Document:

Exhibit 10.41

	
   

  

 

 

LIMITED LIABILITY COMPANY AGREEMENT

OF

BEHRINGER HARVARD BAILEYS VENTURE, LLC

(a Delaware Limited Liability Company)

	
   

  

 

 

Dated as of June 26, 2007

 

THE
INTERESTS (THE “INTERESTS”) OF BEHRINGER HARVARD BAILEYS VENTURE, LLC HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE U.S. OR
NON-U.S. SECURITIES LAWS, IN EACH CASE IN RELIANCE UPON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE INTERESTS
MAY BE ACQUIRED FOR INVESTMENT ONLY, AND NEITHER THE INTERESTS NOR ANY
PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD,
ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE
SECURITIES ACT, ANY APPLICABLE STATE SECURITIES LAWS AND ANY OTHER APPLICABLE
SECURITIES LAWS, AND (II) THE TERMS AND CONDITIONS OF THIS LIMITED
LIABILITY COMPANY AGREEMENT. THE INTERESTS WILL NOT BE TRANSFERRED OF RECORD
EXCEPT IN COMPLIANCE WITH SUCH LAWS AND THIS LIMITED LIABILITY COMPANY
AGREEMENT. THEREFORE, PURCHASERS OF THE INTERESTS WILL BE REQUIRED TO BEAR THE
RISK OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  1          DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  2          THE VENTURE

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Formation
  of Venture

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Venture
  Name and Principal Office

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Office
  of and Agent for Service of Process

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Term
  of the Venture

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  Title
  to Assets

  	
  8

  
	
   

  	
   

  	
   

  
	
  2.6

  	
  Purpose
  and Powers

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  3          MEMBERS AND
  CAPITAL CONTRIBUTIONS

  	
  11

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Members;
  Capital Contributions

  	
  11

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Capital
  Calls

  	
  12

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Additional
  Capital Contributions

  	
  12

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Failure
  to Make Capital Contributions

  	
  13

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Return
  of Capital Contributions

  	
  15

  
	
   

  	
   

  	
   

  
	
  3.6

  	
  Capital
  Account

  	
  15

  
	
   

  	
   

  	
   

  
	
  3.7

  	
  Transfer
  of Capital Account

  	
  15

  
	
   

  	
   

  	
   

  
	
  3.8

  	
  Tax
  Matters Partner

  	
  15

  
	
   

  	
   

  	
   

  
	
  3.9

  	
  Liability
  for Venture’s Obligations

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  4          ALLOCATIONS

  	
  16

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Allocation
  of Profits and Losses

  	
  16

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Tax
  Allocations

  	
  16

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  5          DISTRIBUTIONS
  AND EXPENSES

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Distributions
  of Net Cash Flow

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Tax
  Provisions

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Priority

  	
  17

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Expenses

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6          MANAGEMENT
  RIGHTS, DUTIES, AND POWERS OF THE  MANAGER; TRANSACTIONS INVOLVING THE MANAGER OR ITS AFFILIATES; ADDITIONAL OR SUCCESSOR
  MANAGER

  	
  18

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Management
  of the Venture

  	
  18

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Operating
  Plans

  	
  19

  

 

i

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Major
  Decisions

  	
  20

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Business
  with Affiliates; Other Activities

  	
  22

  
	
   

  	
   

  	
   

  
	
  6.5

  	
  Maintenance
  of Domestic Status

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.6

  	
  Tax
  Status

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.7

  	
  Liability
  for Venture’s Obligations

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.8

  	
  Additional
  or Successor Manager

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.9

  	
  Removal
  of Manager for Cause

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  7          LIMITATIONS ON LIABILITY AND
  INDEMNIFICATION

  	
  24

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Limitation
  of Liability

  	
  24

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Indemnification

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  8          TRANSFER OF MEMBERS’ INTERESTS IN THE
  VENTURE; BUY/SELL 

  	
  26 

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Transfers
  of a Member’s Interest

  	
  26

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Buy/Sell
  Arrangement

  	
  27

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Basis
  Election

  	
  34

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Void
  Transfer

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  9          EXCESS INTEREST PROVISIONS

  	
  34

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Definitions

  	
  34

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Ownership
  Limitation

  	
  35

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Excess
  Interests

  	
  37

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Prevention
  of Transfer

  	
  37

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  Notice

  	
  38

  
	
   

  	
   

  	
   

  
	
  9.6

  	
  Information
  for the Venture

  	
  38

  
	
   

  	
   

  	
   

  
	
  9.7

  	
  Other
  Action by Venture

  	
  38

  
	
   

  	
   

  	
   

  
	
  9.8

  	
  Ambiguities

  	
  38

  
	
   

  	
   

  	
   

  
	
  9.9

  	
  Modification
  of Existing Holder Limits

  	
  38

  
	
   

  	
   

  	
   

  
	
  9.10

  	
  Increase
  or Decrease in Ownership Limit

  	
  39

  
	
   

  	
   

  	
   

  
	
  9.11

  	
  Limitations
  on Changes in Existing Holder and Ownership Limits

  	
  39

  
	
   

  	
   

  	
   

  
	
  9.12

  	
  Waivers
  by Venture

  	
  39

  
	
   

  	
   

  	
   

  
	
  9.13

  	
  Severability

  	
  39

  
	
   

  	
   

  	
   

  
	
  9.14

  	
  Trust
  for Excess Interests

  	
  39

  

 

ii

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  9.15 

  	
  Distributions
  on Excess Interests

  	
  40

  
	
   

  	
   

  	
   

  
	
  9.16 

  	
  Voting
  of Excess Interests

  	
  40

  
	
   

  	
   

  	
   

  
	
  9.17 

  	
  Non-Transferability
  of Excess Interests

  	
  40

  
	
   

  	
   

  	
   

  
	
  9.18 

  	
  Call
  by the Venture on Excess Interests

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  10          DISSOLUTION OF
  VENTURE

  	
  41

  
	
   

  	
   

  	
   

  
	
  10.1 

  	
  Bankruptcy
  of Member

  	
  41

  
	
   

  	
   

  	
   

  
	
  10.2 

  	
  Other
  Events of Dissolution

  	
  42

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  Distribution
  Upon Liquidation

  	
  42

  
	
   

  	
   

  	
   

  
	
  10.4 

  	
  Procedural
  and Other Matters

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  11          REPRESENTATIONS
  AND WARRANTIES

  	
  43

  
	
   

  	
   

  	
   

  
	
  11.1 

  	
  Representations
  and Warranties of the Members

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  12          BOOKS AND
  RECORDS; REPORTS TO MEMBERS

  	
  44

  
	
   

  	
   

  	
   

  
	
  12.1 

  	
  Books

  	
  44

  
	
   

  	
   

  	
   

  
	
  12.2 

  	
  Quarterly
  Reports

  	
  44

  
	
   

  	
   

  	
   

  
	
  12.3 

  	
  Annual
  Reports

  	
  45

  
	
   

  	
   

  	
   

  
	
  12.4 

  	
  Accountants;
  Tax Returns

  	
  45

  
	
   

  	
   

  	
   

  
	
  12.5 

  	
  Accounting
  and Fiscal Year

  	
  45

  
	
   

  	
   

  	
   

  
	
  12.6 

  	
  Project
  Valuations

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  13          MISCELLANEOUS

  	
  45

  
	
   

  	
   

  	
   

  
	
  13.1 

  	
  Notices

  	
  45

  
	
   

  	
   

  	
   

  
	
  13.2 

  	
  Execution
  in Counterparts

  	
  47

  
	
   

  	
   

  	
   

  
	
  13.3 

  	
  Amendments

  	
  47

  
	
   

  	
   

  	
   

  
	
  13.4 

  	
  Additional
  Documents

  	
  47

  
	
   

  	
   

  	
   

  
	
  13.5 

  	
  Validity

  	
  47

  
	
   

  	
   

  	
   

  
	
  13.6 

  	
  Governing
  Law

  	
  47

  
	
   

  	
   

  	
   

  
	
  13.7 

  	
  Waiver

  	
  47

  
	
   

  	
   

  	
   

  
	
  13.8 

  	
  Consent
  and Approval

  	
  47

  
	
   

  	
   

  	
   

  
	
  13.9 

  	
  Waiver
  of Partition

  	
  48

  
	
   

  	
   

  	
   

  
	
  13.10 

  	
  Binding
  Effect

  	
  48

  
	
   

  	
   

  	
   

  
	
  13.11 

  	
  Entire
  Agreement

  	
  48

  
	
   

  	
   

  	
   

  
	
  13.12 

  	
  Captions

  	
  48

  

 

iii

 

TABLE OF
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  Page

  
	
   

  	
   

  	
   

  
	
  13.13 

  	
  No
  Strict Construction

  	
  48

  
	
   

  	
   

  	
   

  
	
  13.14 

  	
  Identification

  	
  48

  
	
   

  	
   

  	
   

  
	
  13.15 

  	
  Recourse
  to the Manager

  	
  48

  
	
   

  	
   

  	
   

  
	
  13.16 

  	
  Recourse
  to the Members

  	
  48

  
	
   

  	
   

  	
   

  
	
  13.17 

  	
  Remedies
  Not Exclusive

  	
  49

  
	
   

  	
   

  	
   

  
	
  13.18 

  	
  Use
  of Behringer Harvard Trade Name

  	
  49

  
	
   

  	
   

  	
   

  
	
  13.19 

  	
  Venture
  Counsel

  	
  49

  
	
   

  	
   

  	
   

  
	
  13.20

  	
  Waiver
  of Jury Trial

  	
  49

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
  A

  	
  Members;
  Addresses; Capital Commitments; Percentage Interests

  	
   

  
	
  B

  	
  Legal
  Description of Project

  	
   

  
	
  C

  	
  Investment
  Guidelines

  	
   

  
	
  D

  	
  Master
  Partnership Agreement

  	
   

  
	
  E

  	
  Form of
  Limited Liability Company Agreement for the Subsidiary REIT

  	
   

  

 

iv

 

LIMITED LIABILITY COMPANY AGREEMENT

OF

BEHRINGER HARVARD BAILEYS VENTURE, LLC

 

THIS
LIMITED LIABILITY COMPANY AGREEMENT of BEHRINGER HARVARD BAILEYS VENTURE, LLC
is made and entered into as of June 21, 2007, by and between Behringer
Harvard Baileys, LLC (“BH REIT”), a limited liability company that is an
indirect wholly owned subsidiary of Behringer Harvard Multifamily REIT I, Inc., with its principal office at 15601 Dallas
Parkway, Suite 600, Addison, Texas 75001, and BEHRINGER HARVARD MASTER
PARTNERSHIP I LP (“BH MP”), a Delaware limited partnership with its principal
office at 15601 Dallas Parkway, Suite 600, Addison, Texas 75001.

 

W I T N E S S E T H

 

WHEREAS, BH REIT as the Manager and a Member and BH MP
as a Member desire to form a limited liability company for the purpose of
owning, operating and managing the real property at Parcel 1, Fairfield Baileys
LLC, Mason District, located in Fairfax County, Virginia and Arlington County,
Virginia, the legal description for which is set forth in Exhibit B hereof and known as Baileys (the “Project”);

 

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

 

NOW, THEREFORE, in consideration of the premises and the
mutual covenants of the parties hereto, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

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

 

“Acquisition
Date” has the meaning ascribed thereto in Section 3.1.

 

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

 

“Advisory
Committee” means the Advisory Committee established pursuant to the terms of
the Master Partnership Agreement.

 

1

 

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

 

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

 

“Agreement”
means this Limited Liability Company Agreement, as amended, modified,
supplemented or restated from time to time.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

“Capital
Account” has the meaning ascribed thereto in Section 3.6.

 

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

 

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

 

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

 

“Cause”
means (i) a material breach of this Agreement by the Manager involving
fraud or a violation of a fiduciary duty owed to the Venture or BH MP as a
Member; (ii) the termination of the Advisory Agreement by BH REIT as a
result of, or within six months of the occurrence of, fraud or willful
misconduct on the part of BH REIT Advisor in respect of any Project or Venture;
or (iii) the conviction of, or the entry of a guilty plea or plea of no
contest with respect to, a felony involving fraud, embezzlement or dishonesty
by BH REIT Advisor or any Affiliated Entity of BH REIT Advisor.

 

“Certificate”
means the Certificate of Formation of the Venture, as originally filed with the
office of the Secretary of State of the State of Delaware on June 21,
2007, as amended, supplemented or otherwise modified from time to time as
herein provided.

 

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

 

“Code”
means the Internal Revenue Code of 1986, as amended from time to time (or any
corresponding provisions of succeeding law); any reference to any section of
the Code shall include any corresponding provision of succeeding laws.
Notwithstanding the foregoing, any change in the Code which materially
increases the requirements for qualification of the Subsidiary REIT as a
domestically-controlled qualified investment entity for purposes of Section 897(h)(4)(B) of
the Code, or otherwise causes the Subsidiary REIT not to be a
domestically-controlled qualified investment entity for purposes of
Section 897(h)(4)(B) of the Code, shall not be included in the
definition of “Code” hereunder, it being understood that PGGM will bear the
risk of such change; provided that the Manager will use commercially
reasonable efforts to minimize the financial impact to PGGM (indirectly through
BH MP) of any such change at PGGM’s expense; provided further
that the same does not adversely affect BH REIT’s tax status.

 

3

 

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

 

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

 

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

 

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

 

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

 

“Domestic
Status Loss” means a change in the Tax Sensitive Beneficial Owner Group, if the
effect thereof would be a disqualification of the Subsidiary REIT as a
“domestically-controlled qualified investment entity” within the meaning of
Section 897(h)(4)(B) of the Code.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

“Management
Company” means Fairfield Baileys LLC, a Delaware limited liability company or
an Affiliate thereof.

 

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

 

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

 

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

 

“Master
Partnership Agreement” means that certain limited partnership agreement, dated
as of May 7, 2007, by and between BH Institutional GP LP and PGGM, the
form of which is attached as Exhibit D, as amended, modified, supplemented or
restated from time to time.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

“Person”
means an individual or Entity.

 

“PGGM”
means Stichting Pensioenfonds voor de Gezondheid, Geestelijke en
Maatschappelijke Belangen, a Dutch foundation.

 

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

 

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

 

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

 

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

 

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

 

“Qualifying
Opinion” means a written opinion of outside, reputable tax counsel licensed to
practice law in the United States and acting reasonably.

 

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

 

“REIT”
means a real estate investment trust under the Code.

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Taxes”
shall mean all taxes, charges, fees, duties, levies or other assessments,
including without limitation, income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational and interest equalization, windfall profits,
severance and employees’ income withholding and Social Security taxes, which
are imposed by the United States, or any state, local or foreign government or
subdivision or agency thereof, and such term shall include any interest,
penalties or additions to tax attributable to such Taxes.

 

“Tax
Return” shall mean any report, return or other information required to be
supplied to a taxing authority in connection with Taxes.

 

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

 

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

 

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

 

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

 

“Venture”
means the limited liability company formed hereby.

 

7

 

“Venture
Counsel” has the meaning ascribed thereto in Section 13.19.

 

ARTICLE 2

 

THE VENTURE

 

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

 

2.2                                 Venture Name and Principal Office. The name of the Venture shall be Behringer Harvard
Baileys Venture, LLC or such other name as the Manager may determine. The
principal place of business and the principal administrative office of the
Venture shall be 15601 Dallas Parkway, Suite 600, Addison, Texas 75001.
The Venture may change such office and may have such additional offices as the
Manager may determine.

 

2.3                                 Office of and Agent for Service of Process. The registered office of the Venture in the
State of Delaware shall initially be 1209 Orange Street, Wilmington, Delaware
19801 and the Venture’s agent for service of process on the Venture in the
State of Delaware shall be The Corporation Trust Company. The Venture may
change, at any time and from time to time, the location of such registered
office and/or such registered agent upon written notice of the change to the
Members.

 

2.4                                 Term of the Venture. The term of the Venture commenced on the
date the Certificate was first filed with the Secretary of State of the State
of Delaware. Unless sooner terminated as hereinafter provided or by operation
of law, the term of the Venture shall continue until December 31, 2057.

 

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

 

2.6                                 Purpose and Powers.

 

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

 

8

 

of,
the Venture pursuant to this Agreement or the Act, and further including,
without limitation, the following:

 

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

 

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

 

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

 

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

 

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

 

(vi)                       to make additional investments in the Project
subsequent to the Venture’s initial investment in the Project (including, without
limitation, additional investments made to finance an acquisition by the
Subsidiary REIT or any capital improvements, tenant improvements or other
improvements or alterations to any property constituting the Project or
otherwise to protect the Venture’s investment in the Project or to provide
working capital for the Project);

 

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

 

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

 

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

 

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

 

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

 

9

 

necessary
or appropriate for the acquisition, development, operation, management,
financing, sale or other disposition of the Project or as otherwise
contemplated by this Agreement;

 

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

 

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

 

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

 

(xv)                            to enter into and perform the terms of any
credit facility as borrower or guarantor and cause the Subsidiary REIT to enter
into and perform the terms of any credit facility as borrower, including,
without limitation, repaying borrowings under any credit facility on behalf of
the Venture;

 

(xvi)                         to do such other things and engage in such
other activities as the Manager may deem necessary, convenient or advisable
with respect to the conduct of the business of the Venture, and have and
exercise all of the powers and rights conferred upon limited liability
companies formed pursuant to the Act.

 

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

 

(ii)                                  The Manager shall use “Best Efforts” (as
defined below) to cause the Subsidiary REIT to satisfy the requirements for
taxation as a Domestically-Controlled REIT; provided,  however,
that the Manager and its Affiliates shall not be required to engage in any
transaction with, or on behalf of, the Venture or contribute additional capital
to the Venture in connection with such obligation. For purposes of the
foregoing sentence, the Manager’s “Best Efforts” means that (A) no Capital
Contribution shall be accepted and no redemption of interests in the Venture
shall be allowed if as a result thereof more than 49% of the interests in the

 

10

 

Subsidiary
REIT would be held, directly or indirectly (including, without limitation,
through the Venture) by Persons that are not U.S. Persons, and (B) no
Transfer of less than all of the Venture’s interest in the Subsidiary REIT
shall be permitted if such Transfer would result in the Subsidiary REIT no
longer qualifying as a Domestically-Controlled REIT. In satisfying the
requirements of this Section 2.6(b)(ii),
in the absence of actual knowledge to the contrary, the Manager shall be
entitled to rely upon the most recent written representations of the direct or
indirect partners or members and prospective partners or members of the Venture
regarding the extent to which they are, or are owned by, U.S. Persons.

 

(iii)                               The Manager shall cause the limited liability
company agreement, charter or other governing document of the Subsidiary REIT
to provide that any Transfer that, if effective, would result in the interests
in the Subsidiary REIT being beneficially owned (as provided in
Section 856(a) of the Code) by fewer than 100 Persons (determined
without reference to any rules of attribution) shall be void ab initio as to the Transfer of any interest in the
Subsidiary REIT which would be otherwise beneficially owned (as provided in
Section 856(a) of the Code) by the transferee and that the intended
transferee shall acquire no rights in such interest.

 

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

 

ARTICLE 3

 

MEMBERS AND CAPITAL CONTRIBUTIONS

 

3.1                                 Members; Capital Contributions.
The name, address and Capital Commitment of each Member shall be as set forth
on Exhibit A.
Unless otherwise agreed by each Member, the Members shall have no obligation to
fund Capital Contributions to the Venture in excess of their respective Capital
Commitments set forth on Exhibit A.
The Members shall be required to make Capital Contributions under this Section 3.1 in connection with the Project, including
the acquisition, development, improvement, financing (including any mezzanine
financing), operation or maintenance by the Venture through the Subsidiary REIT
of the Project or to pay any Organizational Expenses or Operating Expenses. The
obligation of each Member to make any Capital Contribution with respect to the
Project (including additional funding subsequent to the acquisition,
development or financing of the Project) contemplated by this Section 3.1 is subject to the conditions concurrent that
(i) (A) the Venture has acquired an interest in the Project or a
binding commitment has been executed for the acquisition of an interest in the
Project; (B) the Project has been substantially developed by the Manager,
an Affiliate or a BH-Sponsored Investment Program; or (C) the Venture,
directly or indirectly, has provided mezzanine or other financing for the
Project or a binding commitment for the provision of such financing has been
executed and, in any case, the applicable event under clause (A), (B) or
(C) occurs no later than 120 days after the date of this Agreement (the
“Acquisition Date”) and (ii) each other Member has made, or is concurrently
making, its proportionate Capital Contribution. If the conditions in clauses
(i) and (ii) have not been satisfied or waived on or

 

11

 

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

 

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

 

3.3          Additional
Capital Contributions.

 

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

 

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

 

12

 

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

 

3.4             Failure to Make Capital Contributions.

 

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

 

(b)           The Non-defaulting Member may, at its
election, make a loan (a “Default Loan”) to the Defaulting Member of all of the
amount that the Defaulting Member was obligated to contribute to the Venture.
The Defaulting Member hereby irrevocably authorizes and directs the
Non-defaulting Member to advance the proceeds of each Default Loan to the
Venture. Receipt by the Venture of such proceeds shall constitute a Capital
Contribution of, and a loan made by the Non-defaulting Member to, the
Defaulting Member, and such Default Loan shall be legally enforceable to the
same extent and in the same manner, subject to the terms of this Agreement, as
if such proceeds were loaned directly to the Defaulting Member and contributed
by the Defaulting Member to the Venture. The making of a Default Loan to the
Defaulting Member shall not cure the default by the Defaulting Member.

 

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

 

(d)           In no event shall the aggregate of the
interest on a Default Loan, plus any other amounts paid in connection with the
Default Loan that under Applicable Law would be deemed “interest,” ever exceed
the maximum amount of interest which, under Applicable Law, could be lawfully
charged on such Default Loan. The Defaulting Member and Non-defaulting

 

13

 

Member
making the Default Loan specifically intend and agree to limit contractually
the interest payable on each Default Loan to not more than an amount determined
as being at the Maximum Rate. Therefore, none of the terms of a Default Loan or
any other instruments pertaining to or securing a Default Loan shall ever be
construed to create a contract to pay interest at a rate in excess of the
Maximum Rate, and neither the Defaulting Member nor any other party liable
therefor shall ever be liable for interest in excess of that determined as
being at the Maximum Rate. The provisions of this Section 3.4(d) shall
control over all provisions of or respecting a Default Loan and of any other
instruments pertaining to or securing a Default Loan. If any amount of interest
taken or received by the Non-defaulting Member shall be in excess of the maximum
amount of interest that, under Applicable Law, could lawfully have been
collected on a Default Loan, then the excess shall be deemed to have been the
result of a mathematical error by the parties hereto and shall be refunded
promptly to the Defaulting Member. All amounts paid or agreed to be paid in
connection with the indebtedness evidenced by a Default Loan that would under
Applicable Law be deemed “interest” shall, to the extent permitted by
Applicable Law, be amortized, prorated, allocated, and spread throughout the
full term of such Default Loan. “Applicable Law” means the law in effect from
time to time and applicable to a Default Loan that permits the charging and
collection of the highest permissible lawful nonusurious rate of interest on a
Default Loan, including laws of the United States of America and, to the extent
applicable to a given Default Loan, laws of the State of Virginia. “Maximum
Rate” means the maximum lawful nonusurious rate of interest (if any) that under
Applicable Law the Non-defaulting Member is permitted to charge the Defaulting
Member on a Default Loan from time to time.

 

(e)           If a suit or other proceeding in any court
shall be instituted for collection of a Default Loan or enforcement of the lien
and security interest securing payment of same, the Defaulting Member, in
addition to all other remedies available at law or in equity in connection with
such Default, shall be liable for all court costs and reasonable attorneys’
fees and other collection costs thereby incurred, payment of which shall
likewise be secured by said security interest and lien. A Member who becomes a
Defaulting Member shall continue to be a Defaulting Member until all Default
Loans made to such Member have been fully repaid, both as to principal and
interest and costs, and all amounts due from the Defaulting Member to the
Venture and the Non-Defaulting Member in connection with such Default Loans
shall have been paid in full. Notwithstanding anything to the contrary in Article 5,
all amounts of Net Cash Flow and any other payments and proceeds which become
distributable or payable to a Defaulting Member shall be paid, first, to
discharge all accrued and unpaid interest and the outstanding principal (in
that order) of the Default Loans made to the Defaulting Member, and second (if
anything remains), to pay all remaining amounts due to the Venture from the
Defaulting Member (with any amounts applied to discharge a Default Loan and any
costs or expenses in connection therewith being treated as having been distributed
to the Defaulting Member).

 

(f)            Notwithstanding anything to the contrary
contained in this Agreement, during the period that any Member is a Defaulting
Member with respect to a Capital Call, such Member’s Consent, whether otherwise
required directly or indirectly, shall not be required in order for the Venture
to make or to implement any Major Decision, and any action, decision or other
matter set forth in Section 6.3(a) as a “Major Decision” shall
cease to be a Major Decision during such period.

 

14

 

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

 

3.6           Capital Account.
The Venture shall establish and maintain throughout the life of the Venture for
each Member a separate capital account (“Capital Account”) in accordance with Section 704(b) of
the Code. Such Capital Account shall be increased by (i) the amount of the
Capital Contributions made by such Member to the Venture pursuant to this
Agreement, and (ii) all items of income and gain allocated to such Member
pursuant to Section 4.1;
and such Capital Account shall be decreased by (A) the amount of cash and
property distributed to such Member pursuant to this Agreement and (B) all
items of loss and deduction allocated to such Member pursuant to Section 4.1.
Any other Venture item which is required or authorized under
Section 704(b) of the Code to be reflected in the Capital Accounts
shall be so reflected.

 

3.7           Transfer of Capital Account.
The original Capital Account established for each transferee shall be in the
same amount as the Capital Account or portion thereof of the Member which such
transferee succeeds, at the time such transferee is admitted to the Venture.
The Capital Account of any Member whose Percentage Interest shall be increased
by means of the Transfer to it of all or part of the Interest of another Member
shall be appropriately adjusted to reflect such Transfer. Any reference in this
Agreement to a Capital Contribution of, or distribution to, a then-Member shall
include a Capital Contribution or distribution, as the case may be, previously
made by or to any prior Member on account of the Interest of such then-Member.

 

3.8           Tax Matters Partner.
BH REIT shall be the Venture’s “Tax Matters Partner” (as such term is defined
in Section 6231(a)(7) of the Code), with all of the powers that
accompany such status (except as otherwise provided in this Agreement).
Promptly following the written request of the Tax Matters Partner, the Venture
shall, to the fullest extent permitted by law, reimburse and indemnify the Tax
Matters Partner for all reasonable expenses, including, without limitation,
reasonable legal and accounting fees, claims, liabilities, losses and damages
incurred by the Tax Matters Partner in connection with any administrative or
judicial proceeding with respect to the tax liability of the Members. The
provisions of this Section 3.8 shall survive the termination of the Venture
and shall remain binding on the Members for as long a period of time as is
necessary to resolve with the Internal Revenue Service any and all matters
regarding the U.S. federal income taxation of the Venture or the Members.

 

3.9           Liability for Venture’s Obligations.
Except as otherwise provided by the Act, the debts, obligations and liabilities
of the Venture, whether arising in contract, tort or otherwise,

 

15

 

shall be solely the debts, obligations and liabilities of the Venture,
and the Members shall not be obligated personally for any such debt, obligation
or liability solely by reason of being a Member of the Venture. Each Member
shall be obligated to make payment of its contributions of capital as and when
due hereunder and other payments as provided in this Agreement.

 

ARTICLE 4

 

ALLOCATIONS

4.1           Allocation of Profits and Losses.

 

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

 

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

 

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

 

4.2           Tax Allocations.

 

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

 

(b)           In accordance with Section 704(c) of
the Code and the regulations thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Venture shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Venture for
federal income tax purposes and its fair market value as of the date of
contribution. In the event the book value of any Venture property is adjusted
pursuant to the Venture’s maintenance of Capital Accounts, subsequent
allocations of income, gain, loss, and deduction with respect to such asset shall
take account of any variation between the adjusted basis of such asset for
federal

 

16

 

income
tax purposes and its book value for Capital Account purposes in the same manner
as under Section 704(c) of the Code and the regulations thereunder.
Any elections or other decisions relating to such allocations shall be made by
the Manager in any manner that reasonably reflects the purpose and intention of
this Agreement.

 

(c)           Allocations pursuant to this Section 4.2
are solely for purposes of federal, state, and local taxes and shall not
affect, or in any way be taken into account in computing, any Member’s Capital
Account or share of Profits, Losses or distributions pursuant to any provision
of this Agreement.

 

ARTICLE 5

 

DISTRIBUTIONS AND EXPENSES

 

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

 

5.2           Tax Provisions. In the event the Venture is subject to any
tax or other obligation that is attributable to the Interest of one Member, but
not all the Members, such tax or other obligation shall be specially allocated
to, and charged against the Capital Account of, such Member, and the amounts
otherwise distributable to such Member pursuant to this Agreement shall be
reduced by such amount but shall nevertheless be deemed to be a distribution of
such amount to such Member for all purposes of this Agreement.

 

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

 

5.4           Expenses.

 

(a)           Organizational Expenses. The Members shall bear, either directly or
indirectly through the Venture, all out-of-pocket costs (including, without
limitation, legal and accounting fees and expenses) incurred in connection with
the formation and organization of the Venture, the Subsidiary REIT and any subsidiary thereof (“Organizational
Expenses”) in accordance with their respective Percentage Interests. The
Manager may make one or more Capital Calls in accordance with Article 3
in order to enable the Venture to pay (or, if applicable, to reimburse to the
Manager or its Affiliates) any Organizational Expenses.

 

(b)           Operating Expenses. The Venture shall bear all other costs and
expenses of the Venture’s activities and operations, including without
limitation, the following: (i) Taxes of the Venture, fees and expenses of
professional advisors to the Venture, premiums for insurance (including,
without limitation, error and omissions, directors and officers and other

 

17

 

forms
of liability insurance (other than the cost of liability insurance for the
Manager, its Affiliates and any of their respective officers, directors,
partners, members, shareholders and employees)) protecting the Venture, the
Manager and other Indemnified Persons and litigation costs of the Venture; (ii) administrative
expenses related to the Venture, including without limitation, fees and
expenses of accountants, lawyers and other professionals incurred in connection
with the Venture’s annual audit, financial reporting, legal opinions and
preparation of Tax Returns; (iii) the Venture’s proportionate share of all
fees, costs and expenses incurred in evaluating, developing, negotiating,
structuring, acquiring, holding, appraising, financing, selling or otherwise
disposing of or otherwise dealing with the Subsidiary REIT and the Project (or
the Venture’s interest therein) pursued for the Venture in accordance with the
terms of this Agreement, whether or not the Venture actually invests therein
(including, without limitation, any “dead deal” costs, travel, legal,
accounting, due diligence, projections, valuations and other fees and
out-of-pocket expenses related thereto); (iv) all fees and expenses
incurred in connection with obtaining independent, third-party valuations of
the Venture pursuant to Section 12.6; (v) indemnification expenses incurred pursuant to Section 7.2; and (vi) all other customary fees,
costs and expenses of the Venture (collectively, “Operating Expenses”). The
Manager may make one or more Capital Calls in accordance with Article 3 in order to enable the Venture to pay any
Operating Expenses.

