Document:

Exhibit
10.30

 

	
  THIS
  INSTRUMENT PREPARED BY, RECORDED AND RETURN TO:

  (Print Name of Attorney)

  Amy B. Connelly, Esq.

  Krooth & Altman LLP

  1850 M Street, NW, Suite 400

  Washington, DC 20036

  

  	
  (Reserved)

  

 

 

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

 

(FLORIDA)

 

 

	
  FANNIE
  MAE MULTIFAMILY SECURITY INSTRUMENT - FLORIDA

  	
  Form
  4010

  	
  06/09

  
	
   

  	
   

  	
   

  
	
   

  	
  © 1997-2009 Fannie Mae

  

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  UNIFORM COMMERCIAL CODE SECURITY AGREEMENT

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  ASSIGNMENT OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN
  POSSESSION

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  ASSIGNMENT OF LEASES; LEASES AFFECTING THE MORTGAGED
  PROPERTY

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  PAYMENT OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS;
  PREPAYMENT PREMIUM

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  EXCULPATION

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  DEPOSITS FOR TAXES, INSURANCE AND OTHER CHARGES

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  COLLATERAL AGREEMENTS

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  APPLICATION OF PAYMENTS

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  COMPLIANCE WITH LAWS

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  USE OF PROPERTY

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  PROTECTION OF LENDER’S SECURITY

  	
   

  	
  14

  

 

i

 

	
  13.

  	
   

  	
  INSPECTION

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
   

  	
  BOOKS AND RECORDS; FINANCIAL REPORTING

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  TAXES; OPERATING EXPENSES

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
   

  	
  LIENS; ENCUMBRANCES

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
   

  	
  PRESERVATION, MANAGEMENT AND MAINTENANCE OF MORTGAGED
  PROPERTY

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
   

  	
  ENVIRONMENTAL HAZARDS

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
   

  	
  PROPERTY AND LIABILITY INSURANCE

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
   

  	
  CONDEMNATION

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
   

  	
  TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN
  BORROWER

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
   

  	
  EVENTS OF DEFAULT

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  23.

  	
   

  	
  REMEDIES CUMULATIVE

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  24.

  	
   

  	
  FORBEARANCE

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  25.

  	
   

  	
  LOAN CHARGES

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  26.

  	
   

  	
  WAIVER OF STATUTE OF LIMITATIONS

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  27.

  	
   

  	
  WAIVER OF MARSHALLING

  	
   

  	
  33

  

 

ii

 

	
  28.

  	
   

  	
  FURTHER ASSURANCES

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  29.

  	
   

  	
  ESTOPPEL CERTIFICATE

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  30.

  	
   

  	
  GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  31.

  	
   

  	
  NOTICE

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  32.

  	
   

  	
  SALE OF NOTE; CHANGE IN SERVICER

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  33.

  	
   

  	
  SINGLE ASSET BORROWER

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  34.

  	
   

  	
  SUCCESSORS AND ASSIGNS BOUND

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  35.

  	
   

  	
  JOINT AND SEVERAL LIABILITY

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  36.

  	
   

  	
  RELATIONSHIP OF PARTIES; NO THIRD PARTY BENEFICIARY

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  37.

  	
   

  	
  SEVERABILITY; AMENDMENTS

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  38.

  	
   

  	
  CONSTRUCTION

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  39.

  	
   

  	
  LOAN SERVICING

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  40.

  	
   

  	
  DISCLOSURE OF INFORMATION

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  41.

  	
   

  	
  NO CHANGE IN FACTS OR CIRCUMSTANCES

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  42.

  	
   

  	
  SUBROGATION

  	
   

  	
  36

  

 

iii

 

	
  43.

  	
   

  	
  ACCELERATION; REMEDIES; WAIVER OF PERMISSIVE COUNTERCLAIMS

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  44.

  	
   

  	
  RELEASE

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  45.

  	
   

  	
  FUTURE ADVANCES

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  46.

  	
   

  	
  WAIVER OF TRIAL BY JURY

  	
   

  	
  37

  

 

iv

 

THIS IS A BALLOON MORTGAGE AND
THE FINAL PRINCIPAL PAYMENT OR THE PRINCIPAL BALANCE DUE UPON MATURITY IS
$25,728,671.93, TOGETHER WITH ACCRUED INTEREST, IF ANY, AND ALL
ADVANCEMENTS MADE BY THE MORTGAGEE (LENDER) UNDER THE TERMS OF THIS MORTGAGE

 

MULTIFAMILY MORTGAGE,

ASSIGNMENT OF RENTS

AND SECURITY AGREEMENT

 

THIS
MULTIFAMILY MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT (the “Instrument”) is dated as of the 17th day of September, 2010, between 7900 HAMPTON BLVD, LLC, 
a limited liability company organized and existing under the laws of
Delaware, whose address is 4582 South Ulster Street Parkway, Suite 1200,
Denver, Colorado 80237, as mortgagor (“Borrower”),
and  AMERISPHERE MULTIFAMILY
FINANCE, L.L.C., a limited liability company organized and existing
under the laws of Nebraska, whose address is One Pacific Place, Suite 130,
1125 South 103rd Street, Omaha, Nebraska 68124 as mortgagee (“Lender”).

 

Borrower is indebted to Lender in the principal amount of $29,578,000,
as evidenced by Borrower’s Multifamily Note payable to Lender dated as of the
date of this Instrument, and maturing on October 1, 2017.

 

TO SECURE TO LENDER the repayment of the Indebtedness, and all
renewals, extensions and modifications of the Indebtedness, and the performance
of the covenants and agreements of Borrower contained in the Loan Documents,
Borrower mortgages, warrants, grants, conveys and assigns to Lender the
Mortgaged Property, including the Land located in Broward County, State of
Florida and described in Exhibit A attached to this Instrument.

 

Borrower represents and warrants that Borrower is lawfully seized of
the Mortgaged Property and has the right, power and authority to mortgage,
grant, convey, bargain, sell, transfer and assign the Mortgaged Property, and
that the Mortgaged Property is unencumbered. 
Borrower covenants that Borrower will warrant and defend generally the
title to the Mortgaged Property against all claims and demands, subject to any
easements and restrictions listed in a schedule of exceptions to coverage in
any title insurance policy issued to Lender contemporaneously with the
execution and recordation of this Instrument and insuring Lender’s interest in
the Mortgaged Property.

 

Covenants.  Borrower and
Lender covenant and agree as follows:

 

1.             DEFINITIONS.

 

The following terms, when used in this Instrument (including when used
in the above recitals), shall have the following meanings:

 

1

 

(a)           “Borrower” means all persons or entities identified as “Borrower”
in the first paragraph of this Instrument, together with their successors and
assigns.

 

(b)           “Collateral Agreement” means any separate agreement between
Borrower and Lender for the purpose of establishing replacement reserves for
the Mortgaged Property, establishing a fund to assure completion of repairs or
improvements specified in that agreement, or assuring reduction of the
outstanding principal balance of the Indebtedness if the occupancy of or income
from the Mortgaged Property does not increase to a level specified in that
agreement, or any other agreement or agreements between Borrower and Lender
which provide for the establishment of any other fund, reserve or account.

 

(c)           “Environmental Permit” means any permit, license, or other
authorization issued under any Hazardous Materials Law with respect to any
activities or businesses conducted on or in relation to the Mortgaged Property.

 

(d)           “Event of Default” means the occurrence of any event listed
in Section 22.

 

(e)           “Fixtures” means all property which is so attached to the
Land or the Improvements as to constitute a fixture under applicable law,
including: machinery, equipment, engines, boilers, incinerators, installed
building materials; systems and equipment for the purpose of supplying or
distributing heating, cooling, electricity, gas, water, air, or light;
antennas, cable, wiring and conduits used in connection with radio, television,
security, fire prevention, or fire detection or otherwise used to carry
electronic signals; telephone systems and equipment; elevators and related
machinery and equipment; fire detection, prevention and extinguishing systems
and apparatus; security and access control systems and apparatus; plumbing
systems; water heaters, ranges, stoves, microwave ovens, refrigerators,
dishwashers, garbage disposers, washers, dryers and other appliances; light
fixtures, awnings, storm windows and storm doors; pictures, screens, blinds,
shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor
and wall coverings; fences, trees and plants; swimming pools; and exercise
equipment.

 

(f)            “Governmental Authority” means any board, commission,
department or body of any municipal, county, state or federal governmental
unit, or any subdivision of any of them, that has or acquires jurisdiction over
the Mortgaged Property or the use, operation or improvement of the Mortgaged
Property.

 

(g)           “Hazardous Materials” means petroleum and petroleum products
and compounds containing them, including gasoline, diesel fuel and oil;
explosives; flammable materials; radioactive materials; polychlorinated
biphenyls (“PCBs”) and compounds containing them; lead and lead-based paint;
asbestos or asbestos-containing materials in any form that is or could become
friable; underground or above-ground storage tanks, whether empty or containing
any substance; any substance the presence of which on the Mortgaged Property is
prohibited by any federal, state or local authority; any substance that
requires special handling; and any other material or substance now or in the
future defined as a “hazardous substance,” “hazardous material,” “hazardous
waste,”

 

2

 

“toxic
substance,” “toxic pollutant,” “contaminant,” or “pollutant” within the meaning
of any Hazardous Materials Law.

 

(h)           “Hazardous Materials Laws” means all federal, state, and
local laws, ordinances and regulations and standards, rules, policies and other
governmental requirements, administrative rulings and court judgments and
decrees in effect now or in the future and including all amendments, that
relate to Hazardous Materials and apply to Borrower or to the Mortgaged
Property. Hazardous Materials Laws include, but are not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C.
Section 2601, et seq., the
Clean Water Act, 33 U.S.C. Section 1251, et seq.,
and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101, et seq., and their state analogs.

 

(i)            “Impositions” and “Imposition Deposits”
are defined in Section 7(a).

 

(j)            “Improvements” means the buildings, structures, improvements,
and alterations now constructed or at any time in the future constructed or
placed upon the Land, including any future replacements and additions.

 

(k)           “Indebtedness” means the principal of, interest on, and all
other amounts due at any time under, the Note, this Instrument or any other
Loan Document, including prepayment premiums, late charges, default interest,
and advances as provided in Section 12 to protect the security of this
Instrument.

 

(l)            [Intentionally
omitted]

 

(m)          “Key
Principal” means (A) the natural person(s) or entity
identified as such at the foot of this Instrument; (B) the natural person
or entity who signed either the Acknowledgement and Agreement of Key Principal
to Personal Liability for Exceptions to Non-Recourse Liability or the
Exceptions to Non-Recourse Guaranty (or is otherwise a guarantor on the
Indebtedness); and (C) any person or entity who becomes a Key Principal
after the date of this Instrument and is identified as such in an assumption
agreement, or another amendment or supplement to this Instrument or who
otherwise signs either the Acknowledgement and Agreement of Key Principal to
Personal Liability for Exceptions to Non-Recourse Liability or Exceptions to
Non-Recourse Guaranty (or any other guaranty of the Indebtedness).

 

(n)           “Land” means the land described in Exhibit A.

 

(o)           “Leases” means all present and future leases, subleases,
licenses, concessions or grants or other possessory interests now or hereafter
in force, whether oral or written, covering or affecting the Mortgaged
Property, or any portion of the Mortgaged Property (including proprietary
leases or occupancy agreements if Borrower is a cooperative housing
corporation), and all modifications, extensions or renewals.

 

3

 

(p)                                 “Lender” means the entity identified as “Lender” in the first
paragraph of this Instrument and its successors and assigns, or any subsequent
holder of the Note.

 

(q)                                 “Loan Documents” means the Note, this Instrument, all
guaranties, all indemnity agreements, all Collateral Agreements, O&M
Programs, and any other documents now or in the future executed by Borrower,
Key Principal, any guarantor or any other person in connection with the loan
evidenced by the Note, as such documents may be amended from time to time.

 

(r)                                    “Loan Servicer” means the entity that from time to time is
designated by Lender to collect payments and deposits and receive notices under
the Note, this Instrument and any other Loan Document, and otherwise to service
the loan evidenced by the Note for the benefit of Lender.  Unless Borrower receives notice to the
contrary, the Loan Servicer is the entity identified as “Lender” in the first
paragraph of this Instrument.

 

(s)                                  “Mortgaged Property” means all of Borrower’s present and
future right, title and interest in and to all of the following:

 

(1)           the Land;

 

(2)           the
Improvements;

 

(3)           the Fixtures;

 

(4)           the Personalty;

 

(5)           all current and
future rights, including air rights, development rights, zoning rights and
other similar rights or interests, easements, tenements, rights-of-way, strips
and gores of land, streets, alleys, roads, sewer rights, waters, watercourses,
and appurtenances related to or benefitting the Land or the Improvements, or
both, and all rights-of-way, streets, alleys and roads which may have been or
may in the future be vacated;

 

(6)           all proceeds
paid or to be paid by any insurer of the Land, the Improvements, the Fixtures,
the Personalty or any other part of the Mortgaged Property, whether or not
Borrower obtained the insurance pursuant to Lender’s requirement;

 

(7)           all awards,
payments and other compensation made or to be made by any municipal, state or
federal authority with respect to the Land, the Improvements, the Fixtures, the
Personalty or any other part of the Mortgaged Property, including any awards or
settlements resulting from condemnation proceedings or the total or partial
taking of the Land, the Improvements, the Fixtures, the Personalty or any other
part of the

 

4

 

Mortgaged Property under the power of eminent domain or otherwise and
including any conveyance in lieu thereof;

 

(8)           all contracts,
options and other agreements for the sale of the Land, the Improvements, the
Fixtures, the Personalty or any other part of the Mortgaged Property entered
into by Borrower now or in the future, including cash or securities deposited
to secure performance by parties of their obligations;

 

(9)           all proceeds
from the conversion, voluntary or involuntary, of any of the above into cash or
liquidated claims, and the right to collect such proceeds;

 

(10)         all Rents and
Leases;

 

(11)         all earnings,
royalties, accounts receivable, issues and profits from the Land, the
Improvements or any other part of the Mortgaged Property, and all undisbursed
proceeds of the loan secured by this Instrument and, if Borrower is a
cooperative housing corporation, maintenance charges or assessments payable by
shareholders or residents;

 

(12)         all Imposition
Deposits;

 

(13)         all refunds or
rebates of Impositions by any municipal, state or federal authority or
insurance company (other than refunds applicable to periods before the real
property tax year in which this Instrument is dated);

 

(14)         all tenant
security deposits which have not been forfeited by any tenant under any Lease;
and

 

(15)         all names under
or by which any of the above Mortgaged Property may be operated or known, and
all trademarks, trade names, and goodwill relating to any of the Mortgaged
Property.

 

(t)                                    “Note” means the Multifamily Note described on page 1 of
this Instrument, including the Acknowledgment and Agreement of Key Principal to
Personal Liability for Exceptions to Non-Recourse Liability (if any), and all schedules,
riders, allonges and addenda, as such Multifamily Note may be amended from time
to time.

 

(u)                                 “O&M Program” is defined in Section 18(a).

 

(v)                                 “Personalty” means all equipment, inventory, general
intangibles which are used now or in the future in connection with the
ownership, management or operation of the Land or the Improvements or are
located on the Land or in the Improvements, including furniture, furnishings,
machinery, building materials, appliances, goods, supplies, tools, books,
records (whether in written or electronic form), computer equipment (hardware
and software) and other tangible personal

 

5

 

property
(other than Fixtures) which are used now or in the future in connection with
the ownership, management or operation of the Land or the Improvements or are
located on the Land or in the Improvements, and any operating agreements
relating to the Land or the Improvements, and any surveys, plans and
specifications and contracts for architectural, engineering and construction
services relating to the Land or the Improvements and all other intangible
property and rights relating to the operation of, or used in connection with,
the Land or the Improvements, including all governmental permits relating to
any activities on the Land.

 

(w)          “Property
Jurisdiction” is defined in Section 30(a).

 

(x)            “Rents” means all rents (whether from residential or
non-residential space), revenues and other income of the Land or the
Improvements, including subsidy payments received from any sources (including,
but not limited to payments under any Housing Assistance Payments Contract),
parking fees, laundry and vending machine income and fees and charges for food,
health care and other services provided at the Mortgaged Property, whether now
due, past due, or to become due, and deposits forfeited by tenants.

 

(y)           “Taxes” means all taxes, assessments, vault rentals and other
charges, if any, general, special or otherwise, including all assessments for
schools, public betterments and general or local improvements, which are
levied, assessed or imposed by any public authority or quasi-public authority,
and which, if not paid, will become a lien, on the Land or the Improvements.

 

(z)            “Transfer” means (A) a sale, assignment, transfer, or
other disposition (whether voluntary, involuntary or by operation of law); (B) the
grant, creation, or attachment of a lien, encumbrance, or security interest
(whether voluntary, involuntary or by operation of law); (C) the issuance
or other creation of a direct or indirect ownership interest; or  (D) the withdrawal, retirement, removal
or involuntary resignation of any owner or manager of a legal entity.

 

(aa)         “Bankruptcy Event” means any one or more of
the following: (i) the commencement of a voluntary case under one or more
of the Insolvency Laws by the Borrower; (ii) the acknowledgment in writing
by the Borrower that it is unable to pay its debts generally as they mature; (iii) the
making of a general assignment for the benefit of creditors by the Borrower; (iv) an
involuntary case under one or more Insolvency Laws against the Borrower; (v) the
appointment of a receiver, liquidator, custodian, sequestrator, trustee or
other similar officer who exercises control over the Borrower or any substantial
part of the assets of the Borrower provided that any proceeding or case under (iv) or
(v) above is not dismissed within 90 days after filing.

 

(bb)         “Borrower Affiliate”
means, as to either Borrower or Key Principal, (i) any entity that
directly or indirectly owns, controls, or holds with power to vote, 20 percent
or more of the outstanding voting securities of Borrower or of Key Principal, (ii) any
corporation 20 percent or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held with power to vote by Borrower
or by Key Principal, (iii) any partner, shareholder or, if a limited
liability company, member of Borrower or Key Principal, or (iv) any other
entity that is related (to the third degree of consanguinity) by blood or
marriage to Borrower or Key Principal.

 

6

 

(cc)                            “Insolvency Laws” means the United States Bankruptcy Code, 11
U.S.C. § 101, et seq., together
with any other federal or state law affecting debtor and creditor rights or
relating to the bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding, as
amended from time to time, to the extent applicable to the Borrower.

 

2.                                      UNIFORM COMMERCIAL
CODE SECURITY AGREEMENT.

 

This Instrument is also a security agreement under the Uniform
Commercial Code for any of the Mortgaged Property which, under applicable law,
may be subject to a security interest under the Uniform Commercial Code,
whether acquired now or in the future, and all products and cash and non-cash
proceeds thereof (collectively, “UCC Collateral”),
and Borrower hereby grants to Lender a security interest in the UCC
Collateral.  Borrower hereby authorizes
Lender to file financing statements, continuation statements and financing
statement amendments in such form as Lender may require to perfect or continue
the perfection of this security interest and Borrower agrees, if Lender so
requests, to execute and deliver to Lender such financing statements,
continuation statements and amendments. 
Borrower shall pay all filing costs and all costs and expenses of any
record searches for financing statements that Lender may require.  Without the prior written consent of Lender,
Borrower shall not create or permit to exist any other lien or security
interest in any of the UCC Collateral. 
If an Event of Default has occurred and is continuing, Lender shall have
the remedies of a secured party under the Uniform Commercial Code, in addition
to all remedies provided by this Instrument or existing under applicable
law.  In exercising any remedies, Lender
may exercise its remedies against the UCC Collateral separately or together,
and in any order, without in any way affecting the availability of Lender’s
other remedies.  This Instrument
constitutes a financing statement with respect to any part of the Mortgaged
Property which is or may become a Fixture.

 

3.                                      ASSIGNMENT
OF RENTS; APPOINTMENT OF RECEIVER; LENDER IN POSSESSION.

 

(a)                                  As part of the
consideration for the Indebtedness, Borrower absolutely and unconditionally
assigns and transfers to Lender all Rents. It is the intention of Borrower to
establish a present, absolute and irrevocable transfer and assignment to Lender
of all Rents and to authorize and empower Lender to collect and receive all
Rents without the necessity of further action on the part of Borrower.  Promptly upon request by Lender, Borrower
agrees to execute and deliver such further assignments as Lender may from time
to time require.  Borrower and Lender
intend this assignment of Rents to be immediately effective and to constitute
an absolute present assignment and not an assignment for additional security
only.  For purposes of giving effect to
this absolute assignment of Rents, and for no other purpose, Rents shall not be
deemed to be a part of the “Mortgaged Property,” as that term is defined in Section 1(s).  However, if this present, absolute and
unconditional assignment of Rents is not enforceable by its terms under the
laws of the Property Jurisdiction, then the Rents shall be included as a part
of the Mortgaged Property and it is the intention of the Borrower that in this
circumstance this Instrument create and perfect a lien on Rents in favor of
Lender, which lien shall be effective as of the date of this Instrument.

 

7

 

(b)                                 After the occurrence
of an Event of Default, Borrower authorizes Lender to collect, sue for and
compromise Rents and directs each tenant of the Mortgaged Property to pay all
Rents to, or as directed by, Lender, and Borrower shall, upon Borrower’s
receipt of any Rents from any sources (including, but not limited to subsidy
payments under any Housing Assistance Payments Contract), pay the total amount
of such receipts to the Lender.  However,
until the occurrence of an Event of Default, Lender hereby grants to Borrower a
revocable license to collect and receive all Rents, to hold all Rents in trust
for the benefit of Lender and to apply all Rents to pay the installments of
interest and principal then due and payable under the Note and the other
amounts then due and payable under the other Loan Documents, including
Imposition Deposits, and to pay the current costs and expenses of managing,
operating and maintaining the Mortgaged Property, including utilities, Taxes
and insurance premiums (to the extent not included in Imposition Deposits),
tenant improvements and other capital expenditures.  So long as no Event of Default has occurred
and is continuing, the Rents remaining after application pursuant to the
preceding sentence may be retained by Borrower free and clear of, and released
from, Lender’s rights with respect to Rents under this Instrument.  From and after the occurrence of an Event of
Default, and without the necessity of Lender entering upon and taking and
maintaining control of the Mortgaged Property directly, or by a receiver,
Borrower’s license to collect Rents shall automatically terminate and Lender
shall without notice be entitled to all Rents as they become due and payable,
including Rents then due and unpaid. 
Borrower shall pay to Lender upon demand all Rents to which Lender is
entitled.  At any time on or after the
date of Lender’s demand for Rents, Lender may give, and Borrower hereby
irrevocably authorizes Lender to give, notice to all tenants of the Mortgaged
Property instructing them to pay all Rents to Lender, no tenant shall be
obligated to inquire further as to the occurrence or continuance of an Event of
Default, and no tenant shall be obligated to pay to Borrower any amounts which
are actually paid to Lender in response to such a notice.  Any such notice by Lender shall be delivered
to each tenant personally, by mail or by delivering such demand to each rental
unit.  Borrower shall not interfere with
and shall cooperate with Lender’s collection of such Rents.

 

(c)                                  Borrower
represents and warrants to Lender that Borrower has not executed any prior
assignment of Rents (other than an assignment of Rents securing indebtedness
that will be paid off and discharged with the proceeds of the loan evidenced by
the Note), that Borrower has not performed, and Borrower covenants and agrees
that it will not perform, any acts and has not executed, and shall not execute,
any instrument which would prevent Lender from exercising its rights under this
Section 3, and that at the time of execution of this Instrument there has
been no anticipation or prepayment of any Rents for more than two months prior
to the due dates of such Rents.  Borrower
shall not collect or accept payment of any Rents more than two months prior to
the due dates of such Rents.

 

(d)                                 If an Event of
Default has occurred and is continuing, Lender may, regardless of the adequacy
of Lender’s security or the solvency of Borrower and even in the absence of
waste, enter upon and take and maintain full control of the Mortgaged Property
in order to perform all acts that Lender in its discretion determines to be
necessary or desirable for the operation and maintenance of the Mortgaged
Property, including the execution, cancellation or modification of Leases, the
collection of all Rents, the making of repairs to the Mortgaged Property and
the execution or 

 

8

 

termination
of contracts providing for the management, operation or maintenance of the
Mortgaged Property, for the purposes of enforcing the assignment of Rents
pursuant to Section 3(a), protecting the Mortgaged Property or the
security of this Instrument, or for such other purposes as Lender in its
discretion may deem necessary or desirable. 
Alternatively, if an Event of Default has occurred and is continuing, regardless
of the adequacy of Lender’s security, without regard to Borrower’s solvency and
without the necessity of giving prior notice (oral or written) to Borrower,
Lender may apply to any court having jurisdiction for the appointment of a
receiver for the Mortgaged Property to take any or all of the actions set forth
in the preceding sentence.  If Lender
elects to seek the appointment of a receiver for the Mortgaged Property at any
time after an Event of Default has occurred and is continuing, Borrower, by its
execution of this Instrument, expressly consents to the appointment of such
receiver, including the appointment of a receiver ex parte
if permitted by applicable law.  Lender
or the receiver, as the case may be, shall be entitled to receive a reasonable
fee for managing the Mortgaged Property. 
Immediately upon appointment of a receiver or immediately upon the
Lender’s entering upon and taking possession and control of the Mortgaged
Property, Borrower shall surrender possession of the Mortgaged Property to
Lender or the receiver, as the case may be, and shall deliver to Lender or the
receiver, as the case may be, all documents, records (including records on
electronic or magnetic media), accounts, surveys, plans, and specifications
relating to the Mortgaged Property and all security deposits and prepaid
Rents.  In the event Lender takes
possession and control of the Mortgaged Property, Lender may exclude Borrower
and its representatives from the Mortgaged Property.  Borrower acknowledges and agrees that the
exercise by Lender of any of the rights conferred under this Section 3
shall not be construed to make Lender a mortgagee-in-possession of the
Mortgaged Property so long as Lender has not itself entered into actual
possession of the Land and Improvements.

 

(e)                                  If Lender
enters the Mortgaged Property, Lender shall be liable to account only to
Borrower and only for those Rents actually received.  Lender shall not be liable to Borrower,
anyone claiming under or through Borrower or anyone having an interest in the
Mortgaged Property, by reason of any act or omission of Lender under this
Section 3, and Borrower hereby releases and discharges Lender from any
such liability to the fullest extent permitted by law.

 

(f)                                    If the Rents
are not sufficient to meet the costs of taking control of and managing the
Mortgaged Property and collecting the Rents, any funds expended by Lender for
such purposes shall become an additional part of the Indebtedness as provided
in Section 12.

 

(g)                                 Any entering
upon and taking of control of the Mortgaged Property by Lender or the receiver,
as the case may be, and any application of Rents as provided in this Instrument
shall not cure or waive any Event of Default or invalidate any other right or
remedy of Lender under applicable law or provided for in this Instrument.

 

4.                                      ASSIGNMENT
OF LEASES; LEASES AFFECTING THE MORTGAGED PROPERTY.

 

(a)                                  As part of the
consideration for the Indebtedness, Borrower absolutely and unconditionally
assigns and transfers to Lender all of Borrower’s right, title and interest in,
to and under the Leases, including Borrower’s right, power and authority to
modify the terms of any such 

 

9

 

Lease,
or extend or terminate any such Lease. 
It is the intention of Borrower to establish a present, absolute and
irrevocable transfer and assignment to Lender of all of Borrower’s right, title
and interest in, to and under the Leases. 
Borrower and Lender intend this assignment of the Leases to be
immediately effective and to constitute an absolute present assignment and not
an assignment for additional security only. 
For purposes of giving effect to this absolute assignment of the Leases,
and for no other purpose, the Leases shall not be deemed to be a part of the “Mortgaged
Property,” as that term is defined in Section 1(s).  However, if this present, absolute and
unconditional assignment of the Leases is not enforceable by its terms under
the laws of the Property Jurisdiction, then the Leases shall be included as a
part of the Mortgaged Property and it is the intention of the Borrower that in
this circumstance this Instrument create and perfect a lien on the Leases in
favor of Lender, which lien shall be effective as of the date of this
Instrument.

 

(b)                                 Until Lender
gives notice to Borrower of Lender’s exercise of its rights under this
Section 4, Borrower shall have all rights, power and authority granted to
Borrower under any Lease (except as otherwise limited by this Section or
any other provision of this Instrument), including the right, power and
authority to modify the terms of any Lease or extend or terminate any
Lease.  Upon the occurrence of an Event
of Default, the permission given to Borrower pursuant to the preceding sentence
to exercise all rights, power and authority under Leases shall automatically
terminate.  Borrower shall comply with
and observe Borrower’s obligations under all Leases, including Borrower’s
obligations pertaining to the maintenance and disposition of tenant security
deposits.

 

(c)                                  Borrower
acknowledges and agrees that the exercise by Lender, either directly or by a
receiver, of any of the rights conferred under this Section 4 shall not be
construed to make Lender a mortgagee-in-possession of the Mortgaged Property so
long as Lender has not itself entered into actual possession of the Land and
the Improvements.  The acceptance by
Lender of the assignment of the Leases pursuant to Section 4(a) shall
not at any time or in any event obligate Lender to take any action under this
Instrument or to expend any money or to incur any expenses.  Lender shall not be liable in any way for any
injury or damage to person or property sustained by any person or persons, firm
or corporation in or about the Mortgaged Property.  Prior to Lender’s actual entry into and taking
possession of the Mortgaged Property, Lender shall not (i) be obligated to
perform any of the terms, covenants and conditions contained in any Lease (or
otherwise have any obligation with respect to any Lease); (ii) be
obligated to appear in or defend any action or proceeding relating to the Lease
or the Mortgaged Property; or (iii) be responsible for the operation,
control, care, management or repair of the Mortgaged Property or any portion of
the Mortgaged Property.  The execution of
this Instrument by Borrower shall constitute conclusive evidence that all
responsibility for the operation, control, care, management and repair of the
Mortgaged Property is and shall be that of Borrower, prior to such actual entry
and taking of possession.

 

(d)                                 Upon delivery
of notice by Lender to Borrower of Lender’s exercise of Lender’s rights under
this Section 4 at any time after the occurrence of an Event of Default,
and without the necessity of Lender entering upon and taking and maintaining
control of the Mortgaged Property directly, by a receiver, or by any other
manner or proceeding permitted by the laws of the Property Jurisdiction, Lender
immediately shall have all rights, powers and authority granted to Borrower 

 

10

 

under
any Lease, including the right, power and authority to modify the terms of any
such Lease, or extend or terminate any such Lease.

 

(e)                                  Borrower shall,
promptly upon Lender’s request, deliver to Lender an executed copy of each
residential Lease then in effect. All Leases for residential dwelling units
shall be on forms approved by Lender, shall be for initial terms of at least
six months and not more than two years, and shall not include options to
purchase.  If customary in the applicable
market, residential Leases with terms of less than six months may be permitted
with Lender’s prior written consent.

 

(f)                                    Borrower shall
not lease any portion of the Mortgaged Property for non-residential use except
with the prior written consent of Lender and Lender’s prior written approval of
the Lease agreement.  Borrower shall not
modify the terms of, or extend or terminate, any Lease for non-residential use
(including any Lease in existence on the date of this Instrument) without the
prior written consent of Lender. 
Borrower shall, without request by Lender, deliver an executed copy of
each non-residential Lease to Lender promptly after such Lease is signed.  All non-residential Leases, including
renewals or extensions of existing Leases, shall specifically provide that (1) such
Leases are subordinate to the lien of this Instrument (unless waived in writing
by Lender); (2) the tenant shall attorn to Lender and any purchaser at a
foreclosure sale, such attornment to be self-executing and effective upon
acquisition of title to the Mortgaged Property by any purchaser at a
foreclosure sale or by Lender in any manner; (3) the tenant agrees to
execute such further evidences of attornment as Lender or any purchaser at a
foreclosure sale may from time to time request; (4) the Lease shall not be
terminated by foreclosure or any other transfer of the Mortgaged Property; (5) after
a foreclosure sale of the Mortgaged Property, Lender or any other purchaser at
such foreclosure sale may, at Lender’s or such purchaser’s option, accept or
terminate such Lease; and (6) the tenant shall, upon receipt after the
occurrence of an Event of Default of a written request from Lender, pay all
Rents payable under the Lease to Lender.

 

(g)                                 Borrower shall
not receive or accept Rent under any Lease (whether residential or
non-residential) for more than two months in advance.

 

5.                                      PAYMENT
OF INDEBTEDNESS; PERFORMANCE UNDER LOAN DOCUMENTS; PREPAYMENT PREMIUM.

 

Borrower shall pay the Indebtedness when due in accordance with the
terms of the Note and the other Loan Documents and shall perform, observe and
comply with all other provisions of the Note and the other Loan Documents.  Borrower shall pay a prepayment premium in
connection with certain prepayments of the Indebtedness, including a payment made
after Lender’s exercise of any right of acceleration of the Indebtedness, as
provided in the Note.

 

6.                                      EXCULPATION.

 

Borrower’s personal liability for payment of the Indebtedness and for
performance of the other obligations to be performed by it under this
Instrument is limited in the manner, and to the extent, provided in the Note.

 

11

 

7.                                      DEPOSITS
FOR TAXES, INSURANCE AND OTHER CHARGES.

 

(a)                                  Borrower shall
deposit with Lender on the day monthly installments of principal or interest,
or both, are due under the Note (or on another day designated in writing by
Lender), until the Indebtedness is paid in full, an additional amount
sufficient to accumulate with Lender the entire sum required to pay, when due (1) any
water and sewer charges which, if not paid, may result in a lien on all or any
part of the Mortgaged Property, (2) the premiums for fire and other hazard
insurance, rent loss insurance and such other insurance as Lender may require
under Section 19, (3) Taxes, and (4) amounts for other charges
and expenses which Lender at any time reasonably deems necessary to protect the
Mortgaged Property, to prevent the imposition of liens on the Mortgaged
Property, or otherwise to protect Lender’s interests, all as reasonably
estimated from time to time by Lender. 
The amounts deposited under the preceding sentence are collectively
referred to in this Instrument as the “Imposition Deposits”.  The obligations of Borrower for which the
Imposition Deposits are required are collectively referred to in this
Instrument as “Impositions”.  The amount of the Imposition Deposits shall
be sufficient to enable Lender to pay each Imposition before the last date upon
which such payment may be made without any penalty or interest charge being
added.  Lender shall maintain records
indicating how much of the monthly Imposition Deposits and how much of the
aggregate Imposition Deposits held by Lender are held for the purpose of paying
Taxes, insurance premiums and each other obligation of Borrower for which
Imposition Deposits are required.  Any
waiver by Lender of the requirement that Borrower remit Imposition Deposits to
Lender may be revoked by Lender, in Lender’s discretion, at any time upon
notice to Borrower.

 

(b)                                 Imposition
Deposits shall be held in an institution (which may be Lender, if Lender is
such an institution) whose deposits or accounts are insured or guaranteed by a
federal agency.  Lender shall not be
obligated to open additional accounts or deposit Imposition Deposits in
additional institutions when the amount of the Imposition Deposits exceeds the
maximum amount of the federal deposit insurance or guaranty.  Lender shall apply the Imposition Deposits to
pay Impositions so long as no Event of Default has occurred and is
continuing.  Unless applicable law
requires, Lender shall not be required to pay Borrower any interest, earnings
or profits on the Imposition Deposits. 
Borrower hereby pledges and grants to Lender a security interest in the
Imposition Deposits as additional security for all of Borrower’s obligations
under this Instrument and the other Loan Documents.  Any amounts deposited with Lender under this
Section 7 shall not be trust funds, nor shall they operate to reduce the
Indebtedness, unless applied by Lender for that purpose under
Section 7(e).

 

(c)                                  If Lender
receives a bill or invoice for an Imposition, Lender shall pay the Imposition
from the Imposition Deposits held by Lender. 
Lender shall have no obligation to pay any Imposition to the extent it
exceeds Imposition Deposits then held by Lender.  Lender may pay an Imposition according to any
bill, statement or estimate from the appropriate public office or insurance
company without inquiring into the accuracy of the bill, statement or estimate
or into the validity of the Imposition.

 

(d)                                 If at any time
the amount of the Imposition Deposits held by Lender for payment of a specific
Imposition exceeds the amount reasonably deemed necessary by Lender, the excess
shall be credited against future installments of Imposition Deposits.  If at any time the amount of the

 

12

 

Imposition
Deposits held by Lender for payment of a specific Imposition is less than the
amount reasonably estimated by Lender to be necessary, Borrower shall pay to
Lender the amount of the deficiency within 15 days after notice from Lender.

 

(e)                                  If an Event of
Default has occurred and is continuing, Lender may apply any Imposition
Deposits, in any amounts and in any order as Lender determines, in Lender’s
discretion, to pay any Impositions or as a credit against the Indebtedness.
Upon payment in full of the Indebtedness, Lender shall refund to Borrower any
Imposition Deposits held by Lender.

 

8.                                      COLLATERAL
AGREEMENTS.

 

Borrower shall deposit with Lender such amounts as may be required by
any Collateral Agreement and shall perform all other obligations of Borrower
under each Collateral Agreement.

 

9.                                      APPLICATION
OF PAYMENTS.

 

If at any time Lender receives, from Borrower or otherwise, any amount
applicable to the Indebtedness which is less than all amounts due and payable
at such time, then Lender may apply that payment to amounts then due and
payable in any manner and in any order determined by Lender, in Lender’s
discretion.  Neither Lender’s acceptance
of an amount which is less than all amounts then due and payable nor Lender’s
application of such payment in the manner authorized shall constitute or be
deemed to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.  Notwithstanding the
application of any such amount to the Indebtedness,  Borrower’s obligations under this Instrument
and the Note shall remain unchanged.

 

10.                               COMPLIANCE
WITH LAWS.

 

Borrower shall comply with all laws, ordinances, regulations and
requirements of any Governmental Authority and all recorded lawful covenants
and agreements relating to or affecting the Mortgaged Property, including all
laws, ordinances, regulations, requirements and covenants pertaining to health
and safety, construction of improvements on the Mortgaged Property, fair
housing, zoning and land use, and Leases. 
Borrower also shall comply with all applicable laws that pertain to the
maintenance and disposition of tenant security deposits.  Borrower shall at all times maintain records
sufficient to demonstrate compliance with the provisions of this
Section 10.  Borrower shall take
appropriate measures to prevent, and shall not engage in or knowingly permit,
any illegal activities at the Mortgaged Property that could endanger tenants or
visitors, result in damage to the Mortgaged Property, result in forfeiture of
the Mortgaged Property, or otherwise materially impair the lien created by this
Instrument or Lender’s interest in the Mortgaged Property.  Borrower represents and warrants to Lender
that no portion of the Mortgaged Property has been or will be purchased with
the proceeds of any illegal activity.

