CONSTRUCTION LOAN AGREEMENT

 

 

                                                                    Exhibit 99.1

 

                           CONSTRUCTION LOAN AGREEMENT

 

        This CONSTRUCTION LOAN AGREEMENT is entered into as of September 30,

2005 ("CLOSING DATE"), by and between BEHRINGER HARVARD MOCKINGBIRD COMMONS LP,

a Texas limited partnership ("BORROWER"), and TEXANS COMMERCIAL CAPITAL, LLC, a

Texas limited liability company ("LENDER").

 

                              W I T N E S S E T H:

 

        WHEREAS, Lender and Borrower entered into that certain Loan Agreement

dated as of November 8, 2004, pursuant to which Lender agreed to lend to

Borrower up to the sum of $17,000,000.00 to finance the acquisition of the

Aggregate Property (hereinafter defined) and for certain other purposes related

to the Aggregate Property and such loan (the "ORIGINAL LOAN"); and

 

        WHEREAS, the Original Loan was secured by, among other things, that

certain Deed of Trust, Security Agreement and Financing Statement executed by

Borrower for the benefit of Lender, dated as of November 8, 2004 against the

real property comprised of approximately 5.339 acres located in Dallas County,

Texas as more particularly described therein (the "AGGREGATE PROPERTY"),

recorded at Volume 2004217, Page 2155, and re-recorded at Volume 2005153, Page

0104, Real Property Records of Dallas County, Texas, as amended by First

Amendment to Deed of Trust, Security Agreement and Financing Statement dated as

of February 18, 2005, executed by Borrower and Lender, recorded at Volume

2005073, Page 175 and re-recorded at Volume 2005153, Page 0123, Real Property

Records of Dallas County, Texas (as amended, the "ORIGINAL DEED OF TRUST"); and

 

        WHEREAS, Borrower has requested that Lender make a loan to Borrower to

refinance a portion of the Original Loan and for construction of a residential

condominium tower upon a portion of the Aggregate Property, as more particularly

described in the definition of "Property" below, and for certain other purposes

related thereto, which loan is to be secured by, among other things, a first

lien deed of trust on the Property; and

 

        WHEREAS, Borrower has requested that Lender assign to American National

Bank the lien of the Deed of Trust to the extent, and only to the extent, that

it affects the Hotel/Retail Property (as hereinafter defined); and

 

        WHEREAS, Lender is willing to make such loan to Borrower and to assign

to American National Bank the lien of the Original Deed of Trust, to the extent

it covers the Hotel/Retail Property, subject to and upon the terms and

conditions hereinafter set forth.

 

        NOW, THEREFORE, for and in consideration of the mutual covenants herein

contained and other good and valuable consideration, the receipt and legal

sufficiency of which are hereby acknowledged by the parties hereto, Borrower and

Lender agree as follows:

 

                                    ARTICLE I

 

                                   DEFINITIONS

 

        1.01     DEFINITIONS. For purposes of this Loan Agreement, unless the

context otherwise requires, the following terms shall have the respective

meanings assigned to them in this ARTICLE I or in the sections and subsections

referred to below:

 

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        "ADA" means the Americans with Disabilities Act of 1990, Pub. L. No.

89-670, 104 Stat. 327 (1990), as amended, and all regulations promulgated

pursuant thereto.

 

        "ACCOUNT" means an account of Borrower established with Texans Credit

Union.

 

        "ADVANCE" means a disbursement by Lender of any of the proceeds of the

Loan and/or the Borrower's Deposit, and "ADVANCES" shall be the plural thereof..

 

        "AFFILIATE" of any Person means any other Person:

 

                (a)      which directly or indirectly through one or more

        intermediaries controls, or is controlled by, or is under common control

        with, such Person; or

 

                (b)      which, directly or indirectly, beneficially owns or

        holds 10% or more of any class of stock or any other ownership interest

        in such Person; or

 

                (c)      10% or more of the direct or indirect ownership of which

        is beneficially owned or held by such Person.

 

        For purposes of this definition, the term "control" (and its correlative

meanings) means the possession, directly or indirectly, of the power to direct

or cause the direction of the management and policies of a Person, whether

through the ownership of stock, by contract or otherwise. In any event, each of

Borrower and Guarantor, and each of their respective Affiliates, shall be deemed

to be an Affiliate of each of the other of them.

 

        "ANB CONSTRUCTION LOAN" means that certain construction loan in the

amount of $36,000,000.00 of American National Bank to Borrower, secured by the

Hotel/Retail Property, and given for the purpose of the construction of the

Hotel Unit, the Hotel Room Units, and the Retail Unit (as each is defined in the

Master Declaration).

 

        "ANTI-TERRORISM AND ANTI-MONEY LAUNDERING LAWS" means the USA Patriot

Act of 2001, the Bank Secrecy Act, as amended through the date hereof, Executive

Order 13324 - Blocking Property and Prohibiting Transactions with Persons Who

Commit, Threaten to Commit, or Support Terrorism, as amended through the date

hereof, and as they may be amended, and other federal laws and regulations and

executive orders administered by the United States Department of the Treasury,

Office of Foreign Assets Control ("OFAC") which prohibit, among other things,

the engagement in transactions with, and the provision of services to, certain

foreign countries, territories, entities and individuals (such individuals

include specially designated nationals, specially designated narcotics

traffickers and other parties subject to OAFC sanction and embargo programs),

and such additional laws and programs administered by OFAC which prohibit

dealing with individuals or entities in certain countries regardless of whether

such individuals or entities appear on any of the OFAC lists.