 

ARTICLE 6

 

MANAGEMENT RIGHTS, DUTIES, AND POWERS OF THE

MANAGER; TRANSACTIONS INVOLVING

THE MANAGER OR ITS AFFILIATES;

ADDITIONAL OR SUCCESSOR MANAGER

 

6.1           Management of the Venture.

 

(a)           Right, Power and Authority of Manager.
Except as provided in this Agreement, the Manager shall have the right, power
and authority to manage and control the day-to-day affairs of the Venture.
Subject to Sections 6.2 and 6.3 and except for any other
provision of this Agreement that requires the Consent of the Members, any
action taken by the Manager on behalf of the Venture shall constitute the act
of, and serve to bind, the Venture. Without limiting the generality of the
foregoing, it is understood and agreed that the Manager may enter into letters
of intent, purchase agreements or other commitments relating to the acquisition
or development of the Project on behalf of the Venture and in anticipation of
the purchase or development of the Project by the Subsidiary REIT (or a
subsidiary thereof), it being acknowledged that any liability thereby incurred
by the Manager in connection therewith shall be subject to indemnification
under Section 7.2.
In no event shall any Person dealing with the Manager with respect to the
conduct of the affairs of the Venture be obligated to ascertain that the terms
of this Agreement have been complied with or be obligated to inquire into the
necessity or expediency of any action of the Manager. The Manager shall be
required to devote only such time to the business of the Venture as is
reasonably necessary to perform its obligations under this Agreement.

 

(b)           Reliance on Officers of the Manager.
It is understood and agreed that each officer of the Manager may act for and in
the name of the Manager under this Agreement.

 

18

 

In
dealing with any officer of the Manager acting for or on behalf of the Venture,
no Person shall be required to inquire into, and Persons dealing with the
Venture are entitled to rely conclusively on, the right, power and authority of
any officer of the Manager to bind the Venture.

 

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

 

6.2           Operating Plans.

 

(a)           Initial Operating Plan.
The Manager shall prepare, or have prepared, an initial operating plan (the
“Initial Operating Plan”) for the Project and submit the Initial Operating Plan
to BH MP for its review and approval prior to the date of the Venture’s
acquisition of an ownership interest in the Project. The Initial Operating Plan
shall cover the period from the Venture’s acquisition of an ownership interest
in the Project through the end of the first full fiscal year of the Venture
following such acquisition and shall contain all material pertinent leasing,
financing, operational and disposition information together with a detailed
budget of projected operating and capital expenses and revenues and any other
information deemed appropriate by the Manager for the Project, to the extent
applicable. BH MP may make comments on and suggestions for the Initial
Operating Plan, and if accepted by the Manager in its reasonable discretion,
such comments and suggestions shall be incorporated into a revised Initial
Operating Plan. Upon approval by BH MP of the Initial Operating Plan (as
revised, if applicable), the Manager shall have the operations of the Project
conducted in all material respects in accordance with the Initial Operating
Plan (as revised, if applicable) through the end of such first full year,
except for any action or expenditure the Manager deems reasonably necessary or
appropriate in the event of any emergency situation affecting the Project, as
determined by the Manager in its reasonable discretion. After the receipt of
the Consent of BH MP for the Initial Operating Plan (as revised, if
applicable), any material deviation from or amendment to the Initial Operating
Plan shall be submitted to BH MP for its Consent, except for any action or
expenditure the Manager deems reasonably necessary or appropriate in the event
of an emergency situation affecting the Project, as determined by the Manager
in its reasonable discretion. Except as otherwise provided herein in the event
of an emergency situation affecting the Project, the Initial Operating Plan and
each amendment thereto or deviation therefrom in any material respect shall
require the approval of BH MP, and the operations of the Project after the
acquisition of the Venture’s ownership interest in the Project shall not
commence until BH MP has approved the Initial Operating Plan.

 

(b)           Subsequent Operating Plans.
Thirty days before the end of the Venture’s first full fiscal year after the
acquisition of its ownership interest in the Project and each subsequent fiscal
year of the Venture, the Manager shall prepare, or cause to be prepared, and
submit to BR MP for its review and approval an operating plan (a “Subsequent
Operating Plan”) for the Project for the next succeeding fiscal year of the
Venture. Each Subsequent Operating Plan for the Project shall contain all
material pertinent leasing, financing, operational and disposition information
together with a detailed budget of projected operating and capital expenses and
revenues and any other information deemed appropriate by the Manager for the
applicable fiscal year. BH MP may make comments on and suggestions for the
Subsequent Operating Plan, and if accepted by the Manager in its reasonable
discretion, such comments and

 

19

 

suggestions
shall be incorporated into a revised Subsequent Operating Plan for such
Project. Upon receiving the Consent of BH MP for the Subsequent Operating Plan
(as revised, if applicable), the Manager shall cause the operations of the
Project for the applicable fiscal year to be conducted in all material respects
in accordance with such Subsequent Operating Plan. If BH MP has not granted its
Consent to a Subsequent Operating Plan for the Project prior to the beginning
of the fiscal year for which the Subsequent Operating Plan is intended to be
used, the Manager shall cause the operations of the Project to be conducted in
all material respects in accordance with the operating plan for the immediately
preceding fiscal year (the “Prior Operating Plan”); provided that, (i) the
Manager may make such adjustments to the Prior Operating Plan as the Manager reasonably
deems necessary or appropriate under the circumstances, except that, other than
as permitted by clause (iii) of this Section 6.2, the Manager
may not increase any items of operating or capital expenses in excess of the
amounts permitted by clause (ii) of this Section 6.2 without
the Consent of BH MP, (ii) the Manager may increase each item of operating
and capital expenses in the Prior Operating Plan by up to 5%, and (iii) in
the event of an emergency situation affecting the Project, as determined by the
Manager in its reasonable discretion, the Manager may take, or cause to be
taken, such action in respect of such emergency situation as the Manager deems
reasonably necessary or appropriate; provided that, the Manager promptly
advises BH MP of such emergency situation and such action taken or caused to be
taken. After its approval by BH MP, any material deviation from or amendment to
an approved Subsequent Operating Plan shall require the Consent of the Members
pursuant to Section 6.3, except for any action or expenditure the
Manager deems reasonably necessary or appropriate in the event of an emergency
situation affecting the Project, as determined by the Manager in its reasonable
discretion.

 

6.3           Major Decisions.

 

(a)           Notwithstanding anything to the contrary
contained in this Agreement (except as otherwise provided in Section 3.4(f) or
permitted in accordance with Section 6.2), the Manager shall have
no authority on behalf of the Venture to take any action, make any decision,
expend any sum or undertake or suffer any obligation if to do so would
constitute a Major Decision, unless such Major Decision is approved in advance
in writing by all of the Members (or, in the case of clause (vii) below,
by the affected Member(s)) As used herein, “Major Decision” means any decision
of the Venture to do or take any of the following actions:

 

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

 

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

 

20

 

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

 

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

 

(v)           causing or permitting the Venture or the
Subsidiary REIT to mortgage, pledge or hypothecate the Project (except pursuant
to leases entered into in the ordinary course of business) to secure any
indebtedness for borrowed money of the Venture other than in accordance with
the Initial Operating Plan or the applicable Subsequent Operating Plan, as the
case may be;

 

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

 

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

 

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

 

(ix)           adopting and implementing a Subsequent
Operating Plan or making any material deviation from or amendment to the
Initial Operating Plan or a previously approved Subsequent Operating Plan other
than as contemplated by Section 6.2;
or

 

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

 

(b)           In connection with any proposed Consent to a
Major Decision, the Manager shall provide the Members with such information as
they may reasonably request and as shall be reasonably available to the General
Partner for the Members (or, in the case of clause (vii) of  Section 6.3(a), the affected Member(s)) to make a prudent
judgment whether to approve or disapprove the proposed action. The Manager
shall give the Members not less than 10 Business Days’ advance written notice
of, and request their Consent to, each proposed Major Decision. Should a Member
fail to respond to a Consent request with respect to a Major

 

21

 

Decision
within 10 Business Days from when such notice is given, such Member shall
conclusively be deemed to have granted its Consent to such Major Decision
(other than a Major Decision identified in Section 6.3(a)(i), (ii) or
(vii), which shall require the affirmative Consent of each Member or, in
the case of Section 6.3(a)(vii), the affected Member(s)) and shall
waive any right to withdraw such Consent or otherwise object to such Major
Decision, provided that the notice must indicate that it will become effective
at the expiration of the 10 Business Day period in order to become effective in
such manner.

 

6.4           Business with Affiliates; Other Activities.

 

(a)           The Venture, directly or through the
Subsidiary REIT, may invest in the Project, notwithstanding that Behringer, any
of its Affiliates or any BH-Sponsored Investment Program holds a material (or
lesser) interest in the Project or that the Project has been recently developed
by, or is to be developed by, Behringer, any of its Affiliates or any BH-Sponsored
Investment Program, and, subject to Sections 2.6(b) and 6.3(a)(i),
may sell, assign or otherwise Transfer interests in the Project or other assets
of the Venture or the Subsidiary REIT to, and otherwise enter into a joint
venture or other partnership or co-ownership arrangement with, Behringer, any
of its Affiliates or any BH-Sponsored Investment Program.

 

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

 

(c)           Nothing herein contained shall prevent or
prohibit Behringer, any of its Affiliates, or any of their respective trustees,
officers, directors, members, partners, employees or shareholders from
acquiring, developing, investing in, managing, leasing or otherwise dealing in
real property of any kind or nature for its own account or that of any of its
Affiliates or third parties or from entering into, engaging in or conducting
any other activity or performing for a fee any service (including, without
limitation, engaging in any business dealing with real property of

 

22

 

any
type or location, acting as a director, officer or employee of any corporation,
as a trustee of any trust, as a general partner of any partnership, as a member
or manager of any limited liability company or as an official of any other
Entity, or receiving compensation for services to, or participating in profits
derived from, the investments of any such corporation, trust, partnership,
limited liability company or other Entity, regardless of whether such
activities are competitive with the Venture or the Project). The fact that
Behringer or its Affiliates may encounter opportunities to purchase, otherwise
acquire, lease, sell or otherwise dispose of real or personal property and may
take advantage of such opportunities themselves or introduce such opportunities
to other Persons in which it has or has not any interest, shall not subject
Behringer or its Affiliates to liability to the Venture or any of the Members
(or any of the direct or indirect partners or members of the Members) on
account of the lost opportunity.

 

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

 

6.6           Tax Status. Each Member agrees to
take commercially reasonable actions to assist the other Member in achieving
the most favorable tax treatment for such other Member (and the owners of such
Member); provided that, no Member shall be required to take or permit any
action which (a) creates any risk of material adverse economic or tax
consequences for such Member (or the owners of such Member), unless the
requesting Member agrees to reimburse each such Person that may be subject to
such consequences for all adverse economic and tax consequences, or (b) is
contrary to law.

 

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

 

6.8           Additional or Successor Manager.
The Manager may delegate its rights and powers as a manager under this
Agreement and the Act, and may admit to the Venture as an additional or
successor Manager, any of its Affiliates, Behringer or any of its Affiliates
without the Consent of any Member, provided that, the Manager arranges for such
Person(s) to be bound by the provisions of this Agreement by having such
Person(s) execute such documents as may be reasonably required to make
such Person(s) party to this Agreement as an additional or successor
Manager(s). In the event that any such Person is admitted as an additional
Manager, the Manager and such additional Manager shall share in the rights and
powers, as well as any duties and obligations, under this Agreement and the Act
in such manner and to such extent as the Manager and such additional Manager
may agree. In the event that any such Person is admitted as a successor
Manager, the Manager shall thereupon cease to have any rights, powers, duties
or obligations under this Agreement and the Act, and such Person, as the
successor Manager, shall assume all such rights, powers, duties and obligations
previously held by the Manager. Except

 

23

 

as
provided in this Section 6.8, the Manager may not admit any Person as an
additional or successor Manager without the Consent of the Members.

 

6.9           Removal of Manager for Cause.
Notwithstanding anything herein to the contrary, BH MP shall have the sole
right to elect to remove the Manager for Cause. Upon the occurrence of any
event constituting Cause for its removal, the Manager shall deliver written
notice of such event to BH MP within five (5) Business Days of the
occurrence of such event. BH MP shall exercise its right to remove the Manager,
if at all, by delivering to the Manager written notice of such election within
twenty (20) Business Days of the delivery of the notice of Cause from the
Manager. In the event BH MP shall exercise the right to remove the Manager, BH
MP shall promptly (but in no event later than ten (10) Business Days after
its exercise of the right of removal) appoint a successor Manager of the
Venture. Upon the removal of the Manager the Venture shall file an amendment to
its Certificate evidencing the removal of the Manager as manager of the
Venture.

 

ARTICLE 7

 

LIMITATIONS ON LIABILITY AND
INDEMNIFICATION

 

7.1           Limitation of Liability.
To the maximum extent permitted under the Act in effect from time to time,
neither the Manager nor any other Indemnified Person shall be liable to the
Venture or to any Member for (a) any act or omission performed or failed
to be performed by it, or for any losses, claims, costs, damages or liabilities
arising from any such act or omission, except to the extent such loss, claim,
cost, damage or liability results from such Indemnified Person’s gross
negligence, willful misconduct, fraud or a material breach of this Agreement, (b) any
tax liability imposed on the Venture or (c) any losses due to the
negligence (gross or ordinary), dishonesty or bad faith of any agents of the
Venture, as long as such persons are selected with reasonable care. Without
limiting the generality of the foregoing, each Indemnified Person shall, in the
performance of his, her or its duties, be fully protected in relying in good
faith upon the records of the Venture and upon information, opinions, reports
or statements presented to such Indemnified Person by the Manager or by any
other Person as to matters such Indemnified Person reasonably believes are
within such other Person’s professional or expert competence and who has been
selected with reasonable care by or on behalf of the Venture. Any repeal or
modification of this Section 7.1 shall not adversely affect any right or
protection of a Person existing at the time of such repeal or modification.

 

7.2           Indemnification.  

 

(a)           Advancement of Expenses.
In the event that the Manager, any of its Affiliates or any directors,
officers, shareholders, partners, members, employees, trustees, representatives
or agents of any of them (each, an “Indemnified Person” and collectively, the
“Indemnified Persons”) becomes involved in any capacity in any threatened,
pending or completed action, proceeding or suit, whether civil, criminal,
administrative or investigative, by reason of the fact that it, he or she was a
manager, officer, employee, representative or agent of the Venture, the Manager
or otherwise authorized to act hereunder or in connection herewith or otherwise
failed to act in connection with the business or affairs of the Venture or one
of its direct or indirect subsidiaries or otherwise is or was serving at the
Venture’s or one of the

 

24

 

Venture’s direct or indirect subsidiary’s request as a director,
trustee, officer, partner, employee or agent of another Entity, the Venture
will periodically reimburse such Indemnified Person for its reasonable legal
and other expenses (including, without limitation, the costs of any
investigation and preparation) incurred in connection with such involvement,
provided that such Indemnified Person shall promptly repay to the Venture the
amount of any such reimbursed expenses paid to it if it is ultimately
determined by a court having appropriate jurisdiction in a decision that is not
subject to appeal, that such Indemnified Person is not entitled to be
indemnified by the Venture under this Section 7.2.

 

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

 

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

 

(d)           Exclusivity. The indemnification
provided by this Section 7.2 shall not be deemed to be exclusive of any
other rights to which the Indemnified Person may be entitled under any
agreement or as a matter of law, or otherwise, both as to action in an
Indemnified Person’s official capacity and to action in another capacity, and
shall continue as to an Indemnified Person who has ceased to have an official
capacity for acts or omissions during such official capacity or otherwise when
acting at the request of the Manager and shall inure to the benefit of the
heirs, successors and administrators of such Indemnified Person.

 

(e)           Limitation. Notwithstanding any of
the foregoing to the contrary, the provisions of this Section 7.2 shall not be construed as to provide for the
indemnification of any Indemnified Person for any liability (including, without
limitation, liability under U.S. federal securities laws which, under certain
circumstances, impose liability on Persons that act in good faith), to the
extent (but only to the extent) that such indemnification would be in violation
of

 

25

 

applicable
law, but shall be construed so as to effectuate the provisions of this Section 7.2 to the fullest extent permitted by law.

 

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

 

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

 

ARTICLE 8

 

TRANSFER OF MEMBERS’ INTERESTS IN THE VENTURE;

BUY/SELL

 

8.1           Transfers of a Member’s Interest.

 

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

 

(b)           In the event any Member desires to Transfer
all or any portion of its Interest in the Venture (and the Manager Consents
thereto) the Transferring Member shall arrange for its transferee to be bound
by the provisions of this Agreement by having such transferee execute such
documents as shall be reasonably required by the Manager to make the transferee
a party to this Agreement and by delivering the same to the Manager together
with such other information that may be reasonably requested by counsel to the
Manager. The transferee of all or any portion of the Interest of a Member shall
become a substituted Member as to the Interest (or portion thereof) thus
Transferred upon the written Consent of the Manager, which Consent may be
granted or withheld in the sole discretion of the Manager. Any such substituted
Member shall succeed to all of the rights and assume all of the obligations of
the Member to the extent of the portion of the Interest in the Venture which
has been Transferred to such substituted Member. A transferee of all of any
portion of the Interest of a Member who is not a substituted Member shall have
the right to receive allocations of income, gain, loss and deduction and
distributions of Net Cash Flow and other distributions pursuant to this
Agreement, but shall have no other rights hereunder, and neither the transferor
nor the transferee shall have

 

26

 

the
right to vote with respect to any Interest so Transferred. The effective date
of any Transfer under Section 8.1 (a) or (b)
shall be the date on which the transferee executes and delivers to the Manager
the documents required by the Manager, and the Manager grants its Consent in
accordance with Section 8.1(a) or (b),
as the case may be.

 

(c)           Anything contained in Sections 8.1(a) or (b) to the contrary notwithstanding, no Transfer of an
Interest or any portion shall be effective if it would result in the Venture
being classified as an association (or publicly traded partnership) taxable as
a corporation for federal or state income tax purposes, and any such Transfer
shall be effected in such manner as may be necessary to maintain the
classification of the Venture as a partnership for federal and state income tax
purposes.

 

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

 

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

 

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

 

(a)           Either Member (an “Offeror”) may serve upon
the other Member (an “Offeree”) a notice (an “Offering Notice”) which shall
contain the following:

 

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

 

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

 

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

 

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

 

27

 

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

 

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

 

(d)           (i) If BH REIT is the Member obligated
to purchase the Buy/Sell Interest under Section 8.2(b) or (c) (the “Purchaser”), then within five (5) Business
Days after the date of the exercise of the election by the Offeree or five (5) Business
Days after the expiration of the Option Period, whichever is earlier, the
Purchaser shall deposit in cash an amount in escrow, which amount while in escrow
shall be invested in Permitted Temporary Investments as directed by the
Purchaser (such amount, together with any interest earned thereon being the
“Earnest Money”), equal to 10% of the Offer Price or Alternative Offer Price,
as the case may be (such Offer Price or Alternative Offer Price, as applicable,
being the “Purchase Price”), with an independent third party (the “Escrow
Agent”) reasonably satisfactory to BH MP as the Member obligated to sell its
Interest under this Section 8.2(d) (the “Seller”). The Earnest Money shall be applied against the Purchase
Price at the closing referenced below, or shall be paid to the Seller as
liquidated damages in the event of a default by the Purchaser in accordance
with this Section 8.2(d)(i).
In the event the Purchaser fails to deposit timely such Earnest Money as
provided above or fails or refuses to close on the purchase and sale of its
Buy/Sell Interest on the Closing Date (such Purchaser being then referred to as
the “Defaulting Purchaser”), then within fifteen (15) days thereafter, unless
the Defaulting Purchaser has earlier cured such default by depositing the
required Earnest Money as provided above or has proven to the reasonable
satisfaction of the Seller that the Defaulting Purchaser is ready, willing and
able to close such purchase and sale, the Seller shall have the option of
substituting itself as Purchaser of the Buy/Sell Interest of the Defaulting
Purchaser (such Seller being then referred to as the “Substituted Purchaser”)
under this Section 8.2(d) at a purchase price (the “Substituted Purchase Price”) equal to 90% of
the Purchase Price multiplied by the ratio of BH REIT’s Percentage Interest to
BH MP’s Percentage Interest if the Defaulting Purchaser is BH REIT (or if,
after becoming the Purchaser in accordance with Section 8.2(e),
BH MP or the BH MP Venture is the Defaulting Purchaser, 90% of the Purchase
Price multiplied by the ratio of BH MP’s Percentage Interest to BH REIT’s
Percentage Interest). In the event that the Seller elects to become the Substituted
Purchaser in accordance with the preceding sentence, the Seller shall, within
10 Business Days after the Seller obtains the right to become the Substituted
Purchaser, give written notice to the Defaulting Purchaser of its intention to
do so, which notice shall specify the Substituted Purchase Price. Within five (5) Business
Days after such notice the Substituted Purchaser shall deposit Earnest Money
equal to 10% of the Substituted Purchase Price in escrow with an Escrow Agent
selected by the Substituted Purchaser, whereupon, for purposes of Sections 8.2(d)(ii) and (iii) below, the Substituted Purchaser shall become the Purchaser, the
Defaulting Purchaser shall become the Seller and the Substituted Purchase Price
shall become the Purchase Price. Alternatively, after the default by the
Defaulting Purchaser and its failure to cure such default prior to the earlier
of (A) fifteen (15) days after such default and (B) the Seller’s
election to become the Substituted Purchaser, the Seller may elect to obtain,
and retain as liquidated damages for the Defaulting Purchaser’s default under
this Section 8.2(d),
the amount of Earnest Money deposited by the

 

28

 

Defaulting
Purchaser (or the amount that should have been deposited by the Defaulting
Purchaser as Earnest Money but was not).

 

(ii)           On or before the date on which the Purchaser
is required to make the Earnest Money deposit referenced in Section 8.2(d)(i) (or, if the Substituted Purchaser has become the Purchaser, within five
(5) Business Days after such Purchaser has made its Earnest Money
deposit), the Purchaser shall fix a closing date (the “Closing Date”) not later
than 30 days (or as soon thereafter as practicable) following (i) the date
of the election by the Offeree, or (ii) if no election was made, the date
of the expiration of the Option Period, provided that such Option Period shall
be subject to extension by up to 150 days if BH MP has become the Substituted
Purchaser. If the Purchaser’s election has been to purchase the Seller’s
interest in the Shares, immediately prior to the Closing Date, the Venture
shall make a distribution in-kind of the Shares owned by the Venture to the
Members in accordance with their respective Percentage Interests. For purposes
of the distribution in-kind, the distributed Shares shall have a value per
Share equal to the Purchase Price divided by the number of Shares to be
distributed to the Seller. The closing shall take place on the Closing Date at
a location reasonably designated by the Purchaser. The Purchaser may assign its
rights to purchase the Seller’s Buy/Sell Interest hereunder to any third party,
including one or more of its Affiliates; provided that, the Purchaser shall
remain liable for any such obligation to purchase.

 

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

 

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

 

(v)           A sale of its Buy/Sell Interest shall not
relieve the Seller from any obligations or liabilities arising under or in
connection with this Agreement prior to the closing of the sale of the Buy/Sell
Interest, including, without limitation, any obligation to repay a Default Loan
in accordance with Section 3.4, and the Purchaser shall be entitled to
withhold from the Purchase Price an amount equal to the then outstanding
principal and accrued and unpaid interest of any such Default Loan in payment
thereof. Similarly, after the closing of the sale of a Buy/Sell Interest the
Purchaser shall remain liable to the Seller for the amount of any Default Loan
incurred by the Purchaser and outstanding on and after the closing of such sale

 

29

 

until
the outstanding principal and any accrued and unpaid interest of such Default
Loan has been paid in full.

 

(e)           (i)            If
BH MP is the Offeree pursuant to Section 8.2(a) and elects to purchase BH REIT’s Buy/Sell
Interest, or has become the Substituted Purchaser, then BH MP shall have 150
days after the earlier of the election by BH MP to purchase BH REIT’s Buy/Sell
Interest under this Section 8.2 and the expiration of the Option Period
either to purchase BH REIT’s Buy/Sell Interest or to find a third party to form
a joint venture or other joint ownership arrangement (the “BH MP Venture”) with
BH MP for the acquisition and ownership of BH REIT’s Buy/Sell Interest. In the
event that BH MP either decides to purchase BH REIT’s Buy/Sell Interest or
finds a third party for such joint venture or other joint ownership arrangement
for the purchase of BH REIT’S Buy/Sell Interest, BH MP shall so notify BH REIT
in writing within such 150-day period. In such event, BH MP or the BH MP
Venture, as the case may be, shall become the “Purchaser,” BH REIT shall become
the “Seller” and the provisions in Section 8.2(d),
to the extent not inconsistent with this Section 8.2(e)(i),
shall apply; provided that, BH MP or BH MP Venture, as the case may be, shall
have five (5) Business Days after its election to proceed with the purchase
to deposit its Earnest Money in escrow. If BH MP is the Offeror pursuant to Section 8.2(a) and BH REIT, as the Offeree, elects to sell its Buy/Sell Interest to BH
MP, then the provisions of this Section 8.2(e)(i) shall apply and, if BH MP does not find a third party with whom to form
a joint venture or other joint ownership arrangement and otherwise elects not
to proceed with the purchase of BH REIT’s Buy/Sell Interest, the provisions of Section 8.2(e)(ii) shall apply.

 

(ii)           If BH MP does not find a third party with
whom to form a joint venture or other joint arrangement and otherwise elects
not to proceed with the purchase, or if BH MP does not notify BH REIT in
writing within the applicable 150-day period that BH MP or the BH MP Venture
will proceed with the purchase, then, subject to Section 2.6(b),
BH REIT shall have the opportunity to elect to purchase, or to have Behringer,
its Affiliate or another designee (collectively, the “Behringer Party”)
purchase, or to seek to cause the sale of, the Project in accordance with the
following procedures.

 

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

 

(B)         The Behringer Party and BH MP shall each use reasonable efforts to
agree, within ten (10) days after the delivery of an Arbitration Notice,
upon the appointment of one arbitrator to agree on a Mark to

 

30

 

Market
Price of the Project. If an agreement on a single arbitrator is not reached
within such 10-day period, then the Behringer Party and BH MP shall each
appoint one arbitrator within ten (10) days after the expiration of such
previous 10-day period and shall specify the name and address of their
respective arbitrators to the other party prior to the expiration of such
10-day period; provided that, if one party fails to specify the name and
address of its selected arbitrator within such 10-day period, then the other
party shall give such failing party written notice, and if within three (3) days
after such written notice the failing party still has not specified an arbitrator,
then the arbitrator selected by the other party shall act as the sole
arbitrator as if both parties had agreed to the appointment of such arbitrator
as provided above.

 

(C)         If two arbitrators have been selected, then such arbitrators shall then
appoint a third arbitrator within ten (10) days after their appointment.
If the first two arbitrators are unable to agree upon a third arbitrator within
such 10-day period, then the third arbitrator shall be appointed as soon as
reasonably practicable thereafter by a court of competent jurisdiction residing
in the county in which the Project is situated, subject to the qualification
requirements set forth in paragraph (G) of this Section 8.2(e)(ii).
In the event of the failure, refusal or inability of any arbitrator to act, a
new arbitrator shall be appointed as a replacement, which appointment shall be
made in the same manner as set forth above for the appointment of such
resigning arbitrator. Immediately after the selection of the final arbitrator,
the three arbitrators shall meet and, within fifteen (15) days after the
completion of the selection of the arbitrators shall, or, if there is only one
arbitrator, within fifteen (15) days after his selection, such arbitrator
shall, endeavor to determine the Mark to Market Price.

 

(D)         Within ten (10) days after the selection of the sole arbitrator or
all arbitrators, as the case may be, the Behringer Party and BH MP shall submit
to the arbitrator(s) such party’s proposed Mark to Market Price as well as
all other economic terms relevant to the determination of the Mark to Market
Price, together with reasonable evidence supporting such proposed Mark to
Market Price. The arbitrator(s) shall select either the proposed Mark to
Market Price submitted by the Behringer Party or the proposed Mark to Market
Price submitted by BH MP, whichever proposal the arbitrator(s) deem to be
the most nearly correct according to the definitions, terms and requirements
set forth in this Agreement and the information submitted to the arbitrator(s) by
the parties, with no compromise. The power of the arbitrator(s) shall be
exercised by the concurrence of at least two arbitrators, except that if only
one arbitrator is selected, the decision of such arbitrator shall govern. The
proposed Mark to Market Price selected by the arbitrator(s) shall be the
“Mark to Market Price.” The determination of the arbitrator(s) shall be
final and non-

 

31

 

appealable,
shall be binding on both BH MP and the Behringer Party, and may be enforced in
any court of competent jurisdiction.

 

(E)         The price (the “Buy/Sell Market Price”) to be paid for BH MP’s
Buy/Sell Interest shall be equal to the amount that BH MP would receive
assuming that the Project were sold at its Mark to Market Price, the Subsidiary
REIT and, if applicable, any subsidiary thereof owning an interest in the
Project were liquidated, all of their other assets sold, their debts and other
liabilities discharged, and any net proceeds remaining were distributed to the
Members in proportion to their respective interests in the Venture. Within ten (10) days
after the decision of the arbitrator(s) determining the Mark to Market
Price, the Behringer Party shall deliver written notice to BH MP stating
whether the Behringer Party elects (x) to purchase BH MP’s Buy/Sell
Interest at the Buy/Sell Market Price or (y) seek to obtain a third-party
purchaser for the Project. In the event that the Behringer Party elects to
purchase BH MP’s Buy/Sell Interest, the Behringer Party and BH MP shall close
on such purchase at the Buy/Sell Market Price payable in cash within thirty
(30) days of such election by the Behringer Party. The provisions of Section 8.2(d) shall, to the extent not inconsistent with Section 8.2(e)(ii), shall apply to such purchase. In the event
that the Behringer Party elects to seek to obtain a third-party purchaser, the
Behringer Party shall have 150 days from such election to obtain such
third-party purchaser either to purchase (1) the Members’ entire Interests
in the Venture, or (2) all of the Venture’s Shares in the Subsidiary REIT,
in either case for a price equal to what Members would have received assuming
the Project were sold at the Mark to Market Price, the Subsidiary REIT and, if
applicable, any subsidiary thereof owning an interest in the Project were
liquidated, all of their other assets sold, their debts and liabilities
discharged, and any net proceeds remaining were distributed to the Members in
proportion to their respective interests in the Venture. The Behringer Party
shall provide prompt written notice advising BH MP of the identity of such
third-party purchaser, if any. In the event that a third party is to purchase
either the Interests of the Members or the Shares owned by the Venture, the
third-party purchaser shall purchase such Interests or Shares for cash at the
closing of such purchase, which shall occur within thirty (30) days of the
Behringer Party’s written notification of the third-party purchaser’s identity.
In such event, the Mark to Market Price shall be reduced for any distributions
made by the Venture to its Members after the determination of the Mark to
Market Price and the closing of such sale. Such sale shall not relieve either
Member from any obligations or liabilities arising under or in connection with
this Agreement prior to such sale including, without limitation any obligation
to repay a Default Loan in accordance with Section 3.4.
If, at the end of such 150-day period, the Behringer Party has not
obtained a third-party purchaser, the Behringer Party shall advise BM MP of
such fact, and the Behringer Party may, within such 150-day period, elect to
purchase BM MP’s Buy/Sale Interest at the Buy/Sell

 

32

 

Market
Price, in which event such purchase price shall be payable in cash at a closing
to be held thirty (30) days after the end of such 150-day period, and the
provisions of Section 8.2(d) shall, to the extent not inconsistent with Section 8.2(e)(ii),
apply to the purchase of BH MP’s Buy/Sell Interest under this Section 8.2(e).
In the event that the Behringer Party does not elect to purchase BH MP’s
Buy/Sell Interest and does not find a third-party purchaser for the Project,
either BH REIT or BH MP may, at its election, re-initiate the Buy/Sell
procedure in accordance with this Section 8.2 but
otherwise shall not be obligated to purchase the other party’s Buy/Sell
Interest.

