing to the Company under the Lease; provided, however, that
such amounts will be deemed for purposes of this Agreement to be first
distributed to the Smith Investor and then paid to the Company by the lessee pursuant
to the Lease.

(g)                                 Notwithstanding anything to the contrary set
forth above, if any Member’s Company Percentage has been diluted by failure to
make an Additional Capital Contribution pursuant to Section 3.4, then the
distribution percentages with respect to the Delinquent Member set forth in
paragraphs (b), (c), (d) and (e) above shall be reduced by the same percentage
as such Member’s Company Percentage has been reduced as a result of the
dilution and the percentage of the non-diluted Member shall be increased by the
same amount.

 16
 

 

6.2                                    Distributions
of Distributable Cash from a Capital Transaction.  As soon as reasonably practicable after
the occurrence of a Capital Transaction, the Company shall distribute
Distributable Cash resulting from such Capital Transaction in the following
order of priority:

(a)                                  First, to the Members, in proportion to their
respective Company Percentages, until each Member has received the return of
its total Capital Contributions and distributions resulting from its investment
in the Company sufficient to provide an IRR of eighteen percent (18%);

(b)                                 Second, ninety percent (90%) to BH Investor
and ten percent (10%) to Smith Investor until each of the Members shall have
received distributions resulting from its investment in the Company sufficient
to provide an IRR of twenty-three percent (23%);

(c)                                  Third, eighty percent (80%) to BH Investor
and twenty percent (20%) to Smith Investor until each of the Members shall have
received distributions resulting from its investment in the Company sufficient
to provide an IRR of twenty-eight percent (28%);

(d)                                 Fourth, sixty-five percent (65%) to BH
Investor and thirty-five percent (35%) to Smith Investor until each of the
Members shall have received distributions resulting from its investment in the
Company sufficient to provide an IRR of thirty-three percent (33%);

(e)                                  Fifth, fifty percent (50%) to BH Investor and
fifty percent (50%) to Smith Investor.

(f)                                    Notwithstanding anything to the contrary set
forth above, no distributions will be made to the Smith Investor to the extent
of any amounts owing to the Company under the Lease; provided, however, that
such amounts will be deemed for purposes of this Agreement to be first
distributed to the Smith Investor and then paid to the Company by the lessee  pursuant to the Lease.

(g)                                 Notwithstanding anything to the contrary set
forth above, if any Member’s Company Percentage has been diluted by failure to
make an Additional Capital Contribution pursuant to Section 3.4, then the
distribution percentages with respect to the Delinquent Member set forth in
paragraphs (b), (c), (d) and (e) above shall be reduced by the same percentage
as the Member’s Company Percentage has been reduced as a result of the dilution
and the percentage of the non-diluted Member shall be increased by the same
amount.

6.3                               Tax
Distributions. The Company anticipates distributing cash to each Member
in an amount at least sufficient to pay the Deemed Tax Liability of such
Member.  Tax distributions may be made on
a quarterly or other basis as determined by the Company to enable each Member
to satisfy both estimated and final tax payment requirements.  The amount of any tax distributions made to
each Member pursuant to this Section 6.3 (i) shall be considered advance distributions
and shall be deducted from the amount of any future distributions that would
otherwise be paid to such Member pursuant to Section 6.1 or Section 6.2 and
(ii) shall be taken into account in all computations of IRR under Section 6.1
and Section 6.2.

ARTICLE VII.

ALLOCATION OF PROFITS AND LOSSES

7.1                               Allocation of Profits and
Losses.  After application of Section 7.3 hereof,
Profits and Losses for each fiscal year or a portion thereof shall be allocated
among the Members as of each Adjustment Date so as to reduce, proportionately,
in the case of any Profits, the difference between their respective Target
Accounts and Partially Adjusted Capital Accounts as of each Adjustment Date
and, in

 17
 

 

the case of Losses, the difference between their respective Partially
Adjusted Capital Accounts and Target Accounts as of each Adjustment Date.  To the extent that, in the fiscal year in
which all or substantially all of the Company’s assets are disposed of, or in
the fiscal year in which the Company is liquidated, the allocation of Profit or
Loss set forth in the preceding sentence does not cause each Member’s Partially
Adjusted Capital Account balance to equal the balance of its Target Account,
items of income or gain will be reallocated to any Member with a Partially
Adjusted Capital Account which is less than its Target Account, and items of
loss, deduction or expense will be reallocated to any Member with a Partially
Adjusted Capital Account that is greater than its Target Account in such manner
as to reduce, to the greatest extent possible, the difference between each Member’s
respective balance in its Target Account and its Partially Adjusted Capital
Account balance.

7.2                               Limitation on Loss Allocations. 
Notwithstanding
anything in this Agreement to the contrary, no Losses or item of deduction
shall be allocated to a Member if such allocation would cause the Capital
Account of such Member to have a deficit in excess of the sum of (a) the amount
of additional capital such Member would be required to contribute to the Company
if the Company were to dissolve on the last day of the accounting period to
which such allocation relates, if any, plus (b) such Member’s distributive
share of Company Minimum Gain as of the last day of such accounting period,
determined pursuant to Regulations Section 1.704-2(g)(1), plus (c) such Member’s
share of Member Minimum Gain as of the last day of such year, determined
pursuant to Regulation Section 1.704-2(i)(5). 
Any amounts not allocated to a Member pursuant to the limitations set
forth in this paragraph shall be
allocated to the other Members to the extent possible without violating the
limitations set forth in this paragraph. For purposes of the foregoing
provisions, the balance of a Member’s Capital Account shall be determined after
reducing such Capital Account by (i) all anticipated allocations of loss or
deduction pursuant to Sections 704(e)(2) and 706(d) of the Code, and Section
1.751-1(b)(2)(ii) of the Regulations, and (ii) anticipated distributions to
such Member to the extent such anticipated distributions exceed anticipated
increases to such Member’s Capital Account during or prior to the year of
distribution (other than increases which may not be taken into account pursuant
to Section 1.704-1(b)(2)(ii)(d)(6) of the Regulations).

7.3                               Special Allocations. 
The following special
allocations shall be made in the following order:

(a)                                  Minimum Gain Chargeback.  Except as otherwise provided in
Section 1.704-2(f) of the Regulations, in the event there is a net
decrease in Company Minimum Gain during a Company taxable year, each Member
shall be allocated (before any other allocation is made pursuant to this
Section 7.3) items of income and gain for such year (and, if necessary, for
subsequent years) equal to that Member’s share of the net decrease in Company
Minimum Gain. The determination of a Member’s share of the net decrease in Company
Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(g). The items to be specially allocated to the Members in accordance
with this Section 7.3(a) shall be determined in accordance with Regulation
Section 1.704-2(f)(6). This Section 7.3(a) is intended to comply with the
Minimum Gain chargeback requirement set forth in Section 1.704-2(f) of
the Regulations and shall be interpreted consistently therewith.

