Document:

Exhibit 4.4

 

SECOND AMENDED AND RESTATED
 SHARE REDEMPTION PROGRAM
 OF
 BEHRINGER HARVARD OPPORTUNITY REIT II, INC.

 

This second amended and restated share redemption program, adopted as of March 20, 2012 (our “Program”), is intended to provide limited interim liquidity for our stockholders until a bona fide secondary market develops for our shares of common stock (the “Shares”).  No such market presently exists, and we can provide no assurance that any market for the Shares will ever develop.

 

Prior to the time that a bona fide secondary market for our Shares has developed, stockholders who meet the applicable requirements, as described herein, may receive the benefit of limited liquidity by presenting for redemption all or a portion of their Shares to us at any time in accordance with the procedures outlined herein.  At that time, we may, subject to the conditions and the Redemption Limitations described below, redeem for cash such Shares.  The terms on which we redeem Shares may differ between redemptions upon the death or “qualifying disability” (as defined herein) of the stockholder or requests for redemption sought upon a stockholder’s confinement to a long-term care facility (collectively referred to herein as “Exceptional Redemptions”) and all other redemptions (referred to herein as “Ordinary Redemptions”).

 

Ordinary Redemptions

 

In the case of Ordinary Redemptions, prior to the first valuation conducted by our Board of Directors (our “Board”) or a committee thereof (the “Initial Board Valuation”)in accordance with our valuation policy, as such valuation policy is amended from time to time (the “Valuation Policy”), the purchase price per Share for the redeemed Shares will equal 80% of the difference of (a) the Original Share Price (as defined herein) less (b) the aggregate of any special distributions so designated by the Board (the “Special Distributions”), distributed to stockholders prior to the redemption date and declared from the date of first issue of such redeemed Shares.  On or after the Initial Board Valuation, the purchase price per Share for the redeemed Shares will equal the lesser of 80% of:

 

·                  the current estimated value per share (the “Valuation”) as determined in accordance with the Valuation Policy; and

 

·                  Original Share Price less any Special Distributions distributed to stockholders prior to the redemption date and declared from the date of first issue of such redeemed Shares.

 

As used herein “Original Share Price” means the average price per Share the original purchaser or purchasers of Shares paid to us for all of his or her Shares (as adjusted for any stock dividends, combinations, splits, recapitalizations and the like with respect to our common stock).

 

Exceptional Redemptions

 

In addition, and subject to the conditions and limitations described below, we may redeem Shares upon the death of a stockholder who is a natural person, including Shares held by the stockholder through a revocable grantor trust, or an IRA or other retirement or profit-sharing plan, after receiving written notice from the estate of the stockholder, the recipient of the Shares through bequest or inheritance, or, in the case of a revocable grantor trust, the trustee of the trust, having the sole ability to request redemption on behalf of the trust.  We must, however, receive the written notice within one year after the death of the stockholder.  Requests not received within the one-year period will not be eligible to be treated as a redemption request in connection with the death of a stockholder, but instead will be treated as an Ordinary Redemption.  If spouses are joint registered holders of Shares, the request to redeem the Shares may be made if either of the registered holders dies.  If the stockholder is not a natural person, such as a trust (other than a revocable grantor trust), partnership, corporation or other similar entity, the right of redemption upon death does not apply.

 

Furthermore, and subject to the conditions and limitations described below, we may redeem Shares held by a stockholder who is a natural person with a qualifying disability, or upon confinement to a long-term care facility, including Shares held by the stockholder through a revocable grantor trust, or an IRA or other retirement or profit-sharing plan, after receiving written notice from the stockholder, provided that the condition causing the qualifying disability was not pre-existing on the date that the stockholder became a stockholder or that the stockholder seeking redemption was not confined to a long-term care facility on the date the person became a stockholder.  We must,

 

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however, receive the written notice within one year after the determination of the stockholder’s qualifying disability or with respect to redemptions sought upon a stockholder’s confinement to a long-term care facility, within one year of the earlier of (1) the one year anniversary of the stockholder’s admittance to the long-term care facility or (2) the date of the determination of the stockholder’s indefinite confinement to the long-term care facility by a licensed physician.  Requests not received within the one-year period will not be eligible to be treated as a redemption request in connection with a qualifying disability of a stockholder or confinement to a long-term care facility, but instead will be treated as an Ordinary Redemption.  If the stockholder is not a natural person, such as a trust (other than a revocable grantor trust), partnership, corporation or other similar entity, the right of redemption described in this paragraph does not apply.

 

In order for a disability to be considered a “qualifying disability,” (1) the stockholder must receive a determination of disability based upon a physical or mental condition or impairment arising after the date the stockholder acquired the Shares to be redeemed, and (2) the determination of disability must be made by the governmental agency responsible for reviewing the disability retirement benefits that the stockholder could be eligible to receive (the “applicable governmental agency”).  The “applicable governmental agencies” are limited to the following: (a) if the stockholder paid Social Security taxes and therefore could be eligible to receive Social Security disability benefits, then the applicable governmental agency is the Social Security Administration or the agency charged with responsibility for administering Social Security disability benefits at that time if other than the Social Security Administration; (b) if the stockholder did not pay Social Security benefits and therefore could not be eligible to receive Social Security disability benefits, but the stockholder could be eligible to receive disability benefits under the Civil Service Retirement System (CSRS), then the applicable governmental agency is the U.S. Office of Personnel Management or the agency charged with responsibility for administering CSRS benefits at that time if other than the Office of Personnel Management; or (c) if the stockholder did not pay Social Security taxes and therefore could not be eligible to receive Social Security benefits but suffered a disability that resulted in the stockholder’s discharge from military service under conditions that were other than dishonorable and therefore could be eligible to receive military disability benefits, then the applicable governmental agency is the Veteran’s Administration or the agency charged with the responsibility for administering military disability benefits at that time if other than the Veteran’s Administration.

 

Disability determinations by governmental agencies for purposes other than those listed above, including but not limited to worker’s compensation insurance, administration or enforcement of the Rehabilitation Act or Americans with Disabilities Act, or waiver of insurance premiums, will not entitle a stockholder to the terms available for Exceptional Redemptions, unless permitted in the discretion of our Board.  Redemption requests following an award by the applicable governmental agency of disability benefits must be accompanied by (1) the stockholder’s initial application for disability benefits and (2) a Social Security Administration Notice of Award, a U.S. Office of Personnel Management determination of disability under CSRS, a Veteran’s Administration record of disability-related discharge or such other documentation issued by the applicable governmental agency that we deem acceptable and demonstrates an award of the disability benefits.

 

We understand that the following disabilities do not entitle a worker to Social Security disability benefits:

 

·                  disabilities occurring after the legal retirement age;

 

·                  temporary disabilities; and

 

·                  disabilities that do not render a worker incapable of performing substantial gainful activity.

 

Therefore, these disabilities will not qualify for the terms available for Exceptional Redemptions.  However, where a stockholder requests the redemption of his or her Shares due to a disability and the stockholder does not have a “qualifying disability” under the terms described above, but has become subject to similar circumstances, our Board may redeem the stockholder’s Shares, in its sole discretion, on the terms available for Exceptional Redemptions.

 

With respect to Exceptional Redemptions sought upon a stockholder’s confinement to a long-term care facility, a “long-term care facility” shall mean an institution that: (1) either (a) is approved by Medicare as a provider of skilled nursing care or (b) is licensed as a skilled nursing home by the state or territory in which it is located (it must be within the United States, Puerto Rico, or U.S. Virgin Islands) and (2) meets all of the following requirements: (a) its main function is to provide skilled, intermediate or custodial nursing care; (b) it provides continuous room and board to three or more persons; (c) it is supervised by a registered nurse or licensed practical nurse; (d) it keeps daily medical records of all medication dispensed; and (e) its primary service is other than to

 

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provide housing for residents.  A stockholder seeking an Exceptional Redemption of his or her Shares due to confinement to a long-term care facility must submit a written statement from a licensed physician certifying either (1) the stockholder’s continuous and continuing confinement to a long-term care facility over the course of the last year or (2) that the licensed physician has determined that the stockholder will be indefinitely confined to a long-term care facility.  Notwithstanding the above, where a stockholder requests an Exceptional Redemption of his or her Shares due to confinement to a long-term care facility but does not meet the definition set forth above, but has become subject to similar circumstances, our Board may redeem the stockholder’s Shares, in the Board’s sole discretion, on the terms available for Exceptional Redemptions.

 

In the case of Exceptional Redemptions, prior to the Initial Board Valuation, the purchase price per Share for the redeemed Shares will equal 90% of the difference of (a) the Original Share Price less (b) the Special Distributions distributed to stockholders prior to the redemption date and declared from the date of first issue of such redeemed Shares.  On or after the Initial Board Valuation, the purchase price per Share for the redeemed Shares will equal the lesser of 90% of:

 

·                  the Valuation; and

 

·                  Original Share Price less any Special Distributions distributed to stockholders prior to the redemption date and declared from the date of first issue of such redeemed Shares.

 

General Terms for Redemption

 

Our Program, whether for Ordinary Redemptions or Exceptional Redemptions, is available only for stockholders who have held their Shares for at least one year and who acquired their Shares directly from us or the transferees mentioned below, and is not intended to provide liquidity to any stockholder who acquired his or her Shares by purchase from another stockholder.  In connection with a request for redemption, the stockholder or his or her estate, heir or beneficiary will be required to certify to us that the stockholder either (1) acquired the Shares requested to be repurchased directly from us or (2) acquired the Shares from the original subscriber by way of a bona fide gift not for value to, or for the benefit of, a member of the subscriber’s immediate or extended family (including the subscriber’s spouse, parents, siblings, children or grandchildren and including relatives by marriage) or through a transfer to a custodian, trustee or other fiduciary for the account of the subscriber or members of the subscriber’s immediate or extended family in connection with an estate planning transaction, including by bequest or inheritance upon death or operation of law.

 

For purposes of the one-year holding period, limited partners of Behringer Harvard Opportunity OP II LP (“Behringer Harvard Opportunity OP II”) who exchange their limited partnership units for Shares will be deemed to have owned their Shares as of the date they were issued their limited partnership units in Behringer Harvard Opportunity OP II.

 

We will not redeem Shares that are subject to liens or other encumbrances until the stockholder presents evidence that the liens or encumbrances have been removed.  If any Shares subject to a lien are inadvertently redeemed or we shall otherwise be required to pay to any other party all or any amount in respect of the value of redeemed Shares, then the recipient of amounts in respect of redemption shall repay to us the amount paid for such redemption up to the amount we are required to pay to such other party.

 

Notwithstanding the redemption prices established above, the Board may determine, whether pursuant to formulae or processes approved by our Board or otherwise set by our Board, the redemption price of the Shares, which may differ between Ordinary Redemptions and Exceptional Redemptions; provided, however, that we must provide at least 30 days’ notice to stockholders before applying the new price that is set pursuant to this sentence to either Ordinary Redemptions or Exceptional Redemptions.

 

Any Shares approved for redemption will be redeemed on a periodic basis as determined from time to time by our Board, and no less frequently than annually. We will not redeem, during any twelve-month period, more than 5% of the weighted average number of Shares outstanding during the twelve-month period immediately prior to the date of redemption (the “5% Limitation”).  The cash available for redemption in any quarterly period will generally be limited to no more than $250,000, and in no event more than $1,000,000 in any twelve- month period beginning April 1, 2012 (the “Funding Limitation” and, together with the 5% Limitation, the “Redemption Limitations”).  The Redemption Limitations apply to all redemptions, whether Ordinary or Exceptional Redemptions.

 

Our Board reserves the right in its sole discretion at any time and from time to time to (1) waive the one-year holding requirement applicable to exigent circumstances such as bankruptcy, a mandatory distribution

 

3

 

requirement under a stockholder’s IRA or with respect to Shares purchased under or through our DRP, (2) reject any request for redemption, (3) change the purchase price for redemptions, (4) limit the funds to be used for redemptions hereunder or otherwise change the Redemption Limitations or (5) amend, suspend (in whole or in part) or terminate the Program.  If we suspend our Program (in whole or in part), except as otherwise provided by the Board, until the suspension is lifted, we will not accept any requests for redemption in respect of Shares to which such suspension applies in subsequent periods and any such requests and all pending requests that are subject to the suspension will not be honored or retained, but will be returned to the requestor.  Our advisor and its affiliates will defer their own redemption requests, if any, until all other requests for redemption have been satisfied in any particular period.  Provided that a request for an Exceptional Redemption is made within one year of the event giving rise to eligibility for an Exceptional Redemption, we will waive the one-year holding requirement (a) upon the request of the estate, heir or beneficiary of a deceased stockholder or (b) upon the qualifying disability of a stockholder or upon a stockholder’s confinement to a long-term care facility, provided that the condition causing such disability or need for long-term care was not preexisting on the date that such person became a stockholder.

 

A request for redemption may be withdrawn in whole or in part by a stockholder in writing at any time prior to redemption.  We cannot guarantee that we will accommodate all requests made in any particular redemption period.  If we do not redeem all Shares presented for redemption during any period, the stockholder or his or her estate, heir or beneficiary can (1) withdraw the request for redemption, or (2) if we have not suspended the redemption of the Shares that are subject to the redemption request (in which case the request will be returned as provided above), ask that we honor the request during the next period in which requests are considered.  Further, if we do not redeem all Shares presented for redemption during any period in which we are redeeming Shares, then all Shares will be redeemed on a pro rata basis during the relevant period.  Any portion of a redemption request that is not honored will be automatically treated as a request for redemption during the next period in which requests will be considered, unless the stockholder seeking redemption affirmatively asks us to withdraw that portion of the request.  The stockholder will then be required to resubmit a request for redemption.  Unless otherwise determined by the Board, we will not retain any redemption requests that are withdrawn.

 

In general, a stockholder or his or her estate, heir or beneficiary may present to us fewer than all of the Shares then owned for redemption, except that the minimum number of Shares that must be presented for redemption must be at least 25% of the holder’s Shares.  If, however, redemption is being requested (1) within the one-year timeframe discussed above, on behalf of a deceased stockholder or by a stockholder with a qualifying disability or who is confined to a long-term care facility or (2) by a stockholder due to other exigent circumstances, such as bankruptcy or a mandatory distribution requirement under such stockholder’s IRA, a minimum of 10% of the stockholder’s Shares may be presented for redemption; provided, however, that any future redemption request by the stockholder must present for redemption at least 25% of the stockholder’s remaining Shares.  Except in the case of redemptions due to a mandatory distribution under a stockholder’s IRA, we will treat a redemption request that would cause a stockholder to own fewer than 200 Shares as a request to redeem all of his or her Shares, and we will vary from pro rata treatment of redemptions as necessary to avoid having stockholders holding fewer than 200 Shares.  In the case of stockholders who undertake a series of partial redemptions, appropriate adjustments in the purchase price for the redeemed Shares will be made so that the blended price per Share for all redeemed Shares reflects the Original Share Price of all Shares owned by the stockholder through the dates of each redemption.

 

A stockholder who wishes to have Shares redeemed must mail or deliver to us a written request on a form provided by us and executed by the stockholder, its trustee or authorized agent.  An estate, heir or beneficiary that wishes to have Shares redeemed following the death of a stockholder must mail or deliver to us a written request on a form provided by us, including evidence acceptable to our Board of the death of the stockholder, and executed by the executor or executrix of the estate, the heir or beneficiary, or their trustee or authorized agent.  A stockholder requesting the redemption of his or her Shares due to a qualifying disability or confinement to a long-term care facility must mail or deliver to us a written request on a form provided by us, including the evidence and documentation described above, or evidence acceptable to our Board of the stockholder’s permanent disability or confinement to a long-term care facility.  If the Shares are to be redeemed under the conditions outlined herein, we will forward the documents necessary to affect the redemption, including any signature guaranty we may require.

 

The effective date of any redemption (the “Effective Date”), and the date on which the purchase price per Share is determined, calculated in accordance with the procedures discussed herein, will be the last day of the calendar month preceding the date that the Board accepts the request for redemption (the “Determination Date”).  Commencing on the Effective Date, any Shares accepted for redemption will no longer be deemed outstanding and will no longer be eligible to receive distributions.  Our Board will consider only properly completed redemption

 

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requests that we received on or before the end of the period ending no later than the last day of the calendar month preceding the Determination Date.  Payment for the Shares so approved for redemption, assuming that we have not exceeded the Redemption Limitations and that all necessary conditions have been satisfied, will be made no later than 15 days after the Determination Date.

 

Subject to the restrictions in Behringer Harvard Opportunity OP II’s limited partnership agreement and any other applicable agreement, we may cause Behringer Harvard Opportunity OP II to offer to its limited partners (other than our subsidiaries, BHO II, Inc. and BHO Business Trust II) a partnership unit redemption program equivalent to our Program.  Any units redeemed under the partnership unit redemption program will be redeemed upon terms substantially equivalent to the redemption terms of our Program and will be treated as Shares for purposes of calculating the Redemption Limitations.

 

Neither our advisor, any member of our Board nor any of their affiliates will receive any fee on the repurchase of Shares by us pursuant to our Program. The Shares we purchase under our Program will be cancelled, and will have the status of authorized but unissued Shares.  We will not reissue repurchased Shares unless they are first registered with the Securities and Exchange Commission under the Securities Act of 1933, as amended, and under appropriate state securities laws or otherwise issued in compliance with or exemption from registration under these laws.

 

The foregoing provisions regarding our Program in no way limit our ability to repurchase Shares or other of our securities or those of Behringer Harvard Opportunity OP II from holders thereof by any other legally available means for any reason that the advisor or our Board, each in its discretion, deems to be in our best interest.

 

5Exhibit 10.15

 

Execution

 

THE LIMITED LIABILITY COMPANY INTERESTS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION AND MAY NOT BE SOLD, PLEDGED, ASSIGNED OR TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE FEDERAL, STATE OR FOREIGN SECURITIES LAWS. IN ADDITION, TRANSFER OR OTHER DISPOSITION OF THE LIMITED LIABILITY COMPANY INTERESTS IS RESTRICTED AS PROVIDED IN THIS AGREEMENT.

 

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

BEHRINGER HARVARD ARBORS, LLC

 

DATED DECEMBER 12, 2011

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    	
DEFINED TERMS
    	
1
    
	
 
    	
 
    	
 
    
	
1.1
    	
Defined Terms
    	
1
    
	
 
    	
 
    	
 
    
	
1.2
    	
Other References
    	
14
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    	
ORGANIZATION
    	
14
    
	
 
    	
 
    	
 
    
	
2.1
    	
Formation
    	
14
    
	
 
    	
 
    	
 
    
	
2.2
    	
Name and Principal Place of Business
    	
15
    
	
 
    	
 
    	
 
    
	
2.3
    	
Term
    	
15
    
	
 
    	
 
    	
 
    
	
2.4
    	
Registered Agent and Registered Office
    	
15
    
	
 
    	
 
    	
 
    
	
2.5
    	
Purpose
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    	
MEMBERS
    	
16
    
	
 
    	
 
    	
 
    
	
3.1
    	
Admission of Members
    	
16
    
	
 
    	
 
    	
 
    
	
3.2
    	
Limitation on Liability
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    	
CAPITAL
    	
17
    
	
 
    	
 
    	
 
    
	
4.1
    	
Initial Capital Contributions
    	
17
    
	
 
    	
 
    	
 
    
	
4.2
    	
Additional Capital Contributions
    	
20
    
	
 
    	
 
    	
 
    
	
4.3
    	
Capital Accounts
    	
22
    
	
 
    	
 
    	
 
    
	
4.4
    	
No Further Capital Contributions
    	
23
    
	
 
    	
 
    	
 
    
	
4.5
    	
Acquistion Loan
    	
23
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    	
INTERESTS IN THE COMPANY
    	
25
    
	
 
    	
 
    	
 
    
	
5.1
    	
Contribution and Promote Percentage Adjustments
    	
25
    
	
 
    	
 
    	
 
    
	
5.2
    	
Return of Capital
    	
25
    
	
 
    	
 
    	
 
    
	
5.3
    	
Ownership
    	
25
    
	
 
    	
 
    	
 
    
	
5.4
    	
Waiver of Partition; Nature of Interests in the Company
    	
25
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    	
ALLOCATIONS AND DISTRIBUTIONS
    	
25
    
	
 
    	
 
    	
 
    
	
6.1
    	
Allocations
    	
25
    
	
 
    	
 
    	
 
    
	
6.2
    	
Allocations and Compliance with Sections 704(b)
    	
26
    
	
 
    	
 
    	
 
    
	
6.3
    	
Distributions from Operations
    	
27
    
	
 
    	
 
    	
 
    
	
6.4
    	
Distributions from Capital Transactions
    	
27
    
	
 
    	
 
    	
 
    
	
6.5
    	
Special Distributions
    	
29
    
	
 
    	
 
    	
 
    
	
6.6
    	
Distributions in Liquidation
    	
29
    
	
 
    	
 
    	
 
    
	
6.7
    	
Tax Matters
    	
29
    

 

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TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
6.8
    	
Tax Matters Partner
    	
30
    
	
 
    	
 
    	
 
    
	
6.9
    	
Section 704(c)
    	
30
    
	
 
    	
 
    	
 
    
	
6.10
    	
Withholding
    	
30
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    	
MANAGEMENT
    	
30
    
	
 
    	
 
    	
 
    
	
7.1
    	
Managing Member and Major Decisions
    	
30
    
	
 
    	
 
    	
 
    
	
7.2
    	
Duties of Managing Member
    	
38
    
	
 
    	
 
    	
 
    
	
7.3
    	
Management of the Property; Fees
    	
42
    
	
 
    	
 
    	
 
    
	
7.4
    	
Duties and Conflicts
    	
42
    
	
 
    	
 
    	
 
    
	
7.5
    	
Company Expenses
    	
44
    
	
 
    	
 
    	
 
    
	
7.6
    	
Venture Coordinator
    	
44
    
	
 
    	
 
    	
 
    
	
7.7
    	
Enforcement of Affiliate Agreements
    	
45
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII
    	
BOOKS, RECORDS, REPORTS AND   PROPERTY PLAN
    	
45
    
	
 
    	
 
    	
 
    
	
8.1
    	
Books and Records
    	
45
    
	
 
    	
 
    	
 
    
	
8.2
    	
Accounting and Fiscal Year
    	
45
    
	
 
    	
 
    	
 
    
	
8.3
    	
Reports
    	
45
    
	
 
    	
 
    	
 
    
	
8.4
    	
The Company Accountant
    	
47
    
	
 
    	
 
    	
 
    
	
8.5
    	
Reserves
    	
47
    
	
 
    	
 
    	
 
    
	
8.6
    	
The Budget and Business Plan
    	
47
    
	
 
    	
 
    	
 
    
	
8.7
    	
Accounts
    	
48
    
	
 
    	
 
    	
 
    
	
8.8
    	
REIT Matters
    	
48
    
	
 
    	
 
    	
 
    
	
ARTICLE IX
    	
TRANSFER OF INTERESTS
    	
49
    
	
 
    	
 
    	
 
    
	
9.1
    	
No Transfer
    	
49
    
	
 
    	
 
    	
 
    
	
9.2
    	
Permitted Transfers
    	
49
    
	
 
    	
 
    	
 
    
	
9.3
    	
Transferees
    	
51
    
	
 
    	
 
    	
 
    
	
9.4
    	
Section 754 Election
    	
51
    
	
 
    	
 
    	
 
    
	
9.5
    	
[Reserved]
    	
51
    
	
 
    	
 
    	
 
    
	
ARTICLE X
    	
EXCULPATION AND INDEMNIFICATION
    	
51
    
	
 
    	
 
    	
 
    
	
10.1
    	
Exculpation
    	
51
    
	
 
    	
 
    	
 
    
	
10.2
    	
Indemnification
    	
52
    
	
 
    	
 
    	
 
    
	
ARTICLE XI
    	
DISSOLUTION AND TERMINATION
    	
54
    
	
 
    	
 
    	
 
    
	
11.1
    	
Dissolution
    	
54
    
	
 
    	
 
    	
 
    
	
11.2
    	
Termination
    	
54
    

 

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TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
11.3
    	
Liquidating Member
    	
55
    
	
 
    	
 
    	
 
    
	
11.4
    	
Claims of the Members
    	
55
    
	
 
    	
 
    	
 
    
	
ARTICLE XII
    	
DEFAULT BY MEMBER
    	
55
    
	
 
    	
 
    	
 
    
	
12.1
    	
Events of Default
    	
55
    
	
 
    	
 
    	
 
    
	
12.2
    	
Effect of Event of Default
    	
56
    
	
 
    	
 
    	
 
    
	
ARTICLE XIII
    	
MISCELLANEOUS
    	
57
    
	
 
    	
 
    	
 
    
	
13.1
    	
Representations and Warranties of the Members
    	
57
    
	
 
    	
 
    	
 
    
	
13.2
    	
Further Assurances
    	
58
    
	
 
    	
 
    	
 
    
	
13.3
    	
Notices
    	
58
    
	
 
    	
 
    	
 
    
	
13.4
    	
Governing Law
    	
59
    
	
 
    	
 
    	
 
    
	
13.5
    	
Captions
    	
60
    
	
 
    	
 
    	
 
    
	
13.6
    	
Pronouns and Interpretation
    	
60
    
	
 
    	
 
    	
 
    
	
13.7
    	
Successors and Assigns
    	
60
    
	
 
    	
 
    	
 
    
	
13.8
    	
Extension Not a Waiver
    	
60
    
	
 
    	
 
    	
 
    
	
13.9
    	
Creditors Not Benefited
    	
60
    
	
 
    	
 
    	
 
    
	
13.10
    	
Recalculation of Interest
    	
60
    
	
 
    	
 
    	
 
    
	
13.11
    	
Severability
    	
61
    
	
 
    	
 
    	
 
    
	
13.12
    	
Entire Agreement
    	
61
    
	
 
    	
 
    	
 
    
	
13.13
    	
Publicity and Press Releases
    	
61
    
	
 
    	
 
    	
 
    
	
13.14
    	
Confidentiality
    	
62
    
	
 
    	
 
    	
 
    
	
13.15
    	
Venue
    	
63
    
	
 
    	
 
    	
 
    
	
13.16
    	
Waiver of Jury Trial
    	
63
    
	
 
    	
 
    	
 
    
	
13.17
    	
Cooperation
    	
63
    
	
 
    	
 
    	
 
    
	
13.18
    	
Counterparts
    	
63
    
	
 
    	
 
    	
 
    
	
13.19
    	
Attorneys’ Fees
    	
63
    
	
 
    	
 
    	
 
    
	
13.20
    	
[Reserved]
    	
63
    
	
 
    	
 
    	
 
    
	
ARTICLE XIV
    	
PATRIOT ACT
    	
64
    
	
 
    	
 
    	
 
    
	
14.1
    	
Compliance with International Trade Control Laws and OFAC   Regulations
    	
64
    
	
 
    	
 
    	
 
    
	
14.2
    	
Member’s Funds
    	
64
    
	
 
    	
 
    	
 
    
	
14.3
    	
Member Compliance with Patriot Act
    	
64
    
	
 
    	
 
    	
 
    
	
14.4
    	
Cooperation with Other Members
    	
65
    

 

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Page
    
	
 
    	
 
    	
 
    
	
14.5
    	
Actions Taken Pursuant to Anti-Money Laundering Laws
    	
65
    
	
 
    	
 
    	
 
    
	
ARTICLE XV
    	
BUY-SELL PROCEDURE
    	
65
    
	
 
    	
 
    	
 
    
	
15.1
    	
General Provisions
    	
65
    
	
 
    	
 
    	
 
    
	
15.2
    	
Termination of Other Agreements
    	
66
    
	
 
    	
 
    	
 
    
	
15.3
    	
Power of Attorney
    	
67
    
	
 
    	
 
    	
 
    
	
ARTICLE XVI
    	
RIGHT OF BH TO TRIGGER SALE OF   THE PROPERTY; ROFO
    	
68
    
	
 
    	
 
    	
 
    
	
16.1
    	
ROFO on the Sale of the Property
    	
68
    
	
 
    	
 
    	
 
    
	
16.2
    	
Termination of Other Agreements
    	
70
    
	
 
    	
 
    	
 
    
	
16.3
    	
Power of Attorney
    	
70
    

 

Appendix A  FORM OF PROPERTY AMENDMENT

 

Appendix B  INITIAL APPROVED BUDGET AND BUSINESS PLAN

 

Appendix C  INITIAL PRE-APPROVED SIGNATORIES

 

iv

 

LIMITED LIABILITY COMPANY AGREEMENT OF
 BEHRINGER HARVARD ARBORS, LLC

 

THIS LIMITED LIABILITY COMPANY AGREEMENT of BEHRINGER HARVARD ARBORS, LLC (as amended, restated, replaced, supplemented or otherwise modified from time to time, this “Agreement”) is entered into on December 12, 2011 to be effective as provided in Section 13.20 below (the “Effective Date”), is made by, between and among BEHRINGER HARVARD OPPORTUNITY OP II LP, a Delaware limited partnership (together with its successors and permitted assigns, “BH”), and HARBOR TOWN APARTMENTS, a Tennessee general partnership (together with its successors and permitted assigns, “CH”).