 

(F)         The arbitrator(s) shall have the authority to request
additional facts or evidence from each of the parties and, if such arbitrator(s) so
require, a hearing to present the same. In the event of such a hearing, rules of
evidence applicable to state court judicial proceedings in civil district courts
in Dallas, Texas shall govern; provided that, evidence will be admitted or
excluded in the sole discretion of the arbitrator(s). The arbitrator(s) shall
resolve the controversy and shall execute and acknowledge his or their
decision, together with a brief statement describing the rationale for such
decision, in writing and simultaneously deliver a copy thereof to each of the
parties personally or by registered or certified mail, return receipt
requested. If the arbitrators fail to reach an agreement during such 15-day
period (as may be extended in accordance with the next sentence), then they
shall be discharged, and new arbitration proceedings shall commence, with new
arbitrators being appointed in the same manner as set forth above. By agreement
in writing, the Behringer Party and BH MP may extend the time to reach
agreement either before or after the expiration thereof up to a maximum of
thirty (30) additional days. The period within which the arbitrator(s) must
act are not jurisdictional.

 

(G)         Each arbitrator shall (x) be an independent appraiser
licensed under the laws of the state in which the Project is situated, and (y) have
been actively and continuously engaged in appraising multifamily rental
communities as Member of the Appraisal Institute in the county in which the
Project is situated, for not less than the previous five years. The arbitrator(s) selected
by the Behringer Party and BH MP shall be instructed that they are neutral
arbitrators and shall not have any ex parte communication with the appointing party and
may not be appraisers that consulted with the Behringer Party or BH MP in
negotiations regarding the Mark to Market Price prior to the submission of the
Mark to Market Price proposals to arbitration. In addition, the sole arbitrator
or third arbitrator, as the case may be, shall be an independent appraiser
having no relationship representing the Behringer Party, BH MP, PGGM or their
respective Affiliates during the immediately preceding 365-day period prior to
selection.

 

33

 

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

 

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

 

8.4           Void Transfer.
In no event shall any Interest, or any portion, thereof, be Transferred to a
minor or an incompetent or in violation of any state or Federal law or in
violation of this Article 8.
Any such attempted Transfer shall be void and ineffectual and shall not bind
the Venture or any Member.

 

ARTICLE 9

 

EXCESS INTEREST PROVISIONS

 

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

 

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

 

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

 

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

 

“Excess
Interest Trustee”
shall mean a Person, who shall be unaffiliated with the Venture, any Purported
Beneficial Transferee and any Purported Record Transferee, identified by the
Venture as the trustee of the Excess Interest Trust.

 

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

 

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

 

34

 

“Existing
Holder Limit” (a) for
the Members shall mean, initially, 45% in the case of BH MP and 55% in the case
of BH REIT of the Interests, and, after any adjustment pursuant to Section 9.9,
shall mean such percentage of the outstanding Interests, as the case may be, as
so adjusted, and (b) for any Existing Holder who becomes an Existing
Holder by virtue of clause (b) of the definition thereof, shall mean,
initially, the percentage of the outstanding Interests Beneficially Owned by
such Existing Holder at the time that such Existing Holder becomes an Existing
Holder, but in no event shall such percentage be greater than the Existing
Holder Limit for the Existing Holder who Transferred Beneficial Ownership of
such Interests or, in the case of more than one transferor, in no event shall
such percentage be greater than the smallest Existing Holder Limit of any
transferring Existing Holder, and, after any adjustment pursuant to Section 9.9, shall mean such percentage of the outstanding Interests as so
adjusted.

 

“Market
Price” shall mean the
market price of such class of Interests on the relevant date as determined in
good faith by the Manager.

 

“Ownership
Limit” shall
initially mean 9.8% in number of the Interests or value of the outstanding
Interests, and after any adjustment as set forth in Section 9.10,
shall mean such greater percentage of the outstanding Interests as so adjusted.
The number and value of the outstanding Interests of the Venture shall be
determined by the Manager in good faith, which determination shall be
conclusive for all purposes hereof.

 

“Person” shall mean an individual, corporation,
partnership, estate, trust (including, without limitation, a trust qualified
under Section 401(a) or 501(c)(17) of the Code), portion of a trust
permanently set aside for or to be used exclusively for the purposes described
in Section 642(c) of the Code, association, private foundation within
the meaning of Section 509(a) of the Code, joint stock company or
other Entity.

 

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

 

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

 

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

 

“Redemption
Price” has the
meaning provided in Section 9.18.

 

“Restriction
Termination Date”
shall mean the first day on which the Venture determines that it is no longer
in the best interests of the Subsidiary REIT to attempt to, or continue to,
qualify as a REIT.

 

9.2           Ownership Limitation.

 

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

 

35

 

Ownership
Limit and no Existing Holder shall Beneficially Own Interests in excess of the
Existing Holder Limit for such Existing Holder.

 

(b)           Except as provided in Section 9.12, until the Restriction Termination Date, any
Transfer that, if effective, would result in any Person (other than an Existing
Holder) Beneficially Owning Interests in excess of the Ownership Limit shall be
void ab
initio as to the Transfer of
the Interests which would otherwise be Beneficially Owned by such Person in
excess of the Ownership Limit; and the intended transferee shall acquire no
rights in such Interests.

 

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

 

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

 

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

 

(f)            Until the Restriction Termination Date, any Transfer
that, if effective, would result in the Venture (treating the Venture as if it
otherwise qualified as a REIT solely for this purpose) becoming a “pension-held
REIT” as defined in Section 856(h) of the Code shall be void ab initio as to the Transfer of Interests which would
result in the Venture (treating the Venture as if it otherwise qualified as a
REIT solely for this purpose) becoming a “pension-held REIT;” and the intended
transferee shall acquire no rights in such Interests.

 

(g)           Until the Restriction Termination Date, any
Transfer that would result in the Venture (treating the Venture as if it
otherwise qualified as a REIT solely for this purpose) not maintaining its
status as a Domestically-Controlled REIT shall be void ab initio as to the Transfer of Interests which would
result in the Venture (treating the Venture as if it otherwise qualified as a
REIT solely for this purpose) failing to maintain its status as a
Domestically-Controlled REIT; and the intended transferee shall acquire no rights
in such Interests.

 

36

 

9.3           Excess Interests.

 

(a)           If, notwithstanding the other provisions
contained in this Article 9, at any time, until the Restriction
Termination Date, there is a purported Transfer or other change in the capital
structure of the Venture such that any Person would Beneficially Own Interests
in excess of the applicable Ownership Limit or Existing Holder Limit (as
applicable), then, except as otherwise provided in Sections 9.9 and 9.12,
the Interests Beneficially Owned in excess of such Ownership Limit or Existing
Holder Limit (rounded up to the nearest whole Interest) shall constitute “Excess
Interests” and shall be treated as provided in this Article 9.
Such designation and treatment shall be effective as of the close of business
on the business day prior to the date of the purported Transfer or change in
capital structure.

 

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

 

(c)           If, at any time prior to the Restriction
Termination Date, notwithstanding the other provisions contained in this Article 9,
there is an event (a “Prohibited Owner Event”) which would result in the
disqualification of the Venture as a REIT under the Code (treating the Venture
as if it otherwise qualified as a REIT solely for this purpose) by virtue of
actual, Beneficial or constructive ownership of Interests, then Interests which
result in such disqualification shall be automatically exchanged for an equal
number of Excess Interests to the extent necessary to avoid such disqualification.
Such exchange shall be effective as of the close of business on the business
day prior to the date of the Prohibited Owner Event. In determining which
Interests are exchanged, Interests owned directly or indirectly by any Person
who caused the Prohibited Owner Event to occur shall be exchanged before any
Interests not so held are exchanged. If similarly situated Persons exist, such
exchange shall be pro rata. If the Venture is still so disqualified as a REIT (treating the Venture
as if it otherwise qualified as a REIT solely for this purpose), Interests
owned directly or indirectly by Persons who did not cause the Prohibited Owner
Event to occur shall be chosen by random lot and exchanged for Excess Interests
until the Venture is no longer so disqualified as a REIT (treating the Venture
as if it otherwise qualified as a REIT solely for this purpose).

 

9.4           Prevention of Transfer. If the Venture or its designee shall at any
time determine in good faith that a Transfer has taken place in violation of Section 9.2
or that a Person intends to acquire or has attempted to acquire beneficial
ownership (determined without reference to any rules of attribution) or
Beneficial Ownership of any Interests in violation of Section 9.2,
the Venture or its designee shall take such action as it deems advisable to
refuse to give effect to or to prevent such Transfer, including, without
limitation, refusing to give effect to such Transfer on the books of the
Venture or instituting proceedings to enjoin such Transfer; provided, however,
that any Transfers or attempted Transfers in violation of paragraph (b), (c),
(d), (e), (f)

 

37

 

or
(g) Section 9.2 shall automatically result in the
designation and treatment described in Section 9.3, irrespective of any action (or non-action)
by the Venture.

 

9.5           Notice. Any Person who
acquires or attempts to acquire Interests in violation of Section 9.2,
or any Person who is a transferee such that Excess Interests result under Section 9.3, shall immediately give written notice or, in the event of a proposed or
attempted Transfer, shall give at least fifteen (15) days prior written notice
to the Venture of such event and shall provide to the Venture such other
information as the Venture may request in order to determine the effect, if
any, of such Transfer or attempted Transfer on the Subsidiary REIT’s status as
a REIT.

 

9.6           Information for the Venture.
Until the Restriction Termination Date:

 

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

 

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

 

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

 

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

 

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

 

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

 

38

 

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

 

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

 

9.11           Limitations on Changes in Existing Holder and
Ownership Limits.

 

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

 

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

 

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

 

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

 

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

 

9.14           Trust for Excess Interests.
Upon any purported Transfer that results in Excess Interests pursuant to Section 9.3,
such Excess Interests shall be deemed to have been transferred to the Excess
Interest Trustee, as trustee of the Excess Interest Trust for the exclusive
benefit of the Charitable Beneficiary. Excess Interests so held in trust shall
be issued and outstanding

 

39

 

Interests
of the Venture. The Purported Beneficial Transferee shall have no rights in
such Excess Interests except as provided in Section 9.17.

 

9.15         Distributions on Excess Interests. Any distributions (whether as dividends,
distributions upon liquidation, dissolution or winding up or otherwise) on
Excess Interests shall be paid to the Excess Interest Trust for the benefit of
the Charitable Beneficiary. Upon liquidation, dissolution or winding up, the
Purported Record Transferee shall receive the lesser of (a) the amount of
any distribution made upon liquidation, dissolution or winding up or (b) the
price paid by the Purported Record Transferee for the Interests, or if the
Purported Record Transferee did not give value for the Interests, the Market
Price of the Interests on the day of the event causing the Interests to be held
in trust. Any such dividend paid or distribution paid to the Purported Record
Transferee in excess of the amount provided in the preceding sentence prior to
the discovery by the Venture that the Interests with respect to which the
dividend or distribution was made had been exchanged for Excess Interests shall
be repaid by the Purported Record Transferee to the Excess Interest Trust for
the benefit of the Charitable Beneficiary.

 

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

 

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

 

If
any of the foregoing restrictions on Transfer of Excess Interests is determined
to be void, invalid or unenforceable by any court of competent jurisdiction,
then the Purported Record

 

40

 

Transferee
may be deemed, at the option of the Venture, to have acted as an agent of the
Venture in acquiring such Excess Interests and to hold such Excess Interests on
behalf of the Venture.

 

9.18         Call by the Venture on Excess Interests. Excess Interests shall be deemed to have
been offered for sale to the Venture, or its designee, at a price per Interest
equal to the lesser of the price per Interest in the transaction that created
such Excess Interests (or, in the case of a devise, gift or other transaction
in which no value was given for such Excess Interests, the Market Price at the
time of such devise, gift or other transaction) and the Market Price of the
Interests to which such Excess Interests relates on the date the Venture, or
its designee, accepts such offer (the “Redemption Price”). The Venture
shall have the right to accept such offer for a period of ninety (90) days
after the later of (x) the date of the Transfer which resulted in such
Excess Interests and (y) the date the Manager determines in good faith
that a Transfer resulting in Excess Interests has occurred, if the Venture does
not receive a notice of such Transfer pursuant to Section 9.5 but
in no event later than a permitted Transfer pursuant to and in compliance with
the terms of Section 9.17. Unless the Manager determines that it is
in the interests of the Venture to make earlier payments of all of the amount
determined as the Redemption Price per Interest in accordance with the
preceding sentence, the Redemption Price may be payable at the option of the
Venture at any time up to but not later than one year after the date the
Venture accepts the offer to purchase the Excess Interests. In no event shall
the Venture have an obligation to pay interest to the Purported Record
Transferee.

 

ARTICLE 10

 

DISSOLUTION OF VENTURE

 

10.1         Bankruptcy of Member.

 

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

 

(b)           For purposes of this Agreement, the
“Bankruptcy” a Member shall be deemed to have occurred upon the happening of
any of the following: (i) the filing of an application by the Member for,
or a consent to, the appointment of a trustee of its assets, (ii) the
filing by the Member 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 the Member of a general assignment for the benefit of creditors or (iv) the
expiration of 60 days following the entry of an

 

41

 

order,
judgment or decree by any court of competent jurisdiction adjudicating the
Member a bankrupt or appointing a trustee of its assets.

 

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

 

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

 

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

 

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

 

Each
Member waives the right to cause a dissolution of the Venture in any other way.
Dissolution of the Venture shall be effective on the day on which the event
occurs which gives rise to the dissolution, but the Venture shall not terminate
until the assets of the Venture shall have been distributed as provided herein
and a certificate of cancellation of the Certificate has been filed with the
Secretary of State of the State of Delaware.

 

10.3         Distribution Upon
Liquidation.

 

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

 

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

 

(ii)         Cash and all other assets of the Venture not sold pursuant to this Section 10.3 will be distributed
among the Members in the same manner as Net Cash Flow in accordance with Section 5.1.

 

(b)           The Members shall continue to share income,
loss and other tax items during the period of such Liquidation in the same
proportions as before dissolution. Subject to Sections 2.6(b) the
Liquidator shall determine whether to sell any Venture property, and, if so,

 

42

 

whether
at a public or private sale, for what price, and on what terms. If the
Liquidator determines to sell or otherwise dispose of any Venture property or
any interest therein, the Liquidator shall not be required to do so promptly
but shall do so in an orderly and commercially reasonable manner so as to avoid
a distress sale.

 

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

 

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

 

10.4         Procedural and Other Matters.

 

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

 

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

 

ARTICLE 11

 

REPRESENTATIONS AND WARRANTIES

 

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

 

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

 

(b)           The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of such Member. This Agreement
has been executed and delivered by a duly authorized officer of such Member and
constitutes the valid and binding obligation of such Member, enforceable against
such Member in accordance with the terms hereof, subject, as to

 

43

 

enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditor’s rights and to general
principles of equity.

 

(c)           The execution, delivery and performance by
such Member of this Agreement and all other agreements contemplated hereby to
which it is to be a party do not and will not (i) violate any decree or
judgment of any court of governmental authority that may be applicable to such
Member; (ii) violate any law (or regulation promulgated under any law); (iii) violate
or conflict with, or result in a breach of, or constitute a default (or an
event with or without notice or lapse of time or both would constitute a
default) under any contract or agreement to which such Member is a party; or (iv) violate
or conflict with any provision of the organizational documents of such Member.

 

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

 

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

 

ARTICLE 12

 

BOOKS AND RECORDS; REPORTS TO MEMBERS

 

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

 

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

 

44

 

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

 

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

 

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

 

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

 

ARTICLE 13

 

MISCELLANEOUS

 

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

 

45

 

If
to BH MP, addressed as follows:

 

Behringer
Harvard

Master
Partnership I LP

15601
Dallas Parkway, Suite 600

Addison,
Texas 75001

Attention:
 Gerald J. Reihsen, Esq.

Facsimile:  (469) 341-0540

Email:
 greihsen@behringerharvard.com

 

with
a copy to:

 

Stichting Pensioenfonds voor de Gezondheid,

Geestelijke en Maatschappelijke Belangen

Kroostweg-Noord 149

P.O. Box
117

3700
AC Zeist

The
Netherlands

Attention:
 Werner Sohier

Facsimile:
 011.31.30.277 4724

Email:
 werner.sohier@pggm.nl

 

with
a copy to:

 

Stichting Pensioenfonds voor de Gezondheid,

Geestelijke en Maatschappelijke Belangen

Kroostweg-Noord 149

P.O. Box
117

3700
AC Zeist

The
Netherlands

Attention:
 Gert-Jaap Das

Facsimile:
 011.31.30.277 9191

Email:
 gert.jaap.das@pggm.nl

 

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

 

Behringer
Harvard Baileys, LLC

15601
Dallas Parkway, Suite 600

Addison,
Texas 75001

Attention:
Gerald J. Reihsen, Esq.

Facsimile:
(469) 341-0540

Email:
greihsen@behringerharvard.com

 

Unless
delivered personally or by telefax, telex or other wire transmission or by
email as above (which shall be deemed delivered on the next Business Day
following the date of such personal delivery or transmission or email, provided
that such day is a Business Day in the recipient’s jurisdiction, or otherwise
on the following Business Day in such jurisdiction), any notice shall be

 

46

 

deemed
to have been given when received by its addressee. Any party hereto may
designate a different address to which notices and demands shall thereafter be
directed by written notice given in the same manner and directed to the other
parties at their offices hereinabove set forth.

 

13.2         Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the some instrument. In addition, this Agreement may contain
more than one counterpart of the signature page, and this Agreement may be
executed by the affixing of the signature (or one of the several signatures) of
the Manager and each of the Members to any of such counterpart signature pages;
all of such counterpart signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.

 

13.3         Amendments. This Agreement may be amended only with the unanimous written Consent
of the Manager and the Members. Any waiver of any provision of this Agreement shall
require the Consent of the Party from whom such waiver is sought.

 

13.4         Additional Documents. The Manager may cause to be filed with any
governmental agency any Applications for Authority and, where applicable,
certificates of cancellation or certificates or statements of dissolution as
may be required or permitted by the laws of the State of Delaware and any other
jurisdiction where the Venture is organized or doing business. Each party
hereto agrees to execute, with acknowledgment or affidavit, if required by the
Manager, any and all documents and writings that may be necessary or expedient
in connection with the creation of the Venture and the achievement of its
purposes, provided that no such document may modify this Agreement.

 

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

 

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

 

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

 

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

 

47

 

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

 

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

 

13.11       Entire
Agreement. This Agreement
constitutes the entire agreement among the parties with respect to the
formation and operation of the Venture; it supersedes any prior agreements or
understandings among them and it may not be modified or amended in any manner
other than pursuant to Section 13.3.

 

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

 

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

 

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

 

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

 

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

 

48

 

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

 

13.18       Use of Behringer Harvard Trade Name. If any third parties other than Behringer, any of its Affiliates or
any BH-Sponsored Investment Program acquires the Interest of any Member, or if
the property management agreement between the Subsidiary REIT (or any
subsidiary thereof) and the Management Company (or any other Affiliate of
Behringer) is terminated for any reason, then the remaining Member shall cause
the Venture (and the Subsidiary REIT (and any subsidiary thereof)) to cease to
use the name “Behringer Harvard” within 30 days of such event, unless Behringer
agrees in writing to allow the continued use of such name beyond such 30-day
period.

 

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

 

13.20       Waiver of Jury Trial.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

[INTENTIONALLY LEFT BLANK]

 

* * * * *

 

49

 

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

 

 

	
  Manager:

  	
  BEHRINGER
  HARVARD BAILEYS, LLC, a

  
	
   

  	
  Delaware
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  M. Jason Mattox

  
	
   

  	
   

  	
  M.
  Jason Mattox

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
  Members:

  	
  BEHRINGER
  HARVARD MASTER

  PARTNERSHIP I LP, a
  Delaware limited

  partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Behringer
  Harvard Institutional GP LP, a

  Texas limited partnership, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Harvard
  Property Trust, LLC, a Delaware

  limited liability company, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  M. Jason Mattox

  
	
   

  	
   

  	
  M.
  Jason Mattox

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  BEHRINGER
  HARVARD BAILEYS, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  M. Jason Mattox

  
	
   

  	
   

  	
  M.
  Jason Mattox

  
	
   

  	
   

  	
  President

  

 

50Exhibit 10.42

 

 

BEHRINGER HARVARD BAILEYS
INVESTORS, L.P.,

a Delaware limited partnership

 

AMENDED AND RESTATED

LIMITED PARTNERSHIP AGREEMENT

 

 

December 1, 2009

 

 

 

INTERESTS IN THE PARTNERSHIP
ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS. 
THIS AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS IN SECTIONS 5.2
AND 5.3.

 

INTERESTS IN THE PARTNERSHIP
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
THE SECURITIES LAWS OF ANY STATE IN RELIANCE UPON EXEMPTIONS UNDER SUCH ACT AND
LAWS.  THE TRANSFER OF INTERESTS IN THE
PARTNERSHIP IS PROHIBITED UNLESS SUCH TRANSFER IS MADE IN COMPLIANCE WITH ALL
SUCH APPLICABLE ACTS.  ADDITIONAL
RESTRICTIONS ON TRANSFERS OF INTERESTS IN THE PARTNERSHIP ARE SET FORTH IN THIS
AGREEMENT.

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I. ORGANIZATION

  	
   

  	
  1

  
	
  1.1    Formation

  	
   

  	
  1

  
	
  1.2    Name

  	
   

  	
  2

  
	
  1.3    Purpose

  	
   

  	
  2

  
	
  1.4    Registered
  Agent and Office; Principal Place of Business

  	
   

  	
  2

  
	
  1.5    Foreign
  Qualifications

  	
   

  	
  2

  
	
  ARTICLE II. CAPITAL CONTRIBUTIONS

  	
   

  	
  2

  
	
  2.1    Initial
  Capital Contributions

  	
   

  	
  2

  
	
  2.2    Additional
  Capital Contributions

  	
   

  	
  2

  
	
  2.3    Additional
  Capital Contribution Procedures

  	
   

  	
  3

  
	
  2.4    Failures
  to Make Additional Capital Contributions

  	
   

  	
  3

  
	
  2.5    Capital
  Accounts

  	
   

  	
  4

  
	
  2.6    No
  Return of Capital Contributions

  	
   

  	
  5

  
	
  2.7    No
  Interest

  	
   

  	
  5

  
	
  2.8    Partner
  Loans

  	
   

  	
  5

  
	
  2.9    BH
  Additional Capital Contributions

  	
   

  	
  6

  
	
  2.10  BH-Funded
  Accrued Development Fee, BH-Funded Affiliate Fees and BH-Funded
  Hard Cost Savings

  	
   

  	
  6

  
	
  2.11  Exercise
  of Conversion Right

  	
   

  	
  7

  
	
  2.12  Modification
  of Senior Loan

  	
   

  	
  7

  
	
  ARTICLE III. MANAGEMENT OF THE PARTNERSHIP

  	
   

  	
  8

  
	
  3.1    Management

  	
   

  	
  8

  
	
  3.2    Limitations
  on Power and Authority of the General Partner

  	
   

  	
  8

  
	
  3.3    Liability
  of the General Partner

  	
   

  	
  8

  
	
  3.4    Compensation;
  Reimbursement

  	
   

  	
  8

  
	
  3.5    Other
  Activities

  	
   

  	
  8

  
	
  3.6    Transactions
  with Affiliates; Deferred Affiliate Fees

  	
   

  	
  8

  
	
  3.7    Devotion
  of Time

  	
   

  	
  10

  
	
  3.8    REIT
  Compliance

  	
   

  	
  10

  
	
  3.9    Removal
  of the General Partner Upon Triggering Events

  	
   

  	
  10

  
	
  ARTICLE IV. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS

  	
   

  	
  12

  
	
  4.1    No
  Authority

  	
   

  	
  12

  
	
  4.2    Liability
  of Limited Partners

  	
   

  	
  12

  
	
  4.4    Permanent
  Financing of the Project

  	
   

  	
  12

  
	
  ARTICLE V. EXCULPATION AND INDEMNIFICATION

  	
   

  	
  12

  
	
  5.1    Exculpation

  	
   

  	
  12

  
	
  5.2    Indemnification

  	
   

  	
  12

  
	
  5.3    Guaranties

  	
   

  	
  13

  
	
  ARTICLE VI. DISTRIBUTIONS

  	
   

  	
  13

  
	
  6.1    Distributable
  Cash

  	
   

  	
  13

  
	
  6.2    Tax
  Distributions

  	
   

  	
  14

  
	
  6.3    Minimum
  Distributions to REIT

  	
   

  	
  14

  
	
  6.4    Distributions
  upon Liquidation

  	
   

  	
  14

  
	
  6.5    Distributions
  of Certain Lender-Funded Amounts

  	
   

  	
  14

  
	
  6.6    Certain
  Definitions

  	
   

  	
  15

  
	
  ARTICLE VII. TAX ALLOCATIONS AND OTHER TAX MATTERS

  	
   

  	
  16

  
	
  7.1    Allocations
  of Profits and Losses to Capital Accounts

  	
   

  	
  16

  

 

ii

 

	
  7.2    Other
  Allocation Rules

  	
   

  	
  19

  
	
  7.3    Tax
  Allocations; Section 704(c) of the Code

  	
   

  	
  19

  
	
  7.4    Certain
  Definitions

  	
   

  	
  20

  
	
  7.5    Tax
  Matters Partner; Tax Returns; Tax Elections

  	
   

  	
  23

  
	
  7.6    Tax
  Returns; Tax Elections

  	
   

  	
  23

  
	
  7.7    No
  Publicly Traded Partnership

  	
   

  	
  23

  
	
  7.8    Amounts
  Withheld; Taxes of Taxing Authorities

  	
   

  	
  24

  
	
  ARTICLE VIII. ADMISSIONS, TRANSFERS AND WITHDRAWALS

  	
   

  	
  24

  
	
  8.1    Admissions

  	
   

  	
  24

  
	
  8.2    Transfer
  of General Partner’s Interest

  	
   

  	
  24

  
	
  8.3    Transfer
  of Limited Partners’ Interest

  	
   

  	
  24

  
	
  8.4    Substituted
  Partners

  	
   

  	
  25

  
	
  8.5    Withdrawal
  of Partners

  	
   

  	
  26

  
	
  8.6    Transfer
  of Interests in Partners

  	
   

  	
  26

  
	
  8.7    BREOF
  Partner’s Put Right

  	
   

  	
  26

  
	
  8.8    BREOF
  Partner’s Tag-Along Right

  	
   

  	
  28

  
	
  8.9    Buy/Sell
  Rights

  	
   

  	
  29

  
	
  8.10  Call Right

  	
   

  	
  29

  
	
  8.11  Net
  Profits Payment

  	
   

  	
  29

  
	
  8.12  Tax
  Characterization of Net Profits Payments

  	
   

  	
  30

  
	
  ARTICLE IX. FISCAL AND OPERATIONAL MATTERS

  	
   

  	
  30

  
	
  9.1    Fiscal
  Year

  	
   

  	
  30

  
	
  9.2    Books
  of Account

  	
   

  	
  30

  
	
  9.3    Inspection

  	
   

  	
  30

  
	
  9.4    Bank
  Accounts

  	
   

  	
  30

  
	
  9.5    Title
  to Partnership Property

  	
   

  	
  30

  
	
  9.6    No
  Employees

  	
   

  	
  31

  
	
  9.7    Insurance

  	
   

  	
  31

  
	
  9.8    Reports

  	
   

  	
  31

  
	
  9.9    Budgets

  	
   

  	
  31

  
	
  ARTICLE X. AMENDMENTS AND WAIVERS

  	
   

  	
  32

  
	
  10.1  Amendments
  and Waivers

  	
   

  	
  32

  
	
  ARTICLE XI. DISSOLUTION,
  LIQUIDATION AND TERMINATION

  	
   

  	
  32

  
	
  11.1  Dissolution

  	
   

  	
  32

  
	
  11.2  Accounting

  	
   

  	
  32

  
	
  11.3  Liquidation

  	
   

  	
  33

  
	
  11.4  Termination

  	
   

  	
  33

  
	
  11.5  No Deficit
  Capital Account Restoration Obligation

  	
   

  	
  33

  
	
  11.6  Deemed
  Contribution and Distribution

  	
   

  	
  33

  
	
  11.7  No Other
  Cause of Dissolution

  	
   

  	
  33

  
	
  ARTICLE XII. MISCELLANEOUS PROVISIONS

  	
   

  	
  34

  
	
  12.1  Representations
  of the Partners

  	
   

  	
  34

  
	
  12.2  Attorneys’
  Fees

  	
   

  	
  34

  
	
  12.3  Binding
  Effect

  	
   

  	
  34

  
	
  12.4  Construction

  	
   

  	
  34

  
	
  12.5  Counterparts

  	
   

  	
  35

  
	
  12.6  Entire
  Agreement

  	
   

  	
  35

  
	
  12.7  Expenses

  	
   

  	
  35

  
	
  12.8  Further
  Assurances

  	
   

  	
  35

  
	
  12.9  Governing
  Law

  	
   

  	
  35

  
	
  12.10 Jurisdiction;
  Venue

  	
   

  	
  35

  

 

iii

 

	
  12.11 Notices

  	
   

  	
  35

  
	
  12.12 Public
  Statements

  	
   

  	
  36

  
	
  12.13 No Recourse

  	
   

  	
  36

  
	
  12.14 Remedies
  Cumulative

  	
   

  	
  36

  
	
  12.15 Severability

  	
   

  	
  36

  
	
  12.16 Third-Party
  Beneficiaries

  	
   

  	
  36

  
	
  12.17 Waiver of Jury
  Trial

  	
   

  	
  37

  
	
  12.18 Waiver of
  Partition

  	
   

  	
  37

  

 

iv

 

GLOSSARY

 

	
  Act

  	
  1

  
	
  Adjusted Capital Account Deficit(s)

  	
  20

  
	
  Agreement

  	
  1

  
	
  Arbitration Notice

  	
  27

  
	
  Back-End Percentage Interests

  	
  15

  
	
  BH Additional Capital Contributions

  	
  6

  
	
  BH Partner

  	
  1

  
	
  BH-Funded Accrued Development Fee

  	
  6

  
	
  BH-Funded Affiliate Fees

  	
  6

  
	
  BH-Funded Construction Costs

  	
  7

  
	
  BH-Funded Hard Cost Savings

  	
  6

  
	
  BREOF Acceptance Notice

  	
  26

  
	
  BREOF Hypothetical Closing Costs

  	
  27

  
	
  BREOF Mark to Market Price

  	
  27

  
	
  BREOF Negotiation Deadline

  	
  26

  
	
  BREOF Partner

  	
  1

  
	
  BREOF Put Period

  	
  27

  
	
  BREOF Valuation Notice

  	
  26

  
	
  Buy-Sell Offer

  	
  E-1

  
	
  Call Notice

  	
  D-1

  
	
  Called Interest

  	
  D-1

  
	
  Calling Partner

  	
  D-1

  
	
  Capital Account

  	
  4

  
	