(b)                                 Member Minimum Gain Chargeback.  Except as otherwise provided in
Section 1.704-2(i)(4), in the event there is a net decrease in Member
Minimum Gain during a Company taxable year, each Member who has a share of that
Member Minimum Gain as of the beginning of the year, to the extent required by
Regulation Section 1.704-2(i)(4), shall be specially allocated items of Company
income and gain for such year (and, if necessary, subsequent years) equal to
that Member’s share of the net decrease in Member Minimum Gain. Allocations
pursuant to this subparagraph (b) shall be made in accordance with Regulation
Section 1.704-2(i)(4). This Section 7.3(b) is intended to comply

 18
 

 

with the require­ment set forth in Regulation Section 1.704-2(i)(4) and
shall be interpreted consistently therewith.

(c)                                  Qualified Income Offset Allocation.  In the event any Member unexpectedly receives
any adjustments, allocations or distributions described in Regulation Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6)
or which would cause the negative balance in such Member’s Capital Account to
exceed the sum of (i) his obligation to restore a Capital Account deficit upon
liquidation of the Company, plus (ii) his share of Company Minimum Gain
determined pursuant to Regulation Section 1.704-2(g)(1), plus (iii) such Member’s
share of Member Minimum Gain determined pursuant to Regulation Section 1.704-2(i)(5),
items of Company income and gain shall be specially allocated to such Member in
an amount and manner sufficient to eliminate such excess negative balance in
his Capital Account as quickly as possible. 
This Section 7.3(c) is intended to comply with the alternative test for
economic effect set forth in Regulation Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.

(d)                                 Gross Income Allocation.  In the event any Member has a deficit Capital
Account at the end of any Company fiscal year which is in excess of the sum of
(i) any amounts such Member is obligated to restore pursuant to this Agreement,
plus (ii) such Member’s distributive share of Minimum Gain as of such date,
plus such Member’s share of Member Minimum Gain determined pursuant to
Regulation Section 1.704-2(i)(5), each such Member shall be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 7.3(d) shall be
made only if and to the extent that such Member would have a deficit Capital
Account in excess of such sum after all other allocations provided for in this
Section 7.3 have been made, except assuming that Section 7.3(c) above and this
Section 7.3(d) were not contained in this Agreement.

(e)                                  Allocation of Nonrecourse Deductions.  Nonrecourse Deductions shall be allocated to
the Members in accordance with their respective Company Percentages.

(f)                                    Allocation of Member Nonrecourse
Deductions.  Member
Nonrecourse Deductions shall be allocated as prescribed by the Regulations.

(g)                                 Basis Adjustment under
Section 754.  To the extent an adjustment to the adjusted
tax basis of any Company assets pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be
taken into account in determining Capital Accounts, 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 a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Section of the Regulations.

7.4                               Built-In Gain or Loss/Section
704(c) Tax Allocations.  In the event that the Capital Accounts of the Members are credited with
or adjusted to reflect the Gross Asset Value of the Company’s property and
assets, the Members’ distributive shares of depreciation, depletion,
amortization, and gain or loss, as computed for tax purposes, with respect to
such property, shall be determined pursuant to Section 704(c) of the Code and
the Regulations thereunder, so as to take account of the variation between the
adjusted tax basis and Gross Asset Value of such property in a manner
determined by Approval by Company Vote.  The
Members recognize that the contribution of the Property to the Company by Smith
Investor shall be governed by this Section 7.4 and the Members recognize that
there has been approval by Company Vote to utilize the “traditional method with
curative allocations” method of accounting for the book-tax difference
attributable to such contribution, as described in Section 1.704-3(c) of the
Regulations.  Any deductions, income,
gain or loss specially allocated pursuant to this Section 7.4 shall

 19
 

 

not be taken into account for purposes of determining Profits or Losses
or for purposes of adjusting a Member’s Capital Account.

7.5                               Recapture. 
Ordinary income
arising from the recapture of depreciation and unrecaptured Section 1250 gain
shall be allocated to the Members in the manner that is prescribed by the
Regulations, or if the Regulations do not prescribe a manner in which
depreciation is to be recaptured, then depreciation shall be recaptured in the
same manner as such depreciation was allocated to the Members.

7.6                               Retention of Section 751 Assets. 
Upon the occurrence
of an event which would otherwise cause a reduction in a Member’s respective
interest in the Company’s Section 751 assets (“substantially appreciated
inventory” and “unrealized receivables” as defined in Section 751 of the Code),
such as the admission of new Members or otherwise, no such reduction shall
occur with respect to Members who were Members immediately preceding such event
and who continue to be Members after the occurrence of such event but, rather,
each such Member shall retain his respective interest in the Company’s Section
751 assets existing immediately prior to such event.

7.7                               Prohibition Against Retroactive
Allocations.  Notwithstanding anything in this Agreement to the contrary, no Member
shall be allocated any loss, credit or income attributable to a period prior to
his admission to the Company.  In the
event that a Member Transfers all or a portion of his Company interest, or if
there is a reduction in a Member’s Company Percentage due to the admission of
new Members or otherwise, each Member’s distributive share of Company items of
income, loss, credit, etc., shall be determined by taking into account each Member’s
varying interests in the Company during the Company’s taxable year.  For this purpose, each Member’s distributive
share shall be estimated by taking the pro rata portion of the distributive
share such Member would have included in his taxable income had he maintained
his Company Percentage throughout the Company year.  Such proration shall be based upon the
portion of the year during which such Member held the Company, except that
extraordinary, nonrecurring items shall be allocated to the persons holding Company
interests at the time such extraordinary items occur.

7.8                               Allocation of Nonrecourse
Liabilities.  The “excess nonrecourse liabilities” of the Company (within the meaning
of Section 1.752-3(a)(3) of the Regulations) shall be allocated to the Members
in accordance with their respective Company Percentage.

ARTICLE VIII.

TRANSFER OF COMPANY INTEREST

8.1                               General Prohibition Against
Transfers of Member’s Interest.  A Member may not Transfer any or all of such Member’s
interest in the Company except as permitted in Section 8.4 or 8.6; provided,
however, that BH Investor may Transfer all or any portion of its interest in
the Company to an Affiliate without the consent of any other Member.  Notwithstanding the foregoing, at any time
after the completion of the Development Agreements, Smith Investor may Transfer
all or any portion of its interest in the Company to any entity owned or
controlled by either James L. Smith or Marcia Smith-Niedringhaus (the “Smith
Group”) as long as such entity has a net worth equal to or greater than the net
worth of Smith Investor at the time of the Transfer.  As used herein, “controlled by the Smith
Group” shall mean the Smith Group owns not less than fifty-one percent of the
equity in the proposed transferee.  Any
act in violation of this Article shall be null and void as against the Company
and the Members, except as otherwise provided by law.

 20

 

8.2                               Conditions Upon Transfers by a Member. 
A Member may Transfer
all or any part of such Member’s interest in the Company only with the written
consent of the Members (as Approved by Company Vote); provided, however, that
the Members’ written consent shall not be given unless:

(a)                                  the Members are
satisfied that the proposed Transfer will not have any adverse effect upon the Company
or the Members under federal income tax laws then in effect or cause any
default in any loan documents of the Company or the Property owner;

(b)                                 the Members have
received, if requested, an opinion from counsel for the Company to the effect
that such Transfer will not violate federal or state securities laws or
regulations;

(c)                                  the person, firm or
entity to acquire such interest agrees to comply with all terms of this
Agreement, including without limitation Section 8.5 below; and

(d)                                 the Members confirm
with tax counsel for BH REIT that such transfer will not adversely impact the
REIT status of BH REIT.