 

11.                               USE OF
PROPERTY.

 

Unless required by applicable law, Borrower shall not (a) except
for any change in use approved by Lender, allow changes in the use for which
all or any part of the Mortgaged Property is

 

13

 

being
used at the time this Instrument was executed, (b) convert any individual
dwelling units or common areas to commercial use, (c) initiate or
acquiesce in a change in the zoning classification of the Mortgaged Property,
or (d) establish any condominium or cooperative regime with respect to the
Mortgaged Property.

 

12.                               PROTECTION
OF LENDER’S SECURITY.

 

(a)                                  If Borrower
fails to perform any of its obligations under this Instrument or any other Loan
Document, or if any action or proceeding (including a Bankruptcy Event) is
commenced which purports to affect the Mortgaged Property, Lender’s security or
Lender’s rights under this Instrument, including eminent domain, insolvency,
code enforcement, civil or criminal forfeiture, enforcement of Hazardous
Materials Laws, fraudulent conveyance or reorganizations or proceedings
involving a bankrupt or decedent, then Lender at Lender’s option may make such
appearances, disburse such sums and take such actions as Lender reasonably
deems necessary to perform such obligations of Borrower and to protect Lender’s
interest, including (1) payment of fees and out-of-pocket expenses of
attorneys, accountants, inspectors and consultants, (2) entry upon the
Mortgaged Property to make repairs or secure the Mortgaged Property, (3) procurement
of the insurance required by Section 19, and (4) payment of amounts
which Borrower has failed to pay under Sections 15 and 17.

 

(b)                                 Any amounts
disbursed by Lender under this Section 12, or under any other provision of
this Instrument that treats such disbursement as being made under this
Section 12, shall be added to, and become part of, the principal component
of the Indebtedness, shall be immediately due and payable and shall bear
interest from the date of disbursement until paid at the “Default Rate”,
as defined in the Note.

 

(c)                                  Nothing in this
Section 12 shall require Lender to incur any expense or take any action.

 

13.                               INSPECTION.

 

Lender, its agents, representatives, and designees may make or cause to
be made entries upon and inspections of the Mortgaged Property (including
environmental inspections and tests) during normal business hours, or at any
other reasonable time.

 

14.                               BOOKS
AND RECORDS; FINANCIAL REPORTING.

 

(a)                                  Borrower shall
keep and maintain at all times at the Mortgaged Property or the management
agent’s offices, and upon Lender’s request shall make available at the
Mortgaged Property, complete and accurate books of account and records
(including copies of supporting bills and invoices) adequate to reflect
correctly the operation of the Mortgaged Property, and copies of all written
contracts, Leases, and other instruments which affect the Mortgaged Property.  The 

 

14

 

books,
records, contracts, Leases and other instruments shall be subject to
examination and inspection at any reasonable time by Lender.

 

(b)                                 Borrower shall
furnish to Lender:

 

(1)           (i) except
as provided in clause (ii) below, within 45 days after the end of each
fiscal quarter of Borrower, a statement of income and expenses for Borrower’s
operation of the Mortgaged Property on a year-to-date basis as of the end of
each fiscal quarter, (ii) within 120 days after the end of each fiscal
year of Borrower, (A) a statement of income and expenses for Borrower’s
operation of the Mortgaged Property for such fiscal year, (B) a statement
of changes in financial position of Borrower relating to the Mortgaged Property
for such fiscal year, and (C) when requested by Lender, a balance sheet
showing all assets and liabilities of Borrower relating to the Mortgaged
Property as of the end of such fiscal year; and (iii) any of the foregoing
at any other time upon Lender’s request;

 

(2)           (i) except
as provided in clause (ii) below, within 45 days after the end of each
fiscal quarter of Borrower, and (ii) within 120 days after the end of each
fiscal year of Borrower, and at any other time upon Lender’s request, a rent
schedule for the Mortgaged Property showing the name of each tenant, and for
each tenant, the space occupied, the lease expiration date, the rent payable
for the current month, the date through which rent has been paid, and any
related information requested by Lender;

 

(3)           within 120 days
after the end of each fiscal year of Borrower, and at any other time upon
Lender’s request, an accounting of all security deposits held pursuant to all
Leases, including the name of the institution (if any) and the names and identification
numbers of the accounts (if any) in which such security deposits are held and
the name of the person to contact at such financial institution, along with any
authority or release necessary for Lender to access information regarding such
accounts;

 

(4)           within 120 days
after the end of each fiscal year of Borrower, and at any other time upon
Lender’s request, a statement that identifies all owners of any interest in
Borrower and the interest held by each, if Borrower is a corporation, all
officers and directors of Borrower, and if Borrower is a limited liability
company, all managers who are not members;

 

(5)           upon Lender’s
request, a monthly property management report for the Mortgaged Property,
showing the number of inquiries made and rental applications received from
tenants or prospective tenants and deposits received from tenants and any other
information requested by Lender;

 

15

 

(6)           upon Lender’s
request, a balance sheet, a statement of income and expenses for Borrower and a
statement of changes in financial position of Borrower for Borrower’s most
recent fiscal year; and

 

(7)           if required by
Lender, within 30 days of the end of each calendar month, a monthly statement
of income and expenses for such calendar month on a year-to-date basis for
Borrower’s operation of the Mortgaged Property.

 

(c)                                  Each of the
statements, schedules and reports required by Section 14(b) shall be
certified to be complete and accurate by an individual having authority to bind
Borrower, and shall be in such form and contain such detail as Lender may
reasonably require.  Lender also may
require that any statements, schedules or reports be audited at Borrower’s
expense by independent certified public accountants acceptable to Lender.

 

(d)                                 If Borrower
fails to provide in a timely manner the statements, schedules and reports
required by Section 14(b), Lender shall have the right to have Borrower’s
books and records audited, at Borrower’s expense, by independent certified
public accountants selected by Lender in order to obtain such statements,
schedules and reports, and all related costs and expenses of Lender shall
become immediately due and payable and shall become an additional part of the
Indebtedness as provided in Section 12.

 

(e)                                  If an Event of
Default has occurred and is continuing, Borrower shall deliver to Lender upon
written demand all books and records relating to the Mortgaged Property or its
operation.

 

(f)                                    Borrower
authorizes Lender to obtain a credit report on Borrower at any time.

 

15.                               TAXES;
OPERATING EXPENSES.

 

(a)                                  Subject to the
provisions of Section 15(c) and Section 15(d), Borrower shall
pay, or cause to be paid, all Taxes when due and before the addition of any
interest, fine, penalty or cost for nonpayment.

 

(b)                                 Subject to the
provisions of Section 15(c), Borrower shall pay the expenses of operating,
managing, maintaining and repairing the Mortgaged Property (including insurance
premiums, utilities, repairs and replacements) before the last date upon which each
such payment may be made without any penalty or interest charge being added.

 

16

 

(c)                                  As long as no
Event of Default exists and Borrower has timely delivered to Lender any bills
or premium notices that it has received, Borrower shall not be obligated to pay
Taxes, insurance premiums or any other individual Imposition to the extent that
sufficient Imposition Deposits are held by Lender for the purpose of paying
that specific Imposition.  If an Event of
Default exists, Lender may exercise any rights Lender may have with respect to
Imposition Deposits without regard to whether Impositions are then due and
payable.  Lender shall have no liability
to Borrower for failing to pay any Impositions to the extent that any Event of
Default has occurred and is continuing, insufficient Imposition Deposits are
held by Lender at the time an Imposition becomes due and payable or Borrower
has failed to provide Lender with bills and premium notices as provided above.

 

(d)                                 Borrower, at
its own expense, may contest by appropriate legal proceedings, conducted
diligently and in good faith, the amount or validity of any Imposition other
than insurance premiums, if (1) Borrower notifies Lender of the
commencement or expected commencement of such proceedings, (2) the
Mortgaged Property is not in danger of being sold or forfeited, (3) Borrower
deposits with Lender reserves sufficient to pay the contested Imposition, if
requested by Lender, and (4) Borrower furnishes whatever additional security
is required in the proceedings or is reasonably requested by Lender, which may
include the delivery to Lender of the reserves established by Borrower to pay
the contested Imposition.

 

(e)                                  Borrower shall
promptly deliver to Lender a copy of all notices of, and invoices for, Impositions,
and if Borrower pays any Imposition directly, Borrower shall promptly furnish
to Lender receipts evidencing such payments.

 

16.                               LIENS;
ENCUMBRANCES.

 

Borrower acknowledges that, to the extent provided in Section 21,
the grant, creation or existence of any mortgage, deed of trust, deed to secure
debt, security interest or other lien or encumbrance (a “Lien”)
on the Mortgaged Property (other than the lien of this Instrument) or on
certain ownership interests in Borrower, whether voluntary, involuntary or by
operation of law, and whether or not such Lien has priority over the lien of
this Instrument, is a “Transfer” which
constitutes an Event of Default.

 

17.                               PRESERVATION,
MANAGEMENT AND MAINTENANCE OF MORTGAGED PROPERTY.

 

(a) Borrower (1) shall not commit waste or permit impairment
or deterioration of the Mortgaged Property, (2) shall not abandon the
Mortgaged Property, (3) shall restore or repair promptly, in a good and
workmanlike manner, any damaged part of the Mortgaged Property to the
equivalent of its original condition, or such other condition as Lender may
approve in writing, whether or not insurance proceeds or condemnation awards
are available to cover any costs of such restoration or repair, (4) shall
keep the Mortgaged Property in good repair, including the replacement of
Personalty and Fixtures with items of equal or better function and quality, (5) shall
provide for professional management of the Mortgaged Property by a residential
rental property manager satisfactory to Lender under a contract approved by
Lender in writing, and (6) shall give

 

17

 

notice
to Lender of and, unless otherwise directed in writing by Lender, shall appear
in and defend any action or proceeding purporting to affect the Mortgaged
Property, Lender’s security or Lender’s rights under this Instrument.  Borrower shall not (and shall not permit any
tenant or other person to) remove, demolish or alter the Mortgaged Property or
any part of the Mortgaged Property except in connection with the replacement of
tangible Personalty.

 

(b)                                 If, in
connection with the making of the loan evidenced by the Note or at any later
date, Lender waives in writing the requirement of Section 17(a)(5) above
that Borrower enter into a written contract for management of the Mortgaged
Property and if, after the date of this Instrument, Borrower intends to change
the management of the Mortgaged Property, Lender shall have the right to
approve such new property manager and the written contract for the management
of the Mortgaged Property and require that Borrower and such new property
manager enter into an Assignment of Management Agreement on a form approved by
Lender.  If required by Lender (whether
before or after an Event of Default), Borrower will cause any Affiliate of
Borrower to whom fees are payable for the management of the Mortgaged Property
to enter into an agreement with Lender, in a form approved by Lender, providing
for subordination of those fees and such other provisions as Lender may
require.  “Affiliate of Borrower” means
any corporation, partnership, joint venture, limited liability company, limited
liability partnership, trust or individual controlled by, under common control
with, or which controls Borrower (the term “control” for these purposes shall
mean the ability, whether by the ownership of shares or other equity interests,
by contract or otherwise, to elect a majority of the directors of a
corporation, to make management decisions on behalf of, or independently to
select the managing partner of, a partnership, or otherwise to have the power
independently to remove and then select a majority of those individuals
exercising managerial authority over an entity, and control shall be
conclusively presumed in the case of the ownership of 50% or more of the equity
interests).

 

18.                               ENVIRONMENTAL
HAZARDS.

 

(a)                                  Except for
matters covered by a written program of operations and maintenance approved in
writing by Lender (an “O&M Program”)
or matters described in Section 18(b), Borrower shall not cause or permit
any of the following:

 

(1)                                  the presence,
use, generation, release, treatment, processing, storage (including storage in
above ground and underground storage tanks), handling, or disposal of any
Hazardous Materials on or under the Mortgaged Property or any other property of
Borrower that is adjacent to the Mortgaged Property;

 

(2)                                  the transportation
of any Hazardous Materials to, from, or across the Mortgaged Property;

 

(3)                                  any occurrence
or condition on the Mortgaged Property or any other property of Borrower that
is adjacent to the Mortgaged Property, which occurrence or condition is or may
be in violation of Hazardous Materials Laws; or

 

18

 

(4)                                  any violation
of or noncompliance with the terms of any Environmental Permit with respect to
the Mortgaged Property or any property of Borrower that is adjacent to the
Mortgaged Property.

 

The
matters described in clauses (1) through (4) above are referred to
collectively in this Section 18 as “Prohibited Activities or
Conditions”.

 

(b)                                 Prohibited
Activities and Conditions shall not include the safe and lawful use and storage
of quantities of (1) pre-packaged supplies, cleaning materials and
petroleum products customarily used in the operation and maintenance of
comparable multifamily properties, (2) cleaning materials, personal
grooming items and other items sold in pre-packaged containers for consumer use
and used by tenants and occupants of residential dwelling units in the
Mortgaged Property; and (3) petroleum products used in the operation and
maintenance of motor vehicles from time to time located on the Mortgaged
Property’s parking areas, so long as all of the foregoing are used, stored,
handled, transported and disposed of in compliance with Hazardous Materials
Laws.

 

(c)                                  Borrower shall
take all commercially reasonable actions (including the inclusion of
appropriate provisions in any Leases executed after the date of this
Instrument) to prevent its employees, agents, and contractors, and all tenants
and other occupants from causing or permitting any Prohibited Activities or
Conditions.  Borrower shall not lease or
allow the sublease or use of all or any portion of the Mortgaged Property to
any tenant or subtenant for nonresidential use by any user that, in the
ordinary course of its business, would cause or permit any Prohibited Activity
or Condition.

 

(d)                                 If an O&M
Program has been established with respect to Hazardous Materials, Borrower
shall comply in a timely manner with, and cause all employees, agents, and
contractors of Borrower and any other persons present on the Mortgaged Property
to comply with the O&M Program.  All
costs of performance of Borrower’s obligations under any O&M Program shall
be paid by Borrower, and Lender’s out-of-pocket costs incurred in connection
with the monitoring and review of the O&M Program and Borrower’s
performance shall be paid by Borrower upon demand by Lender.  Any such out-of-pocket costs of Lender which
Borrower fails to pay promptly shall become an additional part of the
Indebtedness as provided in Section 12.

 

(e)                                  Borrower
represents and warrants to Lender that, except as previously disclosed by
Borrower to Lender in writing:

 

(1)                                  Borrower has
not at any time engaged in, caused or permitted any Prohibited Activities or
Conditions;

 

(2)                                  to the best of
Borrower’s knowledge after reasonable and diligent inquiry, no Prohibited
Activities or Conditions exist or have existed;

 

(3)                                  except to the
extent previously disclosed by Borrower to Lender in writing, the Mortgaged
Property does not now contain any underground storage

 

19

 

tanks, and, to the best of Borrower’s knowledge after reasonable and
diligent inquiry, the Mortgaged Property has not contained any underground
storage tanks in the past.  If there is
an underground storage tank located on the Mortgaged Property which has been
previously disclosed by Borrower to Lender in writing, that tank complies with
all requirements of Hazardous Materials Laws;

 

(4)                                  Borrower has
complied with all Hazardous Materials Laws, including all requirements for
notification regarding releases of Hazardous Materials.  Without limiting the generality of the
foregoing, Borrower has obtained all Environmental Permits required for the
operation of the Mortgaged Property in accordance with Hazardous Materials Laws
now in effect and all such Environmental Permits are in full force and effect;

 

(5)                                  no event has
occurred with respect to the Mortgaged Property that constitutes, or with the
passing of time or the giving of notice would constitute, noncompliance with
the terms of any Environmental Permit;

 

(6)                                  there are no
actions, suits, claims or proceedings pending or, to the best of Borrower’s
knowledge after reasonable and diligent inquiry, threatened that involve the
Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity
or Condition; and

 

(7)                                  Borrower has
not received any complaint, order, notice of violation or other communication
from any Governmental Authority with regard to air emissions, water discharges,
noise emissions or Hazardous Materials, or any other environmental, health or
safety matters affecting the Mortgaged Property or any other property of
Borrower that is adjacent to the Mortgaged Property.

 

The
representations and warranties in this Section 18 shall be continuing
representations and warranties that shall be deemed to be made by Borrower
throughout the term of the loan evidenced by the Note, until the Indebtedness
has been paid in full.

 

(f)                                    Borrower shall
promptly notify Lender in writing upon the occurrence of any of the following
events:

 

(1)                                  Borrower’s
discovery of any Prohibited Activity or Condition;

 

(2)                                  Borrower’s
receipt of or knowledge of any complaint, order, notice of violation or other
communication from any Governmental Authority or other person with regard to
present or future alleged Prohibited Activities or Conditions or any other
environmental, health or safety matters affecting the Mortgaged Property or any
other property of Borrower that is adjacent to the Mortgaged Property; and

 

20

 

(3)                                  any
representation or warranty in this Section 18 becomes untrue after the
date of this Agreement.

 

Any such notice given by Borrower shall not relieve Borrower of, or
result in a waiver of, any obligation under this Instrument, the Note, or any
other Loan Document.

 

(g)                                 Borrower shall
pay promptly the costs of any environmental inspections, tests or audits (“Environmental Inspections”) required by Lender in connection
with any foreclosure or deed in lieu of foreclosure, or as a condition of
Lender’s consent to any Transfer under Section 21, or required by Lender
following a reasonable determination by Lender that Prohibited Activities or
Conditions may exist.  Any such costs
incurred by Lender (including the fees and out-of-pocket costs of attorneys and
technical consultants whether incurred in connection with any judicial or
administrative process or otherwise) which Borrower fails to pay promptly shall
become an additional part of the Indebtedness as provided in Section 12.  The results of all Environmental Inspections
made by Lender shall at all times remain the property of Lender and Lender
shall have no obligation to disclose or otherwise make available to Borrower or
any other party such results or any other information obtained by Lender in
connection with its Environmental Inspections. 
Lender hereby reserves the right, and Borrower hereby expressly
authorizes Lender, to make available to any party, including any prospective
bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental
Inspections made by Lender with respect to the Mortgaged Property.  Borrower consents to Lender notifying any
party (either as part of a notice of sale or otherwise) of the results of any
of Lender’s Environmental Inspections. 
Borrower acknowledges that Lender cannot control or otherwise assure the
truthfulness or accuracy of the results of any of its Environmental Inspections
and that the release of such results to prospective bidders at a foreclosure
sale of the Mortgaged Property may have a material and adverse effect upon the
amount which a party may bid at such sale. 
Borrower agrees that Lender shall have no liability whatsoever as a
result of delivering the results of any of its Environmental Inspections to any
third party, and Borrower hereby releases and forever discharges Lender from
any and all claims, damages, or causes of action, arising out of, connected
with or incidental to the results of, the delivery of any of Lender’s
Environmental Inspections.

 

(h)                                 If any
investigation, site monitoring, containment, clean-up, restoration or other
remedial work (“Remedial Work”) is necessary to
comply with any Hazardous Materials Law or order of any Governmental Authority
that has or acquires jurisdiction over the Mortgaged Property or the use,
operation or improvement of the Mortgaged Property under any Hazardous
Materials Law, Borrower shall, by the earlier of (1) the applicable
deadline required by Hazardous Materials Law or (2) 30 days after notice
from Lender demanding such action, begin performing the Remedial Work, and
thereafter diligently prosecute it to completion, and shall in any event
complete the work by the time required by applicable Hazardous Materials
Law.  If Borrower fails to begin on a
timely basis or diligently prosecute any required Remedial Work, Lender may, at
its option, cause the Remedial Work to be completed, in which case Borrower
shall reimburse Lender on demand for the cost of doing so.  Any reimbursement due from Borrower to Lender
shall become part of the Indebtedness as provided in Section 12.

 

21

 

(i)                                     Borrower shall
cooperate with any inquiry by any Governmental Authority and shall comply with
any governmental or judicial order which arises from any alleged Prohibited
Activity or Condition.

 

(j)                                     Borrower shall
indemnify, hold harmless and defend (i) Lender, (ii) any prior owner
or holder of the Note, (iii) the Loan Servicer, (iv) any prior Loan
Servicer, (v) the officers, directors, shareholders, partners, employees and
trustees of any of the foregoing, and (vi) the heirs, legal
representatives, successors and assigns of each of the foregoing (collectively,
the “Indemnitees”) from and against all
proceedings, claims, damages, penalties and costs (whether initiated or sought
by Governmental Authorities or private parties), including fees and
out-of-pocket expenses of attorneys and expert witnesses, investigatory fees,
and remediation costs, whether incurred in connection with any judicial or
administrative process or otherwise, arising directly or indirectly from any of
the following:

 

(1)                                  any breach of
any representation or warranty of Borrower in this Section 18;

 

(2)                                  any failure by
Borrower to perform any of its obligations under this Section 18;

 

(3)                                  the existence
or alleged existence of any Prohibited Activity or Condition;

 

(4)                                  the presence or
alleged presence of Hazardous Materials on or under the Mortgaged Property or
any property of Borrower that is adjacent to the Mortgaged Property; and

 

(5)                                  the actual or
alleged violation of any Hazardous Materials Law.

 

(k)                                  Counsel
selected by Borrower to defend Indemnitees shall be subject to the approval of
those Indemnitees.  However, any
Indemnitee may elect to defend any claim or legal or administrative proceeding
at the Borrower’s expense.

 

(l)                                     Borrower shall
not, without the prior written consent of those Indemnitees who are named as
parties to a claim or legal or administrative proceeding (a “Claim”), settle or compromise the Claim if the settlement (1) results
in the entry of any judgment that does not include as an unconditional term the
delivery by the claimant or plaintiff to Lender of a written release of those
Indemnitees, satisfactory in form and substance to Lender; or (2) may
materially and adversely affect Lender, as determined by Lender in its
discretion.

 

(m)                               Lender agrees
that the indemnity under this Section 18 shall be limited to the assets of
Borrower and Lender shall not seek to recover any deficiency from any natural
persons who are general partners of Borrower.

 

(n)                                 Borrower shall,
at its own cost and expense, do all of the following:

 

22

 

(1)                                  pay or satisfy
any judgment or decree that may be entered against any Indemnitee or
Indemnitees in any legal or administrative proceeding incident to any matters
against which Indemnitees are entitled to be indemnified under this
Section 18;

 

(2)                                  reimburse
Indemnitees for any expenses paid or incurred in connection with any matters
against which Indemnitees are entitled to be indemnified under this
Section 18; and

 

(3)                                  reimburse
Indemnitees for any and all expenses, including fees and out-of-pocket expenses
of attorneys and expert witnesses, paid or incurred in connection with the
enforcement by Indemnitees of their rights under this Section 18, or in
monitoring and participating in any legal or administrative proceeding.

 

(o)                                 In any
circumstances in which the indemnity under this Section 18 applies, Lender
may employ its own legal counsel and consultants to prosecute, defend or
negotiate any claim or legal or administrative proceeding and Lender, with the
prior written consent of Borrower (which shall not be unreasonably withheld,
delayed or conditioned), may settle or compromise any action or legal or
administrative proceeding.  Borrower
shall reimburse Lender upon demand for all costs and expenses incurred by
Lender, including all costs of settlements entered into in good faith, and the
fees and out-of-pocket expenses of such attorneys and consultants.

 

(p)                                 The provisions
of this Section 18 shall be in addition to any and all other obligations
and liabilities that Borrower may have under applicable law or under other Loan
Documents, and each Indemnitee shall be entitled to indemnification under this
Section 18 without regard to whether Lender or that Indemnitee has
exercised any rights against the Mortgaged Property or any other security,
pursued any rights against any guarantor, or pursued any other rights available
under the Loan Documents or applicable law. If Borrower consists of more than
one person or entity, the obligation of those persons or entities to indemnify
the Indemnitees under this Section 18 shall be joint and several. The
obligation of Borrower to indemnify the Indemnitees under this Section 18
shall survive any repayment or discharge of the Indebtedness, any foreclosure
proceeding, any foreclosure sale, any delivery of any deed in lieu of
foreclosure, and any release of record of the lien of this Instrument.

 

19.                               PROPERTY
AND LIABILITY INSURANCE.

 

(a)                                  Borrower shall
keep the Improvements insured at all times against such hazards as Lender may
from time to time require, which insurance shall include but not be limited to
coverage against loss by fire and allied perils, general boiler and machinery
coverage, and business income coverage. 
Lender’s insurance requirements may change from time to time throughout
the term of the Indebtedness.  If Lender
so requires, such insurance shall also include sinkhole insurance, mine

 

23

 

subsidence
insurance, earthquake insurance, and, if the Mortgaged Property does not
conform to applicable zoning or land use laws, building ordinance or law
coverage.  If any of the Improvements is
located in an area identified by the Federal Emergency Management Agency (or
any successor to that agency) as an area having special flood hazards, and if
flood insurance is available in that area, Borrower shall insure such
Improvements against loss by flood.

 

(b)                                 All premiums on
insurance policies required under Section 19(a) shall be paid in the
manner provided in Section 7, unless Lender has designated in writing
another method of payment.  All such
policies shall also be in a form approved by Lender.  All policies of property damage insurance shall
include a non-contributing, non-reporting mortgage clause in favor of, and in a
form approved by, Lender.  Lender shall
have the right to hold the original policies or duplicate original policies of
all insurance required by Section 19(a). 
Borrower shall promptly deliver to Lender a copy of all renewal and
other notices received by Borrower with respect to the policies and all
receipts for paid premiums.  At least 30
days prior to the expiration date of a policy, Borrower shall deliver to Lender
the original (or a duplicate original) of a renewal policy in form satisfactory
to Lender.

 

(c)                                  Borrower shall
maintain at all times commercial general liability insurance, workers’
compensation insurance and such other liability, errors and omissions and
fidelity insurance coverages as Lender may from time to time require.

 

(d)                                 All insurance
policies and renewals of insurance policies required by this Section 19
shall be in such amounts and for such periods as Lender may from time to time
require, and shall be issued by insurance companies satisfactory to Lender.

 

(e)                                  Borrower shall
comply with all insurance requirements and shall not permit any condition to
exist on the Mortgaged Property that would invalidate any part of any insurance
coverage that this Instrument requires Borrower to maintain.

 

(f)                                    In the event of
loss, Borrower shall give immediate written notice to the insurance carrier and
to Lender.  Borrower hereby authorizes
and appoints Lender as attorney-in-fact for Borrower to make proof of loss, to
adjust and compromise any claims under policies of property damage insurance,
to appear in and prosecute any action arising from such property damage
insurance policies, to collect and receive the proceeds of property damage
insurance, and to deduct from such proceeds Lender’s expenses incurred in the
collection of such proceeds.  This power
of attorney is coupled with an interest and therefore is irrevocable.  However, nothing contained in this Section 19
shall require Lender to incur any expense or take any action.  Lender may, at Lender’s option, (1) hold
the balance of such proceeds to be used to reimburse Borrower for the cost of
restoring and repairing the Mortgaged Property to the equivalent of its
original condition or to a condition approved by Lender (the “Restoration”), or (2) apply the balance of such
proceeds to the payment of the Indebtedness, whether or not then due. To the
extent Lender determines to apply insurance proceeds to Restoration, Lender
shall do so in accordance with Lender’s then-current policies relating to the
restoration of casualty damage on similar multifamily properties.

 

24

 

(g)                                 Lender shall
not exercise its option to apply insurance proceeds to the payment of the
Indebtedness if all of the following conditions are met:  (1) no Event of Default (or any event
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default) has occurred and is continuing; (2) Lender
determines, in its discretion, that there will be sufficient funds to complete
the Restoration; (3) Lender determines, in its discretion, that the net
operating income generated by the Mortgaged Property after completion of the
Restoration will be sufficient to support a debt service coverage ratio not
less than the greater of (A) the debt service coverage ratio as of the
date of this Instrument (based on the final underwriting of the Mortgaged
Property) or (B) the debt service coverage ratio immediately prior to the
loss (in each case, Lender’s determination shall include all operating costs
and other expenses, Imposition Deposits, deposits to reserves and loan
repayment obligations relating to the Mortgaged Property); (4) Lender
determines, in its discretion, that the Restoration will be completed before
the earlier of (A) one year before the maturity date of the Note or (B) one
year after the date of the loss or casualty; and (5) upon Lender’s
request, Borrower provides Lender evidence of the availability during and after
the Restoration of the insurance required to be maintained by Borrower pursuant
to this Section 19.

 

(h)                                 If the
Mortgaged Property is sold at a foreclosure sale or Lender acquires title to
the Mortgaged Property, Lender shall automatically succeed to all rights of Borrower
in and to any insurance policies and unearned insurance premiums and in and to
the proceeds resulting from any damage to the Mortgaged Property prior to such
sale or acquisition.

 

20.                               CONDEMNATION.

 

(a)                                  Borrower shall
promptly notify Lender of any action or proceeding relating to any condemnation
or other taking, or conveyance in lieu thereof, of all or any part of the
Mortgaged Property, whether direct or indirect (a “Condemnation”).  Borrower shall appear in and prosecute or
defend any action or proceeding relating to any Condemnation unless otherwise
directed by Lender in writing.  Borrower
authorizes and appoints Lender as attorney-in-fact for Borrower to commence,
appear in and prosecute, in Lender’s or Borrower’s name, any action or
proceeding relating to any Condemnation and to settle or compromise any claim
in connection with any Condemnation. 
This power of attorney is coupled with an interest and therefore is
irrevocable.  However, nothing contained
in this Section 20 shall require Lender to incur any expense or take any
action.  Borrower hereby transfers and
assigns to Lender all right, title and interest of Borrower in and to any award
or payment with respect to (i) any Condemnation, or any conveyance in lieu
of Condemnation, and (ii) any damage to the Mortgaged Property caused by
governmental action that does not result in a Condemnation.

 

(b)                                 Lender may
apply such awards or proceeds, after the deduction of Lender’s expenses
incurred in the collection of such amounts, at Lender’s option, to the
restoration or repair of the Mortgaged Property or to the payment of the
Indebtedness, with the balance, if any, to Borrower.  Unless Lender otherwise agrees in writing,
any application of any awards or proceeds to the Indebtedness shall not extend
or postpone the due date of any monthly installments referred to in the Note,
Section 7 of this Instrument or any Collateral Agreement, or change the
amount of such

 

25

 

installments.  Borrower agrees to execute such further
evidence of assignment of any awards or proceeds as Lender may require.

 

21.                               TRANSFERS
OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

 

(a)                                  The occurrence
of any of the following events shall constitute an Event of Default under this
Instrument:

 

(1)                                  a Transfer of
all or any part of the Mortgaged Property or any interest in the Mortgaged
Property;

 

(2)                                  a Transfer of a
Controlling Interest in Borrower;

 

(3)                                  a Transfer of a
Controlling Interest in any entity which owns, directly or indirectly through
one or more intermediate entities, a Controlling Interest in Borrower;

 

(4)                                  a Transfer of
all or any part of a Key Principal’s ownership interests in Borrower, or in any
other entity which owns, directly or indirectly through one or more intermediate
entities, an ownership interest in Borrower (other than a Transfer of an
aggregate beneficial ownership interest in the Borrower of 49% or less of such
Key Principal’s original ownership interest in the Borrower and which does not
otherwise result in a Transfer of the Key Principal’s Controlling Interest in
such intermediate entities or in the Borrower);

 

(5)                                  if Key
Principal is an entity, (A) a Transfer of a Controlling Interest in Key
Principal, or (B) a Transfer of a Controlling Interest in any entity which
owns, directly or indirectly through one or more intermediate entities, a
Controlling Interest in Key Principal;

 

(6)                                  if Borrower or
Key Principal is a trust, the termination or revocation of such trust; unless
the trust is terminated as a result of the death of an individual trustor, in
which event Lender must be notified and such Borrower or Key Principal must be
replaced with an individual or entity acceptable to Lender, in accordance with
the provisions of Section 21(c) hereof, within 90 days of such death
(provided however that no property inspection shall be required and a 1%
transfer fee will not be charged);

 

(7)                                  if Key
Principal is a natural person, the death of such individual; unless the Lender
is notified and such individual is replaced with an individual or entity
acceptable to Lender, in accordance with the provisions of Section 21(c) hereof,
within 90 days of such death (provided however that no property inspection
shall be required and a 1% transfer fee will not be charged);

 

(8)                                  the merger,
dissolution, liquidation, or consolidation of (i) Borrower, (ii) any
Key Principal that is a legal entity, or (iii) any legal entity holding,
directly or indirectly, a Controlling Interest in the Borrower or in any Key
Principal that is an entity;

 

26

 

(9)          a conversion of Borrower
from one type of legal entity into another type of legal entity (including the
conversion of a general partnership into a limited partnership and the
conversion of a limited partnership into a limited liability company), whether
or not there is a Transfer; if such conversion results in a change in any
assets, liabilities, legal rights or obligations of Borrower (or of Key
Principal, guarantor, or any general partner of Borrower, as applicable), by
operation of law or otherwise; and

 

(10)                            a Transfer of
the economic benefits or right to cash flows attributable to the ownership
interests in Borrower and/or, if Key Principal is an entity, Key Principal,
separate from the Transfer of the underlying ownership interests, unless the
Transfer of the underlying ownership interests would otherwise not be
prohibited by this Agreement

 

Lender shall not be required to demonstrate any actual impairment of
its security or any increased risk of default in order to exercise any of its
remedies with respect to an Event of Default under this Section 21.

 

(b)                                 The occurrence
of any of the following events shall not constitute an Event of Default under
this Instrument, notwithstanding any provision of Section 21(a) to
the contrary:

 

(1)                                  a Transfer to
which Lender has consented;

 

(2)                                  except as
provided in Section 21(a)(6) and (7), a Transfer that occurs by
devise, descent, pursuant to the provisions of a trust, or by operation of law
upon the death of a natural person;

 

(3)                                  the grant of a
leasehold interest in an individual dwelling unit for a term of two years or
less not containing an option to purchase;

 

(4)                                  a Transfer of
obsolete or worn out Personalty or Fixtures that are contemporaneously replaced
by items of equal or better function and quality, which are free of liens,
encumbrances and security interests other than those created by the Loan
Documents or consented to by Lender;

 

(5)                                  the grant of an
easement, servitude, or restrictive covenant if, before the grant, Lender
determines that the easement, servitude, or restrictive covenant will not
materially affect the operation or value of the Mortgaged Property or Lender’s
interest in the Mortgaged Property, and Borrower pays to Lender, upon demand,
all costs and expenses incurred by Lender in connection with reviewing Borrower’s
request;

 

(6)                                  the creation of
a tax lien or a mechanic’s, materialman’s, or judgment lien against the
Mortgaged Property which is bonded off, released of record, or otherwise remedied
to Lender’s satisfaction within 45 days after Borrower has actual or
constructive notice of the existence of such lien; and

 

27

 

(7)                                  the conveyance
of the Mortgaged Property at a judicial or non-judicial foreclosure sale under
this Instrument.

 

(c)                                  Lender shall
consent to a Transfer that would otherwise violate this Section 21 if,
prior to the Transfer, Borrower has satisfied each of the following
requirements:

 

(1)                                  the submission
to Lender of all information required by Lender to make the determination
required by this Section 21(c);

 

(2)                                  the absence of
any Event of Default;

 

(3)                                  the transferee
meets all of the eligibility, credit, management, and other standards
(including any standards with respect to previous relationships between Lender
and the transferee and the organization of the transferee) customarily applied
by Lender at the time of the proposed Transfer to the approval of borrowers in
connection with the origination or purchase of similar mortgage finance
structures on similar multifamily properties, unless partially waived by Lender
in exchange for such additional conditions as Lender may require;

 

(4)                                  the Mortgaged
Property, at the time of the proposed Transfer, meets all standards as to its physical
condition that are customarily applied by Lender at the time of the proposed
Transfer to the approval of properties in connection with the origination or
purchase of similar mortgage finance structures on similar multifamily
properties, unless partially waived by Lender in exchange for such additional
conditions as Lender may require;

 

(5)                                  if transferor
or any other person has obligations under any Loan Document, the execution by
the transferee or one or more individuals or entities acceptable to Lender of
an assumption agreement (including, if applicable, an Acknowledgement and
Agreement of Key Principal to Personal Liability for Exceptions to Non-Recourse
Liability) that is acceptable to Lender and that, among other things, requires
the transferee to perform all obligations of transferor or such person set
forth in such Loan Document, and may require that the transferee comply with
any provisions of this Instrument or any other Loan Document which previously
may have been waived by Lender;

 

(6)                                  if a guaranty
has been executed and delivered in connection with the Note, this Instrument or
any of the other Loan Documents, the Borrower causes one or more individuals or
entities acceptable to Lender to execute and deliver to Lender a substitute
guaranty in a form acceptable to Lender;

 

(7)                                  Lender’s
receipt of all of the following:

 

(A)                              a
non-refundable review fee in the amount of $3,000 and a transfer fee equal to 1
percent of the outstanding Indebtedness immediately prior to the Transfer; and

 

28

 

(B)                                Borrower’s
reimbursement of all of Lender’s out-of-pocket costs (including reasonable
attorneys’ fees) incurred in reviewing the Transfer request, to the extent such
expenses exceed $3,000; and

 

(8)                                  Borrower has
agreed to Lender’s conditions to approve such Transfer, which may include, but
are not limited to (A) providing additional collateral, guaranties, or
other credit support to mitigate any risks concerning the proposed transferee
or the performance or condition of the Mortgaged Property, and (B) amending
the Loan Documents to (i) delete any specially negotiated terms or
provisions previously granted for the exclusive benefit of transferor and (ii) restore
to original provisions of the standard Fannie Mae form multifamily loan
documents, to the extent such provisions were previously modified.

 

(d)                                 For purposes of
this Section, the following terms shall have the meanings set forth below:

 

(1)                                  “Initial
Owners” means, with respect to Borrower or any other entity, the persons or
entities who on the date of the Note, directly or indirectly, own in the
aggregate 100% of the ownership interests in Borrower or that entity.

 

(2)                                  A Transfer of a “Controlling Interest” shall mean:

 

(A)                              with respect to
any entity, the following:

 

(i)                                     if such entity
is a general partnership or a joint venture, a Transfer of any general
partnership interest or joint venture interest which would cause the Initial
Owners to own less than 51% of all general partnership or joint venture
interests in such entity;

 

(ii)                                  if such entity
is a limited partnership, (A) a Transfer of any general partnership
interest, or (B) a Transfer of any partnership interests which would cause
the Initial Owners to own less than 51% of all limited partnership interests in
such entity;

 

(iii)                               if such entity is
a limited liability company or a limited liability partnership, (A) a
Transfer of any membership or other ownership interest which would cause the
Initial Owners to own less than 51% of all membership or other ownership
interests in such entity, (B) a Transfer of any membership, or other
interest of a manager, in such entity that results in a change of manager, or (C) a
change of the non-member manager;

 

(iv)                              if such entity
is a corporation (other than a Publicly-Held Corporation) with only one class
of voting stock, a Transfer of any voting stock which would cause the Initial
Owners to own less than 51% of voting stock in such corporation;

 

29

 

(v)                                 if such entity
is a corporation (other than a Publicly-Held Corporation) with more than one
class of voting stock, a Transfer of any voting stock which would cause the
Initial Owners to own less than a sufficient number of shares of voting stock
having the power to elect the majority of directors of such corporation; and

 

(vi)                              if such entity
is a trust (other than a Publicly-Held Trust), the removal, appointment or
substitution of a trustee of such trust other than (A) in the case of a
land trust, or (B) if the trustee of such trust after such removal,
appointment, or substitution is a trustee identified in the trust agreement
approved by Lender; and/or

 

(B)                                any agreement
(including provisions contained in the organizational and/or governing
documents of Borrower or Key Principal) or Transfer not specified in clause
(A), the effect of which, either immediately or after the passage of time or
occurrence of a specified event or condition, including the failure of a
specified event or condition to occur or be satisfied, would (i) cause a
change in or replacement of the Person that controls the management and
operations of the Borrower or Key Principal or (ii) limit or otherwise
modify the extent of such Person’s control over the management and operations
of Borrower or Key Principal.