 

The Company (as hereinafter defined) was formed pursuant to a Certificate of Formation signed by Sharon Butterworth as authorized person (the “Certificate of Formation”), filed with the Secretary of State of Delaware on November 21, 2011.

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

ARTICLE I
 DEFINED TERMS

 

1.1          Defined Terms. As used in this Agreement, the following terms have the meanings set forth below:

 

“Acquisition Loan” has the meaning set forth in Section 4.5(a)

 

“Additional Capital Contribution” has the meaning set forth in Section 4.2(a).

 

“Adjusted Capital Account Deficit” means, with respect to any Member for any taxable year or other period, the deficit balance, if any, in such Member’s Capital Account as of the end of such year or other period, after giving effect to the following adjustments:

 

(a)           credit to such Capital Account any amounts that such Member is obligated to restore or is deemed obligated to restore as described in the penultimate sentence of Treasury Regulation Section 1.704-2(g)(1) and in Treasury Regulation Section 1.704-2(i)(5); and

 

(b)           debit to such Capital Account the items described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

“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” or “Affiliated” means, with respect to any Person, (a) any other Person directly or indirectly Controlling, Controlled by, or under common Control with such Person and (b) any other Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, or (c) any officer, director, general partner or member of such Person, or (d) any other Person which is an officer, director, general partner, member or holder of ten percent (10%) or more of the voting interests of any other Person described in clauses (a)

 

1

 

through (c) of this definition and (e) for the avoidance of doubt, all CH Persons are Affiliates of CH.

 

“Agreement” has the meaning set forth in the introductory paragraph hereof.

 

“Anti-Money Laundering Laws” shall mean those Laws, regulations and sanctions, state and federal, criminal and civil, that (a) limit the use of and/or seek the forfeiture of proceeds from illegal transactions; (b) limit commercial transactions with designated countries or individuals believed to be terrorists, narcotics dealers or otherwise engaged in activities contrary to the interests of the United States; (c) require identification and documentation of the parties with whom a Financial Institution conducts business; or (d) are designed to disrupt the flow of funds to terrorist organizations. Such Laws, regulations and sanctions shall be deemed to include the Patriot Act, the Bank Secrecy Act, the Trading with the Enemy Act, 50 U.S.C. App. Section 1 et seq., the International Emergency Economic Powers Act, 50 U.S.C. Section 1701 et seq., and the sanction regulations promulgated pursuant thereto by the OFAC, as well as Laws relating to prevention and detection of money laundering in 18 U.S.C. Sections 1956 and 1957.

 

“Approve,” “Approved,” or “Approval” means a proposed decision, action, report, budget, election or any other matter that has been proposed by a Member or the Managing Member and which has received the written approval or consent of the other Member or Managing Member, as applicable BH (in each case where such consent is required under this Agreement).

 

“Bankruptcy” the “Bankruptcy” of a Person shall be deemed to have occurred upon the happening of any of the following: (i) the filing of an application by such Person for, or a consent to, the appointment of a trustee of its assets, (ii) the filing by such Person of a voluntary petition for relief as a debtor under the United States Bankruptcy Code or the filing of a pleading in any court of record admitting in writing its inability to pay its debts as they come due, (iii) the making by such Person of a general assignment for the benefit of creditors, (iv) the filing against a Person of an involuntary petition or application for relief in bankruptcy which is not dismissed within ninety (90) days, or (v) the expiration of sixty (60) days following the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such Person a bankrupt or appointing a receiver, liquidator, assignee, trustee, conservator, custodian, sequester or other similar official, over such Person’s assets (or consenting thereto by any member of the CH Member Group). This definition of Bankruptcy shall apply for purposes of this Agreement instead of the definition of bankruptcy in Section 18-101 and Section 18-304 of the Delaware Act.

 

“Bankruptcy Event” means a Bankruptcy of CH, an CH Person, or the Property Manager, application for relief or answer seeking or acquiescing in any reorganization, liquidation, dissolution or similar relief by CH, an CH Person or Property Manager under any present or future federal, state or other statute, law, code or regulation relating to bankruptcy, insolvency or other relief for debtors, or seeking or consenting to or requesting the appointment of a receiver, liquidator, assignee, trustee, conservator, custodian, sequester or other similar official, over any of CH, an CH Person or Property Manager or the making by CH, an CH Person or Property Manager of any general assignment for the benefit of creditors, or the admission in writing by CH, an CH Person or Property Manager of its inability to pay its debts as they become due, and

 

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the taking of any action by CH, an CH Person or Property Manager in preparation of furtherance of any of the foregoing.

 

“BH” has the meaning set forth in the introductory paragraph hereof.

 

“BH Opp REIT II” means Behringer Harvard Opportunity REIT II, Inc., a Maryland corporation.

 

“BH Reserved Tax Elections” has the meaning set forth in Section 7.1(a)(xxxi).

 

“Book Basis” means, with respect to any asset of the Company, the adjusted basis of such asset for federal income tax purposes; provided, however, that (a) if any asset is contributed to the Company, the initial Book Basis of such asset shall equal its fair market value on the date of contribution as determined by the Managing Member, and (b) the Book Basis of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Managing Member, as of the following times: (i) the acquisition of an additional Interest by any new or existing Member in exchange for more than a de minimis Capital Contribution; (ii) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for all or any part of an Interest; (iii) in connection with the liquidation of the Company within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g); and (iv) in any other circumstances permitted by the Code or Treasury Regulations; provided, however, that adjustments pursuant to clauses (i), (ii) and (iv) above shall be made only if the Managing Member with the Approval of BH determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company. The Book Basis of all assets of the Company shall be adjusted by the depreciation, amortization, or other cost recovery deduction allowable under federal income tax law, except that, in accordance with Section 6.9 below, if the Book Basis of an asset differs from its adjusted basis for federal income tax purposes, the Book Basis shall be adjusted by depreciation or amortization as provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), and any other adjustment to the basis of such assets other than depreciation or amortization.

 

“Budget” means the initial and each subsequent annual budget prepared by or on behalf of the Managing Member covering the Company’s anticipated operating costs and capital expenditures (including any construction costs), as Approved by BH and in effect from time to time pursuant to the terms hereof, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.

 

“Business Day” means any day other than Saturday, Sunday, any day that is a legal holiday in the State of Texas or Florida, or any other day on which banking institutions in Texas or Tennessee are authorized to close.

 

“Buy-Sell Offer” shall have the meaning set forth in Section 15.1.

 

“Buy-Sell Offer Price” shall have the meaning set forth in Section 15.1(a).

 

“Capital Account” means the separate account maintained for each Member under Section 4.3.

 

3

 

“Capital Contribution” means, with respect to any Member, the aggregate amount of all Initial Capital Contributions and any Additional Capital Contributions made (or deemed made) by such Member to the Company pursuant to this Agreement, in each case as the same may be adjusted from time to time in accordance with the provisions hereof.

 

“Capital Transaction” means any insurance award or condemnation award that does not result in rebuilding of the Property related to same, sale or other disposition of all or any portion of the Company Property or interest therein, sale of easements, rights of way or similar interest in the Company Property, any financing or refinancing of indebtedness secured by part or all of the Company Property, and any similar items, and any other transaction undertaken as part of or which results in the dissolution of the Company, other than sales or other dispositions of de minimis amounts of personal property in the ordinary course of business.

 

“Carve-out Indemnity” has the meaning set forth in Section 4.5(c).

 

“Carve-out Release” has the meaning set forth in Section 4.5(c).

 

“Certificate of Formation” has the meaning set forth in the recital paragraphs to this Agreement.

 

“CH” has the meaning set forth in the introductory paragraph hereof.

 

“CH Member Group” means the collective reference to CH, Harbor Town Apartments, a Tennessee general partnership, FinPar Equity/Memphis II, L.L.C., a Tennessee limited liability company, FinPar Harbor Town/Memphis II, L.L.C., a Tennessee limited liability company, Carter-Haston Financial Partners, L.L.C., a Tennessee limited liability company, CHRES/Management, L.L.C., a Tennessee limited liability company, Carter-Haston Real Estate Services, Inc., a Tennessee corporation, and all CH Persons.

 

“CH Person” means L. Marc Carter and C. Harris Haston.

 

“Change in Control” means the occurrence of any of the following:

 

(i)            The failure of at least one of the CH Persons to be a manager of Carter-Haston Financial Partners, L.L.C. and to actively and consistently participate in the management of CH;

 

(ii)           The failure of at least one of the CH Persons, to own a Controlling Interest in CH and actively Control CH;

 

(iii)          CH is dissolved, terminated, liquidated, merged, consolidated or reorganized into or with another Person, unless part of an internal (i.e., among the CH Member Group) reorganization and at least one of CH Person owns a Controlling Interest in CH and actively Controls CH, CH provides notice of such reorganization and provides such information regarding the reorganization as BH may reasonably request and any such reorganization otherwise complies with the Loan Documents;

 

4

 

(iv)          The failure of at least one CH Person to devote an adequate amount of his business time and attention to the affairs of CH, which failure is not remedied within a fifteen-day cure period after written demand from BH;

 

(v)           The occurrence of a Bankruptcy Event involving CH; FinPar Harbor Town/Memphis, L.L.C., Carter-Haston Financial Partners, L.L.C., or Property Manager, or their permitted assigns, or

 

(vi)          The occurrence of a Bankruptcy Event involving an CH Person; provided, however, that a Bankruptcy Event involving an CH Person shall be deemed not to constitute a Change in Control if such Bankruptcy Event (A) involves one (and only one) CH Person, (B) does not otherwise result in a Change in Control as defined in the foregoing clauses (i)-(vi) of this definition, and (C) does not materially and adversely affect the management or operation of CH or the Property.

 

“Closing Date” means the date of the “Closing” under the Purchase Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company” means the limited liability company governed by the terms of this Agreement.

 

“Company Accountant” has the meaning set forth in Section 8.4.

 

“Company Minimum Gain” means “partnership minimum gain” as defined in Treasury Regulation Section 1.704-2(d).

 

“Company Property” means, either individually or collectively as the context requires or otherwise indicates, any asset or other property (real, personal or mixed) owned by the Company from time to time including, initially, the Property.

 

“Confidential Information” has the meaning set forth in Section 13.14(a).

 

“Contributing Party” has the meaning set forth in Section 4.2(b).

 

“Contribution Percentage” means, with regard to each Member at any time, the proportion which such Member’s aggregate Capital Contributions to the Company bears to the total of all Capital Contributions to the Company, as adjusted pursuant to Section 4.2(d), which shall initially be in the percentages set forth below opposite its name below:

 

	
Member
    	
 
    	
Contribution Percentage
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
BH
    	
 
    	
94
    	
%
    
	
 
    	
 
    	
 
    	
 
    
	
CH
    	
 
    	
6
    	
%
    

 

“Control” means, when used with respect to any Person, the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise, and the terms

 

5

 

“Controlling,” “Controlled by” and “under common Control with” shall have the meanings correlative therewith.

 

“Controllable Expense” means an expense relating to administrative, payroll, marketing and maintenance expenses included in Operating Expenses and “Controllable Expenses” means all administrative, payroll, marketing and maintenance expenses included in Operating Expenses.

 

“Controllable Expense Variance” means an Expense for Controllable Operating Expenses that exceeds five percent (5.0%) of the total amount of Controllable Expenses for the quarter in which such variance is incurred as the set forth in the Approved Budget (individually or when aggregated with all other variances) (in addition to individual expenditures and obligations, such test also shall be applied to aggregate expenditures and obligations made on a quarterly basis).

 

“Controlling Interest” means, when used with respect to an entity (i) ownership, directly or indirectly, of fifty one percent (51%) or more of the ownership interests in such entity, or (ii) the possession, directly or indirectly, of the power to control, direct or cause the direction of the management, policies, business and affairs of such entity, including without limitation, decisions regarding the sale and financing of the assets of such entity.

 

“Deadlock Event” means the failure of CH and BH to reach agreement with regard to a Major Decision which continues for a period of at least thirty (30) calendar days following notice from either CH or BH to the other party.

 

“Delaware Act” means the Delaware Limited Liability Company Act, as amended from time to time.

 

“Deposit” has the meaning set forth in Section 4.1(a).

 

“Deposit Agreement” means the Agreement Regarding Acquisition and Deposits dated November 23, 2011 between FinPar 4, L.L.C. and Behringer Harvard Opportunity OP II LP.

 

“Election” shall have the meaning set forth in Section 15.1(c).

 

“Event of Default” has the meaning set forth in Section 12.1.

 

“Exchanging Member” has the meaning set forth in Section 13.16.

 

“Failed Contribution” has the meaning set forth in Section 4.1(e).

 

“Financial Institution” has the meaning set forth in Section 13.1(a)(vii).

 

“First Tier Promote Percentage” means ten percent (10%), subject to adjustment as provided in Section 4.2(d).

 

“For Cause Event” has the meaning set forth in Section 7.2(e).

 

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

 

“Guaranty” has the meaning given in the Indemnification Agreement.

 

6

 

“Indemnity” has the meaning given in the Indemnification Agreement.

 

“Indemnification Agreement” means that certain Indemnification Agreement, by and between CH, the CH Member Group, CH Person and BH Opp REIT II, in respect to the Carve-Out Indemnity.

 

“Indemnitees” has the meaning set forth in Section 10.2.

 

“Initial Approved Budget and Operating Plan” has the meaning set forth in Section 8.6.

 

“Initial Capital Contribution” means, with respect to any Member, any capital contribution made by such Member pursuant to Section 4.1 hereof.

 

“Interest” means, with respect to any Member at any time, the limited liability company interest of such Member in the Company at such time, including the right of such Member to any and all of the benefits to which such Member may be entitled as provided in this Agreement, together with the obligations of such Member to comply with all of the terms and provisions of this Agreement.

 

“IRR” means the annual percentage rate, compounded monthly, which, when utilized to calculate the present value of the distributions of Net Cash Flow and Net Capital Proceeds to a Member, causes such present value of distributions to equal the present value of total Capital Contributions (other than Priority Capital Contributions) made to the Company by such Member. A specified IRR shall be deemed to have been attained as of any date that the sum of the present values of all amounts distributed to a Member pursuant to Sections 6.3 and 6.4 (other than Sections 6.3(a) and 6.4(a)) for all periods, as of the time of determination, when discounted to their present values as of the Closing Date by using a discount rate equal to such specified IRR and assuming that such amounts were distributed or deemed distributed as of the end of the applicable month to which such amounts relate, equals the sum of the separate present values of all amounts taken into account in determining such Member’s total Capital Contributions (other than Priority Capital Contributions) when discounted to their present values as of the Closing Date, using a discount rate equal to the specified IRR, and assuming that all such amounts were contributed or deemed contributed as of the time such amounts are received by the Company or otherwise taken into account pursuant to the definition of Capital Contributions. For purposes of the foregoing, present value shall be determined using monthly compounding periods.

 

“Key Principal” has the meaning given in Section 4.5(c).

 

“Law” or “Laws” means any and all statutes (including provisions of state constitutions to the extent directly enforceable against non-governmental Persons), ordinances, rules, regulations, and judicial decisions, rulings, orders and decrees of general application of the United States or any state, or of any authority, agency, court or political subdivision of the United States or any state.

 

“Leasing Guidelines” means the leasing guidelines for the Property then in effect, as Approved by BH.

 

“Lender” means Fannie Mae.

 

7

 

“Liquidating Member” means the Member designated as such by the Managing Member but subject to the Approval of BH; provided, however, that any Member that is then in default hereunder or that causes the dissolution of the Company under Section 11.1(a)(iii) shall not serve as the Liquidating Member (in which event the Liquidating Member shall be the non-defaulting Member), and provided further that in the event of a dissolution under Section 11.1(a)(iii), the Liquidating Member shall be the bankruptcy trustee or debtor-in-possession of the bankruptcy estate of such last Member.

 

“Loan Documents” means the documents from time to time evidencing, securing or otherwise entered into by the Company in connection with a loan or financing extended by a third party lender, including the Acquisition Loan.

 

“Loan Fees” has the meaning set forth in Section 4.1(a).

 

“Loss” means, for each taxable year or other period, an amount equal to the Company’s items of taxable deduction and loss for such year or other period, determined in accordance with Section 703(a) of the Code (including all items of loss or deduction required to be stated separately under Section 703(a)(1) of the Code), with the following adjustments:

 

(a)           any expenditures of the Company described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures under Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Loss, will be considered an item of Loss;

 

(b)           loss resulting from any disposition of Company Property with respect to which gain or loss is recognized for federal income tax purposes will be computed by reference to the Book Basis of such property, notwithstanding that the adjusted tax basis of such property may differ from its Book Basis;

 

(c)           with respect to an asset in which the Book Basis of such asset differs from its adjusted basis for federal income tax purposes, in lieu of depreciation, amortization and other cost recovery deductions taken into account in computing taxable income or loss, there will be taken into account depreciation for the taxable year or other period as determined in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g);

 

(d)           any items of deduction and loss specially allocated pursuant to Section 6.2 shall not be considered in determining Loss; and

 

(e)           any decrease to the Book Basis of Company assets pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f) shall constitute an item of Loss.

 

“Major Decision” has the meaning set forth in Section 7.1(a).

 

“Majority-In-Interest” means, as to the class or group of Members referred to, required or to be determined, such of those Members of that class or group having more than 50% of the Contribution Percentages of the Members in such class or group.

 

8

 

“Management Agreements” means the collective reference to (i) the Oversight Agreement, (ii) the Property Amendment to the Oversight Agreement in the form attached hereto as Appendix A, and (iii) the Property Management Contract.

 

“Managing Member” means CH, and its successors and permitted assigns.

 

“Material Damage or Loss” is a violation, breach or default which causes losses or damages in excess of $20,000.00.

 

“Member” means one or more of BH, CH or any other Person who is admitted as a member of the Company in accordance with this Agreement and applicable Law.

 

“Member Minimum Gain” means the Company’s “partner nonrecourse debt minimum gain” as defined in Treasury Regulation Section 1.704-2(i)(2).

 

“Member Non-recourse Deductions” means “partner nonrecourse deductions” as defined in Treasury Regulations §§ 1.704-2(i)(1) and 1.704-2(i)(2).

 

“Missed Contribution” has the meaning set forth in Section 4.2(d).

 

“Necessary Expense” has the meaning set forth in Section 7.2(b)(iii).

 

“Net Cash Flow” means, for any period, the excess of (i) Operating Revenues for such period, over (ii) Operating Expenses for such period.

 

“Net Capital Proceeds” means, for any period of determination, the excess of (a) the sum of the net gross proceeds received by the Company during such period from Capital Transactions, including all receipts or net proceeds of the Company from or related to (i) any sale or other disposition of all or any portion of the Company Property, (ii) any condemnation of or casualty loss with regard to all or any portion of the Company Property (including any and all insurance awards with regard thereto), (iii) any financing, refinancing, monetization or securitization of the Company Property or any interest therein, and (iv) any and all other Capital Transactions, including, without limitation, (A) distributions and other amounts received directly or indirectly from any entity in which the Company owns an interest which is attributable to a Capital Transaction, and (B) net proceeds or receipts received by the Company incident to the dissolution and liquidation of the Company, but specifically excluding revenues from operations; over (b) the sum of the total cash expenditures of the Company during such period attributable to Capital Transactions, including without limitation, (i) fees and commissions paid with regard thereto, (ii) all costs and expenses incurred as a result of the applicable Capital Transaction, (iii) all costs, expenses and payments to discharge part or all of any loan or other financing required to be made as a result of the applicable Capital Transaction, (iv) all costs and expenses relating to any sale, disposition, financing, refinancing, monetization or securitization of the Property, and (v) all other closing costs attributable or related to the applicable Capital Transaction.

 

“Net Loss” means, for any period, the excess of (i) Losses for such period, over (ii) Profits, if applicable, for such period determined without regard to any Profits or Losses allocated pursuant to Section 6.2.

 

9

 

“Net Profit” means, for any period, the excess of (i) Profits for such period, over (ii) Losses, if applicable, for such period determined without regard to any Profits or Losses allocated pursuant to Section 6.2.

 

“Non-Contributing Party” has the meaning set forth in Section 4.2(b).

 

“Non-recourse Deductions” has the meaning set forth in Treasury Regulation Section 1.704-2(b)(1).

 

“Non-Withdrawing Member” has the meaning set forth in Section 4.1(e).

 

“Notices” has the meaning set forth in Section 13.3.

 

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

 

“Offeree” shall have the meaning set forth in Section 15.1.

 

“Offeree Value” shall have the meaning set forth in Section 15.1(b).

 

“Offeror” shall have the meaning set forth in Section 15.1.

 

“Offeror Value” shall have the meaning set forth in Section 15.1(b).

 

“Operating Expenses” means, for any period, the sum of the total gross cash expenditures of the Company attributable to operations during such period, including without limitation (a) all cash operating expenses (including, without limitation, all fees, commissions, expenses and allowances paid to any third party or paid or reimbursed to any Member or any of its Affiliates pursuant to any agreement or contract (including the Management Agreements) or otherwise, as permitted hereunder), (b) all debt service payments including debt service on loans made to the Company by the Members or any of their Affiliates, (c) all expenditures which are treated as capital expenditures (as distinguished from expense deductions), (d) all real estate taxes, personal property taxes, sales taxes and Tennessee Franchise and Excise taxes, (e) all deposits to the Company’s reserve accounts, and (f) all costs and expenditures related to any acquisition of the Property; provided, however, that Operating Expenses shall not include (i) any payment or expenditure to the extent (A) the sources of funds used for such payment or expenditure are not included in Operating Revenues or (B) such payment or expenditure is paid out of any reserve account of the Company, (ii) any expenditure properly attributable to any Capital Transaction, including the dissolution and liquidation of the Company, (iii) non-cash expenses such as depreciation or amortization.

 

“Operating Plan” means the initial and each subsequent annual strategic and comprehensive operating and business plan prepared by or on behalf of the Managing Member covering the Company’s anticipated operations and including (to the extent applicable) any capital expenditures for the benefit of the Property, as Approved by BH and in effect from time to time pursuant to the terms hereof, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.

 

“Operating Revenues” means, for any period, the sum of the total gross cash revenues received by the Company during such period from operations, including all receipts of the

 

10

 

Company from (a) proceeds from Capital Contributions , (b) rent (including additional rent and percentage rent) paid to the Company (including for parking facilities), (c) concessions, (d) expense reimbursements, (e) proceeds from rent or business interruption insurance, if any, (g) funds made available to the extent such funds are withdrawn from the Company’s reserve accounts and deposited into the Company’s operating accounts, and (h) all other operating revenues and receipts realized by the Company, including, without limitation, distributions and other payments and amounts received directly or indirectly from any entity in which the Company owns an interest (and attributable to operations) and interest accrued on any funds held by the Company; provided, however, that Operating Revenues shall not include any revenues or receipts realized by the Company incident to or from a Capital Transaction, including the dissolution and liquidation of the Company.

 

“Oversight Agreement” means that certain Amended and Restated Property Management and Leasing Agreement dated August 13, 2008 between Oversight Manager, Behringer Harvard Opportunity REIT II, Inc., a Maryland corporation and Behringer Harvard Opportunity OP II LP, a Texas limited partnership to the extent applicable to the Property as a result of the Property Amendment to be entered into on or before Closing by the Company, Behringer Harvard Opportunity REIT II, Inc., Behringer Harvard Opportunity OP II LP and Oversight Manager in the form attached hereto Appendix A.

 

“Oversight Manager” means Behringer Harvard Opportunity II Management Services, LLC, a Texas limited liability company.

 

“Partially Adjusted Capital Account” means, with respect to any Member for any taxable year or other period of the Company, the Capital Account balance of such Member at the beginning of such year or period, adjusted for all contributions and distributions made or deemed made to or by such Member during such year or period and all special allocations to such Member pursuant to Section 6.2 with respect to such year or period, but before giving effect to any allocations of Net Profit or Net Loss to such Member pursuant to Section 6.1 with respect to such year or period.

 

“Permitted Exceptions” has the meaning set forth in Section 16.1(a).

 

“Permitted Transferee” has the meaning set forth in Section 9.2(c).

 

“Person” means any individual, general partnership, limited partnership, corporation, limited liability company, limited liability partnership, trust or other entity.

 

“Priority Capital Contribution” has the meaning set forth in Section 4.2(b).

 

“Profit” means, for each taxable year or other period, an amount equal to the Company’s items of taxable income and gain for such year or other period, determined in accordance with Section 703(a) of the Code (including all items of income and gain required to be stated separately under Section 703(a)(1) of the Code), with the following adjustments:

 

(i)                                     any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profit will be added to Profit;

 

11

 

(ii)                                  any gain resulting from any disposition of Company Property with respect to which gain or loss is recognized for federal income tax purposes will be computed by reference to the Book Basis of such property, notwithstanding that the adjusted tax basis of such property may differ from its Book Basis;

 

(iii)                               any items specially allocated pursuant to Section 6.2 shall not be considered in determining Profit; and

 

(iv)                              any increase to the Book Basis of Company assets pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f) shall constitute an item of Profit.

 

“Prohibited Person” means (a) a Person with whom a U.S. Person is prohibited from transacting business of the type contemplated by this Agreement or any other Transaction Document, whether such prohibition arises under United States law, regulation, executive orders and lists published by OFAC, including those executive orders and lists published by OFAC with respect to Persons that have been designated by executive order or by the sanction regulations of OFAC as Persons with whom U.S. Persons may not transact business or must limit their interactions to types approved by OFAC or otherwise, (b) any (i) “employee benefit plan” as defined in Section 3(3) of ERISA, whether or not such plan is subject to ERISA, (ii) “plan” as defined in Section 4975 of the Code (iii) entity deemed to hold plan assets within the meaning of 29C.F.R. Section 2510.3-101 or any other applicable regulation of any of the foregoing, or (v) “governmental plan” within the meaning of Section 3932) of ERISA, (c) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; (d) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (e) any other Person subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money..

 

“Promote-Loss For Cause Event” shall mean a For Cause Event described in Section 7.2(e)(iii) pursuant to which CH is removed as Managing Member and which results from the failure of the Managing Member to obtain the consent or Approval of BH with respect to a Major Decision described in Sections 7.1(a)(i)-(iv), 7.1(a)(ix), 7.1(a)(xi)-(xiii), 7.1(a)(xvii)-(xviii), 7.1(a)(xxi)-(xxii), 7.1(a)(xxiii)-(xxvii), 7.1(a)(xxix), 7.1(a)(xxxi)-(xxxiv), 7.1(a)(xxxv)-(xxxvii), 7.1(a)(xxxix)-(xli), 7.1(a)(xliii-xliv), and 7.1(a)(xlvii).

 

“Promote Percentages” means the collective reference to the First Tier Promote Percentage, the Second Tier Promote Percentage and the Third Tier Promote Percentage.