8.3                               Substitution of Assignee.  Except
as otherwise permitted herein, no Transferee of the whole or any portion of a Member’s
interest in the Company shall have the right to be admitted to the Company and
become a Member unless and until all of the Members in their absolute
discretion consent and all of the following conditions are satisfied:

(a)                                  the Transferor and Transferee execute and
acknowledge a written instrument of assignment, together with such other
instruments as the Members may deem necessary or desirable to effect the admission
of the Transferee as a substitute Member; and

(b)                                 an instrument specifically Transferring such
interest, signed by both assignor and assignee, shall be filed with the remaining
Member, and until such instrument is so filed, the Company shall not recognize
any Transfer of interest for the purposes of making payments of profits, income
or any other distribution with respect to such interest.

8.4                               Buy-Sell Agreement.

(a)                                  Any Member that is not a Delinquent Member
(the “Offeror”) may make an offer in writing (the “Offer”) to the
other Members (the “Offeree”), which shall state an amount (the “Buy-Sell
Value”) determined in the sole and absolute discretion of the Offeror.  The Buy-Sell Value shall be the amount that (i)
if the Offeror is initiating the Buy-Sell as a result of an event of default
under this Agreement, the Development Agreements or the Management Agreements
or as a result of deadlock between the Members (“Cause”), shall equal the value
of the Assets and the Assets of the Hotel Company (as defined in that certain limited
liability company agreement of The Hotel Company) (the “Total Assets”) and (ii)
if the Offeror is initiating the Buy-Sell for any reason other than for Cause,
shall equal the value of the Total Assets plus (i) any Termination Fee (as
defined in the Development Agreements) plus (ii)any Termination Fee (as defined
in the Hotel Management Agreement) required pursuant to the Hotel Management
Agreement (such Termination Fees set forth in (i) and (ii) above to be paid only
if the Member selling its interests in the Company is Smith Investor).  An offer made pursuant to this Section 8.4
shall constitute an irrevocable offer by the Offeror to the Offeree either (i)
to sell all, but not less than all, of the Offeror’s interests in the Company and
the Hotel Company (including any interests held by, or Transferred to, its
Affiliates), or (ii) to purchase all, but not less than all, of the Offeree’s
interests in the Company and the Hotel Company (including any interests held by
or Transferred to its Affiliates).

(b)                                 If the Offeree believes in good faith that
the Buy-Sell Value represents an amount that is less than the fair market value
of the Total Assets (plus any Termination Fees, as

 21
 

 

appropriate), then Offeree may, within ten (10) days of receipt of the Offer,
deliver a written notice to the Offeror indicating that that an appraisal shall
be required to determine the Buy-Sell Value. 
If Offeree does not deliver such a notice within the ten (10)-day
period, then Offeree will be deemed to have accepted the Buy-Sell Value.  Both Offeror and Offeree shall each select an
appraiser from a nationally recognized business valuation services firm qualified
to perform hotel/condominium business valuation appraisals within ten (10) days
after receipt by Offeror of written notice that an appraisal shall be required.  The two appraisers shall determine the
Buy-Sell Value within thirty (30) days after the expiration of the ten (10)-day
appraiser selection period.  If the two
appraisers can not agree on the Buy-Sell Value within the thirty day period
(the “Initial Appraisal Period”) then the appraisers shall jointly
select a third appraiser with similar qualifications within five (5) business days
after the end of the Initial Appraisal Period and such appraiser shall
determine the Buy-Sell Value within thirty (30) days after the end of the five
(5)-day appraiser selection period (the “Additional Appraisal Period”).  The determination of the Buy-Sell Value by
the third appraiser shall be final.

(c)                                  The Offeree shall have sixty (60) days after the
later of (i) receipt of an Offer made pursuant to Section 8.4(a) or (ii) the expiration
of the Initial Appraisal Period (or, if necessary, the Additional Appraisal
Period), if necessary, to elect either (A) to sell its interests in the Company
and the Hotel Company at a price equal to the amount the Offeree would have
received pursuant to a liquidation of the Company and the Hotel Company if the Total
Assets had been sold to a third party for the Buy-Sell Value and the proceeds
therefrom had been applied and distributed in accordance with Section 12.2
(assuming that all allocations resulting from the sale had been made and no
reserves are established); or (B) to buy the Offeror’s interest in the Company and
the Hotel Company at a price equal to the amount the Offeror would have
received pursuant to a liquidation of the Company and the Hotel Company if the Total
Assets had been sold to a third party for the Buy-Sell Value and the proceeds
therefrom had been applied and distributed in accordance with Section 12.2
(assuming that all allocations resulting from the sale had been made and no
reserves are established) (the “Buy-Sell Election Period”).  If the Offeree fails to make such an election
during the Buy-Sell Election Period, the Offeree shall be deemed to have
elected to sell its interests in the Company. In any case in which there is
more than one purchasing Member, the purchasing Members shall determine the
proportions of the interests in the Company and the Hotel Company to be
purchased by each such Member.

(d)                                 Closing shall occur at the offices of the Company
no later than ninety (90) days following the date after the expiration of the
Buy-Sell Election Period. It is understood and agreed that if a portion of the Total
Assets are sold between the time that the Offeror initiates the procedure set
forth Section 8.4(a) above and closing, the proceeds of such sale shall be
retained by the Company and/or the Hotel Company and not distributed to the Members.
At the closing, the applicable interests in the Company and the Hotel Company shall
be duly conveyed, free of all liens and encumbrances, and the purchase price
shall be paid by wire transfer of immediately available federal funds. At the
election of the purchasing Member, the applicable interests in the Company and
the Hotel Company to be purchased may be acquired in the name of a nominee
(whether or not such nominee is an Affiliate of the Purchasing Member),
provided, that the Purchasing Member shall have designated such nominee by
written notice prior to the date of purchase. It shall be a condition of the
selling Member’s obligation to proceed with any such purchase that the
purchasing Member shall have obtained releases of any guaranties of
indebtedness of the Company executed by the selling Member or any Affiliates of
(or principals in) such selling Member. The purchasing Member, in addition to
paying at the closing the purchase price, shall be obligated to loan to the Company
and the Hotel Company an amount sufficient to discharge at the closing all
outstanding and unpaid obligations of the Company and the Hotel Company to the
selling Member as of such time.

(e)                                  Upon receipt of the purchase price, the selling
Member shall execute and deliver all documents reasonably required to transfer
the interest in the Company and the Hotel Company being

 22
 

 

sold.  The selling Member shall
also execute such resignations and other documents as may be reasonably
required by counsel for the Company to accomplish the withdrawal of the selling
Member as a Member of the Company and the purchasing Member shall assume all of
the selling Member’s obligations to the Company and any of its creditors under
any loans to the Company permitted by this Agreement, such assumptions to be in
form reasonably satisfactory to counsel for the selling Member.