 

(3)                                  “Publicly-Held
Corporation” shall mean a corporation the outstanding voting
stock of which is registered under Section 12(b) or 12(g) of the
Securities and Exchange Act of 1934, as amended.

 

(4)                                  “Publicly-Held Trust” shall
mean a real estate investment trust the outstanding voting shares or beneficial
interests of which are registered under Section 12 (b) or 12 (g) of
the Securities Exchange Act of 1934, as amended.

 

(e)                                  Lender shall be
provided with written notice of all Transfers under this Section 21,
whether or not such Transfers are permitted under Section 21(b) or
approved by Lender under Section 21(c), no later than 10 days prior to the
date of the Transfer.”

 

22.                               EVENTS
OF DEFAULT.

 

The
occurrence of any one or more of the following shall constitute an Event of
Default under this Instrument:

 

(a)                                  any failure by
Borrower to pay or deposit when due any amount required by the Note, this
Instrument or any other Loan Document;

 

(b)                                 any failure by
Borrower to maintain the insurance coverage required by Section 19;

 

30

 

(c)                                  any failure by
Borrower to comply with the provisions of Section 33;

 

(d)                                 fraud or
material misrepresentation or material omission by Borrower, or any of its
officers, directors, trustees, general partners or managers, Key Principal or
any guarantor in connection with (A) the application for or creation of
the Indebtedness, (B) any financial statement, rent roll, or other report
or information provided to Lender during the term of the Indebtedness, or (C) any
request for Lender’s consent to any proposed action, including a request for
disbursement of funds under any Collateral Agreement;

 

(e)                                  any (i) Event
of Default under Section 21 and/or (ii) occurrence of a Bankruptcy
Event;

 

(f)                                    the
commencement of a forfeiture action or proceeding, whether civil or criminal,
which, in Lender’s reasonable judgment, could result in a forfeiture of the
Mortgaged Property or otherwise materially impair the lien created by this
Instrument or Lender’s interest in the Mortgaged Property;

 

(g)                                 any failure by
Borrower to perform any of its obligations under this Instrument (other than
those specified in Sections 22(a) through (f)), as and when required,
which continues for a period of 30 days after notice of such failure by Lender
to Borrower, but no such notice or grace period shall apply in the case of any
such failure which could, in Lender’s judgment, absent immediate exercise by
Lender of a right or remedy under this Instrument, result in harm to Lender,
impairment of the Note or this Instrument or any other security given under any
other Loan Document;

 

(h)                                 any failure by
Borrower to perform any of its obligations as and when required under any Loan
Document other than this Instrument which continues beyond the applicable cure
period, if any, specified in that Loan Document; and

 

(i)                                     any exercise by
the holder of any other debt instrument secured by a mortgage, deed of trust or
deed to secure debt on the Mortgaged Property of a right to declare all amounts
due under that debt instrument immediately due and payable.

 

23.                               REMEDIES
CUMULATIVE.

 

Each right and remedy provided in this Instrument is distinct from all
other rights or remedies under this Instrument or any other Loan Document or
afforded by applicable law, and each shall be cumulative and may be exercised
concurrently, independently, or successively, in any order.

 

31

 

24.                               FORBEARANCE.

 

(a)                                  Lender may (but
shall not be obligated to) agree with Borrower, from time to time, and without
giving notice to, or obtaining the consent of, or having any effect upon the
obligations of, any guarantor or other third party obligor, to take any of the
following actions:  extend the time for
payment of all or any part of the Indebtedness; reduce the payments due under
this Instrument, the Note, or any other Loan Document; release anyone liable
for the payment of any amounts under this Instrument, the Note, or any other
Loan Document; accept a renewal of the Note; modify the terms and time of
payment of the Indebtedness; join in any extension or subordination agreement;
release any Mortgaged Property; take or release other or additional security;
modify the rate of interest or period of amortization of the Note or change the
amount of the monthly installments payable under the Note; and otherwise modify
this Instrument, the Note, or any other Loan Document.

 

(b)                                 Any forbearance
by Lender in exercising any right or remedy under the Note, this Instrument, or
any other Loan Document or otherwise afforded by applicable law, shall not be a
waiver of or preclude the exercise of any other right or remedy.  The acceptance by Lender of payment of all or
any part of the Indebtedness after the due date of such payment, or in an amount
which is less than the required payment, shall not be a waiver of Lender’s
right to require prompt payment when due of all other payments on account of
the Indebtedness or to exercise any remedies for any failure to make prompt
payment. Enforcement by Lender of any security for the Indebtedness shall not
constitute an election by Lender of remedies so as to preclude the exercise of
any other right available to Lender. 
Lender’s receipt of any awards or proceeds under Sections 19 and 20
shall not operate to cure or waive any Event of Default.

 

25.                               LOAN
CHARGES.

 

If any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower is interpreted so that any charge
provided for in any Loan Document, whether considered separately or together
with other charges levied in connection with any other Loan Document, violates
that law, and Borrower is entitled to the benefit of that law, that charge is
hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to Lender
in excess of the permitted amounts shall be applied by Lender to reduce the
principal of the Indebtedness.  For the
purpose of determining whether any applicable law limiting the amount of
interest or other charges permitted to be collected from Borrower has been
violated, all Indebtedness which constitutes interest, as well as all other
charges levied in connection with the Indebtedness which constitute interest,
shall be deemed to be allocated and spread over the stated term of the Note.  Unless otherwise required by applicable law,
such allocation and spreading shall be effected in such a manner that the rate
of interest so computed is uniform throughout the stated term of the Note.

 

26.                               WAIVER
OF STATUTE OF LIMITATIONS.

 

Borrower hereby waives the right to assert any statute of limitations
as a bar to the enforcement of the lien of this Instrument or to any action
brought to enforce any Loan Document.

 

32

 

27.                               WAIVER
OF MARSHALLING.

 

Notwithstanding the existence of any other security interests in the
Mortgaged Property held by Lender or by any other party, Lender shall have the
right to determine the order in which any or all of the Mortgaged Property
shall be subjected to the remedies provided in this Instrument, the Note, any
other Loan Document or applicable law. 
Lender shall have the right to determine the order in which any or all
portions of the Indebtedness are satisfied from the proceeds realized upon the
exercise of such remedies.  Borrower and any
party who now or in the future acquires a security interest in the Mortgaged
Property and who has actual or constructive notice of this Instrument waives
any and all right to require the marshalling of assets or to require that any
of the Mortgaged Property be sold in the inverse order of alienation or that
any of the Mortgaged Property be sold in parcels or as an entirety in
connection with the exercise of any of the remedies permitted by applicable law
or provided in this Instrument.

 

28.                               FURTHER
ASSURANCES.

 

Borrower shall execute, acknowledge, and deliver, at its sole cost and
expense, all further acts, deeds, conveyances, assignments, estoppel
certificates, financing statements, transfers and assurances as Lender may
require from time to time in order to better assure, grant, and convey to
Lender the rights intended to be granted, now or in the future, to Lender under
this Instrument and the Loan Documents.

 

29.                               ESTOPPEL
CERTIFICATE.

 

Within 10 days after a request from Lender, Borrower shall deliver to
Lender a written statement, signed and acknowledged by Borrower, certifying to
Lender or any person designated by Lender, as of the date of such statement, (i) that
the Loan Documents are unmodified and in full force and effect (or, if there
have been modifications, that the Loan Documents are in full force and effect
as modified and setting forth such modifications); (ii) the unpaid
principal balance of the Note; (iii) the date to which interest under the
Note has been paid; (iv) that Borrower is not in default in paying the
Indebtedness or in performing or observing any of the covenants or agreements
contained in this Instrument or any of the other Loan Documents (or, if the
Borrower is in default, describing such default in reasonable detail); (v) whether
or not there are then existing any setoffs or defenses known to Borrower
against the enforcement of any right or remedy of Lender under the Loan
Documents; and (vi) any additional facts requested by Lender.

 

30.                               GOVERNING
LAW; CONSENT TO JURISDICTION AND VENUE.

 

(a)                                  This
Instrument, and any Loan Document which does not itself expressly identify the
law that is to apply to it, shall be governed by the laws of the jurisdiction
in which the Land is located (the “Property Jurisdiction”).

 

(b)                                 Borrower agrees
that any controversy arising under or in relation to the Note, this Instrument,
or any other Loan Document shall be litigated exclusively in the Property
Jurisdiction.

 

33

 

The
state and federal courts and authorities with jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to the Note, any security for the
Indebtedness, or any other Loan Document. 
Borrower irrevocably consents to service, jurisdiction, and venue of
such courts for any such litigation and waives any other venue to which it
might be entitled by virtue of domicile, habitual residence or otherwise.

 

31.                               NOTICE.

 

(a)                                  All notices,
demands and other communications (“notice”) under
or concerning this Instrument shall be in writing.  Each notice shall be addressed to the
intended recipient at its address set forth in this Instrument, and shall be
deemed given on the earliest to occur of (1) the date when the notice is
received by the addressee; (2) the first Business Day after the notice is
delivered to a recognized overnight courier service, with arrangements made for
payment of charges for next Business Day delivery; or (3) the third
Business Day after the notice is deposited in the United States mail with
postage prepaid, certified mail, return receipt requested.  As used in this Section 31, the term “Business
Day” means any day other than a Saturday, a Sunday or any other day on which
Lender is not open for business.

 

(b)                                 Any party to
this Instrument may change the address to which notices intended for it are to
be directed by means of notice given to the other party in accordance with this
Section 31.  Each party agrees that
it will not refuse or reject delivery of any notice given in accordance with
this Section 31, that it will acknowledge, in writing, the receipt of any
notice upon request by the other party and that any notice rejected or refused
by it shall be deemed for purposes of this Section 31 to have been
received by the rejecting party on the date so refused or rejected, as
conclusively established by the records of the U.S. Postal Service or the
courier service.

 

(c)                                  Any notice
under the Note and any other Loan Document which does not specify how notices
are to be given shall be given in accordance with this Section 31.

 

32.                               SALE OF
NOTE; CHANGE IN SERVICER.

 

The Note or a partial interest in the Note (together with this
Instrument and the other Loan Documents) may be sold one or more times without
prior notice to Borrower.  A sale may
result in a change of the Loan Servicer. 
There also may be one or more changes of the Loan Servicer unrelated to
a sale of the Note.  If there is a change
of the Loan Servicer, Borrower will be given notice of the change.

 

33.                               SINGLE
ASSET BORROWER.

 

Until the Indebtedness is paid in full, Borrower (a) shall not
acquire any real or personal property other than the Mortgaged Property and
personal property related to the operation and maintenance of the Mortgaged
Property;  (b) shall not operate any
business other than the management and operation of the Mortgaged Property; and
(c) shall not maintain its assets in a way difficult to segregate and
identify.

 

34

 

34.                               SUCCESSORS
AND ASSIGNS BOUND.

 

This Instrument shall bind, and the rights granted by this Instrument
shall inure to, the respective successors and assigns of Lender and
Borrower.  However, a Transfer not
permitted by Section 21 shall be an Event of Default.

 

35.                               JOINT AND
SEVERAL LIABILITY.

 

If more than one person or entity signs this Instrument as Borrower,
the obligations of such persons and entities shall be joint and several.

 

36.                               RELATIONSHIP
OF PARTIES; NO THIRD PARTY BENEFICIARY.

 

(a)                                  The
relationship between Lender and Borrower shall be solely that of creditor and
debtor, respectively, and nothing contained in this Instrument shall create any
other relationship between Lender and Borrower.

 

(b)                                 No creditor of
any party to this Instrument and no other person shall be a third party
beneficiary of this Instrument or any other Loan Document.  Without limiting the generality of the
preceding sentence, (1) any arrangement (a “Servicing
Arrangement”) between the Lender and any Loan Servicer for loss
sharing or interim advancement of funds shall constitute a contractual
obligation of such Loan Servicer that is independent of the obligation of
Borrower for the payment of the Indebtedness, (2) Borrower shall not be a
third party beneficiary of any Servicing Arrangement, and (3) no payment
by the Loan Servicer under any Servicing Arrangement will reduce the amount of
the Indebtedness.

 

37.                               SEVERABILITY;
AMENDMENTS.

 

The invalidity or unenforceability of any provision of this Instrument
shall not affect the validity or enforceability of any other provision, and all
other provisions shall remain in full force and effect.  This Instrument contains the entire agreement
among the parties as to the rights granted and the obligations assumed in this
Instrument.  This Instrument may not be
amended or modified except by a writing signed by the party against whom
enforcement is sought.

 

38.                               CONSTRUCTION.

 

The captions and headings of the sections of this Instrument are for
convenience only and shall be disregarded in construing this Instrument.  Any reference in this Instrument to an “Exhibit”
or a “Section” shall, unless otherwise explicitly provided, be construed as
referring, respectively, to an Exhibit attached to this Instrument or to a
Section of this Instrument.  All
Exhibits attached to or referred to in this Instrument are incorporated by
reference into this Instrument.  Any
reference in this Instrument to a statute or regulation shall be construed as
referring to that statute or regulation as amended from time to time.  Use of the singular in this Agreement
includes the plural and use of the plural includes the singular.  As used in this Instrument, the term “including”
means “including, but not limited to.”

 

35

 

39.                               LOAN
SERVICING.

 

All actions regarding the servicing of the loan evidenced by the Note,
including the collection of payments, the giving and receipt of notice,
inspections of the Property, inspections of books and records, and the granting
of consents and approvals, may be taken by the Loan Servicer unless Borrower
receives notice to the contrary.  If
Borrower receives conflicting notices regarding the identity of the Loan
Servicer or any other subject, any such notice from Lender shall govern.

 

40.                               DISCLOSURE
OF INFORMATION.

 

Lender may furnish information regarding Borrower or the Mortgaged
Property to third parties with an existing or prospective interest in the
servicing, enforcement, evaluation, performance, purchase or securitization of
the Indebtedness, including trustees, master servicers, special servicers,
rating agencies, and organizations maintaining databases on the underwriting
and performance of multifamily mortgage loans. 
Borrower irrevocably waives any and all rights it may have under
applicable law to prohibit such disclosure, including any right of privacy.

 

41.                               NO
CHANGE IN FACTS OR CIRCUMSTANCES.

 

All information in the application for the loan submitted to Lender
(the “Loan Application”) and in all financial
statements, rent rolls, reports, certificates and other documents submitted in
connection with the Loan Application are complete and accurate in all material
respects.  There has been no material
adverse change in any fact or circumstance that would make any such information
incomplete or inaccurate.

 

42.                               SUBROGATION.

 

If, and to the extent that, the proceeds of the loan evidenced by the
Note are used to pay, satisfy or discharge any obligation of Borrower for the
payment of money that is secured by a pre-existing mortgage, deed of trust or
other lien encumbering the Mortgaged Property (a “Prior Lien”),
such loan proceeds shall be deemed to have been advanced by Lender at Borrower’s
request, and Lender shall automatically, and without further action on its
part, be subrogated to the rights, including lien priority, of the owner or
holder of the obligation secured by the Prior Lien, whether or not the Prior
Lien is released.

 

43.                               ACCELERATION;
REMEDIES; WAIVER OF PERMISSIVE COUNTERCLAIMS.

 

At any time during the existence of an Event of Default, Lender, at
Lender’s option, may declare the Indebtedness to be immediately due and payable
without further demand, and may foreclose this Instrument by judicial
proceeding and may invoke any other remedies permitted by Florida law or
provided in this Instrument or in any other Loan Document.  Lender shall be entitled to collect all costs
and expenses incurred in pursuing such remedies, including attorneys’ fees,
costs

 

36

 

of
documentary evidence, abstracts and title reports.  Borrower waives any and all rights to file or
pursue permissive counterclaims in connection with any legal action brought by
Lender under this Instrument, the Note or any other Loan Document.

 

44.                               RELEASE.

 

Upon payment of the Indebtedness, Lender shall release this
Instrument.  Borrower shall pay Lender’s
reasonable costs incurred in releasing this Instrument.

 

45.                               FUTURE
ADVANCES.

 

Lender may from time to time, in Lender’s discretion, make optional
future or additional advances (collectively, “Future
Advances”) to Borrower, except that at no time shall the unpaid
principal balance of all indebtedness secured by the lien of this Instrument,
including Future Advances, be greater than an amount equal to two hundred
percent (200%) of the original principal amount of this Note as set forth on
the first page of this Instrument plus accrued interest and amounts
disbursed by Lender under Section 12 or any other provision of this
Instrument that treats a disbursement by Lender as being made under Section 12.  All Future Advances shall be made, if at all,
within twenty (20) years after the date of this Instrument, or within such
lesser period that may in the future be provided by law as a prerequisite for
the sufficiency of actual or record notice of Future Advances as against the
rights of creditors or subsequent purchasers for value.  Borrower shall, immediately upon request by
Lender, execute and deliver to Lender a promissory note evidencing each Future
Advance together with a notice of such Future Advance in recordable form.  All promissory notes evidencing Future
Advances shall be secured, pari  passu, by the lien of this
Instrument, and each reference in this Instrument to the Note shall be deemed
to be a reference to all promissory notes evidencing Future Advances.

 

46.                               WAIVER
OF TRIAL BY JURY.

 

BORROWER AND LENDER EACH (A) COVENANTS AND AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS INSTRUMENT OR THE
RELATIONSHIP BETWEEN THE PARTIES AS BORROWER AND LENDER THAT IS TRIABLE OF
RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO
SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF
COMPETENT LEGAL COUNSEL.

 

37

 

ATTACHED EXHIBITS.  The following Exhibits are attached to this
Instrument:

 

	
   

  	
  x

  	
  Exhibit A

  	
  Description
  of the Land (required).

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  x

  	
  Exhibit B

  	
  Modifications
  to Instrument

  

 

THIS IS A BALLOON MORTGAGE AND
THE FINAL PRINCIPAL PAYMENT OR THE PRINCIPAL BALANCE DUE UPON MATURITY IS
$25,728,671.93, TOGETHER WITH ACCRUED INTEREST, IF ANY, AND ALL
ADVANCEMENTS MADE BY THE MORTGAGEE (LENDER) UNDER THE TERMS OF THIS MORTGAGE

 

[REST OF PAGE INTENTIONALLY LEFT BLANK]

 

38

 

IN WITNESS WHEREOF, Borrower has signed and
delivered this Instrument or has caused this Instrument to be signed and
delivered by its duly authorized representative.

 

	
   

  	
   

  	
  7900
  HAMPTON BLVD, LLC

  
	
   

  	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Hampton
  Peak, LLC

  
	
   

  	
   

  	
   

  	
  a
  Colorado limited liability company

  
	
   

  	
   

  	
   

  	
  Managing
  Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  Luke Simpson

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Luke
  Simpson

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ACKNOWLEDGMENT

  
	
   

  	
   

  	
   

  	
   

  
	
  STATE
  OF COLORADO

  	
   

  	
  )

  	
   

  
	
   

  	
   

  	
  )
  ss:

  	
   

  
	
  COUNTY
  OF DENVER

  	
   

  	
  )

  	
   

  
								

 

I
HEREBY CERTIFY that on this day, before me, an officer duly authorized in the
State of Colorado to take acknowledgments, personally appeared Luke Simpson, to
me known and known to me to be the person described in and who executed the
foregoing instrument as Manager of Hampton Peak, LLC, the Managing Member of
7900 Hampton Blvd, LLC, the Limited Liability Company named in the foregoing
instrument, and acknowledged to me that he as such officer of the Managing
Member of the Limited Liability Company, being authorized to do so, executed
the foregoing instrument for the purposes therein contained in the name of such
Limited Liability Company by himself as Manager of the Managing Member of the
Limited Liability Company.

 

Witness
my hand and official seal in the county and state last aforesaid, this 14th day
of September, 2010.

 

	
  (SEAL)

  	
  /s/
  Authorized Signatory

  
	
   

  	
  Notary Public

  
	
   

  	
   

  	
   

  	
   

  
	
  My
  Commission Expires:

  	
  10/31/11

  	
  Personally
  Known

  	
  x

  
	
   

  	
   

  	
  or
  Produced ID

  	
  o

  
	
   

  	
   

  	
  [Check
  one of the above]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Type
  of Identification Produced

  
	
   

  	
   

  	
   

  

 

39

 

KEY PRINCIPAL

 

	
  Key Principal

  
	
   

  
	
  Name:

  	
  Don
  Simpson

  
	
   

  	
   

  
	
  Address:

  	
  c/o
  Grand Peaks Properties, LLC

  
	
   

  	
  4582
  South Ulster Street Parkway, Suite 1200

  
	
   

  	
  Denver,
  Colorado 80237

  
	
   

  	
   

  
	
  Name:

  	
  Luke
  Simpson

  
	
   

  	
   

  
	
  Address:

  	
  c/o
  Grand Peaks Properties, LLC

  
	
   

  	
  4582
  South Ulster Street Parkway, Suite 1200

  
	
   

  	
  Denver,
  Colorado 80237

  
	
   

  	
   

  
	
  Name:

  	
  Nick
  Simpson

  
	
   

  	
   

  
	
  Address:

  	
  c/o
  Grand Peaks Properties, LLC

  
	
   

  	
  4582
  South Ulster Street Parkway, Suite 1200

  
	
   

  	
  Denver,
  Colorado 80237

  

 

40

 

EXHIBIT A

 

[DESCRIPTION OF THE LAND]

 

A-1

 

EXHIBIT B

 

MODIFICATIONS TO SECURITY
INSTRUMENT

(Parrot’s Landing Transaction)

 

The
following modifications are made to the text of the Instrument that precedes
this Exhibit:

 

1.                                       Section 1
is amended to include the following definitions:

 

“BH
Member” means Behringer Harvard Parrot’s Landing, LLC, and a
member of Borrower.

 

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

 

“BH
Subsidiary” means any entity wholly owned and controlled,
directly or indirectly, by BH REIT.

 

“Developer
Member” means Hampton Peak, LLC, and managing member of
Borrower.

 

“Immediate
Family Members” means a non-minor child, non-minor grandchild,
spouse, or parent, of a transferor under Section 21.”

 

“Operating
Agreement” means the Operating Agreement of Borrower dated September 17,
2010, executed by Developer Member and BH Member.

 

“Prohibited
Entity” means any person or entity who (i) has been convicted of fraud or
a crime involving moral turpitude, (ii) has been involved in a bankruptcy
or reorganization within the ten years preceding the date on which the Transfer
is completed, (ii) is on the list of Specially Designated Nationals or
other blocked persons published by the U.S. Office of Foreign Assets Control
(or any successor entity), (iv) is on the list of persons or entities
prohibited from doing business with the Department of Housing and Urban
Development, (v) is a person or entity for whom there then exists an
uncured Event of Default with respect to any related or unrelated loan
obligations then owed to Fannie Mae, (vi) is a person or entity with whom
Fannie Mae is then prohibited from doing business pursuant to any law, rule,
regulation, judicial proceeding, or administrative directive, or (vii) is
a person or entity then identified on Fannie Mae’s “Multifamily Applicant
Experience Checklist”.

 

2.                                       Section 21(a)(7) is
hereby deleted in its entirety and the following is inserted in lieu thereof:

 

“(7)                            if Key
Principal is a natural person, the death of such individual unless either (A) Don
Simpson (or his replacement) and at least one other individual remain as Key
Principals, or (B) if Don Simpson (or his replacement) is the deceased Key
Principal or 

 

B1

 

the
death of a Key Principal would result in only one remaining Key Principal, then
(i) Lender is notified in writing within 90 days after such individual’s
death and (ii) such individual is replaced, if required by Lender, with an
individual or entity acceptable to Lender, in accordance with the provisions of
Section 21(c) hereof, within 180 days after such individual’s death
(the “Replacement Period”). 
Notwithstanding the foregoing, the Replacement Period may be extended,
at Lender’s discretion, for a period not to exceed 185 days from the last day
of the initial Replacement Period (the “Extended Replacement Period”),
provided:

 

(I)                                    Borrower, if
required by Lender, either (i) replaces the current property manager with
a property manager reasonably acceptable to Lender, or, (ii) engages a
property manager reasonably acceptable to Lender if a property manager has not
been previously engaged; and/or

 

(II)                                Borrower (and
the property manager), if required by Lender, institutes a lockbox or cash
management arrangement reasonably acceptable to Lender during the Extended
Replacement Period.

 

No
property inspection shall be required and the 1% transfer fee will not be
charged if the foregoing requirements are timely satisfied;”

 

3.                                       Section 21(a) is
hereby amended to add a new Subsection (11) as follows:

 

“(11)                      the Transfer of
shares of common stock, preferred stock or other beneficial or ownership
interests or other forms of securities in BH REIT and the issuance of all
varieties of convertible debt, equity and other similar securities of BH REIT
and the subsequent Transfer of such securities, if such issuance or Transfer
results in BH REIT losing its qualification as a REIT or results in a
concentration of ownership of common stock or preferred stock greater than or
equal to 20% in any single beneficial owner.”

 

4.                                       Section 21(b) is
hereby amended to add a new Subsection (8) as follows:

 

“(8)                            a Transfer of
ownership interests in Borrower (or other intermediate entity) to an entity or
entities in which the BH REIT has a direct or indirect Controlling Interest,
provided that (i) except as provided in Section 21(b)(9) and
Section 21(b)(10), such Transfer of ownership interests will not cause a
change in the management and control of Borrower (or other intermediate
entity), and after which Transfer, the BH REIT shall maintain the same right
and ability to manage and control Borrower (or other intermediate entity) as
existed prior to the Transfer; (ii) Borrower provides Lender notice of
such Transfer and reasonable substantiation that the above conditions are satisfied
as soon as practicable after such Transfer; and (iii) such Transfer is not
to a Prohibited Entity.”

 

B2

 

5.                                       Section 21(b) is
hereby amended to add a new Subsection (9) as follows:

 

“(9)                            any Transfer of
all direct interest in Borrower from the Developer Member to the BH Member, BH
REIT or a BH Subsidiary, or any Transfer occurring as a result of any removal
and replacement of Developer Member as managing member of Borrower by BH Member
(or its permitted successors) in accordance with the terms and provisions of
the Operating Agreement, so long as each of the following conditions is
satisfied:

 

(A)                              Borrower and/or
BH Member provides Lender with at least 30 days prior written notice of any
such Transfer, which notice is accompanied by a non-refundable review fee in
the amount of $5,000.00 and all information and organizational documents
reasonably requested by Lender, including information with respect to the
transferee;

 

(B)                                The BH Member,
BH REIT or a BH Subsidiary will be the managing member of the Borrower and will
control and manage, directly or indirectly, the day-to-day operations of
Borrower after any such Transfer;

 

(C)                                At the time
Borrower and/or BH Member delivers to Lender notice of any such Transfer and
thereafter to the date the Transfer is completed, no Event of Default shall
have occurred and be continuing and no event or condition shall have occurred
and be continuing that, with the giving of notice or the passage of time, or
both, would become an Event of Default;

 

(D)                               Borrower and/or
BH Member provides confirmation acceptable to Lender that Borrower is and will
remain in compliance with Section 33 after any such Transfer;

 

(E)                                 The Mortgaged
Property is and will continue to be managed either by (i) the initial
property manager or (ii) a successor property manager satisfactory to
Lender pursuant to a property management agreement approved by Lender in
writing, which successor property manager, together with Borrower, shall
execute an assignment of the management agreement in form acceptable to Lender;

 

(F)                                 If the Transfer
is to BH REIT or a BH Subsidiary, then such transferee must meet Lender’s
then-current underwriting criteria;

 

(G)                                The Transfer
shall not be to a Prohibited Entity; and

 

(H)                               BH REIT or
another person or entity approved (in writing) by Lender, in its sole
discretion, but based upon Lender’s then-current underwriting criteria, must
replace the then-existing Key Principal as substitute Key Principal and execute
an assumption agreement, an Acknowledgement and

 

B3

 

Agreement
of Key Principal to Personal Liability for Exceptions to Non Recourse
Liability, an Exceptions to Non-Recourse Guaranty, or such other documentation
as may be required by Lender to evidence its obligations as substitute Key
Principal’s under the Loan Documents, all in form and substance substantially
similar to the obligations of Key Principal as of the date of this Instrument
and subject to the same limits thereof, it being understood that:

 

(1)                                  Such substitute
Key Principal shall be liable for all obligations and liabilities to the extent
arising from or relating to acts, events or omissions that occur after the date
of such Transfer;

 

(2)                                  Upon the
execution and delivery of the documentation required by the substitute Key
Principal, the existing Key Principal shall be released from any obligations
and liabilities to the extent arising from or relating to acts, events or
omissions that occur after such Transfer; but shall remain liable for all
obligations and liabilities to the extent arising from or relating to acts,
events or omissions that occurred prior to the such Transfer; and

 

(3)                                  such substitute
Key Principal shall not be a Prohibited Entity.

 

In connection with any such Transfer pursuant to this subsection (9),
Lender shall be entitled to collect from Borrower, and Borrower shall pay upon
demand, all reasonable costs incurred by Lender, including the cost of all
title searches, title insurance and recording costs (if applicable) and
reasonable attorneys’ fees; however, if any such proposed Transfer satisfies
the conditions of this subsection (9), the one percent (1%) transfer fee set
forth in Section 21(c)(7)(A) otherwise due in connection with such
Transfer shall be waived by Lender.”

 

6.                                       Section 21(b) is
hereby amended by adding a new Subsection (10) as follows:

 

“(10)                      any Transfer of
all direct interest in Borrower from the BH Member to Developer Member, so long
as each of the following conditions is satisfied:

 

(A)                              Borrower and/or
Developer Member provides Lender with at least 30 days prior written notice of
any such Transfer, which notice is accompanied by a non-refundable review fee
in the amount of $5,000.00 and all information and organizational documents
reasonably requested by Lender, including information with respect to the
transferee;

 

(B)                                Developer
Member will remain managing member of the Borrower and directly controls and
manages the day-to-day operations of Borrower after any such Transfer, without
reduction or limitation of or on Don Simpson’s, Luke Simpson’s or Nick Simpson’s
(or such replacement Key Principal as may have been approved by Lender upon the
death of Don Simpson, Luke 

 

B4

 

Simpson
or Nick Simpson in accordance with Section 21(a)(7) of this
Instrument) right or ability to manage and control the day-to-day operations of
Developer Member as exists on the date of this Instrument;

 

(C)                                At the time
Borrower and/or Developer Member delivers to Lender notice of any such Transfer
and thereafter to the date on which the Transfer is completed, no Event of
Default shall have occurred and be continuing and no event or condition shall
have occurred and be continuing that, with the giving of notice or the passage
of time, or both, would become an Event of Default;

 

(D)                               Borrower and/or
Developer Member provides confirmation acceptable to Lender that Borrower is
and will remain in compliance with Section 33 after any such Transfer; and

 

(E)                                 The Mortgaged
Property is and will continue to be managed either by (i) the initial
property manager or (ii) a successor property manager satisfactory to
Lender pursuant to a property management agreement approved by Lender in
writing, which successor property manager, together with Borrower, shall
execute an assignment of the management agreement in form acceptable to Lender.

 

In connection with any such Transfer pursuant to this subsection (10),
Lender shall be entitled to collect from Borrower, and Borrower shall pay upon demand,
all reasonable costs incurred by Lender, including the cost of all title
searches, title insurance and recording costs (if applicable) and reasonable
attorneys’ fees; however, if any such proposed Transfer satisfies the
conditions of this subsection (10), the one percent (1%) transfer fee set forth
in Section 21(c)(7)(A) otherwise due in connection with such Transfer
shall be waived by Lender.”

 

7.                                       Section 21(b) is
hereby amended by adding a new Subsection 11 as follows:

 

“(11)                      a Transfer of
the Mortgaged Property or of ownership interests held by an individual or
entity Key Principal in Borrower, or in any other entity which owns, directly
or indirectly through one or more intermediate entities, an ownership interest
in Borrower, to (i) other Key Principals; (ii) Immediate Family
Members; or (iii) trusts established for the benefit of the transferor
and/or Immediate Family Members; provided, however, that such Transfer of
ownership interests will not cause a change in the management and control of Borrower
(or other intermediate entity), and after which Transfer, the transferor Key
Principal shall maintain the same right and ability to manage and control
Borrower (or other intermediate entity) as existed prior to the Transfer.”

 

8.                                       Section 21(b) is
hereby amended by adding a new Subsection 12 as follows:

 

“(12)                      a Transfer of
any stock in any Publicly-Held Corporation.”

 

B5

 

9.                                       All capitalized
terms used in this Exhibit not specifically defined herein shall have the
meanings set forth in the text of the Instrument that precedes this Exhibit.

 

10.                                 The
modifications set forth in this Exhibit B shall become ineffective upon a
Transfer, as defined in the Instrument, except for Transfers which are
permitted in Sections 21(b)(2) through 21(b)(11).