 

“Property” has the meaning set forth in the Purchase Agreement.

 

“Property Management Contract” means that certain Property Management Contract entered into on or before the Closing Date between the Company and Property Manager in the form Approved by BH..

 

“Property Manager” means CHRES/Management, L.L.C., a Tennessee limited liability company, or a replacement Property Manager Approved by BH or appointed by BH in accordance with the terms of this Agreement.

 

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“Purchase Agreement” means that certain Real Estate Purchase and Sale Agreement, effective October 28, 2011 as amended, between Seller, as seller, and Purchaser, to which the Company shall take an assignment of Purchaser’s interest to purchase the Property as provided herein, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

 

“Purchaser” means FinPar 4, L.L.C., a Tennessee limited liability company.

 

“Pursuit Costs” has the meaning set forth in Section 4.1(b)(i).

 

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

 

“ROFO Election” has the meaning set forth in Section 16.1(b).

 

“ROFO Escrow Agent” has the meaning set forth in Section 16.1(c).

 

“ROFO Escrow Deposit” has the meaning set forth in Section 16.1(c).

 

“ROFO Notice” has the meaning set forth in Section 16.1(a).

 

“ROFO Response Period” has the meaning set forth in Section 16.1(b).

 

“Second Tier Promote Percentage” means twenty percent (20%), subject to adjustment as provided in Section 4.2(d).

 

“Seller” means Arbors of Harbor Town Joint Venture, a Tennessee general partnership.

 

“Shortfall” has the meaning set forth in Section 4.2(a).

 

“Substitute Contribution” has the meaning set forth in Section 4.2(b).

 

“Target Account” means, with respect to any Member for any taxable year of the Company or other period, the excess of (a) an amount equal to the hypothetical distribution such Member would receive if all assets of the Company, including cash, were sold for cash equal to their Book Basis (taking into account any adjustments to Book Basis for such year or other period but not adjustments caused by any such hypothetical distributions pursuant to this clause (a)), all liabilities allocable to such assets were then due and were satisfied according to their terms (limited, with respect to each non-recourse liability, to the Book Basis of the assets securing such liability) and all remaining proceeds from such sale were distributed pursuant to Section 6.4, over (b) the amount of Company Minimum Gain and Member Minimum Gain that would be charged back to such Member as determined pursuant to Treasury Regulation Section 1.704-2 immediately prior to such sale.

 

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“Third Tier Promote Percentage” means thirty percent (30%), subject to adjustment as provided in Section 4.2(d).

 

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

 

“Transfer” has the meaning set forth in Section 9.1.

 

“Treasury Regulation” or “Regulation” means, with respect to any referenced provision, such provision of the regulations of the United States Department of the Treasury or any successor provision.

 

“U.S. Person” means a United States citizen, a permanent resident of the United States, an entity organized under the Laws of the United States or any of its territories or having its principal place of business within the United States or any of its territories, or any other Person that is a “United States person” as described in, or for the purposes of, Executive Order 13224 of September 23, 2001 or any amendment, replacement or other modification thereto.

 

“Unreturned Capital Contributions” means, as to each Member and any time, the excess, if any, of (i) such Member’s aggregate Capital Contributions made or deemed made prior to such time, over (ii) all distributions made to such Member pursuant to Section 6.4(b).

 

“Venture Coordinator” shall have the meaning set forth in Section 7.6.

 

“Winding Up Profit and Loss” means items of Net Profit or Net Loss in the Winding Up Year.

 

“Winding Up Year” means the taxable year of the Company in which all of its assets are disposed of, or the Company liquidates.

 

“Withdrawing Member” shall have the meaning set forth in Section 4.1(e).

 

1.2                               Other References. As used in this Agreement, unless otherwise specified, all references to Sections, Articles or Appendices are to Sections, Articles or Appendices of this Agreement.

 

ARTICLE II
 ORGANIZATION

 

2.1                               Formation. The Members hereby agree to form the Company as a limited liability company under the Delaware Act, upon the terms and subject to the conditions set forth in this Agreement. The Managing Member is hereby authorized to file and record any amendments to the Certificate of Formation and such other documents as may be reasonably required or appropriate under the Delaware Act or the Laws of any other jurisdiction in which the Company may conduct business or own property.

 

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2.2                               Name and Principal Place of Business.

 

(a)                                 The name of the Company is set forth on the cover page to this Agreement. Subject to the Approval of BH and the terms of the Loan Documents, the Managing Member may change the name of the Company or adopt such trade or fictitious names for use by the Company as the Managing Member may from time to time determine. All business of the Company shall be conducted under the name of the Company name or approved trade or fictitious name, and title to all Company Property shall be held in the name of the Company.  In the event that the Company shall conduct business under a trade name or assumed name, the Managing Member shall promptly execute and duly file with the proper offices in each state in which the Company may conduct the activities under such trade name or assumed name one or more certificates as required by the Fictitious Name or Assumed Name Act or similar statute in effect as to each such state in which such activities are so conducted.

 

(b)                                 The principal place of business and office of the Company shall be located at 3301 West End Avenue, Suite 200, Nashville, Tennessee 37203, or such other address as may be Approved by BH.

 

2.3                               Term. The term of the Company commenced on the date of the filing of the Certificate of Formation pursuant to the Delaware Act, and shall continue until terminated pursuant to the provisions of this Agreement. The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate of Formation as provided in the Delaware Act.

 

2.4                               Registered Agent and Registered Office. The name of the Company’s registered agent for service of process shall be Corporation Service Company, and the address of the Company’s registered agent and the address of the Company’s registered office in the State of Delaware shall be 2711 Centerville Road, Suite 400, in the City of Wilmington, Delaware 19808. Subject to the Approval of BH, such agent and such office may be changed from time to time by the Managing Member with written notice to all Members.

 

2.5                               Purpose.

 

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

 

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

 

(ii)                                  directly or indirectly acquire, own, manage, service, operate, improve, finance, refinance, develop, redevelop, construct, renovate, market, lease, sell and otherwise deal with and dispose of the Company Property; and

 

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

 

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

 

(c)                                  The Company shall comply with the terms of the Loan Documents and the Company shall:

 

1.                                      not acquire any real property, personal property or assets other than the Company Property;

 

2.                                      not own, operate or participate in any business other than the management and operation of the Company Property;

 

3.                                      not commingle its assets or funds with those of any other Person unless such assets or funds can be segregated and identified and such commingling is Approved by BH;

 

4.                                      accurately maintain its financial statements, accounting records and other limited liability company or partnership, or other corporate documents, as the case may be, separate from those of any other Person (provided, however, that the foregoing shall not prohibit the financial statements from being included in the consolidated financial statements of another Person when permitted or required by applicable law or generally accepted accounting principles);

 

5.                                      not assume, guaranty or become obligated for, the liabilities of any other Person (except in connection with the Acquisition Loan or any refinancing thereof, or the endorsement of negotiable instruments in the ordinary course of business) or hold out its credit as being available to satisfy the obligations of any other Person; and

 

6.                                      except for capital contributions or capital distributions permitted under this Agreement, a business management services agreement with an affiliate of the Company and any property management agreements with an affiliates of the Company approved by BH and any Lender, shall not enter into, or become a party to, any transaction with any affiliate of any Person, except in the ordinary course of business and on terms which are no less favorable to any such Person than would be obtained in a comparable arm’s length transaction with an unrelated third party.

 

ARTICLE III
 MEMBERS

 

3.1                               Admission of Members. Effective as of the date of this Agreement, BH and CH are admitted as Members of the Company and CH shall be the sole Managing Member of the Company. No other Person shall be admitted as a member of the Company and no additional Interest shall be issued, without the Approval of all of the Members, except as expressly permitted by this Agreement.

 

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3.2                               Limitation on Liability. Except as otherwise expressly provided in the Delaware Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a member of the Company. Except as otherwise expressly provided herein as to certain recourse obligations of the Members and as may be otherwise provided in the Delaware Act, the liability of each Member shall be limited to the amount of Capital Contributions required to be made by such Member in accordance with the provisions of this Agreement, but only when and to the extent the same shall become due pursuant to the provisions of this Agreement. Further, except as otherwise expressly provided herein to the contrary, no general or limited partner of any Member, shareholder, member, partner or other holder of an equity interest in any Member or Managing Member, or any officer, director or employee of any of the foregoing or any of their Affiliates is obligated personally for any debt, obligation or other liability of the Company solely by reason of their being a general or limited partner of any Member, shareholder, member, partner or other holder of an equity interest in any Member and/or Managing Member, or officer, director or employee of any of the foregoing or any of their Affiliates. Further, failure of the Company to observe any corporate or company governance or other formalities or requirements relating to the exercise of its powers or the management of its business or affairs under this Agreement or the Delaware Act will not be grounds for any Member, general or limited partner of any Member, shareholder, member or other holder of an equity interest in any Member, or any officer, director or employee of any of the foregoing or any of their Affiliates to be held liable or obligated for any debt, obligation or other liability of the Company.

 

ARTICLE IV
 CAPITAL

 

4.1                               Initial Capital Contributions.

 

(a)                                 Deposits Under the Purchase Agreement. It is acknowledged that, on or prior to the date hereof, one or more of the Members (or their Affiliates) has paid all or a portion of the deposits required under the Purchase Agreement (the “Deposit”) and certain fees with respect to an application for an Acquisition Loan (the “Loan Fees”). On the date BH elects in a written notice from BH to CH, CH or an Affiliate will cause the Purchase Agreement to be assigned by Purchaser to and assumed by the Company in consideration of a credit by the Company to the Capital Account of the applicable Member equal to the portion of the Deposit and Loan Fees paid by such Member.

 

(b)                                 Pursuit Costs. (i)  Prior to the date hereof, the Purchaser and BH and their respective Affiliates, have incurred, and may hereafter incur prior to the Closing Date third party out-of-pocket costs and expenses in connection with the negotiation and closing of the Purchase Agreement and their respective due diligence analyses and other evaluations of the Property (including, without limitation, costs of environmental and engineering and other feasibility reports and studies, costs related to analyzing the Property (including, without limitation, travel costs) and costs (including, without limitation, attorneys’ fees) incurred by the Members in reviewing and analyzing work conducted by Purchaser. or its agents), fees and expenses related to the Acquisition Loan, and costs to complete a Rule 3-14 audit of the financial statements in

 

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respect of the Property in compliance with certain Laws and regulations applicable to BH and/or its Affiliates (collectively, the “Pursuit Costs”).

 

(ii)                                  Provided that the Company acquires the Property pursuant to the Purchase Agreement, the Company shall pay or reimburse each Member for the portion of any Deposit and Loan Fees it made after the date the Purchase Agreement is assigned to the Company and all Pursuit Costs actually incurred by such Member in good faith pursuant to the terms hereof to the extent set forth in a budget approved by all Members, or shall credit such amounts against such Member’s Initial Capital Contribution as provided in Section 4.1(d) below, so that each Member’s share of such costs shall be in proportion to their respective Contribution Percentages. If BH elects not to cause the Company to acquire the Property or the Company fails to acquire the Property for any reason, then, each Member (or its Affiliate) shall be responsible for and pay all Pursuit Costs incurred by such Member.  Pursuant to the Purchase Agreement, Purchaser made an earnest money deposit in the amount of $250,000 (the “Initial Deposit”). An additional earnest money deposit in the amount of $250,000 (the “Approval Deposit”) was required to be made by November 29, 2011 under the Purchase Agreement and in accordance with the terms of the Deposit Agreement, as of November 29, 2011, BH deposited $250,000 (representing the entire Approval Deposit) and $220,000 (being the amount of the Initial Deposit funded by Purchaser less Purchasers $15,000 share of the Initial Deposit and $15,000 share of the Approval Deposit) by wire transfer to the Escrow Holder (as defined in the Purchase Agreement). BH, CH and the Company shall cooperate in causing the Escrow Holder to return $235,000 of the amount in escrow to Purchaser.  Unless the Purchase Agreement is terminated on or before December 8, 2011 as a result of a Financing Contingency (as defined in the Second Amendment to the Purchase Agreement), the entire balance of the Initial Deposit and the Approval Deposit (collectively, the “Deposit”) will become non-refundable. If all or any portion of the Deposit is refunded for any reason, the portion of the Deposit advanced by BH shall be refunded to BH and the portion of the Deposit advanced by CH or Purchaser that has not already been returned to Purchaser shall be refunded to CH pari passu on a pro rata basis.

 

(iii)                               Fees of legal counsel for the Members incurred in connection with or related to the negotiation of this Agreement shall be borne by each Member and shall not be reimbursed by the Company.

 

(iv)                              Provided that the Company acquires the Property pursuant to the Purchase Agreement, the Company shall pay an equity placement fee to Brush Island Capital, LLC in an amount $115,000 on the Closing Date and applicable fees to Lender as set forth below in this Section 4.1(b)(ii) in connection with the acquisition of the Property and the Loan. CH and the CH Persons represent and warrant that the amount of the fee or commission payable to Brush Island Capital, LLC in connection with the equity placement in the Company will be in the amount provided above in this subsection (iv) and the maximum amount of loan or commitment fees payable to the Lender under the Loan will not exceed $110,000 and that no portion of any such fees are or will be payable or paid to CH, any Affiliate of CH, or any CH Person.

 

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(c)                                  Failure to Close Purchase. Whether the Company shall proceed with the transactions contemplated by the Purchase Agreement, including (without limitation) whether it shall close the purchase of the Property, shall be determined by BH in its sole discretion, and neither the CH Member Group nor any Affiliate of the CH Member Group shall have any claim against the Company or BH or any of its Affiliates by reason of such determination; provided that if BH unilaterally determines not to close the acquisition of the Property, it shall use reasonable efforts to keep the CH Member Group updated as to its decision making process, and it shall provide notice of such final decision to the CH Member Group as soon as possible.

 

(d)                                 Closing Contributions. In the event that BH decides to cause the Company to close the purchase of the Property pursuant to the Purchase Agreement, then on or before the Closing Date, the Members shall contribute in cash (or be credited to the extent as provided in Sections 4.1(a) and 4.1(b)(ii) with making cash contributions) to the capital of the Company their pro rata share (based upon their relative Contribution Percentages) of the sum of (x) the amount reasonably necessary to close the acquisition of the Property, closing costs, Pursuit Costs, other amounts payable or reimbursable by the Company under Section 4.1(b) and (y) a reasonable amount of initial working capital and reserves (which shall include anticipated capital expenditures to be made in the period following acquisition of the Property as set forth in the Initial Approved Budget and Operating Plan as well as any and all anticipated third party loan commitment fees and closing costs which may be incurred in connection with any permanent financing to be obtained by the Company) for the Company, as Approved by the Members. CH will deliver to the Members for Approval a statement of sources and uses for the closing and a detailed estimate of the Initial Capital Contributions. Amounts payable to the Company by a Member on the Closing Date may be set off from amounts the Company owes to a Member and each Member shall receive credits for payments made prior to the Closing Date for amounts paid to a third party as set forth in such Approved closing statement.

 

(e)                                  Withdrawing Members. Subject to the provisions of Section 4.1(d) and this Section 4.1(e), if any Member (a “Withdrawing Member”) fails to timely make all or any portion of its Initial Capital Contributions pursuant to this Section 4.1 (a “Failed Contribution”), then one or more of the other Members that is not an Affiliate of the Withdrawing Member (the “Non-Withdrawing Member”) may either pursue all of its rights and remedies at law and in equity, or elect to make such Failed Contribution, in which case, as such Non-Withdrawing Member’s sole and exclusive remedy with respect thereto (i) the Withdrawing Member shall be automatically terminated as a Member for all purposes hereunder and (ii) the Interest of the Withdrawing Member (and its share of the Deposit and Loan Fees) shall be deemed forfeited in its entirety and such Withdrawing Member shall cease to have any Interest in the Company or any rights under this Agreement with respect thereto. Each Member acknowledges and agrees that the other Members would not be entering into this Agreement were it not for (i) the Members agreeing to make the Initial Capital Contributions provided for in this Section 4.1, and (ii) the remedy provisions set forth above in this Section 4.1(e). Each Member acknowledges and agrees that in the event any Member fails to make its Initial Capital Contributions pursuant to this Agreement, the other Members will suffer substantial damages and the remedy provisions set forth above are fair, just and equitable in all respects.

 

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4.2                               Additional Capital Contributions.

 

(a)                                 If at any time or from time to time after all of the Initial Capital Contributions have been contributed, the Managing Member determines that additional funds (a “Shortfall”) are reasonably required (i) for development and tenant improvement costs and other capital expenditures contemplated by the Approved Budget and Operating Plan, (ii) to meet the ongoing obligations, liabilities, Operating Expenses or reasonable business needs of the Company in accordance with the then applicable Approved Budget or Operating Plan, or to pay Necessary Expenses or other costs which are not provided for in the Approved Budget and Operating Plan, but which are Approved by BH to the extent not covered by the Initial Capital Contributions, or (iii) for any other purpose Approved by BH, the Managing Member may (but shall not be obligated to), request that each of the Members contribute its pro rata share (based upon the Contribution Percentages of the Members at the time of such request) of such Shortfall (any such contribution, an “Additional Capital Contribution”). If so requested by the Managing Member or a Member pursuant to the foregoing provisions, such contributions shall be due within five (5) Business Days thereafter (or by the 1st calendar day of the next month, whichever is later).

 

(b)                                 Notwithstanding anything to the contrary contained herein, a failure by any Member to make any Additional Capital Contribution to the extent required or requested hereunder shall not constitute an Event of Default by such Member and the sole consequences of such failure shall be as set forth in this Section 4.2. If BH or CH (the “Non-Contributing Party”) fails to timely make all or any portion of any Additional Capital Contribution as requested pursuant to Section 4.2(a) above and the other party (the “Contributing Party”) makes all of its share of any Additional Capital Contribution as requested pursuant to Section 4.2(a) above, then the Contributing Party may make the full amount of such Additional Capital Contribution on behalf of the Non-Contributing Party (any such Capital Contribution by a Contributing Party, a “Substitute Contribution”). In such an event, the Contributing Party may elect by written notice given within five (5) Business Days of making the Substitute Contribution either (i) to treat the entire amount contributed by the Contributing Party (including both the Contributing Party’s and the Non-Contributing Party’s pro rata portion thereof) as a Priority Capital Contribution (a “Priority Capital Contribution”) by such Contributing Party in accordance with Section 4.2(c) below, or (ii) to treat the Substitute Contribution as a regular Capital Contribution in accordance with Section 4.2(d) below.

 

(c)                                  To the extent any Contributing Party elects to treat its own Additional Capital Contribution and such Substitute Contribution as a Priority Capital Contribution, such Priority Capital Contribution shall be returned on a priority basis together with an eighteen percent (18%) per annum cumulative annual preferred return thereon as provided in Section 6.3(a) and/or Section 6.4(a), as applicable.

 

(d)                                 If a Contributing Party elects to treat a Substitute Contribution as a regular Capital Contribution, then the Contribution Percentage of the Contributing Party shall be adjusted to equal the percentage equivalent of the quotient determined by dividing:

 

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

 

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(A)                               the sum of (I) one hundred percent (100%) of the aggregate Capital Contributions (excluding Substitute Contributions) then or theretofore made by such Member to the Company, plus (II) two hundred percent (200%) of the Substitute Contributions then or theretofore made by such Member to the Company (the excess of 200% of such Member’s Substitute Contributions over the actual amount of such Member’s Substituted Contributions is referred to herein as the “Excess Amounts”); minus

 

(B)                               the Substitute Contributions then or theretofore made by the other Member to the Company; by

 

(ii)                                  one hundred percent (100%) of the aggregate Capital Contributions (including, without limitation, Substitute Contributions) then or theretofore made by all of the Members to the Company.

 

and the Contribution Percentage of the Non-Contributing Party shall be reduced by the percentage necessary to insure that the Contribution Percentages add up to 100%. At the same time, the Promote Percentages of each Member shall be adjusted (increased or decreased in the same proportions as the Contribution Percentages were adjusted pursuant to the foregoing provisions (e.g., if a Member’s Contribution Percentage is reduced by half or 50%, then the Promote Percentages of such Member will also be reduced by half or 50%). In addition, an amount of Unreturned Capital Contributions equal to such Excess Amount shall be treated as having been transferred from the Non-Contributing Party to the Contributing Party but such transfer shall be solely for the purpose of computing preferred return pursuant to Sections 6.3(b) and 6.4(b) and Unreturned Capital Contributions pursuant to Section 6.4(c) with the result that each Member will have Unreturned Capital Contributions in proportion to its adjusted Contribution Percentage after giving effect to such transfer. The Capital Accounts shall be adjusted accordingly.

 

Any Non-Contributing Party shall have until seventy-five (75) days after the date on which its missed Additional Capital Contribution (the “Missed Contribution”) was due in order to cure its failure to make such Missed Contribution by depositing into an account designated by the Contributing Party an amount equal to the amount of the Missed Contribution together with interest thereon at a eighteen percent (18%) per annum rate (or the maximum rate allowed by applicable law, if lower) from the due date established by the Managing Member until such amount has been so deposited in full into such account, at which point such amount shall promptly be distributed to the Contributing Party if and to the extent the Contributing Party made a Substitute Contribution on account of the Missed Contribution. If the Non-Contributing Party makes such deposits as aforesaid, any adjustment to Contribution Percentages, dilution of the Promote Percentages (and the distributions affected thereby) and transfers of Unreturned Capital Contributions caused by its failure to make the applicable Additional Capital Contribution shall be unwound, and the payment, dilution and transfers described above shall not be reflected in the Members’ Capital Accounts.

 

(e)                                  Each Member acknowledges and agrees that the other Members would not be entering into this Agreement were it not for (i) the Members agreeing to make the Capital Contributions provided for in this Section 4.2, and (ii) the remedy provisions set forth above in

 

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this Section 4.2. Each Member acknowledges and agrees that in the event any Member fails to make its Capital Contributions pursuant to this Agreement, the other Members will suffer substantial damages and the remedy provisions set forth above are fair, just and equitable in all respects.

 

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

 

(g)                                  Notwithstanding anything to the contrary in this Agreement, if CH’s Contribution Percentage is reduced below three percent (3%) as a result of the application of the provisions of this Section 4.2 after expiration of the cure period above, then CH shall have no right to vote on or Approve any Major Decision, the Budget, or any other matter which may or could result in a Deadlock Event.

 

4.3                               Capital Accounts. A separate Capital Account will be maintained for each Member in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv). Consistent therewith, the Capital Account of each Member will be determined and adjusted as follows:

 

(a)                                 Each Member’s Capital Account will be credited with:

 

(i)                                     any contributions of cash made by such Member to the capital of the Company plus the fair market value of any property contributed by such Member to the capital of the Company (net of any liabilities to which such property is subject or which are assumed by the Company);

 

(ii)                                  the Member’s distributive share of Net Profit and any items in the nature of income or gain specially allocated to such Member pursuant to Section 6.2; and

 

(iii)                               any other increases required by Treasury Regulation Section 1.704-1(b)(2)(iv), without duplication.

 

(b)                                 Each Member’s Capital Account will be debited with:

 

(i)                                     any distributions of cash made from the Company to such Member plus the fair market value of any property distributed in kind to such Member (net of any liabilities to which such property is subject or which are assumed by such Member);

 

(ii)                                  the Member’s distributive share of Net Loss and any items in the nature of expenses or losses specially allocated to such Member pursuant to Section 6.2; and

 

(iii)                               any other decreases required by Treasury Regulation Section 1.704-1(b)(2)(iv), without duplication.

 

(c)                                  In the event all or a portion of any Interest in the Company is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. In determining the

 

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amount of any liability for purposes of the foregoing, Code Section 752(c) and any applicable provisions of the Code shall be taken into account

 

(d)                                 The provisions of this Section 4.3 and any other provisions of this Agreement relating to the maintenance of Capital Accounts have been included in this Agreement to comply with Section 704(b) of the Code and the Treasury Regulations promulgated thereunder and will be interpreted and applied in a manner consistent with those provisions. Subject to the Approval of BH, in the event the Managing Member determines that it is prudent to modify the manner in which the Capital Accounts are maintained in order to comply with such Treasury Regulations, the Managing Member may make such modification(s) provided that any such modifications is not likely to have a material effect on the amounts distributable to any Member pursuant to the terms of this Agreement.

 

4.4                               No Further Capital Contributions. Except as expressly provided in this Agreement or with the prior written consent of all of the Members, no Member shall be required or entitled to contribute any other or further capital to the Company, nor shall any Member be required or entitled to loan any funds to the Company. No Member will have any obligation to restore any negative balance in its Capital Account at any time including upon liquidation or dissolution of the Company.

 

4.5                               Acquisition Loan.

 

(a)                                 It is acknowledged that both BH and the Managing Member on behalf of the Company shall use good faith efforts to secure a permanent loan secured by the Property in the approximate aggregate amount of $26,000,000 (the “Acquisition Loan”) on terms which are acceptable to both BH and CH, the proceeds of which will be applied on the Closing Date to pay a portion of the purchase price for the Property under the Purchase Agreement.

 

(b)                                 If either BH or the Managing Member does not Approve a financing proposal for the Acquisition Loan presented by the other party (the “Presenting Member”), the party who fails to Approve such proposal (the “Rejecting Member”) must identify to the Presenting Member the basis for such disapproval in writing, and provided that the Seller under the Purchase Agreement agrees to extend the Closing Date, and the Rejecting Member will thereafter have a period of sixty (60) calendar days in which to obtain an alternative financing commitment including terms not materially worse (taken as a whole) than the financing terms originally proposed by the Presenting Member and including improved or different terms with respect to the item(s) the Rejecting Member originally identified as the reason for its disapproval. If the Rejecting Member has not delivered to the Presenting Member a financing commitment on such revised terms by the end of such sixty-day period, the Presenting Member shall be empowered to alone cause the Company to Approve the original financing proposal by such Member (notwithstanding the provisions of Section 7.1(a)(ii)). Each Member agrees to act in a commercially reasonable manner in proposing, voting to Approve or dis-Approve or otherwise acting in connection with a financing proposal under Section 7.1(a)(ii) or under this Section 4.5.

 

(c)                                  The CH Persons will be the Key Principal (as such term is defined in the Loan Documents) and shall be responsible for the non-recourse carve-outs under the Loan

 

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Documents. Except in the case of an acquisition of CH’s interest by BH as provided in this Agreement, neither BH nor any of its affiliates shall be designated as the Key Principal liable under any non-recourse carve-outs under the Loan Documents, provided that the Loan Documents may provide for the substitution of BH or an Affiliate of BH acceptable to BH and the Lender as Key Principal.

 

(i)                                     In the event of a removal of the Managing Member and/or the acquisitions of the Interests of CH under any provision of this Agreement, including, but not limited to, under Article XV or Article XVI except in those instances as specifically set forth in subsection (ii) below, BH shall (1) obtain the substitution of the Key Principal and the release of the Key Principal under the Loan Documents from liability under the Guaranty and the Indemnity as to acts, events or omissions occurring or obligations arising after the effective date of such release; provided, however, that the terms of such release may not apply to any acts, events or omissions which occurred prior to the effective date of the release, whether or not the effects of or damages from such acts, events or omissions are apparent or ascertainable as of such effective date (a “Carve-out Release”); and (2) if BH is unable to obtain the Carve-Out Release from the Lender after making commercially reasonable efforts to do so, or to extent a Carve-Out Release is not a full and complete release, the Indemnification Agreement shall remain in place with respect to any unreleased liability relating to matters that would otherwise be subject to the Indemnification Agreement, and provided further that if BH Opp REIT II does not have a minimum net worth of $15,000,000 at the time that the Carve-Out Release would otherwise be required to be provided, the parties agree that the Property shall be marketed and sold in a commercially reasonable manner as expeditiously as possible in lieu of the removal of the Managing Member or acquisition of CH’s interests, unless the parties otherwise agree differently (and provided that if CH would have been otherwise terminated as the Managing Member due to a Promote-Loss For Cause Event or an Event of Default, the provisions of Section 6.5 will govern any distributions to CH).