(f)                                    It is expressly agreed that the remedy at law
for breach of any of the obligations set forth in this Section 8.6 is
inadequate in view of (i) the complexities and uncertainties in measuring the
actual damages that would be sustained by reason of the failure of a Member to
comply fully with each of said obligations, and (ii) the uniqueness of the Company
business and Members’ relationship. Accordingly, each of the aforesaid
obligations shall be, and is hereby expressly made, enforceable by specific
performance.

8.5                               Cost and Expense of Transfer;
Allocation of Profits and Losses.  All costs and expenses incurred by the Company
in connection with any disposition of a Member’s interest, including any
filing, recording and publishing costs and the fees and disbursements of
counsel, shall be paid by the Member disposing of such interest.  If an interest in the Company is disposed of
pursuant to this Article VIII, the selling Member shall nevertheless be
entitled to a portion of the profits and be charged with a portion of the
losses allocated to such interest or part thereof for the fiscal year of the Company
in which such disposition occurs, consistent with Section 7.7 above.

ARTICLE IX.

OWNERSHIP OF COMPANY PROPERTY

All real or personal
property, including all improvements placed or located thereon, acquired by the
Company shall be owned by and in the name of the Company, such ownership being
subject to the other terms and provisions of this Agreement.

ARTICLE X.

FISCAL MATTERS

10.1                        Fiscal Year.  The
fiscal year of the Company shall be the calendar year.

10.2                        Records; Financial
Statements.

(a)                                  Proper books and records shall be kept with
reference to all Company transactions at the principal place of business of the
Company, and each Member shall at all reasonable times during business hours
have access thereto.  The books shall be
kept in such manner of accounting as shall properly reflect the actions of the Company
in accordance with accounting principles generally accepted within the industry
and consistently applied on such basis as will, in the opinion of the Company’s
accountants, be most advantageous to the Company.  The books and records shall include the
designation and identification of any property in which the Company owns a
beneficial interest.  The books and
records of the Company shall be reviewed annually at the expense of the Company
by an independent certified public accountant selected by the BH Investor, who
shall prepare and deliver to the Company, for filing, the appropriate federal Company
income tax return(s) before March 31 of each year. Each Member shall receive a
copy of the Company income tax return at least ten (10) business days prior to
filing such return. The Company shall report its operations for tax purposes on
the accrual basis.

(b)                                 The BH Investor shall, at Company expense,
furnish (or request the manager of the Property to furnish) to the Members (i)
on or before the twentieth (20th) day of each calendar quarter,

 23
 

 

an unaudited statement setting forth and describing in reasonable
detail the receipts and expenditures of the Company during the preceding
calendar quarter and comparing the results of operations of the Company for
such calendar quarter and for the year to date to the appropriate Operating
Budget, (ii) on or before one hundred twenty (120) days after the end of each
fiscal year, a balance sheet of the Company dated as of the end of such fiscal
year, a statement of the Members’ Capital Accounts, a statement of
Distributable Cash, and a statement setting forth the Profits and Losses for
such fiscal year, audited by an independent firm of certified public
accountants as determined by approval by the Members, and (iii) from time to
time, all other information relating to the Company and the business and its
affairs reasonably requested by any Member.

10.3                        Accounts.  All
funds of the Company shall be deposited in its name in an account or accounts
maintained at a bank designated by the BH Investor or with an agent designated
by the Members.  Checks shall be drawn
upon the Company account or accounts only for purposes of the Company and shall
be signed by the Member holding a Majority in Interest of the Company
Percentages.

10.4                        Federal Tax Elections.  All
elections for federal tax purposes, including but not limited to an election to
adjust the basis of the assets of the Company pursuant to Section 754 of the
Code, and the adoption of accelerated depreciation or cost recovery methods
required or permitted to be made by the Company under the Code shall be
determined by the BH Investor.

10.5                        Tax Audits.  BH
Investor shall be designated as the “tax matters member” of the Company as
defined in Sections 6221 et seq.,
of the Code and, in the event of an audit of the Company by the Internal Revenue
Service (“IRS”), BH Investor, at Company expense, shall have the
exclusive right to conduct all negotiations with the Internal Revenue Service
on behalf of the Company, and the attorneys and accountants selected by the Members
to conduct such negotiations are hereby specifically authorized by the Members
to act on behalf of the Company in such negotiations, and each Member will
execute such further authority as the IRS may require to permit BH Investor and
its selected attorneys and accountants to so represent the Members; provided BH
Investor shall not take any action take any action contemplated by Sections
6222 through 6232 of the Code without Approval by Company Vote.  This provision is not intended to authorize BH
Investor to take any action left to the determination of an individual Member
under Sections 6222 through 6232 of the Code.

ARTICLE XI.

AMENDMENT

This Agreement may not be altered or amended except
by a written instrument signed by the Members holding a Majority in Interest of
the Company Percentages, provided that no amendment may reduce a Member’s
economic interest in the Company without the Member’s prior written consent

ARTICLE XII.

DISSOLUTION OF THE COMPANY

12.1                        Dissolution.

(a)                                  It is the intention of the Members that the Company
shall be continued by the Members, or those remaining, pursuant to the
provisions of this Agreement, notwithstanding the occurrence of any event which
would otherwise result in a dissolution of the Company pursuant to the law of
the State of Delaware, and no Member shall be released or relieved of any duty
or obligation hereunder by reason of any such dissolution; provided, however,
that the Company shall be terminated, its affairs wound up and its property and
assets distributed on the earlier of:

 24
 

 

 

(i)                                     expiration of the Company term as provided in
Section 1.5 hereof;

(ii)                                  the written consent of the Members;

(iii)                               the disposition (including condemnation or casualty loss) of all or
substantially all of the property and assets of the Company and receipt of the
proceeds from such sale of other disposition (except under circumstances where
(x) all or a portion of the purchase price is payable after the closing of the
sale or other disposition, or (y) the Company retains a material economic or
ownership interest in the entity to which all or substantially all of its
assets are Transferred); or

(iv)                              dissolution by law or appropriate judicial decree.

(b)                                 Dissolution of the Company shall be effective
on December 31, 2056 or the day on which the event occurs giving rise to the
dissolution, but the Company shall not terminate until the Certificate shall
have been canceled and the assets of the Company shall have been distributed as
provided below.  Notwithstanding the
dissolution of the Company, prior to the termination of the Company as
aforesaid, the business of the Company and the affairs of the Members shall
continue to be governed by this Agreement.

(c)                                  The bankruptcy, insolvency, dissolution, or
adjudication of incompetency of a Member shall not cause the dissolution of the
Company.  In the event of the bankruptcy,
or incompetency of a Member, its administrators or representatives (“Successor”)
shall have the same rights that such Member would have had if it had not become
bankrupt, except that, in the event of bankruptcy, such Successor shall have no
right to participate in the management of the Company or vote on any Company
matter unless such Successor is admitted to the Company as a Member pursuant to
Section 8.5, and the interest of such Member in the Company shall, until the
termination of the Company, otherwise be subject to the terms, provisions and
conditions of this Agreement as if such Member had not become bankrupt.  In the event of any other withdrawal of a Member,
the Member shall only be entitled to Company distributions distributable to it
but not actually paid to it prior to such withdrawal and shall not have any
right to have its interest in the Company purchased or paid for.