 

[BORROWER’S INITIALS APPEAR ON SUCCEEDING PAGE]

 

B6

 

	
   

  	
  LS

  
	
   

  	
  Borrower’s
  Initials

  

 

B7Exhibit 10.31

 

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

 

 

 

LIMITED
LIABILITY COMPANY AGREEMENT

 

OF

 

7900
HAMPTON BLVD, LLC

 

 

DATED
SEPTEMBER 17, 2010

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINED TERMS

  	
  1

  
	
  1.1

  	
  Defined Terms

  	
  1

  
	
  1.2

  	
  Other References

  	
  13

  
	
  ARTICLE II

  	
  ORGANIZATION

  	
  13

  
	
  2.1

  	
  Formation

  	
  13

  
	
  2.2

  	
  Name and Principal Place of Business

  	
  13

  
	
  2.3

  	
  Term

  	
  14

  
	
  2.4

  	
  Registered Agent and Registered Office

  	
  14

  
	
  2.5

  	
  Purpose

  	
  14

  
	
  ARTICLE III

  	
  MEMBERS

  	
  14

  
	
  3.1

  	
  Admission of Members

  	
  14

  
	
  3.2

  	
  Limitation on Liability

  	
  15

  
	
  ARTICLE IV

  	
  CAPITAL

  	
  15

  
	
  4.1

  	
  Initial Capital Contributions

  	
  15

  
	
  4.2

  	
  Additional Capital Contributions

  	
  17

  
	
  4.3

  	
  Capital Accounts

  	
  19

  
	
  4.4

  	
  No Further Capital Contributions

  	
  20

  
	
  4.5

  	
  Acquisition Loan

  	
  20

  
	
  ARTICLE V

  	
  INTERESTS IN THE COMPANY

  	
  21

  
	
  5.1

  	
  Contribution and Promote Percentage Adjustments

  	
  21

  
	
  5.2

  	
  Return of Capital

  	
  21

  
	
  5.3

  	
  Ownership

  	
  21

  
	
  5.4

  	
  Waiver of Partition; Nature of Interests in the Company

  	
  21

  
	
  ARTICLE VI

  	
  ALLOCATIONS AND DISTRIBUTIONS

  	
  22

  
	
  6.1

  	
  Allocations

  	
  22

  
	
  6.2

  	
  Allocations and Compliance with Section 704(b)

  	
  22

  
	
  6.3

  	
  Distributions from Operations

  	
  23

  
	
  6.4

  	
  Distributions from Capital Transactions

  	
  24

  
	
  6.5

  	
  Special Distributions

  	
  25

  
	
  6.6

  	
  Distributions in Liquidation

  	
  25

  
	
  6.7

  	
  Tax Matters

  	
  25

  
	
  6.8

  	
  Tax Matters Partner

  	
  26

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  6.9

  	
  Section 704(c)

  	
  26

  
	
  6.10

  	
  Withholding

  	
  26

  
	
  ARTICLE VII

  	
  MANAGEMENT

  	
  26

  
	
  7.1

  	
  Managing Member and Major Decisions

  	
  26

  
	
  7.2

  	
  Duties of Managing Member

  	
  33

  
	
  7.3

  	
  Management of the Property; Fees

  	
  38

  
	
  7.4

  	
  Duties and Conflicts

  	
  38

  
	
  7.5

  	
  Company Expenses

  	
  40

  
	
  7.6

  	
  Venture Coordinator

  	
  40

  
	
  7.7

  	
  Enforcement of Affiliate Agreements

  	
  40

  
	
  ARTICLE VIII

  	
  BOOKS, RECORDS, REPORTS AND
  PROPERTY PLAN

  	
  40

  
	
  8.1

  	
  Books and Records

  	
  40

  
	
  8.2

  	
  Accounting and Fiscal Year

  	
  41

  
	
  8.3

  	
  Reports

  	
  41

  
	
  8.4

  	
  The Company Accountant

  	
  43

  
	
  8.5

  	
  Reserves

  	
  43

  
	
  8.6

  	
  The Budget and Operating Plan

  	
  43

  
	
  8.7

  	
  Accounts

  	
  44

  
	
  8.8

  	
  REIT Matters

  	
  44

  
	
  ARTICLE IX

  	
  TRANSFER OF INTERESTS

  	
  44

  
	
  9.1

  	
  No Transfer

  	
  44

  
	
  9.2

  	
  Permitted Transfers

  	
  45

  
	
  9.3

  	
  Transferees

  	
  46

  
	
  9.4

  	
  Section 754 Election

  	
  46

  
	
  9.5

  	
  Other Transfers

  	
  47

  
	
  ARTICLE X

  	
  EXCULPATION AND INDEMNIFICATION

  	
  49

  
	
  10.1

  	
  Exculpation

  	
  49

  
	
  10.2

  	
  Indemnification

  	
  49

  
	
  ARTICLE XI

  	
  DISSOLUTION AND TERMINATION

  	
  50

  
	
  11.1

  	
  Dissolution

  	
  50

  
	
  11.2

  	
  Termination

  	
  51

  
	
  11.3

  	
  Liquidating Member

  	
  52

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  11.4

  	
  Claims of the Members

  	
  52

  
	
  ARTICLE XII

  	
  DEFAULT BY MEMBER

  	
  52

  
	
  12.1

  	
  Events of Default

  	
  52

  
	
  12.2

  	
  Effect of Event of Default

  	
  53

  
	
  ARTICLE XIII

  	
  MISCELLANEOUS

  	
  53

  
	
  13.1

  	
  Representations and Warranties of the Members

  	
  53

  
	
  13.2

  	
  Further Assurances

  	
  55

  
	
  13.3

  	
  Notices

  	
  55

  
	
  13.4

  	
  Governing Law

  	
  56

  
	
  13.5

  	
  Captions

  	
  56

  
	
  13.6

  	
  Pronouns

  	
  56

  
	
  13.7

  	
  Successors and Assigns

  	
  56

  
	
  13.8

  	
  Extension Not a Waiver

  	
  56

  
	
  13.9

  	
  Creditors Not Benefited

  	
  56

  
	
  13.10

  	
  Recalculation of Interest

  	
  56

  
	
  13.11

  	
  Severability

  	
  57

  
	
  13.12

  	
  Entire Agreement

  	
  57

  
	
  13.13

  	
  Publicity

  	
  57

  
	
  13.14

  	
  Confidentiality

  	
  57

  
	
  13.15

  	
  Venue

  	
  58

  
	
  13.16

  	
  Waiver of Jury Trial

  	
  59

  
	
  13.16

  	
  Cooperation

  	
  59

  
	
  13.17

  	
  Counterparts

  	
  59

  
	
  13.18

  	
  Attorneys’ Fees

  	
  59

  
	
  ARTICLE XIV

  	
  PATRIOT ACT

  	
  59

  
	
  14.1

  	
  Compliance with International Trade Control Laws and OFAC
  Regulations

  	
  59

  
	
  14.2

  	
  Member’s Funds

  	
  60

  
	
  14.3

  	
  Member Compliance with Patriot Act

  	
  60

  
	
  14.4

  	
  Cooperation with Other Members

  	
  60

  
	
  14.5

  	
  Actions Taken Pursuant to Anti-Money Laundering Laws

  	
  60

  

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
  BUY-SELL PROCEDURE

  	
  61

  
	
  15.1

  	
  General Provisions

  	
  61

  
	
  15.2

  	
  Termination of Other Agreements

  	
  62

  
	
  15.3

  	
  Power of Attorney

  	
  63

  
	
  ARTICLE XVI

  	
  RIGHT OF BH TO TRIGGER SALE OF
  THE PROPERTY; ROFO

  	
  63

  
	
  16.1

  	
  ROFO on the Sale of the Property

  	
  63

  
	
  16.2

  	
  Termination of Other Agreements

  	
  65

  
	
  16.3

  	
  Power of Attorney

  	
  65

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  9

  
	
  1.1

  	
  Account

  	
  9

  
	
  1.2

  	
  Affiliate

  	
  9

  
	
  1.3

  	
  Annual Business Plan

  	
  10

  
	
  1.4

  	
  Approved Leasing Parameters

  	
  10

  
	
  1.5

  	
  Behringer Harvard

  	
  10

  
	
  1.6

  	
  Behringer Harvard REIT

  	
  10

  
	
  1.7

  	
  Capital Budget

  	
  10

  
	
  1.8

  	
  CGL

  	
  10

  
	
  1.9

  	
  Code

  	
  10

  
	
  1.10

  	
  Controlling Agreements

  	
  10

  
	
  1.11

  	
  Executive Order

  	
  10

  
	
  1.12

  	
  Exhibits

  	
  10

  
	
  1.13

  	
  GAAP

  	
  10

  
	
  1.14

  	
  Governmental Requirements

  	
  10

  
	
  1.15

  	
  Gross Revenues

  	
  10

  
	
  1.16

  	
  Intellectual Property Rights

  	
  10

  
	
  1.17

  	
  Leases

  	
  11

  
	
  1.18

  	
  Losses

  	
  11

  
	
  1.19

  	
  Management Fee

  	
  11

  
	
  1.20

  	
  Manager Indemnified Parties

  	
  11

  
	
  1.21

  	
  Monthly Report Deadline

  	
  11

  
	
  1.22

  	
  Mortgagee

  	
  11

  
	
  1.23

  	
  OFAC

  	
  11

  
	
  1.24

  	
  OFAC Screening

  	
  11

  

 

iv

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.25

  	
  On-Site Manager

  	
  11

  
	
  1.26

  	
  Operating Budget

  	
  11

  
	
  1.27

  	
  Owner

  	
  11

  
	
  1.28

  	
  Person

  	
  11

  
	
  1.29

  	
  Prohibited Person

  	
  11

  
	
  1.30

  	
  Property Data

  	
  11

  
	
  1.31

  	
  Proprietary Property

  	
  11

  
	
  1.32

  	
  Qualifying Income

  	
  11

  
	
  1.33

  	
  REIT

  	
  11

  
	
  1.34

  	
  Subcontractor Employees

  	
  11

  
	
  1.35

  	
  Subcontractor Indemnified Parties

  	
  11

  
	
  1.36

  	
  Texas Tax Code

  	
  12

  
	
  1.37

  	
  Unauthorized Acts

  	
  12

  
	
  ARTICLE II

  	
  ENGAGEMENT OF SUBCONTRACTOR;
  SUBCONTRACTOR’S DUTIES AND AUTHORITY

  	
  12

  
	
  2.1

  	
  Engagement

  	
  12

  
	
  2.2

  	
  Master Agreement

  	
  12

  
	
  2.3

  	
  Status of Subcontractor; Limitation on Authority

  	
  12

  
	
  2.4

  	
  Subcontractor’s Standard of Care

  	
  12

  
	
  2.5

  	
  On-Site Manager

  	
  13

  
	
  2.6

  	
  Employment of Personnel

  	
  13

  
	
  2.7

  	
  Information

  	
  14

  
	
  2.8

  	
  Emergency Contact

  	
  14

  
	
  2.9

  	
  Treatment Under Texas Margin Tax

  	
  14

  
	
  2.10

  	
  Controlling Agreements

  	
  14

  
	
  ARTICLE III

  	
  SERVICES TO BE PERFORMED BY
  SUBCONTRACTOR

  	
  14

  
	
  3.1

  	
  Subcontractor’s Expenses

  	
  14

  
	
  3.2

  	
  Covenants Concerning Payment of Operating Expenses

  	
  15

  
	
  3.3

  	
  Leasing of Premises

  	
  15

  
	
  3.4

  	
  Utility and Service Contracts

  	
  16

  
	
  3.5

  	
  Maintenance and Repair of the Project

  	
  17

  
	
  3.6

  	
  Supervision of Capital Improvements or Major Repairs

  	
  17

  

 

v

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  3.7

  	
  Collection of Monies

  	
  18

  
	
  3.8

  	
  Subcontractor Disbursements

  	
  18

  
	
  3.9

  	
  Use and Maintenance of Premises

  	
  19

  
	
  3.10

  	
  Insurance and Indemnification

  	
  19

  
	
  3.11

  	
  Annual Business Plan

  	
  22

  
	
  3.12

  	
  Records

  	
  23

  
	
  3.13

  	
  Monthly Reports

  	
  23

  
	
  3.14

  	
  Compliance with Legal Requirements

  	
  24

  
	
  3.15

  	
  Performance of Accounting Function

  	
  25

  
	
  ARTICLE IV

  	
  SUBCONTRACTOR’S COMPENSATION,
  TERM

  	
  27

  
	
  4.1

  	
  Management Fee

  	
  27

  
	
  4.2

  	
  Term

  	
  27

  
	
  4.3

  	
  Subcontractor’s Obligations Upon Termination

  	
  27

  
	
  4.4

  	
  Manager’s Obligations Upon Termination

  	
  28

  
	
  ARTICLE V

  	
  PROCEDURES FOR HANDLING RECEIPTS
  AND OPERATING CAPITAL

  	
  28

  
	
  5.1

  	
  Security Deposits

  	
  28

  
	
  5.2

  	
  Banking Accommodations

  	
  28

  
	
  5.3

  	
  Depository Accounts

  	
  29

  
	
  5.4

  	
  Working Capital

  	
  29

  
	
  5.5

  	
  Authorized Signatures

  	
  29

  
	
  ARTICLE VI

  	
  MISCELLANEOUS

  	
  30

  
	
  6.1

  	
  Assignment

  	
  30

  
	
  6.2

  	
  Notices

  	
  30

  
	
  6.3

  	
  Entire Agreement

  	
  30

  
	
  6.4

  	
  No Waiver

  	
  30

  
	
  6.5

  	
  No Partnership

  	
  30

  
	
  6.6

  	
  Severability

  	
  30

  
	
  6.7

  	
  No Third Party Beneficiary

  	
  30

  
	
  6.8

  	
  Captions, Plural Terms

  	
  31

  
	
  6.9

  	
  Activities of Subcontractor

  	
  31

  
	
  6.10

  	
  Attorneys’ Fees

  	
  31

  

 

vi

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  6.11

  	
  Signs

  	
  31

  
	
  6.12

  	
  Documents Required by Lender

  	
  31

  
	
  6.13

  	
  Survival of Indemnities

  	
  31

  
	
  6.14

  	
  Publicity

  	
  31

  
	
  6.15

  	
  Specific Performance

  	
  31

  
	
  6.16

  	
  Compliance with Laws

  	
  32

  
	
  6.17

  	
  Ownership of Proprietary Property

  	
  32

  
	
  6.18

  	
  Governing Law, Venue

  	
  32

  
	
  6.19

  	
  Counterparts

  	
  32

  
	
  6.20

  	
  Savings Clause

  	
  32

  
	
  6.21

  	
  Compliance Amendments

  	
  32

  
	
  6.22

  	
  REIT Compliance

  	
  32

  
	
  6.23

  	
  Sarbanes-Oxley

  	
  33

  
	
  6.24

  	
  Prohibited Persons and Transactions

  	
  33

  

 

Appendix
A-1  FORM OF PROPERTY
AMENDMENT

Appendix
A-2  FORM OF PROPERTY
MANAGEMENT SUBCONTRACT

Appendix
B  INITIAL APPROVED BUDGET
AND OPERATING PLAN

 

vii

 

LIMITED
LIABILITY COMPANY AGREEMENT OF

7900 HAMPTON BLVD, LLC

 

THIS LIMITED
LIABILITY COMPANY AGREEMENT of 7900 HAMPTON BLVD, LLC dated September 17,
2010 (as amended, restated, replaced, supplemented or otherwise modified from
time to time, this “Agreement”), is made by, between and among BEHRINGER
HARVARD PARROT’S LANDING, LLC, a Delaware limited liability company (together
with its successors and permitted assigns, “BH”), and HAMPTON PEAK, LLC,
a Colorado limited liability company (together with its successors and
permitted assigns, “HP”).

 

WHEREAS, the Company
(as hereinafter defined) was formed pursuant to a Certificate of Formation
signed by Douglas J. Becker as authorized person (the “Certificate of
Formation”), filed with the Secretary of State of Delaware on July 29,
2010.

 

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

 

ARTICLE I

DEFINED TERMS

 

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

 

“Acceptable
Transfer Terms” has the meaning set forth in Section 9.5(a).

 

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

 

“Adjusted Capital
Account” means, with respect to any Member, the balance, if any, in that
Member’s Capital Account after crediting to such Capital Account the amount
such Member is deemed obligated to restore pursuant to the penultimate
sentences of Treasury Regulation Sections 1.704-2(g)(1) and (i)(5).

 

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

 

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

 

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

 

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

 

“Affiliate” or
“Affiliated” means, with respect to any Person, (a) any other
Person directly or indirectly Controlling, Controlled by, or under common
Control with such Person and (b) for the avoidance of doubt, all HP
Persons are Affiliates of HP.

 

1

 

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

 

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

 

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

 

“Acquisition Loan”
has the meaning set forth in Section 4.5.

 

“Asset Management
Fee” has the meaning set forth in Section 7.3(b).

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Capital
Transaction” means any insurance award, condemnation, sale of all or any
portion of the Company Property or interest therein, sale of easements, rights
of way or similar

 

3

 

interest in the
Company Property, any financing or refinancing of indebtedness secured by part
or all of the Company Property, and any similar items, and any other
transaction undertaken as part of or which results in the dissolution of the
Company.

 

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

 

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

 

(i)            The failure of at least two (2) HP
Persons to be a manager of HP and to actively and consistently participate in
the management of HP;

 

(ii)           The failure at least two (2) HP
Persons, together, to both own a Controlling Interest in HP and actively
Control HP;

 

(iii)          HP is dissolved, terminated,
liquidated, merged, consolidated or reorganized into or with another Person;

 

(iv)          More than one HP Person
sells all or substantially all of its real estate related assets or investments
to any Person other than as part of a permitted Transfer;

 

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

 

(vi)          The occurrence of a
Bankruptcy Event involving HP; or

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

	
  Member

  	
   

  	
  Contribution Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BH

  	
   

  	
  90

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  HP

  	
   

  	
  10

  	
  %

  

 

“Control”
means, when used with respect to any Person, the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities or other beneficial interests, by contract or
otherwise, and the terms “Controlling,” “Controlled by” and “under common
Control with” shall have the meanings correlative therewith.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“First Tier
Capital Transaction Promote Percentage” means 35.0%, subject to adjustment
as provided in Section 4.2(d).

 

5

 

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

 

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

 

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

 

“HP Member Group”
means the collective reference to HP and all HP Persons.

 

“HP Person”
means Luke C. Simpson, Donald A. Simpson and Nick A. Simpson.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Management
Agreements” means the collective reference to the Primary Management
Agreement and the Property Management Subcontract.

 

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

 

7

 

“Material Damage
or Loss” is a violation, breach or default which causes losses or damages
in excess of $200,000.00.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Operating
Revenues” means, for any period, the sum of the total gross cash revenues
received by the Company during such period from operations, including all
receipts of the Company from (a) proceeds from Capital Contributions ,
(b) rent (including additional rent and percentage rent) paid to the
Company (including for parking facilities), (c) concessions,
(d) expense reimbursements, (e) proceeds from rent or business
interruption insurance, if any, (g) funds made available to the extent
such funds are withdrawn from the Company’s reserve accounts and deposited into
the Company’s operating accounts, and (h) all other operating revenues and
receipts realized by the Company, including, without limitation, distributions
and 

 

9

 

other payments and
amounts received directly or indirectly from any entity in which the Company
owns an interest (and attributable to operations) and interest accrued on any
funds held by the Company; provided,
however, that Operating Revenues shall not include any revenues or
receipts realized by the Company incident to or from a Capital Transaction,
including the dissolution and liquidation of the Company.

 

“Operations
Promote Percentage” means fifteen percent (15%), subject to adjustment as
provided in Section 4.2(d).

 

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

 

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

 

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

 

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

 

“Primary
Management Agreement” means (i) that certain Amended and Restated
Property Management Agreement dated as of August 13, 2008, by and among
Behringer Harvard Opportunity REIT II, Inc. (“BHOP REIT II”),
Behringer Harvard Opportunity OP II LP (“BHOP II”) and Behringer Harvard
Opportunity II Management Services, LLC, its successors and permitted assigns (“Manager”)
to the extent applicable to the Property as a result of a Property Amendment to
be entered into on or before the Closing by the Company, BHOP REIT II, BHOP II,
and Manager on the form attached hereto as Appendix A-1.

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

“Property”
shall have the meaning set forth in the Purchase Agreement.

 

“Property
Management Subcontract” means that certain Property Management Subcontract
entered into on or before the Closing Date between the Manager and Grand Peaks
Property Management, LLC, its successors and permitted assigns (“Submanager”)
in the form attached hereto as Appendix A-2.

 

“Purchase
Agreement” means that certain Purchase and Sale Agreement and Agreement to
Enter into Ground Lease, effective May 27, 2010 as amended, between
Seller, as seller, and Purchaser, to which the Company shall take an assignment
of Purchaser’s interest to purchase the Property as provided herein, as the
same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.

 

“Purchaser”
means Grand Peaks Properties, LLC and its assigns.

 

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

 

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

 

“Recipient Party”
has the meaning set forth in Section 9.5(a).

 

11

 

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

 

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

 

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

 

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

 

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

 

“Second Tier
Capital Transaction Promote Percentage” means 50.0%, subject to adjustment
as provided in Section 4.2(d).

 

“Seller” means
the collective reference to Parrot’s Landing Florida Phase I LLC, a Delaware
limited liability company, and Parrot’s Landing Florida Phase II LLC, a Delaware
limited liability company.

 

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

 

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

 

“Submanager”
has the meaning set forth in the definition of “Property Management Subcontract.”

 

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

 

“Target Interest”
has the meaning set forth in Section 9.5(a).

 

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

 

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

 

“Transfer Election”
has the meaning set forth in Section 9.5(a).

 

“Transfer Escrow
Agent” has the meaning set forth in Section 9.5(b).

 

12

 

“Transfer Escrow
Deposit” has the meaning set forth in Section 9.5(b).

 

“Transfer ROFO
Notice” has the meaning set forth in Section 9.5(a).

 

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

 

“Triggering Party”
has the meaning set forth in Section 9.5(a).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE II

ORGANIZATION

 

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

 

2.2           Name and Principal Place of
Business.

 

(a)           The name of the Company is
set forth on the cover page to this Agreement.  Subject to the Approval of BH, the Managing
Member may change the name of the Company or adopt such trade or fictitious
names for use by the Company as the Managing 

 

13

 

Member may from time to time determine.  All business of the Company shall be
conducted under such name, and title to all Company Property shall be held in
such name.

 

(b)           The principal place of
business and office of the Company shall be located at 4582 South Ulster Street
Parkway, Suite 1200, Denver, Colorado 80237.

 

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

 

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

 

2.5           Purpose.

 

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

 

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

 

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

 

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

 

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

 

ARTICLE III

MEMBERS

 

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

 

14

 

 

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

 

ARTICLE IV

CAPITAL

 

4.1           Initial Capital Contributions.

 

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

 

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

 

15

 

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

 

(ii)           Provided that the Company acquires the Property pursuant
to the Purchase Agreement, the Company shall pay or reimburse each Member for
the portion of any Deposit and Rate Lock Fees it made after the date the
Purchase Agreement is assigned to the Company and all Pursuit Costs actually
incurred by such Member in good faith pursuant to the terms hereof to the
extent set forth in a budget approved by all Members, or shall credit such
amounts against such Member’s Initial Capital Contribution as provided in
Section 4.1(d) below, so that each Member’s share of such costs shall
be in proportion to their respective Contribution Percentages.  If BH elects not to cause the Company to
acquire the Property or the Company fails to acquire the Property for any
reason, then, each Member shall be responsible for and pay all Pursuit Costs
incurred by such Member.

 

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

 

(iv)          Notwithstanding anything to the contrary in this Agreement,
the Company shall pay any brokerage fee or commission payable to NorthMarq and
AmeriSphere in connection with the acquisition of the Property and the Loan. HP
and the HP Persons represent and warrant that the amount of the fee or
commission payable to NorthMarq in connection with the equity being contributed
to the Company by BH shall not exceed $135,000 and the maximum amount of loan
or commitment fees payable to the lender under the Loan will not exceed
$156,763.40 and that no portion of any such fees are or will be payable or paid
to HP, any Affiliate of HP, or any HP Person.

 

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

 

(d)           Closing Contributions.  In the event that BH decides to cause the
Company to close the purchase of the Property pursuant to the Purchase Agreement,
then on or before the Closing Date, the Members shall contribute in cash (or be
credited to the extent as provided in Sections 4.1(a) and 4.1(b)(ii) with
making cash contributions) to the capital of the Company their pro rata share (based upon their relative Contribution
Percentages) of the sum of (x) the amount reasonably necessary to close
the acquisition of the Property, closing costs, Pursuit Costs, other amounts
payable or reimbursable by the Company under Section 4.1(b) and
(y) a reasonable amount of initial working capital and reserves (which
shall include anticipated capital expenditures to be made in the period
following acquisition of the Property as set forth in the Initial Approved
Budget and Operating Plan as well as any and all anticipated third party loan 

 

16

 

commitment fees and closing costs which may be
incurred in connection with any permanent financing to be obtained by the
Company) for the Company, as Approved by the Members.  HP will deliver to the Members for Approval a
statement of sources and uses for the closing and a detailed estimate of the
Initial Capital Contributions.  Amounts
payable to the Company by a Member on the Closing Date may be set off from
amounts the Company owes to a Member and each Member shall receive credits for
payments made prior to the Closing Date for amounts paid to a third party as
set forth in such Approved closing statement.

 

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

 

4.2           Additional Capital Contributions.

 

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

 

(b)           Notwithstanding anything to the contrary contained herein,
a failure by any Member to make any Additional Capital Contribution to the
extent required or requested hereunder shall not constitute an Event of Default
by such Member and the sole consequences of 

 

17

 

such failure shall be as set forth in this Section 4.2.  If BH or HP (the “Non-Contributing Party”)
fails to timely make all or any portion of any Additional Capital Contribution
as required pursuant to Section 4.2(a) above and the other party (the
“Contributing Party”) makes all of its share of any Additional Capital
Contribution as required pursuant to Section 4.2(a) above, then the
Contributing Party may make the full amount of such Additional Capital Contribution
on behalf of the Non-Contributing Party (any such Capital Contribution by a
Contributing Party, a “Substitute Contribution”).  In such an event, the Contributing Party may
elect by written notice given within five (5) Business Days of making the
Substitute Contribution either (i) to treat the entire amount contributed
by the Contributing Party (including both the Contributing Party’s and the
Non-Contributing Party’s pro rata
portion thereof) as a Priority Capital Contribution (a “Priority Capital Contribution”)
by such Contributing Party in accordance with Section 4.2(c) below,
or (ii) to treat the Substitute Contribution as a regular Capital
Contribution in accordance with Section 4.2(d) below.

 

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

 

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

 

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

 

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

 

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

 

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

 

and the Contribution
Percentage of the Non-Contributing Party shall be reduced by the percentage
necessary to insure that the Contribution Percentages add up to 100%.  At the same time, the Promote Percentages of
each Member shall be adjusted (increased or decreased in the same proportions
as the Contribution Percentages were adjusted pursuant to the foregoing provisions
(e.g., if a Member’s Contribution
Percentage is reduced by half or 50%, then the Promote Percentages of such
Member will also be reduced by half or 50%). 
In addition, an 

 

18

 

amount of Unreturned Capital
Contributions equal to such Excess Amount shall be treated as having been
transferred from the Non-Contributing Party to the Contributing Party but such
transfer shall be solely for the purpose of computing preferred return pursuant
to Sections 6.3(b) and 6.4(b) and Unreturned Capital
Contributions pursuant to Section 6.4(c) with the result that each
Member will have Unreturned Capital Contributions in proportion to its adjusted
Contribution Percentage after giving effect to such transfer.  The Capital Accounts shall be adjusted
accordingly.

 

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

 

(e)           Each Member acknowledges and agrees that the other Members
would not be entering into this Agreement were it not for (i) the Members
agreeing to make the Capital Contributions provided for in this Section 4.2,
and (ii) the remedy provisions set forth above in this Section 4.2.  Each Member acknowledges and agrees that in
the event any Member fails to make its Capital Contributions pursuant to this
Agreement, the other Members will suffer substantial damages and the remedy
provisions set forth above are fair, just and equitable in all respects.

 

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

 

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

 

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

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

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

 

(c)           The provisions of this Section 4.3 and any other
provisions of this Agreement relating to the maintenance of Capital Accounts
have been included in this Agreement to comply with Section 704(b) of
the Code and the Treasury Regulations promulgated thereunder and will be
interpreted and applied in a manner consistent with those provisions.

 

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

 

4.5           Acquisition Loan.

 

(a)           It is acknowledged that both BH and the Managing Member on
behalf of the Company shall use good faith efforts to secure a permanent loan
secured by all or a portion of the Company Property (the “Acquisition Loan”)
in the minimum amount of $29,578,000 on terms which are acceptable to both BH
and the Managing Member, the proceeds of which will be applied on the Closing
Date to pay a portion of the purchase price for the Property under the Purchase
Agreement.

 

(b)           If either BH or the Managing Member does not Approve a
financing proposal for an Acquisition Loan presented by the other party (the “Presenting
Member”), the party who fails to Approve such proposal (the “Rejecting
Member”) must identify to the Presenting Member the basis for such
disapproval in writing, and provided that the Seller under the Purchase
Agreement agrees to extend the Closing Date, and the Rejecting Member will
thereafter have a period of sixty (60) calendar days in which to obtain an
alternative financing commitment including terms not materially worse (taken as
a whole) than the financing terms originally proposed by the Presenting Member
and including improved or different terms with respect to the item(s) the
Rejecting Member originally identified as the reason for its disapproval.  If the Rejecting Member has not delivered to
the Presenting Member a financing 

 

20

 

commitment on such revised terms by the end of such
sixty-day period, the Presenting Member shall be empowered to alone cause the
Company to Approve the original financing proposal by such Member
(notwithstanding the provisions of Section 7.1(a)(ii)).  Each Member agrees to act in a commercially
reasonable manner in proposing, voting to Approve or dis-Approve or otherwise
acting in connection with a financing proposal under Section 7.1(a)(ii) or
under this Section 4.5.

 

(c)           The HP Persons will be the Key Principal (as such term is
defined in the Loan Documents) and shall be responsible for the recourse
carve-outs under the Loan Documents. 
Except in the case of an acquisition of HP’s interest by BH as provided
in this Agreement, neither BH nor any of its affiliates shall be designated as
the Key Principal or liable under any recourse carve-outs under the Loan
Documents, provided that the Loan Documents may provide for the substitution of
BH or an Affiliate of BH acceptable to BH and the lender as Key Principal.

 

ARTICLE V

INTERESTS IN THE COMPANY

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

21

 

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

 

ARTICLE VI

ALLOCATIONS AND
DISTRIBUTIONS

 

6.1           Allocations. 
After application of Section 6.2, Profits and Losses for each
fiscal year or the applicable portion thereof shall be allocated among the
Members as of each Adjustment Date so as to reduce, proportionally, in the case
of Profits, the differences between their respective Target Accounts and
Partially Adjusted Capital Accounts as of each Adjustment Date and in the case
of Losses, the differences between their respective Partially Adjusted Capital
Accounts and Target Accounts as of each Adjustment Date. To the extent, that in
the fiscal year in which all or substantially all of the Company’s assets are
disposed of, or in the fiscal year in which the Company is liquidated, the
allocation of Profit or Loss set forth in the preceding sentence does not cause
each Member’s Partially Adjusted Capital Account to equal such Member’s Target
Account, items of income or gain will be reallocated to any Member with a
Partially Adjusted Capital Account which is less than its Target Account, and
items of loss, deduction or expense will be reallocated to any Member with a
Partially Adjusted Capital Account that is greater than its Target Account, in
such manner as to reduce, to the greatest extent possible, the difference
between each Member’s respective Target Account and its Partially Adjusted
Capital Account.

 

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

 

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

 

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

 

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

 

(d)           Any Member who unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes or
increases a negative balance in his or its Capital Account shall be allocated
items of 

 

22

 

Profit sufficient to eliminate such increase or
negative balance caused thereby, as quickly as possible, to the extent required
by such Treasury Regulation.

 

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

 

(f)            For purposes of Section 752 of the Code and the
Treasury Regulations thereunder, excess non-recourse liabilities (within the
meaning of Treasury Regulations Section 1.752-3(a)(3)) shall be allocated
to the Members pro rata in proportion to
their respective Contribution Percentages.

 

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

 

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

 

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

 

(c)           Third, remaining Net Cash Flow shall be distributed
pari passu to the Members in accordance
with their respective Contribution Percentages until the Members have received
aggregate distributions sufficient to generate a 14% IRR in respect to such
Members’ respective Capital Contributions.

 

(d)           Fourth, remaining Net Cash Flow shall be
distributed pari passu as follows:

 

(i)            In amount equal to the Operations Promote Percentage to
be distributed to HP as an incentive distribution, and

 

23

 

(ii)           With the remaining balance of Net Cash Flow being
distributed to the Members pro rata
based on their Contribution Percentages.

 

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

 

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

 

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

 

(c)           third, remaining Net Capital Proceeds shall be
distributed pari passu to the Members in accordance
with their respective Capital Contributions until the Members have received
aggregate distributions sufficient to generate a 14% IRR in respect to such
Members’ respective Capital Contributions;

 

(d)           fourth, a percentage of the remaining Net Capital
Proceeds, if any, equal to the Operations Promote Percentage to HP and the
balance to the Members (pro rata
in accordance with the Contribution Percentages) until aggregate distributions
have been made to the Members in an amount necessary to provide an 18% IRR to
all Members with respect to their respective total Capital Contributions to the
Company;

 

(e)           fifth, a percentage of the remaining Net Capital
Proceeds, if any, equal to the First Tier Capital Transaction Promote
Percentage to HP and the balance to the Members (pro rata in accordance with the Contribution Percentages)
until aggregate distributions have been made to the Members in an amount
necessary to provide a 22% IRR to all Members with respect to their respective
total Capital Contributions to the Company; and

 

24

 

(f)            sixth, a percentage of the remaining Net Capital
Proceeds, if any, equal to the Second Tier Capital Transaction Promote
Percentage to HP and the balance to the Members (pro rata in accordance with the Contribution Percentages).

 

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

 

6.6           Distributions in Liquidation.

 

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

 

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

 

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

 

25

 

 

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

 

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

 

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

 

ARTICLE VII

MANAGEMENT

 

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

 

(a)                                  The Managing
Member shall have responsibility for establishing the policies and operating
procedures with respect to the business and affairs of the Company and for
making all decisions as to all matters which the Company has authority to
perform.  Subject to the remaining
provisions of this Article VII, all decisions made with respect to the
management and control of the Company and Approved by the Managing Member shall
be binding on the Company and all Members. 
The Managing Member may elect officers of the Company to implement the
decisions (including without limitation executing documents) of the Managing
Member from time to time.  The Managing
Member shall be responsible for performing, or for causing to be performed, and
shall have the authority to perform (subject to the requirement of receiving BH’s
Approval, as applicable, if and when required by the terms hereof), the duties
described in Section 7.2.  Except as
otherwise expressly provided in this Agreement or as otherwise previously
Approved by BH, or provided for in any Approved Budget or Operating 

 

26

 

Plan, the Managing Member shall not cause the
Company to undertake any of the following matters without the prior Approval of
BH (a “Major Decision”):

 

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

 

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

 

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

 

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

 

(v)                                 any
improvement, renovation, development, rehabilitation, alteration, repair, or
completion of construction of any Company Property, or taking any action
relating thereto which burdens or encumbers the Company Property, which is not
otherwise subject to any Approved Budget and Operating Plan;

 

(vi)                              any activity
which generates revenues, or which is otherwise on terms that vary materially
from the ranges and guidelines in the Approved Budget or Operating Plan;
provided that, for purposes of this Section 7.1(a)(vi), such a material
variance shall include (I) an amount that is not within the ranges
established in the 

 

27

 

Approved Operating Plan or
is in excess of the amount set forth in the Approved Budget for such revenues,
expenditure or line item by more than five
percent (5.0%) of the line item or five percent (5.0%) of the total Budget, whichever is less (in
addition to individual expenditures and obligations, such test shall be applied
to aggregate expenditures and obligations made on a quarterly basis as well),
and (II) terms that materially conflict with any other guidelines in the
Operating Plan regarding such transactions or any other requirements of BH;

 

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

 

(viii)                        the making of
any recurring operating expenditure or incurring of any recurring operating
obligation by or on behalf of the Company that varies materially from the
Approved Budget or entering into (or amending or modifying) of any agreement
which was not specifically included or contemplated in the Approved Budget or
Approved Operating Plan, or otherwise Approved by BH; provided that, for
purposes of this Section 7.1(a)(viii), such a material variance shall
include (A) expenditures or obligations involving an amount that is in
excess of the amount set forth on a quarterly basis or on an annual basis in
the Approved Budget or Approved Operating Plan for such expenditure on a line
item basis by more than five percent
(5.0%) of the line item or five
percent (5.0%) of the total Budget, whichever is less, for such period,
(B) expenditures or obligations involving the incurrence of an expenditure
or obligation for any transaction or any series of related transactions when
taken with all prior expenditures or obligations during the particular quarter
or fiscal year related thereto exceeds the maximum expenditure amount provided
in the Approved Budget or the Approved Operating Plan for such particular
transaction or series of transactions for such period by the lesser of five percent (5.0%)   of such maximum
expenditure amount for such particular transaction or series of transactions
for such period or five percent (5.0%)
of the total Budget for such period, or (C) in the case of any material
service, maintenance or similar agreement proposed to be entered into, such
agreement is not terminable (without penalty) by the Company on thirty (30)
days or less written notice to the other party; provided, however, that
expenditures made or obligations incurred or agreements entered into pursuant
to, or which are specifically included in or contemplated under, the Approved
Budget or the Approved Operating Plan shall not be Major Decisions to the
extent they do not vary from amounts, provisions and requirements set forth in
the Approved Budget and the Approved Operating Plan and provided, however, with
respect to any expenditures in excess of $25,000 which are not included in an
Approved Project Budget, the making of which do not constitute a Major
Decision, prior to making such expenditure, Manager shall provide notice to BH
of the amount of such expenditure and the underlying reason for making the
same;

 

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

 

28

 

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

 

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

 

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

 

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

 

(xiv)                         except with regard
to the Management Agreements to be executed on or before the Closing Date,
entering into any asset or property management or leasing or development
agreement, or other third party contract with respect to which funds are not
explicitly provided for, or the existence of which is not contemplated, in the
Approved Budget and/or Approved Operating Plan, as applicable, with regard to
the Company or any Company Property;

 

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

 

(xvi)                         exercising any
right, and the making of any material claim, demand or application, the conduct
of any material proceedings, the approval, consent or determination of any
material matter and/or the taking of any other material action by or on behalf
of the Company under any material agreement or contract to which the Company is
a party (including any Transaction Document);

 

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

 

29

 

(xviii)                   determining the types and
amounts of insurance coverage for the Company and the Company Property, and the
deductibles and underwriters with regard thereto;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(xxviii)              with regard to any other
Person in which the Company holds a direct or indirect equity interest, the
making of any decision, taking any action or providing any consent or approval
with regard to any matter which if made or taken by the Company would have been
a Major Decision as set forth in this Agreement or which requires the consent
of approval of the shareholders, board of directors, executive committee,
managing members, general partners or similar management body or persons of any
other Person in which the Company holds an equity interest pursuant to any
agreement, contract, document or law;

 

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

 

30

 

require any pre-payment of
indebtedness owed by the Company as a result of the exercise of the Members’
rights pursuant to Section Article XV or Article XVI;

 

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

 

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

 

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

 

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

 

(xxxiv)               Approval of any federal,
state or local tax return to be filed on behalf of the Company, which Approval
may not be unreasonably withheld, delayed or conditioned;

 

(xxxv)                  any release, compromise,
assignment or transfer of any material claims of or any material rights or
benefits of the Company;

 

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

 

(xxxvii)            settlement of any insurance
claims by the Company where the amount in controversy is greater than $25,000;

 

(xxxviii)         any decision regarding any
environmental matter relating to the Property, including, without limitation,
the adoption of and implementation of any operation and maintenance program or
any other program to remove or otherwise remediate hazardous materials or
relating to the introduction or allowance of any substance regulated of as a
hazardous substance under applicable Law (other than (1) supplies for
cleaning, maintenance and operations in commercially reasonable amounts
required for use in the ordinary course of business, provided such items are
incidental to the use of the Property and are used, stored and disposed of in
compliance with all applicable Requirements of Environmental Laws, and (2) gas,
oil and other ordinary automotive fluids contained in an ordinary manner in
motor vehicles visiting the Property in the ordinary course of business);
provided, however, with respect to any environmental matter that, if not timely
resolved, would result in a violation of any 

 

31

 

environmental indemnity or
covenant provided by an indemnitor under the Loan Documents or the Company to
any lender, tenant or insurance company, or would otherwise result in a
violation of law, BH hereby agrees to reply promptly (in no less than ten (10) days)
to requests regarding such environmental matters, provided that Managing Member
indicates the urgency of such request when providing notice of the Major
Decision;

 

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

 

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

 

(xli)                             establishing of
or additions to a pre-approved list of signatories on bank accounts (the
initial list of pre-approved signatories is attached hereto as Appendix C);
provided, however, either Member shall have the unilateral right to remove any
Person from such pre-approved list of signatories, and upon any such Person’s
removal, such Person shall immediately cease to have rights as a signatory on
bank accounts;

 

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

 

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

 

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

 

(xlv)                         [intentionally
omitted];

 

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

 

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

 

(b)                                 The Managing
Member shall have all of the same powers and duties as a general partner of a
limited partnership under the Laws of the State of Delaware, including, without
limitation (but subject to the other provisions of this Agreement), the full
power and authority to cause the Company to:

 

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

 

(ii)                                  in furtherance
of the Company’s purposes and business, borrow money, whether on a secured or
unsecured basis, refinance, recast, modify, amend, extend, compromise or
otherwise deal with any such loan, and in connection therewith, 

 

32

 

issue evidences of
indebtedness and secure the same by mortgages, deeds of trust, security
agreements or other similar documents affecting the assets of the Company;

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)                                  Notwithstanding
anything to the contrary contained in this Agreement, all Net Cash Flow and Net
Capital Proceeds of the Company shall be deposited into an account in the name
of the Company, as set forth in Section 7.2(c)(vi), prior to distribution
of all or any portion thereof pursuant to Article VI.  The designation of such account pursuant to
this Section 7.1(e) shall have no effect on the distributions to be
made pursuant to Article VI.

 

7.2                                 Duties of
Managing Member.

 

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

 

33

 

Approval of BH, if and when required by the terms
hereof.  Specifically, the Managing
Member shall:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

34

 

(iii)                               the Managing
Member shall be entitled to, and shall, expend funds in respect of debt service
on the Company’s financing (including the expense of curing any defaults
thereunder), utilities, real estate taxes and assessments, insurance and
emergency repairs, any annual or other periodic fees, or other expenditures
which the Managing Member determines are necessary for the continued ordinary
operation of the Company Property, including without limitation uninsured
losses or deductibles, operating shortfalls, repairs, additions or
modifications to comply with applicable Laws or insurance requirements,
insurance premiums for insurance policies Approved by BH, and any final orders,
judgments, or other proceedings and all costs and expenses related thereto,
regardless of whether the Budget has been approved or whether such expenditures
exceed the amounts provided for in the applicable Budget (all of the foregoing
described in this clause (iii), collectively, “Necessary Expenses”).