  Certificate

  	
  1

  
	
  Code

  	
  20

  
	
  Completion Date

  	
  27

  
	
  Completion Guaranty

  	
  3

  
	
  Contributing Partners

  	
  3

  
	
  Contribution Notice

  	
  3

  
	
  Conversion Option

  	
  1

  
	
  Defaulting Purchaser

  	
  E-3

  
	
  Deferred Affiliate Fees

  	
  9

  
	
  Deposit

  	
  E-2

  
	
  Depreciation

  	
  20

  
	
  Developer Partner

  	
  2

  
	
  Development Budget

  	
  31

  
	
  Dissolution Events

  	
  32

  
	
  Distributable Cash

  	
  15

  
	
  Effective Date

  	
  1

  
	
  Election

  	
  E-2

  
	
  Event of Withdrawal

  	
  11

  
	
  First Priority Preference Amount

  	
  15

  
	
  GAAP

  	
  31

  
	
  General Partner

  	
  1

  
	
  Gross Asset Value

  	
  21

  
	
  Guaranteed Indebtedness

  	
  13

  
	
  Guarantor

  	
  3

  
	
  Hard Costs Shortfall

  	
  7

  
	
  Hypothetical Distributions

  	
  D-1

  
	
  Indemnitees

  	
  12

  
	
  Initial Senior Loan

  	
  7

  
	
  Initiating Partner

  	
  E-1

  
	
  Institutional Partner

  	
  8

  
	
  Land

  	
  2

  
	
  Lender-Funded Amounts

  	
  14

  
	
  Limited Partners

  	
  1

  
	
  Loan Modification Terms

  	
  7

  
	
  Major Decision

  	
  8

  
	
  Major Decision Approval

  	
  8

  
	
  Mezzanine Loan

  	
  1

  
	
  Minimum Distribution Amount

  	
  14

  
	
  Non-Contributed Amount

  	
  3

  
	
  Non-Contributing Partner

  	
  3

  
	
  Non-Funding Notice

  	
  3

  
	
  Non-Initiating Partner

  	
  E-1

  
	
  Nonrecourse Deductions

  	
  21

  
	
  Nonrecourse Liability

  	
  22

  
	
  Offeree

  	
  E-1

  
	
  Offeree Group

  	
  E-1

  
	
  Offeree Value

  	
  E-1

  
	
  Offeror

  	
  E-1

  
	
  Offeror Group

  	
  E-1

  
	
  Offeror Value

  	
  E-1

  
	
  Operating Budget

  	
  31

  
	
  Original Agreement

  	
  1

  
	
  Partner Non-Recourse Debt

  	
  22

  
	
  Partner Non-Recourse Debt Minimum Gain

  	
  22

  
	
  Partner Non-Recourse Deductions

  	
  22

  
	
  Partners

  	
  1

  
	
  Partnership

  	
  1

  
	
  Partnership Costs

  	
  3

  
	
  Partnership Minimum Gain

  	
  22

  
	
  Partnership Property

  	
  22

  
	
  Permits

  	
  C-3

  
	
  Plans and Specifications

  	
  C-2

  
	
  Profit(s) and Loss(es)

  	
  22

  
	
  Profits Participation Agreement

  	
  D-1

  
	
  Project

  	
  2

  
	
  Project Owner

  	
  2

  
	
  Purchase Price

  	
  E-1

  
	
  Purchaser

  	
  E-2

  
	
  Regulatory Allocations

  	
  18

  
	
  REITs

  	
  10

  
	
  Report

  	
  C-3

  
	
  Representing Parties

  	
  C-1

  
	
  Revised Development Budget

  	
  31

  

 

v

 

	
  Second Priority Preference Amount

  	
  16

  
	
  Section 8.11 Net Profits Payment

  	
  29

  
	
  Section 8.7 Net Profits Payment

  	
  28

  
	
  Section 8.8 Net Profits Payment

  	
  29

  
	
  Securities Act

  	
  34

  
	
  Seller

  	
  E-2

  
	
  Senior Loan

  	
  7

  
	
  Special REIT Distribution

  	
  14

  
	
  Special Tax Distribution

  	
  14

  
	
  Tag-Along Acceptance Notice

  	
  28

  
	
  Tag-Along Acceptance Period

  	
  28

  
	
  Tag-Along Hypothetical Price

  	
  29

  
	
  Tag-Along Notice

  	
  28

  
	
  Tag-Along Price

  	
  28

  
	
  Tag-Along Right

  	
  28

  
	
  Tag-Along Transaction

  	
  28

  
	
  Treasury Regulations

  	
  23

  
	
  Triggering Event

  	
  10

  
	
  Undistributed First Priority Capital

  	
  16

  
	
  Undistributed Second Priority Capital

  	
  16

  
	
  Unexpected Shortfall

  	
  3

  
	
  Withdrawing General Partner

  	
  1

  

 

vi

 

BEHRINGER HARVARD BAILEYS
INVESTORS, L.P.

 

AMENDED AND RESTATED

 

LIMITED PARTNERSHIP AGREEMENT

 

THIS AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT (this “Agreement”)
of BEHRINGER HARVARD BAILEYS INVESTORS, L.P.,
a Delaware limited partnership (the “Partnership”), is entered into as
of December 1, 2009 (the “Effective Date”), among BEHRINGER HARVARD BAILEYS GP, LLC, a Delaware limited
liability company, as the sole general partner (the “General Partner”),
and the persons listed from time to time as limited partners on Schedule I (the “Limited
Partners” and, together with the General Partner, the “Partners”).

 

Recitals

 

A.                                   On July 10, 2007, FF Baileys LLC (“Withdrawing General Partner”), as
general partner, and FF Investors III East LLC and BREOF Baileys, LLC (“BREOF Partner”), as limited partners, formed the Partnership, formerly known as
Fairfield Baileys Investors L.P., and entered into that certain Limited
Partnership Agreement of Fairfield Baileys Investors L.P. (the “Original
Agreement”).

 

B.                                     In connection with the transactions
contemplated in the Original Agreement, Behringer Harvard Baileys REIT, LLC (“BH
Partner”), made a mezzanine loan to the Project Owner pursuant to that
certain Mezzanine Loan Agreement dated as of July 10, 2007 (the “Mezzanine
Loan”).  In connection with the
Mezzanine Loan and the Original Agreement, the Partnership and BH Partner
entered into that certain Option Agreement dated as of July 10, 2007,
pursuant to which BH Partner has the option to convert the total outstanding
balance of the Mezzanine Loan and other amounts then owed to Mezzanine Lender,
including all outstanding principal, accrued interest, late charges and other
amounts due under the Mezzanine Loan, into an equity investment in the
Partnership and to become a Limited Partner in the Partnership (the “Conversion
Option”).

 

C.                                     The Partners now desire to amend and
restate the Original Agreement to reflect (i) the transfer of all of the
right, title and interest of Withdrawing General Partner in and to its general partner interest in the Partnership to General
Partner, (ii) the admission of the General Partner as a substituted
general partner of the Partnership, (iii) the withdrawal of Withdrawing General Partner as the general partner of the
Partnership, (iv) the exercise of the Conversion Option by BH Partner, (v) the
change of the name of the Partnership to Behringer Harvard Baileys Investors,
L.P., (vi) additional capital contributions, (vii) certain conforming
changes and (viii) other amendments, all on the terms and subject to the
conditions set forth herein.

 

Article I

Organization

 

1.1                                 Formation.  The
General Partner and the Limited Partners have formed a limited partnership
pursuant to and in accordance with the Delaware Revised Uniform Limited
Partnership Act (the “Act”).  The
General Partner filed, on behalf of the Partnership, a certificate of limited
partnership (the “Certificate”) conforming to the Act with the office of
the Secretary of State of the State of Delaware.  The term of the Partnership
began upon such filing and shall continue until the dissolution, liquidation
and termination of the Partnership in accordance with Article XI.

 

1

 

1.2                                 Name.  
The name of the Partnership shall be Behringer Harvard Baileys Investors,
L.P.  The General Partner may change the
name of the Partnership from time to time. 
In such event, the General Partner shall promptly (i) give notice
thereof to each Limited Partner and (ii) file in the office of the
Secretary of State of the State of Delaware a certificate of amendment to the
Certificate reflecting such change of name.

 

1.3                                 Purpose.  The
purposes of the Partnership shall be to: (i) directly or indirectly,
acquire, hold, manage, sell and exercise rights in respect of membership
interests in Behringer Harvard Baileys Project Owner, LLC, a Delaware limited
liability company, formerly known as Fairfield Baileys, LLC (together with its
successors, the “Project Owner”), which in turn owns the real property
in Bailey’s Crossroads, Virginia particularly described on Schedule II
(the “Land”) on which the
Project Owner will construct a 414-unit apartment community (the “Project”),
and (ii) engage or participate in such other activities related or
incidental thereto as the General Partner may deem necessary, appropriate or
desirable from time to time.

 

1.4                                 Registered
Agent and Office; Principal Place of Business.  The
name and address of the Partnership’s initial registered agent and its initial
registered office in the State of Delaware are Corporation Service Company,
2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.  The initial principal place of business of the
Partnership is located at c/o Behringer Harvard Baileys GP, LLC, 15601 Dallas
Parkway, Suite 600, Addison, Texas 75001. 
The General Partner may change such registered office, registered agent
or principal place of business from time to time.  In the event of any such change, the General
Partner shall promptly (i) give notice thereof to each Limited Partner and
(ii) file in the office of the Secretary of State of the State of Delaware
a certificate of amendment to the Certificate reflecting such change.  The Partnership may have such other place or
places of business within or outside the State of Delaware as may be determined
by the General Partner from time to time.

 

1.5                                 Foreign
Qualifications.  The General Partner shall cause the
Partnership to be registered or qualified as a foreign limited partnership
under its own name or under an assumed or fictitious name in any jurisdiction
in which the Partnership owns property or transacts business if such
registration or qualification is necessary to protect the limited liability of
the Limited Partners or to permit the Partnership lawfully to own property or
transact business in such jurisdiction.

 

1.6                                 Effect
of this Agreement.  Except as otherwise provided in
this Section 1.6 to the contrary, this Agreement supersedes the
Original Agreement in its entirety, and the Original Agreement shall no longer
have any force or effect on and after the Effective Date; provided, however, (i) the
provisions of Section 12.1 (Representations of the Partners) of the
Original Agreement shall continue in full force and effect and are unchanged by
this Agreement, and (ii) the provisions of Sections 5.1 and 5.2
of the Original Agreement shall continue in full force and effect and are
unchanged by this Agreement as to the Withdrawing General Partner and the other
Indemnitees (as defined therein).

 

Article II

Capital Contributions

 

2.1                                 Initial
Capital Contributions.  Each Partner has made or agreed
to make an initial capital contribution to the Partnership, in cash or in kind,
in the amount set forth opposite such Partner’s name on Schedule I.  For the purposes of determining the initial
balance in the Capital Accounts of the General Partner and FF Investors
III-East LLC (the “Developer Partner”), the Partners have agreed that no
amount shall be credited to the Capital Account of either such Partner in
respect of its contribution to the Partnership of the rights to acquire the
Land.

 

2.2                                 Additional
Capital Contributions.  If
the General Partner determines that the Partnership requires additional cash
funds in order to pay all of the expenditures of any kind made or to 

 

2

 

be
made in respect of operation of the Partnership, the Project Owner or otherwise
in connection with the Project, including pre-development activities, studies,
tests, development and construction costs, development fees, principal,
interest, loan fees, points, penalties and other amounts payable on
indebtedness, ad valorem taxes, state and local taxes, impact fees, permit fees,
license fees, insurance premiums, escrow payments, repair and maintenance
costs, advertising expenses, professional fees, utilities costs, equipment
costs, sales commissions, management fees, leasing fees, salaries, wages,
fringe benefits, tenant improvement costs, costs to form the Partnership and
the Project Owner, and other similar types of costs, expenses, charges,
liabilities and obligations of any entity controlled by the Partnership and
otherwise relating to the Project (collectively, “Partnership Costs”),
and if the amount by which such Partnership Costs exceed the Partnership’s
available funds (the “Unexpected Shortfall”) is not otherwise required
to be funded by the Guarantor pursuant to the Completion Guaranty, then,
subject to the procedures set forth in Section 2.3, the General
Partner may request that the Partners make, and the Partners may, at their
option, make, additional capital contributions to the Partnership equal to
their respective Back-End Percentage Interests of the Unexpected Shortfall, it
being agreed that no Partner shall be required to make any additional capital
contributions under this Section 2.2.  For avoidance of doubt, the Partners
acknowledge and agree that neither the provision of, nor any funding under, the
Completion Guaranty shall be treated as capital contributions to the
Partnership.  As used herein, (i) “Completion
Guaranty” means the guaranty of completion provided in connection with the
Senior Loan, and “Guarantor” means the guarantor under the Completion
Guaranty.

 

2.3                                 Additional
Capital Contribution Procedures.  If the General
Partner desires to request an additional capital contribution from the Partners
pursuant to Section 2.2, then the General Partner shall deliver a
notice (“Contribution Notice”) to each Partner setting forth: (i) the
aggregate amount of the additional capital contribution to be made (which
amount shall not exceed the Unexpected Shortfall); (ii) each Partner’s
respective Back-End Percentage Interest of the aggregate additional capital
contribution; (iii) the date on which such additional capital contribution
is due (which date shall not be less than five business days after the
date on which the Contribution Notice is delivered); (iv) a brief
description of the reason for such additional capital contribution; (v) a
statement that the additional capital contribution is optional; and (vi) the
wiring or other instructions for payment by the Partners of such additional
capital contribution.

 

2.4                                 Failure
to Make Additional Capital Contributions.

 

(a)                                  If a Partner fails or elects not to make any additional
capital contribution requested pursuant to Section 2.2 (a “Non-Contributing
Partner”), then the General Partner shall send a notice (the “Non-Funding
Notice”) to all Partners identifying the Non-Contributing Partner, and
setting forth the amount of the additional capital contribution that such
Non-Contributing Partner failed or elected not to make (the “Non-Contributed
Amount”).  If a Non-Contributing
Partner fails to make the additional capital contribution to the Partnership
within five business days after the provision of a Non-Funding Notice to all
Partners, then the Partners that made their optional additional capital
contributions to the Partnership (the “Contributing Partners”), in their
sole and absolute discretion, may elect to make additional capital
contributions to the Partnership in an amount up to the Non-Contributed Amount
in the place and stead of the Non-Contributing Partner, with each Contributing
Partner having the right to contribute up to its pro rata share of the
Non-Contributed Amount based on the ratio that its Back-End Percentage Interest
bears to the aggregate Back-End Percentage Interests of all Contributing
Partners or in such other percentage as the Contributing Partners holding a
majority of all Back-End Percentage Interests held by all Contributing Partners
shall agree (provided that if a Partner is an affiliate of another Partner,
then neither such Partner shall be treated as a Contributing Partner unless
each such Partner contributes its pro rata share of the optional additional
capital contribution).  In the case of
any non-pro rata contributions by the Partners (i.e., other than in accordance
with Back-

 

3

 

End Percentage Interests), the amounts so contributed shall
be treated as either (i) loans to the Partnership to be evidenced by one
or more non-negotiable demand promissory notes bearing interest at the rate of
14% per annum and requiring prepayment of principal and interest out of any
available Distributable Cash prior to any distributions of Distributable Cash
being made to the Partners, or (ii) if all of the Contributing Partners
agree in writing within 60 days after making such contributions, as additional
capital contributions, in which event the Back-End Percentage Interests of the
Partners shall be adjusted as provided in Section 2.4(b).

 

(b)                                 If the Back-End Percentage Interests of the Partners are
required to be adjusted as provided in Section 2.4(a), then the Back-End
Percentage Interests of each Non-Contributing Partner shall be reduced by the
quotient (expressed as a percentage) of: 
(i) the Non-Contributed Amount; divided by (ii) the sum of the
aggregate capital contributions made to the Partnership by all Partners from
the Effective Date through the applicable date of determination.  The Back-End Percentage Interest of each
Contributing Partner shall be increased by its proportionate share of the
amount that the Back-End Percentage Interest of the Non-Contributing Partner is
reduced (determined based upon the ratio that the portion of Non-Contributed
Amount paid by such Partner bears to the aggregate portion of the
Non-Contributed Amount paid by all Partners). 
Further, if the Back-End Percentage Interests of the Partners are
required to be adjusted as provided in Section 2.4(a), then the
amount of any additional capital contributions to the Partnership in (1) an
amount up to the Non-Contributed Amount made by a Contributing Partner or (2) in
an amount up to the amount of any non-pro rata contributions by the Partners
(i.e., other than in accordance with Back-End Percentage Interests) made by a
Contributing Partner shall, in either case, increase the Undistributed First
Priority Capital of each such Contributing Partner.  For illustration purposes only, assume
that:  (A) an additional capital
contribution was requested; (B) the Non-Contributing Partner’s Back-End
Percentage Interest is 50%; (C) the Contributing Partner’s Back-End
Percentage Interest is 50%; (D) the Non-Contributed Amount is $1,000,000;
and (E) the sum of the aggregate capital contributions made to the
Partnership by the Partners from the Effective Date through the applicable date
of determination equals $10,000,000. 
Under these circumstances, the Non-Contributing Partner’s Back-End
Percentage Interest would decrease from 50% to 40% (50% minus the quotient
(expressed as a percentage) of: (1) $1,000,000; divided by (2) $10,000,000);
and the Contributing Partner’s Back-End Percentage Interest would increase from
50% to 60%.

 

(c)                                  THE PARTNERS ACKNOWLEDGE AND AGREE THAT THE PARTNERSHIP
INTEREST OF A NON-CONTRIBUTING PARTNER MAY BE SUBSTANTIALLY DILUTED FOR
FAILING (OR ELECTING NOT) TO MAKE CAPITAL CONTRIBUTIONS UNDER SECTION 2.2.

 

2.5                                 Capital
Accounts.

 

(a)                                  A separate capital account (a “Capital Account”) shall
be established for each Partner in accordance with the following provisions.

 

(i)                                     Each Partner’s Capital Account shall be increased by: (A) the
amount of money contributed by the Partner to the Partnership; (B) the
initial Gross Asset Value of property (other than money) contributed by, or on
behalf of, the Partner to the Partnership (net of liabilities secured by such
contributed property that the Partnership assumes or subject to which it takes
the property), determined as of the date of such contribution; and (C) such
Partner’s distributive share of Profits and items in the nature of Partnership
income and gain that are specially allocated hereunder.

 

4

 

(ii)                                  Each Partner’s Capital Account shall be decreased by: (A) the
amount of money distributed to the Partner; (B) the Gross Asset Value of
property (other than money) distributed to the Partner by the Partnership (net
of liabilities secured by such distributed property that the Partner assumes or
subject to which it takes the property), determined as of the date of such
distribution; and (C) such Partner’s distributive share of Losses and any
items in the nature of expenses or losses that are specially allocated
hereunder.

 

(iii)                               Upon the transfer of all or any portion of an interest in the
Partnership, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the interest transferred.

 

(b)                                 The provisions of this Section 2.5 relating to
the maintenance of Capital Accounts are intended to comply with the
requirements of Section 1.704-1(b) of the Treasury Regulations and
shall be interpreted and applied in a manner consistent with such Treasury
Regulations; provided, however, that nothing contained herein shall be
construed as creating a deficit capital account restoration obligation or
otherwise personally obligating any Partner to make capital contributions in
excess of the capital contributions expressly otherwise provided for in this
Agreement.  If the General Partner
reasonably determines that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including debits or credits
relating to liabilities that are secured by contributions or distributed
property or that are assumed by the Partnership or the Partners), are computed
in order to comply with such Treasury Regulations, then the General Partner may
make such modification if such modification is not likely to have a material
effect on the amounts distributed to any person pursuant to Article XI
upon the dissolution, liquidation and termination of the Partnership.  The General Partner also shall (i) make
any adjustments that are necessary or appropriate to maintain equality between
the Capital Accounts of the Partners and the amount of Partnership capital
reflected on the Partnership’s balance sheet, as computed for book purposes, in
accordance with Section 1.704-1(b)(2)(iv)(q) of the Treasury
Regulations, and (ii) make any appropriate modifications if unanticipated
events might otherwise cause this Agreement not to comply with Section 1.704-1(b) of
the Treasury Regulations.

 

2.6                                 No
Return of Capital Contributions.   No Partner
shall be entitled to a withdrawal or return of its capital contributions to the
Partnership or the balance in its Capital Account.  Instead, each Partner shall look solely to
distributions from the Partnership for such purpose as provided in Article VI
and Article XI.

 

2.7                                 No
Interest.  No Partner shall be entitled to
interest on its capital contributions to the Partnership or the balance in its
Capital Account, and any interest actually received by reason of the investment
of any part of the Partnership’s funds shall constitute the Partnership’s
property.

 

2.8                                 Partner
Loans.  If the Partnership or the Project Owner
has insufficient funds to meet its obligations as they become due or to carry
out its operations, business and affairs, then, in lieu of borrowing any
required funds from third parties, selling assets or requesting additional
capital contributions, then the General Partner with Major Decision Approval
may, but shall not be required to, cause the Partnership to borrow the
necessary funds from one or more Partners; provided, however, that any such
borrowing shall, in the judgment of the General Partner and with Major Decision
Approval, be on such terms and conditions as are no less favorable than those
that reasonably could be obtained in an arm’s length transaction with a person
that is not an affiliate of the Partnership or the General Partner.  No Partner shall be obligated to loan or
advance any funds to the Partnership.  No
loan or advance to the Partnership shall be deemed a capital contribution to
the Partnership.  For the avoidance of
doubt, no 

 

5

 

amounts
shall be borrowed without Major Decision Approval if such borrowed amounts
would be a substitute for obligations required to be funded by the Guarantor
pursuant to the Completion Guaranty.

 

2.9                                 BH
Additional Capital Contributions.  Before the
execution and delivery of this Agreement and before the exercise of the
Conversion Option, the General Partner made additional capital contributions to
the Partnership pursuant to Section 2.2 (“BH Additional Capital
Contributions”).  BREOF Partner  did not make
any additional capital contribution to the Partnership when the BH Additional
Capital Contributions were made.  In
connection with the BH Additional Capital Contributions: (i) the General
Partner was a Contributing Partner; (ii) BREOF Partner was a
Non-Contributing Partner; (iii) Developer Partner was a Non-Contributing
Partner; (iv) the Undistributed First Priority Capital of the General
Partner increased by the entire amount of the BH Additional Capital
Contribution (other than the portion thereof made in accordance with the
Back-End Percentage Interest of the General Partner at the time the BH
Additional Capital Contribution was made), and (v) the Back-End Percentage
Interests of the Partners were adjusted. 
The Contributed Amount and Non-Contributed Amount of each Partner in
respect of the BH Additional Capital Contributions, and the Back-End Percentage
Interests of the Partners as of the Effective Date, are set forth on Schedule I.

 

2.10                           BH-Funded
Accrued Development Fee, BH-Funded Affiliate Fees and BH-Funded Hard
Cost Savings.

 

(a)                                  As of the Effective Date, the General Partner made an
additional capital contribution to the Partnership in the amount set forth on Schedule I as the BH-Funded
Accrued Development Fee (the “BH-Funded Accrued Development Fee”), which
amount represents a portion of the development fee described in Section 3.6(a) that
was earned and payable before the Effective Date but was not funded by proceeds
under the Initial Senior Loan.  The
General Partner shall cause the Partnership to pay the BH-Funded Accrued
Development Fee to FF Development L.P. on the Effective Date.  Subject to the provisions of this Section 2.10(a),
the General Partner agrees to make additional capital contributions to the
Partnership (the “BH-Funded Affiliate Fees”) in an aggregate amount not
to exceed: (i) a portion of the development fee described in Section 3.6(a) equal
to the positive difference between (a) the amount of the development fee
described in clause (A) of Section 3.6(a) that is
included in the Development Budget and (b) the amount of the development
fee described in clause (A) of Section 3.6(a) that
is included in the Revised Development Budget; (ii) the amount of the
development fee described in clause (B) of Section 3.6(a);
and (iii) the portion of the general contractor’s fee described in Section 3.6(b) for
which payment is deferred until completion of the Project as set forth in the
Senior Loan documents.  From time to
time, the General Partner shall make the additional capital contributions to
the Partnership representing the BH-Funded Affiliate Fees and shall cause the
Partnership to pay the BH-Funded Affiliate Fees, or portion thereof, then due
and payable to the persons entitled thereto and at the times set forth in the
provisions of Sections 3.6(a) and (b), as applicable,
unless and to the extent that the payment of any portion thereof is made
available and paid from proceeds under the Senior Loan.

 

(b)                                 Subject to the provisions of this Section 2.10(b),
the General Partner agrees to make additional capital contributions to the
Partnership (the “BH-Funded Hard Cost Savings”) in an aggregate amount
not to exceed $100,000.  The BH-Funded
Hard Cost Savings represents the amount to which FF Development L.P., the
general contractor for the construction of the Project, may be entitled
pursuant to the applicable provisions of the agreement for construction for the
Project.  From time to time, the General
Partner shall make the additional capital contributions to the Partnership
representing the BH-Funded Hard Cost Savings and shall cause the Partnership to
pay the BH-Funded Hard Cost Savings, or portion thereof, then due and payable
to FF Development L.P. at the times and in the manner set forth in the
applicable provisions of the 

 

6

 

agreement for construction for the Project, unless and to the
extent that the payment of any portion thereof is made available and paid from
proceeds under the Senior Loan.

 

(c)                                  Subject to the provisions of this Section 2.10(c),
the General Partner agrees to make additional capital contributions to the
Partnership (the “BH-Funded Construction Costs”) in an aggregate amount
not to exceed $411,041.00 to fund the amount, if any, that hard construction
costs of the Project (excluding fees to the general contractor) exceed
$74,036,778.75 (the “Hard Costs Shortfall”).  From time to time, the General Partner shall
make the additional capital contributions to the Partnership representing the
BH- Funded Construction Costs to the extent of the Hard Costs Shortfall and
shall cause the Partnership to pay such Hard Costs Shortfall at the times and
in the manner set forth in the applicable provisions of the agreement for
construction for the Project, unless and to the extent that the payment of any
portion thereof is made available and paid from the proceeds under the Senior
Loan.

 

(d)                                 (d)                                 The entire amount of the BH-Funded Accrued Development Fee,
and, to the extent contributed to the capital of the Partnership, the amount so
contributed of the BH-Funded Affiliate Fees, the amount so contributed of the
BH-Funded Hard Cost Savings, and the amount so contributed of the BH-Funded
Construction Costs, shall be treated as additional capital contributions that
increase the Undistributed First Priority Capital of the General Partner, and (ii) the
Back-End Percentage Interests of the Partners (other than the General Partner)
shall be reduced by the quotient (expressed as a percentage) of:  (i) the sum of the BH-Funded Accrued
Development Fee, the amount so contributed of the BH-Funded Affiliate Fees plus
the amount so contributed of the BH-Funded Hard Cost Savings; divided by (ii) the
sum of the aggregate capital contributions made to the Partnership by all
Partners from July 10, 2007 (i.e., the effective date of the Original
Agreement) through the applicable date of determination.  The Back-End Percentage Interest of the
General Partner shall be increased by its proportionate share of the aggregate
amount that the Back-End Percentage Interest of the Partners (other than the
General Partner) is reduced in connection with such BH-Funded Accrued
Development Fee, BH-Funded Affiliate Fees and BH-Funded Hard Cost Savings.  For the avoidance of doubt, the foregoing
adjustments of the Back-End Percentage Interest of the Partners in respect of
the BH-Funded Accrued Development Fee are reflected on Schedule I.  THE PARTNERS ACKNOWLEDGE AND AGREE THAT THE
PARTNERSHIP INTEREST OF THE PARTNERS (OTHER THAN THE GENERAL PARTNER) MAY BE
SUBSTANTIALLY DILUTED AS PROVIDED IN THIS SECTION 2.10.

 

2.11                           Exercise
of Conversion Right.  After payment of the BH
Additional Capital Contributions and before the execution and delivery of this
Agreement, BH Partner, in its capacity as Mezzanine Lender, exercised the
Conversion Right.  Upon the exercise of
the Conversion Right by Mezzanine Lender, Mezzanine Lender was admitted as a
Limited Partner in the Partnership and was deemed to have made a capital
contribution in cash to the Partnership (classified as Undistributed Second
Priority Capital) in an amount equal to the outstanding principal amount of and
any accrued but unpaid interest on the Mezzanine Loan at the time of exercise,
which amount is included in the capital contributions of BH Partner set forth
on Schedule I.

 

2.12                           Modification
of Senior Loan.  The construction loan for the Project
made by Bank of America, N.A. (or a bank group led by it) (the “Initial
Senior Loan”) is being modified contemporaneously with the execution and
delivery of this Agreement.  The terms
and conditions of such modification are generally set forth on Exhibit G (“Loan
Modification Terms”) and are more particularly described in the
modification documentation entered into pursuant thereto, with any changes
therein as the General Partner may have approved in connection with the
documentation process.  The Initial
Senior Loan, as modified by such modification documentation, is referred to
herein as the “Senior Loan.”  The 

 

7

 

Partners hereby approve the Loan Modification
Terms and the documentation of the Senior Loan.

 

Article III

Management of the Partnership

 

3.1                                 Management.  
Subject to the limitations set forth in Section 3.2 and except as
otherwise expressly provided herein to the contrary, the business and affairs
of the Partnership shall be managed by the General Partner and all
determinations relating to the business and affairs of the Partnership
(including all decisions required or permitted to be made by the Partnership in
respect of its equity interest in the Project Owner) shall be made exclusively
by the General Partner.

 

3.2                                 Limitations
on Power and Authority of the General Partner.  No
act or determination set forth on Exhibit A
(each, a “Major Decision”) shall be taken on behalf of the Partnership
by the General Partner without Major Decision Approval.  As used herein, “Major Decision Approval”
means the prior written consent or approval of BH Partner and BREOF Partner (BH
Partner and BREOF Partner each is an “Institutional Partner”).  The General Partner shall give notice to each
Institutional Partner of any request for Major Decision Approval.  In the event either Institutional Partner
does not respond to such request within five business days, such Major
Decisions shall be deemed to have been disapproved.  After such deemed disapproval, the General
Partner may give another notice to such Institutional Partner who did not
timely respond, which notice must, as a condition to the effectiveness thereof,
be conspicuously marked in bold, all capital letters of at least
11-point font both on the outside of the delivery envelope and on the notice
itself: “URGENT/BAILEYS SECOND NOTICE: FAILURE TO RESPOND
IN FIVE BUSINESS DAYS IS DEEMED APPROVAL OF THE MATTER DESCRIBED HEREIN.”  If such non-responding Institutional Partner does
not respond to such request within five business days, such Major Decisions
shall be deemed to have been approved and consented to, and Major
Decision Approval shall be deemed to have been given, in respect of the matter
at issue.

 

3.3                                 Liability
of the General Partner.  The General
Partner shall not be personally liable for the debts or obligations of the
Partnership unless (but solely to the extent) expressly required by applicable
law; provided, however, that all such debts and obligations shall be paid or
discharged first with the property of the Partnership (including insurance
proceeds) before the General Partner shall be obligated to pay or discharge any
such debt or obligation with its personal assets.  Notwithstanding the foregoing, the General
Partner shall not be personally liable for any debt or obligation that is
nonrecourse or that, under the terms thereof, does not create or impose such
liability.