 

(ii)                                  Notwithstanding anything to the contrary set forth in subsection (i) above, if the Managing Member is being removed or a substitution of the Managing Member is being made under any provision of this Agreement that allows for such removal or substitution in connection with an event that has (due directly or indirectly to the actions or inactions of Managing Member or another member of the CH Group) caused the Company or the Key Principal to have personal liability under the non-recourse carve-outs under the Loan Documents, BH shall have no obligation to obtain a Carve-out Release or provide a Carve-Out Indemnification of the Key Principal for any such acts in relation to the removal or substitution of the Managing Member, except as such liability or liabilities arose directly or indirectly due to the actions or inactions of BH and/or its Affiliates.

 

(d)                                 In recognition that BH’s actions or inactions, pursuant to the powers, controls and authority reserved to BH in this Agreement, could cause the Key Principal to

 

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become liable for certain non-recourse carve outs under the Loan Documents, BH, a BH Affiliate acceptable to the Key Principal, the Key Principal and the CH Member Group shall enter into the Indemnification Agreement simultaneously with this Agreement.

 

ARTICLE V
  INTERESTS IN THE COMPANY

 

5.1                               Contribution and Promote Percentage Adjustments. The Promote Percentages and Contribution Percentages of the Members may be adjusted only as set forth in this Agreement.

 

5.2                               Return of Capital. No Member shall be liable for the return of the Capital Contributions (or any portion thereof) of any other Member, it being expressly understood that any such return shall be made solely from the assets of the Company. No Member shall be entitled to withdraw or receive a return of any part of its Capital Contributions or Capital Account, to receive interest on its Capital Contributions or Capital Account or to receive any distributions from the Company, except as expressly provided for in this Agreement. No Member shall have any obligation to restore any negative or deficit balance in its Capital Account at any time including upon liquidation and dissolution of the Company.

 

5.3                               Ownership. All Company Property shall be owned by the Company, subject to the terms and provisions of this Agreement.

 

5.4                               Waiver of Partition; Nature of Interests in the Company. Except as otherwise expressly provided for in this Agreement, each of the Members hereby irrevocably waives any right or power that such Member might have to:

 

(a)                                 cause the Company or any of its assets to be partitioned;

 

(b)                                 cause the appointment of a receiver for all or any portion of the assets of the Company;

 

(c)                                  compel any sale of all or any portion of the assets of the Company pursuant to any applicable law; or

 

(d)                                 file a complaint, or to institute any proceeding at law or in equity, to cause the termination, dissolution or liquidation of the Company.

 

Each of the Members has been induced to enter into this Agreement in reliance upon the waivers set forth in this Section 5.4, and without such waivers no Member would have entered into this Agreement. No Member shall have any interest in any specific Company Property. The Interests of all Members in this Company are personal property.

 

ARTICLE VI
 ALLOCATIONS AND DISTRIBUTIONS

 

6.1                               Allocations. After application of Section 6.2, Profits and Losses for each fiscal year or the applicable portion thereof shall be allocated among the Members as of each Adjustment Date so as to reduce, proportionally, in the case of Profits, the differences between

 

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their respective Target Accounts and Partially Adjusted Capital Accounts as of each Adjustment Date and in the case of Losses, the differences 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 to equal such Member’s 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 Target Account and its Partially Adjusted Capital Account.

 

6.2                               Allocations and Compliance with Section 704(b). The following special allocations shall, except as otherwise provided, be made in the following order:

 

(a)                                 Notwithstanding anything to the contrary contained in this Article VI, if there is a net decrease in Company Minimum Gain or in any Member Minimum Gain during any taxable year or other period, prior to any other allocation pursuant hereto, such Member shall be specially allocated items of Profit for such year (and, if necessary, subsequent years) in an amount and manner required by Treasury Regulation Sections 1.704-2(f) or 1.704-2(i)(4). The items of Profit to be so allocated shall be determined in accordance with Treasury Regulation Section 1.704-2.

 

(b)                                 Non-recourse Deductions for any taxable year or other period shall be allocated (as nearly as possible) under Treasury Regulation Section 1.704-2 to the Members, pro rata in proportion to their respective Contribution Percentages.

 

(c)                                  Any Member Non-recourse Deductions for any taxable year or other period shall be allocated to the Member that made or guarantied or is otherwise liable with respect to the loan to which such Member Non-recourse Deductions are attributable in accordance with principles under Treasury Regulation Section 1.704-2(i).

 

(d)                                 Any Member who unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes or increases a negative balance in his or its Capital Account shall be allocated items of Profit sufficient to eliminate such increase or negative balance caused thereby, as quickly as possible, to the extent required by such Treasury Regulation.

 

(e)                                  No allocation of an item of Loss shall be made to any Member if, as a result of such allocation, such Member would have an Adjusted Capital Account Deficit. Any such disallowed allocation shall be made to the Members entitled to receive such allocation under Treasury Regulation Section 1.704 in proportion to their respective Contribution Percentages.

 

(f)                                   For purposes of Section 752 of the Code and the Treasury Regulations thereunder, excess non-recourse liabilities (within the meaning of Treasury Regulations

 

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Section 1.752-3(a)(3)) shall be allocated to the Members pro rata in proportion to their respective Contribution Percentages.

 

6.3                               Distributions from Operations. Except as provided in Sections 6.5 and 6.6, the Company shall, as soon as reasonably practical (but no less often than monthly, if appropriate), make distributions of Net Cash Flow to the Members in the following manner and order of priority:

 

(a)                                 First, an amount of such Net Cash Flow will be distributed (in the order and priority set forth below in this Section 6.3(a)) to the Members that have made Priority Capital Contributions until each of such Members has received aggregate distributions pursuant to this Section 6.3(a) and Section 6.4(a) for the current period and all previous periods, equal to the sum of (i) the aggregate amount of its Priority Capital Contributions made pursuant to this Agreement, and (ii) an eighteen percent (18%) per annum (using a 360 day year) cumulative preferred returned thereon (amounts distributed under this Section 6.3(a) will be distributed in the reverse order in which such Priority Capital Contributions were made — that is, the most recent Priority Capital Contribution, together with the eighteen percent (18%) per annum cumulative preferred return thereon, will be returned and paid first to the Member having made such Priority Capital Contribution, and then the next most recent Priority Capital Contribution, together with the eighteen percent (18%) per annum cumulative preferred return thereon, will be returned and paid to the Member having made such Priority Capital Contribution, etc.);

 

(b)                                 Second, remaining Net Cash Flow, if any, shall be distributed pari passu to each Member until each Member has received an amount equal to its Unreturned Capital Contributions, with such distributions being made pro rata to each Member in accordance with their respective Contribution Percentages;

 

(c)                                  Third, remaining Net Cash Flow, if any, shall be distributed pari passu to the Members in accordance with their respective Contribution Percentages until the Members have received aggregate distributions sufficient to generate a 15% IRR in respect to such Members’ respective Capital Contributions (excluding any Priority Capital Contributions);

 

(d)                                 Fourth, thereafter, remaining Net Cash Flow, if any, shall be distributed to the Members, with (i) a percentage of such remaining Net Cash Flow being distributed to CH equal to the First Tier Promote Percentage and (ii) the remaining percentage of such remaining Net Cash Flow to the Members (pro rata in accordance with their respective Contribution Percentages) (i.e., to the extent that there is any remaining Net Cash Flow, 10% of the remaining Net Cash Flow will be distributed to CH and 90% of the remaining Net Cash Flow will be distributed to the Members pari passu, with the distributions to the Members being on a pro rata basis in accordance with their respective Contribution Percentages).

 

6.4                               Distributions from Capital Transactions. Except as provided in Sections 6.5 and 6.6, the Company shall, as soon as reasonably practical (but no less often than monthly, if appropriate), make distributions of Net Capital Proceeds (after establishment of appropriate and reasonable reserves, as determined by the Managing Member or to the extent set forth in an Approved Budget) to the Members in the following manner and order of priority:

 

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(a)                                 first, an amount of such Net Capital Proceeds will be distributed (in the order and priority set forth below in this Section 6.4(a)) to the Members that have made Priority Capital Contributions until each of such Members has received aggregate distributions pursuant to this Section 6.4(a) and Section 6.3(a) for the current period and all previous periods, equal to the sum of (i) the aggregate amount of its Priority Capital Contributions made pursuant to this Agreement, and (ii) an eighteen percent (18%) per annum (using a 360 day year) cumulative preferred returned thereon (amounts distributed under this Section 6.4(a) will be distributed in the reverse order in which such Priority Capital Contributions were made — that is, the most recent Priority Capital Contribution, together with the eighteen percent (18%) per annum cumulative preferred return thereon, will be returned and paid first to the Member having made such Priority Capital Contribution, and then the next most recent Priority Capital Contribution, together with the eighteen percent (18%) per annum cumulative preferred return thereon, will be returned and paid to the Member having made such Priority Capital Contribution, etc.);

 

(b)                                 second, remaining Net Capital Proceeds, if any, shall be distributed pari passu to each Member until each Member has received an amount equal to its Unreturned Capital Contributions, with such distributions being made pro rata to each Member in accordance with their respective Contribution Percentages;

 

(c)                                  third, remaining Net Capital Proceeds, if any, shall be distributed pari passu to the Members in accordance with their respective Capital Contributions until the Members have received aggregate distributions sufficient to generate a 15% IRR in respect to such Members’ respective Capital Contributions (excluding any Priority Capital Contributions);

 

(d)                                 fourth, remaining Net Capital Proceeds, if any, shall be distributed to the Members with (i) a percentage of such remaining Net Capital Proceeds being distributed to CH equal to the First Tier Promote Percentage and (ii) the remaining percentage of such remaining Net Capital Proceeds to the Members (pro rata in accordance with their respective Contribution Percentages) until aggregate distributions have been made to the Members in an amount necessary to provide an 20% IRR to all Members (i.e., to the extent that there are any remaining Net Capital Proceeds to be distributed under this Section 6.4(d), 10% of the remaining Net Capital Proceeds will be distributed to CH and 90% of the remaining Net Capital Proceeds will be distributed to the Members pari passu, with the distributions to the Members being on a pro rata basis in accordance with their respective Contribution Percentages, until an 20% IRR in respect to such Members’ respective Capital Contributions (excluding any Priority Capital Contributions) has been achieved by the Members);

 

(e)                                  fifth, remaining Net Capital Proceeds, if any, shall be distributed to the Members with (i) a percentage of such remaining Net Capital Proceeds being distributed to CH equal to the Second Tier Promote Percentage and (ii) the remaining percentage of such remaining Net Capital Proceeds to the Members (pro rata in accordance with their respective Contribution Percentages) until aggregate distributions have been made to the Members in an amount necessary to provide an 25% IRR to all Members (i.e., to the extent that there are any remaining Net Capital Proceeds to be distributed under this Section 6.4 (e), 20% of the remaining Net Capital Proceeds will be distributed to CH and 80% of the remaining Net Capital Proceeds will be distributed to the Members pari passu, with the distributions to the Members being on a pro rata basis in accordance with their respective Contribution Percentages, until a 25% IRR in

 

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respect to such Members’ respective Capital Contributions (excluding any Priority Capital Contributions) has been achieved by the Members); and

 

(f)                                   sixth, thereafter, remaining Net Capital Proceeds, if any, shall be distributed to the Members, with (i) a percentage of such remaining Net Capital Proceeds being distributed to CH equal to the Third Tier Promote Percentage and (ii) the remaining percentage of such remaining Net Capital Proceeds to the Members (pro rata in accordance with their respective Contribution Percentages) (i.e., to the extent that there is any remaining Net Capital Proceeds, 30% of the remaining Net Capital Proceeds will be distributed to CH and 70% of the remaining Net Capital Proceeds will be distributed to the Members pari passu, with the distributions to the Members being on a pro rata basis in accordance with their respective Contribution Percentages).

 

6.5                               Special Distributions. From and after the time CH shall have been terminated as the Managing Member due to a Promote-Loss For Cause Event or an Event of Default, Net Cash Flow otherwise distributable under Section 6.3 and Net Capital Proceeds otherwise distributable under Section 6.4(d) shall not be distributed as provided in such Sections but rather shall be distributed as provided pursuant to this Section 6.5, and, except as provided in Section 6.6, the Company shall, as soon as reasonably practical (but no less often than monthly, if appropriate), make distributions of such Net Cash Flow of Net Capital Proceeds (i) first, as provided in Section 6.3(a), and (ii) second, to the Members in proportion to their respective Contribution Percentages.

 

6.6                               Distributions in Liquidation.

 

(a)                                 Upon the dissolution and winding-up of the Company, the proceeds of the sale of the Property and other assets of the Company distributable to the Members under Section 11.2(c)(iii) shall be distributed, not later than the latest time specified for such distributions pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2) to the Members as provided in Section 6.4 above as if such distributions are additional Net Capital Proceeds.

 

(b)                                 A pro rata portion of the distributions that would otherwise be made to the Members under the preceding provisions of this Section 6.6 shall be withheld by the Liquidating Member in order to pay all debts and other liquidated amounts known to be owed by the Company and, with the Approval of the Members, an additional amount (pro rata as to each Member otherwise entitled to distributions upon liquidation) may be distributed to a trust reasonably established, for a reasonable period of time, for the benefit of the Members for the purposes of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company arising out of or in connection with the Company. The assets of any trust established under this Section 6.6 will be distributed to the Members from time to time by the trustee of the trust in the same proportions as the amount would otherwise have been distributed by the Company to the Members under this Agreement.

 

6.7                               Tax Matters. The Members intend for the Company to be treated as a partnership for federal income tax purposes. BH shall make all applicable elections, determinations and other decisions under the Code and applicable Treasury Regulations to the extent not provided for

 

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herein, including, without limitation, the deductibility of a particular item of expense and the positions to be taken on the Company’s tax return, and shall approve the settlement or compromise of all audit matters raised by the Internal Revenue Service affecting the Members generally. The CH Member Group shall take reporting positions on their respective federal, state and local income tax returns consistent with the positions determined for the Company by BH. The Managing Member shall cause all federal, state and local income and other tax returns to be timely filed by the Company after same are Approved by BH and shall, after receiving BH’s Approval of such returns, be authorized to execute such returns (provided that the Managing Member shall, for so long as it diligently performs its obligations hereunder, not be responsible for the delays of BH or reputable accountants or auditors retained by the Managing Member or at the request of BH on behalf of the Company).

 

6.8                               Tax Matters Partner. BH shall be the tax matters partner within the meaning of Section 6231(a)(7) of the Code and, subject to Section 6.6, shall exercise all rights, obligations and duties of a tax matters partner under the Code; and the CH Member Group shall be kept informed of, and be given an opportunity to participate in a non-binding manner in, all such matters which the tax matters partner deems to be material.

 

6.9                               Section 704(c). In accordance with Section 704(c) of the Code and the applicable Treasury Regulations thereunder, income, gain, loss, deduction and tax depreciation with respect to any property contributed to the capital of the Company, or with respect to any property which has a Book Basis different than its adjusted tax basis, shall, solely for federal income tax purposes, be allocated among the Members so as to take into account any variation between the adjusted tax basis of such property to the Company and the Book Basis of such property. Any elections, accounting conventions or other decisions relating to such allocations shall be made by BH in a manner that (i) reasonably reflects the purposes and intention of this Agreement, (ii) complies with Code Sections 704(b) and 704(c) and the Treasury Regulations thereunder, and (iii) with respect to reverse Section 704(c) allocations, treat CH and BH on a pari  passu basis.

 

6.10                        Withholding. All amounts required to be withheld pursuant to Section 1446 of the Code or any other provision of federal, state, or local tax law shall be withheld and shall be treated as amounts actually distributed to the Members for all purposes under this Agreement. If the Managing Member determines that the Company has insufficient liquid assets to satisfy such withholding obligation, the Member as to which withholding applies shall pay cash to the Company (which in no event shall constitute a Capital Contribution) within 5 days of a demand therefor in an amount sufficient to satisfy such withholding obligation. Any failure to timely make such payment shall result in a fully recourse loan bearing interest at 20% per annum (or the maximum amount permitted by applicable Law, if less) until paid.

 

ARTICLE VII
 MANAGEMENT

 

7.1                               Managing Member and Major Decisions. Except as otherwise expressly provided in this Agreement (including Major Decisions and as otherwise provided in Section 4.5 with regard to the Acquisition Loan), the business and affairs of the Company shall be vested in and controlled by the Managing Member as provided below.

 

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(a)                                 The Managing Member shall have responsibility for establishing the policies and operating procedures with respect to the business and affairs of the Company and for making all decisions as to all matters which the Company has authority to perform. Subject to the remaining provisions of this Article VII, all decisions made with respect to the management and control of the Company and Approved by the Managing Member shall be binding on the Company and all Members. The Managing Member may elect officers of the Company to implement the decisions (including without limitation executing documents) of the Managing Member from time to time. The Managing Member shall be responsible for performing, or for causing to be performed, and shall have the authority to perform (subject to the requirement of receiving BH’s Approval, as applicable, if and when required by the terms hereof), the duties described in Section 7.2. Except as otherwise expressly provided in this Agreement or as otherwise previously Approved by BH, or provided for in any Approved Budget or Operating Plan, the Managing Member shall not cause the Company to undertake any of the following matters without the prior Approval of BH (a “Major Decision”):

 

(i)                                     the execution and delivery of any agreement or instrument with respect to the purchase of the Property and the taking of any action required or permitted to be taken under the Purchase Agreement (including without limitation, all action necessary to close the purchase of the Property under the Purchase Agreement or otherwise and any election thereunder as to whether or not to purchase the Property) or any waiver under, amendment of or assignment (in whole or in part) of any Transaction Document (including, without limitation, any changes to the reporting requirements under the Property Management Contract or amendments to the Purchase Agreement), the execution and delivery of any agreements with any governmental agency, any neighboring or adjacent property owner, any community organizations or any other third parties, or sending any correspondence to or having any other material communications with, any governmental agency which directly binds the Company or advocates with a third party a position on behalf of the Company with respect to the foregoing, any election under the Purchase Agreement or other Transaction Documents which the Company may exercise under same and exercise by the Company of rights and remedies thereunder;

 

(ii)                                  any financing, refinancing or securitization of any Company Property and the use of any proceeds thereof, including, without limitation, interim and permanent financing, and any other financing or refinancing of the operations of the Company and the execution and delivery of any documents, agreements or instruments evidencing, securing or relating to any such financing; provided, however, that no guaranties or credit enhancements can be required from any Member or its Affiliates without such party’s consent;

 

(iii)                               the Approval of any Budget and Operating Plan, and any amendments or modifications thereto (which shall only be permitted in accordance with this Agreement) and the Approval of any supplemental budget, operating plan or other proposal relating to any development and/or renovation of any portion of the Company Property and any amendment or modifications thereto and the making or incurring of any expenditure which is not included or contemplated thereby;

 

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(iv)                              establishing sales parameters for the Property and any sale, assignment, transfer or other disposition of a Property or all or any material portion of the Company Property or any merger, consolidation or other business combination transaction involving the Company entirely for cash consideration;

 

(v)                                 any improvement, renovation, development, rehabilitation, alteration, repair, or completion of construction of any Company Property, or taking any action relating thereto which burdens or encumbers the Company Property, which is not otherwise subject to any Approved Budget and Operating Plan (but excluding for purposes of this subsection any work which is of the type contemplated by the repairs and maintenance portion of the Approved Budget);

 

(vi)                              any activity which generates revenues or expenses, or which is otherwise on terms that vary materially from the ranges and guidelines in the Approved Budget or Operating Plan; provided that, for purposes of this Section 7.1(a)(vi), such a material variance shall include (I) incurring a Controllable Expense or aggregate Controllable Expenses during any applicable calendar Quarter that results in a Controllable Expense Variance and (II) terms that materially conflict with any other guidelines in the Operating Plan regarding such transactions or any other requirements of BH;

 

(vii)                           any lease with regard to space in a Property which is not in accord with the Leasing Guidelines in all material respects;

 

(viii)                        the making of any recurring operating expenditure or incurring of any recurring operating obligation by or on behalf of the Company that varies materially from the Approved Budget or entering into (or amending or modifying) of any agreement which was not specifically included or contemplated in the Approved Budget or Approved Operating Plan, or otherwise Approved by BH; provided that, for purposes of this Section 7.1(a)(viii), such a material variance shall include (A) incurring a Controllable Expense or aggregate Controllable Expenses during any applicable calendar Quarter that results in a Controllable Expense Variance, (B) expenditures or obligations involving the incurrence of an expenditure or obligation for any transaction or any series of related transactions when taken with all prior expenditures or obligations during the particular quarter results in a Controllable Expense Variance, or (C) in the case of any material service, maintenance or similar agreement proposed to be entered into, such agreement is not terminable (without penalty) by the Company on thirty (30) days or less written notice to the other party; provided, however, that expenditures made or obligations incurred or agreements entered into pursuant to, or which are specifically included in or contemplated under, the Approved Budget or the Approved Operating Plan shall not be Major Decisions to the extent they do not vary from amounts, provisions and requirements set forth in the Approved Budget and the Approved Operating Plan and provided, however, with respect to any expenditures in excess of $5,000 which are not included in an Approved Project Budget, the making of which do not constitute a Major Decision, prior to making such expenditure, Manager shall provide notice to BH of the amount of such expenditure and the underlying reason for making the same;

 

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(ix)                              except with regard to the Management Agreements to be executed on the Closing Date, entering into or consummating any transaction or arrangement by and between the Company and the Managing Member or any Affiliate of the Managing Member, or any other transaction involving an actual or potential conflict of interest;

 

(x)                                 the establishment of reasonable reserves, determination of the amount of available Net Cash Flow and Net Capital Proceeds, and making of distributions to Members (subject to the requirements of Sections 6.3, 6.4, 6.5 and 6.6);

 

(xi)                              the institution of any legal proceedings in the name of the Company, settlement of any legal proceedings against the Company and confession of any judgment against the Company or any property of the Company other than the institution of any eviction, suits for breach of tenant leases or proceedings involving amounts in dispute of less than $5,000, or proceedings contemplated or provided for in the Approved Operating Plan;

 

(xii)                           the possession or pledge of any Company Property for other than Company purposes (which shall require the Approval of all Members) resulting in a loss to the Company in excess of $500;

 

(xiii)                        (A) the filing of any voluntary petition in bankruptcy on behalf of the Company, (B) the consenting to the filing of any involuntary petition in bankruptcy against the Company, (C) the filing of any petition seeking, or consenting to, the reorganization or relief under any applicable federal or state law relating to bankruptcy or insolvency involving the Company, (D) the consenting to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or a substantial part of its property, (E) the making of any assignment for the benefit of creditors, (F) the admission in writing of the Company’s inability to pay its debts generally as they become due or (G) the taking of any action by the Company in furtherance of any such action;

 

(xiv)                       except with regard to the Management Agreements to be executed on or before the Closing Date, entering into any asset or property management or leasing or development agreement, or other third party contract with respect to which funds are not explicitly provided for, or the existence of which is not contemplated, in the Approved Budget and/or Approved Operating Plan, as applicable, with regard to the Company or any Company Property (provided that the foregoing shall not limit the Managing Member’s ability to enter into contracts relating to the operation of the Property that are within the variance amounts covered in (viii) above and are terminable upon not more than 30 days notice without premium or penalty);

 

(xv)                          the engagement of any servicer, manager, contractor, or sales or placement agent or broker not expressly permitted hereunder for the management, leasing, servicing, disposition, financing or refinancing of any Company Property;

 

(xvi)                       the taking of any material enforcement by or on behalf of the Company under any material agreement or contract to which the Company is a party

 

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(including any Transaction Document but excluding tenant leases and ordinary trade and vendor contracts);

 

(xvii)                    the execution and delivery, amendment, restatement, replacement, supplement or other modification of any of the Transaction Documents and any approval, consent or other determination with respect to the foregoing;

 

(xviii)                 to the extent not in compliance with any Loan Document requirements, determining the types and amounts of insurance coverage for the Company and the Company Property, and the deductibles and underwriters with regard thereto;

 

(xix)                       the removal, dismissal, termination, replacement or employment of the on-site manager of a Property or any other individual acting in a similar capacity with respect to the Property;

 

(xx)                          the approval, determination or any other action expressly reserved to BH under this Agreement, including, without limitation, any modification, amendment, or renewal of any matter previously requiring the Approval of BH;

 

(xxi)                       except as otherwise provided in this Agreement, extension of any loans to any Member or its Affiliates;

 

(xxii)                    acquisition of or lease of any additional real property by the Company other than the Property;

 

(xxiii)                 any act in contravention of this Agreement which would make it impossible to carry out the business of the Company;

 

(xxiv)                admission of any additional Member into the Company or otherwise issuing any equity interest in the Company or creating any subsidiaries of the Company;

 

(xxv)                   causing the Company to make any distribution of Company Property in kind to any Member;

 

(xxvi)                changing the nature of the business conducted by the Company or its purposes as described in Section 2.5 hereof;

 

(xxvii)             any merger, consolidation or other business combination transaction involving the Company;

 

(xxviii)          In the event that the Company forms a subsidiary to hold any Company Property, the making of any decision, taking any action or providing any consent or approval relating to such subsidiary with regard to any matter which if made or taken by the Company would have been a Major Decision as set forth in this Agreement or which requires the consent of approval of the shareholders, board of directors, executive committee, managing members, general partners or similar

 

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management body or any other Person pursuant to any agreement, contract, document or law;

 

(xxix)                taking any action, entering into any agreement, or approving any action or agreement by the Company (i) which would impair either Member’s ability to invoke the procedures set forth in Article XV or Article XVI  or their respective rights thereunder, (ii) that will have the effect of subordinating the rights of the Members to exercise their respective rights under Section Article XV or Article XVI, or (iii) that will require any pre-payment of indebtedness owed by the Company as a result of the exercise of the Members’ rights pursuant to Section Article XV or Article XVI;

 

(xxx)                   selection of a general contractor to renovate the Property or to restore the Property following a casualty or condemnation;

 

(xxxi)                making any tax elections that may affect the REIT status of Behringer Harvard Opportunity REIT II, Inc. or any of its affiliates or the acceleration or deferral of deductions or any other tax election that BH has specified in writing to the Managing Member, including any elections noted as part of BH’s review and Approval of any tax return (collectively “BH Reserved Tax Elections”) required by any federal, state or local Laws for the Company;

 

(xxxii)             changing the BH Reserved Tax Elections or methods of reporting income or loss for federal or state income tax purposes provided for in this Agreement unless required under applicable Law;

 

(xxxiii)          Approval or replacement of the tax matters partner;

 

(xxxiv)         Approval of any federal, state or local tax return to be filed on behalf of the Company;

 

(xxxv)            Except as provided under (xi) above, any release, compromise, assignment or transfer of any material claims of or any material rights or benefits of the Company;

 

(xxxvi)         in the event of fire, other casualty or partial condemnation of the Property where the cost of repair or restoration exceeds 10% of the value of the Property immediately prior to such casualty or condemnation, to determine whether to construct or reconstruct improvements unless such construction or reconstruction is required under the terms and provisions of any lease, mortgage or security deed or other Transaction Document affecting the damaged or condemned portion of the Property;

 

(xxxvii)      [Intentionally omitted];

 

(xxxviii)   any decision regarding any environmental matter relating to the Property, including, without limitation, the adoption of and implementation of any operation and maintenance program or any other program to remove or otherwise remediate hazardous materials or relating to the introduction or allowance of any substance regulated of as a hazardous substance under applicable Law (other than

 

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(1) supplies for cleaning, maintenance and operations in commercially reasonable amounts required for use in the ordinary course of business, provided such items are incidental to the use of the Property and are used, stored and disposed of in compliance with all applicable Requirements of Environmental Laws, and (2) gas, oil and other ordinary automotive fluids contained in an ordinary manner in motor vehicles visiting the Property in the ordinary course of business); provided, however, with respect to any environmental matter that, if not timely resolved, would result in a violation of any environmental indemnity or covenant provided by an indemnitor under the Loan Documents or the Company to any lender, tenant or insurance company, or would otherwise result in a violation of law, BH hereby agrees to reply promptly (in no less than ten (10) days) to requests regarding such environmental matters, provided that Managing Member indicates the urgency of such request when providing notice of the Major Decision;

 

(xxxix)         requiring Additional Capital Contributions in accordance with Section 4.2(a);

 

(xl)                              making any allocations or distributions other than as provided in Article VI of this Agreement;

 

(xli)                           establishing of or additions to a pre-approved list of signatories on bank accounts (the initial list of pre-approved signatories is attached hereto as Appendix C); provided, however, either Member shall have the unilateral right to remove and replace any Person designated by such Member and BH shall have the unilateral right to remove and replace any person designated by the Managing Member or Property Manager following an Event of Default under this Agreement or a default under the Property Management Agreement or if the Managing Member is removed as the Managing Member in accordance with the terms of this Agreement, from such pre-approved list of signatories, and upon any such Person’s removal, such Person shall immediately cease to have rights as a signatory on bank accounts;

 

(xlii)                        selecting title insurance underwriters which the Company may use for any future loans on or sales of the Property;

 

(xliii)                     any reciprocal easement agreement or similar agreement to be entered into on behalf of the Company;

 

(xliv)                    selecting outside Company auditors or any appraiser or evaluation expert retained by the Company;

 

(xlv)                       approving the interim closing of the Company’s books on the permitted Transfer of a Member’s Interest; and;

 

(xlvi)                    winding up the affairs of the Company after a voluntary or involuntary dissolution.