(d)                                 Notwithstanding anything in this Agreement to
the contrary, upon a sale of all or substantially all of the assets of the Company
in a single transaction (a “Single Sale Transaction”) where all or any
portion of the consideration payable to the Company is to be received by the Company
more than ninety (90) days after the date on which such Single Sale Transaction
occurs, the Company shall continue for purposes of collecting the deferred
payments and making distributions to the Members.  In such event (i) gain recognized and cash
distributed in any year as a result of such Single Sale Transaction shall be
allocated and distributed among the Members in the same proportion as such gain
and cash would have been allocated and distributed were the entire gain
resulting from such Single Sale Transaction required to be recognized for Federal
income tax purposes in the year in which such Single Sale Transaction occurred;
and (ii) income attributable to interest on deferred payments shall be
allocated among, and such interest shall be distributed to, the Members as if
the deferred payment obligations received by the Company had been distributed
to the Members pursuant to Section 6.1.

12.2                        Wind-Up of Affairs. 
As expeditiously as
possible following the occurrence of an event giving rise to a termination of
the Company pursuant to Section 12.1 above, a liquidator appointed by BH
Investor (such liquidator is referred to herein as the “Liquidator”)
shall liquidate the assets of the Company, apply and distribute the proceeds
thereof as contemplated by this Agreement and cause the cancellation of the
Certificate.  As soon as possible after
the dissolution of the Company, a full account of the assets and liabilities of
the Company shall be taken, and a statement shall be prepared by the
independent accountants then acting for the Company setting forth the assets
and liabilities of the

 25
 

 

Company.  A copy of such
statement shall be furnished to each of the Members within ninety (90) days
after such dissolution.  Thereafter, the
Liquidator shall wind up the affairs of the Company and distribute the Company
assets in the following order of priority:

(a)                                  to creditors (including Members who are
creditors) in satisfaction of the liabilities of the Company, other than
liabilities to existing and former Members for distributions from the Company;

(b)                                 to the establishment of any reserves which
the Liquidator deems reasonably necessary for any contingencies or unforeseen
liabilities or obligations of the Company. 
Such reserves shall be paid over by the Liquidator to an escrow agent or
shall be held by the Liquidator for the purpose of disbursing such reserves in
payment of any of such contingencies.  At
the expiration of such period as the Liquidator deems advisable, the balance
thereof shall be distributed in the manner and order provided in this Section;

(c)                                  to existing and former Members in
satisfaction of any liabilities to them, if any, for distributions from the Company;

(d)                                 to the Members in accordance with Section 6.2
above.

Notwithstanding anything
to the contrary, in the event the Company is “liquidated” within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g) and an event described in Section
12.1(a) shall have occurred, liquidating distributions shall be made pursuant
to this Section 12.2 by the end of the taxable year in which the Company is
liquidated, or, if later, within ninety (90) days after the date of such
liquidation.  Distributions pursuant to
the preceding sentence may be made to a trust for the purpose of an orderly
liquidation of the Company by the trust in accordance with the Act.

12.3                        Compliance with Treasury
Regulations.  It is
the intent of the Members that the allocations provided in Section 7.1 result
in distributions required pursuant to Section 12.2(d) being in accordance with
positive Capital Accounts as provided for in the Treasury Regulations under
Code Section 704(b).  However, if after
giving hypothetical effect to the allocations required by Section 7.1, the
Capital Accounts of the Members are in such ratios or balances that
distributions pursuant to Section 12.2(d) would not be in accordance with the
positive Capital Accounts of the Members as required by the Treasury
Regulations under Code Section 704(b), such failure shall not affect or alter
the distributions required by Section 12.2(d). 
Rather, the liquidator will have the authority to make other allocations
of Profits and Losses (or items thereof) among the Members which, to the extent
possible, will result in the Capital Accounts of each Members having a balance
prior to distribution equal to the amount of distributions to be received by
such Members pursuant to Section 12.2(d).

12.4                        No Deficit Capital Account
Obligation. 
Notwithstanding anything else to the contrary in this Agreement, upon a
liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations,
if any Member has a deficit Capital Account (after giving effect to all
contributions, distributions, allocations and other Capital Account adjustments
for all taxable years, including the year during which such liquidation
occurs), such Member shall have no obligation to make any Capital Contribution,
and the negative balance of such Member’s Capital Account shall not be
considered a debt owed by such Member to the Company or to any other Person for
any purpose whatsoever.

12.5                        Distribution in Kind. 
If any assets of the Company
are to be distributed in kind, the net fair market value of such assets as of
the date of dissolution shall be determined by independent appraisal or by
agreement of the Members.  Prior to
distribution, such assets shall be deemed to have been sold for their fair
market values and the Capital Accounts of the Members shall be adjusted
pursuant to the terms

 26
 

 

of this Agreement to reflect the allocation of gain or loss which would
have resulted from such deemed sale.

12.6                        Cancellation of Certificate. 
Upon the dissolution
and the final liquidation of the Company, there shall be filed for record as
provided by Delaware law a Certificate of Cancellation executed by the Member
holding the Majority in Interest of the Company Percentages.

12.7                        Return of Contribution
Nonrecourse to Other Members.  Except as provided by law or as expressly
provided in this Agreement, upon dissolution each Member shall look solely to
the assets of the Company for the return of its Capital Contribution.  If the Company property remaining after the
payment or discharge of the debts and liabilities of the Company is
insufficient to return the cash contribution of one or more Members, such Member
or Members shall have no recourse against any other Member.

ARTICLE XIII.

MISCELLANEOUS PROVISIONS

13.1                        Key Man Insurance.  The
parties acknowledge and agree that Jim Smith, a principal of the Smith
Investor, has key knowledge and experience that the parties are relying on in
connection with the transactions contemplated herein.  Jim Smith hereby acknowledges and agrees that
BH Investor, at its option, may procure “key man insurance” on Jim Smith for
the sole benefit of BH Investor at BH Investor’s cost.  Jim Smith agrees to cooperate with BH
Investor and any insurance provider in such a manner to cause the issuance of
such a policy to BH Investor.

13.2                        Notices. 
Except as may be
otherwise specifically provided in this Agreement, all notices required or
permitted hereunder shall be in writing and shall be deemed to be delivered on
the earlier of (i) when delivered in person, or (ii) when delivered by
commercial courier such as Federal Express, Express Mail or other overnight
delivery service where delivery is evidenced by written receipt, addressed to
the appropriate party at the addresses set forth in Article II, or such other
address of the party as may have been changed as provided herein.  Any party may change the address to which
notices will be given by giving notice of such change to the other parties, in
accordance with the provisions of this Section 14.1.

13.3                        Governing Law. 
This Agreement shall
be construed under and in accordance with the laws of the State of Delaware,
excluding any conflicts of law rule or principle which might refer such
construction to the laws of another state or country.