 

3.4                                 Compensation;
Reimbursement.  The General Partner shall not be
entitled to a management fee or other compensation for serving as the general
partner of the Partnership.  The
Partnership shall promptly reimburse the General Partner and its affiliates for
all reasonable costs and other obligations paid or incurred by them on behalf
of the Partnership to the extent that they are included in the Revised
Development Budget or the Operating Budget, as applicable.  Nothing contained in this Section 3.3
is intended to affect the Back-End Percentage Interest of the General Partner
or the amounts otherwise distributable to the General Partner by reason of its
Back-End Percentage Interest.

 

3.5                                 Other
Activities.  Neither this Agreement nor any
principle of law or equity shall preclude or limit, in any respect, the right
of any Partner, its affiliates or any of their respective officers, directors,
stockholders, members, managers, partners, employees or agents to engage in or
derive profit or compensation from any activities or investments, including
activities or investments that are in competition with the Partnership, nor
give any other Partner any right to participate or share in such activities or
investments or any profit or compensation derived therefrom.

 

3.6                                 Transactions
with Affiliates; Deferred Affiliate Fees.  Unless approved
in accordance with Section 3.2, except as otherwise provided in
this Agreement, neither the General Partner nor any 

 

8

 

affiliates
of the General Partner shall receive any remuneration, fees or other payments
from the Project Owner or the Partnership. 
In addition to the services and transactions specifically contemplated
by this Agreement, the General Partner, its affiliates and their respective
representatives and advisors may with Major Decision Approval provide services
to, and engage in transactions with, the Partnership on terms and conditions
that are, in the judgment of the General Partner, deemed to be not less
favorable than would be obtained in a comparable arm’s length transaction with
a person that is not an affiliate of the General Partner.

 

(a)                                  FF Development L.P. shall receive a development fee equal to
3% of the lesser of (i) the total Project costs set forth in Development
Budget, excluding the Development Fee in the Development Budget or (ii) the
total Project costs, excluding the Development Fee, actually incurred by
Project Owner and the Partnership in developing the Project; in either case,
with (A) the portion of the fee equal to 2.25% of total Project costs due
and payable by the Partnership with each loan draw under the construction loan
for the Project during construction of the Project and ending on the Completion
Date based on the total Project costs incurred with respect to such draw, and (B) the
portion of the fee equal to 0.75% of total Project costs payable when the
Project is at least 50% leased by unaffiliated, third-party tenants.

 

(b)                                 FF Development L.P. shall be the general contractor for the
construction of the Project pursuant to an agreement for construction, the form
and substance of which shall be subject to Major Decision Approval, and
pursuant and subject to such agreement shall receive a general contractor’s fee
equal to 6% of the lesser of (i) the hard construction costs set forth in
the Development Budget, excluding the general contractor’s fee in the
Development Budget or (ii) the hard construction costs, excluding the
general contractor’s fee in the Development Budget, actually incurred by
Project Owner and the Partnership in developing the Project, due and payable by
the Partnership with each loan draw under the construction loan for the Project
during construction of the Project and ending on the Completion Date based on
the hard construction costs incurred with respect to such draw.

 

(c)                                  FF Properties L.P. shall be the property manager of the
Project pursuant to a property management agreement, the form and substance of
which shall be subject to Major Decision Approval, and pursuant and subject to
such agreement shall receive a monthly property management fee equal to the
greater of (i) two percent (2%) of gross receipts collected from the
Project for the previous month or (ii) $5,000.  Payment of the property management fee shall
commence as provided in the property management agreement.

 

(d)                                 Certain employees of or consultants to the Developer Partner
or its affiliate shall receive an acquisition fee or commission payable in the
amount of $145,728.  The acquisition fee
or commission shall be payable as follows: (i) 62.5% of such fee or
commission on the closing of the Senior Loan; and (ii) 37.5% of such fee
or commission as and in the manner prescribed for the Deferred Affiliate
Fees.  As used herein, the “Deferred
Affiliate Fees” means 37.5% of the fees or commission described in Sections 3.6(d),
3.6(e) and 3.6(f). 
Any portion of the Deferred Affiliate Fees remaining after the
Completion Date shall be paid to the Developer Partner from any net
Distributable Cash remaining after any distribution of Distributable Cash to
the Partners pursuant to Sections 6.1(a), 6.1(b), 6.1(c) and
6.1(d).

 

(e)                                  Certain employees of or consultants to the Developer Partner
or its affiliate shall receive a capital markets fee payable in the amount of
$242,000.  The capital markets fee shall
be payable as follows: (i) 62.5% of such fee on the closing of the Senior
Loan; and (ii) 37.5% of such fee as and in the manner prescribed for the
Deferred Affiliate Fees.

 

9

 

(f)                                    Certain employees of or consultants to the Developer Partner
or its affiliate shall receive a development processing fee in the amount of
$364,320.  The development processing fee
shall be payable as follows: (i) 62.5% of such fee on the closing of the
Senior Loan; and (ii) 37.5% of such fee as and in the manner prescribed
for the Deferred Affiliate Fees.

 

(g)                                 Developer Partner or its affiliate shall provide, without
additional compensation from the Partnership, asset management services to the
Partnership, including (i) assisting the General Partner in the
preparation of the Operating Budget, (ii) advising the General Partner in
connection with all Major Decisions, (iii) monitoring the services of the
general contractor for the construction of the Project and the property manager
of the Project and act as a liaison between the General Partner and the general
contractor and property manager of the Project, (iv) assisting in the
maintenance of the records and books of account of the Partnership and the
preparation of financial statements and tax returns of the Partnership, (v) advising
the General Partner on ways to manage the Project to achieve the goals of and
to comply with the applicable business plan, (vi) informing the General
Partner as to significant market trends and conditions of which Developer
Partner is aware and which it believes may warrant consideration or action by
the General Partner on behalf of the Partnership, (vii) upon request,
recommending to the General Partner professional service providers in
connection with the Project and (viii) performing such other similar
services reasonably requested by the General Partner on behalf of the
Partnership.

 

3.7                                 Devotion
of Time.   The General Partner shall devote such
time and efforts to the operations, business and affairs of the Partnership as
are reasonably necessary to manage and supervise the operations, business and
affairs of the Partnership in an efficient manner.  Subject to the limitations set forth in Section 3.2
and the provision thereof in the Revised Development Budget or the Operating
Budget, as applicable, the General Partner shall have the right to employ, at
the expense of the Partnership, any agent or third person to manage or provide
other services to the Project Owner and the Partnership.

 

3.8                                 REIT
Compliance.  The General Partner acknowledges that
the BH Partner and certain of its affiliates qualify as real estate investment
trusts within the meaning of Section 856 of the Code (“REITs”) and,
as such, the BH Partner intends for its interest in the Partnership not to
adversely affect its classification (or the classification of any entity
directly or indirectly controlling BH Partner or any of its affiliates) as a
REIT.  Accordingly, for so long as the BH
Partner is a Limited Partner, the Partnership’s operations and the operations
of each other entity in which the Partnership may have a direct or indirect
interest shall be conducted at all times in a manner that will enable BH
Partner and its affiliates to satisfy all the requirements for REIT status
under the Code.  In furtherance of the
foregoing (and not in limitation thereof), notwithstanding any other provision
herein to the contrary, the General Partner agrees to consult regularly with
counsel for the BH Partner to ensure that the business of the Partnership and
its underlying contractual arrangements are structured in such manner as to
comply with the REIT classification rules.

 

3.9                                 Removal
of the General Partner upon Triggering Event.

 

(a)                                  Triggering Events.  Subject
to Section 3.11(b), the Institutional Partners may remove the
General Partner with Major Decision Approval upon the occurrence of any of the
following events (each, a “Triggering Event”):

 

(i)                                     the General Partner breaches any of its obligations hereunder
or under any other agreement or contract relating to the Project to which the
General Partner is a party, and such breach continues for ten days after
the receipt by the General Partner of notice of such breach from any
Institutional Partner;

 

10

 

(ii)                                  an affiliate of the General Partner breaches any of its
obligations under any agreement or contract relating to the Project to which it
is a party, and such breach continues for ten days after the receipt by
such affiliate of notice of such breach from any Institutional Partner;

 

(iii)                               the General Partner or any affiliate thereof commits any act
of gross negligence, willful misconduct, bad faith or fraud in connection with
its duties or obligations hereunder or under any other agreement or contract relating
to the Project to which it is a party;

 

(iv)                              the General Partner or any affiliate thereof is convicted of,
or pleads guilty or nolo contendere
to, any felony involving moral turpitude;

 

(v)                                 the General Partner or any affiliate thereof misapplies or
misappropriates Partnership or the Project Owner funds in violation of this
Agreement or otherwise;

 

(vi)                              the General Partner (A) makes a general assignment for
the benefit of creditors, (B) files a voluntary petition in bankruptcy, (C) files
a petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under
any bankruptcy or debtor relief law, (D) files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against it in any bankruptcy or insolvency proceeding brought against it, or (E) seeks,
consents to, or acquiesces in the appointment of a trustee, receiver, or
liquidator of the General Partner or of all or any substantial part of its
property;

 

(vii)                           if within 60 days after the commencement of any
proceeding against the General Partner seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under
any bankruptcy or debtor relief law, the proceeding is not dismissed;

 

(viii)                        if within 60 days after the appointment (without the
General Partner’s consent or acquiescence) of a trustee, receiver, or
liquidator of the General Partner or of all or any substantial part of its property,
the appointment is not vacated or stayed; or

 

(ix)                                if within 60 days after the expiration of any such stay,
the appointment is not vacated (the events described in Sections 3.9(a)(vii) through
3.9(a)(ix) being referred to herein as an “Event of Withdrawal”).

 

(b)                                 Conditions Precedent.  The
removal of the General Partner pursuant to Section 3.9(a) shall
not be effective and the business of the Partnership shall not be deemed to be
continued pursuant to Section 11.1, unless each of the following
conditions precedent shall have been satisfied: 
(i) a new general partner shall have been selected and admitted as
a new general partner of the Partnership by the Institutional Partners (other
than any Institutional Partner that is an affiliate of the General Partner
being removed), and such new general partner shall have assumed all obligations
of a General Partner under this Agreement arising after the date on which such
new general partner is admitted to the Partnership; (ii) such new general
partner shall have filed an amendment to the Certificate reflecting the
admission of the new general partner in place of the withdrawing General
Partner; (iii) the removed General Partner’s interest is converted to an
interest as a Limited Partner; and (iv) any required consents of any
lender to the Partnership for the change in general partner shall have been
obtained, and the Guarantor shall have been released of its liability from all
creditors of the Partnership (subject, however, to the terms of any 

 

11

 

recourse provisions in loan documents then applicable to and
binding the General Partner) or refinancing of the existing indebtedness of the
Partnership without the liability of the General Partner.

 

Article IV

Rights and Obligations of the Limited Partners

 

4.1                                 No
Authority.  No Limited Partner shall participate in
the management, control or direction of the Partnership’s operations, business
or affairs, transact any business for the Partnership or have the power to act for
or on behalf of or to bind the Partnership, such powers being vested solely and
exclusively in the General Partner; provided, however, that nothing contained
in this Section 4.1 shall prohibit any Limited Partner from acting
as an officer, manager, member or partner of the General Partner or its
affiliates or from limiting any voting or consent right as otherwise specified
herein.

 

4.2                                 Liability
of Limited Partners.  Except as otherwise required by
applicable law, no Limited Partner shall be personally liable for any debt or
obligation of the Partnership; provided, however, that each Limited Partner
shall be obligated to make the capital contributions and other payments
required to be made by such Limited Partner pursuant to this Agreement or
applicable law.  No Limited Partner shall
be liable, or deemed to have any fiduciary or other obligation to any other
Partner under the Act or otherwise, for any act of the General Partner,
notwithstanding that such Limited Partner or any of its officers, directors, stockholders,
managers, members, partners or affiliates may be acting as officers, directors,
managers, members or partners of the General Partner or its affiliates.

 

4.3                                 Permanent
Financing of the Project.  At any time
after the Completion Date, the General Partner or any BH Partner (upon Major
Decision Approval) shall have the right, by notice to and with the prior
written approval of the other, which approval shall not be unreasonably
withheld, to cause the Partnership to cause the Project Owner to obtain
permanent financing for the Project in an amount not less than the amount then
owed by the Project Owner under the construction loan for the Project.  If such right properly is exercised, the
Partners shall use commercially reasonable efforts to obtain such permanent
financing; provided, however, that the terms and conditions of such permanent
financing shall be reasonably acceptable to all Partners and such permanent
financing shall be non-recourse to the Partners.  The Partnership shall bear all of the costs
and expenses incurred in negotiating and obtaining such permanent financing.

 

Article V

Exculpation and Indemnification

 

5.1                                 Exculpation.  None
of the General Partner, its affiliates or any of their respective officers,
directors, stockholders, managers, members, partners, employees or agents
(collectively, “Indemnitees”) shall be liable, responsible or
accountable in damages or otherwise to the Partnership or any Partner by reason
of, arising from or relating to the operations, business or affairs of, or any
action taken or failure to act on behalf of, the Partnership, except to the
extent that any of the foregoing is caused by the gross negligence, willful
misconduct, violation of law or bad faith of such Indemnitee.

 

5.2                                 Indemnification.   The Partnership shall indemnify, defend and
hold harmless each Indemnitee against any claim, loss, damage, liability or
expense (including reasonable attorneys’ fees, court costs and costs of
investigation and appeal) suffered or incurred by such Indemnitee by reason of,
arising from or relating to the operations, business or affairs of, or any
action taken or failure to act on behalf of, the Partnership, except to the
extent any of the foregoing is caused by the gross negligence, willful
misconduct, violation of law or bad faith of such Indemnitee.  Unless a determination has been made by
final, nonappealable order of a court of competent jurisdiction that
indemnification is not required, the Partnership shall, upon the request of any
Indemnitee, advance or promptly reimburse such 

 

12

 

Indemnitee’s
reasonable costs of investigation, litigation or appeal, including reasonable
attorneys’ fees; provided, however, that the affected Indemnitee shall, as a
condition of such Indemnitee’s right to receive such advances or
reimbursements, undertake in writing promptly to repay the Partnership for all
such advancements and reimbursements if a court of competent jurisdiction
determines that such Indemnitee is not then entitled to indemnification under
this Section 5.2.  No Partner
shall be required to contribute capital in respect of any indemnification under
this Section 5.2 unless otherwise provided in another written
agreement to which such Partner is a party.

 

5.3                                 Guaranties.  To
the extent that any Indemnitee provides a guaranty or similar undertaking to
any third-party covering any obligation or liability of the Partnership or the
Project Owner (including a loan to any of them) (“Guaranteed Indebtedness”),
the Partnership shall indemnify such Indemnitee against any amount paid under
such guaranty or other undertaking and any costs incurred in defending against
a claim for performance by such person under the guaranty or other undertaking,
except to the extent any of the foregoing is caused by the gross negligence,
willful misconduct, violation of law or bad faith of such Indemnitee.  Upon request, the Partnership will enter into
an indemnity agreement acceptable to the General Partner and BH Partner with
any person entitled to indemnity under this Section 5.3 confirming
the Partnership’s obligations to such person. 
The form of such indemnity agreement shall be subject to the approval of
BREOF Partner, which approval shall not be unreasonably withheld, conditioned
or delayed.  No guarantee or other
undertaking contemplated in this Section 5.3 shall be the
Completion Guaranty, and nothing in this Section 5.3 requires the
Partnership to indemnify any Indemnitee to the extent any cost or liability
incurred by such Indemnitee is required to be funded pursuant to the Completion
Guaranty.

 

Article VI

Distributions

 

6.1                                 Distributable
Cash.  The General Partner shall
determine on a quarterly basis the amount of Distributable Cash of the
Partnership.  Except as otherwise
expressly provided herein, all Distributable Cash shall be distributed in the
following order of priority within 30 days after the end of each fiscal
quarter:

 

(a)                                  first, to the
Partners pro rata in proportion to each such Partner’s accrued and unpaid First
Priority Preference Amount, if any, until each such Partner has received
distributions under this Section 6.1(a) equal to such Partner’s
accrued and unpaid First Priority Preference Amount;

 

(b)                                 second, to the
Partners pro rata in proportion to and to the extent of the Undistributed First
Priority Capital, if any, of each Partner;

 

(c)                                  third, to the
Partners pro rata in proportion to each such Partner’s accrued and unpaid
Second Priority Preference Amount, if any, until each such Partner has received
distributions under this Section 6.1(c) equal to such Partner’s
accrued and unpaid Second Priority Preference Amount;

 

(d)                                 fourth, to the
Partners pro rata in proportion to and to the extent of the Undistributed
Second Priority Capital, if any, of each Partner; and

 

(e)                                  thereafter, subject
to the provisions of Section 8.11 and further subject to any
payment of the Deferred Affiliate Fees, to all Partners pro rata in proportion
to their respective Back-End Percentage Interests.

 

13

 

6.2                                 Tax
Distributions.  Notwithstanding any other
provision of this Agreement to the contrary, the General Partner shall have the
right and authority to make distributions of Distributable Cash from the
Partnership (no later than April 1 after the close of a fiscal year) to
the Partners (including the General Partner) in an amount that, when combined
with all other distributions made or deemed made to such Partner in respect of
such fiscal year, is not less than the product of (i) the highest marginal
federal income tax rate applicable to individuals (applying the tax rates in
effect for the period in question so as to achieve the objective of the parties
of determining the tax cost to such Partner, as if such Partner was an
individual taxpayer, on a stand-alone basis) and (ii) the aggregate net
taxable income allocated to such Partner in respect of such year (with such
amount to be separately calculated for the different categories of income and
gain allocable to such Partner that are subject to different marginal tax
rates).  To the extent that the
distributions made or deemed made to a Partner pursuant to Section 6.1
in respect of any fiscal year are less than the amount determined to be made by
the General Partner by reference to this Section 6.2, any such additional
distribution (a “Special Tax Distribution”) in respect of such year
payable to any Partner pursuant to this Section 6.2 shall reduce on
a dollar-for-dollar basis, until fully recovered and notwithstanding any other
provision of this Agreement to the contrary (but without duplication of any
amount to be so recovered pursuant to Section 6.3), any
distributions to which such Partner is otherwise entitled from the Partnership
under or by reference to Section 6.1. The Partnership shall have no
obligation to borrow funds or incur indebtedness to fund any Special Tax
Distribution made pursuant to this Section 6.2.

 

6.3                                 Minimum
Distributions to REIT.  Notwithstanding any other
provision of this Agreement to the contrary, the General Partner shall use its best
efforts and endeavor to make distributions to BH Partner from the Partnership
(no later than January 15 after the close of a fiscal year) in an amount
(the “Minimum Distribution Amount”) that, when combined with all other
distributions made to BH Partner in respect of such fiscal year (inclusive of
distributions pursuant to Section 6.2 hereof made by January 15
after the close of a fiscal year), is not less than 90% of the taxable income
allocated to BH Partner in respect of such fiscal year.  To the extent that distributions made to BH
Partner pursuant to Sections 6.1 or 6.2 in respect of
any fiscal year (and no later than January 15 after the close of such
fiscal year) are less than the Minimum Distribution Amount, any such additional
distribution in respect of such year payable to BH Partner pursuant to this Section 6.3
(a “Special REIT Distribution”) shall reduce on a dollar-for-dollar
basis, until fully recovered and notwithstanding any other provision of this
Agreement to the contrary, any distributions to which such Partner is otherwise
entitled from the Partnership under or by reference to Section 6.1.
The Partnership shall have no obligation to borrow funds or incur indebtedness
to fund any Special REIT Distribution made pursuant to this Section 6.3.  It is the intention of the parties that this Section 6.3
shall take precedence over Section 6.2, and to the extent that both
a Special Tax Distribution and Special REIT Distribution is made to BH Partner
in respect of a fiscal year, any reduction in future distributions to such
Limited Partner pursuant to or by reference to Section 6.1 as
authorized by Section 6.2 and this Section 6.3 shall be
applied without duplication of any such Special Tax Distribution or Special
REIT Distribution amounts.

 

6.4                                 Distributions
upon Liquidation.  Upon liquidation of the Partnership the
assets of the Partnership shall be distributed in accordance with Article XI.  Unless approved by the Limited Partners, the
General Partner shall only distribute marketable securities, cash or cash
equivalents to the Partners.  Subject to
the foregoing, if any direct interests in real property are distributed to the
Partners in kind, then the Partners shall own and hold the same as tenants in
common in accordance with their respective interests in such real property.

 

6.5                                 Distributions
of Certain Lender-Funded Amounts.  If and to the
extent that the portion of any additional capital contribution made by the
General Partner for the BH-Funded Accrued Development Fee, the BH-Funded
Affiliate Fees or the BH-Funded Hard Cost Savings is made available and paid
from proceeds under the Senior Loan (such portion, the “Lender-Funded
Amounts”), whether

 

14

 

through
recognition of hard cost savings, reallocation of budget line items or
otherwise, then the amount of the Lender-Funded Amounts shall be treated as
Distributable Cash, and the General Partner may, in its sole discretion, from
time to time distribute to the General Partner such deemed Distributable Cash
pursuant to Sections 6.1(a) and (b).  Any portion of the BH-Funded Accrued
Development Fee, the BH-Funded Affiliate Fees or the BH-Funded Hard Cost
Savings that is not made available and paid from proceeds under the Senior
Loan, and thus all or a portion thereof is not treated as Lender-Funded
Amounts, then the amount thereof that is not treated as Lender-Funded Amounts
shall continue as Undistributed First Priority Capital of the General Partner
and shall be distributed to the General Partner pursuant to the provisions of
this Agreement.

 

6.6           Certain Definitions.  As
used in this Agreement, the following terms shall have the following meanings:

 

(a)           “Back-End
Percentage Interests” means the percentage interest of a Partner in certain
allocations of Profits, Losses and other items of income, gain, loss or
deduction and certain distributions of cash and property.  As of the Effective Date, the Back-End
Percentage Interest of each Partner is set forth opposite such Partner’s name
on Schedule I.  The Back-End Percentage Interest of any
Partner may be adjusted pursuant to Section 2.4, and, upon the
transfer of all or any portion of an interest in the Partnership in accordance
with this Agreement, the transferee shall succeed to the Back-End Percentage
Interest of the transferor to the extent it relates to the transferred interest
in the Partnership.  After any such
adjustment, the Back-End Percentage Interest of such Partner, as adjusted,
shall constitute such Partner’s Back-End Percentage Interest for all purposes
under this Agreement.

 

(b)           “Distributable Cash” for any period
means the net cash receipts of the Partnership as determined on the cash
receipts and disbursements basis of accounting, including distributions from
the Project Owner and other Entities owned by the Partnership, cash from
operations or investments, proceeds from the sale, exchange or other
disposition of Partnership assets and refinancings, less the portion thereof
set aside by the General Partner, subject to Section 3.2, to pay or
establish reserves for Partnership expenses, debt payments, capital
improvements, replacements and contingencies, including (A) the working
capital needs of the Partnership, (B) the payment of liabilities incurred
(including any loan made by any Partner) or arising in the reasonably
foreseeable future in connection with the operations, business and affairs of
the Partnership, and (C) capital expenditures or contributions incurred or
arising in the reasonably foreseeable future. 
Distributable Cash shall not be reduced by Depreciation, amortization,
cost recovery deductions or similar allowances, but shall be increased by
reductions in reserves previously established pursuant to the immediately
preceding sentence.  Furthermore, except
as otherwise determined by the General Partner, subject to Section 3.2,
or in connection with a final liquidating distribution, Distributable Cash
shall not include capital contributions made by the Partners or Partner
loans.  Notwithstanding the foregoing
provisions of this definition to the contrary, the amount of the Lender-Funded
Amounts shall be deemed to be Distributable Cash as provided in Section 6.5.

 

(c)           “First
Priority Preference Amount” means, with respect to each Partner, an
aggregate amount computed like interest at a rate equal to 14%  per annum, compounded quarterly, on the average daily
balance from time to time during the applicable period to which the First
Priority Preference Amount relates of such Partner’s Undistributed First
Priority Capital, reduced by all distributions made to such Partner pursuant to
or by reference to Section 6.1(a) (inclusive of any such
distributions pursuant to Section 11.3(f)).

 

15

 

(d)           “Second
Priority Preference Amount” means, with respect to each Partner, an
aggregate amount computed like interest at a rate equal to 9.5% per annum,
compounded quarterly, on the average daily balance from time to time during the
applicable period to which the Second Priority Preference Amount relates of
such Partner’s Undistributed Second Priority Capital, reduced by all
distributions made to such Partner pursuant to or by reference to Section 6.1(c) (inclusive
of any such distributions pursuant to Section 11.3(f)).

 

(e)           “Undistributed
First Priority Capital” means, with respect to each Partner (other than a
Default Partner) on any day, the amount in a special recordkeeping account
maintained by the Partnership for such Partner equal to the excess, if any, of (i) the
aggregate amount of (A) any additional capital contributions made by such
Partner as of such date pursuant to Section 2.2 to fund an
Unexpected Shortfall that are treated as increasing the Undistributed First
Priority Capital of such Contributing Partner pursuant to Section 2.4(b),
plus (B) any additional capital contributions made by the General Partner
as of such date pursuant to Section 2.10 in respect of the
BH-Funded Accrued Development Fee, the BH-Funded  Deferred Affiliate Fees and the BH-Funded
Hard Cost Savings, over (ii) the aggregate distributions to such
Partner pursuant to or by reference to Section 6.1(b) (inclusive
of any such distributions pursuant to Section 11.3(f)).  Upon the transfer of all or any portion of an
interest in the Partnership in accordance with this Agreement, the transferee
shall succeed to the Undistributed First Priority Capital of the transferor to
the extent it relates to the transferred interest in the Partnership.

 

(f)            “Undistributed
Second Priority Capital” means, with respect to each Partner on any day,
the amount in a special recordkeeping account maintained by the Partnership for
such Partner equal to the excess, if any, of (i) the sum of (A) the
aggregate capital contributions of such Partner made to the Partnership as of
such date as credited to the Capital Account of such Partner pursuant to Section 2.1
plus (B) the aggregate additional capital contributions of such Partner
made to the Partnership as of such date to fund an Unexpected Shortfall other
than any such additional capital contribution that is treated as increasing a
Contributing Partner’s Undistributed First Priority Capital pursuant to Section 2.4(b),
over (ii) the aggregate distributions to such Partner pursuant to or by
reference to Section 6.1(d) as of such date (inclusive of any
such distributions pursuant to Section 11.3(f)).  Upon the transfer of all or any portion of an
interest in the Partnership in accordance with this Agreement, the transferee
shall succeed to the Undistributed Second Priority Capital of the transferor to
the extent it relates to the transferred interest in the Partnership; provided,
however, upon assignment of the Withdrawing General Partner’s interest in the
Partnership to the General Partner, the Withdrawing General Partner’s
Undistributed Second Priority Capital and Second Priority Preference Amount
were assigned to the Developer Partner, and General Partner did not and does
not succeed to such amounts.

 

Article VII

Tax Allocations and Other Tax Matters

 

7.1           Allocations of Profits and
Losses to Capital Accounts.

 

(a)           General
Rule.  Except as provided in Section 7.1(b) or
elsewhere in this Agreement, Profits (and items thereof) and Losses (and items
thereof) for any fiscal year shall be allocated among the Partners in a manner
such that the Capital Account of each Partner, immediately after giving effect
to such allocation, is, as nearly as possible, equal to the amount of
distributions that would be made to such Partner during such fiscal year or
period pursuant to Section 6.1, if (i) the Partnership were
dissolved and terminated; (ii) its affairs were wound up and each
Partnership asset was sold for cash equal to its Gross Asset Value; (iii) all
Partnership liabilities were satisfied (limited in respect of each nonrecourse
liability to the Gross Asset Value

 

16

 

of the assets securing such liability); and (iv) the net
assets of the Partnership were distributed in accordance with Section 6.1
to the Partners immediately after giving effect to such allocation, minus, to
the extent applicable, such Partner’s share of Partnership Minimum Gain and
Partner Non-Recourse Debt Minimum Gain allocable pursuant to Section 7.1(c)(i) or
7.1(c)(ii), computed immediately prior to the hypothetical sale of
assets.  The General Partner may make
such other assumptions (whether or not consistent with the above assumptions)
as are necessary to effectuate the intended economic arrangement of the
Partners.

 

(b)           Allocations
Relating to Last Fiscal Year.  The Partners intend that the
provisions of this Article VII be interpreted, to the extent
permissible under Section 704(b) of the Code and the Treasury
Regulations thereunder, to produce liquidating distributions pursuant to Article XI
that do not differ from the distributions that would have been made had
liquidating distributions been controlled by Section 6.1.  Accordingly, except as otherwise provided
elsewhere in this Agreement, if upon the dissolution, liquidation and
termination of the Partnership pursuant to Article XI and after all
other allocations provided for in Section 7.1 have been tentatively
made as if this Section 7.1(b) were not in this Agreement, a
distribution to the Partners under Article XI would be different
from a distribution to the Partners under Section 6.1, then Profits
(and items thereof) and Losses (and items thereof) for the fiscal year in which
the Partnership dissolves, liquidates and terminates pursuant to Article XI
shall be allocated among the Partners in a manner such that the Capital Account
of each Partner, immediately after giving effect to such allocation, is, as
nearly as practicable, equal (proportionately) to the amount of the
distributions that would be made to such Partner during such last fiscal year
pursuant to Section 6.1.  The
General Partner may apply the principles of this Section 7.1(b) to
any fiscal year preceding the fiscal year in which the Partnership dissolves,
liquidates and terminates (including through application of Section 761(e) of
the Code) if delaying application of the principles of this Section 7.1(b) would
likely result in distributions under Article XI that are materially
different from distributions under Section 6.1 in the fiscal year
in which the Partnership dissolves, liquidates and terminates.

 

(c)           Special
Allocations.  The following special allocations shall be made in
the following order of priority.

 

(i)            If there
is a net decrease in Partnership Minimum Gain during any fiscal year, then each
Partner shall be specially allocated items of Partnership income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Partner’s share of the net decrease in Partnership Minimum Gain,
determined in accordance with Section 1.704-2(g) of the Treasury Regulations.

 

(ii)           If there
is a net decrease in Partner Non-Recourse Debt Minimum Gain attributable to a
Partner Non-Recourse Debt during any fiscal year, then each Partner who has a
share of the Partner Non-Recourse Debt Minimum Gain, determined in accordance
with Section 1.704-2(i)(5) of the Treasury Regulations, shall be
specially allocated items of Partnership income and gain, including gross
income, for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Partner’s share of the net decrease in Partner
Non-Recourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(4) of
the Treasury Regulations.

 

(iii)          If any
Limited Partner unexpectedly receives any adjustments, allocations or
distributions described in Section 1.704-1 (b)(2)(ii)(d)(4), (5) or (6) of
the Treasury Regulations, then items of Partnership income and gain, including
gross income, shall be specially allocated to each such Limited Partner in an
amount and manner sufficient to eliminate the Adjusted Capital Account Deficit
of such Limited

 

17

 

Partner as quickly as practicable; provided, however, that an
allocation pursuant to this Section 7.1(c)(iii) shall be made
if and only to the extent that such Limited Partner would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Article VII
have been tentatively made as if this Section 7.1(c)(iii) were
not in this Agreement.

 

(iv)          If any
Limited Partner has an Adjusted Capital Account Deficit at the end of any
fiscal year, then each such Limited Partner shall be specially allocated items
of Partnership income and gain in the amount of such excess as quickly as
practicable; provided, however, that an allocation pursuant this sentence shall
be made only if and to the extent that such Limited Partner would have an
Adjusted Capital Account Deficit after all other allocations provided for in
this Article VII have been made as if the allocations provided for
in this sentence and in Section 7.1(c)(iii) were not in this
Agreement.