 

(b)                                 The Managing Member shall have all of the same powers and, to the extent not inconsistent with terms of this Agreement, duties as a general partner of a limited

 

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partnership under the Laws of the State of Delaware, including, without limitation (but subject to the other provisions of this Agreement), the full power and authority to cause the Company to:

 

(i)                                     acquire, hold, operate, manage, sell, transfer, assign, convey, exchange, lease, sublease, mortgage or otherwise dispose of or deal with all or any part of the Company Property;

 

(ii)                                  in furtherance of the Company’s purposes and business, borrow money, whether on a secured or unsecured basis, refinance, recast, modify, amend, extend, compromise or otherwise deal with any such loan, and in connection therewith, issue evidences of indebtedness and secure the same by mortgages, deeds of trust, security agreements or other similar documents affecting the assets of the Company;

 

(iii)                               authorize other persons to execute and deliver such documents on behalf of the Company as the Managing Member may deem necessary or desirable for the Company’s business, including, without limitation, guaranties and indemnities;

 

(iv)                              perform, or cause to be performed, all of the Company’s obligations under any agreement to which the Company is a party;

 

(v)                                 enter into contracts on behalf of the Company and make expenditures as are required to operate and manage the Company and the Company Properties; and

 

(vi)                              do, or cause to be done, any act which is necessary or desirable to carry out any of the purposes of the Company.

 

(c)                                  Only the Managing Member shall have the right or power to make decisions on behalf of and exercise control over the Company business, affairs or operations; provided, however, that the Managing Member may elect to implement those decisions through any Member it selects in writing, pursuant to the terms hereof, and/or through one or more officers it elects in writing; and provided further that the Managing Member may not, without the Approval of BH, take any action which specifically requires the Approval of BH pursuant to the terms hereof. Except as otherwise provided in this Agreement, BH shall not have the right, absent prior authorization from the Managing Member, to bind the Company by reason of Section 18-402 of the Delaware Act.

 

(d)                                 Notwithstanding anything in this Agreement to the contrary, the Managing Member shall have no authority to perform any act for, on behalf of or with respect to the Company in violation of any provision of any Management Agreement or other property management or material agreement or loan agreement (or Loan Document) to which the Company is a party, the Transaction Documents and any and all applicable Laws, rules or regulations.

 

(e)                                  Notwithstanding anything to the contrary contained in this Agreement, all Net Cash Flow. Net Capital Proceeds and cash reserves of the Company shall be deposited into an account in the name of the Company, as set forth in Section 7.2(c)(vi), prior to distribution of

 

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all or any portion thereof pursuant to Article VI. The designation of such account pursuant to this Section 7.1(e) shall have no effect on the distributions to be made pursuant to Article VI.

 

7.2                               Duties of Managing Member.

 

(a)                                 The Managing Member shall use commercially reasonable efforts to implement the Approved Budget and Approved Operating Plan (including the Initial Approved Budget and Approved Operating Plan) and shall otherwise perform those duties set forth below, and shall have the authority to perform the duties described in this Section 7.2 or as otherwise specifically set forth herein, in each instance subject to the requirement of receiving the prior Approval of BH, if and when required by the terms hereof. Specifically, the Managing Member shall:

 

(i)                                     conduct the business of the Company on a day-to-day basis, and use diligent efforts to cause such operations to be conducted in accordance with the Approved Budget and the Approved Operating Plan, which duties may be discharged by delegating the same to a property and/or development manager pursuant to the Management Agreements;

 

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

 

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

 

Subject to any right provided to the Managing Member to be reimbursed for Company Expenses pursuant to Section 7.5, and subject further to the fees authorized pursuant to the provisions of Section 7.3, the Managing Member shall not otherwise be entitled to receive any fees or other compensation in respect of any duties or services, and will not receive reimbursement for compensation payable to any of its employees or other direct or indirect overhead which may be attributable to such duties and services.

 

(b)                                 Notwithstanding anything to the contrary contained in Section 7.1(a)(iii), if at the beginning of any calendar year the Budget and Operating Plan or any item or portion thereof shall not have been Approved by BH, then:

 

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

 

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

 

(iii)                               the Managing Member shall be entitled to, and shall, expend funds in respect of debt service on the Company’s financing (including the expense of curing any defaults thereunder), utilities, real estate taxes and assessments, insurance and emergency repairs, any annual or other periodic fees, or other expenditures which the Managing Member determines are necessary for the continued ordinary operation of the Company Property, including without limitation uninsured losses or deductibles, operating shortfalls, repairs, additions or modifications to comply with applicable Laws or insurance requirements, insurance premiums for insurance policies Approved by BH, and any final orders, judgments, or other proceedings and all costs and expenses related thereto, regardless of whether the Budget has been approved or whether such expenditures exceed the amounts provided for in the applicable Budget (all of the foregoing described in this clause (iii), collectively, “Necessary Expenses”). Notwithstanding the foregoing, the Managing Member shall not have any obligation to expend funds for Necessary Expenses where there are no Company funds available or already reserved to pay such Necessary Expenses and where BH has not Approved an Additional Capital Contribution therefor.

 

(iv)                              notwithstanding the above, in the event that Necessary Expenses are due, owing and unpaid, and the Members have not (or will not) made adequate funds available through Additional Capital Contributions, or otherwise, or if the Company has adequate funds to pay Necessary Expenses but BH will not permit the Managing Member to disburse those funds, or for any reason BH cannot or will not make such funds available, the Managing Member is authorized to advance such amounts to the Company as it determines, and such funds shall be treated as either Priority Capital Contribution as provided in Section 4.2(b) or as a regular Capital Contribution in accordance with Section 4.2(d).

 

(c)                                  Subject to the availability of adequate funds therefor in the Approved Budget and from Operating Revenues, Capital Contributions or other sources, and subject further, in any event, to the provisions of Section 7.1 and any other relevant provisions hereof, in addition to and without limiting any other duties set forth in this Agreement, the Managing Member shall:

 

(i)                                     oversee, coordinate and process the operations of the Company on a day-to-day basis, including without limitation, the management, servicing, leasing, development, renovation and sale of any and all of the assets which comprise any portion

 

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of the Company Property, and prepare all communications with any property manager, any lender and any other relevant third parties;

 

(ii)                                  take all proper and necessary actions reasonably required to cause the Company and all third parties at all times to perform and comply with the terms and provisions (including without limitation, any provisions requiring the expenditure of funds by the Company) of the Management Agreements, any Loan Documents, the Transaction Documents and any other agreement, mortgage, lease, or other contract, instrument or agreement to which the Company is a party or is bound, or which affects all or any portion of the Company Property or the operation thereof;

 

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

 

(iv)                              to the extent available, obtain and maintain insurance coverage on the Company Property as Approved by BH and pay all non-disputed taxes, assessments, charges and fees payable in connection with the ownership, use and occupancy of the Company Property;

 

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

 

(vi)                              deposit all receipts from operations of the Company Property to a separate account established and maintained by BH, subject to the terms of the Property Management Agreement in the name of the Company, and not commingle those receipts with any other funds or accounts of the Managing Member or any member of the CH Member Group;

 

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

 

(viii)                        if and to the extent the Managing Member delegates to any loan servicer or property manager (previously Approved by BH) or subcontracts with any third party or Affiliate for the performance of any of the services to be performed by the Managing Member, supervise and oversee the performance of the services performed by such third parties or Affiliates and cause the same to be performed in the manner required hereunder; and

 

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

 

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(d)                                 Notwithstanding anything to the contrary contained in this Agreement, BH shall have the absolute right, power and authority at any time upon delivery of written notice to Managing Member and after the occurrence of any (i) For Cause Event (as set forth in Section 7.2(e) below) or (ii) the occurrence of any Event of Default (as set forth in Article XII) to remove CH as the Managing Member and appoint or designate BH or an Affiliate of BH as a replacement Managing Member.

 

(e)                                  Upon and after the occurrence of any For Cause Event as described in this Section 7.2(e), or any Event of Default with respect to any member of the CH Member Group, in each case subject to any applicable cure rights, BH shall have the right in its sole and absolute discretion to terminate CH as the Managing Member by the delivery of (1) written notice of such termination to Managing Member and (2) to the extent required under this Agreement, obtaining a Carve-Out Release of the Key Principal or delivering or maintain a Carve-Out Indemnity from BH Opp REIT II substantially in the form of the Indemnification Agreement as provided in Section 4.5(c), then (x) BH may cause the Company to terminate any Management Agreement with an Affiliate of CH immediately and without payment of a termination fee, (2) BH may designate a successor Managing Member (which may be itself or an Affiliate of BH), (3) any distributions to the Members under Sections 6.3 and 6.4 shall no longer be made under Sections 6.3 and 6.4 hereof and from that time forward shall be made instead under Section 6.5 hereof, and (4) BH may make a Buy-Sell Offer under Section 15.1 and, notwithstanding anything to the contrary contained in this Agreement, BH shall have the unilateral right and authority to make all decisions on behalf of the Company and cause the Company to take any and all actions which BH, in its sole discretion, may determine. For the purposes of this Agreement, a “For Cause Event” shall mean any of the following:

 

(i)                                     any actions or omissions on the part of (i) any on-site personnel that are not cured as provided below or (ii) the CH Member Group or any of its representatives (including, without limitation any CH Person), or by any other Person at the explicit direction of any manager of CH or any CH Person which amounts to fraud, willful misconduct or gross negligence; provided, however, that with respect to any fraud, willful misconduct or gross negligence by any on-site personnel not acting at the explicit direction of an CH Person (or at the explicit direction of another Person acting at the explicit direction of a CH Person), CH shall have the right to cure any damage or loss to the Company resulting from an above-described action or omission within a Reasonable Period, which cure may include, but is not limited to, payment by CH to the Company of the amount of any such damage or loss, and upon completion of such cure within a Reasonable Period, it shall be deemed that no For Cause Event has occurred as a result of any such act or omission by any on-site personnel; or

 

(ii)                                  any Change in Control involving Managing Member or the Property Manager occurs; or

 

(iii)                               the Managing Member takes any action which, under this Agreement, requires the consent or Approval of BH, without obtaining such consent or Approval (except where BH is required not to withhold such consent or Approval unreasonably, such consent or Approval has been duly requested and BH has either unreasonably withheld it or has failed, within thirty (30) days after such request, to state a

 

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reasonable objection to such action in a written notice to the Managing Member). Notwithstanding the forgoing provisions of this Subsection (iii), BH may not declare that a For Cause Event has occurred relating to a failure to obtain BH’s Approval to a Major Decision that is susceptible to cure without first providing Managing Member with written notice of same and allowing Managing Member a 10-day period to cure any monetary default (to the extent a For Cause Event relating to a Major Decision can be cured by the payment of money) and the right to cure any other non-monetary act or omission susceptible of cure) within a Reasonable Period by (A) reversing such action (to the extent such action can be reversed without the Company or BH suffering any damage or liability), or (B) taking such other steps as may be necessary to cure any damage or loss to the Company or BH to the reasonable satisfaction of BH resulting from such unauthorized action or omission within a Reasonable Period. For purposes of the preceding sentence, the inadvertent failure to CH to obtain the consent of BH to the following actions may be susceptible of cure and to the extent any such event does not constitute a monetary default for which the Managing Member has a 10-day cure period, accordingly, CH shall be afforded a Reasonable Period to cure same: the Major Decisions described in Sections 7.1(a)(i)-(viii), 7.1(a)(xiv)-(xxi), 7.1(a)(xxviii), 7.1(a)(xxx), 7.1(a)(xxxviii), 7.1(a)(xlii), and 7.1(a)(xlv)-(xlvi).

 

(f)                                   CH’s appointment as the Managing Member shall automatically terminate if it (or a Permitted Transferee thereof) is no longer a Member of the Company.

 

7.3                               Management of the Property; Fees.

 

(a)                                 Provided that the Property is purchased by the Company on the Closing Date, the Managing Member shall cause the Company to enter into the Property Amendment with the Oversight Manager to add the Property to the Oversight Agreement in the form attached hereto as Appendix A (the “Property Amendment”), and the Property Management Contract in the form Approved by BH, which shall provide for the payment of market standard leasing commissions and management fees in the aggregate amount of 3.50% of the Gross Revenues (as defined therein) under the Management Agreements comprised of (i) 0.50% payable under the Oversight Agreement and (ii) 3.00% payable under the Property Management Contract and subject to the terms set forth therein.

 

(b)                                 Provided that the Property is purchased by the Company on the Closing Date, the Company will pay Carter-Haston Real Estate Services, Inc an acquisition fee in the amount of 0.50% of the purchase price of the Property and will pay Behringer Harvard Opportunity OP II LP, a Delaware limited partnership (or its designee), an acquisition fee in the amount 0.50% of the purchase price of the Property.

 

7.4                               Duties and Conflicts.

 

(a)                                 The Members and their respective officers, employees, and Affiliates shall devote such time to the Company business as they deem to be necessary or desirable in connection with their respective duties and responsibilities hereunder. Except as provided hereunder or as otherwise agreed to in writing by the Members, no Member nor any member,

 

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partner, shareholder, officer, director, employee, agent or representative of any Member shall receive any salary or other remuneration for its services rendered pursuant to this Agreement.

 

(b)                                 Each of the Members recognizes, acknowledges and agrees as follows:

 

(i)                                     each of the Members and their respective Affiliates, employees, agents, and representatives have or may have in the future other business interests, activities and investments, some of which may be in conflict or competition with the business of the Company, and are entitled to carry on such other business interests, activities and investments;

 

(ii)                                  each of the Members and their respective Affiliates, employees, agents, and representatives may engage, invest in and/or possess an interest in, independently, with one another, or with others, any business activity of any type or description, including without limitation, those that might be the same as or similar to the business of the Company and that might be in direct or indirect competition with the Company, and including, without limitation, owning, financing, acquiring, leasing, promoting, developing, improving, operating, managing and servicing real property and loans on its own behalf or on behalf of other entities with which any of the Members is affiliated or otherwise;

 

(iii)                               each of the Members and their respective Affiliates, employees, agents, and representatives may engage in any such activities, whether or not competitive with the Company, without any obligation to offer any interest in such activities to the Company or to the other Members;

 

(iv)                              neither the Company nor any Member shall have any right, by virtue of this Agreement, in or to such ventures or activities, or the income or profits derived therefrom, and the pursuit of such activities, even if competitive with the business of the Company, shall not be deemed wrongful or improper; and

 

(v)                                 the obligations and duties of the Members to each other and to the Company shall be limited solely to those arising under the Transaction Documents, and neither the Members nor their respective Affiliates shall be obligated to present any investment opportunity or prospective economic advantage to the Company or the Members, even if the opportunity is of the character that, if presented to the Company or the Members, could be taken by any of them.

 

(c)                                  Notwithstanding the provisions of Section 7.4(b), until such time as the Company has been dissolved in accordance with Section 11.1, the CH Member Group and its respective Affiliates shall not own or manage or participate in the ownership or management of any competing multifamily apartment project of the same general class and with similar rent parameters as the Property within a three mile radius of the Property that may compete with or be detrimental to the Property, unless such ownership or management has been Approved by BH in its sole discretion. Such Approval rights shall (i) cease to be applicable at such time as either (A) the Company no longer has any ownership interest in the Property, or (B) neither BH nor any

 

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Affiliate has any interest in the Company; and (ii) not apply to the existing projects of the CH Member Group and its Affiliates owned or managed on the date of this Agreement

 

(d)                                 Notwithstanding the preceding provisions of this Section 7.4, no member of the CH Member Group or their Affiliates shall initiate the solicitation of tenants in any building that comprises any part of the Property to move to other buildings owned or managed by any member of the CH Member Group or their Affiliates outside of the Company without the prior written consent of BH. As used herein the term “initiate the solicitation of” shall mean the initiation of contact directly between the CH Member Group or its Affiliates and a tenant regarding a move by such tenant to a property which is not the Property; provided, however, that such term shall in no event apply to (i) responses to requests for proposals submitted by tenants or their brokers, agents or representatives or (ii) new or additional requirements of such tenants or (iii) general advertising. Furthermore, no member of the CH Member Group nor their Affiliates shall actively discourage prospective tenants from leasing available space in a building that comprises all or part of the Property and shall not discriminate against a building that comprises any part of the Property in favor of other properties owned outside the Company in its presentations and communications with potential tenants.

 

7.5                               Company Expenses.  The Company shall be responsible for paying, and shall pay, all costs and expenses related to the business of the Company and of acquiring, holding, owning, developing, leasing, servicing, collecting upon and operating the Company Property, except for (i) costs of preparing the reports to Members specifically called for by the terms hereof and the Approved Budget and Operating Plan, which shall be the cost of the Managing Member (provided that reasonable third party costs (including audit and legal) incurred in connection with the same shall be at the Company’s expense), (ii) costs to be borne by any third party under any agreement with the Company, and (iii) costs to be borne by any Member or its Affiliates as specifically provided in this Agreement or the Management Agreements. Subject to the preceding sentence and the other provisions of this Agreement, all management fees and expenses payable under Section 7.3, costs of financing and financing fees, fees and disbursements of attorneys, financial advisors, accountants, appraisers, brokers and engineers, travel expenses, and all other fees, costs and expenses directly attributable to the business and operations of the Company shall be borne by the Company. In the event any such costs and expenses are or have been paid by any Member, such Member shall be entitled to be reimbursed for such payment so long as such payment is reasonably necessary for Company business or operations and has been Approved by the other Member or is expressly authorized in this Agreement or the appropriate Approved Budget or Approved Operating Plan (including any permitted variance hereunder).  Notwithstanding the foregoing, in no event shall the Company have any obligation to pay or reimburse any Member or any of their respective Affiliates for any general overhead or similar costs and expenses of such Member or Affiliate.

 

7.6                               Venture Coordinator.  BH will designate an asset manager for its investment in the Company (the “Venture Coordinator”) who will have primary responsibility for fulfilling BH’s obligations under this Agreement and will be empowered to Approve matters for and on behalf of BH, including with respect to Major Decisions. Such Venture Coordinator shall be designated in writing and may be changed by BH by Notice to CH.

 

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7.7                               Enforcement of Affiliate Agreements.  Notwithstanding anything herein or in any other agreement to the contrary, in the event the Company has the right to terminate, amend, modify, extend, renew, waive, consent to or approve any material right or exercise any remedy with regard to any Management Agreement or other agreement between the Managing Member or any Affiliate of the Managing Member, on the one hand, and the Company, on the other hand, then the exercise of any such right on behalf of the Company, including the giving of any notice or approval with regard thereto, will be controlled solely by BH which shall have the right to cause the Company to exercise any rights to vote or influence the actions of the Company in connection therewith, and the Managing Member shall not have the right to exercise any control over the Company’s actions in respect thereof. Any decision made by BH in accordance with the preceding sentence shall be implemented solely by BH.

 

ARTICLE VIII
 BOOKS, RECORDS, REPORTS AND PROPERTY PLAN

 

8.1                               Books and Records. The Managing Member shall maintain, or cause to be maintained, at the expense of the Company, in a manner customary and consistent with good accounting principles, practices and procedures, a comprehensive system of office records, books and accounts (which records, books and accounts shall be and remain the property of the Company) in which shall be entered fully and accurately each and every financial transaction with respect to the ownership and operation of the Company Property. Bills, receipts and vouchers shall be maintained on file by the Managing Member. The Managing Member shall maintain or cause to be maintained said books and accounts in a safe manner and separate from any records not having to do directly with the Company or any Company Property. At the cost and expense of the Company, the Managing Member shall cause audits to be performed and audited statements and income tax returns to be prepared as required by Section 8.3. Such books and records of account shall be prepared and maintained by the Managing Member at the principal place of business of the Managing Member. Each Member or its duly authorized representative shall have the right to inspect, examine and copy such books and records of account at the Company’s office during reasonable business hours. Additionally, upon request of a Member, all professionals given access to any such books or records shall be directed to provide such books or records to such Member.

 

8.2                               Accounting and Fiscal Year. The books of the Company shall be kept on the accrual basis in accordance with GAAP and on a tax basis and the Company shall report its operations for tax purposes on the accrual method. The fiscal year and federal income tax year of the Company shall end on December 31 of each year, unless a different tax year shall be required by the Code.

 

8.3                               Reports.

 

(a)                                 The Managing Member will prepare, or cause to be prepared, at the expense of the Company, and furnish to each Member the following within the periods set forth below (provided that if the last day for delivery called for below falls on any day that is not a Business Day, the deadline shall be extended to the next Business Day and for so long as it diligently performs its obligations hereunder, the Managing Member shall not be responsible for the delays of any Person that is not an Affiliate of Managing Member or reputable accountants or

 

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auditors retained by the Managing Member on behalf of the Company), all of which shall be certified by the Managing Member to the best of the Managing Member’s knowledge as being true and correct:

 

(i)                                     within ten (10) days after the end of each calendar month of the Company, (A) an unaudited balance sheet of the Company dated as of the end of such calendar month, (B) an unaudited related income statement of the Company for such calendar month, (C) an unaudited statement of each Member’s Capital Account for such calendar month, (D) an unaudited statement of cash flows of the Company for such calendar month, and (E) a reconciliation of actual Operating Expenses and Operating Revenues during such period compared with the Budget amounts for such items, and (F) a monthly explanation of the discrepancies; and

 

(ii)                                  within ten (10)  days after the end of each calendar month, a status report of the Company’s activities during such calendar month, including summary descriptions of additions to, dispositions of and leasing and occupancy of Company Property and any material legal issues such as claims filed or threatened against the Company, material claims of the Company against other parties and developments in any then pending legal actions affecting the Company during such month.

 

(b)                                 The Managing Member will prepare, or cause to be prepared, on an accrual basis in accordance with GAAP and on a tax basis, at the expense of the Company, and furnish to each Member no later than January 15 after the end of each fiscal year of the Company the following, all of which shall be certified by the Managing Member to the best of the Managing Member’s knowledge as being true and correct:

 

(i)                                     an unaudited balance sheet of the Company dated as of the end of such fiscal year;

 

(ii)                                  an unaudited related income statement of the Company for such fiscal year;

 

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

 

(iv)                              an unaudited statement of cash flows of the Company as of the end of the fiscal year; and

 

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

 

(c)                                  In addition, if requested by BH, the Managing Member will use its diligent commercially reasonable efforts to cause to be prepared, at the expense of the Company, and furnish to each Member within forty-five (45) calendar days after the end of each fiscal year of the Company, the final audited amount of net income of the Company for such fiscal year and, within sixty (60) calendar days after the end of such taxable year, each of the following, all of which shall be certified by the Managing Member to the best of the Managing Member’s knowledge as being true and correct and all of which shall be certified in the customary manner

 

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by the Company Accountant (which firm shall provide such balance sheet, income statement and statement of Capital Account in draft form to the Members for review prior to finalization and certification thereof) (i) an audited balance sheet of the Company dated as of the end of such taxable year; (ii) an audited related income statement of the Company for such taxable year; (iii) an audited statement of cash flows for such taxable year; and (iv) an audited statement of each Member’s Capital Account for such taxable year.

 

(d)                                 All schedules of book income shall be prepared on a GAAP basis. Promptly after the end of each fiscal year, the Managing Member will cause the Company Accountant to prepare and deliver to each Member a Schedule K-1 and a report setting forth in sufficient detail all such additional information and data with respect to business transactions effected by or involving the Company during the fiscal year as will enable the Company and each Member to timely prepare its federal, state and local income tax returns in accordance with applicable Laws, rules and regulations. The Managing Member will use its diligent commercially reasonable efforts to cause the Company Accountant to prepare all federal, state and local tax returns required of the Company, submit those returns to BH for its approval not later than March 1st of the year following such fiscal year and will file the tax returns after they have been Approved by BH and the Managing Member.

 

(e)                                  The Managing Member shall prepare, or cause to be prepared, at Company expense, such additional financial reports and other information as BH may determine are appropriate. The Managing Member will furnish to each Member upon request, at the expense of the Company, copies of all reports, statements, notices and other material written information received by the Company or the Managing Member from, or delivered by or on behalf of the Company to, any third party lender. Subject to the provisions of Section 13.14, each Member shall be permitted to deliver to any of its Affiliates, and BH shall be permitted to deliver to any of its direct or indirect members, partners or investors, a copy of any of the reports and statements provided to such Member pursuant to this Section 8.3.

 

(f)                                   All decisions as to accounting principles shall be made by the Managing Member with the Approval of BH, subject to the provisions of this Agreement.

 

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

 

8.5                               Reserves. The Managing Member may, in its discretion and subject to the Approval of BH and such conditions as it shall determine, establish reasonable reserves for the purposes and requirements as it may deem appropriate, provided that the Managing Member will in any case, to the extent Company funds are available to do so, establish and maintain reserves from funds of the Partnership to the extent required under the Loan Documents.

 

8.6                               The Budget and Operating Plan. The Budget and Operating Plan attached hereto as Appendix B is a preliminary estimated Budget for the period through December 31, 2012 and Operating Plan for the Company for the period from the Closing Date through December 31,

 

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2012, which include projected costs to operate the Company and make Property improvements and capital expenditures to be set forth therein to be made in the budget period following acquisition of the Property (the “Initial Approved Budget and Operating Plan”), which have been Approved by BH. Thereafter, commencing for the 2013 fiscal year, the Budget and Operating Plan shall be prepared in proposed form and submitted annually by the Managing Member to BH for Approval at least sixty (60) calendar days prior to the end of the current fiscal year (so that the Managing Member will submit a Budget and Operating Plan for the 2013 fiscal year no later than November 1, 2012 to BH for its Approval) with respect to the following fiscal year, together with five (5) year forward projections (provided if the Managing Member should fail to timely prepare and submit in proposed form any such Budget and Operating Plan, BH shall be authorized to prepare such Budget and Operating Plan and submit it to the Managing Member for informational purposes and for use by the Managing Member in carrying out its duties under this Agreement). In formulating the comprehensive Budget and Operating Plan, to the extent reasonably feasible at the time of preparation thereof, the Managing Member will develop (for Approval by BH) proposed strategies regarding (i) plans for renovation, leasing, financing, sale and rehabilitation of the Property and any other real property and proposed reductions to Operating Expenses and other Company costs and expenses and increases in revenues, (ii) preparation and release of all promotional and advertising material relating to, and a marketing plan for, the Company Property or concerning the Company, (iii) terms for any proposed sale or disposition of any Company Property, or acquisition of additional Company Property, and (iv) selection of legal counsel, accountants, appraisers and other consultants for the Company to efficiently implement the Approved Budget and Operating Plan. The Managing Member will also consider and make recommendations to the extent it deems the same appropriate regarding the financing, amendment, modification, alteration, change, cancellation, or prepayment of any indebtedness evidenced by any loan presently or hereafter affecting any Company Property, and procurement of title insurance and other insurance for the Company, or decrease or vary the insurance carried by or on behalf of the Company and any other matters affecting the Company’s business. BH and the Managing Member may from time to time review the Approved Budget and Operating Plan and make such amendments or modifications thereto as they shall jointly determine to be appropriate or necessary.