13.4                        Execution of Other Agreements. 
The parties hereto
covenant and agree that they will execute such other further instruments and
documents as are or may become necessary or convenient to effectuate and carry
out the Company created by this Agreement.

13.5                        No Action for Partition. 
No Member shall be
entitled to bring an action for partition against the Company, and each Member
hereby irrevocably waives, during the term of the Company and during the period
of its liquidation following any dissolution, any right to maintain an action
for partition with respect to any of the assets of the Company.

13.6                        Paragraph Headings. 
The headings used in
this Agreement are used for administrative purposes only and do not constitute
substantive matter to be considered in construing the terms of this Agreement.

 27
 

 

13.7                        Binding Effect and Benefit. 
This Agreement is
binding on, and shall inure to the benefit of, all of the parties hereto and to
their respective heirs, executors, administrators, legal representatives, and
successors and assigns where permitted by this Agreement.

13.8                        Severability. 
In case any one or
more of the provisions contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision hereof, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.

13.9                        Counterparts. 
This Agreement may be
executed in any number of counterparts, all of which together shall constitute
a single contract, and each of such counterparts shall for all purposes be
deemed to be an original.  This Agreement
may be executed and delivered by fax (telecopier); any original signatures that
are initially delivered by fax shall be physically delivered with reasonable
promptness thereafter.  This Agreement
shall become binding when one or more counterparts hereof, individually or
taken together, shall bear the signatures of all of the parties reflected
hereon as the signatories.

13.10                 Gender. 
Wherever the context
so requires, all words herein in the neuter gender shall be deemed to include
the feminine or masculine genders, and vice versa, all singular words shall include
the plural, and all plural words shall include the singular.

13.11                 Entire Agreement. 
This Agreement,
together with all Exhibits hereto and all other documents referred to herein,
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof, and supersedes all prior and contemporaneous agreements,
understanding, inducements or conditions, express or implied, oral or written.

13.12                 Validity. 
In the event that all
or any portion of any provision of this Agreement shall be held to be invalid,
the same shall not affect in any respect whatsoever the validity of the
remainder of this Agreement.

13.13                 Indulgences, Etc. 
Neither the failure
nor any delay on the part of any party hereto to exercise any right, remedy,
power or privilege under this Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
preclude any other or further exercise of the same or any other right, remedy,
power or privilege; nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence.  No waiver shall be effective unless it is in
writing and signed by the party asserted to have granted such waiver.

13.14                 Remedies. 
In the event of any
breach of this Agreement by any Member or default by any Member in connection
with performing any obligation of such Member under this Agreement, the Company’s
and the non-defaulting Member’s rights and remedies contained herein or in any
other agreement shall be cumulative and shall not be exclusive of any other
rights or remedies which the Company or the non-defaulting Member may have at
law or in equity.

13.15                 Interpretation. 
No provision of this
Agreement is to be interpreted for or against either party because that party
or that party’s legal representative drafted such provision.

13.16                 Time of Essence. 
TIME IS OF THE
ESSENCE in connection with this Agreement.

13.17                 Dispute Resolution. The
Members have agreed to submit disputes to mandatory arbitration in accordance
with the provisions of this Section 13.17. 
Each Member waives the right to commence an action in connection with
this Agreement in any court and expressly agrees to be bound by

 28
 

 

the decision of the arbitrator determined in
this Section 13.17; provided, however, the waiver in this Section 13.17 will
not prevent any Member from commencing an action in any court for the sole
purposes of enforcing the obligation of another Member to submit to binding
arbitration or the enforcement of an award granted by arbitration herein.  Notwithstanding the foregoing, prior to
submitting any dispute hereunder to arbitration, the Members shall first
attempt in good faith, for thirty (30) days after the first notice given under
this Agreement regarding such dispute, to resolve any such dispute promptly by
negotiation between executives of each party who have authority to settle the
dispute, which shall include an in-person meeting between such executives in Dallas,
Texas.

(a)           Any
dispute between the Members as to the interpretation of any provision of this
Agreement or the rights and obligations of any party hereunder shall be
resolved through binding arbitration as hereinafter provided in Dallas, Texas.

(b)                                 If
arbitration is required to resolve a dispute between the Members, a panel of
three (3) arbitrators shall be convened. 
Each of BH Investor and Smith Investor shall each select one (1)
arbitrator with at least five (5) years experience in commercial real estate in
general and hotel/condominium operation in particular, and those two (2)
arbitrators shall by agreement select a third arbitrator having recognized
expertise and at least five (5) years experience in commercial real estate in
general and hotel/condominium operation in particular.

(c)                                  The
arbitrators selected pursuant to Section 13.17(b) above will establish the
rules for proceeding with the arbitration of the dispute, which will be binding
upon all parties to the arbitration proceeding. The arbitrators may use the
rules of the American Arbitration Association for commercial arbitration but
are encouraged to adopt the rules the arbitrators deem appropriate to
accomplish the arbitration in the quickest and least expensive manner possible.
Accordingly, the arbitrators may (i) dispense with any formal rules of
evidence and allow hearsay testimony so as to limit the number of witnesses
required, (ii) minimize discovery procedures as the arbitrators deem appropriate,
(iii) limit the time for presentation of any party’s case as well as the
amount of information or number of witnesses to be presented in connection with
any hearing, and (iv) impose any other rules which the arbitrators believe
appropriate to effect a resolution of the dispute as quickly and inexpensively
as possible. In any event, the arbitrators (A) shall permit each side no more
than two (2) depositions (including any deposition of experts), which
depositions may not exceed four (4) hours each, one set of 10 interrogatories
(inclusive of sub-parts) and one set of five (5) document requests (inclusive
of sub-parts); (B) shall not permit any requests for admissions; (C) shall
limit the hearing, if any, to two (2) days; and (D) shall render their decision
within sixty (60) days of the filing of the arbitration.

(d)                                 The
arbitrators will have the exclusive authority to determine and award costs of
arbitration and the costs incurred by any party for its attorneys, advisors and
consultants.

(e)                                  Any
award made by the arbitrators shall be binding on the Members and all parties
to the arbitration and shall be enforceable to the fullest extent of the law.

(f)                                    In reaching any
determination or award, the arbitrators will apply the laws of the state of Delaware.
 Except as permitted under Section 13.17(d)
above, the arbitrators’ award will be limited to actual damages and will not
include consequential, special, punitive or exemplary damages. Nothing.
contained in this Agreement will be deemed to give the arbitrators any authority,
power or right to alter, change, amend, modify, add to or subtract from any of
the provisions of this Agreement. All privileges under state and federal law,
including, without limitation, attorney-client, work product and party
communication privileges, shall be preserved and protected. All experts engaged
by a party must be disclosed to the other party within fourteen (14) days after
the date of notice and demand for arbitration is given.