 

(v)           Losses
allocated pursuant to Section 7.1(a) or 7.1(b) shall
not exceed the maximum Losses that can be so allocated without causing any
Limited Partner to have an Adjusted Capital Account Deficit at the end of any
fiscal year.  If some, but not all, of
the Limited Partners would have Adjusted Capital Account Deficits as a
consequence of the allocation of Losses pursuant to Section 7.1(a) or
7.1(b), then the limitations set forth in this Section 7.1(c)(v) shall
be applied on a Limited Partner-by-Limited Partner basis so as to allocate the
maximum permissible Losses to each Limited Partner under the Section 1.704-l(b)(2)(ii)(d) of
the Treasury Regulations.  All Losses in
excess of the limitations set forth in this Section 7.1(c)(v) shall
be allocated to the General Partner.

 

(vi)          Non-Recourse
Deductions for any fiscal year shall be considered an additional item of
taxable loss or deduction that is included in the determination of Profits and
Losses and that is then allocated among the Partners as part of the allocation
of Profits and Losses.

 

(vii)         Any
Partner Non-Recourse Deductions for any fiscal year shall be specially
allocated to the Partner who bears the economic risk of loss in respect of the
Partner Non-Recourse Debt in accordance with Section 1.704-2(i)(1) of
the Treasury Regulations.

 

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

 

(d)           Curative
Allocations.  The allocations set forth in Section 7.1(c) (the
“Regulatory Allocations”) are intended to comply with the Treasury
Regulations.  It is the intent of the
Partners that, to the extent practicable, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of
other items of Partnership income, gain, loss or deduction pursuant to this Section 7.1(d).  Therefore, notwithstanding any other
provision of 

 

18

 

this Article VII to the contrary (other than the
Regulatory Allocations), the General Partner shall make such offsetting special
allocations of Partnership income, gain, loss or deduction in whatever manner
it reasonably determines appropriate so that, after such offsetting allocations
are made, each Partner’s Capital Account balance is, to the extent practicable,
equal to the Capital Account balance such Partner would have had if the
Regulatory Allocations were not part of the Agreement and all Partnership items
were allocated pursuant to Sections 7.1(a) and 7.1(b).  In exercising its discretion under this Section 7.1(d),
the General Partner shall take into account future Regulatory Allocations under
Sections 7.1(c)(i) and 7.1(c)(ii) that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 7.1(c)(vi) and 7.1(c)(vii).

 

7.2           Other Allocation Rules.

 

(a)           In each
fiscal year, Profits (and items thereof) and Losses (and items thereof) shall
be allocated:

 

(i)            at the
time of any distribution pursuant to Section 6.1 for the period
commencing on the later of (A) the first day of such fiscal year and (B) the
date of the most recent prior distribution in such fiscal year, and ending on
the date immediately preceding such distribution;

 

(ii)           as of the
last day of each fiscal year, for the period commencing on the later of (A) the
first day of such fiscal year and (B) the date of the most recent prior
distribution in such fiscal year, and ending on such last day; and

 

(iii)          at such
other times as the Gross Asset Values of Partnership property are adjusted
pursuant to clause (ii) of the definition of Gross Asset Value.

 

(b)           If the
Partners’ interests vary during a fiscal year due to the contribution of
additional capital to the Partnership or because of a transfer of interests in
the Partnership, then allocations of Profits and Losses and any other items of
income, gain, loss, deduction or credit allocated under this Article VII
shall be allocated among the Partners whose interests changed during the fiscal
year based upon the length of time during such year that each Partner held a
particular interest in the Partnership and as if the items were incurred or
received, as the case may be, ratably throughout the entire taxable year;
provided, however, that if a material portion of the assets of the Partnership
are sold, exchanged or otherwise disposed of after a change in interest, but
during the fiscal year in which the change occurs, then any items of income,
gain, loss, deduction or credit losses attributable to such sale, exchange or
other disposition shall be allocated, to the extent permitted by any allowable
convention or election under the Code, only among those Partners then owning an
interest in the Partnership, in accordance with their respective interests, on
the date of the sale, exchange or other disposition.

 

7.3           Tax Allocations; Section 704(c) of
the Code.

 

(a)           Except as
otherwise provided in Section 7.3(b), for each fiscal year or period,
items of Partnership income, gain, loss, deduction and expense shall be
allocated, for federal, state and local income tax purposes, among the Partners
in the same manner as the Profits (and items thereof) or Losses (and items
thereof) of which such items are components were allocated pursuant to Section 7.1.

 

(b)           In
accordance with Section 704(c) of the Code and the Treasury
Regulations thereunder, income, gain, loss and deduction in respect of any
property contributed to the capital

 

19

 

of the Partnership shall, solely for tax purposes, be
allocated among the Partners so as to take account of any variation between the
adjusted basis of such property to the Partnership for U.S. federal income
tax purposes and its initial Gross Asset Value (computed in accordance with
clause (i) of the definition of Gross Asset Value) using the “traditional
method” described in Section 1.704-3(b) of the Treasury Regulations;
provided, however, that any other method allowable under applicable Treasury
Regulations may be used for any contribution of property as to which there is
agreement between the contributing Partner and the General Partner.

 

(c)           If the
Gross Asset Value of any Partnership asset is adjusted pursuant to clause (ii) of
the definition of Gross Asset Value, then subsequent allocations of income,
gain, loss and deduction in respect of such asset shall take account of any
variation between the adjusted basis of such asset for U.S. federal income
tax purposes and its Gross Asset Value in the same manner as under Section 704(c) of
the Code and the Treasury Regulations thereunder.

 

(d)           Any
elections or other decisions relating to such allocations shall be made by the
General Partner in any manner that reasonably reflects the purpose and
intention of this Agreement.  Allocations
pursuant to this Section 7.3 are solely for purposes of federal,
state and local taxes and shall not affect, or in any way be taken into account
in computing, any Partner’s Capital Account or share of Profits, Losses, other
items or distributions pursuant to any provision of this Agreement.

 

(e)           The
Partners are aware of the income tax consequences of the allocations made by
this Article VII and shall be bound by the provisions of this Article VII
in reporting their shares of Partnership income and loss for income tax
purposes.

 

7.4           Certain Definitions.  As
used in this Agreement, the following terms have the following meanings.

 

(a)           “Adjusted
Capital Account Deficit(s)”  means,
in respect of any Partner, the deficit balance, if any, in such Partner’s
Capital Account as of the end of the relevant fiscal year, after giving effect
to the following adjustments:

 

(i)            the
Capital Account shall be increased by any amounts that such Partner is obligated
to restore pursuant to any provision of this Agreement or is deemed to be
obligated to restore pursuant to the penultimate sentence of Section 1.704-2(g)(1) of
the Treasury Regulations and of Section 1.704-2(i)(5) of the Treasury
Regulations; and

 

(ii)           the
Capital Account shall be decreased by the items described in
Sections 1.704-l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations.

 

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

 

(b)           “Code”
means the Internal Revenue Code of 1986, as amended from time to time.

 

(c)           “Depreciation” means for each fiscal
year an amount equal to the depreciation, amortization or other cost-recovery
deduction allowable in respect of an asset for such fiscal year, except that if
the Gross Asset Value of any asset differs from its adjusted basis for
U.S. federal income tax purposes at the beginning of such fiscal year,
Depreciation shall be an amount that bears the same ratio to such beginning
Gross Asset Value as the U.S. federal income tax 

 

20

 

depreciation, amortization or other cost-recovery deduction
for such fiscal year bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for U.S. federal income tax purposes
of an asset at the beginning of such fiscal year is zero, then Depreciation shall
be determined with reference to such beginning Gross Asset Value using any
reasonable method approved by the General Partner.

 

(d)           “Gross Asset Value” means an asset’s
adjusted basis for U.S. federal income tax purposes, except as follows:

 

(i)            the initial
Gross Asset Value of any asset contributed by a Partner to the Partnership
shall be the gross fair market value of such asset, as reasonably determined by
the contributing Partner and the General Partner;

 

(ii)           the Gross
Asset Values of all assets shall be adjusted to equal their respective gross
fair market values, as reasonably determined by the General Partner, as of the
following times:

 

(A)          the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis
contribution;

 

(B)           the distribution by the Partnership
to a Partner of more than a de minimis
amount of property as consideration for an interest in the Partnership; and

 

(C)           the liquidation of the
Partnership within the meaning of Section 1.704-l(b)(2)(ii)(g) of the
Treasury Regulations; provided, however, that adjustments pursuant to
clauses (i) and (ii) of this definition shall be made only if
the General Partner reasonably determines that such adjustments are necessary
to reflect the relative economic rights of the Partners.

 

(iii)          the Gross
Asset Value of any asset distributed to any Partner shall be adjusted to equal
the gross fair market value of such asset on the date of distribution as
determined by the General Partner;

 

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

 

(v)           if the
Gross Asset Value of an asset has been determined or adjusted pursuant to
clause (a), (b) or (d) of this definition, then such Gross Asset
Value shall thereafter be adjusted by the Depreciation taken into account in
respect of such asset for purposes of computing Profits and Losses.

 

(e)           “Nonrecourse
Deductions” has the meaning set forth in Sections 1.704-2(b)(1) and
1.704-2(c) of the Treasury Regulations.

 

21

 

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

 

(g)           “Partner Non-Recourse Debt” has the
meaning set forth in Section 1.704-2(b)(4) of the Treasury
Regulations for “partner nonrecourse debt.”

 

(h)           “Partner Non-Recourse Debt Minimum Gain”
means an amount, in respect of each Partner Nonrecourse Debt, equal to the
Partnership Minimum Gain that would result if such Partner Nonrecourse Debt
were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Treasury Regulations.

 

(i)            “Partner Non-Recourse Deductions”
has the meaning set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of
the Treasury Regulations for “partner nonrecourse deductions.”

 

(j)            “Partnership Minimum Gain” means
the same as “partnership minimum gain” as set forth in Section 1.704-2(b)(2) and
1.704-2(d) of the Treasury Regulations.

 

(k)           “Partnership
Property” means collectively, all right, title and interest of the
Partnership in and to all or any portion of all assets (real, personal,
tangible or intangible) owned by the Partnership including, the securities or
other interests of another person owned by the Partnership.

 

(l)            “Profit(s) and Loss(es)”  means, for each fiscal year, an amount equal
to the Partnership’s taxable income or loss for such fiscal year, determined in
accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(l) of the Code shall be included in
taxable income or loss), with the following adjustments:

 

(i)            any
income of the Partnership that is exempt from U.S. federal income tax and
not otherwise taken into account in computing Profits or Losses pursuant to
this definition of Profit(s) and Loss(es) shall be added to such taxable
income or loss;

 

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

 

(iii)          if the
Gross Asset Value of any Partnership asset is adjusted pursuant to clause (b) or
(c) of the definition of Gross Asset Value, then the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Profits or Losses;

 

(iv)          gain or
loss resulting from any disposition of Partnership Property in respect of which
gain or loss is recognized for U.S. federal income tax purposes shall be
computed by reference to the Gross Asset Value of the Partnership Property
disposed of, notwithstanding that the adjusted tax basis of such Partnership Property
differs from its Gross Asset Value;

 

(v)           in lieu of
the depreciation, amortization and other cost recovery deductions taken into
account in computing such taxable income or loss, there shall be

 

22

 

taken into account Depreciation for such fiscal year,
computed in accordance with the definition thereof; and

 

(vi)          to the
extent an adjustment to the adjusted tax basis of any Partnership Property
pursuant to Section 734(b) or 743(b) of the Code is required
pursuant to Section 1.704-l(b)(2)(iv)(m)(4) of the Treasury
Regulations to be taken into account in determining Capital Accounts as a
result of a distribution other than in complete liquidation of a Partner’s
economic rights, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the asset
and shall be taken into account for purposes of computing Profits or Losses.

 

(vii)         Notwithstanding
any other provision of this definition of Profits and Losses to the contrary,
any items that are specially allocated pursuant to Section 7.1(c) shall
not be taken into account in computing Profits or Losses.

 

(viii)        The
amounts of the items of Partnership income, gain, loss or deduction available
to be specially allocated pursuant to Section 7.1(c) shall be
determined by applying rules analogous to those set forth in clauses (i) through
(vi) of this definition.

 

(m)          “Treasury
Regulations” means the temporary or final Treasury Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

 

7.5           Tax Matters Partner; Tax
Returns; Tax Elections.   The General Partner is
hereby designated as the “tax matters partner” under Section 6231 of the
Code.  If an audit of the Partnership’s
U.S. federal income tax return is commenced, then the General Partner
shall promptly advise all Limited Partners of the audit and the status thereof
but shall not agree to any final adjustment without Major Decision
Approval.  The General Partner also shall keep the Partners informed of all
administrative and judicial proceedings, as required by Section 6223(g) of
the Code, and shall promptly furnish to the Partners a copy of each notice or
other communication received by the General Partner from the Internal Revenue
Service (except such notices or communications as are sent directly to the
Partners by the Internal Revenue Service).

 

7.6           Tax Returns; Tax Elections.  The
General Partner shall, at the expense of the Partnership, prepare and file, or
shall cause to be prepared and filed, all U.S. federal, state and local
income and other tax returns required to be filed by the Partnership.  The General Partner shall determine the
accounting methods and conventions to be used in the preparation of the
Partnership’s tax returns and shall make any and all elections under the tax
laws of the United States and any other relevant jurisdictions as to the
treatment of items of income, gain, loss, deduction and credit of the
Partnership, or any other method or procedure related to the preparation of the
Partnership’s tax returns; provided, however, that neither the Partnership, nor
the General Partner on behalf of the Partnership, shall make an election to
exclude the Partnership from the provisions of subchapter K of the Code or
to have the Partnership treated as an entity other than a partnership.  Each Limited Partner shall be responsible for
preparing and filing all tax returns required to be filed by such Limited
Partner.

 

7.7           No Publicly Traded
Partnership.  The General Partner is authorized to
take all actions necessary to prevent the Partnership from being treated as a
publicly traded partnership within the meaning of Section 7704 of the
Code.  To ensure that interests in the
Partnership are not traded on an established securities market within the
meaning of Section 1.7704-1(b) of the Treasury Regulations or readily
tradable on a secondary market or the substantial equivalent thereof within the
meaning of Section 1.7704-1(c) of the Treasury Regulations,
notwithstanding any other provision of this Agreement 

 

23

 

to
the contrary: (i) the Partnership shall not participate in the
establishment of a market or the inclusion of its interests thereon, and (ii) the
Partnership shall not recognize any transfer made on any market by (A) redeeming
the transferor Partner (in the case of a redemption or repurchase by the
Partnership) or (B) admitting the transferee as a Partner or otherwise
recognizing any rights of the transferee, such as a right of the transferee to
receive Partnership distributions (directly or indirectly) or to acquire an
interest in the capital or profits of the Partnership.

 

7.8           Amounts Withheld; Taxes of Taxing Authorities.  To
the extent required by the laws of any taxing authority, each Partner requested
to do so by the General Partner shall promptly submit to the Partnership an
agreement indicating that such Partner (i) will make timely income tax
payments to such taxing authority and (ii) accepts personal jurisdiction
of such taxing authority in respect of the collection of income taxes
attributable to such Partner’s income and interest and penalties assessed on
such income.  If any Partner fails to
provide such agreement, then the Partnership may withhold and pay over to such
taxing authority the amount of tax, penalty and interest determined under the
laws of such taxing authority in respect of such income.  The Partnership may, where permitted by the rules of
any taxing authority, file a composite, combined or aggregate tax return
reflecting the income of the Partnership and pay the tax, interest and
penalties of some or all of the Partners on such income to the taxing
authority, in which case the Partnership shall inform the Partners of the
amount of such tax, interest and penalties so paid.  Without limiting the foregoing provisions of
this Section 7.1, the Partnership is authorized to withhold from
distributions and to pay over to any federal, state or local government any
amount required to be so withheld pursuant to the Code or any provision of any
other federal, state or local law and shall allocate any such amount to the
Partner in respect of which such amount was withheld.  All amounts withheld by the Partnership
pursuant to the Code or any provision of any state or local tax law in respect
of any payment, distribution or allocation by the Partnership to the Partners
shall be treated as amounts distributed to the Partners pursuant to Article VI
for all purposes of this Agreement.  Each
Partner shall provide such identifying numbers and other certificates as are
requested by the Partnership to enable it to comply with any tax reporting or
withholding requirement under the Code or any applicable state, local or
foreign tax law.

 

Article VIII

Admissions, Transfers and Withdrawals

 

8.1           Admissions.  No new Partner may be
admitted to the Partnership without the prior written consent of the General
Partner and Major Decision Approval, and then only upon satisfaction of such
terms and conditions as are required by the General Partner.

 

8.2           Transfer of General
Partner’s Interest.  The General Partner shall not
transfer, assign, encumber, hypothecate or otherwise convey all or any portion
of its general partner interest in the Partnership without Major Decision
Approval; provided, however, the General Partner may transfer, assign or
otherwise convey all or any portion of its interest in the Partnership to any
affiliate of the General Partner without having to obtain the prior written
consent of any Partner or other person.

 

8.3           Transfer of Limited
Partners’ Interests.

 

(a)           No
Transfers Without Consent.  No Limited Partner may transfer,
assign, encumber, hypothecate or otherwise convey all or any portion of such
Limited Partner’s interest in the Partnership without the prior written consent
of the General Partner and Major Decision Approval; provided, however, any
Limited Partner may transfer, assign or otherwise convey all or any portion of
its interest in the Partnership to any affiliate of such Limited Partner
without having to obtain the prior written consent of any Partner or other
person.

 

24

 

(b)                                 Restrictions on Transfer.  Any
purported transfer of an interest in the Partnership in violation of this
Agreement shall be void and of no force or effect.  Notwithstanding any provision of this
Agreement to the contrary, no Partner shall make or suffer any transfer of its
interest in the Partnership if such transfer would:  (i) require the Partnership, or the
interest in the Partnership being transferred, to be registered or qualified
under federal or state securities laws; (ii) cause the Partnership to be
classified other than as a partnership for U.S. federal income tax
purposes or be treated as a publicly traded partnership under Section 7704
of the Code; or (iii) cause the Partnership to be in breach or default
under any mortgage, deed of trust or other security agreement encumbering the
Project or any of the Partnership’s assets.

 

(c)                                  Death, Bankruptcy, etc. of Limited Partner.  In the event of the death, incompetence,
insolvency, bankruptcy, dissolution, liquidation or termination of any Limited
Partner:

 

(i)                                     the Partnership shall not be dissolved, liquidated or
terminated, and the remaining Partners shall continue the Partnership and its
operations, business and affairs until the dissolution thereof as provided in Section 11.1;

 

(ii)                                  such Limited Partner thereupon shall cease to be a Partner
for all purposes of this Agreement and, except as provided in Section 8.4,
no officer, partner, beneficiary, creditor, trustee, receiver, fiduciary or
other legal representative and no estate or other successor in interest of such
Limited Partner (whether by operation of law or otherwise) shall become or be
deemed to become a Limited Partner for any purpose under this Agreement;

 

(iii)                               the Partnership interest of such Limited Partner shall not be
subject to withdrawal or redemption (by such Limited Partner’s estate or other
legal representative or successor in interest) in whole or in part prior to the
dissolution, liquidation and termination of the Partnership;

 

(iv)                              the estate or other successor in interest of such Limited
Partner shall be deemed a transferee of, and shall be subject to all of the
obligations in respect of, the Partnership interest of such Limited Partner as
of the date of death, incompetence, insolvency, bankruptcy, dissolution,
liquidation or termination, except to the extent the General Partner (with
Major Decision Approval) releases such estate or successor from such
obligations; and

 

(v)                                 any legal representative or successor in interest having
lawful ownership of the assigned Partnership interest of such Limited Partner
shall have the right to receive notices, reports and distributions, if any, to
the same extent as would have been available to such Limited Partner.

 

8.4                                 Substituted
Partners.  A transferee of any general or limited
partnership interest in the Partnership may become a substituted General
Partner or Limited Partner, as the case may be, as to the interest in the
Partnership transferred, in place of the transferor only with the prior written
consent of the General Partner and Major Decision Approval.  Notwithstanding the preceding sentence, a
transferee who is a then existing Partner shall automatically without the
consent of the General Partner become a substituted Limited Partner in place of
the transferor as to the interest in the Partnership transferred.  The General Partner and its affiliates shall
have the right to be a Limited Partner or to become a substituted Limited
Partner.  Unless a transferee of any
Partnership interest of a Partner becomes a substituted General Partner or
substituted Limited Partner in accordance with this Agreement, such transferee
shall not be entitled to any of the rights granted to a Partner hereunder other
than the right to receive all or part 

 

25

 

of
the share of the income, gains, losses, deductions, expenses, credits,
distributions or returns of capital to which its transferor would otherwise be
entitled in respect of the Partnership interest so transferred.  As a condition precedent to becoming a
substituted General Partner or Limited Partner, as the case may be, the
transferee shall execute a joinder agreement agreeing to be bound by the terms
and conditions of this Agreement in a form satisfactory to the General Partner
in the case of a substituted Limited Partner or to the Institutional Partners
holding a majority of the Back-End Percentage Interests held by all
Institutional Partners in the case of a substituted General Partner.

 

8.5                                 Withdrawal
of Partners.  Except as permitted by this Section 8.5,
no Partner shall have any right to withdraw or resign from the Partnership,
unless (i) such Partner transfers its entire interest in the Partnership
to one or more transferees, all of whom have been admitted as substituted
General or Limited Partners, as the case may be, in accordance with Section 8.4
or (ii) such Partner’s entire interest in the Partnership is transferred
in accordance with Section 8.7, Section 8.8, Exhibit E or Exhibit F.

 

8.6                                 Transfers
of Interests in Partners.  No Partner
shall permit any transfer, either directly or indirectly, by any equity owner
of all or any portion of the stock, partnership interests or other equity
interests of such Partner, either voluntarily or involuntarily, without Major
Decision Approval; provided, however, any equity owner of any Partner may
directly or indirectly transfer all or any portion of the stock, partnership
interests or other equity interests of such Partner, either voluntarily or
involuntarily, to an affiliate of such Partner without having to obtain the
prior written consent of any Partner or other person.  For purposes of this Section 8.6,
the issuance of new equity interests will be deemed a transfer of those equity
interests; provided, however, the direct or indirect transfer of stock, partnership
interests or other equity interests in Behringer Harvard Holdings,
LLC, Behringer Harvard REIT I, Inc., Behringer Harvard Mid-Term Value
Enhancement Fund I LP, Behringer Harvard Short-Term Opportunity Fund I LP,
Behringer Harvard Opportunity REIT I, Inc., Behringer Harvard Strategic
Opportunity Fund I LP, Behringer Harvard Strategic Opportunity Fund II LP or
Behringer Harvard Multifamily REIT I, Inc. (or any other person directly
or indirectly sponsored by or affiliated with Behringer Harvard Holdings, LLC,
provided such person’s sole investment is not an investment in this
Partnership) and their respective affiliates, on the one hand, and Brookfield US
Real Estate Opportunity Fund I, L.P. (or any other person
directly or indirectly sponsored by or affiliated with BREOF Holdings
LLC, provided such person’s sole investment is not an investment in this
Partnership), or affiliates of either of them, on the other
hand, as applicable, shall not be deemed a transfer for purposes of this Section 8.6.

 

8.7                                 BREOF
Partner’s Put Right.

 

(a)                                  BREOF Valuation Notice.  At
any time during the BREOF Put Period, BREOF Partner shall have the right to
initiate a pricing procedure to ascertain the market price for the Project by
delivery of a notice to BH Partner (the “BREOF Valuation Notice”).  The BREOF Valuation Notice shall set forth
the BREOF Partner’s determination of the fair market value of the Project.

 

(b)                                 Acceptance and Rejection Notices.  If BH Partner disagrees with the fair market
value of the Project as set forth in the BREOF Valuation Notice, then BH
Partner and BREOF Partner shall negotiate to attempt to reach an agreement as
to the fair market value within 30 days after the date of the BREOF
Valuation Notice (“BREOF Negotiation Deadline”).  At any time prior to expiration of the BREOF
Negotiation Deadline, (i) BH Partner may accept the fair market value of
the Project set forth in the BREOF Valuation Notice by delivery of notice of
acceptance (“BREOF Acceptance Notice”) to BREOF Partner, (ii) BH
Partner may reject the fair market value of the Project set forth in the BREOF
Valuation Notice by delivery of notice of rejection to BREOF Partner, or (iii) BH
Partner and BREOF Partner may agree in writing to the fair market value of the
Project other than the fair market value set forth in the BREOF Valuation
Notice.  If 

 

26

 

BH Partner timely delivers a BREOF Acceptance Notice or if BH
Partner and BREOF Partner agree upon a fair market value of the Project as
described in clause (iii) above, then the fair market value so agreed
upon shall be the “BREOF Mark to Market Price” and the provisions of Section 8.7(d) shall
apply.

 

(c)                                  Arbitration.  If
BH Partner and BREOF Partner do not agree upon the fair market value of the
Project prior to the expiration of the BREOF Negotiation Deadline, then either
such Partner may deliver to the other a notice of arbitration (the “Arbitration
Notice”), pursuant to which the “BREOF Mark to Market Price” shall
be determined by “baseball style” arbitration in accordance with the provisions
of Exhibit D.

 

(d)                                 Purchase of BREOF’s Partnership Interest.  Once the BREOF Mark
to Market Price has been determined, BH Partner shall, within 60 days after
such determination, purchase BREOF Partner’s interest in the Partnership.

 

(e)                                  Closing.  The purchase price for BREOF Partner’s
interest in the Partnership shall be an amount equal to the share of
hypothetical net distribution proceeds that would be received by BREOF Partner
in respect of its interest in the Partnership assuming: (i) the
Partnership sold the Project for the BREOF Mark to Market Price; and (ii) the
Partnership: (A) paid the BREOF Hypothetical Closing Costs together with
any other reasonable and customary closing and transaction costs that would be
payable in an arms-length sale of the Project to the extent the amount of the
BREOF Hypothetical Closing Costs are insufficient to cover such costs; (B) discharged
all outstanding Partnership liabilities and indebtedness to which the Project,
the Project Owner and the Partnership were subject (including the outstanding
principal, interest and prepayment premiums (if any) of the construction loan);
(C) repaid all Partner loans; and (D) paid the Section 8.7 Net
Profits Payment to the Developer Partner; and (iii) after giving effect to
the preceding clauses (i) and (ii), the resulting net assets of the
Partnership were distributed in accordance with Section 6.1
immediately prior to the closing of the purchase of BREOF Partner’s interest in
the Partnership, after giving effect to all capital contributions,
distributions and allocations for all periods. 
At the closing, BREOF Partner shall assign all of its interest in the
Partnership to BH Partner (or its designee) by written assignment in a form and
substance reasonably acceptable to BH Partner and to BREOF Partner; provided,
however, that BREOF Partner shall convey its interest in the Partnership to BH
Partner (or its designee), free and clear of all liens, claims and
encumbrances, and BH Partner shall likewise execute and deliver to BREOF
Partner all documents that may be reasonably requested to confirm the sale and
purchase of such Partnership interest. 
The purchase price paid by BH Partner (or its designee) for BREOF
Partner’s interest in the Partnership shall be satisfied in cash at the
closing.

 

(f)                                    Certain Definitions.  As
used in this Section 8.7, the following terms have the following
meanings:

 

(i)                                     “BREOF Put Period” means the period commencing on the
last day of the 24th month following the Effective Date and continuing until
the last day of the 36th month following the Effective Date, subject to the
other terms and conditions of this Agreement.

 

(ii)                                  “BREOF Hypothetical Closing Costs” means the amount
equal to the product of (1) the BREOF Mark to Market Price; multiplied by (2) 1.75%.

 

(iii)                               “Completion Date” means the date upon which the
General Partner receives (A) a copy of the final Certificate of Occupancy
in respect of the Project, and 

 

27

 

(B) lien waivers, releases or other similar evidences of
payment from the general contractor on the Project.

 

(iv)                              “Section 8.7 Net Profits Payment” means 50% of
the net Distributable Cash remaining to be distributed from a hypothetical sale
of the Project and distribution of proceeds from that sale assuming: (i) the
Partnership sold the Project for the BREOF Mark to Market Price and (ii) the
Partnership (A) paid the BREOF Hypothetical Closing Costs together with
any other reasonable and customary closing and transaction costs that would be
payable in an arms-length sale of the Project to the extent the amount of the
BREOF Hypothetical Closing Costs are insufficient to cover such costs; (B) discharged
all outstanding liabilities and indebtedness to which the Project, the Project
Owner and the Partnership were subject (including the outstanding principal,
interest and prepayment premiums (if any) of the construction loan); (C) repaid
all Partner loans; and (D) distributed to the Partners the amounts payable
pursuant to Sections 6.1(a), 6.1(b), 6.1(c) and 6.1(d).

 

8.8                                 BREOF
Partner’s  Tag-Along Right.

 

(a)                                  General.  Provided the General Partner and BH Partner
elect to sell all or any portion of their Partnership interests in the
Partnership, then BREOF Partner shall have the right (the “Tag-Along Right”)
to require the General Partner and BH Partner to purchase all or a portion of
the Partnership interest of BREOF Partner as a part of the transaction in which
the General Partner and BH Partner sells their Partnership interests (a “Tag-Along
Transaction”).  If the General
Partner and BH Partner elect to sell any portion (but less than all) of their
Partnership interests, then BREOF Partner shall be entitled to require the
General Partner and BH Partner to purchase only an applicable proportionate
share (determined based upon the ratio that the portion of interests the
General Partner or BH Partner elects to sell bears to the aggregate interests
of the General Partner and BH Partner) of the Partnership interest of BREOF
Partner.

 

(b)                                 Notice; Exercise.  The General Partner shall notify BREOF
Partner of any transaction that would trigger a Tag-Along Transaction (the “Tag-Along
Notice”).  The Tag-Along Notice shall
include the Tag-Along Hypothetical Price. 
BREOF Partner may elect to require the General Partner and BH Partner to
purchase from BREOF Partner all or the applicable portion of its interest in
the Partnership by delivering notice of such election (the “Tag-Along
Acceptance Notice”) to the General Partner and BH Partner within 30 days
after delivery of the Tag-Along Notice (the “Tag-Along Acceptance Period”).  The Tag-Along Acceptance Notice shall state
that BREOF Partner desires to transfer all or the applicable portion of its
Partnership interest to the General Partner and BH Partner.

 

(c)                                  Tag-Along Price.  The
purchase price (the “Tag-Along Price”) for the Partnership interest of
BREOF Partner or portion thereof being sold, as applicable, shall be an amount
equal to the share of hypothetical net distribution proceeds that would be
received by BREOF Partner in respect of its Partnership interest or portion
thereof being sold, as applicable, assuming: (i) the Partnership sold the
Project for the Tag-Along Hypothetical Price; and (ii) the Partnership: (A) paid
the BREOF Hypothetical Closing Costs together with any other reasonable and
customary closing and transaction costs that would be payable in an arms-length
sale of the Project to the extent the amount of the BREOF Hypothetical Closing
Costs are insufficient to cover such costs; (B) discharged all outstanding
Partnership liabilities and indebtedness to which the Project, the Project
Owner and the Partnership were subject (including the outstanding principal,
interest and prepayment premiums (if any) of the construction loan); (C) repaid
all Partner loans; and (D) paid the Section 8.8 Net Profits Payment
to the Developer Partner; and 

 

28

 

(iii) after giving effect to the preceding clauses (i) and
(ii), the resulting net assets of the Partnership were distributed to BREOF
Partner in accordance with Section 6.1 immediately prior to the
closing of the purchase of the BREOF Partner’s interest in the Partnership,
after giving effect to all capital contributions, distributions and allocations
for all periods.  The General Partner and
BH Partner may allocate payment of the Tag-Along Price between each of them in
their discretion provided the aggregate amount paid by the General Partner or
BH Partner equals the Tag-Along Price.