 

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

 

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

 

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

 

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

 

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

 

(v)                                 deliver to the
other Members promptly upon the receipt or sending thereof, copies of all
material notices, reports and communications (other than routine, usual and
customary notices and other standard communications) between the Company and
any lender, manager, governmental agencies, neighboring property owners,
community groups and other relevant third parties affecting all or any portion
of any 

 

35

 

Company Property, or any of
such other parties, which relates to any existing or pending default thereunder
or to any financial or operational information required by such Person;

 

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

 

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

 

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

 

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

 

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

 

(e)                                  Upon and after
the occurrence of any For Cause Event as described in this Section 7.2(e),
or any Event of Default with respect to any member of the HP Member Group, in
each case subject to any applicable cure rights, BH shall have the right in its
sole and absolute discretion to terminate HP as the Managing Member by the
delivery of written notice and, upon any such termination (1) BH may cause
the Company to terminate any Management Agreement with an Affiliate of HP
immediately and without payment of a termination fee, (2) BH may designate
a successor Managing Member (which may be itself or an Affiliate of BH), (3) any
distributions to the Members under Sections 6.3 and 6.4 shall no longer be made
under Sections 6.3 and 6.4 hereof and from that time forward shall be made
instead under Section 6.5 hereof; provided, however, that this clause (3) shall
only apply in the event of a termination of HP as the Managing Member as a
result of a Promote-Loss For Cause Event or an Event of Default, and (4) BH
may make a Buy-Sell Offer under Section 15.1 and, notwithstanding anything
to the contrary contained in this Agreement, BH shall have the unilateral right
and authority to make all decisions on behalf of the Company and cause the
Company to take any and all actions which BH, in its sole discretion, may
determine.  For the purposes of this
Agreement, a “For Cause Event” shall mean any of the following:

 

36

 

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

 

(ii)                                  any Change in
Control occurs; or

 

(iii)                               the Managing
Member takes any action which, under this Agreement, requires the consent or
Approval of BH, without obtaining such consent or Approval (except where BH is
required not to withhold such consent or Approval unreasonably, such consent or
Approval has been duly requested and BH has either unreasonably withheld it or
has failed, within thirty (30) days after such request, to state a reasonable objection
to such action in a written notice to the Managing Member); provided, however,
that in the event HP has inadvertently neglected to obtain the consent or
Approval of BH, HP shall have the right to cure any such action (if such action
is susceptible of cure) within a Reasonable Period by (A) reversing such
action (to the extent such action can be reversed without the Company or BH
suffering any damage or liability), or (B) taking such other steps as may
be necessary to cure any damage or loss to the Company or BH to the
satisfaction of BH in its sole discretion resulting from such unauthorized
action or omission within a Reasonable Period, which cure may include, but is
not limited to, payment by HP to the Company or BH of the amount of any damage
or loss to the Company or BH resulting from such unauthorized action, and upon
completion of such cure within a Reasonable Period, it shall be deemed that no
For Cause Event has occurred.  For
purposes of the preceding sentence, the inadvertent failure to HP to obtain the
consent of BH to the following actions shall be deemed susceptible of cure and,
accordingly, HP shall be afforded a Reasonable Period to cure same: the Major
Decisions described in Sections 7.1(a)(i)-(viii), 7.1(a)(xiv)-(xxi),
7.1(a)(xxviii), 7.1(a)(xxx), 7.1(a)(xxxviii), 7.1(a)(xlii), and
7.1(a)(xlv)-(xlvii).

 

(f)                                    Notwithstanding
anything to the contrary elsewhere in this Agreement, including Sections 6.5
and 7.2(e), HP may not be removed as the Managing Member and Section 6.5
shall not become applicable until such time as HP and its Affiliates are
released from liability and indemnified for events or matters occurring or
relating to the period after the date of removal of HP as the Managing Member
and which do not relate to acts or omissions of any of the HP Member Group or
any Person Affiliated with the HP Member Group consistent with the provisions
of Section 15.2 as if HP were the selling Member under such Section 15.2
(including the limitation thereof relating to environmental hazards).

 

37

 

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

 

7.3                                 Management of
the Property; Fees.

 

(a)                                  On the Closing
Date, the Managing Member shall cause the Company to enter into the Property
Amendment to add the Property to the Primary Management Agreement in the form
attached hereto as Appendix A-1 and the Property Management Subcontract
in the form attached hereto as Appendix A-2 which shall provide for the
payment of (i) market standard leasing commissions and (ii) management
fees in the aggregate amount of 3.75%, under the Primary Management Agreement
and 3.25% under the Property Management Subcontract of the Gross Revenues (as
defined therein) and subject to the terms set forth therein.

 

(b)                                 Provided that
the Property is purchased by the Company on the Closing Date, beginning on October 1,
2010, and continuing on the first day of each calendar month thereafter, until
termination of this Agreement, the Company will pay HP an asset management fee
(the “Asset Management Fee”) equal to Three Thousand Five Hundred
Dollars ($3,500).

 

(c)                                  Provided that
the Property is purchased by the Company on the Closing Date, the Company will
pay Purchaser an acquisition fee in the amount of Three Hundred Fifteen
Thousand dollars ($315,000) and will pay Behringer Harvard Opportunity Advisors
II LP, a Texas limited partnership (or its designee), an acquisition fee in the
amount of Three Hundred Fifteen Thousand dollars ($315,000).

 

7.4                                 Duties and
Conflicts.

 

(a)                                  The Members and
their respective officers, employees, and Affiliates shall devote such time to
the Company business as they deem to be necessary or desirable in connection
with their respective duties and responsibilities hereunder.  Except as provided hereunder or as otherwise
agreed to in writing by the Members, no Member nor any member, partner,
shareholder, officer, director, employee, agent or representative of any Member
shall receive any salary or other remuneration for its services rendered
pursuant to this Agreement.

 

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

 

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

 

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

 

38

 

loans on its own behalf or
on behalf of other entities with which any of the Members is affiliated or
otherwise;

 

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

 

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

 

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

 

(c)                                  Until such time
as the Company has been dissolved in accordance with Section 11.1, the HP
Member Group and its respective Affiliates shall not own or manage or
participate in the ownership or management of any competing multifamily
apartment project of the same general class and with similar rent parameters as
the Property within a three-mile radius of the Property that may compete with
or be detrimental to the Property, unless such ownership or management has been
Approved by BH in its sole discretion. Such Approval rights shall
(i) cease to be applicable at such time as either (A) the Company no
longer has any ownership interest in the Property, or (B) neither BH nor
any Affiliate has any interest in the Company; and (ii) not apply to the
existing projects of the HP Member Group and its Affiliates owned or managed on
the date of this Agreement

 

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

 

39

 

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

 

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

 

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

 

ARTICLE VIII

BOOKS, RECORDS, REPORTS
AND PROPERTY PLAN

 

8.1                                 Books and
Records.  The Managing Member shall
maintain, or cause to be maintained, at the expense of the Company, in a manner
customary and consistent with good accounting principles, practices and
procedures, a comprehensive system of office records, books and accounts (which
records, books and accounts shall be and remain the property of the 

 

40

 

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

 

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

 

8.3                                 Reports.

 

(a)                                  The Managing
Member will prepare, or cause to be prepared, at the expense of the Company,
and furnish to each Member the following within the periods set forth below
(provided that for so long as it diligently performs its obligations hereunder,
the Managing Member shall not be responsible for the delays of any Person that
is not an Affiliate of Managing Member or reputable accountants or auditors retained
by the Managing Member on behalf of the Company), all of which shall be
certified by the Managing Member as being true and correct:

 

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

 

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

 

(b)                                 The Managing
Member will prepare, or cause to be prepared, on an accrual basis in accordance
with GAAP and on a tax basis, at the expense of the Company, and 

 

41

 

furnish to each Member no later than January 15
after the end of each fiscal year of the Company the following, all of which
shall be certified by the Managing Member as being true and correct:

 

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

 

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

 

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

 

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

 

(v)                                 such other
supporting schedules, reports and backup information as are reasonably
requested by BH; provided that any such supporting schedules, reports, and
backup information shall not be required to be provided on less than fifteen
days notice.

 

(c)                                  In addition, if
requested by BH, the Managing Member will prepare, at the expense of the
Company, and furnish to each Member within forty-five (45) calendar days after
the end of each fiscal year of the Company, the final audited amount of net
income of the Company for such fiscal year and, within sixty (60) calendar days
after the end of such taxable year, each of the following, all of which shall
be certified by the Managing Member as being true and correct and all of which
shall be certified in the customary manner by the Company Accountant (which firm
shall provide such balance sheet, income statement and statement of Capital
Account in draft form to the Members for review prior to finalization and
certification thereof) (i) an audited balance sheet of the Company dated
as of the end of such taxable year; (ii) an audited related income
statement of the Company for such taxable year; (iii) an audited statement
of cash flows for such taxable year; and (iv) an audited statement of each
Member’s Capital Account for such taxable year.

 

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

 

(e)                                  The Managing
Member shall prepare, or cause to be prepared, at Company expense, such
additional financial reports and other information as BH may determine are
appropriate.  The Managing Member will
furnish to each Member upon request, at the 

 

42

 

expense of the Company, copies of all reports,
statements, notices and other material written information received by the
Company or the Managing Member from, or delivered by or on behalf of the
Company to, any third party lender. 
Subject to the provisions of Section 13.14, each Member shall be
permitted to deliver to any of its Affiliates, and BH shall be permitted to
deliver to any of its direct or indirect members, partners or investors, a copy
of any of the reports and statements provided to such Member pursuant to this Section 8.3.

 

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

 

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

 

8.5                                 Reserves.  The Managing Member may, in its discretion
and subject to the Approval of BH and such conditions as it shall determine,
establish reasonable reserves for the purposes and requirements as it may deem
appropriate.

 

8.6                                 The Budget and
Operating Plan.  No later
than the Closing Date, the Managing Member shall have prepared and submitted to
BH for Approval (and BH shall have Approved) a preliminary estimated Budget for
the period through December 31, 2010 and Operating Plan for the Company
for the period from the Closing Date through December 31, 2010, which
shall include projected costs to operate the Company and make tenant
improvements, leasing conversions and capital expenditures to be set forth
therein to be made in the budget period following acquisition of the Property
and shall be in the form attached as Appendix B hereto (the “Initial
Approved Budget and Operating Plan”). 
Thereafter, commencing for the 2011 fiscal year, the Budget and
Operating Plan shall be prepared in proposed form and submitted annually by the
Managing Member to BH for Approval at least sixty (60) calendar days prior to
the end of the current fiscal year (so that the Managing Member will submit a
Budget and Operating Plan for the 2011 fiscal year no later than
November 1, 2010 to BH for its Approval) with respect to the following
fiscal year, together with five (5) year forward projections (provided if
the Managing Member should fail to timely prepare and submit in proposed form
any such Budget and Operating Plan, BH shall be authorized to prepare such
Budget and Operating Plan).  In
formulating the comprehensive Budget and Operating Plan, to the extent
reasonably feasible at the time of preparation thereof, the Managing Member
will develop (for Approval by BH) proposed strategies regarding (i) plans
for renovation, leasing, financing, sale and rehabilitation of the Property and
any other real property and proposed reductions to Operating Expenses and other
Company costs and expenses and increases in revenues, (ii) preparation and
release of all promotional and advertising material relating to, and a
marketing plan for, the Company Property or concerning the Company,
(iii) terms for any proposed sale or disposition of any Company Property,
or acquisition of additional Company Property, and (iv) selection of legal
counsel, accountants, appraisers and other consultants for the Company to
efficiently implement the Approved Budget and Operating Plan.  The Managing Member will also consider and
make recommendations to the extent it deems the same appropriate regarding the
financing, amendment, modification, alteration, change, cancellation, or
prepayment of any indebtedness 

 

43

 

evidenced by any loan presently or hereafter
affecting any Company Property, and procurement of title insurance and other
insurance for the Company, or decrease or vary the insurance carried by or on
behalf of the Company and any other matters affecting the Company’s
business.  BH and the Managing Member may
from time to time review the Approved Budget and Operating Plan and make such
amendments or modifications thereto as they shall jointly determine to be
appropriate or necessary.

 

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

 

8.8                                 REIT Matters.  Within fifteen (15) days following the end of
each calendar quarter, the Company shall provide to BH all tax information
requested by BH and necessary for BH (or its REIT affiliates) to comply with
the REIT requirements under Sections 856 and 857 of the Code (provided that BH
has advised HP of what tax information is necessary to accomplish such
compliance). Notwithstanding anything to the contrary in this Agreement,
neither the Company nor any Member (acting on the Company’s behalf) shall take
any action which would cause BH (or its REIT affiliates) to (a) fail to
qualify as a “real estate investment trust” (as defined under Sections 856 &
857 of the Code) or (b) incur any additional taxes under Section 857
or Section 4981 of the Code (or any successor provisions).  In particular, the Company shall conduct its
business affairs in a manner so as to avoid incurring income that would not
qualify under Sections 856(c)(2) and 856(c)(3) of the Code and
will not acquire assets that are not described in Section 856(c)(4) of
the Code unless approved by BH.  The
Members shall periodically consult with each other (or their designee) to
ensure that any prospective transaction undertaken by the Company, or a Member
acting on behalf of the Company, shall not cause BH (or its REIT affiliates) to
fail to qualify as a REIT.  If the
Members disagree as to whether any transaction will cause BH (or its REIT
affiliates) to fail to qualify as a REIT (as defined under Sections 856
and 857 of the Code) or incur any additional taxes under Section 857 or
Section 4981 of the Code (or any successor provisions), the reasonable
determination of BH shall be final.

 

ARTICLE IX

TRANSFER OF INTERESTS

 

9.1                                 No Transfer.  Except as expressly permitted or contemplated
by this Agreement (including pursuant to Sections 9.2 and 9.5 below, and
pursuant to Article XV), no Member may sell, assign, give, hypothecate,
pledge, encumber or otherwise transfer (“Transfer”) all or any portion
of its Interest, whether directly or indirectly, without the Approval of the
other Members.  Any Transfer in
contravention of this Article IX shall be null and void.  In no event shall any Member transfer all or
any part of its Interest to any Person if, as a result of such Transfer, a
Prohibited Person would be the direct, indirect, or beneficial owner of all or
a portion of such Interest.  No Member,
without the prior Approval of the other Members, shall resign from the Company
except as permitted by this Article IX. 
Nothing in this Article IX is meant to or will be interpreted to
restrict in any way the ability of any equityholder in Behringer Harvard 

 

44

 

Opportunity REIT II, Inc.  BHO II, Inc., BHO Business Trust II or
Behringer Harvard Opportunity OP II, LP and/or their constituent owners
from transferring securities issued by such entities.

 

9.2                                 Permitted
Transfers.

 

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

 

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

 

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

 

(d)                                 Notwithstanding
the foregoing, if the Company is required by applicable Law to recognize a
Transfer that is not a permitted Transfer (an “Unapproved Transfer”) (or
if the Managing Member and the non-transferring Member(s), in its (or their)
sole discretion, shall elect to recognize but not Approve a Transfer that is
not a permitted Transfer), the Interest Transferred shall be strictly limited
to the transferor’s rights to allocations and distributions as provided by this
Agreement with respect to the transferred Interest, which allocations and
distributions may be applied (without limiting any other legal or equitable
rights of the Company) to satisfy any debts, obligations, or liabilities for
damages that the transferor or transferee of such Interest may have to the
Company or any other Member prior to any other 

 

45

 

allocations or distributions relating to the
Unapproved Transfer.  In the case of a
Transfer or attempted Transfer of an Interest that is not a permitted Transfer,
the parties engaging or attempting to engage in such Transfer shall be liable
to indemnify and hold harmless the Company and the other Members from all cost,
liability and damage that any of such indemnified Persons may incur (including,
without limitation, incremental tax liability and lawyers’ fees and expenses)
as a result of such Transfer or attempted Transfer and efforts to enforce the
indemnity granted hereby.  A Person who
acquires an Interest in an Unapproved Transfer as provided in this Section 9.2(d) but
who is not admitted as a substituted Member shall be entitled only to
allocations and distributions with respect to such Interest in accordance with
this Agreement, and shall have no right to any information or accounting of the
affairs of the Company, shall not be entitled to inspect the books or records
of the Company, and shall not have any of the rights of a Member under the Act
or this Agreement, including any voting rights; provided, however, that no
rights, including but not limited to rights to distributions, shall be transferred
or permitted with respect to any Interest if a Prohibited Person would be the
direct, indirect or beneficial owner of all or any portion of such rights.

 

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

 

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

 

46

 

9.5                                 Other Transfers.

 

(a)                                  On or after the
second annual anniversary of this Agreement, in the event BH or the HP Member
Group desires to Transfer its Interest in a manner which is not a permitted
Transfer under Section 9.2(a) or (b), BH or the HP Member Group, as
applicable, may otherwise Transfer all of its Interest to a bona fide third
party transferee provided that as a condition to completing such
Transfer, the transferring Member or the HP Member Group (“Triggering Party”)
shall first deliver to the other Member or HP Member Group (“Recipient Party”)
written notice of its intention to sell all of its Interest (“Target
Interest”) setting forth the proposed purchase price and such other terms
and conditions of the proposed sale (“Transfer ROFO Notice”).  At any time within thirty (30) calendar days
after the date the Recipient Party receives the Transfer ROFO Notice (the “Transfer
Response Period”), the Recipient Party shall have the right, exercisable by
delivery of notice in writing (the “Transfer Election”) to the
Triggering Member, to either:

 

(i)                                     Approve the
sale of the Target Interests and authorize the Triggering Party to attempt to
sell or dispose of the Target Interests on the terms and conditions set forth
in the Transfer ROFO Notice; or

 

(ii)                                  offer to
purchase all of the Target Interests for a cash purchase price and on the terms
set forth in the Transfer ROFO Notice and subject to no other terms and
conditions (the “Acceptable Transfer Terms”).

 

(b)                                 Any election
pursuant to Section 9.5(a)(ii) above shall be made by (x) delivering to the Triggering
Party the Transfer Election, which shall affirmatively state that the Recipient
Party is exercising such option, and (y) depositing
in an escrow account at a bank or other financial institution selected by the
Triggering Party (the “Transfer Escrow Agent”), a deposit equal to 5% of
the purchase price (the “Transfer Escrow Deposit”) (as set forth in the
applicable Acceptable Transfer Terms) within five calendar days of such
election.  In the event of an election to
purchase pursuant to Section 9.5(a)(ii) above, within 60 calendar
days of the date of the Recipient Party’s Transfer Election to purchase, the
Recipient Party and the Triggering Party shall close the purchase of the Target
Interests and the Triggering Party shall assign the Target Interest to the
Recipient Party or to a designee of the Recipient Party, upon receipt of
payment of the purchase price.  All
closings of any purchase and sale under this Section 9.5 will be held at
the Company’s principal office and will take place no later than the closing
date set forth in the applicable Acceptable Transfer Terms.

 

(c)                                  If during the
Transfer Response Period the Recipient Party neither (x) authorizes the
Triggering Party to attempt to sell the applicable Target Interests as provided
in Section 9.5(a)(i) nor (y) elects to purchase the Target
Interests of the Triggering Party’s provided in Section 9.5(a)(ii), then
the Recipient Party shall be deemed to have authorized and have Approved a
Transfer of the Target Interests pursuant to Section 9.5(a)(i) to a
bona fide third party transferee, for a purchase price not less than 95.0%
of the purchase price set forth in the Acceptable Transfer Terms, and otherwise
pursuant to such other terms, conditions and provisions as are determined
appropriate in the reasonable discretion of the Triggering Party.  In the event the Recipient Party authorized
or is deemed to have authorized the Transfer of the applicable Target Interests
pursuant to the terms described above, and the Triggering Party

 

47

 

thereafter receives a bona fide offer for the
purchase of the Target Interests from any party for a purchase price which is
at least equal to 95.0% of the purchase price set forth in the Acceptable
Transfer Terms, the Triggering Party may consummate the sale of the Target
Interest on such terms, without the requirement of any Approval of the
Recipient Party; provided,
the Triggering Party shall have entered into a binding contract for the
transfer of the applicable Target Interests within 180 calendar days after the
date on which the Recipient Party authorized or was deemed to have authorized
such transfer, and such Transfer must be consummated within the same
180-day-calendar-day period.  The failure
of the Triggering Party to enter into such binding contract within the 180-day
period referred to in the immediately preceding sentence, shall require the
Triggering Party to again deliver to the Recipient Party a Transfer ROFO Notice
and to again follow the procedures set forth in this Section 9.5.

 

(d)           In the event the Recipient
Party should default in its obligation to purchase a Target Interest pursuant
to the terms of this Section 9.5, the following shall be the sole remedies
for such default:

 

(i)            The Recipient Party will
immediately and without any further action cease to have any rights of first
offer pursuant to the provisions of this Section 9.5, including with
regard to any future or subsequent Transfers of any Interest by the Triggering
Party;

 

(ii)           The Recipient Party will
immediately and without any further action cease to have any right to make a
Buy-Sell Offer or otherwise trigger or initiate the provisions set forth in Article XV;

 

(iii)          The Transfer Escrow Agent
shall immediately deliver to the Triggering Party the Transfer Escrow Deposit
as liquidated damages to retain for its own account (such amount shall not be
deemed to be a contribution or distribution of capital, or effect in any way
the Capital Account of any Member or the allocation provisions or any other
provisions of this Agreement); and

 

(iv)          Thereafter, the Triggering
Party may at any time Transfer all or any portion of its Interests in the
Company, without the prior Approval of the Recipient Party and without having
to comply with the provisions of this Section 9.5.

 

(e)           Notwithstanding the
foregoing, if the provisions of Article XV have been initiated by any
Member, then no Member may initiate the provisions of this Section 9.5
until the procedures set forth in Article XV have been completed or
terminated pursuant to the provisions of such Article.

 

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

 

48

 

the Triggering Party shall be responsible for payment
of all such fees and expenses, the payment thereof being a condition precedent
to any such transfer.

 

ARTICLE X

EXCULPATION AND INDEMNIFICATION

 

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

 

10.2         Indemnification.

 

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

 

49

 

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

 

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

 

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

 

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

 

ARTICLE XI

DISSOLUTION AND TERMINATION

 

11.1         Dissolution.

 

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

 

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

 

50

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(ii)           second, subject to the
Approval of BH, to the setting up of any reserves which the Liquidating Member
and the Managing Member shall determine to be reasonably necessary for
contingent, unliquidated or unforeseen liabilities or obligations of the
Company or any Member arising out of or in connection with the Company.  Such reserves may, in the discretion of the
Liquidating Member, be paid over to a national bank or national title company
selected by it and authorized to conduct business as an escrow agent to be held
by such bank or title company as escrow agent for the purposes of disbursing
such reserves to satisfy the liabilities and obligations described above, and
at the expiration of such period as the Liquidating Member may reasonably deem 

 

51

 

advisable, distributing any
remaining balance as provided in Section 11.2(c)(iii); provided, however,
that, to the extent that it shall have been necessary, by reason of applicable
law or regulation, to create any reserves prior to any and all distributions
which would otherwise have been made under Section 11.2(c)(i) and, by
reason thereof, a distribution under Section 11.2(c)(i) has not been
made, then any balance remaining shall first be distributed pursuant to
Section 11.2(c)(i);

 

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

 

11.3         Liquidating Member.  The Liquidating Member is hereby irrevocably
appointed as the true and lawful attorney in the name, place and stead of each
of the Members, such appointment being coupled with an interest, to make,
execute, sign, acknowledge and file with respect to the Company all papers
which shall be necessary or desirable to effect the dissolution and termination
of the Company in accordance with the provisions of this Article XI.  Notwithstanding the foregoing, each Member,
upon the request of the Liquidating Member or the Managing Member, shall
promptly execute, acknowledge and deliver all such documents, certificates and
other instruments as the Liquidating Member or the Managing Member shall
reasonably request to effectuate the proper dissolution and termination of the
Company, including the winding up of the business of the Company.

 

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

 

ARTICLE XII

DEFAULT BY MEMBER

 

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

 

(a)           A voluntary Transfer of any
Member’s Interest, other than a permitted Transfer made in accordance with
Sections 9.2 and 9.5 or Article XV.

 

(b)           A Member’s voluntary
withdrawal as a Member for any reason other than a permitted Transfer of its
Interest and the admission of the transferee as a Member in its stead (in
accordance with the applicable provisions of Sections 9.2 or 9.5).

 

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

 

(d)           Such Member or its
Affiliates shall violate any other material term, breach any material provision
or default in the performance of any of its duties or material covenant
applicable to such Member as set forth in this Agreement (excluding a failure to
make Additional Capital Contributions, the exclusive remedy for which is set
forth in Section 4.2) and (i) such 

 

52

 

violation, breach or default causes Material Damage
or Loss to the Company, or any of its Members or their respective Affiliates,
and (ii) such violation, breach or default is not cured (including without
limitation, by the breaching Member reimbursing the Company or the affected
Member for the resulting material damage or loss) within a Reasonable Period.

 

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

 

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

 

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

 

ARTICLE XIII

MISCELLANEOUS

 

13.1         Representations and
Warranties of the Members.

 

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

 

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

 

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

 

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

 

(iv)          The execution and delivery
of this Agreement by the Member, and the consummation of the transactions
contemplated hereby, does not conflict with or 

 

53

 

contravene the provisions of
its organizational documents or any agreement or instrument by which it or its
properties are bound or any law, rule, regulation, order or decree to which it
or its properties are subject.

 

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

 

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

 

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

 

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

 

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

 

54

 

(b)           In addition, HP represents
and warrants to BH that it and the Submanager are Controlled by the HP Persons.

 

(c)           Each Member agrees to
indemnify and hold harmless the Company and each other Member and their
officers, directors, shareholders, partners, members, employees, successors and
assigns from and against any and all loss, damage, liability or expense
(including costs and attorneys’ fees) which they may incur by reason of, or in
connection with, any breach of the foregoing representations and warranties or
those set forth in Article XIV made by such Member and all such
representations and warranties shall represent recourse obligations of the
Members and will survive the execution and delivery of this Agreement and the
termination and dissolution of the Company or any Member.  In addition, BH agrees to indemnify HP, the
HP Persons and their respective Affiliates for any losses or liabilities
incurred by them under any nonrecourse carveouts under the Loan which directly
result from any unauthorized transfers of the Property by BH or its Affiliates,
from any transfers of direct or indirect interests in BH, or from the fraud,
willful misconduct or gross negligence of BH.

 

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

 

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

 

	
  If to BH to:

  	
   

  	
  Behringer Harvard
  Parrot’s Landing, LLC

  15601 Dallas Parkway, Suite 600

  Addison, TX 75001

  Attn: Executive
  Vice President of Real Estate

  Fax: (214) 655-1610

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Behringer Harvard
  Opportunity REIT II, Inc.

  15601 Dallas Parkway, Suite 600

  Addison, TX 75001

  Attn: Chief Legal Officer

  Fax: (214) 655-1610

  
	
   

  	
   

  	
   

  
	
  If to HP and HP
  Persons to:

  	
   

  	
  Hampton Peak, LLC

  4582 South Ulster
  Street Parkway, Suite 1200

  Denver, Colorado
  80237

  Attn: Luke C.
  Simpson

  Fax: (303)
  991-3143

  

 

55

 

	
  With a copy to
  (which shall not constitute notice):

  	
   

  	
  Otten, Johnson,
  Robinson, Neff & Ragonetti, P.C.

  950 Seventeenth
  Street, Suite 1600

  Denver, Colorado
  80202

  Attn: Michael
  Westover, Esq.

  Fax: (303)
  825-6525

  

 

Any Member may
designate another addressee (and/or change its address) for Notices hereunder
by a Notice given pursuant to this Section 13.3.  A Notice sent in compliance with the provisions
of this Section 13.3 shall be deemed given on the date of receipt.

 

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

 

13.5         Captions.  All titles or captions contained in this
Agreement are inserted only as a matter of convenience and for reference and in
no way define, limit, extend, or describe the scope of this Agreement or the
intent of any provision in this Agreement.

 

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

 

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

 

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

 

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

 

13.10       Recalculation of Interest.  If any applicable law is ever judicially
interpreted so as to deem any distribution, contribution, payment or other
amount received by any Member or the Company under this Agreement as interest
and so as to render any such amount in excess of the maximum rate or amount of
interest permitted by applicable law, then it is the express intent of the
Members and the Company that all amounts in excess of the highest lawful rate
or amount

 

56

 

theretofore collected be credited against any other
distributions, contributions, payments or other amounts to be paid by the
recipient of the excess amount or refunded to the appropriate Person, and the
provisions of this Agreement immediately be deemed reformed, without the
necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the payment of the fullest amount otherwise
required hereunder.  All sums paid or
agreed to be paid that are judicially determined to be interest shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the term of such obligation so that the rate or amount of
interest on account of such obligation does not exceed the maximum rate or
amount of interest permitted under applicable law.

 

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

 

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

 

13.13       Publicity.  The parties agree that no Member shall issue
any press release or otherwise publicize or disclose the terms of this
Agreement or the proposed terms of any acquisition of the Company Property,
without the consent of each of the other Members, except as such disclosure may
be made in the course of normal reporting practices by any Member to its
members, shareholders or partners or as otherwise required by law, rule, or
regulation.

 

13.14       Confidentiality.

 

(a)           The terms of this Agreement,
the identity of any person with whom the Company may be holding discussions
with respect to any investment, acquisition, disposition or other transaction,
and all other business, financial, or other information relating directly to
the conduct of the business and affairs of the Company, the Company Property or
the relative or absolute rights or interests of any of the Members
(collectively, the “Confidential Information”) that is not already
publicly available or that has not been publicly disclosed pursuant to
authorization by all of the Members is confidential and proprietary information
of the Company, the disclosure of which would cause irreparable harm to the
Company and the Members.  Accordingly,
each Member represents that it has not and agrees that it will not and will
direct its shareholders, members, partners, directors, officers, agents,
advisors and Affiliates not to, disclose to any Person any Confidential
Information or confirm any statement made by third Persons regarding
Confidential Information until the Company has publicly disclosed the
Confidential Information pursuant to authorization by all of the Members;
provided, however, that any Member (or its Affiliates) may disclose such
Confidential Information if required by law (it being specifically understood
and agreed that anything set forth in a registration statement or any other
document filed pursuant to law will be deemed required by law), if necessary
for it to perform any of its duties or obligations hereunder or in any property
management agreement to

 

57

 

which it is a party covering any Company Property,
or to market the Company Property or any Interests as permitted by the terms of
this Agreement, and to its attorneys and advisors who agree to maintain a
similar confidence; provided, however, that the Company, HP and the HP Persons,
BH and its Affiliates may disclose the content of this Agreement to any of
their partners, members, lenders, or other actual or prospective investor in or
Purchaser of the Company Property in accordance with the terms of this
Agreement.  Without limitation of the
foregoing, it is understood and agreed that BH is an indirect subsidiary of
Behringer Harvard Opportunity REIT II, Inc., a company that is required to
make public disclosures of material facts and events under U.S. federal
securities law, and that in respect of item (b) in the preceding
sentence, Behringer Harvard Opportunity REIT II, Inc. shall determine, in
its sole and absolute discretion, whether any such disclosure is required by
applicable law or regulations.  Nothing
contained in the foregoing provisions shall be construed to prohibit the
recordation in the appropriate real estate records of any document that, when
executed, is necessary to effectuate the intent of this Agreement or will
evidence or convey an interest in real property or debt secured by real
property and that is customarily recorded.

 

(b)           Subject to the provisions of
Section 13.14(a), each Member agrees not to disclose any Confidential
Information to any Person (other than a Person (including without limitation an
attorney or advisor) agreeing to maintain all Confidential Information in
strict confidence or a judge, magistrate or referee in any action, suit or
proceeding relating to or arising out of this Agreement or otherwise), and to
keep confidential all documents (including without limitation, responses to
discovery requests) containing any Confidential Information.  Each Member hereby consents in advance to any
motion for any protective order brought by any other Member represented as
being intended by the movant to implement the purposes of this
Section 13.14, provided that, if a Member receives a request to disclose
any Confidential Information under the terms of a valid and effective order
issued by a court or governmental agency and the order was not sought by or on
behalf of or consented to by such Member, then such Member may disclose the
Confidential Information to the extent required if the Member as promptly as
practicable (i) notifies each of the other Members of the existence, terms
and circumstances of the order, (ii) consults in good faith with each of
the other Members on the advisability of taking legally available steps to
resist or to narrow the order, and (iii) if disclosure of the Confidential
Information is required, exercises its best efforts to obtain a protective
order or other reliable assurance that confidential treatment will be accorded
to the portion of the disclosed Confidential Information that any other Member
designates.  The cost (including without
limitation, attorneys’ fees and expenses) of obtaining a protective order
covering Confidential Information designated by such other Member will be borne
by the Company.

 

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

 

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

 

58

 

 

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

 

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

 

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

 

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

 

ARTICLE XIV

PATRIOT ACT

 

14.1         Compliance with
International Trade Control Laws and OFAC Regulations.  Each Member represents, warrants and
covenants to the other that:

 

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

 

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

 

59

 

14.2         Member’s Funds.

 

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

 

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

 

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

 

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

 

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

 

60

 

ARTICLE XV

BUY-SELL PROCEDURE

 

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

 

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

 

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

 

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

 

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

 

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

 

Failure of the
Offeree to timely give the Offeror notice of the Offeree’s Election will be
deemed, upon the expiration of such forty five (45) day period, to be an
Election to sell under Section 15.1(c)(i).

 

(d)           Contemporaneously with the
Offeree’s Election or deemed Election, the purchasing party under this Section 15.1
shall deposit in escrow with a national title company or bank or other
financial institution selected by the selling party as escrowee an earnest
money deposit in cash in an amount equal to 5% multiplied by the purchase price
to be paid in

 

61

 

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

 

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

 

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

 

(g)           Notwithstanding the
foregoing, if the provisions of Section 9.5 of this Agreement have been
initiated by a Member, then no Member may initiate the provisions of this
Section 15.1 until the procedures set forth in Section 9.5 have been
completed or terminated pursuant to the provisions thereof.  No
Buy-Sell Offer may be made until all periods for making elections and
performing obligations under any previous Buy-Sell Offer pursuant to this
Section 15.1 have terminated.

 

15.2         Termination of Other
Agreements.  If a
purchase and sale of Interests under this Article XV is completed, all
agreements between the Company and a selling Member or its Affiliates related
to the Company Property (including the Management Agreements) will (at the
election of the purchasing party) be terminated on the date such Interest is
purchased without payment of any penalty or termination fee.  In addition, at the closing of such purchase
made in accordance with Section 15.1, the purchaser shall, at its option,
either (i) obtain a release of the selling Member and its Affiliates from
all liability, direct or contingent, by all holders of all Company debts,
obligations or claims for which the selling Member or its Affiliates may be
personally liable (including any guaranties of the non-recourse carve-outs)
occurring or relating to the period on and after the date of the approval by
the lender under the Loan of the same and provided that such release shall not
be required to extend to any liability relating to environmental hazards under
the Loan Documents arising out of conditions existing on or before the date of
the of purchase of such Interests, or (ii) deliver to the selling Member
an agreement in form and substance reasonably satisfactory to the selling
Member from a creditworthy Affiliate to assume the debts, obligations or claims
of the selling Member and its Affiliates with respect to, and to defend,
indemnify and save the selling Member and its Affiliates harmless from, any
liability to the holders of such Company debts, obligations or claims; provided, however, that such
assumption and indemnification shall not extend to those claims arising from
the fraud, bad faith, willful misconduct or gross negligence of the selling
Member or any of its Affiliates.  Unless
such agreement and the indemnity from such credit worthy party have been
Approved by the selling Member in its reasonable discretion by the closing,
then the purchaser shall obtain the release provided for above in
clause (i).

 

62

 

15.3         Power of Attorney.  In the event that the Offeror or Offeree
shall have failed or refused, within five calendar days after receipt of a
notice from the other requesting such party to execute, acknowledge and deliver
such documents, or cause the same to be done, as shall be required to
effectuate the provisions of Section 15.1 hereof, then the non-defaulting
party may execute, acknowledge and deliver such documents for, on behalf of and
in the stead of the defaulting party or on behalf of and in the name of the
Company, as applicable, and such execution, acknowledgment and delivery by the
non-defaulting party shall be for all purposes effective against and binding
upon the defaulting party or the Company, as applicable, as though such
execution, acknowledgment and delivery had been by the defaulting party or the
Company, as applicable.  Each of the
Members does hereby irrevocably constitute and appoint the other Members as the
true and lawful attorney in fact of such appointing Member, in the name, place
and stead of such appointing Member, as the case may be, to execute,
acknowledge and deliver such documents under the circumstances contemplated by
this Section 15.3.  It is expressly
understood, intended and agreed by each Member, that the grant of the power of
attorney to the other Members pursuant to this Section 15.3 is coupled
with an interest, is irrevocable and shall survive the death, dissolution,
termination or legal incompetency of such appointing Member, as the case may
be, or the assignment of the interest of such appointing Member in the Company,
or the dissolution of the Company.

 

ARTICLE XVI

RIGHT OF BH TO TRIGGER
SALE OF THE PROPERTY; ROFO

 

16.1         ROFO on the Sale of the
Property.

 

(a)           If on or after the second
anniversary of this Agreement and subject to the terms of any applicable Loan
Documents, BH desires to sell the Property to any third party, BH shall first
deliver to HP written notice of its intention to offer to sell the Property
setting forth the proposed cash purchase price which BH is willing to accept
and all other material terms and conditions of the proposed sale (“ROFO
Notice”).  BH need not have located a
prospective purchaser or have in its possession an actual offer to purchase in
order to exercise its rights pursuant to this Section 16.1(a).  The ROFO Notice shall include a statement by
BH setting forth the financing and encumbrances, if any, to which the Property
will remain subject to upon conveyance (the “Permitted Exceptions”) and
shall be at a price stated in U.S. 
dollars only.

 

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

 

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

 

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

 

63

 

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

 

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

 

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

 

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

 

64

 

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

 

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

 

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

 

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

 

(g)           Notwithstanding the
foregoing, if the provisions of Section 9.5 or Article XV of this
Agreement have been initiated by a Member or HP, then BH may not initiate the
provisions of this Section 16.1 until the procedures set forth in Section 9.5
or Article XV have been completed or terminated pursuant to the provisions
thereof.  No ROFO Notice may be delivered until
all periods for making elections and performing obligations under any previous
ROFO Notice pursuant to this Section 16.1 have terminated.

 

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

 

16.2         Termination of Other
Agreements.  If the
Property is sold under this Article XVI, all other agreements between the Company
and HP or its Affiliates applicable to the Property will be terminated on the
date the Property is purchased (without payment of any termination fee or
penalty).

 

16.3         Power of
Attorney.  If any
Member shall have failed or refused, within five (5) calendar days after
receipt of a notice from the other Member requesting such Member to execute,
acknowledge and deliver such documents, or cause the same to be done, as shall
be required to effectuate the provisions of Section 16.1, as applicable, then
the other Member may execute, acknowledge and deliver such documents for, on
behalf of and in the stead of the other Member or on behalf of and in the name
of the Company, as applicable, and such execution, acknowledgment and delivery
by that Member shall be for all purposes effective against and binding upon the
other Member and the Company, as applicable, as though such execution,
acknowledgment and delivery had been by the refusing Member or the Company as
applicable.  Each Member does hereby
irrevocably constitute and appoint each other Member as the true and lawful
attorney-in-fact of such appointing Member and the successors and assigns
thereof, in the name, place and stead of such appointing Member or the
successors or assigns thereof, as the case may be, to execute, acknowledge and
deliver such documents under the circumstances contemplated by
Section 16.1.  It is expressly
understood, intended and agreed by each Member, for such Member and its
successors and assigns, that the grant of the power of attorney to any

 

65

 

other Member pursuant to this Section 16.3 is
coupled with an interest, is irrevocable and shall survive the death,
dissolution, termination or legal incompetency, as applicable, of such appointing
Member, or the assignment of the Interest of such appointing Member, or the
dissolution of the Company.