 

8.7                               Accounts. All funds of the Company shall be deposited in such checking accounts, savings accounts, time deposits, or certificates of deposit in the name of the Company or shall otherwise be invested in the name of the Company, in such manner as shall be jointly Approved by the Managing Member and BH. Company funds shall not be commingled with those of any other person or entity. Company funds shall be used only for the business of the Company.

 

8.8                               REIT Matters. Within fifteen (15) days following the end of each calendar quarter, the Company shall provide to BH all tax information requested by BH and necessary for BH (or its REIT affiliates including Behringer Harvard Opportunity REIT II, Inc,, a Maryland corporation) to comply with the REIT requirements under Sections 856 and 857 of the Code (provided that BH has advised CH of what tax information is necessary to accomplish such compliance). Notwithstanding anything to the contrary in this Agreement, neither the Company nor any Member (acting on the Company’s behalf) shall take any action which would cause BH (or its REIT affiliates) to (a) fail to qualify as a “real estate investment trust” (as defined under Sections 856 & 857 of the Code) or (b) incur any additional taxes under Section 857 or

 

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Section 4981 of the Code (or any successor provisions). In particular, the Company shall conduct its business affairs in a manner so as to avoid incurring income that would not qualify under Sections 856(c)(2) and 856(c)(3) of the Code and will not acquire assets that are not described in Section 856(c)(4) of the Code unless approved by BH. The Members shall periodically consult with each other (or their designee) to ensure that any prospective transaction undertaken by the Company, or a Member acting on behalf of the Company, shall not cause BH (or its REIT affiliates) to fail to qualify as a REIT. If the Members disagree as to whether any transaction will cause BH (or its REIT affiliates) to fail to qualify as a REIT (as defined under Sections 856 and 857 of the Code) or incur any additional taxes under Section 857 or Section 4981 of the Code (or any successor provisions), the determination of BH shall be final.

 

ARTICLE IX
 TRANSFER OF INTERESTS

 

9.1                               No Transfer. Except as expressly permitted or contemplated by this Agreement (including pursuant to Sections 9.2 below, and pursuant to Article XV), no Member may sell, assign, give, hypothecate, pledge, encumber or otherwise transfer (“Transfer”) all or any portion of its Interest, whether directly or indirectly, without the Approval of the other Members. Any Transfer in contravention of this Article IX shall be null and void. In no event shall any Member transfer all or any part of its Interest to any Person if, as a result of such Transfer, a Prohibited Person would be the direct, indirect, or beneficial owner of all or a portion of such Interest. No Member, without the prior Approval of the other Members, shall resign from the Company except as permitted by this Article IX. Nothing in this Article IX is meant to or will be interpreted to restrict in any way the ability of any equity holder in Behringer Harvard Opportunity REIT II, Inc. BHO II, Inc., BHO Business Trust II or Behringer Harvard Opportunity OP II, LP and/or their constituent owners from transferring securities issued by such entities.

 

9.2                               Permitted Transfers.

 

(a)                                 Notwithstanding anything to the contrary contained in this Agreement but subject to the terms of the Loan Documents, BH and the CH Member Group may from time to time without the consent or Approval of BH or the CH Member Group, as applicable, Transfer (directly or indirectly) all or any portion of its direct or indirect interest in the Company to any Affiliate other than a Prohibited Person; provided, however, that any such Transfer (either individually or when aggregated with any other prior Transfer by such Member or CH Member Group under this Section 9.2(a)) shall not result in a Change in Control.

 

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

 

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

 

(d)           Notwithstanding the foregoing, if the Company is required by applicable Law to recognize a Transfer that is not a permitted Transfer (an “Unapproved Transfer”) (or if the Managing Member and the non-transferring Member(s), in its (or their) sole discretion, shall elect to recognize but not Approve a Transfer that is not a permitted Transfer), the Interest Transferred shall be strictly limited to the transferor’s rights to allocations and distributions as provided by this Agreement with respect to the transferred Interest, which allocations and distributions may be applied (without limiting any other legal or equitable rights of the Company) to satisfy any debts, obligations, or liabilities for damages that the transferor or transferee of such Interest may have to the Company or any other Member prior to any other allocations or distributions relating to the Unapproved Transfer. In the case of a Transfer or attempted Transfer of an Interest that is not a permitted Transfer, the parties engaging or attempting to engage in such Transfer shall be liable to indemnify and hold harmless the Company and the other Members from all cost, liability and damage that any of such indemnified Persons may incur (including, without limitation, incremental tax liability and lawyers’ fees and expenses) as a result of such Transfer or attempted Transfer and efforts to enforce the indemnity granted hereby. A Person who acquires an Interest in an Unapproved Transfer as provided in this Section 9.2(d) but who is not admitted as a substituted Member shall be entitled only to allocations and distributions with respect to such Interest in accordance with this Agreement, and shall have no right to any information or accounting of the affairs of the Company, shall not be entitled to inspect the books or records of the Company, and shall not have any of the rights of a Member under the Act or this Agreement, including any voting rights; provided, however, that no rights, including but not limited to rights to distributions, shall be transferred or permitted with respect to any Interest if a Prohibited Person would be the direct, indirect or beneficial owner of all or any portion of such rights.

 

(e)           Notwithstanding the foregoing provisions of this Article IX, to the extent any transfer is prohibited or requires the Lender’s consent under the Loan Documents, no transfer shall be permitted until such lender’s consent is obtained and any transfer must be done in accordance with any applicable lender’s consent or approval and the requirements of the Loan Documents. Any transfer prohibited under the Loan Documents which is not consented to as provided above shall be null and void. To the extent that any fees or expenses are incurred in connection with a lender’s consent or approval, including a transfer fee and lender’s legal fees, the party requesting such consent in connection with its proposed transfer shall be responsible for

 

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payment of all such fees and expenses, the payment thereof being a condition precedent to any such transfer

 

9.3          Transferees. Notwithstanding anything to the contrary contained in this Agreement, no transferee of all or any portion of any Interest shall be admitted as a Member unless (a) such Interest is transferred in compliance with the applicable provisions of this Agreement, (b) such transferee shall have furnished evidence of satisfaction of the requirements of Section 9.2 reasonably satisfactory to a Majority-In-Interest of the remaining Members, and (c) such transferee shall have executed and delivered to the Company such instruments as a Majority-In-Interest of the remaining Members reasonably deem necessary or desirable to effectuate the admission of such transferee as a Member and to confirm the agreement of such transferee to be bound by all of the terms and provisions of this Agreement with respect to such Interest. At the request of a Majority-In-Interest of the remaining Members, each such transferee shall also cause to be delivered to the Company, at the transferee’s sole cost and expense, a favorable opinion of legal counsel, to the effect that (i) such transferee has the legal right, power and capacity to own the Interest proposed to be transferred, (ii) if applicable, such Transfer does not violate any provision of any loan commitment or any mortgage, deed of trust or other security instrument encumbering all or any portion of the Company Property or any Loan Document, and (iii) such Transfer does not violate any federal or state securities Laws and will not cause the Company to become subject to the Investment Company Act of 1940, as amended. As promptly as practicable after the admission of any Person as a Member, the books and records of the Company shall be changed to reflect such admission. All reasonable costs and expenses incurred by the Company in connection with any Transfer of any Interest and, if applicable, the admission of any transferee as a Member shall be paid by such transferee.

 

9.4          Section 754 Election. In the event of a Transfer of all or part of the Interest of a Member, at the request of the transferee or if required by the Code, or if otherwise in the best interests of the Company (as determined by a Majority-In-Interest of the Members), the Company shall elect pursuant to Section 754 of the Code to adjust the basis of Company Property as provided by Sections 734 and 743 of the Code, and any cost of such election or cost of administering or accounting for such election shall be at the sole cost and expense of the requesting transferee.

 

9.5          [Reserved]

 

ARTICLE X
 EXCULPATION AND INDEMNIFICATION

 

10.1        Exculpation. No Member, Managing Member, general or limited partner of any Member, shareholder, partner, or member or other holder of an equity interest of any Member or manager, officer or director of any of the foregoing, shall be liable to the Company or to any other Member for monetary damages for any losses, claims, damages or liabilities arising from any breach of fiduciary duty or act or omission performed or omitted by it and arising out of or in connection with this Agreement or the Company’s business or affairs, provided that any such act or omission was taken in good faith, was reasonably believed to be in the best interests of the Company and it was within the scope of authority granted to such Person, and in the case of a Member, Managing Member or related Person, was not attributable to such Member’s, Managing

 

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Member’s or Person’s fraud, bad faith, willful misconduct or negligence or the breach of any covenant, agreement or obligation by such Person contained in this Agreement. No general or limited partner of any Member, Managing Member, shareholder, partner, member or other holder of an equity interest in such Member, Managing Member or manager, officer of director of any of the foregoing shall be personally liable for the performance of any such Member’s or Managing Member’s obligations under this Agreement, but the foregoing shall not relieve any such partner, shareholder or member of any Member or Managing Member from its obligations to such Member or Managing Member.

 

10.2        Indemnification.

 

(a)           The Company shall, to the fullest extent permitted by applicable law, indemnify, defend and hold harmless each Member, the Managing Member and each general or limited partner of any Member or such Member’s Affiliates, shareholders, members, partners or other holders of any equity interest in such Member or its Affiliates, or any manager, officer or director of any of the foregoing (collectively, the “Indemnitees”), from and against any losses, claims, demands, liabilities, costs, damages, expenses (including, without limitation, reasonable fees and expenses of outside counsel) and causes of action imposed on, incurred by, asserted against or to which such Indemnitee may otherwise become subject by reason of or in connection with any breach of fiduciary duty or matter arising out of or incidental to any act performed or omitted to be performed by any such Indemnitee in connection with this Agreement or the Company’s business or affairs; provided, that any such act or omission was taken in good faith, was reasonably believed by the applicable Indemnitee to be in the best interest of the Company and was within the scope of authority granted to such Member or applicable Indemnitee, and in the case of a Member or related Indemnitee, was not attributable to such Indemnitee’s fraud, bad faith, willful misconduct or negligence or the breach of any covenant, agreement or obligation by such Person contained in this Agreement. Any indemnity under this Section 10.2 shall be paid solely out of and to the extent of Company assets and shall not be a personal obligation of any Member and in no event will any Member be required, or permitted without the Approval of all of the Members, to contribute additional capital under Section 4.2 to enable the Company to satisfy any obligation under this Section 10.2. All judgments against the Company and the Members, or any one or more thereof, wherein such Member (or Members) is entitled to indemnification, must first be satisfied from Company assets.

 

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

 

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(c)           The provisions of this Section 10.2 shall survive for a period of two years from the date of dissolution of the Company, provided that, if at the end of such period there are any actions, proceedings or investigations then pending, any Indemnitee may so notify the Company and the other Members at such time (which notice shall include a brief description of each such action, proceeding or investigation and the liabilities asserted therein) and the provisions of this Section 10.2 shall survive with respect to each such action, proceeding or investigation set forth in such notice (or any related action, proceeding or investigation based upon the same or similar claim) until such date that such action, proceeding or investigation is finally resolved, so long as the same is pursued with reasonable diligence.

 

(d)           Notwithstanding anything to the contrary contained in this Agreement, the obligations of the Company or any Member under this Section 10.2 shall (i) be in addition to any liability which the Company or such Member may otherwise have and (ii) inure to the benefit of such Indemnitee, its Affiliates and their respective members, partners, shareholders, managers, directors, officers, employees, agents and Affiliates and any successors, assigns, heirs and personal representatives of such Persons.

 

(e)           Notwithstanding any of the preceding provisions of this Section 10.2, in no event shall the Company have any obligation under this Section 10.2 that is prohibited by the charter of Behringer Harvard Opportunity REIT II, Inc., as same may exist as of the date of this Agreement or after any amendment hereafter made in order to comply with laws and regulations applicable to real estate investment trusts. BH represents and warrants to CH that there is no Company obligation under this Section 10.2 that is prohibited by the charter of Behringer Harvard Opportunity REIT II, Inc., as such charter exists as of the date of this Agreement.

 

(f)            In the event that (i) BH does not Approve any request by the Managing Member (a) under Section 7.(1)(a)(xxxviii) relating to the adoption of and implementation of any operation and maintenance program or any other program to remove or otherwise remediate hazardous materials or relating to the introduction or allowance of any substance regulated of as a hazardous substance under applicable Law, (b) for any Additional Capital Contributions, or use of Net Cash Flow, necessary to prevent waste to the Property (provided that CH has notified BH that the failure to approve and fund Additional Capital Contributions or use Net Cash Flow may result in waste as such term is used in the Loan Documents) of the property, or (ii) BH fails to maintain any Insurance required to under the Loan Documents that BH has agreed to or is required to maintain, or (iii) BH makes any Transfers prohibited under the Loan Documents without first obtaining the Lender’s consent, or (iv) BH causes a Bankruptcy Event by the Company in violation of the Loan Documents, BH (and not the Company) shall indemnify the CH persons who are Key Principals from and against any losses, claims, demands, liabilities, costs, damages, expenses (including, without limitation, reasonable fees and expenses of outside counsel) and causes of action imposed on, incurred by, asserted against or to which such Key Principals may otherwise become subject under the Loan Documents as a result of any of the foregoing.

 

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ARTICLE XI
 DISSOLUTION AND TERMINATION

 

11.1        Dissolution.

 

(a)           The Company shall be dissolved and its business wound up upon the earliest to occur of any of the following events:

 

(i)            the sale, condemnation or other disposition of all Company Property and the receipt of all consideration therefor;

 

(ii)           the unanimous agreement of the Members to dissolve the Company;

 

(iii)          the bankruptcy or dissolution of the last remaining Member (which shall not include the occurrence of such an event with respect to any Member’s constituent equity owners which does not cause such an event to occur with respect to the Member itself) or the occurrence of any other event that terminates the continued membership of all Members in the Company; or

 

(iv)          the occurrence of an event requiring the winding-up of the Company under the Delaware Act.

 

(b)           Without limitation on, but subject to, the other provisions hereof, the assignment of all or any part of a Member’s Interest permitted hereunder will not result in the dissolution of the Company. Except as otherwise specifically provided in this Agreement, each Member agrees that, without the Approval of the other Members, a Member may not withdraw from or cause a voluntary dissolution of the Company. In the event a Member withdraws from or causes a voluntary dissolution of the Company in contravention of this Agreement, such withdrawal or the causing of a voluntary dissolution shall not affect such Member’s liability hereunder.

 

11.2        Termination. In all cases of dissolution of the Company, the business of the Company shall be wound up and the Company terminated as promptly as practicable thereafter, and each of the following shall be accomplished:

 

(a)           The Liquidating Member shall cause to be prepared a statement setting forth the assets and liabilities of the Company as of the date of dissolution, a copy of which statement shall be furnished to all of the Members.

 

(b)           The Company Property shall be liquidated by the Liquidating Member as promptly as possible, but in an orderly and businesslike and commercially reasonable manner and subject to the provisions of the Operating Plan then in effect or a liquidating plan Approved by BH. The Liquidating Member may distribute Company Property in kind only with the Approval of all Members.

 

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

 

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(i)            first, to the payment of (A) the debts and liabilities of the Company (including any outstanding amounts due on any indebtedness encumbering the Company Property, or any part thereof) and (B) the expenses of liquidation;

 

(ii)           second, subject to the Approval of BH, to the setting up of any reserves which the Liquidating Member and the Managing Member shall determine to be reasonably necessary for contingent, unliquidated or unforeseen liabilities or obligations of the Company or any Member arising out of or in connection with the Company. Such reserves may, in the discretion of the Liquidating Member, be paid over to a national bank or national title company selected by it and authorized to conduct business as an escrow agent to be held by such bank or title company as escrow agent for the purposes of disbursing such reserves to satisfy the liabilities and obligations described above, and at the expiration of such period as the Liquidating Member may reasonably deem advisable, distributing any remaining balance as provided in Section 11.2(c)(iii); provided, however, that, to the extent that it shall have been necessary, by reason of applicable law or regulation, to create any reserves prior to any and all distributions which would otherwise have been made under Section 11.2(c)(i) and, by reason thereof, a distribution under Section 11.2(c)(i) has not been made, then any balance remaining shall first be distributed pursuant to Section 11.2(c)(i);

 

(iii)          thereafter, the balance, if any, to the Members in accordance with Section 6.6.

 

11.3        Liquidating Member.  The Liquidating Member shall not be required to post a bond and is hereby irrevocably appointed as the true and lawful attorney in the name, place and stead of each of the Members, such appointment being coupled with an interest, to make, execute, sign, acknowledge and file with respect to the Company all papers which shall be necessary or desirable to effect the dissolution and termination of the Company in accordance with the provisions of this Article XI. Notwithstanding the foregoing, each Member, upon the request of the Liquidating Member or the Managing Member, shall promptly execute, acknowledge and deliver all such documents, certificates and other instruments as the Liquidating Member or the Managing Member shall reasonably request to effectuate the proper dissolution and termination of the Company, including the winding up of the business of the Company.

 

11.4        Claims of the Members. Members and former Members shall look solely to the Company’s assets for the return of their Capital Contributions, and if the assets of the Company remaining after payment of or due provision for all debts, liabilities and obligations of the Company are insufficient to return such Capital Contributions, the Members and former Members shall have no recourse against the Company or any other Member.

 

ARTICLE XII
 DEFAULT BY MEMBER

 

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

 

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(a)           A voluntary Transfer of any Member’s Interest, other than a permitted Transfer made in accordance with Sections 9.2 or Article XV.

 

(b)           A Member’s voluntary withdrawal as a Member for any reason other than a permitted Transfer of its Interest and the admission of the transferee as a Member in its stead (in accordance with the applicable provisions of Sections 9.2).

 

(c)           Any representation or warranty of such Member contained in Sections 13.1, 14.1, or 14.2 is inaccurate or untrue in any material respect.

 

(d)           Such Member or its Affiliates shall violate any other material term, breach any material provision or default in the performance of any of its duties or material covenant applicable to such Member as set forth in this Agreement (excluding a failure to make Additional Capital Contributions, the exclusive remedy for which is set forth in Section 4.2) and (i) such violation, breach or default causes more than a de minimis loss or damage to the Company, or any of its Members or their respective Affiliates, and (ii) such violation, breach or default is not cured (including without limitation, by the breaching Member reimbursing the Company or the affected Member for the resulting damage or loss) within a Reasonable Period.

 

(e)           The occurrence of a Bankruptcy Event of a Member;

 

(f)            Solely with respect to CH, an “event of default” shall occur and be continuing, subject to applicable notice and cure provisions, under any Management Agreement or other material agreement that the Company enters into with the CH Member Group or any of its Affiliates, and (i) such violation, breach or default causes Material Damage or Loss to the Company, or any of its Members or their respective Affiliates, and (ii) such violation, breach or default is not cured (including without limitation, by the CH Member Group reimbursing the Company or the affected Member for the resulting Material Damage or Loss) within a Reasonable Period; or

 

(g)           Solely with respect to the Managing Member, the occurrence of a For Cause Event that is not cured within any applicable cure period.

 

Notwithstanding the foregoing provisions of this Section 12.1, a failure by any Member to make any Additional Capital Contribution to the extent required or requested hereunder shall not constitute an Event of Default by such Member.

 

12.2        Effect of Event of Default. Subject to the provisions hereof, upon the occurrence of an Event of Default by BH or the CH Member Group, then the non-defaulting party (BH or the CH Member Group) shall have the right, at any time within one year from the date of such Event of Default and upon giving the defaulting party at least ten (10) days prior written notice of such election to pursue any right or remedy available to it at law or in equity against the defaulting party (which shall represent a recourse obligation of such party); provided, however, the parties hereto waive any claims to any consequential, indirect or special damages. In addition, BH shall have the remedies set forth in Section 7.2(e) if the defaulting party is any member of the CH Member Group.

 

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ARTICLE XIII
 MISCELLANEOUS

 

13.1        Representations and Warranties of the Members.

 

(a)           Each Member represents and warrants to the other Members as follows:

 

(i)            It is duly organized, validly existing and in good standing under the Laws of its jurisdiction of formation with all requisite power and authority to enter into this Agreement and to conduct the business of the Company.

 

(ii)           This Agreement constitutes the legal, valid and binding obligation of the Member enforceable in accordance with its terms.

 

(iii)          No consents or approvals are required from any governmental authority or other person or entity for the Member to enter into this Agreement and the Company. All limited liability company, corporate or partnership action on the part of the Member necessary for the authorization, execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, have been duly taken.

 

(iv)          The execution and delivery of this Agreement by the Member, and the consummation of the transactions contemplated hereby, does not conflict with or contravene the provisions of its organizational documents or any agreement or instrument by which it or its properties are bound or any law, rule, regulation, order or decree to which it or its properties are subject.

 

(v)           The Member has not retained any broker, finder or other commission or fee agent other than Brush Island Capital, LLC or Lender and no such person has acted on its behalf in connection with the acquisition of the Company Property or the execution and delivery of this Agreement.

 

(vi)          It understands that (A) an investment in the Company involves substantial and a high degree of risk, (B) no federal or state agency has passed on the offer and sale of the Interest in the Company to such Person, (C) it must bear the economic risk of such Person’s investment in the Company for an indefinite period of time, since such Person’s Interest in the Company has not been registered for sale under the Securities Act of 1933 and, therefore, cannot be sold or otherwise transferred unless subsequently registered under the Securities Act of 1933 or an exemption from such registration is available, and the Interest in the Company of such Person cannot be sold or otherwise transferred unless registered under applicable state securities or blue sky Laws or an exemption from such registration is available, (D) there is no established market for the Interest of such Person in the Company and no public market will develop and (E) such Person’s principals have such knowledge and experience in real estate and, other financial and business matters that they are capable of evaluating the merits and risks of an investment in the Company. It has acquired its Interest solely for investment purposes only and not for the purpose of resale.

 

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

 

(viii)        Such Member has taken, and shall continue to take, such measures as are required by applicable law to assure that the funds used to pay sellers and lessors under the Transaction Agreements are derived: (i) from transactions that do not violate United States law nor, to the extent such funds originate outside the United States, do not violate the Laws of the jurisdiction in which they originated; and (ii) from permissible sources under United States law and to the extent such funds originate outside the United States, under the Laws of the jurisdiction in which they originated.

 

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

 

(b)           In addition, CH represents and warrants to BH that it, and for so long as CHRES/Management, L.L.C. is the Property Manager, the Property Manager are or will be Controlled by at least one of the CH Persons.

 

(c)           Each Member agrees to indemnify and hold harmless the Company and each other Member and their officers, directors, shareholders, partners, members, employees, successors and assigns from and against any and all loss, damage, liability or expense (including costs and attorneys’ fees) which they may incur by reason of, or in connection with, any breach of the foregoing representations and warranties or those set forth in Article XIV made by such Member and all such representations and warranties shall represent recourse obligations of the Members and will survive the execution and delivery of this Agreement and the termination and dissolution of the Company or any Member.

 

13.2        Further Assurances. Each Member agrees to execute, acknowledge, deliver, file, record and publish such further instruments and documents, and do all such other acts and things as may be required by law, or as may be required to carry out the intent and purposes of this Agreement.

 

13.3        Notices. All material notices, demands, consents, requests for Approvals, or other requests or communications which any of the parties to this Agreement may desire or be required to give hereunder (collectively, “Notices”) shall be in writing and shall be given by (i) personal delivery, (ii) facsimile transmission with confirmed receipt or (iii) a reputable overnight courier service, fees prepaid, addressed as follows:

 

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If to BH to:
    	
 
    	
Behringer Harvard Opportunity OP II LP  
 15601 Dallas Parkway, Suite 600
   Addison, TX 75001
   Attn: Executive Vice President of Real Estate
   Phone: (214) 655-1600
   Fax: (214) 655-1610
    
	
 
    	
 
    	
 
    
	
With a copy to:
    	
 
    	
Behringer Harvard   Opportunity REIT II, Inc.
   15601 Dallas Parkway, Suite 600
   Addison, TX 75001
   Attn: Chief Legal Officer
   Phone: (214) 655-1600
   Fax: (214) 655-1610Fax: (214) 655-1610
    
	
 
    	
 
    	
 
    
	
If to CH and CH   Persons to:
    	
 
    	
Harbor Town   Apartments
   c/o Carter-Haston Real Estate Services, Inc.
   3301 West End Avenue
   Suite 200
   Nashville, TN 37203
   Attention: L. Marc Carter
   Phone (615) 219-9200
   Fax: (615) 279-9400
    
	
 
    	
 
    	
 
    
	
With a copy to   (which shall not constitute notice):
    	
 
    	
Baker, Donelson,   Bearman, Caldwell & Berkowitz, PC
    211 Commerce Street, Suite 800
   Nashville, TN 37201
   Nashville, TN 37201
   Attn: Laurence M. Papel
    Nashville,   TN 37201
   Phone: (615) 726-5656
   Fax: (615) 744-5656
    

 

The foregoing notice provision shall not be applicable to routine communications between the Members relating to the day-to-day operation of the Property or the Company. Any Member may designate another addressee (and/or change its address) for Notices hereunder by a Notice given pursuant to this Section 13.3. A Notice sent in compliance with the provisions of this Section 13.3 shall be deemed to be delivered, given, and received for all purposes as of (A) the actual date of delivery or transmission, as shown on the postal or courier service receipt or on the transmittal log sheet generated by the sending Fax machine, if delivered or transmitted before 5:00 pm, recipient’s local time, on a Business Day (and, otherwise, on the first Business Day after the date of actual delivery or transmission) or (B) as of the actual date of attempted delivery (but not attempted but failed Fax transmission), if delivery is attempted but refused between the hours of 9:00 am and 5:00 pm, recipient’s local time, on a Business Day..

 

13.4        Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware applicable to agreements made and to be performed wholly within that State.

 

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13.5        Captions. All titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend, or describe the scope of this Agreement or the intent of any provision in this Agreement and do not constitute substantive matter to be considered in construing the terms of this Agreement.

 

13.6        Pronouns and Interpretation. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, and neuter, singular and plural, as the identity of the party or parties may require. Unless the context otherwise requires, (i) all references made in this Agreement to a Section, Schedule, Annex or an Exhibit are to a Section, Schedule, Annex or an Exhibit of or to this Agreement, (ii) “or” is disjunctive but not necessarily exclusive, (iii) “will” shall be deemed to have the same meaning as the word “shall” and (iv) words in the singular includes the plural and vice versa. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation,” where or not so followed. All references to “$” or dollar amounts are to lawful currency of the United States of America, unless otherwise expressly stated.

 

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

 

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

 

13.9        Creditors Not Benefited. Nothing contained in this Agreement is intended or shall be deemed to benefit any creditor of the Company or any creditor of any Member, and no creditor of the Company shall be entitled to require the Company or the Members to solicit or accept any Additional Capital Contribution for the Company or to enforce any right which the Company or any Member may have against any Member under this Agreement or otherwise or under any guaranty.