 

(d)                                 Effect of Exercise of Tag-Along Right.  Upon delivery of the Tag-Along Acceptance Notice
by BREOF Partner, BREOF Partner shall be obligated to sell its interest in the
Partnership, or applicable portion thereof, to the General Partner or BH Partner,
as determined by the General Partner or BH Partner in their discretion, for the
Tag-Along Price, and the General Partner or BH Partner (or any designated
affiliate of either of them), as applicable, shall be obligated to purchase
BREOF Partner’s interest in the Partnership, or applicable portion
thereof.  The closing of the sale and
purchase of BREOF Partner’s interest in the Partnership, or applicable portion
thereof, pursuant to the Tag-Along Right shall occur contemporaneously with the
closing of the Tag-Along Transaction.

 

(e)                                  Certain Definitions.  As
used in this Section 8.8, the following terms have the following
meanings:

 

(i)                                     “Section 8.8 Net Profits Payment” means 50% of
the net Distributable Cash remaining to be distributed from a hypothetical sale
of the Project and distribution of proceeds from that sale assuming: (i) the
Partnership sold the Project for the Hypothetical Tag-Along Price and (ii) the
Partnership (A) paid the BREOF Hypothetical Closing Costs together with
any other reasonable and customary closing and transaction costs that would be
payable in an arms-length sale of the Project to the extent the amount of the
BREOF Hypothetical Closing Costs are insufficient to cover such costs; (B) discharged
all outstanding liabilities and indebtedness to which the Project, the Project
Owner and the Partnership were subject (including the outstanding principal,
interest and prepayment premiums (if any) of the construction loan); (C) repaid
all Partner loans; and (D) distributed to the Partners the amounts payable
pursuant to Sections 6.1(a), 6.1(b), 6.1(c) and 6.1(d).

 

(ii)                                  “Tag-Along Hypothetical Price” means the purchase
price that would have to be paid for a sale of the Project in order for the
General Partner and BH Partner to receive the same net sales proceeds the
General Partner and BH Partner would receive for the sale of their Partnership
interests or portions thereof being sold in the Tag-Along Transaction.

 

8.9                                 Buy/Sell
Rights.   Commencing on the last day of the 36th
month following the Effective Date, any Partner shall have the right, at any
time, to initiate the buy/sell procedure set forth on Exhibit E.

 

8.10                           Call
Right.   The General Partner or BH Partner
shall have the right, at any time, to initiate the call procedure set forth on Exhibit F.

 

8.11                           Net
Profits Payment.   If the Project is sold pursuant to a
sale approved in accordance with Section 3.2 (provided such sale is
not occurring pursuant to Sections 8.7, 8.8 or 8.9),
then the Partnership shall pay the Developer Partner, on a one-time basis, an
amount equal to 50% of the net Distributable Cash remaining after the Partners
have received the amounts payable pursuant to Sections 6.1(a), 6.1(b),
6.1(c) and 6.1(d) (such net amount, the “Section 8.11
Net Profits Payment”).  For 

 

29

 

avoidance of doubt, the Partnership shall not
be required to pay the Section 8.10 Net Profits Payment if the Developer
Partner has been paid any amount pursuant to Section 8.9 or 8.10.

 

8.12                           Tax
Characterization of Net Profits Payments.  Notwithstanding
any other provision of this Agreement to the contrary, (i) any payment to
the Developer Partner of the Section 8.11 Net Profits Payment (including
pursuant to Section 8.10 hereof) or the Buy/Sell Net Profits Payment shall
be deemed a portion of the purchase price of the applicable transaction to
which such payment applies for all purposes, including federal income tax
purposes, and (ii) any payment thereof to Developer Partner shall be
accounted for federal income tax purposes, including the allocation of gain for
tax purposes, in the same manner as a distribution to the Partners pursuant to Section 6.1(e).

 

Article IX

Fiscal and Operational Matters

 

9.1                                 Fiscal
Year.  The fiscal year of the Partnership
shall be the same as its taxable year, which shall be the period beginning on January 1
of a given year (other than the year in which the Partnership is formed, which
shall be the period beginning on the date of such formation) and ending on December 31
of each calendar year, unless another fiscal year is required for
U.S. federal income tax purposes. 
The Partnership shall have the same fiscal year for U.S. federal
income tax purposes and for accounting purposes.

 

9.2                                 Books
of Account.  The General Partner shall keep or cause
to be kept complete and appropriate records and books of account in which shall
be entered all such transactions and other matters relative to the Partnership’s
operations, business and affairs as are usually entered into records and books of
account that are maintained by persons engaged in business of like character or
are required by the Act.  Except as
otherwise expressly provided herein, such books and records shall be maintained
in accordance with the basis utilized in preparing the Partnership’s
U.S. federal income tax returns.  At
the cost and expense of the Partnership, the books and records of the
Partnership shall be audited in order to permit the General Partner to comply
with the reporting requirements set forth in Section 9.8(b), such
auditor to be selected from time to time by the General Partner with Major
Decision Approval.

 

9.3                                 Inspection.  The
books and records of the Partnership shall be maintained at the principal place
of business of the Partnership, and all such books and records and the Project
shall be available for inspection (and copying, as applicable) at the
reasonable request of any Limited Partner during the ordinary business hours of
the Partnership and upon reasonable notice given to the General Partner.  The General Partner shall meet with the
Institutional Partners from time to time from time to time until the Completion
Date at the request of the Institutional Partners to discuss the progress of
the development of the Project.  In
addition, the General Partner shall keep each Institutional Partner reasonably
informed about meetings with the construction lender, the general contractor or
the architect for the Project, and any Institutional Partner shall be entitled
to attend and participate in any such meeting.

 

9.4                                 Bank
Accounts.  The funds of the Partnership shall be
deposited in such account or accounts in the name of the Partnership as are
reasonably determined by the General Partner from time to time.  All withdrawals from or charges against such
accounts of the Partnership shall be made by the General Partner or by its
representatives.  The Partnership’s funds
shall not be commingled with the funds of any other person.

 

9.5                                 Title
to Partnership Property.  Title to all
property owned or leased by the Partnership shall be held and conveyed in the
name of the Partnership.  All property
owned by the Partnership shall be owned by the Partnership and, insofar as
permitted by applicable law, no Partner shall have any ownership interest in
any Partnership property in its individual name or right, and each Partner’s
interest in the Partnership shall be personal property for all purposes.

 

30

 

9.6                                 No
Employees.  The Partnership shall have no
employees.

 

9.7                                 Insurance.  The
General Partner shall, on behalf of the Partnership and at the Partnership’s
cost and expense, obtain, maintain and keep in full force and effect, such
insurance coverage as the General Partner deems necessary, appropriate or
advisable.

 

9.8                                 Reports.  The
General Partner shall prepare, or cause to be prepared at the Partnership’s
expense, and deliver to each Limited Partner:

 

(a)                                  within 90 days after the end of each fiscal year of the
Partnership a draft report of the audited financial statements of the Partnership
for such fiscal year (which financial statements shall be prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”),
consistently applied, and shall include a balance sheet, income statement,
statement of cash flows, a statement of partners’ equity, and all applicable
footnote disclosures);

 

(b)                                 within 120 days after the end of each fiscal year of the
Partnership the final audited financial statements and report of the
Partnership for such fiscal year (which financial statements shall be prepared
in accordance with GAAP, consistently applied, and shall include a balance
sheet, income statement, statement of cash flows, a statement of partners’
equity, and all applicable footnote disclosures); and

 

(c)                                  within 45 days after the end of each fiscal quarter of
the Partnership, (i)  unaudited financial statements prepared in
accordance with an Other Comprehensive Basis of Accounting (Federal Income Tax
Basis), consistently applied in accordance with past practices (which financial
statements shall include a balance sheet, an income statement, a statement of
cash flows and a statement of partners’ equity) and (ii) a schedule of
projected funding requirements by the Partners for the next 90-day period
(which schedule shall be prepared in good faith but which otherwise shall not
be binding on the Partnership).

 

The financial statements of the Partnership provided to the Limited
Partners from time to time under this Section 9.8 shall be, true,
complete and correct, shall accurately reflect the financial condition of the
Partnership, the results of its operations and sources and uses of funds as of
the date of each such statement and for the applicable period then ended, and
shall be accompanied by a written certification of the General Partner to such
effect.

 

9.9                                 Budgets.

 

(a)                                  The Partners have approved the initial budget for development
of the Project set forth on Exhibit B-1
(the “Development Budget”).  The
Partners have approved the revised budget for development of the Project set forth
in the Loan Modification Terms and on Exhibit B-2
(the “Revised Development Budget”).

 

(b)                                 At least 60 days prior to the estimated date of the
substantial completion of the Project, and thereafter no later than November 1
of each year, the General Partner shall prepare or cause to be prepared for the
portion of the calendar year ending after such substantial completion or for
the full calendar year after such November 1, as applicable, an operating
budget for the Project (the “Operating Budget”) setting forth, among
other things, (i) a budget of proposed operating and capital expenditures
to be made in such year in respect of the Project, including cost and timing
estimates therefor, and (ii) the estimated receipts, expenditures, escrow
deposits and reserves for each year on a monthly basis, showing the expected
sources of funds.  The General Partner
shall submit the proposed Operating Budget to the Institutional Partners for
Major Decision Approval.  The
Institutional Partners will use their good faith, reasonable efforts 

 

31

 

to reach agreement on the final form of the Operating Budget
no later than 60 days after the submission of the proposed Operating Budget to
the Institutional Partners by the General Partner, and upon such approval by
all of the Institutional Partners, such Operating Budget shall be the Operating
Budget for the Project.  Until an
Operating Budget for a particular year is approved by the Institutional
Partners, the most recent Operating Budget shall serve as the Operating Budget
for such calendar year, provided that (A) any nonrecurring expenditure in
such prior Operating Budget shall be excluded, and (B) nondiscretionary
expenses shall be deemed included.

 

Article X

Amendments and Waivers

 

10.1                           Amendments
and Waivers.  This Agreement may be modified or
amended, or any provision hereof waived, only with the written consent of the
General Partner, the Developer Partner, the consent or vote of a majority in
interest of all Limited Partners and Major Decision Approval.

 

Article XI

Dissolution, Liquidation and Termination

 

11.1                           Dissolution.  The
Partnership shall be dissolved upon the first to occur of the following events
(“Dissolution Events”):

 

(a)                                  the election of the General Partner to dissolve the
Partnership at any time with Major Decision Approval;

 

(b)                                 the election of the General Partner to dissolve the
Partnership at any time if all or substantially all of the Partnership’s assets
shall have been sold or disposed of or shall consist of cash; or

 

(c)                                  a decree of judicial dissolution in respect of the
Partnership shall have been entered and become final; or

 

(d)                                 the failure of the Partners to continue the Partnership’s
business pursuant to Section 3.9 within 90 days after the
occurrence of an Event of Withdrawal in respect of the General Partner.

 

Within
90 days after the occurrence of an Event of Withdrawal in respect of the
General Partner, the Partnership’s business may be continued by agreement of a
majority in interest of all Limited Partners and Major Decision Approval if
each of the conditions set forth in Section 3.9 is satisfied.  If the Limited Partners fail to continue the
Partnership’s business as provided in this Section 11.1, then the
Partnership shall be liquidated under Section 11.4.

 

11.2                           Accounting.  After
the dissolution of the Partnership (without reconstitution) pursuant to Section 11.1, the books of
the Partnership shall be closed, and a proper accounting of the Partnership’s
assets, liabilities and operations shall be made by the General Partner, all as
of the most recent practicable date.  The
General Partner shall serve as the liquidator of the Partnership unless it
fails or refuses to serve or the Partnership has been dissolved (without
reconstitution) as a result of an Event of Withdrawal.  If the General Partner does not serve as the
liquidator, then one or more other persons may be elected to serve by Major
Decision Approval.  The liquidator shall
have all rights and powers that the Act confers on any person serving in such
capacity.  The expenses incurred by the
liquidator in connection with the dissolution, liquidation and termination of
the Partnership shall be borne by the Partnership.

 

32

 

11.3                           Liquidation.  As expeditiously
as practicable, but in no event later than one year (except as may be necessary
to realize upon any material amount of property that may be illiquid), after
the dissolution of the Partnership (without reconstitution) pursuant to Section 11.1,
the liquidator shall wind up the operations, business and affairs of the
Partnership and liquidate the assets and properties of the Partnership.  The proceeds of such liquidation shall be
applied in the following order of priority:

 

(a)                                  first, to
payment of the expenses of the liquidation;

 

(b)                                 second, to
payment of the liabilities and obligations of the Partnership to creditors of
the Partnership (other than to Partners who are also creditors);

 

(c)                                  third, to
payment of liabilities of the Partners who are also creditors (other than
payments in respect of Partner loans);

 

(d)                                 fourth, to
establish a reserve fund (which may be in the form of cash or other property,
as the liquidator shall determine) for any and all other liabilities, including
contingent liabilities, of the Partnership in a reasonable amount determined by
the liquidator with Major Decision Approval to be appropriate for such purposes
or to otherwise make adequate provision for such other liabilities;

 

(e)                                  fifth, to
payment of the debts of the Partnership to the Partners in respect of Partner
loans; and

 

(f)                                    thereafter, to the
Partners in accordance with their respective positive Capital Account balances,
after giving effect to all contributions, distributions and allocations for all
periods.

 

11.4                           Termination.  At
the time final distributions are made in accordance with Section 11.4, a certificate
of cancellation shall be filed in accordance with the Act, and the legal
existence of the Partnership shall terminate.

 

11.5                           No
Deficit Capital Account Restoration Obligation.  Notwithstanding
any other provision of this Agreement to the contrary, in no event shall any
Partner who has a deficit balance in its Capital Account (after giving effect
to all capital contributions, distributions and allocations for all periods,
including the fiscal year during which the liquidation of the Partnership
occurs), have any obligation to make any contribution to the capital of the
Partnership or any other person for any purpose whatsoever, except as may be
required by applicable law or in respect of any deficit balance resulting from
a failure to contribute capital or a withdrawal of capital in contravention of
this Agreement.

 

11.6                           Deemed
Contribution and Distribution.  If the
Partnership is liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g) of
the Treasury Regulations, but no Dissolution Event has occurred, then the
Partnership’s property shall not be liquidated, the Partnership’s debts and
other liabilities shall not be paid or discharged, and the Partnership’s
affairs shall not be wound up.  Instead,
solely for U.S. federal income tax purposes, the Partnership shall be
deemed to have contributed all property and liabilities to a new limited
partnership in exchange for an interest in such new limited partnership and,
immediately thereafter, the Partnership shall be deemed to liquidate by
distributing interests in the new limited partnership to the Partners.

 

11.7                           No
Other Cause of Dissolution.  The Partnership
shall not be dissolved, or its legal existence terminated, for any reason
whatsoever except as expressly provided in this Article XI.

 

33

 

Article XII

Miscellaneous Provisions

 

12.1                           Representations
of the Partners.  Each Partner represents and warrants to
the Partnership and every other Partner that such Partner (i) understands
and acknowledges that the interests in the Partnership have not been registered
under the Securities Act of 1933, as amended (the “Securities Act”), or
the securities laws of any state or other jurisdiction and, unless so
registered, may not be offered, sold, transferred, or otherwise disposed of
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and any applicable securities
laws of any state or other jurisdiction; (ii) is an “accredited investor”
(as defined in Rule 501(a) of Regulation D under the Securities
Act); (iii) has knowledge and experience in financial and business matters
such that it is capable of evaluating the merits and risks of purchasing the
interests in the Partnership; (iv) is able to bear the economic risk of an
investment in the interests in the Partnership for an indefinite period,
including the risk of a complete loss of any such investment; and (v) is
acquiring the interests in the Partnership for investment for its own account,
and not with a view to, or for sale in connection with, any distribution
thereof.  In addition to the foregoing
representations and warranties, the Withdrawing General Partner and the Limited
Partners (other than the Institutional Partners), jointly and severally, make
to the General Partner and to the Institutional Partners each of the
representations and warranties set forth on Exhibit C.

 

12.2                           Attorneys’
Fees.  If any dispute arises out of or relates
to the subject matter hereof or the transactions contemplated hereby, then the
prevailing party in such dispute shall be entitled to receive from the
non-prevailing party all reasonable costs of investigation, litigation and
appeal (including reasonable attorneys’ fees and disbursements) incurred by the
prevailing party in connection therewith, in addition to any other relief to
which the prevailing party may be entitled, whether at law, in equity or
otherwise.

 

12.3                           Binding
Effect.  Except as otherwise specifically
provided in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the Partners and their respective legal representatives,
successors and permitted assigns.

 

12.4                           Construction.

 

(a)                                  The Article and Section headings in this Agreement
are for convenience of reference only and shall not be deemed to alter or
affect the meaning or interpretation of any provision hereof.  All references to “Articles,” “Sections,” “Exhibits”
and “Schedules” contained in this Agreement are, unless specifically indicated
otherwise, references to articles, sections, exhibits and schedules of or to
this Agreement.  Whenever in this
Agreement the singular number is used, the same shall include the plural where
appropriate (and vice versa), and words of any gender shall include each other
gender where appropriate.  No provision
of this Agreement will be interpreted in favor of, or against, any party hereto
by reason of the extent to which any such party or its counsel participated in
the drafting hereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.  If any notice, payment, closing or other
action is to occur by the terms hereof on a day that is not a business day,
then such action shall be taken on the next succeeding day that is a business
day.

 

(b)                                 As used in this Agreement, the following words or phrases
shall have the meanings indicated: (i) “affiliate” means, as to any
specified person, any other person that directly, or indirectly through one or
more intermediaries controls, is controlled by or is under common control with,
such specified person or, if such specified person is an individual, the
spouse, sibling, parent, child or lineal descendent of such specified person; (ii) “business
day” means any day other than Saturday, Sunday or any day on which banks in
Dallas, Texas or the State in which the Project is located are required or
authorized by law to be closed for business;

 

34

 

(iii) “control” (and, the terms “controlling,”
“controlled by” and “under common control with”) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a person, whether through the ownership
of voting securities, by contract or otherwise; (iv) “day” means a
calendar day; (v) “hereby,” “herein,” “hereof,” “hereto,”
“hereunder,” and words of similar import refer to this Agreement as a
whole and not to any particular provision hereof; (vi) “include,” “including”
or their derivatives means “including without limitation”; (vii) “laws”
means statutes, regulations, rules, judicial orders and other legal
pronouncements having the effect of law; (viii) “majority in interest
of all Limited Partners” means Limited Partners whose Back-End Percentage Interests represent at
least a majority of the Back-End Percentage Interests of all Limited Partners;
(ix) “or” means “and/or”; (x) “person” means any
individual, corporation, partnership, limited liability company, joint venture,
trust, unincorporated association or other form of business or legal entity or
governmental entity; (xi) “transfer” means any assignment, bequest,
exchange, gift, sale or other transfer or disposition, or any pledge,
hypothecation, mortgage, granting of a security interest or other encumbrance,
whether voluntarily or involuntary, or by operation of law, by contract or
otherwise; and (x) “U.S.” means the United States of America.

 

12.5                           Counterparts.  This
Agreement may be executed in multiple counterparts, all of which shall
constitute one and the same instrument.

 

12.6                           Entire
Agreement.  This Agreement constitutes the entire
agreement among the Partners in respect of the subject matter hereof and
supersedes all prior agreements and understandings, if any, among them in
respect of such subject matter.

 

12.7                           Expenses.  The Partnership
shall bear and reimburse the General Partner and each Institutional Partner for
all of the reasonable expenses (including fees and disbursements of its counsel)
incurred by or on behalf of it in connection with the preparation, negotiation,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

 

12.8                           Further
Assurances.  Each Partner shall execute and deliver
all such further and additional instruments and agreements and shall take all
such further and additional actions, as may be reasonably necessary to (i) evidence
or carry out the provisions of this Agreement or to consummate the transactions
contemplated hereby or (ii) enable the Partnership or any Partner to
comply with the requirements of any applicable law.

 

12.9                           Governing
Law.  This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware (without regard
to principles of conflicts of laws).

 

12.10                     Jurisdiction;
Venue.  Any action, suit or proceeding seeking
to enforce any provision of, or based on any matter arising out of or relating
to, this Agreement or the transactions contemplated hereby can only be brought
in federal court sitting in the Northern District of Texas or, if such court
does not have jurisdiction, any district court sitting in Dallas County,
Texas.  Each Partner hereby consents to
the jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such action, suit or proceeding and irrevocably waives, to
the fullest extent permitted by applicable law, any objection that it may now
or hereafter have to the laying of the venue of any such action, suit or proceeding
in any such court or that any such action, suit or proceeding that is brought
in any such court has been brought in an inconvenient forum.

 

12.11                     Notices.  All
notices, requests, demands, consents, votes, approvals, waivers and other
communications required or permitted hereunder shall be effective only if in
writing and delivered (i) in person, (ii) by a nationally recognized
overnight courier service requiring acknowledgment of receipt of delivery, (iii) by
U.S. certified or registered mail, postage prepaid and return receipt
requested, or (iv) by 

 

35

 

facsimile,
if to the Partners, at the addresses or facsimile numbers set forth on Schedule I, and if to the
Partnership, at the address of its principal place of business referred to in Section 1.3,
or to such other address or facsimile number as the Partnership or any
Partner shall have last designated by notice to the Partnership and all other parties
hereto in accordance with this Section 12.11.  Notice shall be deemed given, received and
effective on:  (i) if given by
personal delivery or courier service, the date of actual receipt by the
receiving party, or if delivery is refused on the date delivery was first
attempted; (ii) if given by certified or registered mail, the third day
after being so mailed if posted with the U.S. Postal Service; and (iii) if
given by facsimile, the date on which the facsimile is transmitted if confirmed
by transmission report during the transmitter’s normal business hours, or at
the beginning of the next business day after transmission if confirmed at any
time other than the transmitter’s normal business hours.  Any person entitled to notice may change any
address or facsimile number to which notice is to be given to it by giving
notice of such change of address or facsimile number as provided in this Section 12.11.  The inability to deliver notice because of
changed address or facsimile number of which no notice was given shall be
deemed to be receipt of the notice as of the date such attempt was first
made.  Notwithstanding the foregoing
provisions of this Section 12.11, routine communications including
distribution checks, financial statements and reports of the Partnership may be
sent by first-class mail, postage prepaid.

 

12.12                     Public
Statements.  The Partners shall consult with each
other before issuing any press release or making any public statement in
respect of the Project Owner, the Project, this Agreement or the transactions
contemplated hereby and, except for any press release or public statement the
making of which is required or deemed advisable by any Institutional Investor
or its counsel to be made to such Institutional Partner’s affiliates, agents,
attorneys, representatives, consultants, prospective lenders, current and
prospective investors and their advisors and current and prospective financial
partners in connection with financial reporting, securities disclosures or
other legal, tax or financial requirements or guidelines applicable to such
Institutional Investor or its respective affiliates, including any disclosures
required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.

 

12.13                     No-Recourse.  Notwithstanding
any other provision of this Agreement to the contrary, no Partner nor any
person acting on its behalf shall assert any claim or cause of action against
any controlling person, officer, director, partner, manager, member, agent,
employee or other representative of any of Institutional Partner in connection
with, arising out of or relating to this Agreement or the transactions
contemplated hereby.

 

12.14                     Remedies
Cumulative.  Any rights and remedies provided for
herein are cumulative and are not exclusive of any rights or remedies that may
be available to any Partner whether at law, in equity or otherwise.

 

12.15                     Severability.  If
any provision of this Agreement, or the application of such provision to any
person or circumstance, shall be held invalid under the applicable law of any
jurisdiction, then the remainder of this Agreement or the application of such
provision to other persons or circumstances or in other jurisdictions shall not
be affected thereby.  In addition, if any
provision of this Agreement is invalid or unenforceable under any applicable
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform to such law.  Any provision hereof that may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.

 

12.16                     Third-Party
Beneficiaries.  Except as expressly provided in Article V,
nothing express or implied in this Agreement, is intended or shall be construed
to confer upon or give any person other 

 

36

 

than
the parties hereto and their respective successors and permitted assigns any
right, benefit or remedy under or by reason of this Agreement.

 

12.17                     Waiver
of Jury Trial.  TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO, HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY ACTION, SUIT OR PROCEEDING, DIRECTLY OR INDIRECTLY, AT ANY TIME ARISING
OUT OF, OR RELATING TO, THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

12.18                     Waiver
of Partition.  Each Partner hereby irrevocably waives
all rights that it may have to maintain an action for partition of any of the
Partnership’s property.

 

* * * * *

 

REMAINDER OF PAGE INTENTIONALLY BLANK.

SIGNATURE PAGE(S) FOLLOWS.

 

37

 

IN
WITNESS WHEREOF, the undersigned Partners have executed and delivered this Agreement
as of the Effective Date.

 

	
   

  	
  GENERAL PARTNER:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD BAILEYS GP, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark T. Alfieri

  
	
   

  	
  Name:

  	
  Mark T. Alfieri

  
	
   

  	
  Title:

  	
  Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LIMITED PARTNERS:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD BAILEYS REIT, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Behringer Harvard Baileys Venture, LLC,

  
	
   

  	
   

  	
  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Behringer Harvard Baileys, LLC,

  
	
   

  	
   

  	
   

  	
  its manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Mark T. Alfieri

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Mark T. Alfieri

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Operating Officer

  

 

Amended and Restated Limited
Partnership Agreement

Signature Page(s)

 

 

	
   

  	
  BREOF BAILEYS LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Arthur

  
	
   

  	
  Name:

  	
  David Arthur

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  

 

Amended and Restated Limited
Partnership Agreement

Signature Page(s)

 

 

	
   

  	
  FF INVESTORS III-EAST LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  FF Properties, Inc.,

  
	
   

  	
   

  	
  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ted R. Bradford

  
	
   

  	
   

  	
  Name:

  	
  Ted R. Bradford

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  

 

Amended and Restated Limited
Partnership Agreement

Signature Page(s)

 

 

EXECUTION FOR A LIMITED
PURPOSE

 

The
undersigned joins in the execution of this Agreement to evidence its consent
and agreement to the provisions of Section 12.1.

 

	
   

  	
  WITHDRAWING GENERAL PARTNER:

  
	
   

  	
   

  
	
   

  	
  FF BAILEYS LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  FF Properties, Inc.,

  
	
   

  	
   

  	
  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ted R. Bradford

  
	
   

  	
   

  	
  Name:

  	
  Ted R. Bradford

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  

 

Amended and Restated Limited
Partnership Agreement

Signature Page(s)

 

 

EXHIBIT A

to

Amended and Restated Limited Partnership Agreement

 

MAJOR DECISIONS

 

1.                                      The approval of
and any modifications to any Operating Budget (other than an expenditure for a
nondiscretionary expense); provided, however, that BREOF Partner’s consent or
approval with respect to the matters described in this paragraph 1 shall
not be unreasonably withheld, conditioned or delayed.

 

2.                                      With respect to
the Project Owner or the Partnership, (i) the making of a general
assignment for the benefit of creditors, (ii) the filing of a voluntary
petition in bankruptcy, (iii) the filing of a petition or answer seeking
for itself, any reorganization, arrangement, composition, readjustment,
dissolution, liquidation, or similar relief under any bankruptcy or debtor relief
law, (iv) the filing of an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against it in any
bankruptcy or insolvency proceeding brought against it, or (v) the
seeking, consenting to, or acquiescence in the appointment of a trustee,
receiver, or liquidator of the Partnership or of all or any substantial portion
of its properties.

 

3.                                      The acquisition
by the Project Owner or the Partnership of any land, improved or unimproved
real property or any improvements thereon or interest therein other than the
Land, other than any de minimus
amounts of land ancillary to and necessary or beneficial for the operation of
the Project.

 

4.                                      The (i) incurrence
by the Project Owner of any additional indebtedness for borrowed money (i.e.,
other than indebtedness incurred on or before the Effective Date), including,
without limitation, debt financings, refinancings, hedging transactions, the
approval of any applicable loan documentation for such additional indebtedness,
financings, refinancings (including any refinancing of the Senior Loan), or
transactions and other terms thereof (or the approval of any amendment,
modification or supplement thereto) or the retention of any broker, finder or
similar agent by or on behalf of the Project Owner or the Partnership in
connection with such additional indebtedness, financings, refinancings, or
transactions; or (ii) amendment or modification of the Senior Loan
documents.

 

5.                                      The sale,
exchange, mortgage, encumbrance or other transfer or disposition of all or any
portion of the Project except for the replacement of furniture, fixtures and
equipment in the ordinary course of business following completion of the
Project in accordance with the Operating Budget.

 

6.                                      Entering into,
amending, modifying, terminating or renewing any lease of space in the Project
except residential tenant leases in the ordinary course of business; provided,
however, that BREOF Partner’s consent or approval with respect to the matters
described in this paragraph 6 shall not be unreasonably withheld,
conditioned or delayed.

 

7.                                      Settling any
proceeding or entering into any other agreement with respect to an actual or
threatened condemnation.

 

8.                                      The initiation,
defense, adjustment, settlement or compromise of any claim, action, suit or
judgment by or against the Project Owner or the Partnership involving an amount
in excess of $75,000 or any claim for equitable relief other than initiating
actions to collect rentals and other amounts payable under leases affecting the
Project or to dispossess any occupant or the Project who is in default.

 

A-1

 

9.                                      Entering into,
amending, modifying, terminating or renewing any construction, design, service,
maintenance, employment or contractor agreement that (i) is not terminable
without penalty on not more than 30 days’ notice and (ii) together with
all agreements for which expenditures thereunder are included in the same
Operating Budget line item, provide for aggregate payments in excess of the
amounts set forth in the most recent Operating Budget for such services;
provided, however, entering into any construction or design contracts for
initial construction of the Project having a contract sum of $100,000 or less
shall not be a Major Decision.

 

10.                                The voluntary
dissolution, liquidation, or termination of the Project Owner or the
Partnership.

 

11.                                Lending or
advancing money to, or guarantying any debt, liability, or obligation of, any
other natural person or entity.

 

12.                                Consenting to
or otherwise approving any transfer of all or any portion of an interest in the
Project Owner or the Partnership unless such transfer is expressly permitted by
the provisions of this Agreement.

 

13.                                Establishing
reserves as contemplated in the definition of Distributable Cash to the extent
such reserves exceed $250,000.

 

14.                                Any material
change in the purpose or character of business of the Project Owner or the
Partnership.

 

15.                                The sale or
agreement to sell all or substantially all of the assets or business of the
Project Owner or the Partnership, or the merger, interest exchange, conversion,
or combination of the Project Owner or the Partnership with or into any other
entity.  For the avoidance of doubt, the
exercise of any rights in respect of the Call Right or any Tag-Along
Transaction shall not be a Major Decision.

 

16.                                The taking of
any action that would cause the Project Owner or the Partnership to become a
general partner of any entity.