 

[Signature Page Follows]

 

66

 

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

 

 

	
   

  	
  BH:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD PARROT’S LANDING, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald J. Reishen, III

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President — Corporate

  
	
   

  	
   

  	
  Development & Legal

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HP:

  
	
   

  	
   

  
	
   

  	
  HAMPTON PEAK, LLC,

  
	
   

  	
  a Colorado limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Luke C. Simpson

  
	
   

  	
   

  	
  Luke C. Simpson, Manager

  

 

67

 

Appendix A-1

 

FORM
OF PROPERTY AMENDMENT

 

Property
Description: See Exhibit A attached

 

Legal Name of
Owner:  7900 Hampton Road, LLC

 

Jurisdiction of
Organization/Incorporation:  Delaware

 

Services to be
provided (if other than in Management Agreement):

 

Per Management Agreement

 

Alterations to basic
terms and conditions of Management Agreement (if any):

 

N/A

 

 

	
  Manager:

  	
  BEHRINGER
  HARVARD OPPORTUNITY II

  MANAGEMENT SERVICES, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen,
  III

  
	
   

  	
   

  	
  Executive Vice
  President — Corporate

  
	
   

  	
   

  	
  Development &
  Legal

  
	
   

  	
   

  
	
   

  	
   

  
	
  Owner:

  	
  7900 HAMPTON BLVD, LLC

  
	
   

  	
  a Delaware limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Hampton Peak, LLC

  
	
   

  	
   

  	
  a Colorado limited
  liability company

  
	
   

  	
   

  	
  Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

Appendix A-2

 

FORM
OF PROPERTY MANAGEMENT SUBCONTRACT

 

PROPERTY MANAGEMENT SUBCONTRACT

 

 

by and between

 

 

BEHRINGER HARVARD OPPORTUNITY II MANAGEMENT SERVICES, LLC,

a Texas limited liability company

 

as Manager

 

and

 

GRAND PEAKS PROPERTY MANAGEMENT, INC.,

a Colorado corporation

 

as Subcontractor

 

 

September 17, 2010

 

1

 

Table of Contents

 

	
  ARTICLE I

  	
  DEFINED TERMS

  	
  1

  
	
  1.1

  	
  Defined Terms

  	
  1

  
	
  1.2

  	
  Other References

  	
  13

  
	
  ARTICLE II

  	
  ORGANIZATION

  	
  13

  
	
  2.1

  	
  Formation

  	
  13

  
	
  2.2

  	
  Name and Principal Place of Business

  	
  13

  
	
  2.3

  	
  Term

  	
  14

  
	
  2.4

  	
  Registered Agent and Registered Office

  	
  14

  
	
  2.5

  	
  Purpose

  	
  14

  
	
  ARTICLE III

  	
  MEMBERS

  	
  14

  
	
  3.1

  	
  Admission of Members

  	
  14

  
	
  3.2

  	
  Limitation on Liability

  	
  15

  
	
  ARTICLE IV

  	
  CAPITAL

  	
  15

  
	
  4.1

  	
  Initial Capital Contributions

  	
  15

  
	
  4.2

  	
  Additional Capital Contributions

  	
  17

  
	
  4.3

  	
  Capital Accounts

  	
  19

  
	
  4.4

  	
  No Further Capital Contributions

  	
  20

  
	
  4.5

  	
  Acquisition Loan

  	
  20

  
	
  ARTICLE V

  	
  INTERESTS IN THE COMPANY

  	
  21

  
	
  5.1

  	
  Contribution and Promote Percentage Adjustments

  	
  21

  
	
  5.2

  	
  Return of Capital

  	
  21

  
	
  5.3

  	
  Ownership

  	
  21

  
	
  5.4

  	
  Waiver of Partition; Nature of Interests in the Company

  	
  21

  
	
  ARTICLE VI

  	
  ALLOCATIONS AND DISTRIBUTIONS

  	
  22

  
	
  6.1

  	
  Allocations

  	
  22

  
	
  6.2

  	
  Allocations and Compliance with Section 704(b)

  	
  22

  
	
  6.3

  	
  Distributions from Operations

  	
  23

  
	
  6.4

  	
  Distributions from Capital Transactions

  	
  24

  
	
  6.5

  	
  Special Distributions

  	
  25

  
	
  6.6

  	
  Distributions in Liquidation

  	
  25

  
	
  6.7

  	
  Tax Matters

  	
  25

  

 

2

 

	
  6.8

  	
  Tax Matters Partner

  	
  26

  
	
  6.9

  	
  Section 704(c)

  	
  26

  
	
  6.10

  	
  Withholding

  	
  26

  
	
  ARTICLE VII

  	
  MANAGEMENT

  	
  26

  
	
  7.1

  	
  Managing Member and Major Decisions

  	
  26

  
	
  7.2

  	
  Duties of Managing Member

  	
  33

  
	
  7.3

  	
  Management of the Property; Fees

  	
  38

  
	
  7.4

  	
  Duties and Conflicts

  	
  38

  
	
  7.5

  	
  Company Expenses

  	
  40

  
	
  7.6

  	
  Venture Coordinator

  	
  40

  
	
  7.7

  	
  Enforcement of Affiliate Agreements

  	
  40

  
	
  ARTICLE VIII

  	
  BOOKS, RECORDS, REPORTS AND
  PROPERTY PLAN

  	
  40

  
	
  8.1

  	
  Books and Records

  	
  40

  
	
  8.2

  	
  Accounting and Fiscal Year

  	
  41

  
	
  8.3

  	
  Reports

  	
  41

  
	
  8.4

  	
  The Company Accountant

  	
  43

  
	
  8.5

  	
  Reserves

  	
  43

  
	
  8.6

  	
  The Budget and Operating Plan

  	
  43

  
	
  8.7

  	
  Accounts

  	
  44

  
	
  8.8

  	
  REIT Matters

  	
  44

  
	
  ARTICLE IX

  	
  TRANSFER OF INTERESTS

  	
  44

  
	
  9.1

  	
  No Transfer

  	
  44

  
	
  9.2

  	
  Permitted Transfers

  	
  45

  
	
  9.3

  	
  Transferees

  	
  46

  
	
  9.4

  	
  Section 754 Election

  	
  46

  
	
  9.5

  	
  Other Transfers

  	
  47

  
	
  ARTICLE X

  	
  EXCULPATION AND INDEMNIFICATION

  	
  49

  
	
  10.1

  	
  Exculpation

  	
  49

  
	
  10.2

  	
  Indemnification

  	
  49

  
	
  ARTICLE XI

  	
  DISSOLUTION AND TERMINATION

  	
  50

  
	
  11.1

  	
  Dissolution

  	
  50

  
	
  11.2

  	
  Termination

  	
  51

  
	
  11.3

  	
  Liquidating Member

  	
  52

  

 

3

 

	
  11.4

  	
  Claims of the Members

  	
  52

  
	
  ARTICLE XII

  	
  DEFAULT BY MEMBER

  	
  52

  
	
  12.1

  	
  Events of Default

  	
  52

  
	
  12.2

  	
  Effect of Event of Default

  	
  53

  
	
  ARTICLE XIII

  	
  MISCELLANEOUS

  	
  53

  
	
  13.1

  	
  Representations and Warranties of the Members

  	
  53

  
	
  13.2

  	
  Further Assurances

  	
  55

  
	
  13.3

  	
  Notices

  	
  55

  
	
  13.4

  	
  Governing Law

  	
  56

  
	
  13.5

  	
  Captions

  	
  56

  
	
  13.6

  	
  Pronouns

  	
  56

  
	
  13.7

  	
  Successors and Assigns

  	
  56

  
	
  13.8

  	
  Extension Not a Waiver

  	
  56

  
	
  13.9

  	
  Creditors Not Benefited

  	
  56

  
	
  13.10

  	
  Recalculation of Interest

  	
  56

  
	
  13.11

  	
  Severability

  	
  57

  
	
  13.12

  	
  Entire Agreement

  	
  57

  
	
  13.13

  	
  Publicity

  	
  57

  
	
  13.14

  	
  Confidentiality

  	
  57

  
	
  13.15

  	
  Venue

  	
  58

  
	
  13.16

  	
  Waiver of Jury Trial

  	
  59

  
	
  13.16

  	
  Cooperation

  	
  59

  
	
  13.17

  	
  Counterparts

  	
  59

  
	
  13.18

  	
  Attorneys’ Fees

  	
  59

  
	
  ARTICLE XIV

  	
  PATRIOT ACT

  	
  59

  
	
  14.1

  	
  Compliance with International Trade Control Laws and OFAC
  Regulations

  	
  59

  
	
  14.2

  	
  Member’s Funds

  	
  60

  
	
  14.3

  	
  Member Compliance with Patriot Act

  	
  60

  
	
  14.4

  	
  Cooperation with Other Members

  	
  60

  
	
  14.5

  	
  Actions Taken Pursuant to Anti-Money Laundering Laws

  	
  60

  
	
  ARTICLE XV

  	
  BUY-SELL PROCEDURE

  	
  61

  
	
  15.1

  	
  General Provisions

  	
  61

  

 

4

 

	
  15.2

  	
  Termination of Other Agreements

  	
  62

  
	
  15.3

  	
  Power of Attorney

  	
  63

  
	
  ARTICLE XVI

  	
  RIGHT OF BH TO TRIGGER SALE OF
  THE PROPERTY; ROFO

  	
  63

  
	
  16.1

  	
  ROFO on the Sale of the Property

  	
  63

  
	
  16.2

  	
  Termination of Other Agreements

  	
  65

  
	
  16.3

  	
  Power of Attorney

  	
  65

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  9

  
	
  1.1

  	
  Account

  	
  9

  
	
  1.2

  	
  Affiliate

  	
  9

  
	
  1.3

  	
  Annual Business Plan

  	
  10

  
	
  1.4

  	
  Approved Leasing Parameters

  	
  10

  
	
  1.5

  	
  Behringer Harvard

  	
  10

  
	
  1.6

  	
  Behringer Harvard REIT

  	
  10

  
	
  1.7

  	
  Capital Budget

  	
  10

  
	
  1.8

  	
  CGL

  	
  10

  
	
  1.9

  	
  Code

  	
  10

  
	
  1.10

  	
  Controlling Agreements

  	
  10

  
	
  1.11

  	
  Executive Order

  	
  10

  
	
  1.12

  	
  Exhibits

  	
  10

  
	
  1.13

  	
  GAAP

  	
  10

  
	
  1.14

  	
  Governmental Requirements

  	
  10

  
	
  1.15

  	
  Gross Revenues

  	
  10

  
	
  1.16

  	
  Intellectual Property Rights

  	
  10

  
	
  1.17

  	
  Leases

  	
  11

  
	
  1.18

  	
  Losses

  	
  11

  
	
  1.19

  	
  Management Fee

  	
  11

  
	
  1.20

  	
  Manager Indemnified Parties

  	
  11

  
	
  1.21

  	
  Monthly Report Deadline

  	
  11

  
	
  1.22

  	
  Mortgagee

  	
  11

  
	
  1.23

  	
  OFAC

  	
  11

  
	
  1.24

  	
  OFAC Screening

  	
  11

  
	
  1.25

  	
  On-Site Manager

  	
  11

  
	
  1.26

  	
  Operating Budget

  	
  11

  

 

5

 

	
  1.27

  	
  Owner

  	
  11

  
	
  1.28

  	
  Person

  	
  11

  
	
  1.29

  	
  Prohibited Person

  	
  11

  
	
  1.30

  	
  Property Data

  	
  11

  
	
  1.31

  	
  Proprietary Property

  	
  11

  
	
  1.32

  	
  Qualifying Income

  	
  11

  
	
  1.33

  	
  REIT

  	
  11

  
	
  1.34

  	
  Subcontractor Employees

  	
  11

  
	
  1.35

  	
  Subcontractor Indemnified Parties

  	
  11

  
	
  1.36

  	
  Texas Tax Code

  	
  12

  
	
  1.37

  	
  Unauthorized Acts

  	
  12

  
	
  ARTICLE II

  	
  ENGAGEMENT OF SUBCONTRACTOR;
  SUBCONTRACTOR’S DUTIES AND AUTHORITY

  	
  12

  
	
  2.1

  	
  Engagement

  	
  12

  
	
  2.2

  	
  Master Agreement

  	
  12

  
	
  2.3

  	
  Status of Subcontractor; Limitation on Authority

  	
  12

  
	
  2.4

  	
  Subcontractor’s Standard of Care

  	
  12

  
	
  2.5

  	
  On-Site Manager

  	
  13

  
	
  2.6

  	
  Employment of Personnel

  	
  13

  
	
  2.7

  	
  Information

  	
  14

  
	
  2.8

  	
  Emergency Contact

  	
  14

  
	
  2.9

  	
  Treatment Under Texas Margin Tax

  	
  14

  
	
  2.10

  	
  Controlling Agreements

  	
  14

  
	
  ARTICLE III

  	
  SERVICES TO BE PERFORMED BY
  SUBCONTRACTOR

  	
  14

  
	
  3.1

  	
  Subcontractor’s Expenses

  	
  14

  
	
  3.2

  	
  Covenants Concerning Payment of Operating Expenses

  	
  15

  
	
  3.3

  	
  Leasing of Premises

  	
  15

  
	
  3.4

  	
  Utility and Service Contracts

  	
  16

  
	
  3.5

  	
  Maintenance and Repair of the Project

  	
  17

  
	
  3.6

  	
  Supervision of Capital Improvements or Major Repairs

  	
  17

  
	
  3.7

  	
  Collection of Monies

  	
  18

  
	
  3.8

  	
  Subcontractor Disbursements

  	
  18

  
	
  3.9

  	
  Use and Maintenance of Premises

  	
  19

  

 

6

 

	
  3.10

  	
  Insurance and Indemnification

  	
  19

  
	
  3.11

  	
  Annual Business Plan

  	
  22

  
	
  3.12

  	
  Records

  	
  23

  
	
  3.13

  	
  Monthly Reports

  	
  23

  
	
  3.14

  	
  Compliance with Legal Requirements

  	
  24

  
	
  3.15

  	
  Performance of Accounting Function

  	
  25

  
	
  ARTICLE IV

  	
  SUBCONTRACTOR’S COMPENSATION,
  TERM

  	
  27

  
	
  4.1

  	
  Management Fee

  	
  27

  
	
  4.2

  	
  Term

  	
  27

  
	
  4.3

  	
  Subcontractor’s Obligations Upon Termination

  	
  27

  
	
  4.4

  	
  Manager’s Obligations Upon Termination

  	
  28

  
	
  ARTICLE V

  	
  PROCEDURES FOR HANDLING RECEIPTS
  AND OPERATING CAPITAL

  	
  28

  
	
  5.1

  	
  Security Deposits

  	
  28

  
	
  5.2

  	
  Banking Accommodations

  	
  28

  
	
  5.3

  	
  Depository Accounts

  	
  29

  
	
  5.4

  	
  Working Capital

  	
  29

  
	
  5.5

  	
  Authorized Signatures

  	
  29

  
	
  ARTICLE VI

  	
  MISCELLANEOUS

  	
  30

  
	
  6.1

  	
  Assignment

  	
  30

  
	
  6.2

  	
  Notices

  	
  30

  
	
  6.3

  	
  Entire Agreement

  	
  30

  
	
  6.4

  	
  No Waiver

  	
  30

  
	
  6.5

  	
  No Partnership

  	
  30

  
	
  6.6

  	
  Severability

  	
  30

  
	
  6.7

  	
  No Third Party Beneficiary

  	
  30

  
	
  6.8

  	
  Captions, Plural Terms

  	
  31

  
	
  6.9

  	
  Activities of Subcontractor

  	
  31

  
	
  6.10

  	
  Attorneys’ Fees

  	
  31

  
	
  6.11

  	
  Signs

  	
  31

  
	
  6.12

  	
  Documents Required by Lender

  	
  31

  
	
  6.13

  	
  Survival of Indemnities

  	
  31

  
	
  6.14

  	
  Publicity

  	
  31

  

 

7

 

	
  6.15

  	
  Specific Performance

  	
  31

  
	
  6.16

  	
  Compliance with Laws

  	
  32

  
	
  6.17

  	
  Ownership of Proprietary Property

  	
  32

  
	
  6.18

  	
  Governing Law, Venue

  	
  32

  
	
  6.19

  	
  Counterparts

  	
  32

  
	
  6.20

  	
  Savings Clause

  	
  32

  
	
  6.21

  	
  Compliance Amendments

  	
  32

  
	
  6.22

  	
  REIT Compliance

  	
  32

  
	
  6.23

  	
  Sarbanes-Oxley

  	
  33

  
	
  6.24

  	
  Prohibited Persons and Transactions

  	
  33

  

 

8

 

PROPERTY MANAGEMENT SUBCONTRACT

 

THIS
PROPERTY MANAGEMENT SUBCONTRACT (this “Agreement”)
is made as of (although not necessarily on) the 17th day of September 2010 (the
“Effective Date”), between BEHRINGER
HARVARD OPPORTUNITY II MANAGEMENT SERVICES, LLC, a Texas limited liability
company (“Manager”), and GRAND PEAKS
PROPERTY MANAGEMENT, INC., a Colorado corporation (“Subcontractor”).

 

Behringer Harvard Opportunity REIT II, Inc., a Maryland corporation (“BH OP REIT II”), Behringer Harvard
Opportunity OP II LP, a Texas limited partnership (“BHOP II”), and Manager entered into
that certain Property Management and Leasing Agreement dated January 4, 2008
(the “Original OP REIT II Master Agreement”),
pursuant to which BH OP REIT II and BHOP II retained Manager to manage and
lease certain properties acquired by BH OP REIT II, BHOP II or their Affiliates
(hereinafter defined).

 

BH OP REIT II, BHOP II, and Manager entered into that certain Amended
and Restated Property Management and Leasing Agreement dated August 13, 2008
(the “Master Agreement”),
pursuant to which BH OP REIT II, BHOP II and Manager amended and restated the
Original OP REIT II Master Agreement in its entirety.

 

Pursuant to a Property Amendment (as defined in the Master Agreement)
dated on or about the date hereof, the Project (as hereinafter defined) has
become one of the properties that is subject to the Master Agreement.

 

Manager wishes to subcontract certain of its property management and
leasing duties under the Master Agreement with respect to the management,
operation and leasing of the property known as Parrot’s Landing Apartments and
located at 7900 Hampton Boulevard, North Lauderdale, Florida (the “Project”), as more fully described
on Exhibit A attached hereto, to Subcontractor, and Subcontractor
agrees to perform such duties and receive the fees and other consideration
provided for herein.

 

NOW, THEREFORE, in consideration of the
premises and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound hereby, do hereby agree, as follows:

 

ARTICLE I

 

DEFINITIONS

 

Except
as otherwise specified or as the context may otherwise require, the following
terms have the respective meanings set forth below for all purposes of this
Agreement, and the definition of such terms are equally applicable both to the
singular and plural forms thereof. Capitalized terms not defined herein shall
have the meanings attributed to such terms in the Master Agreement:

 

1.1           “Account” has the meaning set forth
in Section 5.2 hereof.

 

1.2           “Affiliate” means, with respect to
any Person: (i) any Person directly or indirectly owning, controlling or
holding, with the power to vote, ten percent (10%) or more of the outstanding
voting securities of such other Person; (ii) any Person ten percent (10%) or
more of whose outstanding voting securities are directly or indirectly owned,
controlled or held, with the power to vote, by such other Person; (iii) any
Person directly or indirectly controlling, controlled by or under common
control with such other Person; (iv) any executive officer, director, trustee
or general partner of such other Person; or (v) any legal entity for which such
Person acts as an executive officer, director, trustee or general partner.

 

9

 

1.3           “Annual Business Plan” has the
meaning set forth in Section 3.11(a) hereof.

 

1.4           “Approved Leasing Parameters” means
parameters established by or otherwise approved in writing by Manager
specifying the manner of Subcontractor’s performance of promotional, leasing
and management activities required to lease apartment units in the Project.

 

1.5           “Behringer Harvard” has the meaning
set forth in Paragraph b of Exhibit D attached hereto
and made a part hereof.

 

1.6           “Behringer Harvard REIT” has the
meaning set forth in Section 6.22 hereof.

 

1.7           “Capital Budget” has the meaning set
forth in Section 3.11(a) hereof.

 

1.8           “CGL” has the meaning set forth in Section 3.10(c)
hereof.

 

1.9           “Code” has the meaning set forth in Section 6.22
hereof and Exhibit D attached hereto and made a part hereof.

 

1.10         “Controlling
Agreements” means the certificate of formation and limited
liability company agreement of the Owner and the mortgage loan documents
relating to the Project (as same may be amended from time to time).

 

1.11         “Executive
Order” has the meaning set forth in Section 6.24(a)
hereof.

 

1.12         “Exhibits” means, collectively, the following
exhibits, and all exhibits and appendices attached to such exhibits, all of
which are incorporated in and made a part of this Agreement, plus all Exhibits
prepared after the Effective Date and executed by Manager and Subcontractor,
which also shall be incorporated in and made a part of this Agreement:

 

EXHIBIT A           PROJECT
LEGAL DESCRIPTION

 

EXHIBIT B            FORM
OF ANNUAL BUSINESS PLAN

 

EXHIBIT C            MONTHLY
REPORTS

 

EXHIBIT D            REIT
COMPLIANCE GUIDELINES

 

1.13         “GAAP”
has the meaning set forth in Section 3.12 hereof.

 

1.14         “Governmental
Requirements” means applicable ordinances, regulations, rules,
statutes, or laws of governmental entities having jurisdiction over the Project
or the requirements of the board of fire underwriters or other similar bodies.

 

1.15         “Gross
Revenues” means all amounts actually collected, in cash, as
rents or other charges for use and occupancy of apartment units and from users
of garage spaces (if any), leases of other non-dwelling facilities in the
Project and concessionaires (if any) in respect of the Project, including
furniture rental, parking fees, forfeited security deposits, application fees,
late charges, income from coin operated machines, proceeds from rental
interruption insurance, and other miscellaneous income collected at the Project;
but shall exclude all other receipts, including but not limited to, income
derived from interest on investments or otherwise, proceeds of claims on
account of insurance policies (other than rental interruption insurance),
abatement of taxes, and awards arising out of eminent domain proceedings,
discounts and dividends on insurance policies.

 

1.16         “Intellectual
Property Rights” means all rights, titles and interests, whether
foreign or domestic, in and to any and all trade secrets, confidential information
rights, patents, invention rights, copyrights, service marks, trademarks,
know-how, or similar intellectual property rights and all

 

10

 

applications
and rights to apply for such rights, as well as any and all moral rights,
rights of privacy, publicity and similar rights and license rights of any type
under the laws or regulations of any governmental, regulatory, or judicial
authority, foreign or domestic and all renewals and extensions thereof.

 

1.17                           “Leases” has the meaning set forth
in Section 3.3(a) hereof.

 

1.18                           “Losses” means any and all claims,
causes of action, demands, suits, proceedings, loss, judgments, damage, awards,
liens, fines, costs, attorney’s fees and expenses, of every kind and nature
whatsoever.

 

1.19                           “Management Fee” has the meaning set
forth in Section 4.1 hereof.

 

1.20                           “Manager Indemnified Parties” has
the meaning set forth in Section 3.10(m)(i) hereof.

 

1.21                           “Monthly Report Deadline” has the
meaning set forth in Section 3.13 hereof.

 

1.22                           “Mortgagee” has the meaning set
forth in Section 6.12 hereof.

 

1.23                           “OFAC” has the meaning set forth in Section 6.24(a) hereof.

 

1.24                           “OFAC Screening” has the meaning set
forth in Section 6.24(b) hereof.

 

1.25                           “On-Site Manager” has the meaning
set forth in Section 2.5 hereof.

 

1.26                           “Operating Budget” has the meaning
set forth in Section 3.11(a) hereof.

 

1.27                           “Owner” means 7900 Hampton Blvd.,
LLC, which is the owner of the Project.

 

1.28                           “Person” means an individual,
corporation, association, business trust, estate, trust, partnership, limited
liability company or other legal entity.

 

1.29                           “Prohibited Person” has the meaning
set forth in Section 6.24(b) hereof.

 

1.30                           “Property Data” has the meaning set
forth in Section 3.15(a) hereof.

 

1.31                           “Proprietary Property” means all
modeling algorithms, tools, computer programs, know-how, methodologies,
processes, technologies, ideas, concepts, skills, routines, subroutines,
operating instructions and other materials and aides used by Subcontractor in
performing its duties set forth in this Agreement that relate to management
advice, services and techniques regarding the Project, and all modifications,
enhancements and derivative works of the foregoing.

 

1.32                           “Qualifying Income” has the meaning
set forth in Exhibit D attached hereto and made a part hereof.

 

1.33                           “REIT” has the meaning set forth in Section 6.22
hereof.

 

1.34                           “Subcontractor Employees” has the
meaning set forth in Section 2.6(a) hereof.

 

1.35                           “Subcontractor Indemnified Parties”
has the meaning set forth in Section 3.10(m) hereof.

 

11

 

1.36                           Texas
Tax Code” means the Texas Tax Code as amended by Texas H.B.
3, 79th Leg., 3rd C.S. (2006), and reference to any provision of the Texas Tax
Code Act shall mean such provision as in effect from time to time, as the same
may be amended, and any successor provision thereto, as interpreted by any
applicable administrative rules as in effect from time to time.

 

1.37                           “Unauthorized Acts” has the meaning
set forth in Section 3.10(m)(i) hereof.

 

ARTICLE II

 

ENGAGEMENT OF SUBCONTRACTOR; SUBCONTRACTOR’S DUTIES AND AUTHORITY

 

2.1                                 Engagement. Manager
hereby engages and retains Subcontractor to manage and lease the Project as
provided herein, and Subcontractor hereby accepts such engagement on the terms
and conditions hereinafter set forth. Subcontractor hereby represents and
warrants to Manager that Subcontractor is properly licensed to perform such
property management and leasing services in the state in which the Project is
located.

 

2.2                                 Master
Agreement. This Agreement is subject and subordinate in all
respects to the Master Agreement. Subcontractor has received a copy of the
Master Agreement and is familiar with the terms thereof. Subcontractor shall
use its best efforts to perform its duties under this Agreement in accordance
with the Master Agreement and will not, by its act or omission to act,
knowingly, willfully or through its gross negligence or Unauthorized Acts cause
a default under the Master Agreement unless Subcontractor’s act or omission is
pursuant to express, written instructions by Manager. Manager agrees, on its
behalf and on behalf of the Owner, that the Master Agreement will not be
modified or amended in any way that adversely affects the rights or obligations
of Subcontractor hereunder. Except for termination of the Master Agreement by
the owner of the Project upon default thereunder or upon the sale of the
Project (either directly or indirectly through the sale of the fund in which
the Project is a part) to an unaffiliated entity, neither the owner of the
Project nor Manager shall voluntarily terminate the Master Agreement prior to
its stated expiration without the prior written consent of Subcontractor. If
the Master Agreement is terminated by the owner of the Project due to a default
by Manager, Manager shall indemnify, defend, exculpate and hold Subcontractor
harmless from and against all Losses incurred or suffered by Subcontractor as a
result of such early termination; provided, however, that if Subcontractor’s
willful misconduct, gross negligence, breach of this Agreement, or Unauthorized
Acts causes such default, the foregoing indemnity and exculpation shall not
apply.

 

2.3                                 Status of Subcontractor;
Limitation on Authority. Manager hereby delegates to Subcontractor
such authority as is necessary for Subcontractor to perform its obligations
under this Agreement. The foregoing notwithstanding, Subcontractor shall have
no authority to enter into on Manager’s behalf, and shall not bind Manager or
the Owner with respect to, any transfer or disposition of the Project, debt for
borrowed money or other obligation or agreement not expressly authorized
hereunder. This Agreement is not one of agency, partnership, master-servant, or
“joint employer,” but one with Subcontractor engaged in the business of
providing property management and leasing services hereunder on its own behalf
as an independent contractor. Subcontractor shall not have the right, power or
authority to enter into agreements or incur liability on behalf of Manager
except as expressly set forth herein. Any personnel hired by Subcontractor to
maintain, operate and/or lease the Project shall be the employees or
independent contractors of Subcontractor and not of Manager. Any action taken
by Subcontractor which is not expressly permitted by this Agreement shall not
bind Manager.

 

2.4                                 Subcontractor’s
Standard of Care. Unless expressly directed otherwise by Manager,
Subcontractor shall devote best efforts in performing its duties hereunder in a
diligent, careful and vigilant manner. In performing Subcontractor’s duties
under this Agreement, Subcontractor shall exercise the same degree of care,
prudence, and skill as other professional property managers and leasing agents
of 

 

12

 

similar
properties in the area. Subcontractor shall make available to Manager the full
benefit of the judgment, experience and advice of the members of Subcontractor’s
organization and staff with respect to the policies and procedures to be
implemented in managing, operating and leasing the Project.

 

2.5                                 On-Site Manager. Within thirty
(30) days following the date of this Agreement, Subcontractor shall designate a
person approved by Manager as the on-site manager for the Project (the “On-Site Manager”). Thereafter,
Subcontractor shall not transfer or terminate the On-Site Manager without
Manager’s consent, which shall not be unreasonably withheld. If the On-Site
Manager must be replaced, Subcontractor shall notify Manager in writing
regarding such replacement and shall replace such person with an individual
with equal (or better) experience and expertise, or with an individual
otherwise approved by Manager in its reasonable discretion.. Subcontractor
acknowledges and agrees that the experience and expertise of the On-Site
Manager is of material consideration to Manager.

 

2.6                                 Employment of
Personnel.

 

(a)                                  Subject to reimbursement as
may be provided in the Operating Budget unless otherwise previously approved in
writing by Manager, Subcontractor shall hire, supervise, discharge, and pay all
labor required for the operation and maintenance of the Project, including, but
not limited to, on-site and certain off-site (only those off-site individuals
directly involved with and actively managing the Project) personnel, managers,
leasing consultants, assistant managers, engineers, janitors, maintenance
supervisors and other employees (the “Subcontractor Employees”)
required for the operation and maintenance of the Project (provided, however,
that Manager shall not be responsible for the salary, bonus, expense or other
cost of any regional level supervisor or manager, or for any administrative
overhead, except as otherwise expressly agreed to in writing), including
personnel spending a portion of their working hours (to be charged on a pro
rata basis) at the Project. All actual expenses of such employment shall be
deemed operational expenses of the Project to the extent set forth in the approved
Operating Budget or otherwise authorized by this Agreement and shall be
proportionate to the amount of time the Project is owned by the Owner and the
amount of time during such ownership such employee(s) work at or for the
Project. Subject to the foregoing, Manager shall pay or reimburse, or cause the
Owner to pay or reimburse, Subcontractor for all salaries, bonuses, employer
taxes, applicable overtime, and employee-related benefits (e.g., workers’
compensation insurance, health insurance and other benefit programs) of all
employees of Subcontractor dedicated to the Project, the aggregate amounts of
which shall be part of the approved Operating Budget.

 

(b)                                 As part of the standard
services provided hereunder, Subcontractor shall be responsible for the
preparation of and shall timely file all payroll tax reports and timely make
payments of all withholding and other payroll taxes with respect to each of
Subcontractor’s employees. Subcontractor shall fully comply with all applicable
laws and regulations pertaining to workers’ compensation, social security,
unemployment insurance, non-discrimination, disabilities, legal immigration
status, hours of labor, right-to-work and union shop laws, wages and hours,
safety, OSHA and working conditions, and other employer-employee laws and
regulations; shall file all required reports and forms relating thereto; and
shall keep all appropriate documentation, books and records pertaining thereto.

 

(c)                                  All employment related
claims involving Subcontractor Employees are Subcontractor’s sole
responsibility, and neither Manager nor the Owner shall have any liability with
respect thereto. Subcontractor shall furnish such fidelity bond/insurance
policy at Subcontractor’s sole expense and shall provide Manager One Million
Dollars ($1,000,000.00) per occurrence coverage with no more than a Fifty
Thousand Dollar ($50,000.00) deductible.

 

13

 

2.7                                 Information. Subcontractor
agrees to keep Manager informed with respect to all material occurrences and
facts which arise during the performance of Subcontractor’s duties and to meet
and confer with Manager on matters of an emergency nature at any reasonable
time or times requested by Manager.

 

2.8                                 Emergency
Contact. Subcontractor will be available on a 24-hour basis, 7 days per week,
with respect to emergencies, and will establish emergency procedures that shall
assure, at a minimum, that telephone contact with a designated employee or
representative of Subcontractor may be made by Manager, provide that a
responsible representative of Subcontractor will respond within a reasonable
period of time after being notified of the emergency, and contain written
procedures which shall include listing of names and telephone numbers of
designated persons capable of dealing with emergencies.

 

2.9                                 Treatment Under
Texas Margin Tax. Pursuant to the Master Agreement, Manager is a “management
company” within the meaning of Section 171.0001(11) of the Texas Tax Code
in connection with the ownership and operation of the Project. All amounts paid
from Manager to Subcontractor pursuant to this Agreement as expenses under Section 3.1
or Subcontractor’s Management Fee under Section 4.1 are specified
costs incurred by Manager in its conduct of the active trade or business of the
Owner and are reimbursed by the Owner within the meaning of
Section 171.1011(m-1) of the Texas Tax Code. In addition, certain amounts
paid from Manager to Subcontractor under this Agreement are (i) “flow-though
funds” that Manager is mandated by law or fiduciary duty to distribute to other
entities, within the meaning of Section 171.1011(f) of the Texas Tax
Code, and (ii) “flow-through funds” in the form of “sales commissions” and
“subcontracting payments” that Manager is mandated by contract to distribute to
other entities, within the meaning of Section 171.1011(g) of the
Texas Tax Code. The terms of this Agreement shall be interpreted in a manner
consistent with the characterization of Manager as a “management company” with
respect to the Owner as defined in Section 171.0001(11), and with the
characterization of the reimbursements as “flow-though funds” within the
meaning of Section 171.1011(f)-(g) of the Texas Tax Code.

 

2.10                           Controlling
Agreements. Subcontractor has received copies of (and will be
provided with copies of future) Controlling Agreements and is and will be
familiar with the terms thereof. Subcontractor shall use reasonable care to
avoid any act or omission that, in the performance of its duties hereunder,
shall in any way conflict with the terms of Controlling Agreements.

 

ARTICLE III

 

SERVICES TO BE PERFORMED BY SUBCONTRACTOR

 

3.1                                 Subcontractor’s
Expenses. All acts performed by Subcontractor in the
performance of its obligations under this Agreement shall be performed on
behalf of Manager, and all obligations or expenses incurred thereby, if
included in the Annual Business Plan or otherwise approved in writing by
Manager, shall be for the account of, on behalf of, and at the expense of
Manager, except as otherwise specifically provided in this Article III.
Manager shall not be obligated to reimburse Subcontractor for any expense
allocable to (i) time spent on projects other than the Project, or (ii) any
personnel other than personnel located at the Project site and personnel
spending a portion of their working hours (to be charged on a pro rata basis) at the Project site or in specifically
performing Subcontractor’s obligations hereunder, whether on or off the Project
site. All reimbursable payments made by Subcontractor hereunder shall be
reimbursed by Manager from funds deposited in an account established pursuant
to Section 5.2 of this Agreement. Subcontractor shall not be
obligated to make any advance to or for the account of Manager or to pay any
sums, except out of funds held in an account maintained under Section 5.2,
nor shall Subcontractor be obligated to incur any liability or obligation for
the account of Manager without assurance that the necessary funds for the
discharge thereof will be provided by

 

14

 

Manager.
All debts and liabilities to third persons incurred by Subcontractor in the
course of its leasing, operation and management of the Project shall be the
debts and liabilities of Manager only, and Subcontractor shall not be liable
for any such debt or liabilities, except to the extent Subcontractor has
exceeded its authority hereunder.

 

3.2                                 Covenants
Concerning Payment of Operating Expenses. Manager covenants to pay,
or to cause the Owner to pay, all sums for operating expenses in excess of
gross receipts required to operate the Project in accordance with the Annual
Business Plan upon written notice and demand from Subcontractor within thirty
(30) days after receipt of such written notice. Manager further recognizes that
the Project may be operated in conjunction with other properties, and costs may
be allocated or shared between such other properties on a more efficient or
less expensive basis. In such regard, Manager consents to the allocation of
costs and/or the sharing of any expenses in an effort to save costs or operate
the Project in a more efficient manner so long as such allocation is done on an
equitable basis and so long as the computations of such allocations are
provided to Manager for its approval pursuant to Section 3.11
hereof.

 

3.3                                 Leasing of
Premises.

 

(a)                                  Subcontractor shall perform
promotional, leasing and management activities required to lease, manage,
maintain and operate the apartment units in the Project in accordance with the
Approved Leasing Parameters. Throughout the term of this Agreement,
Subcontractor shall use its diligent efforts to lease apartment units in the
Project. Subject to reimbursement by Manager, Subcontractor shall advertise the
Project, or portions thereof, prepare and secure advertising signs, space
plans, circular matter, marketing brochures and other forms of advertising.
Subcontractor is authorized to advertise the Project in conjunction with
general advertising campaigns and to allocate the cost of such campaigns on a pro rata basis among the projects being advertised (to the
extent authorized by the Annual Business Plan). All inquiries for any Leases or
renewals or agreements for the rental of the Project or portions thereof shall
be referred to Subcontractor, and all negotiations connected therewith shall be
conducted solely by or under the direction of Subcontractor in accordance with
the parameters established by or otherwise approved in writing by Manager.
Subcontractor is hereby authorized to execute, deliver and renew leases on
behalf of Manager including, but not limited to tenant and commercial leases
(such as laundry room leases) in accordance with the Approved Leasing
Parameters (“Leases”). Subcontractor is
authorized to utilize the services of apartment locator services and pay
compensation (which shall be at prevailing market rates in the vicinity of the
Project) of duly qualified and licensed leasing personnel responsible for the
leasing of the Project; the fees for such services shall be operating expenses
of the Project and, to the extent paid by Subcontractor, reimbursable to
Subcontractor by Manager to the extent set forth in the applicable Annual
Business Plan.