 

13.10      Recalculation of Interest. If any applicable law is ever judicially interpreted so as to deem any distribution, contribution, payment or other amount received by any Member or the Company under this Agreement as interest and so as to render any such amount in excess of the maximum rate or amount of interest permitted by applicable law, then it is the express intent of the Members and the Company that all amounts in excess of the highest lawful rate or amount theretofore collected be credited against any other distributions, contributions, payments or other amounts to be paid by the recipient of the excess amount or refunded to the appropriate Person, and the provisions of this Agreement immediately be deemed reformed, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the payment of the fullest amount otherwise required hereunder. All sums paid or agreed to be paid that are judicially determined to be interest shall, to the extent permitted by applicable law,

 

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be amortized, prorated, allocated and spread throughout the term of such obligation so that the rate or amount of interest on account of such obligation does not exceed the maximum rate or amount of interest permitted under applicable law.

 

13.11      Severability. In case any one or more of the provisions contained in this Agreement or any application thereof shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and other application thereof shall not in any way be affected or impaired thereby.

 

13.12      Entire Agreement. This Agreement contains the entire agreement between the parties relating to the subject matter hereof and all prior agreements relative hereto which are not contained herein are terminated. Amendments, variations, modifications or changes herein may be made effective and binding upon the Members by, and only by, the setting forth of same in a document duly executed by each Member, and any alleged amendment, variation, modification or change herein which is not so documented shall not be effective as to any Member.

 

13.13      Publicity and 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 Approved by BH. However, notwithstanding the preceding sentence, any Member shall have the right, without obtaining the consent of any other Member, to make disclosures in the course of normal reporting practices to its prospective members, shareholders or partners, or actual members, shareholders or partners or 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 13.13 shall not prohibit a Member from disclosing such information to the actual or prospective accountants, attorneys, consultants, lenders and vendors of the Company to allow such parties to provide services, funds or goods to the Company. Further, it is understood and agreed that BH is a direct or indirect subsidiary of Behringer Harvard Opportunity REIT II, Inc., a corporation that is required to make public disclosures of material facts and events under U.S. federal securities Law, and that, notwithstanding anything to the contrary contained herein, Behringer Harvard Opportunity REIT II, Inc. shall have the right to determine, in its sole and absolute discretion, whether any such disclosure is required by U.S. federal securities Law and to make such disclosure of information as is consistent with such determination. The Members have agreed that if a Member breaches the obligation set forth in the first sentence of this Section 13.13 (the “Non-Disclosure Obligation”), the actual damages that will be incurred by the other Member 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 the other Member liquidated damages (the “Liquidated Damages”) in the amount of Twenty Thousand Dollars ($20,000) 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 13.13 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 Member until the Liquidated Damages

 

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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).

 

13.14      Confidentiality.

 

(a)           The terms of this Agreement, the identity of any person with whom the Company may be holding discussions with respect to any investment, acquisition, disposition or other transaction, and all other business, financial, or other information relating directly to the conduct of the business and affairs of the Company, the Company Property or the relative or absolute rights or interests of any of the Members (collectively, the “Confidential Information”) that is not already publicly available or that has not been publicly disclosed pursuant to authorization by all of the Members is confidential and proprietary information of the Company, the disclosure of which would cause irreparable harm to the Company and the Members. Provided, however, that any Member (or its Affiliates) may disclose such Confidential Information (i) required by law (it being specifically understood and agreed that anything set forth in a registration statement or any other document filed pursuant to law will be deemed required by law), or (ii) to its employees, its proposed lenders, proposed investors, management company, accountants, due diligence consultants, brokers, legal counsel and other agents and representatives who need to know such information to the extent reasonably necessary for such persons to properly analyze and evaluate the proposed transaction, property purchase, loan or investment provided that the disclosing party has informed the recipients of the confidential information and such recipients are subject to an agreement (including by way of a written policy or rule to which the recipient is subject) to keep the Confidential Information confidential and to use it solely for the purpose for which the Confidential Information was disclosed, or (iii) if necessary for it to perform any of its duties or obligations hereunder or in any property management agreement to which it is a party covering any Company Property, or to market the Company Property or any Interests as permitted by the terms of this Agreement; provided, however, that the Company, CH and the CH Persons, BH and its Affiliates may disclose Confidential Information to any of their partners, members, lenders, or other actual or prospective investor in or purchaser of the Company Property in accordance with the terms of this Agreement. Without limitation of the foregoing, it is understood and agreed that BH is an indirect subsidiary of Behringer Harvard Opportunity REIT II, Inc., a corporation that is required to make public disclosures of material facts and events under U.S. federal securities Law, and that in respect of item (b) in the preceding sentence, Behringer Harvard Opportunity REIT II, Inc. shall determine, in its sole and absolute discretion, whether any such disclosure is required by applicable Law or regulations. Nothing contained in the foregoing provisions shall be construed to prohibit the recordation in the appropriate real estate records of any document that, when executed, is necessary to effectuate the intent of this Agreement or will evidence or convey an interest in real property or debt secured by real property and that is customarily recorded.

 

(b)           Subject to the provisions of Section 13.14(a), each Member agrees not to disclose any Confidential Information to any Person (other than a Person (including without limitation an attorney or advisor) who does not agree to maintain all Confidential Information in strict confidence.

 

(c)           Notwithstanding any other provision herein to the contrary, a Member shall have no liability with respect to the obligation to maintain all Confidential Information in

 

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strict confidence if (i) ordered to deliver the Confidential Information by a court or similar tribunal or governmental entity with the power to enforce its order with a contempt decree or otherwise; (ii) any proceeding, dispute or litigation between the parties hereto occurs; (iii) the Confidential Information is already known by others not bound by a duty of confidentiality herein; or (iv) the Confidential Information is or becomes publicly available through no fault of the Member or its representatives

 

(d)           The covenants contained in this Section 13.14 will survive the Transfer of the Interest of any Member and the termination of the Company.

 

13.15      Venue. Each of the Members consents to the jurisdiction of any court in Wilmington, Delaware, Memphis, Tennessee, Nashville, Tennessee, or Dallas, Texas for any action arising out of matters related to this Agreement. Each of the Members waives the right to commence an action in connection with this Agreement in any court outside of Wilmington, Delaware, Memphis, Tennessee, Nashville, Tennessee, or Dallas, Texas.

 

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

 

13.17      Cooperation. In connection with the sale of the Company Property or any portion thereof, each Member agrees to reasonably cooperate with each other Member (the “Exchanging Member”), which seeks to structure the disposition of its Interest in a manner that will afford the Exchanging Member an opportunity to take advantage of provisions of the Code governing tax free exchanges or reorganizations; provided that such structuring does not have an adverse effect on any such sale (including without limitation, with respect to timing), and provided that the Exchanging Member shall bear all costs and expenses associated with such structuring, the other Members shall not be required to take title to any property or interest or assume or be subject to any obligations, and the Exchanging Member shall indemnify, defend and hold the other Member(s) and the Company harmless from and against any and all liabilities that they may incur by reason of their participation or cooperation in such exchange or reorganization transaction, and such structuring shall not delay any such transaction, and shall be subject to any reasonable restrictions proposed by the Members that are not Exchanging Members.

 

13.18      Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute but one and the same agreement.

 

13.19      Attorneys’ Fees. If the Company or any Member obtains a judgment against any Member by reason of the breach of this Agreement or the failure to comply with the terms hereof, it is the intent of the parties that reasonable attorneys’ fees and costs as fixed by the court shall be included in such judgment.

 

13.20      Effectiveness. Pursuant to Section 18-201(d) of the Delaware Act, this Agreement shall be effective as of the time of the filing of the Certificate of Formation with the Office of the Delaware Secretary of State (the “Effective Date”).

 

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ARTICLE XIV
 PATRIOT ACT

 

14.1        Compliance with International Trade Control Laws and OFAC Regulations. Each Member represents, warrants and covenants to the other Member with respect to itself and its Affiliates, as applicable, that:

 

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

 

(b)           Such Member, no CH Person, and no Person who owns a direct interest in such Member is not now nor shall be at any time during the term of this Agreement a Person with whom a U.S. Person, including a Financial Institution, is prohibited from transacting business of the type contemplated by this Agreement, whether such prohibition arises under U.S. law, regulation, executive orders and lists published by the OFAC (including those executive orders and lists published by OFAC with respect to Specially Designated Nationals and Blocked Persons) or otherwise.

 

14.2        Member’s Funds.

 

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

 

(b)           Each Member further represents, warrants and covenants to the other Member that, to the best of its knowledge after making due inquiry, neither the Member, nor any Affiliate, nor any holder of a direct interest in such Member, no any CH Person, nor any Person providing funds to such Member (i) is under investigation by any governmental authority for, or has been charged with, or convicted of, money laundering, drug trafficking, terrorist related activities, any crimes which in the United States would be predicate crimes to money laundering, or any violation of any Anti-Money Laundering Laws; (ii) has been assessed civil or criminal penalties under any Anti-Money Laundering Laws; (iii) has been convicted of any crimes involving moral turpitude or tax fraud; and (iv) has had any of its funds seized or forfeited in any action under any Anti-Money Laundering Laws.

 

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

 

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

 

14.5        Actions Taken Pursuant to Anti-Money Laundering Laws.  If any Member reasonably believes that a Member may have breached any of the representations, warranties or covenants set forth in this Article XIV, each such Member has the right (and may have the obligation under applicable Law), with or without notice to such other Member, to (a) notify the appropriate governmental authority (or authorities) and to take such action as such governmental authority (or authorities) may direct; and/or (b) withhold distributions and segregate the assets constituting the Capital Contribution by such Member or any of such Member’s funds or assets deposited with or otherwise controlled by the Company pursuant to this Agreement or otherwise.

 

ARTICLE XV
 BUY-SELL PROCEDURE

 

15.1        General Provisions.  Either BH or CH (the “Offeror”) may, upon the occurrence of a Deadlock Event, or if earlier, at any time following an Event of Default or a For Cause Event with respect to BH or the CH Member Group, in which event the non-breaching party (BH or CH) may be the Offeror, make an offer as described below (the “Buy-Sell Offer”) to the other (the “Offeree”), as set forth below.

 

(a)           The Buy-Sell Offer must (i) be in writing and be signed by the Offeror, (ii) specify the Offeror’s good faith estimate of the fair market value of the Company Property (the “Buy-Sell Offer Price”) at which the Offeror would purchase all of the assets of the Company, as if such assets were free and clear of all liens, claims and encumbrances (that can be discharged or removed with the payment of money), (iii) disclose all liabilities and potential liabilities of the Company known to the Offeror and a good faith estimate of the monetary amount of such liabilities, and (iv) disclose the terms and details of any financing, refinancing, proposed sale, or other monetization event that the Offeror has initiated, negotiated or discussed during the prior one hundred eighty (180) calendar days with a third party for all or any portion of the Company Property.

 

(b)           A copy of the Buy-Sell Offer must be delivered to the Offeree and to the Company Accountant who shall, within ten (10) Business Days of the Buy-Sell Offer, determine and notify the Members of the amount the Offeree would receive (the “Offeree Value”) and the amount the Offeror would receive (the “Offeror Value”) on account of its or their respective Interest(s) and any Priority Capital Contributions if all Company Property were sold for the aggregate Buy-Sell Offer Price, all liabilities of the Company were paid in full, and the remaining proceeds were distributed to the Members in accordance with Section 6.4.

 

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(c)           The Offeree will have the right, exercisable by delivery of notice in writing (the “Election”) to the Offeror within forty five (45) calendar days after its receipt of the Buy-Sell Offer, to elect to either:

 

(i)            sell to the Offeror all of the Offeree’s rights, title and interests in and to its or their Interest(s) in the Company (and in any Priority Capital Contributions) for a cash purchase price equal to the Offeree Value; or

 

(ii)           purchase all of the Offeror’s rights, title and interests in and to its or their Interest(s) in the Company (and in any Priority Capital Contributions) for a cash purchase price equal to the Offeror Value.

 

Failure of the Offeree to timely give the Offeror notice of the Offeree’s Election will be deemed, upon the expiration of such forty five (45) day period, to be an Election to sell under Section 15.1(c)(i). Notwithstanding anything to the contrary in this Section 15.1, absent an agreement in writing among the parties, once a Buy/Sell Offer has been made in accordance with the terms hereto, the Buy/Sell process may not subsequently be stopped by the Offeree claiming that the Deadlock Event has been resolved or an Event of Default has been cured after the initiation of such process.

 

(d)           Contemporaneously with the Offeree’s Election or deemed Election, the purchasing party under this Section 15.1 shall deposit in escrow with a national title company or bank or other financial institution selected by the selling party as escrowee an earnest money deposit in cash in an amount equal to 5% multiplied by the purchase price to be paid in connection with such purchase, and, if for any reason such purchasing party fails to close such purchase as provided in this Section 15.1, then the selling party may retain such deposit as liquidated damages for its own account or elect to purchase all of the rights, title and interests of the purchasing party in and to its or their Interest(s) (and in any Priority Capital Contributions) for a cash purchase price equal to 95% of the Offeree Value or Offeror Value, as applicable and apply such deposit toward the purchase price. All closings of any purchase and sale under this Section 15.1 will be held at the principal office of the Company and shall take place no later than that date which is 90 calendar days after the later of the Offeree’s Election or deemed Election.

 

(e)           Each of BH and CH will be entitled to enforce its rights under this Section 15.1 by specific performance. If the purchasing party defaults under this Section 15.1, it will have no right to make any future Buy-Sell Offer hereunder.

 

(f)            Any party may freely assign its rights and obligations pursuant to this Section 15.1 by delivering notice of such assignment to BH or CH (as applicable), provided that the assigning party will remain liable for any and all obligations of its assignee, as if such party had not assigned its rights pursuant to this Section 15.1.

 

(g)           Notwithstanding the foregoing, no Buy-Sell Offer may be made until all periods for making elections and performing obligations under any previous Buy-Sell Offer pursuant to this Section 15.1 have terminated.

 

15.2        Termination of Other Agreements. If a purchase and sale of Interests under this Article XV is completed, all agreements between the Company and a selling Member or its 

 

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Affiliates related to the Company Property (including the Management Agreements related to BH or CH, as applicable) will (at the election of the purchasing party) be terminated on the date such Interest is purchased without payment of any penalty or termination fee. In addition, at the closing of such purchase made in accordance with Section 15.1, the purchaser shall (i) obtain a release of the selling Member and its Affiliates (including the Key Principals) from all liability, direct or contingent, by all holders of all Company debts, obligations or claims for which the selling Member or its Affiliates may be personally liable (including any guaranties of the non-recourse carve-outs and the indemnification of environmental hazards not in existence as of the date of closing) occurring or relating to the period on and after the date of the approval by the Lender under the Loan of the same and provided that such release shall not be required to extend to any liability relating to environmental hazards under the Loan Documents arising out of conditions existing as of the closing date for the purchase of such Interests unless such liabilities were incurred due to solely BH’s actions or inactions (directly or indirectly) that allowed for or resulted in such liabilities; provided, however, that if BH is the purchasing party and the Buy-Sell Offer had been made as a result of an Event of Default or a For Cause Event by the Managing Member (in either case following the expiration of any applicable cure periods) then BH shall not be obligated to obtain a release of the Key Principal if BH would not be obligated to obtain a Carve-out Release under the circumstances described in Section 4.5(c), or (ii) if purchaser is unable, after requesting same, to deliver such a release, then deliver to the selling Member and any other Person that is potentially subject to personal liability under the Loan Documents, including the Key Principals, an agreement in form and substance reasonably satisfactory to the selling Member and such other Persons from a creditworthy Affiliate to assume the debts, obligations or claims of the selling Member and its Affiliates with respect to, and to defend, indemnify and save the selling Member, its Affiliates and the Key Principals harmless from, any liability to the holders of such Company debts, obligations or claims arising on or after the date of the purchase; provided, however, that such assumption and indemnification shall not extend to those claims arising from the fraud, bad faith, willful misconduct or negligence of the selling Member or any of its Affiliates or to environmental hazards caused by or attributable to acts or omissions the selling Member or any of its Affiliates, or if BH would not be obligated to deliver a Carve-out Indemnity under the circumstances described in Section 4.5(c). Unless the indemnity from a credit worthy party has been Approved by the selling Member and the Key Principals in their reasonable discretion by the closing, then the purchaser must obtain the release provided for in clause (i) above; provided that if BH or a BH Affiliate is the purchaser and is obligated to obtain a release or provide an indemnity under this section, BH Opp REIT II shall be deemed to be a credit worthy entity provided that it has a minimum net worth of $15,000,000 as of the date such indemnity is to be provided and to the extent the release excludes any items that would otherwise be subject of the Indemnification Agreement, the Indemnification Agreement, amended so as to relate only to those items for which a release has not been obtained, shall be deemed to be a satisfactory form.

 

15.3        Power of Attorney. In the event that the Offeror or Offeree shall have failed or refused, within five calendar days after receipt of a notice from the other requesting such party to execute, acknowledge and deliver such documents, or cause the same to be done, as shall be required to effectuate the provisions of Section 15.1 hereof, then the non-defaulting party may execute, acknowledge and deliver such documents for, on behalf of and in the stead of the defaulting party or on behalf of and in the name of the Company, as applicable, and such execution, acknowledgment and delivery by the non-defaulting party shall be for all purposes

 

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effective against and binding upon the defaulting party or the Company, as applicable, as though such execution, acknowledgment and delivery had been by the defaulting party or the Company, as applicable. Each of the Members does hereby irrevocably constitute and appoint the other Members as the true and lawful attorney in fact of such appointing Member, in the name, place and stead of such appointing Member, as the case may be, to execute, acknowledge and deliver such documents under the circumstances contemplated by this Section 15.3. It is expressly understood, intended and agreed by each Member, that the grant of the power of attorney to the other Members pursuant to this Section 15.3 is coupled with an interest, is irrevocable and shall survive the death, dissolution, termination or legal incompetency of such appointing Member, as the case may be, or the assignment of the interest of such appointing Member in the Company, or the dissolution of the Company.

 

ARTICLE XVI
 RIGHT OF BH TO TRIGGER SALE OF THE PROPERTY; ROFO

 

16.1        ROFO on the Sale of the Property.

 

(a)           If on or after the second anniversary of this Agreement and subject to the terms of any applicable Loan Documents, BH desires to sell the Property to any third party, BH shall first deliver to CH written notice of its intention to offer to sell the Property setting forth the proposed cash purchase price which BH is willing to accept and all other material terms and conditions of the proposed sale (“ROFO Notice”). BH need not have located a prospective purchaser or have in its possession an actual offer to purchase in order to exercise its rights pursuant to this Section 16.1(a). The ROFO Notice shall include a statement by BH setting forth the financing and encumbrances, if any, to which the Property will remain subject to upon conveyance (the “Permitted Exceptions”) and shall be at a price stated in U.S. dollars only.  If the Acquisition Loan is to be assumed by a prospective purchaser, then BH shall cause such purchaser to replace the existing Key Principals simultaneously with closing and to cause the existing Key Principals to be fully released from liability, except (i) for those liabilities or obligations contained in any guaranty or indemnification agreement executed by the Key Principals which are owing or existing as of the date of the transfer, (ii) with respect to any environmental liability that relates to the period prior to the date of the closing (to the extent such release cannot otherwise be obtained), regardless of when such environmental matter is discovered, unless caused directly or indirectly by the actions or inactions of BH and (iii) for any liability relating to a breach by the existing Key Principals under the assumption and release agreement executed in connection with the loan assumption, including a breach of any representations and warranties of the Key Principals made therein.

 

(b)           At any time within forty-five (45) calendar days after the date CH receives the ROFO Notice (the “ROFO Response Period”), CH shall have the right, exercisable by delivery of notice in writing (the “ROFO Election”) to BH to either:

 

(i)            approve the terms of the proposed sale of the Property and authorize BH to cause the Company to sell or dispose of the Property on the terms and conditions set forth in the ROFO Notice; or

 

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(ii)           purchase, or caused to be purchased, the Property for a purchase price equal to the cash purchase price stated in the ROFO Notice, less the sum of any debt or other obligations to be assumed by the purchaser and on the other terms and conditions set forth in the ROFO Notice and subject to no other terms and conditions.

 

(c)           Any election pursuant to subparagraph (ii) of Section 16.1(b) above shall be made by (i) delivering to BH the ROFO Election, which shall affirmatively state that CH is exercising such option, and (ii) depositing in escrow with a national title company or a bank or other financial institution selected by BH (the “ROFO Escrow Agent”), as escrowee, a non-refundable earnest money deposit in cash equal to five percent (5%) of the purchase price (the “ROFO Escrow Deposit”) (as set forth in the ROFO Notice) within five (5) calendar days of such election. BH and the CH shall close the purchase of the Property within 45 calendar days of the date of CH’s ROFO Election to purchase pursuant to subparagraph (ii) above and the Company shall convey the entire fee simple title to the Property by special warranty deed to CH or its designee, against receipt of payment of the cash portion of the purchase price and assumption of any debt as aforesaid, subject to no title exceptions or other encumbrances other than the Permitted Exceptions (and such other title exceptions as do not materially affect the operations of the Property).

 

(d)           If during the ROFO Response Period, CH does not (i) authorize BH to attempt to sell the Property as provided in Section 16.1(b)(i) above, or (ii) timely elect to purchase the Property by following the procedures in Section 16.1(b)(ii) above, then CH shall be deemed to have authorized and approved the sale of the Property pursuant to Section 16.1(b)(i), for a purchase price not less than ninety-five (95%) of the purchase price set forth in the ROFO Notice and otherwise pursuant to such other terms, conditions and provisions as are determined appropriate in the reasonable discretion of BH. If CH authorizes or is deemed to have authorized the sale of the Property pursuant to the terms described above, and the Company thereafter receives a bona fide offer for the purchase of the Property from any third party for a purchase price payable at closing which is at least equal to ninety-five percent (95%) of the purchase price set forth in the ROFO Notice, BH may consummate the sale of the Property on such terms set forth in the ROFO Notice, without the requirement of any consent or Approval of any other Member; provided, however, such sale must be consummated within 360 calendar days after the date on which CH authorized or was deemed to have authorized such sale. The failure of the Company to close such sale within the 360-day period referred to in the immediately preceding sentence requires BH to again deliver to CH an additional ROFO Notice and to again follow the procedures set forth in this Section 16.1.

 

(e)           All closings of any purchase and sale under this Section 16.1 will be held at the principal office of BH and all transfer, stamp and recording taxes imposed on the transfer, and all prepayment fees, exit fees or other fees or penalties payable to any lender in connection with any prepayment of any financing incident to any purchase and sale under this Section 16.1 and all other closing costs shall be allocated as set forth in the ROFO Notice (and in the absence of such specific allocation, in accordance with local custom), and each of the Company and CH shall each pay its own attorney’s fees. Upon the closing of the purchase and sale under this Section 16.1, the purchaser shall execute and deliver to the Company an agreement in mutually acceptable form providing in effect that the purchaser shall indemnify and hold harmless the 

 

69

 

Company from and after the closing date for all costs, expenses, liabilities and obligations of and regarding the Property arising after the closing date.

 

(f)            If CH shall default in its obligations to purchase the Property pursuant to the terms of this Section 16.1, the following shall be the sole and exclusive remedies for such default:

 

(i)            CH will immediately and without any further action cease to have any right to make a Buy-Sell Offer or otherwise trigger or initiate the provisions of Article XV;

 

(ii)           the ROFO Escrow Agent shall immediately deliver to BH the ROFO Escrow Deposit as liquidated damages;

 

(iii)          thereafter, BH may cause the Company to sell at any time the Property to any Person, without the prior written consent of CH and without having to comply with the provisions of this Section 16.1.

 

If BH shall default in its obligations to cause the Company to sell the Property pursuant to the terms of this Section 16.1, then CH shall have the right to pursue specific performance of such sale.

 

(g)           Notwithstanding the foregoing, if the provisions of Article XV of this Agreement have been initiated by a Member or CH, then BH may not initiate the provisions of this Section 16.1 until the procedures set forth in Article XV have been completed or terminated pursuant to the provisions thereof. No ROFO Notice may be delivered until all periods for making elections and performing obligations under any previous ROFO Notice pursuant to this Section 16.1 have terminated.

 

(h)           Subject to compliance with any applicable terms of the Loan Documents, CH may freely assign its rights and obligations pursuant to this Section 16.1 to an Affiliate by delivery of notice of such assignment to BH and the Company, provided that CH will remain liable for any and all obligations of its assignee, as if CH had not assigned its rights pursuant to this Section 16.1(h).

 

16.2        Termination of Other Agreements.  If the Property is sold under this Article XVI to BH or an Affiliate of BH or a third party, all other agreements between the Company and CH, the CH member Group or their Affiliates applicable to the Property will be terminated on the date the Property is purchased (without payment of any termination fee or penalty). If the Property is sold under this Article XVI to CH or an Affiliate of CH or the CH Member Group, all other agreements between BH and its Affiliates applicable to the Property will be terminated on the date the Property is purchased (without payment of any termination fee or penalty).

 

16.3        Power of Attorney.  If any Member shall have failed or refused, within five (5) calendar days after receipt of a notice from the other Member requesting such Member to execute, acknowledge and deliver such documents, or cause the same to be done, as shall be required to effectuate the provisions of Section 16.1, as applicable, then the other Member may execute, acknowledge and deliver such documents for, on behalf of and in the stead of the other 

 

70

 

Member or on behalf of and in the name of the Company, as applicable, and such execution, acknowledgment and delivery by that Member shall be for all purposes effective against and binding upon the other Member and the Company, as applicable, as though such execution, acknowledgment and delivery had been by the refusing Member or the Company as applicable. Each Member does hereby irrevocably constitute and appoint each other Member as the true and lawful attorney-in-fact of such appointing Member and the successors and assigns thereof, in the name, place and stead of such appointing Member or the successors or assigns thereof, as the case may be, to execute, acknowledge and deliver such documents under the circumstances contemplated by Section 16.1. It is expressly understood, intended and agreed by each Member, for such Member and its successors and assigns, that the grant of the power of attorney to any other Member pursuant to this Section 16.3 is coupled with an interest, is irrevocable and shall survive the death, dissolution, termination or legal incompetency, as applicable, of such appointing Member, or the assignment of the Interest of such appointing Member, or the dissolution of the Company.

 

[Signature Page Follows]

 

71

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the introductory paragraph hereof.

 

	
 
    	
BH:
    
	
 
    	
 
    	
 
    
	
 
    	
BEHRINGER HARVARD OPPORTUNITY OP II
   LP, a Delaware limited partnership
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
BHO II, Inc.,   a Delaware corporation,
   its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Gary S. Bresky
    
	
 
    	
 
    	
 
    	
Gary S. Bresky
    
	
 
    	
 
    	
 
    	
Executive Vice   President &
    
	
 
    	
 
    	
 
    	
Chief Financial   Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
CH:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
HARBOR TOWN APARTMENTS
    
	
 
    	
a Tennessee general partnership
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
FinPar Harbor Town/Memphis, L.L.C., a
   Tennessee limited liability company,
   its Managing Member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Carter-Haston   Financial Partners, L.L.C., a Tennessee limited liability company,
   its Managing Member,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ L. Marc Carter
    
	
 
    	
 
    	
 
    	
L. Marc Carter
    
	
 
    	
 
    	
 
    	
Authorized Member
    
					

 

72

 

Appendix A

 

FORM OF PROPERTY AMENDMENT

 

Arbors at Harbor Town Apartments

 

By execution of this Property Amendment and effective as of July       , 2011 (the “Effective Date”), BEHRINGER HARVARD ARBORS, LLC, a Delaware limited liability company (“Owner”), BEHRINGER HARVARD OPPORTUNITY II MANAGEMENT SERVICES, LLC, a Texas limited liability company (“Oversight Manager”), BEHRINGER HARVARD OPPURTUNITY REIT II, INC., a Maryland corporation (“BH Opportunity REIT II”) and BEHRINGER HARVARD OPPORTUNITY OP II LP, a Delaware limited partnership (“BH Opportunity II LP”) agree that the Property described below be added to the Amended and Restated Property Management and Leasing Agreement dated August 13, 2008, between Oversight Manager, BH OP REIT II, and BHOP II LP (the “Management Agreement”) as modified by this Property Amendment.