 29
 

 

(g)                                 Notwithstanding any
provision of this Agreement to the contrary, any party may seek injunctive
relief or other form of ancillary relief at any time from any court of
competent jurisdiction in Dallas County, Texas. In the event that a dispute or
controversy requires emergency relief before the matter may be resolved under
the arbitration procedures of this Section 13.17, notwithstanding the fact that
any court of competent jurisdiction may enter an order providing for injunctive
or other form of ancillary relief, the parties expressly agree that such
arbitration procedures will still govern the ultimate resolution of that
portion of the dispute or controversy not resolved pursuant to said court
order.

13.18                 NOTICE OF INDEMNIFICATION. 
THE PARTIES TO THIS AGREEMENT HEREBY ACKNOWLEDGE AND AGREE THAT THIS
AGREEMENT CONTAINS CERTAIN INDEMNIFICATION PROVISIONS PURSUANT TO SECTION 5.2.

ARTICLE XIV.

SECURITIES LAW CONSIDERATIONS

14.1                        No Registration/Restriction on
Sale.  THE COMPANY INTERESTS HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, NOR HAVE
THEY BEEN REGISTERED WITH THE SECURITIES COMMISSION OF ANY OTHER APPLICABLE
STATE, INCLUDING WITHOUT LIMITATION THE STATE OF DELAWARE.  THE COMPANY INTERESTS MAY BE ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD OR TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND
CONDITIONS OF THIS AGREE­MENT AND IN A TRANSACTION WHICH IS EITHER EXEMPT FROM
REGISTRATION UNDER SUCH ACTS OR PURSUANT TO AN EFFECTIVE REGISTRA­TION
STATEMENT UNDER SUCH ACTS.

14.2                        Compliance with Securities Laws. 
The Members
acknowledge and confirm that their Member interests have not been registered
under any federal or state securities laws by virtue of exemptions from the
registration provisions thereof and consequently cannot be sold except pursuant
to appropriate registration or exemption from registration as applicable.  No Transfer of all or any part of a Member
interest (except a Transfer upon the death, incapacity or bankruptcy of a Member
to his personal representative and beneficiaries), including, without
limitation, any Transfer of a right to distributions, profits and/or losses to
a person who does not become a Member, may be made unless the Company is
provided with an opinion of counsel acceptable to the Members (both as to the
identity of the counsel and the substance of the opinion) to the effect that
such offer or assignment (a) may be effected without registration under the
Securities Act of 1933, as amended, or the Investment Company Act of 1940, as
amended, and (b) does not violate any applicable federal or state securities
laws (including any investment suitability standards) applicable to the Company
or the Members.

14.3                        Access to Information. 
Each of the Members
represents to the Company that before determining to enter into this Agreement
and to invest in the Company, each Member made an independent investigation
into the Company and that it received whatever information it deemed necessary
or relevant in order to decide whether to enter into this Agreement or invest
in the Company.  Each Member acknowledges
that the financial materials provided to the Members are only estimates of
expected future operations based on assumptions about future markets and there
is no assurance that such projections will be realized.

14.4                        Limitations of Fees. 
Reference is made to that certain Amended and Restated Agreement of
Limited Partnership of Behringer Harvard Opportunity OP I LP dated as of November
24, 2004 (together with all amendments thereto, the “BH Investor Agreement”)
in respect of BH Investor.

 30
 

 

Notwithstanding anything contained in this Agreement to the contrary,
if any fee paid by the Company to any general partner in BH Investor or any
Affiliate of any such general partner (each a “BH Investor Manager Party”)
results in BH Investor paying, through its interest in the Company, fees in
excess of those fees permitted to be paid to such BH Investor Manager Party
under the terms of the BH Investor Agreement or any other related agreement,
then such BH Investor Manager Party shall reimburse directly to BH Investor its
allocable share of such fee to the extent necessary to comply with the terms of
the BH Investor Agreement or any other related agreement. In the event that a
BH Investor Manager Party receives from the Company a fee whose retention by
such BH Investor Manager Party is, under the terms of the BH Investor Agreement
or any other related agreement, contingent upon the happening of future events,
such BH Investor Manager Party shall hold BH Investor’s allocable share of such
fee until the applicable contingencies are resolved, and shall thereafter
dispose of BH Investor’s allocable share of such fee in accordance with the BH
Investor Agreement or any other related agreement. It is understood and agreed
that the limitations and provisions set forth in this Section 14.4 are for the
sole benefit of BH Investor, and, accordingly, no other party shall be entitled
to a refund of fees paid by the Company under this Agreement or any other
benefit set forth in this Section 14.4. 
Furthermore, it is understood and agreed that the limitations and other
provisions set forth in this Section 14.4 shall not be applicable at such time
as BH Investor no longer owns a direct or indirect interest in the Company.

14.5                        Amendments to Agreement.  Notwithstanding
anything contained herein to the contrary, in the event that legal counsel for
BH Investor reasonably determines that an amendment to this Agreement is
necessary or advisable in order for this Agreement to comply with applicable
securities laws, the BH Investor Agreement, or NASAA Guidelines (as such term
is defined in the BH Investor Agreement), then each Member shall, within ten
(10) days after request from BH Investor, execute such an amendment; provided,
however, that no such amendment may reduce a Member’s economic interest in the Company
or increase a Member’s liabilities or obligations under this Agreement without
such Member’s prior written consent.

14.6                        Limitation on Liability of
BH Investor.  Notwithstanding anything contained in this
Agreement to the contrary, any liability of BH Investor arising under this
Agreement or in respect of the Company shall be satisfied solely from the
interest of BH Investor in the Company, and each Member and any other Person
having the right to enforce such liability shall look solely to the interest of
BH Investor in the Company for the satisfaction of such liability and shall
have no claim or recourse against any other asset of BH Investor.  In no event shall any of the partners,
officers, directors, agents or advisors of BH Investor be held to any personal
liability whatsoever or be liable for any of the obligations of BH Investor,
nor shall the property of any such Persons be subject to the payment of any
obligations of BH Investor arising under this Agreement or in respect of the Company.

ARTICLE XV.

SPECIAL PURPOSE ENTITY REQUIREMENTS

15.1                        Requirements.  The Company has not and, so long as the
Mortgage Loan is in place, will not:

(a)                                  engage in any business
or activity other than the acquisition, ownership, operation, renovation,
development or redevelopment and maintenance of the Property, and activities
incidental thereto;

(b)                                 acquire or own any
material asset other than the Property and such incidental personal property as
may be necessary for the operation of the Property;

 31
 

 

(c)                                  merge into or
consolidate with any Person or dissolve, terminate or liquidate in whole or in
part, transfer or otherwise dispose of all or substantially all of its assets
or change its legal structure, without in each case obtaining the prior consent
of Lender;

(d)                                 fail to preserve its
existence as an entity duly organized, validly existing and in good standing
(if applicable) under the laws of the jurisdiction of its organization or
formation, or without the prior consent of Lender, amend, modify, terminate or
fail to comply with the provisions of Borrower’s formation documents;

(e)                                  own any subsidiary or
make any investment in or acquire the obligations or securities of any other
Person without the prior consent of Lender;

(f)                                    commingle its
assets with the assets of any of its shareholders, partners, members, principals,
affiliates, or any shareholder, partner, member, principal or affiliate
thereof, or of any other Person or transfer any assets to any such Person other
than distributions on account of equity interests in Borrower permitted
hereunder and properly accounted for;