 

(b)                                 Subcontractor shall obtain
credit reports on and perform, or cause to be performed, lawful screening of,
prospective tenants. Further, Subcontractor shall:

 

(i)                                     charge tenants
all or any of the following to the extent required by the terms of the
applicable Lease: a late rent administrative charge, a non-negotiable check
charge, credit report fee, a subleasing or assignment administrative charge
and/or broker’s commission; and Subcontractor shall account for such charges
and/or commissions to Manager;

 

(ii)                                  following
defaults by tenants and in accordance with the applicable Leases, and, if
appropriate, with the assistance of third-party legal counsel selected by
Subcontractor unless otherwise directed by Manager (provided, however, that

 

15

 

Subcontractor shall cause such legal counsel to run appropriate conflicts
checks to verify that the legal counsel is not representing a party adverse to
Manager or its affiliates, or obtain the written consent to any conflict from
Manager or the appropriate affiliate, which consent may be withheld in the sole
and absolute discretion of Manager or its affiliate, and shall notify Manager
of the name of the legal counsel to be engaged), and paid for as operational
expenses as provided in the Master Agreement, in Manager’s sole discretion,
terminate tenancies at the Project and sign and serve in the name of the Owner
such notices as are deemed necessary by Subcontractor;

 

(iii)                               following
defaults by tenants and in accordance with the applicable Leases, and, if
appropriate, with the assistance of third-party legal counsel selected by
Subcontractor unless otherwise directed by Manager (provided, however, that
Subcontractor shall cause such legal counsel to run appropriate conflicts
checks to verify that the legal counsel is not representing a party adverse to
Manager or its affiliates, or obtain the written consent to any conflict from
Manager or the appropriate affiliate, which consent may be withheld in the sole
and absolute discretion of Manager or its affiliate, and shall notify Manager
of the name of the legal counsel to be engaged) and paid for as operational
expenses as provided in the Master Agreement, institute and prosecute actions
to evict tenants and to recover possession of the Project or portions thereof;

 

(iv)                              in accordance
with any policies and procedures manual, if any, adopted by Manager and
delivered to Subcontractor after the date of this Agreement or other written
direction of Manager (it being agreed that any such manual or other direction
may be revised by Manager from time to time), or at the election of Manager, in
accordance with Subcontractor’s policies and procedures, sue, with the
assistance of third-party legal counsel selected by and Subcontractor unless
otherwise directed by Manager (provided, however, that Subcontractor shall
cause such legal counsel to run appropriate conflicts checks to verify that the
legal counsel is not representing a party adverse to Manager or its affiliates,
or obtain the written consent to any conflict from Manager or the appropriate
affiliate, which consent may be withheld in the sole and absolute discretion of
Manager or its affiliate, and shall notify Manager of the name of the legal
counsel to be engaged) and paid for as operational expenses as provided in the
Master Agreement, for and in the name of the Owner and recover rent and other
sums due, and settle, compromise, and release such actions or suits, or
reinstate such tenancies. All expenses of litigation, including, but not
limited to, attorneys’ fees, filing fees and court costs that Subcontractor
shall incur in connection with the collecting of rent and other sums, or to
recover possession of the Project or any portion thereof, shall be deemed to be
an operational expense of the Project.

 

(c)                                  Subcontractor shall arrange
for and supervise the performance of all installations and improvements in
space leased to any tenant.

 

3.4                                 Utility and
Service Contracts. To the extent Manager has not already entered into
such contracts, Subcontractor shall negotiate and enter into, at Manager’s
expense and in Manager’s name or in Subcontractor’s name, as an authorized
representative for Manager, contracts for water, electricity, gas, fuel, oil,
telephone, vermin extermination, trash removal, cable television, security
protection and other services deemed by Subcontractor to be necessary or
advisable for the operation of the Project, if included in the Annual Business
Plan or otherwise approved in writing by Manager; and contracts for any
emergency services or repairs for items not exceeding Five Thousand and No/100
Dollars ($5,000.00). All such contracts shall have terms not to exceed twelve
(12) months (unless otherwise approved in writing 

 

16

 

by
Manager) and be transferable upon a sale or other conveyance of the Project and
contain a thirty (30) day termination option without any penalty therefor
(unless such agreements pertain to elevator or utility services or other
services as may be approved by Manager, in which event the term may vary with
Manager’s prior written approval). Subcontractor may, with Manager’s consent
(not to be unreasonably withheld), enter into a contract with a third-party
utility billing service to allocate and bill utility charges to tenants of the
Project, or may implement an “in-house” billing system to provide such
services, in which case Subcontractor shall be paid a market rate for providing
such services (in addition to amounts otherwise payable to Subcontractor under
this Agreement); provided, however, that (a) Manager shall have the right
to require that Subcontractor obtain competitive bids for such utility billing
services prior to selecting a provider (including Subcontractor) for such
services, and (b) (i) if Subcontractor is the provider of such
services, Manager shall have the right at any time to terminate the contract or
other arrangement whereby Subcontractor provides such services, and (ii) if
an unaffiliated third party is the provider of such services, Manager shall
have the right to terminate the contract whereby the third party provides such
services in accordance with the terms of such contract. To the extent Manager
has not already entered into such orders, Subcontractor shall also place orders
in the name of Manager for such equipment, tools, appliances, materials, and
supplies as are reasonable and necessary to properly maintain the Project, if
included in the Annual Business Plan or otherwise approved in writing by
Manager. Subcontractor may make such contracts and place such orders in Manager’s
name or in its own name, as a Manager authorized representative. In addition,
Manager agrees to specifically assume in writing all obligations under all such
contracts so entered into by Subcontractor, on behalf of Manager, upon the
termination of this Agreement, and Manager shall indemnify, defend and hold
harmless Subcontractor and the other Subcontractor Indemnified Parties from and
against any and all Losses resulting from, arising out of or in any way related
to such contracts and that relate to or concern matters occurring after
termination of this Agreement, but excluding matters arising out of the
misconduct and/or negligence of Subcontractor, its agents, servants, or
employees. Manager agrees to pay or reimburse Subcontractor for all expenses
and liabilities incurred in accordance with this Section 3.4.

 

3.5                                 Maintenance and
Repair of the Project. Subcontractor shall use its diligent
efforts to maintain, at Manager’s expense, the buildings, appurtenances and
grounds of the Project in good condition and repair and in accordance with
standards established by Manager in writing from time to time, including
interior and exterior cleaning, painting and decorating, plumbing, carpentry
and such other normal maintenance and repair work as may be reasonably
desirable taking into consideration the amount allocated therefor in the Annual
Business Plan. With respect to any expenditure not contemplated by the Annual
Business Plan, Subcontractor shall not incur any individual item for repair or
replacement in excess of Five Thousand Dollars ($5,000.00) unless authorized in
writing by Manager, excepting, however, that emergency repairs immediately
necessary for the preservation and safety of the Project or to avoid the
suspension of any service to the Project or danger of injury to persons or
damage to property may be made by Subcontractor upon written notice to Manager,
but without the approval of Manager. Subcontractor shall not be obligated by
this Section to perform any major capital improvements.

 

3.6                                 Supervision of
Capital Improvements or Major Repairs. When requested by Manager
or set forth in the Annual Business Plan, Subcontractor, at Manager’s expense
and in Manager’s name, shall supervise the installation and construction of all
capital improvements or major repairs to the Project where such work
constitutes other than normal maintenance and repair, for additional
compensation as set forth in a separate agreement between Manager and
Subcontractor. In such events, Subcontractor may negotiate contracts with all
contractors, subcontractors, materialmen, suppliers, architects, and engineers
approved by Manager, on behalf of, and in the name of, Manager, and may
compromise and settle any dispute or claim arising therefrom on behalf of and
in the name of Manager; provided only that Subcontractor shall act in good faith
and in the best interest of Manager at all times. Subcontractor will furnish
all personnel necessary for proper supervision of the work and may assign
personnel located at the

 

17

 

Project
to such supervisory work (and such assignment shall not reduce or abate any
other fees or compensation owed to Subcontractor under this Agreement).

 

3.7                                 Collection of
Monies. Subcontractor shall, in accordance with all applicable laws and with
any policies and procedures manual, if any, adopted by Manager and delivered to
Subcontractor after the date of this Agreement or other written direction of
Manager (it being agreed that any such manual or other direction may be revised
by Manager from time to time), or at the election of Manager, in accordance
with Subcontractor’s policies and procedures regarding the collection of rent
and other monies, use diligent efforts to collect all rents and other charges
due from tenants, users of garage spaces (if any), storage spaces, commercial
lessees (if any) and concessionaires (if any) in respect of the Project and
otherwise due the Owner or Manager with respect to the Project in the ordinary
course of business, provided that Subcontractor does not guarantee the
creditworthiness of any tenants, users, lessees, concessionaires or
collectability of accounts receivable from any of the foregoing. Manager
authorizes Subcontractor to request, demand, collect, receive and provide a
receipt for all such rent and other charges and to institute legal proceedings
in the name of Manager, and at Manager’s expense, for the collection thereof,
and for the dispossession of tenants and other persons from the Project or to
cancel or terminate any lease, license or concession agreement for breach or
default thereunder, and such expense may include the engaging of legal counsel
approved by Manager in writing for any such matter. All monies collected by
Subcontractor shall be deposited in the Account referred to in Section 5.2
herein.

 

3.8                                 Subcontractor
Disbursements.

 

(a)                                  All costs, expenses, debts
and liabilities owed to third persons that are incurred by Subcontractor
pursuant to the terms of this Agreement and in the course of managing, leasing
and operating the Project shall be the responsibility of Manager and not
Subcontractor. Manager agrees to provide sufficient working capital funds to
Subcontractor so that all amounts due and owing may be promptly paid by
Subcontractor. Subcontractor is not obligated to advance any funds. As of the
first day of each month of this Agreement, Subcontractor will project the cash
requirements for such month and (if it shall reasonably determine that
collections will be insufficient to meet such cash requirements) request the
necessary additional funds from Manager, which funds will be deposited with
Subcontractor in the Account referred to in Section 5.2 on or
before ten (10) days following the receipt of such request. If at any
month end, the Account balance exceeds the projected cash requirements, such
excess shall be returned to Manager within five (5) days. If at any time
there is not sufficient cash in the Account with which to promptly pay the
bills due and owing, Subcontractor will request that the necessary additional
funds be deposited in an amount sufficient to create an operating reserve
pursuant to Section 5.4. Manager will deposit the additional funds
requested by Subcontractor within five (5) days following the receipt of
such request.

 

(b)                                 Subcontractor shall analyze
all bills (except to the extent Manager undertakes such analysis) received for
services, work and supplies in connection with Subcontractor’s maintenance and
operation of the Project, pay all such bills when due, and, if requested by
Manager, pay, when due, utility and water charges, sewer rent and assessments,
and any other amount payable with respect to the Project, including bills for
taxes, insurance and debt service related to any mortgage of the Project
(unless otherwise provided in any loan documents affecting the Project). Such
payments shall be processed in accordance with Manager’s policies and
procedures as delivered in writing to Subcontractor. All bills shall be paid by
Subcontractor within the time required to obtain discounts, if any. Manager may
from time to time request that Subcontractor forward certain bills to Manager
promptly after receipt, and Subcontractor shall comply with any such request.
Subcontractor shall pay all bills, assessments, real property taxes, insurance
premiums and any other amount payable with respect to the Project out of the
Account

 

18

 

(as described in Section 5.2 hereof). All expenses shall be
billed to the Project at net cost (i.e., less all rebates, commissions,
discounts and allowances, however designated). Provided that funds in the
Account are available or otherwise made available to Subcontractor for such
purposes, Subcontractor shall give Manager the benefit of any favorable pricing
or discounts available to Subcontractor for goods or services to be obtained
from third parties in connection with its services hereunder. Notwithstanding
the foregoing, however, if Subcontractor fails to timely submit payment for any
bills as set forth in this Section 3.8 and incurs a late charge or
fee therefor, Subcontractor shall pay such late charge or fee out of
Subcontractor’s own funds, and such late charge or fee shall not be disbursed
from Manager’s account; provided, however, that Subcontractor shall not be
obligated to pay any such late fee if (i) Manager did not make sufficient
sums available to Subcontractor for the timely payment thereof; (ii) the
timely payment of such bill was otherwise beyond Subcontractor’s reasonable
control; (iii) Subcontractor in good faith disputes a bill; or (iv) Manager
directs Subcontractor in writing not to submit payment for such bill. Any
account balance remaining at the end of each calendar month during the term of
this Agreement shall be disbursed or transferred as generally or specifically
directed from time to time by Manager.

 

3.9                                 Use and
Maintenance of Premises. Subcontractor agrees that it will not
knowingly permit the use of the Project for any purpose which might void any
policy of insurance held by Manager or which might render any loss thereunder
uncollectible, or which would be in violation of any government restriction or
any covenant or restriction of any Lease of the Project. Subcontractor shall
use its good faith efforts to secure substantial compliance by the tenants with
the terms and conditions of their respective Leases.

 

3.10                           Insurance and
Indemnification.

 

(a)                                  Property Insurance. Manager shall
cause to be placed and kept in force, at the expense of the Owner, causes of
loss — special form commercial property insurance for the Project that contains
coverages and is issued by companies that are acceptable to Manager, in Manager’s
sole discretion. Such policy(ies) shall name Manager and Owner as the named
insureds and any mortgagee(s) as loss payee. Policy terms and conditions
shall comply with the requirements of the applicable mortgage(s) and
Leases affecting the Project.

 

(b)                                 Personal Property of
Subcontractor. Except as otherwise expressly provided herein,
neither Manager nor any of Manager’s Affiliates shall be liable to
Subcontractor, its employees, agents, customers or invitees for loss or damage
to their personal property and business records located at the Project.
Subcontractor shall obtain and keep in full force and effect, at Subcontractor’s
sole cost and expense, during the term of this Agreement extended coverage
property insurance covering one hundred percent (100%) of the replacement cost
of Subcontractor’s personal property. Subcontractor shall procure from its
insurers waivers of subrogation with respect to claims against Manager under
policies in which Manager is not named an additional insured.

 

(c)                                  Liability Insurance. Manager shall
at all times during the term of this Agreement carry Commercial General
Liability (“CGL”) insurance
with respect to the Project in an amount of not less than Ten Million And No/100
Dollars ($10,000,000.00). Such policy limits may be met in combination with
umbrella/excess liability insurance. Such policy shall be primary and
non-contributory over such CGL insurance carried by Subcontractor.
Subcontractor shall at all times during the term of this Agreement carry CGL
insurance covering the actions taken by Subcontractor outside the scope of its
obligations under this Agreement with minimum limits of at least Two Million
And No/100 Dollars ($2,000,000.00) issued by an insurance company

 

19

 

reasonably acceptable to Manager. Manager and Subcontractor shall be
named as an additional insured, respectively, on such policies of each other.

 

(d)                                 Workers’ Compensation and
Employer’s Liability Insurance. Subcontractor shall carry
Worker’s Compensation insurance in statutory amounts. In addition,
Subcontractor shall carry Employer’s Liability Insurance in not less than the
following amounts:

 

$1,000,000 bodily injury by
accident, each accident;

 

$1,000,000 bodily injury by
disease, each employee; and

 

$1,000,000 bodily injury by
disease, policy limit.

 

(e)                                  Commercial Automobile
Liability Insurance. If applicable, Subcontractor shall carry
Automobile Liability Insurance with limits of not less than One Million Dollars
($1,000,000.00) combined single limit. Manager shall be named as an additional
insured on such policy.

 

(f)                                    Property Management
Professional Liability Insurance. Subcontractor shall carry
property management professional liability insurance with limits of not less
than One Million Dollars ($1,000,000.00) per claim.

 

(g)                                 Employment Practices
Liability Insurance. Subcontractor shall maintain employment practices
liability insurance with limits not less than Seven Hundred Fifty Thousand
Dollars ($750,000). Such insurance shall include third party discrimination and
harassment coverage.

 

(h)                                 Employee Dishonesty
Insurance/Fidelity Bond. Subcontractor shall maintain employee
dishonesty or crime insurance, which may be in the form of a fidelity bond,
with limits not less than One Million Dollars ($1,000,000). Such insurance
shall include third party coverage and name Manager as loss payee.

 

(i)                                     Certificates of Insurance. Each party
shall provide to the other a certificate of insurance evidencing that the
insurance policies required pursuant to this Article III are in
full force and effect and shall provide to each other evidence of each party’s
renewal of such insurance policies annually within twenty (20) days of
expiration of such policies. Subcontractor shall collect from all tenants of
the Project certificates of insurance evidencing the existence of all insurance
(if any) required by each tenant’s Lease. Subcontractor shall use commercially
reasonable efforts to obtain a new certificate of insurance from each tenant at
least twenty (20) days prior to the date on which an insurance policy described
in a certificate of insurance previously delivered by the tenant would expire.
Subcontractor shall retain the original of each certificate for its tenant
file.

 

(j)                                     Contractors and Vendors. Subcontractor
shall require that all parties performing work on or with respect to the
Project, including, without limitation, contractors, subcontractors,
materialmen and service vendors, maintain insurance coverage at such party’s
expense, in the following minimum amounts and naming Manager and Subcontractor
as additional insureds:

 

	
  (i)

  	
  Worker’s
  Compensation:

  	
   

  	
  Statutory
  Amount

  
	
   

  	
   

  	
   

  	
   

  
	
  (ii)

  	
  Employer’s
  Liability:

  	
   

  	
  $1,000,000
  bodily injury by accident, each accident;

  

 

20

 

	
   

  	
   

  	
   

  	
  $1,000,000
  bodily injury by disease, each employee;

  
	
   

  	
   

  	
   

  	
  $1,000,000
  bodily injury by disease, policy limit

  
	
   

  	
   

  	
   

  	
   

  
	
  (iii)

  	
  Commercial
  General Liability, including Broad Form Endorsement

  	
   

  	
  $1,000,000
  each occurrence;

  
	
   

  	
   

  	
  $2,000,000
  general aggregate

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (iv)

  	
  Commercial
  Automobile

  	
   

  	
  $1,000,000
  combined single limit Liability

  

 

Manager
may require higher limits depending on the work involved. Subcontractor must
obtain Manager’s written permission prior to waiving any of the above insurance
requirements. Upon prior notice to Manager, Subcontractor shall have the right
to increase the amounts of insurance described above and to require additional
insurance. Subcontractor shall obtain and keep on file a certificate of
insurance evidencing the existence of the coverages described above prior to
permitting any contractor, subcontractor, materialman or vendor to work on the
Project.

 

(k)                                  Cooperation with Insurers. Subcontractor
shall cooperate with and provide reasonable access to the Project to
representatives of insurance companies and insurance brokers or agents with
respect to insurance that is in effect or for which application has been made.
Subcontractor shall use its best efforts to comply with all requirements of
insurers.

 

(l)                                     Accidents and Claims. Subcontractor
shall promptly investigate and shall report in detail to Manager all accidents
and claims for damage relating to the ownership, operation or maintenance of
the Project, and any damage or destruction to the Project and the estimated
costs of repair thereof, and shall prepare for approval by Manager all reports
required by an insurance company in connection with any such accident, claim,
damage, or destruction. Such reports shall be given to Manager promptly, and
shall be noted in the monthly reports delivered to Manager pursuant to Section 3.13
below. Subcontractor shall assist Manager with Manager’s settlement of any
claim against an insurance company arising out of any policy, in executing
proofs of loss and adjustments of loss, and in collecting and receiving loss
proceeds.

 

(m)                               Indemnification.

 

(i)                                     Subcontractor
hereby agrees to indemnify, hold harmless and defend the Owner, Manager and all
Affiliates of the Owner and Manager and their respective stockholders,
officers, directors, employees and managers (the “Manager Indemnified Parties”) from and against any and all
Losses to the extent arising, directly or indirectly, from or in connection
with Subcontractor’s (i) gross negligence, (ii) willful misconduct, (iii) breach
of this Agreement, (iv) violations of any law (“Unauthorized Acts”), and/or (v) any
actual misrepresentations made by Subcontractor or its employees or agents to
tenants, prospective tenants, real estate brokers or other third parties. This
indemnity shall survive the termination of this Agreement.

 

(ii)                                  Manager shall
indemnify, defend and hold Subcontractor and its stockholders, officers,
directors, employees, managers, successors and assigns (collectively, the “Subcontractor Indemnified Parties”)
harmless from and against any Losses to the extent arising out of or in
connection with the management of the Project and the operation thereof, except
for Subcontractor’s (i) gross negligence, (ii) willful misconduct, (iii) breach
of this Agreement, (iv) any actual misrepresentations made by

 

21

 

Subcontractor or its employees or agents to tenants, prospective
tenants, real estate brokers or other third parties, or (v) Unauthorized
Acts. The indemnities contained herein shall survive the termination of this
Agreement. Manager agrees to defend and indemnify and hold harmless the
Subcontractor Indemnified Parties from and against any and all Losses arising
out of any violation, breach or failure of the Project to comply with any or
all state or federal laws applicable to the Project, except for any violations
caused by the misconduct and/or negligence of Subcontractor, its agents,
servants, or employees.

 

(iii)                               These indemnity
provisions shall survive the expiration or earlier termination of this
Agreement. In connection with any claim giving rise to indemnity hereunder
resulting from or arising out of any claim or legal proceeding by a third
party, the indemnifying party, at its sole cost and expense, may, upon written
notice to the indemnified party, assume the defense of any such claim or legal
proceeding. If the indemnifying party assumes the defense of any such claim or
legal proceeding, the indemnifying party shall select counsel reasonably
acceptable to the indemnified party to conduct the defense of such claims or
legal proceedings and at the indemnifying party’s sole cost and expense shall
take all steps necessary in the defense or settlement thereof. The indemnifying
party shall not consent to a settlement of, or the entry of any judgment
arising from, any such claim or legal proceeding, without the prior written
consent of the indemnified party, unless (a) the indemnifying party admits
in writing its liability to hold the indemnified party harmless from and
against any Losses arising out of such settlement, (b) concurrently with
such settlement the indemnifying party pays into court the full amount of all
Losses to be paid by the indemnifying party in connection with such settlement
and obtains a full release of any liability of the indemnified party which is
not conditioned upon any further payment, and (c) such settlement would
not otherwise have a material adverse effect on the indemnified party. The
indemnified party shall be entitled to participate in (but not control) the
defense of any such action, with its own counsel and at its own expense. If the
indemnifying party does not assume (or continue to diligently and competently
prosecute) the defense of any such claim or litigation resulting therefrom in
accordance with the terms hereof, the indemnified party may defend against such
claim or litigation in such manner as it may deem appropriate (and the
indemnifying party may participate at its own expense), including, but not
limited to, settling such claim or litigation, after giving notice of the same
to the indemnifying party but such settlement shall not be made without the
prior written consent of the indemnifying party (which consent will not be
unreasonably withheld) unless the indemnified party agrees that the
indemnifying party is not liable for such claim under this Agreement.

 

(iv)                              In the event of
any occurrence which may give rise to a claim by an indemnified party against
an indemnifying party hereunder, the indemnified party will give notice thereof
to the indemnifying party; provided, however, that failure of the
indemnified party to timely give the notice provided in this Section 3.10
shall not be a defense to the liability of an indemnifying party for such
claim, but such indemnifying party may recover from the indemnified party any
actual damages arising from the indemnified party’s failure to give such timely
notice.

 

3.11                           Annual Business
Plan.

 

(a)                                  On or before October 1
of each calendar year during the term of this Agreement, Subcontractor shall
prepare and submit to Manager for Manager approval an “Annual
Business Plan” in the form attached hereto as Exhibit B
(which form may be revised by Manager from time to time), for the Project for
the promotion, leasing, management, operations, repair and

 

22

 

maintenance of the Project for each calendar year during which this
Agreement is in effect. The Annual Business Plan shall include a detailed
budget of projected income and expenses for the Project for such calendar year
(the “Operating Budget”)
and a detailed budget of projected capital improvements for the Project for
such calendar year (the “Capital Budget”).

 

(b)                                 Subcontractor shall meet
with Manager to discuss the proposed Annual Business Plan, and Manager shall
notify Subcontractor with respect to the approval or disapproval of the
proposed Annual Business Plan within twenty (20) days following the receipt of
the Annual Business Plan. Any notice which disapproves a proposed Annual
Business Plan must contain specific objections in reasonable detail. If Manager
fails to provide approval of a proposed Annual Business Plan within such
twenty-day period, the proposed Annual Business Plan shall be deemed to be
disapproved and the Annual Business Plan in effect for the previous calendar
year shall remain in effect until Manager approves a new Annual Business Plan
for such Project. Manager acknowledges that the Operating Budget is intended
only to be a reasonable estimate of the Project’s income and expenses for the
ensuing calendar year. Subcontractor shall not be deemed to have made any
guarantee, warranty or representation whatsoever in connection with the
Operating Budget.

 

(c)                                  Subcontractor agrees to use
diligence and to employ all reasonable efforts to ensure that the actual costs
of maintaining and operating the Project shall not exceed the Operating Budget
which is a part of the approved Annual Business Plan either in total or in any
one accounting category. Any expense causing or likely to cause a variance of
greater than five percent (5%) or $5,000, whichever is greater, in any one
accounting category on a cumulative year-to-date basis shall be promptly
explained to Manager by Subcontractor in the next monthly report submitted by
Subcontractor to Manager under Section 3.13 below. During the
calendar year Subcontractor shall inform Manager of any major increases or
decreases in costs, expenses, and income that were not reflected in the Annual
Business Plan.

 

3.12                           Records. Subcontractor
shall maintain all office records and books of account and shall record
therein, and keep copies of, each invoice received from services, work and
supplies ordered in connection with the maintenance and operation of the
Project. Such records shall be maintained in accordance with Generally Accepted
Accounting Principles (“GAAP”).
Manager and persons designated by Manager shall at all reasonable times have
access to and the right to audit and make independent examinations of such
records, books and accounts and all vouchers, files and all other material
pertaining to the Project and this Agreement, all of which Subcontractor agrees
to keep safe, available and separate from any records not pertaining to the
Project, at a place recommended by Subcontractor and approved by Manager.
Subcontractor shall provide any and all records reasonably requested by Manager
or Manager’s auditors in compliance with GAAP to regulators and Manager’s
lender(s) as may be designated from time to time by Manager.

 

3.13                           Monthly Reports. On or before
noon Central Standard Time on the tenth (10th) day after the end of each month (the “Monthly Report Deadline”) during
the term of this Agreement, Subcontractor shall prepare and submit to Manager
the reports outlined on Exhibit C attached hereto and the following
reports and statements:

 

(i)                                     rental
collection record;

 

(ii)                                  monthly operating
and cash flow statement;

 

(iii)                               copy of cash
disbursements ledger entries for such period, if requested;

 

(iv)                              copy of cash
receipts ledger entries for such period, if requested;

 

23

 

(v)                                 the original copies
of all contracts entered into by Subcontractor on behalf of Manager during such
period, if requested; and

 

(vi)                              copy of ledger
entries for such period relating to security deposits maintained by
Subcontractor, if requested.

 

In
addition to the above, Subcontractor shall deliver to Manager any additional
reports and statements as may be reasonably requested by Manager. If the
Monthly Report Deadline falls on a Saturday, Sunday, or a holiday (as
determined by Manager), then the foregoing Monthly Reports shall be due on or
before noon Central Standard Time on the first business day following such
Saturday, Sunday or holiday.

 

3.14                           Compliance with
Legal Requirements. Subcontractor shall execute and file when due all
forms, reports, and returns required by law relating to the employment of its
personnel. Subcontractor shall promptly, and in no event later than 72 hours
from the time of receipt, notify Manager in writing of all notices of violation
or other notices relating the Project from any governmental authority, board of
fire underwriters or insurance company, and shall make such recommendations
regarding compliance with such notice as shall be appropriate. Subcontractor
shall be responsible for notifying Manager in the event it receives notice that
any improvement on the Project or any equipment therein does not comply with
the requirements of any statute, ordinance, law or regulation of any
governmental body or of any public authority or official thereof having or
claiming to have jurisdiction thereover. Subcontractor shall promptly forward
to Manager any complaints, warnings, notices or summonses received by it
relating to such matters. Manager represents that to the best of its knowledge
the Project and any equipment thereon will upon acquisition by Manager comply
with all such requirements. Manager authorizes Subcontractor to disclose the
ownership of the Project to any such officials. Manager agrees to indemnify,
defend, and hold harmless Subcontractor and the other Subcontractor Indemnified
Parties from and against any and all Losses that may be imposed on them or any
or all of them by reason of the failure of Manager to correct any present or
future violation or alleged violation of any and all present or future laws,
ordinances, statutes, or regulations of any public authority or official
thereof, having or claiming to have jurisdiction thereover, of which it has
actual notice.

 

Manager
acknowledges that Subcontractor does not hold itself out to be an expert or
consultant with respect to, or represent that, the Project currently complies
with Governmental Requirements. Subcontractor shall take such action as may be
reasonably necessary to comply with any Governmental Requirements applicable to
Subcontractor, including the collection and payment of all margin, sales and
other taxes (other than income taxes) which may be assessed or charged by any
governmental entities in the state in which the Project is located in
connection with Subcontractor’s compensation (set forth in Article IV
below). If Subcontractor discovers the Project does not comply with any
Governmental Requirements, Subcontractor shall make reasonable efforts to bring
the Project into compliance with such Governmental Requirements, subject to the
limitation contained in Section 3.5 of this Agreement regarding the
making of alterations and repairs, but Subcontractor shall have no liability
hereunder if such reasonable efforts are not sufficient to bring the Project
into compliance. Subcontractor, however, shall not take any such action as long
as Manager is contesting or has affirmed its intention to contest and promptly
institute proceedings contesting any such order or requirement. If, however,
failure to comply promptly with any such order or requirement would or might
expose Subcontractor to civil or criminal liability, Subcontractor shall have
the right, but not the obligation, to cause the same to be complied with and
Manager agrees to indemnify and hold harmless Subcontractor and the other
Subcontractor Indemnified Parties from and against any and all Losses that may
be imposed on them or any or all for taking such actions and to promptly
reimburse Subcontractor for expenses incurred thereby. Subcontractor also shall
not be liable for any effort or judgment or for any mistake of fact of law, or
for

 

24

 

anything
which it may do or refrain from doing hereinafter, except as otherwise
expressly provided in this Agreement.

 

3.15                           Performance of
Accounting Function. All accounting performed by Subcontractor with
respect to the Project shall be conducted by means of “Real Page” remote access
software. Subcontractor acknowledges that an owner of direct or indirect
interests in the Owner is part of a consolidated group whose parent company is
a publicly registered entity or that operates in a manner similar to a publicly
registered entity, and that it is of utmost importance that Subcontractor
perform its accounting functions with respect to the Project in an accurate and
timely manner in order to enable such parent company to comply with all of its
regulatory and other similar obligations. Notwithstanding anything contained
herein to the contrary, in the event that more than two (2) times in any
period of twelve (12) consecutive months Subcontractor either (i) causes a
material inaccuracy to be present in any financial report prepared by
Subcontractor with respect to the Project, or (ii) fails to prepare and
deliver to Manager any report required by this Agreement in a timely manner,
then Manager shall have the right at any time thereafter, by written notice to
Subcontractor, to relieve Subcontractor of its accounting and reporting duties
under this Agreement with respect to the Project. In such event, the Management
Fee defined in Section 4.1 shall be reduced by a percentage to be
mutually agreed upon by the parties on a case-by-case basis.

 

(a)                                  Property Data: “Property Data” shall mean any and all
data or other information of any kind in any way relating or pertaining to
Manager or its Affiliates, its business or its clients (existing or
prospective), or any properties, or other assets or proprietary interests of
Manager or an Affiliate of Manager or its clients (existing or prospective),
and whether prepared, collected, or otherwise made available by or to
Subcontractor in connection with the performance of its obligations under this
Agreement or otherwise, except for information described in Section 3.15(c) below.

 

(b)                                 Safeguarding Property Data: Subcontractor
recognizes that the Property Data is owned by Manager. Thus, Subcontractor
shall establish and maintain safeguards consistent with industry standard and
reasonably necessary to prevent the destruction, loss, or alteration of any
Property Data in the possession of Subcontractor. Such safeguards shall be
subject to the reasonable approval of Manager, which approval shall not be
unreasonably withheld. Manager agrees to store, maintain and safeguard the
Property Data during the term of this Agreement and up to seven (7) years
following the expiration or earlier termination of this Agreement. All
reasonable costs associated with storing and maintaining the Property Data and
related records shall be approved in advance by Manager and shall be borne by
the Project.

 

(c)                                  Confidentiality:

 

(i)                                     Subcontractor
acknowledges that some or all of the Property Data may be proprietary and
confidential in nature. Subcontractor shall use the Property Data only for
purposes of this Agreement and shall not disclose such Property Data to any
third party without the prior written consent of Manager.

 

(ii)                                  Notwithstanding
the foregoing, Subcontractor may disclose the Property Data to Subcontractor’s
agents, consultants, or subcontractors as and to the extent required to perform
its obligations under this Agreement, provided that Subcontractor requires such
persons to protect the Property Data and to use the information solely in
furtherance of the purposes for which the information was disclosed to
Subcontractor.

 

(iii)                               Subcontractor’s
obligations under this Section 3.15 will not apply to information
that: (i) is or becomes generally available to the public without breach
by

 

25

 

Subcontractor, or (ii) is independently developed by Subcontractor
without use of the disclosed Property Data.

 

(iv)                              Subcontractor
expressly understands and acknowledges (a) that the Property Data may
constitute material, non-public information regarding Manager or its
Affiliates; (b) several of the entities affiliated with Manager are
publicly held; (c) that federal and state securities laws forbid a person
from purchasing, selling or otherwise engaging in transactions in securities or
derivative securities related to securities of a public company while in
possession of material, nonpublic information about that company, or
communicating such information to another person who may purchase, sell or
otherwise engage in transactions in securities or derivative securities related
to securities of that public company; and (d) that such laws provide
strict penalties (including civil and criminal fines and incarceration) for the
violation thereof. Subcontractor agrees not to violate those laws.
Subcontractor also agrees to take steps to assure that each person given access
through Subcontractor to such Property Data is aware of those laws and to take
all commercially reasonable steps to supervise each person given access to such
Property Data to assure that such person does not violate those laws.

 

(v)                                 If
Subcontractor receives a subpoena or other validly issued administrative or
judicial demand requiring it to disclose the Property Data, Subcontractor shall
provide prompt notice to Manager of such demand and, if reasonably practicable,
shall afford Manager an opportunity to object to such demand; however,
Subcontractor shall thereafter be permitted to disclose such Property Data to
the extent required by law.

 

(vi)                              Subcontractor
may disclose to third parties the existence and general nature of, but not the
amounts payable by the Project or Manager to Subcontractor under any of the
specific terms of, this Agreement; provided, however, that Subcontractor may
disclose the amount of the Management Fee to its agents, attorneys, lenders and
others with a reasonable need to know such information.

 

(vii)                           Upon
termination or expiration of this Agreement, Subcontractor shall return to
Manager any and all Property Data in Subcontractor’s possession, except to
extent the Property Data must be retained or is required for internal
recordkeeping purposes in compliance with applicable professional standards.

 

(viii)                        The provisions
of this Section 3.15 shall survive the expiration or earlier
termination of this Agreement.

 

(d)                                 Work Product: Manager and
Subcontractor shall each have (jointly, not exclusively) ownership in and to
any proprietary tools and methodologies (work product) created by Subcontractor
and/or Manager exclusively in connection with this Agreement. If Subcontractor,
in connection with the performance of its obligations under this Agreement,
uses any pre-existing software owned or licensed by Subcontractor, such
software shall remain the property of Subcontractor (or the licensor, as the
case may be), and Manager shall have no proprietary rights therein. Likewise,
if Manager, in connection with the performance of its obligations under this
Agreement, uses any pre-existing software owned or licensed by Manager, such
software shall remain the property of Manager (or the licensor, as the case may
be), and Subcontractor shall have no proprietary rights therein. Upon the expiration
or earlier termination of this Agreement, Subcontractor shall electronically
furnish to Manager, in a format acceptable to Manager and without charge, one (1) master
copy of the work product jointly owned by

 

26

 

Manager and Subcontractor, including computer software and the
documentation developed by Subcontractor relating thereto. Upon written request
by one party, Manager and Subcontractor shall in good faith prepare and execute
such licensing or other agreements as are necessary or appropriate to
effectuate the intent of the foregoing provisions of this Section 3.15.

 

ARTICLE IV

 

SUBCONTRACTOR’S COMPENSATION, TERM

 

4.1                                 Management Fee. Commencing on
the date hereof, Manager shall pay Subcontractor a monthly management fee (“Management Fee”) equal to three and
twenty-five hundredths percent (3.25%) of Gross Revenues for the Project for
such month payable monthly in arrears.

 

4.2                                 Term. This
Agreement commenced as of the date of this Agreement, and shall thereafter
continue for a period of five (5) year(s) from said commencement
date, unless otherwise terminated as provided herein. If no party gives written
notice to the other at least thirty (30) days prior to the expiration date
hereof that this Agreement is to terminate, then this Agreement shall
automatically continue thereafter for consecutive one (1)-year periods until
terminated by any party by written notice given at least thirty (30) days in
advance of such termination. 
Notwithstanding the foregoing, Manager may terminate this Agreement, in
whole or in part (i) at any time upon delivery of written notice to
Subcontractor not less than thirty (30) days prior to the effective date of
termination, without cause, for any reason or for no reason, and (ii) immediately
upon the occurrence of any of the following:

 

(a)                                  A decree or order is
rendered by a court having jurisdiction (i) adjudging Subcontractor as
bankrupt or insolvent, or (ii) approving as properly filed a petition
seeking reorganization, readjustment, arrangement, composition or similar
relief for Subcontractor under the federal bankruptcy laws or any similar
applicable law or practice, or (iii) appointing a receiver or liquidator
or trustee or assignee in bankruptcy or insolvency of Subcontractor or a
substantial part of the property of Subcontractor, or for the winding up or
liquidating of its affairs; or

 

(b)                                 Subcontractor (i) institutes
proceedings to be adjudicated a voluntary bankrupt or an insolvent, (ii) consents
to the filing of a bankruptcy proceeding against it, (iii) files a
petition or answer or consent seeking reorganization, readjustment,
arrangement, composition or relief under any similar applicable law or
practice, (iv) consents to the filing of any such petition, or to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency for it or for a substantial part of its property, (v) makes an
assignment for the benefit of creditors, (vi) is unable to or admits in
writing its inability to pay its debts generally as they become due unless such
inability shall be the fault of the other party, or (iv) takes corporate
or other action in furtherance of any of the aforesaid purposes;

 

(c)                                  The sale of the Project or
the sale of the fund of which the Project is a part; or

 

(d)                                 The termination or
expiration of the Master Agreement.

 

4.3                                 Subcontractor’s
Obligations Upon Termination. Upon the termination of
this Agreement, Subcontractor shall have the following duties:

 

(a)                                  Subcontractor shall deliver
to Manager or its designee all books and records with respect to the Project.

 

(b)                                 Subcontractor shall transfer
and assign to Manager, or its designee, all service contracts and personal
property relating to or used in the operation and maintenance of the

 

27

 

Project, except personal property paid for and owned by Subcontractor.
Subcontractor shall also, for a period of sixty (60) days immediately following
the date of such termination, make itself available to consult with and advise
Manager, or its designee, regarding the operation, maintenance and leasing of
the Project.