 

The following terms shall have the following meanings for purposes of this Property Amendment and the Agreement as it relates to the Property. This Property Amendment may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Property Amendment to produce or account for more than one such counterpart.  Capitalized terms used in this Property Amendment without definition have the same meanings ascribed to those terms in the Management Agreement.

 

	
1.
    	
 
    	
Property Description
    	
 
    	
Arbors at Harbor   Town Apartments, 671 Harbor Edge Drive, Memphis, TN, as more particularly   described on Exhibit A attached hereto.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
2.
    	
 
    	
Legal Name of Owner
    	
 
    	
Behringer Harvard   Arbors, LLC
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
3.
    	
 
    	
Jurisdiction of Organization:
    	
 
    	
Delaware
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
4.
    	
 
    	
Services to be provided   (if other than inManagement Agreement):
    	
 
    	
Such management   and oversight services under the Management Agreement as have not been   delegated to CHRES/Management, L.L.C. (the “Property   Manager”) under a Property Management Contract for the   Property of even date herewith between Owner and Property Manager (the “Property Management Contract”)
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
5.
    	
 
    	
Alterations to   basic terms and conditions of Management Agreement
    	
 
    	
For so long as the   Property Management Contract is in effect (including any renewals thereof and   modifications thereto), the only Management Fee payable to Oversight Manager   shall be the Oversight Fee as provided in Section 5.1 of the Management   Contract. Oversight Manager shall perform, and 
    

 

1

 

	
 
    	
 
    	
 
    	
 
    	
only be obligated   to perform, such services as have not been delegated to Property Manager   under the Property Management Contract.
    

 

[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

 

2

 

Manager, Owner, BH Opportunity II LP and BH Opportunity REIT II have executed this Property Amendment on the dates set forth below their respective signatures to be effective as of the Effective Date.

 

	
 
    	
MANAGER:
    
	
 
    	
 
    	
 
    
	
 
    	
BEHRINGER HARVARD
    
	
 
    	
OPPORTUNITY II   MANAGEMENT SERVICES, LLC,
    
	
 
    	
a Texas limited   liability company
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Gerald J.   Reihsen, III
    
	
 
    	
 
    	
Gerald J.   Reihsen, III
    
	
 
    	
 
    	
Executive Vice   President — Corporate
    
	
 
    	
 
    	
Development and   Legal
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
OWNER;
    
	
 
    	
 
    	
 
    
	
 
    	
BEHRINGER HARVARD   ARBORS, LLC
    
	
 
    	
a Delaware limited   liability company
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
HARBOR TOWN APARTMENTS
    
	
 
    	
 
    	
a Tennessee general partnership
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
FinPar/Harbor Town, L.L.C.,
    
	
 
    	
 
    	
a Tennessee limited liability company,
    
	
 
    	
 
    	
its Managing Member
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
Carter-Haston Financial Partners, L.L.C.,
    
	
 
    	
 
    	
a Tennessee limited liability company,
    
	
 
    	
 
    	
its Managing Member,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ L. Marc Carter
    
	
 
    	
 
    	
 
    	
L. Marc Carter
    
	
 
    	
 
    	
 
    	
Authorized Member
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
 
    
					

 

3

 

 

	
(Signature page to Property Amendment   continued)
    

 

 

	
 
    	
BH Opportunity II LP:
    
	
 
    	
 
    
	
 
    	
BEHRINGER HARVARD OPPORTUNITY OP II LP, a Delaware limited partnership
    
	
 
    	
 
    
	
 
    	
By:
    	
BHO II, Inc.,
    
	
 
    	
 
    	
a Delaware corporation, its general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Gary S. Bresky
    
	
 
    	
 
    	
Gary S. Bresky
    
	
 
    	
 
    	
Executive Vice   President &
    
	
 
    	
 
    	
Chief Financial   Officer
    
	
 
    	
 
    
	
 
    	
Date:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BH Opportunity REIT II:
    
	
 
    	
 
    
	
 
    	
BEHRINGER HARVARD   OPPORTUNITY REIT II, INC.
    
	
 
    	
a Maryland   corporation
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Robert S.   Aisner
    
	
 
    	
 
    	
Robert S. Aisner
    
	
 
    	
 
    	
President
    
	
 
    	
 
    
	
 
    	
Date:
    	
 
    
					

 

4

 

EXHIBIT A to
 Property Amendment

 

for

 

Arbors at Harbor Town Apartments
 Memphis, Tennessee

 

LEGAL DESCRIPTION

 

LAND SITUATED IN SHELBY COUNTY, TENNESSEE:

 

PARCEL I:

 

AREA 1:

 

BEING PART OF THE ISLAND PROPERTIES ASSOCIATES PROPERTY IN MEMPHIS, SHELBY COUNTY, TENNESSEE AS DESCRIBED IN INSTRUMENT NUMBER AE 5971, IN THE SHELBY COUNTY REGISTER’S OFFICE IN MEMPHIS, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

COMMENCING AT THE INTERSECTION OF THE CENTERLINE OF AUCTION AVENUE (RIGHT-OF-WAY VARIES) AND THE EAST RIGHT-OF-WAY LINE OF ISLAND DRIVE (84 FOOT RIGHT-OF-WAY); THENCE ALONG SAID EAST LINE, N 12 DEGREES 31’ 23” E, 308.35 FEET TO THE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID EAST RIGHT-OF-WAY LINE, N 12 DEGREES 31’ 23” E, A DISTANCE OF 217.97 FEET TO A POINT; THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 30 FEET, AN ARC DISTANCE OF 42.10 FEET TO A POINT OF REVERSE CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 153 FEET, AN ARC DISTANCE OF 68.80 FEET TO A POINT OF REVERSE CURVATURE; THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 7 FEET, AN ARC DISTANCE OF 9.72 FEET TO A POINT OF TANGENCY; THENCE S 33 DEGREES 16’ 20” E, 328.65 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 58 FEET, AN ARC DISTANCE OF 46.97 FEET TO A POINT OF REVERSE CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A 58 FOOT RADIUS, AN ARC DISTANCE OF 138.07 FEET TO A POINT; THENCE S 33 DEGREES 16’ 20” E, A DISTANCE OF 150.19 FEET TO A POINT; THENCE S 20 DEGREES 45’ 15” W, A DISTANCE OF 130.42 FEET TO A POINT ON THE NORTH LINE OF LOT 198; THENCE ALONG SAID NORTH LINE, N 69 DEGREES 14’ 45” W, A DISTANCE OF 185.32 FEET TO A POINT AT THE NORTHWEST CORNER OF LOT 198; THENCE ALONG THE WEST LINE OF LOT 198, S 20 DEGREES 45’ 15” W, A DISTANCE OF 63.75 FEET TO A POINT ON THE NORTH LINE OF AUCTION AVENUE; THENCE ALONG SAID NORTH LINE THE FOLLOWING COURSES AND DISTANCES: N 69 DEGREES 14’ 45” W, A DISTANCE OF 90.03 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE RIGHT HAVING A 300 FOOT RADIUS, AN ARC DISTANCE OF 428.14 FEET TO THE POINT OF BEGINNING.

 

LESS AND EXCEPT THAT PART CONVEYED IN QUIT CLAIM DEED OF RECORD IN INSTRUMENT JM 2856, IN THE REGISTER’S OFFICE, SHELBY COUNTY, TENNESSEE.

 

 

AREA 2:

 

BEING PART OF THE ISLAND PROPERTIES ASSOCIATES PROPERTY IN MEMPHIS, SHELBY COUNTY, TENNESSEE AS DESCRIBED IN INSTRUMENT NUMBER AE 5971, IN THE SHELBY COUNTY REGISTER’S OFFICE IN MEMPHIS, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

COMMENCING AT A POINT 581.77 FEET FROM THE INTERSECTION OF AUCTION AVENUE (RIGHT-OF-WAY VARIES) AND THE EAST RIGHT-OF-WAY LINE OF ISLAND DRIVE (84 FOOT RIGHT-OF-WAY); THENCE ALONG THE CENTERLINE OF HARBOR TOWN CIRCLE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 125 FEET, AN ARC LENGTH OF 99.43 FEET TO A POINT SAID POINT BEING THE INTERSECTION OF THE CENTERLINE OF HARBOR TOWN CIRCLE AND THE CENTERLINE OF HARBOR EDGE DRIVE (44 FOOT RIGHT-OF-WAY); THENCE ALONG THE CENTERLINE OF HARBOR EDGE DRIVE S 33 DEGREES 16’ 20” E, A DISTANCE OF 152.76 FEET; THENCE N 56 DEGREES 43’ 40” E, A DISTANCE OF 22 FEET TO A POINT ON THE NORTH LINE OF HARBOR EDGE DRIVE SAID POINT BEING THE POINT OF BEGINNING; THENCE N 56 DEGREES 43’ 40” E, A DISTANCE OF 34.73 FEET TO A POINT; THENCE S 77 DEGREES 28’ 37” E, A DISTANCE OF 279.15 FEET TO A POINT; THENCE S 51 DEGREES 53’ 08” E, A DISTANCE OF 45.00 FEET TO A POINT ON THE NORTHWEST LINE OF HARBOR BEND ROAD; THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 449 FEET, AN ARC DISTANCE OF 145.86 FEET TO A POINT OF TANGENCY; THENCE S 56 DEGREES 43’ 40” W, A DISTANCE OF 68.41 FEET TO A POINT; THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 32 FEET, AN ARC DISTANCE OF 50.27 FEET TO A POINT OF TANGENCY ON THE NORTHEAST LINE OF HARBOR EDGE DRIVE; THENCE ALONG SAID NORTHEAST LINE N 33 DEGREES 16’ 20” W, A DISTANCE OF 234.24 FEET TO A POINT OF BEGINNING.

 

AREA 3:

 

BEING PART OF THE ISLAND PROPERTIES ASSOCIATES PROPERTY AS RECORDED IN INSTRUMENT AE 5971, ALSO BEING PART OF AREA “A” HARBOR TOWN PLANNED DEVELOPMENT OUTLINE PLAN AS RECORDED IN PLAT BOOK 132, PAGE 2, AT THE SHELBY COUNTY REGISTER’S OFFICE LOCATED IN MEMPHIS, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

COMMENCING AT A POINT ON THE CENTERLINE OF AUCTION AVENUE (R.O.W. VARIES) 192.80 FEET EAST OF THE WEST LINE OF ISLAND DRIVE (84’ R.O.W.); THENCE N 20 DEG. 45 MIN. 15 SEC. E A DISTANCE OF 49.94 FEET TO A POINT; THENCE S 69 DEG. 14 MIN. 45 SEC. E A DISTANCE OF 150.00 FEET TO A POINT; THENCE N 20 DEG. 45 MIN. 15 SEC. E A DISTANCE OF 67.75 FEET TO A POINT; THENCE S 69 DEG. 14 MIN. 45 SEC. E A DISTANCE OF 109.62 FEET TO A POINT; THENCE N 14 DEG. 30 MIN. 57 SEC. E A DISTANCE OF 65.24 FEET TO A POINT; THENCE N 53 DEG. 15 MIN. 29 SEC. E A DISTANCE OF 42.96 FEET TO THE POINT OF BEGINNING; THENCE N 20 DEG. 45 MIN. 15 SEC. E A DISTANCE OF 51.63 FEET TO A POINT; THENCE S 33 DEG. 16 MIN. 20 SEC. E A DISTANCE OF 27.79 FEET TO A POINT; THENCE S 53 DEG. 15 MIN. 29 SEC. W A DISTANCE OF 41.86 FEET TO THE POINT OF BEGINNING.

 

TOGETHER WITH THE FOLLOWING EASEMENTS:

 

 

(1) A NONEXCLUSIVE PERPETUAL EASEMENT FOR UTILITIES, DRAINAGE AND INGRESS AND EGRESS TO AND FROM PARCEL I AND ISLAND DRIVE OVER, UPON, ACROSS AND BENEATH THOSE PORTIONS OF HARBOR TOWN CIRCLE, HARBOR EDGE DRIVE AND HARBOR BEND ROAD (PRIVATE DRIVES AS SHOWN ON PLAT OF RECORD IN PLAT BOOK 129, PAGE 73, SAID REGISTER’S OFFICE) THAT ABUT PARCEL I.

 

(2) A NONEXCLUSIVE PERPETUAL TWENTY-FIVE FOOT (25’) EASEMENT (“EASEMENT I”) FOR INGRESS AND EGRESS TO AND FROM AREA 1 AND HARBOR BEND ROAD OVER THE FOLLOWING DESCRIBED REAL PROPERTY:

 

BEING PART OF THE ISLAND PROPERTIES ASSOCIATES PROPERTY IN MEMPHIS, SHELBY COUNTY, TENNESSEE AS DESCRIBED IN INSTRUMENT NUMBER AE 5971 IN THE SHELBY COUNTY REGISTER’S OFFICE IN MEMPHIS, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

COMMENCING AT THE INTERSECTION OF THE CENTERLINE OF AUCTION AVENUE (RIGHT-OF-WAY VARIES) AND THE EAST RIGHT-OF-WAY LINE OF ISLAND DRIVE (84 FOOT RIGHT-OF-WAY); THENCE ALONG SAID EAST LINE, N 12 DEGREES 31’ 23” E, 308.35 FEET TO A POINT; THENCE CONTINUING ALONG SAID EAST RIGHT-OF-WAY LINE, N 12 DEGREES 31’ 23” E, A DISTANCE OF 217.97 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 30.00 FEET, AN ARC DISTANCE OF 42.10 FEET (CHORD N 52 DEGREES 43’ 46” E 38.73 FEET) TO A POINT OF REVERSE CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 153.00 FEET, AN ARC DISTANCE OF 68.80 FEET (CHORD N 80 DEGREES 03’ 11” E 68.22 FEET) TO A POINT OF REVERSE CURVATURE; THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 7.00 FEET, AN ARC DISTANCE OF 9.72 FEET (CHORD S 73 DEGREES 03’ 04” E 8.96 FEET) TO A POINT OF TANGENCY; THENCE S 33 DEGREES 16’ 20” E, 328.65 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 58.00 FEET, AN ARC DISTANCE OF 46.97 FEET (CHORD S 10 DEGREES 04’ 25” E 45.69 FEET) TO A POINT OF REVERSE CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A 58.00 FOOT RADIUS, AN ARC DISTANCE OF 138.07 FEET (CHORD S 55 DEGREES 04’ 25” E 107.70 FEET) TO THE POINT OF BEGINNING; THENCE S 33 DEGREES 16’ 20” E, A DISTANCE OF 150.19 FEET TO A POINT; THENCE S 20 DEGREES 45’ 15” W, A DISTANCE OF 130.42 FEET TO A POINT ON THE NORTH LINE OF LOT 198; THENCE ALONG THE NORTH LINE OF LOT 198 S 69 DEGREES 14’ 45” E A DISTANCE OF 25 FEET TO A POINT; THENCE N 20 DEGREES 45’ 15” E A DISTANCE OF 143.17 FEET TO A POINT; THENCE N 33 DEGREES 16’ 20” W A DISTANCE OF 168.60 FEET TO A POINT ON THE EAST LINE OF HARBOR EDGE DRIVE (44 FOOT PRIVATE DRIVE); THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 58.00 FEET AN ARC LENGTH OF 25.85 FEET (CHORD S 43 DEGREES 57’ 40” W A DISTANCE OF 25.63 FEET) TO THE POINT OF BEGINNING.

 

PARCEL II:

 

BEING PART OF THE ISLAND PROPERTIES ASSOCIATES PROPERTY IN MEMPHIS, SHELBY COUNTY, TENNESSEE AS DESCRIBED IN INSTRUMENT NUMBER AE 5971, IN THE SHELBY COUNTY REGISTER’S OFFICE IN MEMPHIS, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

 

COMMENCING AT A POINT 3,678.61 FEET FROM THE INTERSECTION OF AUCTION AVENUE (RIGHT-OF-WAY VARIES) AND THE EAST LINE RIGHT OF WAY LINE OF ISLAND DRIVE (84 FOOT RIGHT-OF-WAY); THENCE ALONG THE SOUTH PROPERTY LINE OF JOSEPH L. BAIER TRACT S 82 DEGREES 03’ 54” E A DISTANCE OF 457.63 FEET TO THE POINT OF BEGINNING; THENCE CONTINUING ALONG SAID PROPERTY LINE S 82 DEGREES 03’ 54” E A DISTANCE OF 600 FEET TO A POINT; THENCE S 07 DEGREES 56’ 06” W, A DISTANCE OF 690 FEET TO A POINT; THENCE N 82 DEGREES 03’ 54” W, A DISTANCE OF 600 FEET TO A POINT; THENCE N 07 DEGREES 56’ 06” E A DISTANCE OF 690 FEET TO A POINT OF BEGINNING.

 

TOGETHER WITH THE FOLLOWING EASEMENTS:

 

(3) A NONEXCLUSIVE PERPETUAL SIXTY-SIX FOOT (66’) WIDE EASEMENT (“EASEMENT A”) FOR UTILITIES, DRAINAGE AND INGRESS AND EGRESS TO AND FROM PARCEL II AND HARBOR VILLAGE CIRCLE (A PRIVATE DRIVE AS SHOWN ON PLAT OF RECORD IN PLAT BOOK 129, PAGE 73, SAID REGISTER’S OFFICE) OVER, UPON, ACROSS AND BENEATH THE FOLLOWING DESCRIBED REAL PROPERTY:

 

BEING PART OF THE ISLAND PROPERTIES ASSOCIATES PROPERTY IN MEMPHIS, SHELBY COUNTY, TENNESSEE AS DESCRIBED IN INSTRUMENT NUMBER AE 5971, IN THE SHELBY COUNTY REGISTER’S OFFICE IN MEMPHIS, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

COMMENCING AT A POINT ON THE EAST LINE OF ISLAND DRIVE 3075.85 FEET NORTH OF THE INTERSECTION OF EAST RIGHT-OF-WAY OF ISLAND DRIVE AND THE CENTERLINE OF AUCTION AVENUE; THENCE S 80 DEGREES 46’ 01” E ALONG THE CENTERLINE OF HARBOR VILLAGE CIRCLE A DISTANCE OF 49.56 FEET TO A POINT OF CURVATURE; THENCE CONTINUING ALONG THE CENTERLINE WITH A CURVE TO THE LEFT HAVING A RADIUS OF 76.00 FEET AN ARC LENGTH OF 121.03 FEET (CHORD N 53 DEGREES 36’ 42” E, 108.64 FEET) TO A POINT, SAID POINT BEING THE CENTERLINE OF HARBOR VILLAGE DRIVE; THENCE ALONG THE SAID CENTERLINE S 82 DEGREES 00’ 35” E, A DISTANCE OF 36.37 FEET TO THE POINT OF BEGINNING; THENCE N 07 DEGREES 59’ 25” E, A DISTANCE OF 33.00 FEET TO A POINT IN THE NORTH LINE OF HARBOR VILLAGE DRIVE; THENCE S 82 DEGREES 00’ 35” E A DISTANCE OF 261.10 FEET TO A POINT; THENCE S 07 DEGREES 56’ 06” W, A DISTANCE OF 66 FEET TO A POINT IN THE SOUTH LINE OF HARBOR VILLAGE DRIVE; THENCE N 82 DEGREES 00’ 35” W, A DISTANCE OF 261.15 FEET TO A POINT; THENCE N 07 DEGREES 59’ 25” E A DISTANCE OF 33.00 FEET TO THE POINT OF BEGINNING.

 

(4) A NONEXCLUSIVE PERPETUAL FORTY-FOUR FOOT (44’) WIDE EASEMENT (“EASEMENT D”) FOR UTILITIES, DRAINAGE AND INGRESS AND EGRESS TO AND FROM PARCEL II AND HARBOR VIEW DRIVE (A PRIVATE DRIVE AS SHOWN ON PLAT OF RECORD IN PLAT BOOK 129, PAGE 73, SAID REGISTER’S OFFICE) OVER, UPON, ACROSS AND BENEATH THE FOLLOWING DESCRIBED REAL PROPERTY:

 

BEING PART OF THE ISLAND PROPERTIES ASSOCIATES PROPERTY IN MEMPHIS, SHELBY COUNTY, TENNESSEE AS DESCRIBED IN INSTRUMENT NUMBER AE 5971, IN THE SHELBY COUNTY REGISTER’S OFFICE IN MEMPHIS, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

 

COMMENCING AT A POINT ON THE EAST LINE OF ISLAND DRIVE 3075.85 FEET NORTH OF THE INTERSECTION OF THE EAST RIGHT-OF-WAY LINE OF ISLAND DRIVE AND THE CENTERLINE OF AUCTION AVENUE; THENCE S 80 DEGREES 46’ 01” E ALONG THE CENTERLINE OF HARBOR VILLAGE CIRCLE A DISTANCE OF 49.56 FEET TO A POINT OF CURVATURE; THENCE CONTINUING ALONG THE CENTERLINE WITH A CURVE TO THE LEFT HAVING A RADIUS OF 76.00 FEET AN ARC LENGTH OF 35.63 FEET. (CHORD N 85 DEGREES 48’ 11” E, 35.30 FEET) TO A POINT; THENCE S 33 DEGREES 46’ 30” E, ALONG THE CENTERLINE OF HARBOR VIEW DRIVE (66 FOOT PRIVATE DRIVE) A DISTANCE OF 653.04 FEET TO THE CENTERLINE OF HARBOR BEND ROAD (52 FOOT PRIVATE DRIVE); THENCE N 56 DEGREES 13’ 30” E, ALONG THE CENTERLINE OF SAID ROAD 38.00 FEET TO THE POINT OF BEGINNING; THENCE N 33 DEGREES 46’ 30” W, A DISTANCE OF 26 FEET TO A POINT IN THE WEST LINE OF PROPOSED HARBOR BEND ROAD EXTENSION (52 FOOT PRIVATE DRIVE); THENCE N 56 DEGREES 13’ 30” E ALONG THE WEST LINE OF SAID DRIVE 280.46 FEET TO A POINT; THENCE CONTINUING ALONG SAID PROPOSED DRIVE N 7 DEGREES 59’ 25” E A DISTANCE OF 161.77 FEET TO A POINT; THENCE S 82 DEGREES 03’ 54” E A DISTANCE OF 44.00 FEET TO A POINT IN THE EAST LINE OF SAID PROPOSED DRIVE; THENCE S 7 DEGREES 59’ 25” W A DISTANCE OF 192.24 FEET TO A POINT; THENCE CONTINUING ALONG THE EAST LINE OF SAID PROPOSED PRIVATE DRIVE S 56 DEGREES 13’ 30” W A DISTANCE OF 293.02 FEET TO A POINT; THENCE N 33 DEGREES 46’ 30” W A DISTANCE OF 26 FEET TO THE POINT OF BEGINNING.

 

(5) A NONEXCLUSIVE PERPETUAL FORTY-FOUR FOOT (44’) WIDE EASEMENT (“EASEMENT E”) FOR UTILITIES, DRAINAGE AND INGRESS AND EGRESS TO AND FROM PARCEL II AND HARBOR VIEW DRIVE, OVER, UPON, ACROSS AND BENEATH THE FOLLOWING REAL PROPERTY:

 

BEING PART OF THE ISLAND PROPERTIES ASSOCIATES PROPERTY IN MEMPHIS, SHELBY COUNTY, TENNESSEE AS DESCRIBED IN INSTRUMENT NUMBER AE 5971, IN THE SHELBY COUNTY REGISTER’S OFFICE IN MEMPHIS, TENNESSEE AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

COMMENCING AT A POINT ON THE EAST LINE OF ISLAND DRIVE 3075.85 FEET NORTH OF THE INTERSECTION OF THE EAST RIGHT-OF-WAY LINE OF ISLAND DRIVE AND THE CENTERLINE OF AUCTION AVENUE; THENCE S 80 DEGREES 46’ 01” E ALONG THE CENTERLINE OF HARBOR VILLAGE CIRCLE A DISTANCE OF 49.56 FEET TO A POINT OF CURVATURE; THENCE CONTINUING ALONG THE CENTERLINE WITH A CURVE TO THE LEFT HAVING A RADIUS OF 76.00 FEET AN ARC LENGTH OF 121.03 FEET (CHORD N 53 DEGREES 36’ 42” E, 108.64 FEET) TO A POINT SAID POINT BEING THE CENTERLINE OF HARBOR VILLAGE DRIVE; THENCE ALONG THE SAID CENTERLINE S 82 DEGREES 00’ 35” E, A DISTANCE OF 36.37 FEET TO A POINT; THENCE CONTINUING ALONG PROPOSED HARBOR VILLAGE DRIVE CENTERLINE S 82 DEGREES 00’ 35” E A DISTANCE OF 261.13 FEET TO A POINT; THENCE S 07 DEGREES 56’ 06” W, 33 FEET TO THE POINT OF BEGINNING ON THE SOUTH LINE OF PROPOSED HARBOR VILLAGE DRIVE; THENCE ALONG THE EAST LINE OF THE PROPOSED INGRESS-EGRESS EASEMENT S 7 DEGREES 56’ 06” W A DISTANCE OF 156.15 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 122.00 FEET AN ARC LENGTH OF 102.82 FEET (CHORD S 32 DEGREES 04’ 48” W, 99.81 FEET) TO A POINT OF TANGENCY; THENCE S 56 DEGREES 13’ 30” W, A DISTANCE OF 54.38 FEET TO A POINT ON HARBOR VIEW DRIVE (66 FOOT 

 

 

PRIVATE DRIVE); THENCE N 33 DEGREES 46’ 30” W ALONG HARBOR VIEW DRIVE A DISTANCE OF 44.00 FEET TO A POINT; THENCE N 56 DEGREES 13’ 30” E A DISTANCE OF 49.80 FEET TO A POINT OF CURVATURE; THENCE ALONG A CURVE TO THE LEFT HAVING A RADIUS OF 78.00 FEET AN ARC LENGTH OF 65.74 FEET (CHORD N 32 DEGREES 04’ 48” E 63.81 FEET) TO A POINT OF TANGENCY; THENCE N 7 DEGREES 56’ 06” E A DISTANCE OF 616.52 FEET TO A POINT; THENCE S 82 DEGREES 00’ 54” E A DISTANCE OF 44.00 FEET TO A POINT; THENCE S 7 DEGREES 56’ 06” W A DISTANCE OF 460.36 FEET TO THE POINT OF BEGINNING.

 

(6) A NONEXCLUSIVE PERPETUAL EASEMENT FOR UTILITIES, DRAINAGE AND INGRESS AND EGRESS TO AND FROM EASEMENT A AND ISLAND DRIVE OVER, UPON, ACROSS AND BENEATH HARBOR VILLAGE CIRCLE.

 

(7) A NONEXCLUSIVE PERPETUAL EASEMENT FOR UTILITIES, DRAINAGE AND INGRESS AND EGRESS TO AND FROM EASEMENTS D AND E AND ISLAND DRIVE OVER, UPON, ACROSS AND BENEATH THOSE PORTIONS OF HARBOR VIEW DRIVE AND HARBOR VILLAGE CIRCLE LYING BETWEEN SAID EASEMENTS AND ISLAND DRIVE.

 

BEING THE SAME PROPERTY CONVEYED TO MEMPHIS CENTER CITY REVENUE FINANCE CORPORATION, A PUBLIC NOT-FOR-PROFIT CORPORATION, BY WARRANTY DEED OF RECORD IN INSTRUMENT BR 1144 AND QUIT CLAIM DEED OF RECORD IN INSTRUMENT JM 2855, BOTH IN THE REGISTER’S OFFICE, SHELBY COUNTY, TENNESSEE.

 

 

Appendix B

 

INITIAL APPROVED BUDGET AND BUSINESS PLAN

 

[Follows]

 

1

 

Appendix C

 

PRE-APPROVED SIGNATORIES

 

Managing Member:

 

L. Marc Carter

 

C. Harris Haston

 

Amanda Speed

 

BH:

 

Gary S. Bresky

 

Cindy Falls Cooper

 

Elaine Rainey

 

Terri Crocker

 

Stephanie Potter

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