(g)                                 incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than the Mortgage Loan without the prior consent of Lender,
except reasonable and customary trade payables and operational debt incurred
with trade creditors in the ordinary course of its business of owning and
operating the Property in such amounts as are normal and reasonable under the
circumstances that will be satisfied within 60 days of incurrence, provided
that such debt is not evidenced by a note and is paid when due;

(h)                                 allow any Person to
pay its debts and liabilities (except a guarantor or indemnitor of the Mortgage
Loan) or fail to pay its debts and liabilities solely from its own assets;

(i)                                     fail to maintain
its records, books of account and bank accounts separate and apart from those
of its shareholders, partners, members, principals and affiliates, or any
shareholder, partner, member, principal or affiliate thereof, and any other
Person or fail to prepare and maintain its own financial statements in
accordance with generally accepted accounting principles and susceptible to
audit, or if such financial statements are consolidated fail to cause such
financial statements to contain footnotes disclosing that the Property is
actually owned by the Company;

(j)                                     enter into any
contract or agreement with any of its shareholders, partners, members, principals
or affiliates, any guarantor or indemnitor of all or a portion of the Loan or
any shareholder, partner, member, principal or affiliate thereof, except upon
terms and conditions that are intrinsically fair and substantially similar to
those that would be available on an arms-length basis with third parties;

(k)                                  fail to correct any
known misunderstandings regarding the separate identity of the Company;

(l)                                     share any common
logo with or hold itself out as or be considered as a department or division of
any of its shareholders, partners, members, principals or affiliates, or any
shareholder, partner, member, principal or affiliate thereof, or any other
Person or allow any Person to identify the Company as a department or division
of that Person;

(m)                               hold itself out to be
responsible or pledge its assets or credit worthiness for the debts of another
Person or allow any Person to hold itself out to be responsible or pledge its
assets or credit worthiness for the debts of the Company (except for a guarantor
or indemnitor of the Mortgage Loan);

 32
 

 

(n)                                 make any loans or
advances to any third party, including any of its shareholders, partners,
members, principals or affiliates, or any shareholder, partner, member,
principal or affiliate thereof;

(o)                                 fail to use separate
contracts, purchase orders, stationery, invoices and checks;

(p)                                 fail either to hold
itself out to the public as a legal entity separate and distinct from any other
Person or to conduct its business solely in its own name in order not: (A) to
mislead others as to the entity with which such other party is transacting
business; or (B) to suggest that the Company is responsible for the debts of
any third party (including any of its shareholders, partners, members, principals
or affiliates, or any shareholder, partner, member, principal or affiliate
thereof);

(q)                                 fail to allocate
fairly and reasonably among Company and any third party (including any
guarantor or indemnitor of the Mortgage Loan) any overhead for shared office
space or other overhead and administrative expenses;

(r)                                    allow any Person to
pay the salaries of its own employees or fail to maintain a sufficient number
of employees for its contemplated business operations;

(s)                                  fail to maintain
adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;

(t)                                    seek dissolution or
winding up in whole or in part;

(u)                                 file a voluntary
petition or otherwise initiate proceedings to have Company adjudicated bankrupt
or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against Company, or file a petition seeking or consenting to
reorganization or relief of Company as debtor under any applicable federal or
state law relating to bankruptcy, insolvency, or other relief for debtors with
respect to Company; or seek or consent to the appointment of any trustee,
receiver, conservator, assignee, sequestrator, custodian, liquidator (or other
similar official) of Company or of all or any substantial part of the
properties and assets of Company, or make any general assignment for the
benefit of creditors of Company, or admit in writing the inability of Company
to pay its debts generally as they become due or declare or effect a moratorium
on Company debt or take any action in furtherance of any such action; and

(v)                                 conceal assets from
any creditor, or enter into any transaction with the intent to hinder, delay or
defraud creditors of Company or the creditors of any other Person.

[The
remainder of this page intentionally left blank]

 

 33

 

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement of Limited Liability Company as of
the date first above written.

MEMBER:

BEHRINGER HARVARD OPPORTUNITY OP
I LP,

a Texas limited partnership

	
  

  	
   

  	
  By:

  	
  Behringer Harvard Opportunity REIT I, Inc.,

  
	
   

  	
   

  	
   

  	
  a Maryland
  corporation

  
	
   

  	
   

  	
   

  	
  its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Gerald J.
  Reihsen, III

  	
   

  
	
   

  	
   

  	
   

  	
  Gerald J.
  Reihsen, III

  
	
   

  	
   

  	
   

  	
  Executive Vice
  President

  

 

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement of Limited Liability Company as of
the date first above written.

	
  

  	
   

  	
  MEMBER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KINGSDELL L.P.,

  a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
  

  	
   

  	
  By:

  	
  IFC, INC., a Missouri corporation,

  
	
   

  	
   

  	
   

  	
  its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ James L.
  Smith

  	
   

  
	
   

  	
   

  	
   

  	
  James L. Smith,
  President

  

 

 

 

EXHIBIT B-1

COMPANY
PERCENTAGES AND CAPITAL CONTRIBUTIONS

	
  Members

  	
   

  	
  Company Percentage

  	
   

  	
  Initial Capital

  Contribution

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Behringer
  Harvard Opportunity OP I LP

  	
   

  	
  95.0%

  	
   

  	
  $

  	
  30,708,296.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kingsdell L.P.

  	
   

  	
  5.0%

  	
   

  	
  $

  	
  1,670,000.00

  	
   

  

 

 B-1-1

 

EXHIBIT B-2

 

ADDITIONAL
SCHEDULE TO CAPITAL CONTRIBUTIONS

	
   

  	
   

  	
  Closing

  	
   

  	
  Dec

  	
   

  	
  Jan

  	
   

  	
  Feb

  	
   

  	
  Mar

  	
   

  	
  Apr

  	
   

  	
  Total

  	
   

  	
   

  	
   

  
	
  Behringer
  Harvard Equity

  	
   

  	
  30,708,296

  	
   

  	
  855,486

  	
   

  	
  566,630

  	
  *

  	
  584,343

  	
   

  	
  464,281

  	
   

  	
  828,284

  	
   

  	
  34,007,321

  	
   

  	
  95

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Jim Smith Equity

  	
   

  	
  1,670,000

  	
   

  	
  0

  	
   

  	
  21,074

  	
   

  	
  30,755

  	
   

  	
  24,436

  	
   

  	
  43,594

  	
   

  	
  1,789,859

  	
   

  	
  5

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Equity

  	
   

  	
  32,378,296

  	
   

  	
  855,486

  	
   

  	
  587,704

  	
   

  	
  615,098

  	
   

  	
  488,717

  	
   

  	
  871,878

  	
   

  	
  35,797,180

  	
   

  	
   

  	
   

  

 

*
Total amount due from BH Investor for January. 
Number includes $166,218.00 to be paid by BH Investor as the final
Additional BH Investor Contributions.

 B-2-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00116-of-00352.parquet"}]]