 

(c)                                  Subcontractor shall render
to Manager an accounting of all funds of Manager in its possession and shall
deliver to Manager a statement of all fees and reimbursements claimed to be due
to Subcontractor and shall cause funds of Manager held by Subcontractor
relating to the Project to be paid to Manager or its designee.

 

(d)                                 Within sixty (60) days
immediately following the date of such termination, Subcontractor shall deliver
to Manager the report required by Section 3.13 for any period not
covered by such a report at the time of termination, and within sixty (60) days
immediately following the date of such termination, Subcontractor shall deliver
to Manager, as required by Section 3.13, the statement of
operations for the fiscal year or portion thereof ending on the date of
termination.

 

4.4                                 Manager’s
Obligations Upon Termination. Upon any termination of
this Agreement by Manager, Subcontractor shall be entitled to receive all
compensation and reimbursements, if any, due to Subcontractor through the date
of termination. Such amounts will be due Subcontractor no later than thirty
(30) days from the date of such termination. All provisions of this Agreement
that require Manager to have insured, or to defend, hold harmless and indemnify
or to reimburse Subcontractor shall survive any expiration or termination of
this Agreement, but only to the extent the applicable claim or cause of action
is based on an event occurring prior to the date of termination.

 

The
parties understand and agree that Subcontractor may withhold funds for sixty
(60) days after the end of the month in which this Agreement is terminated to
pay bills previously incurred but not yet invoiced and to close accounts.
Should the funds withheld be insufficient to meet the obligation of
Subcontractor to pay bills previously incurred, Manager will, upon demand,
advance sufficient funds to Subcontractor to ensure fulfillment of
Subcontractor’s obligation to do so, within ten (10) days of receipt of
notice and an itemization of such unpaid bills.

 

ARTICLE V

 

PROCEDURES FOR HANDLING RECEIPTS AND OPERATING CAPITAL

 

5.1                                 Security
Deposits. Tenant security deposits shall be held by
Subcontractor in accordance with the laws of the jurisdiction in which the
Project is located. Manager agrees to indemnify and hold harmless Subcontractor
and the other Subcontractor Indemnified Parties from and against any and all
Losses with respect to any use by Manager of the tenant security deposits that
is inconsistent with the terms of the Lease and applicable laws.

 

5.2                                 Banking
Accommodations. Manager shall establish and maintain separate
account(s) (the “Account”)
for funds relating to the Project, in a bank determined by Manager, which
Account shall be in compliance with lender requirements, if applicable. All
monies deposited from time to time in the Account shall be deemed to be trust
funds and shall be and remain the property of the Owner and shall be withdrawn
and disbursed by Subcontractor for the account of the Owner only as expressly
permitted by this Agreement for the purposes of performing the obligations of
Subcontractor hereunder. No monies collected by Subcontractor on the Owner’s
behalf shall be commingled with funds of Subcontractor. The Account shall be
maintained, and monies shall be deposited therein and withdrawn therefrom, in
accordance with the following:

 

28

 

(a)                                  All sums received from rents
and other income from the Project shall be promptly deposited by Subcontractor
in the Account. Subcontractor shall have the right to designate two (2) or
more persons, subject to Manager’s approval, who shall be authorized to draw
against the Account, but only for purposes authorized by this Agreement. Except
for payments required in the event of an emergency as provided in Section 3.5,
any withdrawal by Subcontractor of an amount which would result in expenses of
more than five percent (5%) or $5,000 (whichever is greater) in excess of the
applicable amount provided for in the Operating Budget and/or Capital Budget
then in effect shall require Manager’s prior written approval.

 

(b)                                 All sums due to
Subcontractor hereunder, whether for compensation, reimbursement for expenditures,
or otherwise, as herein provided, shall be a charge against the operating
revenues of the Project and shall be paid and/or withdrawn by Subcontractor
from the Account prior to making any other disbursements therefrom.

 

(c)                                  Upon instruction by the
Manager, Subcontractor shall forward to Manager all monies contained in the
Account other than a reserve in an amount designated by Manager and any other
amounts otherwise provided in the Operating Budget and/or Capital Budget, which
shall remain in the Account.

 

5.3                                 Depository
Accounts. Manager and Subcontractor agree that Subcontractor
shall have no liability for loss of funds of Manager contained in the Account
for the Project maintained by Subcontractor pursuant to this Agreement due to
insolvency of the bank or financial institution in which its accounts are kept,
whether or not the amounts in such accounts exceed the maximum amount of
federal or other deposit insurance applicable with respect to the financial
institution in question.

 

5.4                                 Working Capital. In addition
to the funds derived from the operation of the Project, Manager shall furnish
and maintain in the operating accounts of the Project such other funds as may
be necessary to discharge financial commitments required to efficiently operate
the Project and to meet all payrolls and satisfy, before delinquency, and to
discharge all accounts payable. Subcontractor shall have no responsibility or
obligation with respect to the furnishing of any such funds. Nevertheless,
Subcontractor shall have the right, but not the obligation, to advance funds or
contribute property on behalf of Manager to satisfy obligations of Manager in
connection with this Agreement and the Project. Subcontractor shall keep
appropriate records to document all reimbursable expenses paid by
Subcontractor, which records shall be made available for inspection by Manager
or its agents on request. Manager agrees to reimburse Subcontractor upon demand
for money paid or property contributed in connection with the Project and this
Agreement.

 

5.5                                 Authorized
Signatures. Any persons from time to time designated by
Subcontractor shall be authorized signatories on all bank accounts established
pursuant to this Agreement and shall have authority to make disbursements from
such accounts. Funds may be withdrawn from all such bank accounts, in
accordance with this Article V, only upon the signature of an
individual who has been granted that authority by Subcontractor. Subcontractor
may endorse any and all checks received in connection with the operation of any
Property and drawn to the order of the Owner, and Manager shall, upon request,
furnish Subcontractor’s depository with an appropriate authorization for
Subcontractor to make such endorsement. Subcontractor shall also have the
authority to collect and handle tenants’ security deposits, including the right
to apply such security deposits to unpaid rent, and to comply, on behalf of the
Owner, with applicable state or local laws concerning security deposits and
interest thereon, if any.

 

29

 

ARTICLE VI

 

MISCELLANEOUS

 

6.1                                 Assignment. Subcontractor
may not assign or delegate its duties and rights, either in whole or in part,
under this Agreement without the prior written consent of Manager, in its sole
discretion. Manager shall have the right, exercised by and upon written notice
to Subcontractor, to assign its rights under this Agreement to an Affiliate of
Manager. Subject to the foregoing limitations regarding assignment, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Whenever in this Agreement
a reference is made to any of the parties hereto, such reference shall be
deemed to include a reference to the successors and assigns of such parties.

 

6.2                                 Notices. All notices,
approvals, consents and other communications hereunder shall be in writing,
and, except when receipt is required to start the running of a period of time,
shall be deemed given when delivered in person or on the fifth (5th) business day after its
mailing by either party by registered or certified United States mail, postage
prepaid and return receipt requested, to the other party, at the addresses set
forth after their respect name below or at such different addresses as either
party shall have theretofore advised the other party in writing in accordance
with this Section 6.2.

 

	
  Manager:

  	
  Behringer
  Harvard Opportunity II Management Services, LLC

  
	
   

  	
  15601
  Dallas Parkway, Suite 600

  
	
   

  	
  Addison,
  Texas 75001

  
	
   

  	
  Attn:
  Chief Legal Officer

  
	
   

  	
   

  
	
  Subcontractor:

  	
  Grand
  Peaks Property Management, Inc.

  
	
   

  	
  4582
  S. Ulster St. Pkwy., Suite 1200

  
	
   

  	
  Denver,
  Colorado 80237

  
	
   

  	
  Attn:
  James B. Phelps

  

 

6.3                                 Entire
Agreement. This Agreement shall constitute the entire
agreement between the parties hereto and no modification thereof shall be
effective unless in writing executed by the parties hereto. There are no
representations, agreements, arrangements or understandings, oral or written,
between Manager and Subcontractor relating to the management or leasing of the
Project that are not fully expressed herein.

 

6.4                                 No Waiver. The failure
of Manager, Subcontractor or the owner of the Project to seek redress for
violation or to insist upon the strict performance of any covenant or condition
of this Agreement shall not constitute a waiver thereof for the future.

 

6.5                                 No Partnership. Nothing
contained in this Agreement shall constitute or be construed to be or create a
partnership or joint venture between Manager, its successors or assigns, on the
one part, and Subcontractor, its successors and assigns, on the other part.

 

6.6                                 Severability. If any one or
more of the provisions of this Agreement, or the applicability of any such
provision to a specific situation shall be held invalid or unenforceable, such
provision should be modified to the minimum extent necessary to make it or its
application valid and enforceable, and the validity and enforceability of all
other provisions of this Agreement and all other applications of such
provisions shall not be affected thereby.

 

6.7                                 No Third Party
Beneficiary. Neither this Agreement nor any part hereof nor any
service relationship shall inure to the benefit of any third party, to any
trustee in bankruptcy, to any assignee for

 

30

 

the
benefit of creditors, to any receiver by reason of insolvency, to any other
fiduciary or officer representing a bankrupt or insolvent estate of either
party, or to the creditors or claimants of such an estate. Without limiting the
generality of the foregoing sentence, it is specifically understood and agreed
that insolvency or bankruptcy of either party hereto shall, at the option of
the other party, void all rights of such insolvent or bankrupt party hereunder
(or so many of such rights as the other party shall elect to void).

 

6.8                                 Captions,
Plural Terms. Unless the context clearly requires otherwise, the
singular number herein shall include the plural, the plural number shall
include the singular and any gender shall include all genders. Titles and
captions herein shall not affect the construction of this Agreement.

 

6.9                                 Activities of
Subcontractor. Subcontractor’s personnel located at the Project
shall not engage in other activities or business ventures that are in
competition with the business of the Owner except with Manager’s prior written
consent.

 

6.10                           Attorneys’ Fees. Should either
party employ an attorney to enforce any of the provisions of this Agreement, or
to recover damages for breach of this Agreement, the non-prevailing party in
any action agrees to pay to the prevailing party all reasonable costs, damages
and expenses, including reasonable attorneys’ fees, expended or incurred by the
prevailing party in connection therewith.

 

6.11                           Signs. Subcontractor
shall have the right to place signs on the Project in accordance with
applicable Governmental Requirements stating that Subcontractor is the manager
and leasing agent for the Project.

 

6.12                           Documents Required by Lender.
In the event that a mortgagee of the Project (a “Mortgagee”) requests that Subcontractor execute a document
in connection with a loan to the Owner, Subcontractor will respond to such
request promptly and will not unreasonably withhold its consent to such
document. Without limiting the generality of the preceding sentence,
Subcontractor agrees that it will execute and deliver, in a form reasonably
acceptable to the Owner, the following documents within ten (10) days
after request therefore: (a) an agreement that a Mortgagee may terminate
this Agreement if a default occurs in respect of the loan secured by the
Project; (b) an estoppel certificate certifying that this Agreement is in
full force and effect and containing such other certifications as may be
reasonably requested; (c) an agreement subordinating this Agreement to any
mortgage or deed or trust held by a Mortgagee; and (d) a waiver by
Subcontractor of any right to assert a lien against the Project. Subcontractor
shall use reasonable care to avoid any act or omission that, in the performance
of its duties hereunder, shall in any way conflict with the terms of any
mortgage documents in respect of the Project, provided that Subcontractor has
been furnished with copies of such mortgage documents.

 

6.13                           Survival of
Indemnities. The indemnification obligations of the parties to
this Agreement shall survive the termination of this Agreement to the extent of
any claim or cause of action based on an event occurring prior to the date of
termination.

 

6.14                           Publicity.
Subcontractor shall not reference the Owner or any Affiliate of the Owner in
any of its marketing materials, announcements or press releases without the
express written consent of Manager.

 

6.15                           Specific
Performance. The parties acknowledge that damages may be an
insufficient remedy in the event of a breach by a party under this Agreement
and agree that in the event of any such breach a party shall have the right to
equitable remedies, including specific performance and injunctive relief.

 

31

 

6.16                           Compliance with
Laws. This Agreement shall be performed in accordance with all applicable
federal, state and local laws, codes, regulations and ordinances.

 

6.17                           Ownership of
Proprietary Property. Manager retains ownership of and reserves all
Intellectual Property Rights in the Proprietary Property. To the extent that
Subcontractor has or obtains any claim to any right, title or interest in the
Proprietary Property, including without limitation in any suggestions,
enhancements or contributions that Subcontractor may provide regarding the
Proprietary Property, Manager hereby assigns and transfers exclusively to
Subcontractor all right, title and interest, including without limitation all
Intellectual Property Rights, free and clear of any liens, encumbrances or licenses
in favor of Manager or any other party, in and to the Proprietary Property. In
addition, at Subcontractor’s expense, Manager will perform any acts that may be
deemed desirable by Subcontractor to evidence more fully the transfer of
ownership of right, title and interest in the Proprietary Property to
Subcontractor, including but not limited to the execution of any instruments or
documents now or hereafter requested by Subcontractor to perfect, defend or
confirm the assignment described herein, in a form determined by Subcontractor.

 

6.18                           Governing Law,
Venue. This Agreement shall be construed under and in accordance with the
laws of the State of Texas, without regard to any choice of law rules, and any
action brought to enforce the agreements made hereunder or any action which
arises out of the relationship created hereunder shall be brought exclusively
in Dallas County, Texas.

 

6.19                           Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original.

 

6.20                           Savings Clause. If any
provision of this Agreement is held unenforceable, then such provision will be
modified to reflect the parties’ intention. By way of example and without
limitation, if any provision requiring the reimbursement of certain of Subcontractor’s
expenses should be deemed unenforceable, the parties shall take such action to
reach an agreement for Manager to pay such reimbursable expenses. All remaining
provisions of this Agreement shall remain in full force and effect.

 

6.21                           Compliance Amendments.
Notwithstanding anything contained herein to the contrary, in the event that
legal counsel for Manager reasonably determines that an amendment to this
Agreement is necessary or advisable in order for this Agreement to comply with
applicable securities laws, the offering documents pertaining to BH OP REIT II
or the Statement of Policy Regarding Real Estate Programs of the North American
Securities Administrators Association, Inc., effective September 29,
1993, as amended, or the Statement of Policy Regarding Real Estate Investment
Trusts of the North American Securities Administrators Association, Inc.,
effective May 7, 2007 (as amended), then Manager and Subcontractor shall,
within ten (10) days after request from Manager, execute such an amendment;
provided, however, that no such amendment may decrease the compensation to
which Subcontractor is entitled hereunder or materially increase Subcontractor’s
liabilities or obligations under this Agreement without Subcontractor’s written
consent; provided further, however, that if any such amendment increases
Subcontractor’s duties hereunder or the costs to provide the services
hereunder, Subcontractor shall be entitled to a reasonable increase in its
Management Fee, in an amount to be determined by the parties.

 

6.22                           REIT Compliance. Subcontractor
hereby acknowledges that it has been informed that Manager is an Affiliate of a
publicly registered entity that is a real estate investment trust (the “Behringer Harvard REIT”), and
consequently Manager must comply with certain statutory and regulatory
limitations under the Internal Revenue Code (the “Code”) in relation to the status of Behringer Harvard REIT
as a real estate investment trust (a “REIT”)
under the Code. In connection therewith, and notwithstanding anything in this
Agreement to the contrary, Subcontractor agrees to comply with the REIT
Compliance Guidelines attached hereto as Exhibit D, as supplemented
or amended from time to time by Manager.

 

32

 

6.23                           Sarbanes-Oxley. Subcontractor
shall use commercially reasonable efforts to assist Manager in establishing
procedures and controls (not to be inconsistent with the rights and obligations
of Subcontractor under this Agreement) to comply with, and to evidence
compliance with, the Sarbanes-Oxley Act of 2002, as now or hereafter amended,
as such statue relates to financial reporting in respect of the Project. Within
fifteen (15) days after written notice from Manager, Subcontractor will provide
Manager with such customary and reasonable certifications as Manager may
reasonably request to enable the Owner to meet its financial certification
obligations under such statute as such statute relates to financial reporting
in respect of the Project; provided, however, that such certifications may be
given by Subcontractor to its actual knowledge without any duty of
investigation. Any and all costs and expenses incurred by Subcontractor related
to this Section 6.23 shall be reimbursed by Manager to
Subcontractor and shall not constitute operating expenses or be included in the
calculation of Gross Revenues (i.e., such costs shall be borne by the owner of
the Project as ownership costs); provided, however, that to the extent
Subcontractor incurs Sarbanes-Oxley compliance costs to satisfy the
requirements of other companies for which Subcontractor performs services,
Subcontractor shall reasonably allocate such costs among such companies and
Manager.

 

6.24                           Prohibited
Persons and Transactions.

 

(a)                                  Subcontractor represents and
warrants to Manager that Subcontractor and, to Subcontractor’s knowledge, each
of its officers, directors and shareholders that own ten percent (10%) or more
of Subcontractor are currently in compliance with, and shall at all times
during the term of this Agreement (including any extension thereof) remain in
compliance with, the regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the
Treasury (including those named on OFAC’s Specially Designated and Blocked
Persons List) or under any statute, executive order (including the September 24,
2001, Executive Order Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit, or Support Terrorism (the “Executive Order”)), or other
governmental action; and that Subcontractor and, to Subcontractor’s knowledge,
each of its officers, directors and shareholders that own ten percent (10%) or
more of Subcontractor are not and will not be a person with whom Manager or the
Owner is restricted from doing business under the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (USA PATRIOT Act), H.R. 3152, Public Law 107-56 and the
Executive Order and regulations promulgated thereunder and including persons
and entities named on the OFAC Specially Designated Nations and Blocked Persons
List.

 

(b)                                 As part of Subcontractor’s
compliance with the regulations of OFAC, Subcontractor shall be responsible for
conducting (or shall cause a third-party service provider, at the expense of
the Owner and with Manager’s prior written approval, to conduct) a periodic
screening process (the “OFAC Screening”)
to verify that each prospective tenant is not a “Prohibited Person.” The
reasonable expenses incurred by Subcontractor in performing the OFAC Screening
shall be reimbursed by Manager. As used in this Agreement, a “Prohibited Person” is a person or
entity with whom U.S. persons or entities are restricted from doing business
under regulations of OFAC (including those named on OFAC’s Specially Designated
and Blocked Persons List) or under any statute, executive order (including the
Executive Order), or other governmental action. The OFAC Screening may utilize
Subcontractor’s standard process, but at a minimum shall be conducted for each
prospective tenant and its control parties, prior to the execution of any new
tenant Lease. Subcontractor shall keep copies of all OFAC Screening reports for
all prospective tenants. The OFAC Screening reports shall include (without
limitation) (A) the names of, and any other information pertaining to all
individuals and entities processed through the OFAC Screening, (B) the
date of such OFAC Screening, (C) any potential issues or problems
identified in the OFAC Screening process and (D) the steps taken to clear
such issues or

 

33

 

problems and verify that the individual or entity in question is not,
in fact, a Prohibited Person. Subcontractor shall provide the OFAC Screening
reports to Manager simultaneously with Subcontractor’s submission of the
Monthly Performance Report (and in all events prior to Manager’s execution of a
Lease agreement with a prospective tenant) and shall cooperate with Manager to
obtain such additional information as may be necessary to clear a prospective
tenant who does not clear an OFAC Screening and verify that the prospective
tenant and/or their control parties is not a Prohibited Person.

 

[REST OF PAGE INTENTIONALLY LEFT BLANK]

 

34

 

IN
WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed by their duly authorized representatives.

 

 

	
  MANAGER:

  	
   

  	
  SUBCONTRACTOR:

  
	
   

  	
   

  	
   

  
	
  BEHRINGER
  HARVARD OPPORTUNITY II

  	
   

  	
  GRAND
  PEAKS PROPERTY

  
	
  MANAGEMENT
  SERVICES, LLC,

  	
   

  	
  MANAGEMENT,
  INC.,

  
	
  a
  Texas limited liability company

  	
   

  	
  a
  Colorado corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Gerald
  J. Reihsen, III

  	
   

  	
   

  	
  James
  B. Phelps

  
	
   

  	
  Executive
  Vice President – Corporate

  	
   

  	
   

  	
  President

  
	
   

  	
  Development
  and Legal

  	
   

  	
   

  

 

35

 

EXHIBIT A 

 

PROJECT LEGAL DESCRIPTION

 

PHASE I:

 

Parcel I:

 

Tract No. 1 and 2, less and
except the West 410.00 feet thereof (as measured at right angles to the West
line of said tracts), of the Plat of the The Hamptons or North Lauderdale,
according to the Plat thereof recorded in Plat Book 109, Page 24, of the
Public Records of Broward County, Florida.

 

Parcel II:

 

Easement for the benefit of
Parcel 1 as created by “Pedestrian
Bridge Easement Agreement” dated May 28, 1987 and filed July 2, 1987
in Official Records Book 14589, at Page 3, granted for the purposes set
forth in said document, over, under and across the land described as follows:

 

Commencing at the Southeast
corner of the West 410.00 feet of Tracts No. 1 and No. 2 of the Plat
entitled “The Hamptons of North Lauderdale”, as recorded in Plat Book 109, at
Page 24, of the Public Records of  Broward County, Florida, thence
North 01 degrees 39 minutes 59 seconds West, along the East boundary of the
said West 410.00 feet of Tract No. 1 and No. 2, a distance of 418.08
feet; thence South 85 degrees 17 minutes 58 seconds East, 546.00 feet to the
Westerly right-of-way line of said canal and the Point of Beginning; thence
continue South 85 degrees 17 minutes 58 seconds East 70.67 feet to the Easterly
right-of-way line of said canal and a point of intersection with a curve,
concave Easterly radial line through said point bears South 80 degrees 10
minutes 10 seconds West; thence Southerly along said Easterly canal
right-of-way line and the arc of said curve, having a radius of 215.00 feet and a delta of 05 degrees 26
minutes 50 seconds, and an arc length of 20.44 Feet; thence North 85 degrees 17
minutes 58 seconds West, 71.73 feet to the Westerly right-of-way line of said
canal and a point of intersection with a curve, concave Easterly; (radial line
through said point bears South 87 degrees 51 minutes 37 seconds West), thence
Northerly along said Westerly canal right-of-way and the arc of a curve, having
a radius of 285.00 feet, a delta of 04 degrees 04 minutes 14 seconds and an arc
length of 20.25 feet to the Point of Beginning.

 

PHASE II:

 

That part of Tract 8, of The
Hamptons of North Lauderdale, according to the plat thereof, as recorded in
Plat Book 109, Page 24. Public Records of Broward County, Florida, which
lies South of that 70 foot Canal Right of Way as recorded in Official Records
Book 4151, page 969, and as set forth on said plat.

 

 

36

 

EXHIBIT B 

 

FORM OF ANNUAL BUSINESS PLAN

 

 

 

 

Community Name 

2009 Operating / Asset Management Plan

 

Date Completed

 

 

Completed
By:

 

37

 

I.              PROPERTY
DESCRIPTION

 

Date of BH
Acquisition:

Property
Name:

Location:

Total
Square Footage:

# of Buildings/#
of Stories:

Year Built:

Condition:

Construction
Type:

 

	
  Parking:         
  Garages:                   
  Covered:                    Open:
                        Total:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Occupancy
  at Acquisition:

  	
   

  	
  Leased -

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Occupied -

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current
  Occupancy:

  	
   

  	
  Leased -

  	
   

  	
   

  	
   

  	
   

  
	
  As of:
        /      /2008

  	
   

  	
  Occupied -

  	
   

  	
   

  	
   

  	
   

  

 

II.            LOCATION DESCRIPTION

 

III.           SWOT ANALYSIS 

Strengths:

·

·

 

Weaknesses:

·

·

 

Opportunities:

·

·

 

Threats:

·

·

 

2

 

38

 

IV.           ASSET STRATEGY (SHORT / LONG-TERM GOALS)

Short-Term Goals (Include Dates)

·

·

·

·

 

Long-Term
Goals (two to five years):

·

·

·

·

 

V.            LEASE EXPIRATIONS

 

Insert lease expiration
report for 2009 from Yardi or RealPage.

 

 

VI.           2009 MARKETING PLAN

 

Goals:

1.  Maintain 95% occupancy throughout 2009

2.  Maintain 20 or more pieces of traffic per week

3.  Maintain 20 or more leases per month

4.  Maintain 15 or more renewals per month

 

Rental
Revenues:

 

Advertising:

 

Trade Publications:

 

Internet Advertising: 

 

Apartmentguide.com and
Forrent.com:

 

3

 

39

 

Locators/Realtors:

 

Models:

 

Resident
Retention:

 

Premier services available
to residents:

·

 

Staffing:

Bonus
Incentives:

 

VII.          CURRENT
MARKET SURVEY

 

Insert the most current
market survey

 

 

VIII.        FINANCIAL OVERVIEW

 

	
   

  	
   

  	
  2008 Forecast

  	
   

  	
  $ / Psf

  	
   

  	
  2009 Budget

  	
   

  	
  $ / Psf

  	
   

  	
  Variance

  	
   

  	
  %

  
	
  Total Ope. Rev.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  #DIV/0!

  
	
  Total Ope. Exp.

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  #DIV/0!

  
	
  NOI

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  #DIV/0!

  
																		

 

Revenue
narrative (explain material variances
> $5K & 10%):

 

Expense
narrative (explain material variances
> $5K & 10% by Category):

 

4

 

40

 

IX.           CAPITAL

 

2009
budgeted Total Capital is: $ 

 

2009
Anticipated work includes:

 

	
  Exterior Replacements

  	
   

  	
  Target Date

  	
   

  	
  Budgeted Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Interior Replacements

  	
   

  	
  Target Date

  	
   

  	
  Budgeted Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

5

 

41

 

EXHIBIT
C

 

MONTHLY
REPORTS

 

 

Operating Month End Reports

 

Operations

1–Executive Summary

2–Variance Analysis

3–Marketing Survey

4–Marketing Plan (Quarterly)

Financials

5–Balance Sheet

6–Income Statement Budget
Comparison

7–Actual to Budget Detail

8–Cash Flow Statement

9–Trial Balance with year-end balances

10–Trial Balance with monthly net activity

11–General Ledger

Reconciliations/Reports

12–Bank Statement and
Reconciliation for all cash accounts

A–Reconciliation

B–Bank statement

C–Outstanding checklist

D–Deposit summary

E–General ledger for cash
account only 

13–Restricted Cash Support (Mortgage
Statement &. Escrow Support)

14–Accounts Receivable Aging
Report

15–Accounts Receivable Misc.
Reconciliation

16–Prepaid Liability
Insurance Reconciliation

17–Prepaid Property Tax
Reconciliation (If Necessary)

18–Other Prepaid
Reconciliation

19–Deposit (Utility) Reconciliation
(If Necessary)

20–Depreciation Schedule

21–Aged Payable Report

22–Accrued Other Payable
Reconciliation

23–Equity Roll

24–Check Register

25–Payroll Accrual

26–Accrued Real Estate Tax Reconciliation
(with roll forward attached)

27–Accrued Interest Reconciliation (with roll
forward attached)

28–Accrued Insurance Reconciliation

29–Accrued Other Payable Reconciliation

30–Security Deposit Activity

31–Tenant Prepaid Reconciliation

32–Notes Payable – Mortgage Statement

33–Support for any Balance sheet Account Not
Specifically Mentioned

34–Resident Lease Expirations

35–Gross Potential Rent

36–Rent Roll

37–Management Free Calculation

38–Journal Entry Register

39–Distribution Worksheet (If Applicable)

 

42

 

EXHIBIT D

 

REIT COMPLIANCE GUIDELINES

 

Subcontractor
shall perform its duties under this Agreement and this Exhibit D in
such a manner that all of the gross income derived from the Project will
consist of (i) interest (as referred to in Section 856(c)(2)(B) or
Section 856(c)(3)(B) of the Internal Revenue Code of 1986, as the
same may be amended from time to time (the “Code”)), (ii) rents from real property (as defined in
Section 856(d) of the Code), (iii) abatements and refunds of
taxes on real property (as referred to in Section 856(c)(2)(E) of the
Code), or (iv) income or gain derived from foreclosure property (as
defined in Section 856(e) of the Code) (items (i) through (iv) above
being referred to herein as “Qualifying
Income”), unless Subcontractor obtains the written consent of
Manager, which consent may be granted or withheld within the sole discretion of
Manager, prior to that point in time when such other gross income would accrue
as income for federal income tax purposes. If Subcontractor desires to act or
otherwise enter into a transaction that could generate gross income other than
Qualifying Income, Subcontractor will notify Manager of the proposed action or
transaction. Subcontractor and Manager will cooperate in attempting to
structure the proposed action or transaction in a manner that produces
Qualifying Income. If Subcontractor and Manager are not able to structure the
proposed action or transaction to the satisfaction of Manager, Subcontractor
will not take the proposed action or close the proposed transaction or
otherwise obtain for Manager the right to receive gross income without the
prior written consent of Manager, which consent may be granted or withheld
within the sole discretion of Manager.

 

a.                                       Except as
provided below in this Exhibit D, after the date of this Agreement,
all Leases entered into with respect to the Project shall utilize a
standardized form lease approved by Manager (without any side agreements), as
such standardized lease form may be amended from time to time with the written
consent of Manager. Any side agreement, amendment or deviation from the
standardized lease form (including any amendment that deviates from the
standardized lease amendment form) must be consented to in the approved Annual
Business Plan or in writing by Manager prior to the execution of such Lease or
amendment, which consent may be granted within the sole discretion of Manager.
In the case of a sublease or assignment, Subcontractor will not consent to an
assignment or sublease that deviates from the standardized lease form without
the written consent of Manager, which consent may be granted or withheld in the
sole discretion of Manager.

 

b.                                      Each service
considered rendered to lessees of the Project within the meaning of
Section 1.512(b)-1(c)(5) of the Treasury Regulations, whether or not
there is a separate charge for such service, shall be performed by an
independent contractor, as such term is defined in Section 856(d)(3) of
the Code. As of the date of this Agreement, each party represents, as to itself
only, that there is no arrangement in place pursuant to which Subcontractor, or
Manager, BH OP REIT II, or BHOP II (Manager, BH OP REIT II, and BHOP II, either
individually or collectively, referred to herein as “Behringer Harvard”) will receive or derive
income from any independent contractor providing services to lessees of the
Project. If Subcontractor receives express authorization from Manager to
contract with a service contractor or other party to provide services for
lessees of the Project, Subcontractor will not take any action, enter into any
agreement or otherwise arrange for Subcontractor or Behringer Harvard to derive
or receive any income from any independent contractor providing services to
lessees of the Project. Subcontractor will not contract with any service
contractor or other party who will perform services for lessees of the Project
unless such service contractor or other party is an independent contractor,

 

43

 

as such term is defined in Section 856(d)(3) of the Code,
from whom Subcontractor and Behringer Harvard will not derive or receive any
income. Prior to Subcontractor entering into a contract with any service
contractor or other party who will provide services to lessees of the Project,
Subcontractor shall provide written notice to Manager of the name and address
of each prospective contractor. Within five (5) business days of receipt
of such written notice, Manager will notify Subcontractor whether the
prospective contractor may qualify as an independent contractor within the
meaning of Section 856(d)(3) of the Code or whether Behringer Harvard
could be considered to derive any income from such contractor, and whether such
prospective contractor is approved by Manager. Failure by Manager to respond
within five (5) business days of Manager receiving such written notice
shall constitute approval of the contractor by Manager only if Subcontractor
shall have, by the fourth (4th) business day of such five (5) business days, confirmed with a
representative of Manager that such notice was received by Manager.
Subcontractor may rely on Manager’s approval or deemed approval of a
contractor. If Behringer Harvard determines in its sole judgment that such
prospective contractor could fail to qualify as an independent contractor from
whom Behringer Harvard does not derive or receive any income as communicated in
Manager’s notice to Subcontractor, Subcontractor will not contract with such
contractor without the prior written consent of Manager, which consent may be
granted or withheld within the sole discretion of Manager. Manager will provide
to Subcontractor a list of persons, which list will be updated as determined by
Manager, which Manager believes may not constitute independent contractors with
respect to Behringer Harvard. Subcontractor will not contract with persons on
such list.

 

c.                                       If Behringer
Harvard determines, in its sole judgment, that such prospective lessee,
sublessee or assignee could be a related party and communicates such conclusion
in writing to Subcontractor, Subcontractor will not continue any discussions or
negotiations with respect to a Lease with such prospective lessee or consent to
the assignment or sublease without the prior written consent of Manager, which
consent may be granted or withheld within the sole discretion of Manager.
Manager may provide to Subcontractor a list of persons which Manager believes
may be considered related to Behringer Harvard, which list will be updated as
determined by Manager. Subcontractor will not market space at the Project or
conduct Lease negotiations with persons on such list.

 

d.                                      Subcontractor
will not propose that Manager enter into any Lease associated with the Project
with respect to personal property unless such personal property is leased in
connection with a Lease of real property and only if the rent attributable to
the personal property at no time during the term of the Lease will exceed 10
percent of the total rent attributable to both real and personal property,
within the meaning of Section 856(d)(1)(C) of the Code.

 

e.                                       Subcontractor
will not propose that Manager enter into any Lease (or consent to any sublease
or assignment) with respect to the Project if the determination of any amount
under the Lease (or sublease or assignment) depends in whole or in part on the
income or profits derived by any person from the Project, within the meaning of
Section 856(d)(2)(A) of the Code.

 

f.                                         Subcontractor
shall not perform any actual construction work in connection with the finish
out, tenant improvements or the development or redevelopment of the Project.
For purposes of this Exhibit D, construction work does not include
performing construction management services.

 

44

 

g.                                      Each
relationship between Subcontractor and any independent contractor will be an
arm’s length relationship and the independent contractor will be adequately
compensated for any services it performs, as determined by Manager and
communicated to Subcontractor in writing. No independent contractor will be an
employee of Manager or Subcontractor.

 

h.                                      If
non-customary services are rendered to a lessee by any independent contractor,
the cost of such services will be borne by the independent contractor, a
separate charge must be received or retained by the independent contractor and
the independent contractor must be adequately compensated for the services, as
determined by Manager and communicated to Subcontractor in writing.

 

i.                                          Nothing in this
Exhibit D
shall allow Manager or Subcontractor to act contrary to the Agreement, except
as expressly provided herein.

 

j.                                          From time to
time upon request by Subcontractor, Manager shall make certain representatives
available to consult with Subcontractor regarding the REIT compliance guidelines
set forth in this Exhibit D, including without limitation
compliance with the sections of the Code and Treasury Regulations cited herein.

 

45

 

Appendix
B

 

INITIAL APPROVED BUDGET AND OPERATING PLAN

 

Parrot’s Landing

9/1/10 - 12/31/10 

Monthly Operating Forecast

 

	
  OPERATING STATEMENT

  	
   

  	
  Sep-10

  	
   

  	
  Oct-10

  	
   

  	
  Nov-10

  	
   

  	
  Dec-10

  	
   

  
	
  REVENUE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Market
  Potential

  	
   

  	
  $

  	
  522,221

  	
   

  	
  $

  	
  523,536

  	
   

  	
  $

  	
  525,484

  	
   

  	
  $

  	
  526,527

  	
   

  
	
  Mgmt./Model
  Units

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Employee
  Discount

  	
   

  	
  (933

  	
  )

  	
  (935

  	
  )

  	
  (938

  	
  )

  	
  (940

  	
  )

  
	
  Upfront
  Concessions

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Static
  Concessions

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  Potential
  Rent:

  	
   

  	
  $

  	
  521,289

  	
   

  	
  $

  	
  522,601

  	
   

  	
  $

  	
  524,546

  	
   

  	
  $

  	
  525,586

  	
   

  
	
   

  	
   

  	
  5.0

  	
  %

  	
  5.0

  	
  %

  	
  5.0

  	
  %

  	
  5.0

  	
  %

  
	
  Vacancy

  	
   

  	
  (26,111

  	
  )

  	
  (26,177

  	
  )

  	
  (26,274

  	
  )

  	
  (26,326

  	
  )

  
	
  Bad
  Debt

  	
   

  	
  (13,056

  	
  )

  	
  (13,088

  	
  )

  	
  (13,137

  	
  )

  	
  (13,163

  	
  )

  
	
  Rental
  Income:

  	
   

  	
  $

  	
  482,122

  	
   

  	
  $

  	
  483,336

  	
   

  	
  $

  	
  485,135

  	
   

  	
  $

  	
  486,097

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other
  Income

  	
   

  	
  43,328

  	
   

  	
  43,328

  	
   

  	
  43,328

  	
   

  	
  43,328

  	
   

  
	
  Total
  Revenue:

  	
   

  	
  $

  	
  525,450

  	
   

  	
  $

  	
  526,664

  	
   

  	
  $

  	
  528,463

  	
   

  	
  $

  	
  529,425

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXPENSES

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Personnel

  	
   

  	
  38,683

  	
   

  	
  58,025

  	
   

  	
  38,683

  	
   

  	
  38,683

  	
   

  
	
  Marketing

  	
   

  	
  5,645

  	
   

  	
  5,645

  	
   

  	
  5,645

  	
   

  	
  5,645

  	
   

  
	
  Utilities

  	
   

  	
  40,911

  	
   

  	
  38,915

  	
   

  	
  37,917

  	
   

  	
  40,911

  	
   

  
	
  Turnover
  R&M

  	
   

  	
  32,118

  	
   

  	
  33,765

  	
   

  	
  34,589

  	
   

  	
  36,236

  	
   

  
	
  Property
  Tax

  	
   

  	
  85,773

  	
   

  	
  85,773

  	
   

  	
  85,773

  	
   

  	
  85,773

  	
   

  
	
  Admin. &
  Other

  	
   

  	
  6,484

  	
   

  	
  6,484

  	
   

  	
  6,484

  	
   

  	
  6,484

  	
   

  
	
  Insurance

  	
   

  	
  7,887

  	
   

  	
  7,887

  	
   

  	
  7,887

  	
   

  	
  7,887

  	
   

  
	
  Management 3.75%

  	
   

  	
  19,704

  	
   

  	
  19,750

  	
   

  	
  19,817

  	
   

  	
  19,853

  	
   

  
	
  Total
  Expenses:

  	
   

  	
  $

  	
  237,205

  	
   

  	
  $

  	
  256,244

  	
   

  	
  $

  	
  236,795

  	
   

  	
  $

  	
  241,472

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NET
  OPERATING INCOME

  	
   

  	
  $

  	
  288,245

  	
   

  	
  $

  	
  270,421

  	
   

  	
  $

  	
  291,667

  	
   

  	
  $

  	
  287,953

  	
   

  

 

 

Appendix C

 

PRE-APPROVED
SIGNATORIES

 

Managing Member:

 

1.               James B. Phelps

2.               Helen Buehrle

3.               Diana Medina

4.               Donald L. Williams

 

BH:

 

1.               Gary Bresky

2.               Cindy Cooper

3.               Elaine Rainey

4.               Terri Crocker

5.               Stephanie Castle

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00179-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00179-of-00352.parquet"}]]