 

17.                                Entering into,
giving or granting any options, rights of first refusal, deeds of trust,
mortgages, pledges, ground leases, security interests (other than in connection
with any equipment leases or personal property that is financed in the ordinary
course of business), or otherwise encumbering the Project, any portion thereof,
or any other Project Owner or Partnership property, other than residential
tenant leases of the Project entered into in the ordinary course of business,
easements and materialmen’s liens granted in the ordinary course of business
(including, without limitation, during construction upon the Project) and other
immaterial and routine encumbrances necessary or beneficial to the operation of
the Project.

 

18.                                Commingling the
funds of the Project Owner or the Partnership with the funds of any other
natural person or entity.

 

19.                                Except as
expressly provided in this Agreement, admitting any natural person or entity as
a new partner or member of the Project Owner or the Partnership or issuing or
selling any membership, partnership or other equity interests in the Project
Owner or the Partnership.

 

20.                                The engagement
in any transaction between or among the Project Owner or the Partnership, on
the one hand, and the General Partner or any affiliate of the General Partner,
on the other hand, other than as expressly contemplated by or permitted in this
Agreement;

 

A-2

 

21.                                Any amendment,
repeal, or restatement of the Certificate, the certificates of organization of
the Project Owner, this Agreement or the limited liability company of the
Project Owner other than in connection with rights granted to the General
Partner in this Agreement.

 

22.                                Filing any
federal, state or local tax return or amendment thereto on behalf of the
Project Owner or the Partnership.

 

23.                                Changing the
elections or choices of methods of reporting income or loss for federal or
state income tax purposes provided for in this Agreement unless required under
applicable law.

 

24.                                Selecting or
changing the auditors of the Partnership.

 

25.                                Consenting to
any material re-zoning or subdivision of the Land or any other material change
in the legal status thereof not otherwise consistent with management and
development of the Project.

 

26.                                Introducing or
permitting to be introduced any environmentally harmful substance or material
to the Project (or portion thereof) which was known at the time to be
environmentally harmful (except for lawful introductions of any such substance
or material).

 

27.                                Making any
decision regarding any material environmental matter relating to the Project
(i.e., any matter that would required to be reflected in the a Phase I
environmental site assessment, soils report or other environmental or
engineering report, that would increase compliance costs for the Project or
that would expose the Partnership or the Project Owner to liability),
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.

 

28.                                In the event of
fire, other casualty or partial condemnation of the Project where the cost of
repair exceeds 10% of the value of the Project 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 affecting the
damaged or condemned portion of the Project.

 

29.                                Releasing,
compromising, assigning or transferring any material claims of or any material
rights or benefits of the Project Owner or the Partnership.

 

30.                                Making any
distributions to the Partners other than as expressly contemplated in this
Agreement.

 

31.                                Making any
investment in any natural person or entity or business or directly or
indirectly acquiring any securities or other ownership interests in any natural
person or entity other than the Project Owner.

 

32.                                Increasing the
capital requirement of any Partner.  For
the avoidance of doubt, a request by the General Partner for additional capital
contributions and the making of additional capital contributions by any Partner
as provided in Section 2.2 through 2.4 of this Agreement, as
applicable, are not Major Decisions.

 

A-3

 

EXHIBIT C

to

Amended and Restated Limited Partnership Agreement

 

REPRESENTATIONS AND WARRANTIES OF

WITHDRAWING GENERAL PARTNER AND DEVELOPER PARTNER

 

The Withdrawing General
Partner and the Developer Partner (collectively, the “Representing Parties”), jointly and
severally, make to the General Partner and to the Institutional Partners, as of
the Effective Date, each of the following representations and warranties:

 

1.                                      Each of the
Representing Parties is duly formed and validly existing as a corporation,
limited partnership or limited liability company, as the case may be, under the
laws of the State of its organization with power and authority to enter into
this Agreement and to perform its obligations under this Agreement and the
other agreements described or contemplated in this Agreement.

 

2.                                      No consent,
waiver, approval or authorization of, or filing, registration or qualification
with, or notice to, any governmental instrumentality or any other natural
person or entity is required to be made, obtained or given by such Representing
Party in connection with the execution and delivery of this Agreement.

 

3.                                      The execution,
delivery and performance of this Agreement by each Representing Party will not
conflict with, or with or without notice or the passage of time or both, result
in a breach of, any of the terms or provisions of, or constitute a default
under, any material indenture, mortgage, loan agreement or instrument to which
such Representing Party is a party or by which such Representing Party or any
of its properties is bound, any applicable law or regulation, or any judgment,
order, or decree of any court entered against such Representing Party or any of
its properties.

 

4.                                      This Agreement
has been duly executed and delivered by each Representing Party and constitutes
a legal, valid and binding obligation of such Representing Party, enforceable
against such Representing Party in accordance with the terms hereof, except as
enforceability hereof may be limited by bankruptcy, insolvency or
reorganization laws or by applicable principles of equity.

 

5.                                      There are no
attachments, executions, assignments for the benefit of creditors or voluntary
or involuntary proceedings in bankruptcy or proceedings under any other debtor
relief laws contemplated by or, to the knowledge of any Representing Party,
pending or threatened against any Representing Party.

 

6.                                      None of the
Representing Parties or any of their respective affiliates have granted any
rights, options, rights of first refusal or any other agreements of any kind, which
are currently in effect, to purchase or to otherwise acquire the Project or any
part thereof or any interest therein.

 

7.                                      The Land as it
presently exists is zoned for use and operation as a multi-family residential
community without relying for compliance upon a variance or a preexisting,
nonconforming use.  None of the
Representing Parties has made any application for variance or change in zoning
which is pending.

 

8.                                      To the best of
the knowledge of the Representing Parties, the Project does not fail to conform
to any law or regulation.  None of the
Representing Parties has received notice, written or otherwise, from any
federal, state, municipal or other governmental instrumentality requiring the
correction 

 

C-1

 

of any condition with respect to the Project, or any
part thereof, by reason of a violation of any law or regulation or otherwise.

 

9.                                      None of the
Representing Parties has received notice of, or has any other knowledge or
information of, any pending or contemplated condemnation action with respect to
the Project, or any part thereof.

 

10.                                The complete
set of plans and specifications (the “Plans and Specifications”)
prepared for the Project by CNK and Associates, the architect for the Project, will
not violate any restriction, condition or agreement contained in any easement,
restrictive covenant or similar instrument or agreement affecting the Project
or any part thereof.  Upon completion of
construction in accordance with the Plans and Specifications, the Project will
be suitable for the purposes for which it is intended.

 

11.                                [Intentionally
Deleted].

 

12.                                None of the
Representing Parties, the Project Owner or the Partnership has received written
notice of, and the Representing Parties do not have any other actual knowledge
or information of, any proposed change in the valuation of the Project for real
estate taxes from that assessed for the current assessment period, nor do the
Representing Parties have any other actual knowledge or information of any
pending action or proceeding designed to levy any special assessment against
the Project.  None of the Representing
Parties, the Project Owner or the Partnership has received written notice of,
and the Representing Parties do not have any other actual knowledge or
information of, any possible future improvements by a governmental
instrumentality, any part of the cost of which is proposed to be assessed
against the Project (other than through inclusion in general real estate tax
levies).  To the best of the knowledge of
each Representing Party, no action is pending to seek an increase in or
reduction of real estate taxes.

 

13.                                None of the
Representing Parties, the Project Owner or the Partnership has received, and
the Representing Parties do not have any other knowledge or information of, any
notice from any insurance company or board of fire underwriters requesting the
performance of any work or alteration with respect to the Project or requiring
an increase in the insurance rates applicable to the Project.  To the knowledge of each Representing Party,
the Project complies with the requirements of all insurance carriers providing
insurance therefor.

 

14.                                None of the
Representing Parties, the Project Owner or the Partnership has received written
notice, and the Representing Parties do not have any other actual knowledge or
information, of any pending or threatened judicial or administrative action, of
any action pending or threatened by adjacent landowners or other persons, or of
any natural or artificial condition upon or affecting the Project, or any part
thereof, any of which would result in any material change in the condition of
the Project, or any part thereof, or in any way limit or impede the development
of the Project.

 

15.                                All water,
sewer, gas (if any), electric, telephone and drainage facilities and other
utilities required by law for the normal and proper operation of the Project
are, or upon completion of the Project in accordance with the Plans and
Specifications will be, installed to the property line and are, or upon
completion of the Project in accordance with the Plans and Specifications will
be, connected with valid permits and in good repair, condition and working
order.  Such utilities will be adequate
to serve the Project and to permit full compliance with all requirements of
law.  To the best of the knowledge of
each Representing Party, all utilities serving or to serve the Project enter or
will enter it through currently effective public or private easements.  To the best of the knowledge of each
Representing Party, no fact or condition exists which would result in the
termination of such utility services to the Project.

 

C-2

 

16.                                The Project has
direct access to all streets and roadways abutting the Project, all of which
are completed and, to the knowledge of each Representing Party, dedicated
streets and roadways that, to the knowledge of each Representing Party, have
been accepted for public maintenance by the appropriate governmental instrumentality.  All applicable governmental authorities have
approved vehicular and pedestrian ingress to and egress from the Project that
is adequate for the normal and proper operation of the Project.  To the knowledge of each Representing Party,
no fact or condition exists which would result in the termination of such
ingress and egress.

 

17.                                To the best of
the knowledge of each Representing Party, no portion of the Project is situated
in an area designated by the Secretary of the United States Department of
Housing and Urban Development (or by any other federal, state, municipal or
other governmental instrumentality) as having special flood or mudslide
hazards.

 

18.                                To the best of
the knowledge of each Representing Party, there are no unrecorded reciprocal
easement agreements affecting the Project, except as may be indicated in the
owner’s policy of title insurance obtained in connection with the construction
loan for the Project.

 

19.                                To the best of
the knowledge of each Representing Party, there are no conditions which are in
noncompliance with environmental laws or regulations with respect to the
Land.  To the best of the knowledge of
each Representing Party, no permits, consents, licenses, certificates, approvals,
registrations and authorizations in connection with environmental matters
(collectively, the “Permits”) are required by any law or regulation with
respect to the Land.  To the best of the
knowledge of each Representing Party, except as provided in that certain Phase
I Environmental Site Assessment dated December 20, 2006, ECS Project No. 9730-D
for FF Development, LP (“Report”) all operations on or at the Land are
and have been conducted in compliance with applicable environmental laws and
regulations.  None of the Representing
Parties has received any notification from any governmental instrumentality
seeking any information or alleging any violation of any law or regulation with
respect to any conditions on the Land, or on any real property within the
vicinity of the Land, subject to regulation under applicable environmental laws
or regulations.  None of the Representing
Parties has caused or permitted, nor has any actual knowledge of, any release
of any hazardous materials on-site or, to the extent involving hazardous
materials generated or processed on-site, off-site of the Land.  To the best of the knowledge of each
Representing Party, the Project (and all uses thereof and operations conducted
thereon) complies with all Permits, and no hazardous materials are located on,
in or under the Project.  To the best of
the knowledge of each Representing Party, no condition, circumstance, or set of
facts directly or indirectly applicable to the Land constitutes or could
reasonably be deemed to constitute a hazard to health, safety, property or the
environment for which any of Representing Parties is or may be liable, or which
is, or with the passage of time, could become a claim or noncompliance under
environmental laws or regulations.

 

20.                                Except as
provided in the Report, to the best of the knowledge of each Representing
Party, there is not now, nor has there been in the past, any asbestos or
asbestos-containing materials located on, incorporated in, or otherwise
contained in the Project or any portion thereof, and, to the best of the
knowledge of each Representing Party, there are not now, and have not in the
past been, any underground storage tanks or similar facilities located on the
Project or any portion thereof.

 

21.                                There are no
actions, suits or proceedings pending or, to the knowledge of each Representing
Party, threatened against each Representing Party affecting any portion of the
Project or its use as a multi-family residential project, at law or in equity
or before or by any federal, state, municipal or other governmental
instrumentality.

 

C-3

 

22.                                To the extent
that after the date hereof (i) the Partnership owns any interest, directly
or indirectly, in any entity in which the Partnership did not have such
ownership interest on or prior to the date hereof, or (ii) any
Representing Party owns an interest in Partnership, directly or indirectly,
through an entity that did not own an interest in the Partnership on or prior
to the date hereof, the foregoing representations and warranties shall bind the
Representing Parties with respect to such entity with the same force and effect
that they bind the Representing Parties with respect to the Partnership.

 

C-4

 

EXHIBIT D

to

Amended and Restated Limited Partnership Agreement

 

ARBITRATION PROCEDURE

 

(1)                                  The Partner (the “Initiating
Partner”) delivering an Arbitration Notice and the Partner receiving the
Arbitration Notice (the “Non-Initiating Partner”) shall attempt to
agree, within 21 days after the delivery of the Arbitration Notice upon
the appointment of one arbitrator to resolve the matter.  If an agreement on a single arbitrator is not
be reached within such 21-day period, then the Initiating Partner and the Non-Initiating
Partner each shall appoint one arbitrator within 15 days after the
expiration of such 21-day period and shall specify the name and address of
their respective arbitrator to the other party prior to the expiration of such
15-day period; provided, however, that if any Partner fails to specify the name
and address of its selected arbitrator within such 15-day period, then the
other Partner may give such failing Partner notice, and if within seven days
after such notice the failing Partner still has not specified an arbitrator,
then the arbitrator selected by the other Partner(s) shall act as the
arbitrator as if all parties had agreed to the appointment of such arbitrator
to resolve the determination of the BREOF Mark to Market Price.

 

(2)                                  If two arbitrators are
selected, then the arbitrators shall appoint a third arbitrator within
15 days after their appointment.  If
the arbitrators are unable to agree upon a third arbitrator within such 15-day
period, then the third arbitrator shall be appointed as soon as reasonably
practicable thereafter by a court of competent jurisdiction residing in the
county in which the Project is situated, subject to the qualification
requirements set forth below.  In the
event of the failure, refusal or inability of any arbitrator to act, a new
arbitrator shall be appointed as a replacement, which appointment shall be made
in the same manner as set forth above. 
Immediately after the selection of the final arbitrator, the arbitrators
shall meet and, within 21 days after the complete selection of the
arbitrators, endeavor to determine the BREOF Mark to Market Price.

 

(3)                                  Within 15 days after
the selection of all arbitrators, the Initiating Partner and the Non-Initiating
Partner shall submit to the arbitrators such party’s proposed BREOF Mark to
Market Price, as well as all other economic terms relevant to the determination
of the BREOF Mark to Market Price, together with reasonable evidence supporting
such proposed BREOF Mark to Market Price. 
The arbitrators shall select the proposed BREOF Mark to Market Price
submitted by one of the parties, whichever proposal the arbitrators deem to be
the most nearly correct according to the definitions, terms and requirements
set forth in this Agreement, with no compromise.  The power of the arbitrators shall be
exercised by the concurrence of a majority, except that if only one arbitrator
is required, the decision of such arbitrator shall govern.  The proposed BREOF Mark to Market Price
selected by the arbitrator(s) shall be the BREOF Mark to Market
Price.  The determination of the
arbitrator(s) shall be final and non-appealable, shall be binding on all
Partners and may be enforced in any court of competent jurisdiction.

 

(4)                                  Each arbitrator
shall have the authority to request additional facts or evidence from each of
the parties and, if any arbitrator so requires, a hearing to present the
same.  In the event of such a hearing, rules of
evidence applicable to state court judicial proceedings in civil district
courts in Dallas, Texas shall govern; provided, however, that evidence will be
admitted or excluded in the sole discretion of the arbitrator(s).  The arbitrator(s) shall resolve the
controversy and shall execute and acknowledge its (or their) decision, together
with a brief statement describing the rationale for such decision, in writing
and simultaneously deliver a copy thereof to each of the parties personally or
by registered or certified mail, return receipt requested.  If the arbitrator(s) fail(s) to
reach an agreement during such 21-day period (as may be extended in accordance
with the next sentence), then the arbitrator(s) shall be discharged, and
new arbitration proceedings shall commence, with new arbitrators being
appointed in the same manner as 

 

D-1

 

set
forth above.  By agreement in writing,
the Initiating Partner and the Non-Initiating Partner may extend the time to
reach agreement either before or after the expiration thereof up to a maximum
of 30 additional days.  The periods
within which the arbitrators must act are not jurisdictional.

 

(5)                                  Each arbitrator shall (A) be
an independent appraiser licensed under the laws of the state in which the
Project is located, and (B) have been actively and continuously engaged in
appraising multi-family rental communities as an MAI appraiser familiar with
the applicable sub-market of the Project for not less than the previous
five years.  The arbitrators
selected by the Initiating Partner and the Non-Initiating Partner shall be
instructed that they are neutral arbitrators and shall not have any ex parte communication with the appointing party and may not
be appraisers that consulted with the Initiating Partner or the Non-Initiating
Partner in negotiations regarding the BREOF Mark to Market Price prior to the
submission of the BREOF Mark to Market Price proposals to arbitration.  In addition, any additional arbitrator shall
be an independent appraiser having no relationship representing the Initiating
Partner, the Non-Initiating Partner or their respective affiliates during the
immediately preceding 365-day period prior to selection.

 

(6)                                  Each party to the
arbitration proceeding shall bear its own costs and the costs of the arbitrator
it appoints.  The cost of any additional
arbitrator (or the single arbitrator if only one arbitrator is required) shall
be split equally between the Initiating Partner and the Non-Initiating Partner.

 

D-2

 

EXHIBIT E

to

Amended and Restated Limited Partnership Agreement

 

BUY/SELL PROCEDURE

 

If any Partner institutes the provisions of
this Exhibit E, then the following shall apply.

 

(a)                                  The Partner that initiates
the provisions of this Exhibit E by making an offer to the other
Partners as described below (the “Buy-Sell Offer”) is referred to as the
“Offeror” and each other Partner is referred to as the “Offeree”;
provided that if there is more than one Offeree, the Offerees shall
collectively constitute the “Offeree Group”, which shall be treated as
one Partner (i.e., one Offeree) for purposes of this Exhibit E, and
such Partners must act as a group with regard to all decisions or elections to
be made by pursuant to this Exhibit E.  If the General Partner or BH Partner is the
Offeror, then the General Partner and BH Partner shall comprise the “Offeror
Group”, which shall be treated as one Partner (i.e., one Offeror) for
purposes of this Exhibit E, and such Partners must act as a group
with regard to all decisions or elections to be made by pursuant to this Exhibit E.  Any such decisions or elections to be made
pursuant to this Exhibit E by any Partners comprising the Offeror
Group or the Offeree Group, as applicable, shall be made by a majority of the
Back-End Percentage Interests of the Offeror Group or the Offeree Group, as
applicable.  References in this Exhibit E
to Offeror or Offeree shall be deemed to refer to Offeror Group or Offeree
Group, as the context may require.  If
the provisions of this Exhibit E are initiated, then the General
Partner shall transfer all of its Capital Account to BH Partner, except that
the General Partner shall retain a portion of its Capital Account necessary to
maintain a 1% Back-End Percentage Interest, and upon such transfer the Back-End
Percentage Interests of the General Partner and BH Partner shall be adjusted
accordingly.  If the closing of a
purchase under this Exhibit E does not close, then BH Partner may
transfer all or any portion of the Capital Account assigned from the General
Partner back to the General Partner.

 

(b)                                 The Buy-Sell Offer shall (i) be
in writing and be signed by the Offeror, and (ii) specify the cash
purchase price (the “Purchase Price”) on which the Offeror would
purchase all of the assets of the Project Owner and as if such assets were free
and clear of all liens, claims and encumbrances.  The General Partner shall promptly provide
any books, records, contracts and other data or information regarding the
Partnership, the Project Owner or the Project that a Partner may reasonably
request with respect to analyzing the potential consequences of accepting or
rejecting a Buy-Sell Offer under this Exhibit E.

 

(c)                                  A copy of the Buy-Sell Offer
shall be delivered to the General Partner who shall, within 15 days, determine
and notify each Offeree as to the amount that Offeree would receive as a
Partner (the “Offeree Value”) and the amount the Offeror would receive
as a Partner (the “Offeror Value”) in respect of its interest in the
Partnership if (i) all of the Project Owner’s and the Partnership’s assets
were sold for the Purchase Price, and (ii) the Project Owner and the
Partnership (A) discharged all outstanding liabilities and indebtedness to
which the Project, the Project Owner and the Partnership were subject
(including the outstanding principal, interest and prepayment premiums (if any)
of the construction loan); and (B) repaid all Partner loans; and (iii) after
giving effect to the preceding clauses (A) and (B), the Developer Partner
received its Buy/Sell Net Profits Payment and the resulting Distributable Cash
of the Partnership were distributed in accordance with Section 6.1
immediately prior to the closing of the purchase of the interest in the
Partnership, after giving effect to all capital contributions, distributions
and allocations for all periods. 
Contemporaneously with the delivery of the notice of Offeree Value and
Offeror Value, the General Partner shall notify each Offeree of any Guaranteed
Indebtedness that is scheduled to mature before the anticipated Buy/Sell
closing date.  Upon delivery of such
maturity notice, the Buy/Sell procedure in this Exhibit E shall be
held in abeyance until the Partners resolve pursuant to 

 

E-1

 

the provisions of this Agreement whether to modify, extend or
re-finance the Guaranteed Indebtedness that is scheduled to mature.  As used herein, “Buy/Sell Net Profits
Payment” means 50% of the net Distributable Cash remaining to be
distributed from a hypothetical sale of the Project and distribution of
proceeds from that sale assuming: (i) the Partnership sold the Project for
the Purchase Price and (ii) the Partnership (A) paid reasonable and
customary closing and transaction costs that would be payable in an arms-length
sale of the Project; (B) discharged all outstanding liabilities and
indebtedness to which the Project, the Project Owner and the Partnership were
subject (including the outstanding principal, interest and prepayment premiums
(if any) of the construction loan); (C) repaid all Partner loans; and (D) distributed
to the Partners the amounts payable pursuant to Sections 6.1(a), 6.1(b),
6.1(c) and 6.1(d)

 

(d)                                 Each Offeree shall have the
right, exercisable by delivery of notice (the “Election”) to the Offeror
within 30 days from the receipt of the Buy-Sell Offer, to elect either to:

 

(i)                                     Sell to the
Offeror all of the Offeree’s right, title and interest in and to its interest
in the Partnership for a cash purchase price equal to the Offeree Value; or

 

(ii)                                  Purchase all of
the Offeror’s right, title and interest in and to its interest in the
Partnership for a cash purchase price equal to the Offeror Value.

 

Failure of the Offeree to give the Offeror notice of the Offeree’s
Election shall be deemed, upon the expiration of such 30-day period, to be an
Election to sell under this subparagraph (d).

 

(e)                                  Within 15 days following the
Election (or the date a deemed Election has been made), the party purchasing
the interests of the other (the “Purchaser”) shall deliver into escrow
with a title company mutually satisfactory to the Purchaser and the party who
is the seller (the “Seller”) $1,000,000 in cash (the “Deposit”)
to serve as a good faith deposit.  At
closing, the Deposit shall be returned to the Purchaser.  Notwithstanding the foregoing, if the
Purchaser was previously a Defaulting Purchaser, the amount of the Deposit
under this provision shall be 150% of the amount delivered as the Deposit in
the last transaction where the Purchaser was a Defaulting Purchaser.  At closing, the Seller shall assign all of
its Partnership Interests to the Purchaser by written assignment with full
warranty of title in a form reasonably acceptable to the Purchaser.  The Seller shall convey its Partnership
Interests free and clear of all liens, claims, and encumbrances, and the Seller
shall execute and deliver to the Purchaser all documents which may be required
to give effect to the sale and purchase of such Partnership Interests.  If there is more than one Purchaser
purchasing the interests of the Seller(s), then unless such Purchasers
otherwise agree between or among themselves, the aggregate interests being
purchased, the aggregate price for those interests and the aggregate amount of
the Deposit each shall be allocated between or among the Purchasers according
to their respective Back-End Percentage Interests.

 

(f)                                    The closing of a purchase
under this Exhibit E will be held at the Partnership’s principal
office and shall take place on the date 45 days after the Offeree’s Election or
deemed Election or as otherwise agreed by the Offeror and Offeree.  At the closing, the Purchaser shall pay to
the Seller the purchase price (being, as applicable, either the Offeror Value
or the Offeree Value).  The closing of a
purchase under this Exhibit E will be held in abeyance for not more
than 60 days to afford the Partners time to seek any lender consent required
for the transfer of the General Partner’s interest under this Exhibit E.  The Partners shall use commercially
reasonable efforts to obtain such lender’s consent.  If such consent is not obtained within such
60-day period, then the purchase under this Exhibit E shall be
adjourned without prejudice or penalty to any Partner, the Deposit shall be
returned to the Purchaser, and the provisions of this Exhibit E
shall remain in effect and may be exercised as provided in this Agreement.

 

E-2

 

(g)                                 If the Purchaser fails to
purchase the interests of the Seller in accordance with this Exhibit E
for any reason other than the Seller’s default or the failure or inability to
obtain the consent of lender as provided in subparagraph (f) of this Exhibit E,
the Seller, as the sole and exclusive remedy on account thereof, shall receive
the Deposit as liquidated damages.  If
there is more than one Purchaser and any such Purchaser defaults (so that
Seller would be entitled to receive the Deposit as liquidated damages), the
non-defaulting Purchaser(s) shall have the right, but not the obligation,
to cure such default as between the Purchaser(s) and Seller(s), at any
time within five days after the scheduled closing date, by acquiring the entire
interests of Seller(s) for its or their own account (and not for any
defaulting Purchaser) and, in such event, shall have the right to apply each
defaulting Purchaser’s share of the Deposit towards the purchase price without
compensation to any defaulting Purchaser as liquidated damages for such
default.  If the Seller refuses to
consummate the sale of its interests in accordance with this Exhibit E,
the Purchaser shall have, as its sole remedy on account thereof, the right to
enforce specific performance.  If the
Purchaser fails to purchase the interests of the Seller in accordance with this
Exhibit E, the Purchaser shall be a “Defaulting Purchaser”
for the purposes of subparagraph (e) of this Exhibit E.

 

(h)                                 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 Exhibit E shall have
terminated.

 

(i)                                     From and after the date on
which a Buy-Sell Offer has been delivered until the Buy-Sell closing date, the
General Partner shall not sell or enter into a binding contract to sell (or
permit the Project Owner to sell or to enter into a binding contract to sell)
all or any portion of the Project, enter into any material binding agreement
with respect to the Partnership, the Project Owner or the Project or make any
new financing commitments on behalf of the Partnership or the Project
Owner.  The General Partner shall keep
the other Partners fully informed as to the status of the Partnership’s affairs
through the Buy-Sell closing date.

 

E-3

 

EXHIBIT F

to

Amended and Restated Limited Partnership Agreement

 

CALL RIGHT

 

If the General Partner or BH
Partner (as applicable, the “Calling Partner”) institutes the provisions
of this Exhibit F, then the following shall apply.

 

(a)                                  At any time the
Calling Partner may deliver to Developer Partner a notice (the “Call Notice”)
that the Calling Partner is exercising its rights pursuant to this Exhibit F.  Within ten days after delivery of the Call
Notice, or such longer period as may be specified by the Calling Partner in the
Call Notice, the Calling Partner shall purchase, and Developer Partner shall
sell to the Calling Partner, all of the Partnership interest of the Developer
Partner in the Partnership (the “Called Interest”).  At the closing of the purchase and sale of
the Called Interest: (i) the Calling Partner shall pay to Developer
Partner the purchase price of $10.00; (ii) Developer Partner shall assign the
Called Interest to the Calling Partner, free and clear of all liens, claims and
encumbrances, pursuant to an assignment agreement prepared by the Calling
Partner and reasonably acceptable to Developer Partner; (iii) Developer
Partner shall execute and deliver to the Calling Partner all documents which
may be required to give effect to the sale and purchase of the Called Interest
to the Calling Partner; and (iv) the General Partner shall cause the
Partnership to enter into a profits participation agreement (the “Profits
Participation Agreement”) with Developer Partner or an affiliate designated
by Developer Partner.  If requested by
the General Partner, BREOF Partner shall join in the execution of the Profits
Participation Agreement to evidence its consent thereto and approval thereof.

 

(b)                                 The Profits
Participation Agreement shall be prepared by the General Partner on behalf of
the Partnership and shall be subject to the reasonable approval of Developer
Partner or its designated affiliate, as applicable, and of the BREOF
Partner.  The Profits Participation
Agreement shall provide that the Partnership shall pay to Developer Partner or
such designated affiliate: (i) the Deferred Affiliate Fees in the amounts
and at the times provided in the Agreement as if Developer Partner had
continued as a Limited Partner in the Partnership; and (ii) payments in
cash equal to the amount the distributions, if any, pursuant to Sections 6.1
(including any amount payable pursuant to Section 8.11) and 11.3
that Developer Partner would have received if Developer Partner had continued
as a Limited Partner in the Partnership (“Hypothetical Distributions”).  The Profits Participation Agreement shall
provide that the General Partner shall cause the Partnership to make any
Hypothetical Distributions within 30 days after each date on which
distributions are made to the Partners pursuant to Sections 6.1 and
11.3 to the extent Developer Partner would have been entitled to any
contemporaneous distribution pursuant to Sections 6.1 (including
any amount payable pursuant to Section 8.11) and 11.3.

 

F-1

 

BEHRINGER
HARVARD BAILEYS INVESTORS, L.P.

 

SCHEDULE I

 

	
  Partner and Address

  	
   

  	
  Capital Contribution

  	
   

  	
  Back-End

  Percentage Interests

  	
   

  
	
  General Partner:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Behringer
  Harvard Baileys GP, LLC 

  15601
  Dallas Parkway, Suite 600 

  Addison,
  Texas 75001 

  Facsimile
  No.: (214) 655-1610 

  Attention:
  Mark T. Alfieri

  	
   

  	
  $

  	
  29,117,514

  	
  (1)

  	
  43.86

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Limited Partners:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FF
  Investors III East LLC 

  2045
  Highway 360, Suite 250 

  Grand
  Prairie, Texas 75050 

  Facsimile
  No.: (214) 574-1301  

  Attention: Ted R. Bradford

  	
   

  	
  $

  	
  2,951,756

  	
  (2)

  	
  4.45

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BREOF
  Baileys, LLC 

  BCE
  Place, Suite 300 

  181
  Bay Street, P.O. Box 762 

  Toronto,
  Ontario M5J 2T3 

  Facsimile
  No.: (416) 365-9642 

  Attention:
  David Arthur

  	
   

  	
  $

  	
  11,807,025

  	
  (3)

  	
  17.79

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Behringer
  Harvard Baileys REIT, LLC 

  15601
  Dallas Parkway, Suite 600 

  Addison,
  Texas 75001 

  Facsimile
  No.: (214) 655-1610 

  Attention:
  Mark T. Alfieri

  	
   

  	
  $

  	
  22,501,858

  	
  (4)

  	
  33.90

  	
  %

  
	
  Total All Partners:

  	
   

  	
  $

  	
  66,378,153

  	
   

  	
  100.0

  	
  %

  

 

Section 2.10(a)

BH-Funded Accrued Development Fee:   $195,521

 

(1) $28,826,339 is Undistributed First
Priority Capital, and $291,175 is Undistributed Second Priority Capital.

(2) Entire amount is Undistributed
Second Priority Capital.

(3) Entire amount is Undistributed
Second Priority Capital.

(4) Entire amount is Undistributed
Second Priority Capital.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}]]