 

        "APPLICABLE INTEREST RATE" has the meaning assigned in the Note.

 

        "APPLICATION FOR ADVANCE" shall mean a written application submitted by

the Borrower's Architect and Borrower on American Institute of Architects form G

702 and/or G 703, as appropriate, or such other form as Lender may hereafter

request which shall: (a) request an Advance, (b) specify by name, current

address and amount owed, all parties to whom Borrower is obligated for labor,

materials or services actually furnished for the construction of the particular

part of the Improvements which are the subject matter of such application and

all other expenses incident to the Loan, (c) certify among other things that

such amounts represent payments due for services or labor actually rendered or

materials actually acquired or furnished in

 

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connection with construction of the Improvements, and interest then payable

under the Note, (d) state whether the sum requested is within the Approved

Budget and whether, in the opinion of the Architect and Borrower, the unadvanced

portion of the Loan is sufficient to complete the Improvements pursuant to the

Plans and to pay for all labor, material, interest and other expenses in

connection with the Loan and the construction of the Improvements, (e) if

requested by Lender, be accompanied by copies of billing statements, vouchers or

invoices from the parties named therein, in form satisfactory to Lender, (f)

refer to an attached schedule, verified by the Architect, and the Inspecting

Architect/Engineer, identifying in a manner satisfactory to Lender all materials

not yet affixed or incorporated into the Improvements but which have been

covered by certificates submitted to date, including the current certificate,

(g) contain a statement, verified by the Architect and the Inspecting

Architect/Engineer, that all such materials not yet affixed or incorporated into

the Improvements have been stored upon the Land under adequate safeguards to

minimize the possibility of loss, damage or commingling with other materials or

projects, (h) be accompanied by appropriate waivers of lien rights satisfactory

to Lender executed by all contractors, subcontractors, laborers, and materialmen

who have furnished labor or material to the Property, (i) certify that all labor

and material bills of every kind and character incurred by Borrower to the date

of such certificate in connection with the Improvements have been paid in

accordance with the payment provisions of each contract except for the unpaid

bills to be paid from the proceeds of the current Advance requested and items to

be retained hereunder, and (j) certify that the Builder's Risk Insurance

contains sufficient coverage for the construction of the Improvements.

 

        "APPRAISAL" means a written appraisal report of the Property, as that

term is defined in the Code of Professional Ethics (the "APPRAISAL CODE") of the

American Institute of Appraisers, meeting the requirements of the Federal

Institutions Reform, Recovery and Enforcement Act of 1989, prepared by a

professional appraiser approved by Lender, who is a member of the Appraisal

Institute ("MAI"), addressed to Lender and in form, scope and substance

satisfactory to Lender, setting forth such appraiser's determination of the

market value of the Property on the appraisal date and as projected upon

completion of construction of the Improvements.

 

        "APPROVED BUDGET" shall mean a budget or cost itemization prepared by

Borrower and approved in writing by Lender specifying the cost by item of (i)

all labor, materials, and services necessary for the construction of the

Improvements in accordance with the Plans and all Governmental Requirements, and

(ii) all other expenses anticipated by Borrower incident to the Loan, the

Property and the construction of the Improvements, including, without

limitation, the Interest Reserve.

 

        "APPROVED MANAGEMENT AGREEMENT" means (i) prior to the completion of the

Improvements, if any, an agreement for the management of Property as a

residential condominium, entered into by Borrower with a management company and

in form and substance acceptable to Lender and (ii) after completion of the

Improvements, an agreement for the management of the Property as a residential

condominium, entered into by the Residential Association (as defined in the

Residential Condominium Declaration) with a management company and in form and

substance approved by the Residential Association.

 

        "ARCHITECT" shall mean Three Architecture of Dallas, whose address is

4040 Central Expressway, Suite 200, Dallas, Texas 75204.

 

        "ASSIGNMENT OF LEASES AND RENTS" means the Assignment of Leases and

Rents dated of even date herewith and executed by Borrower, as it may from time

to time be renewed, amended, supplemented or restated.

 

         "ASSIGNMENT OF PLANS AND SPECIFICATIONS" shall mean the written

agreement whereby Borrower assigns its rights in and to the Plans to Lender in

the form of EXHIBIT F attached hereto.

 

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        "ASSIGNMENT OF RIGHTS UNDER CONSTRUCTION CONTRACt" shall mean the

written agreement whereby Borrower assigns its rights in the Construction

Contract to Lender in the form of EXHIBIT C attached hereto.

 

        "AUDITED FINANCIAL STATEMENTS" means, for any Person, Financial

Statements of such Person in reasonable detail and accompanied by an opinion

thereon of independent public accountants of recognized standing reasonably

acceptable to Lender to the effect that such Financial Statements were prepared

in accordance with GAAP, and that the examination of such accounts in connection

with such Financial Statements has been made in accordance with generally

accepted auditing standards.

 

        "AUTHORIZED SIGNATORY" means Gerald J. Reihsen, III and any other person

authorized by Borrower by delivery of written authorization to Lender, each of

whom, without joinder of the other, is or will be authorized to execute any

Request for Disbursement or any other notice, request or document required or

permitted hereunder to be submitted by Borrower to Lender.

 

        "BORROWER" means BEHRINGER HARVARD MOCKINGBIRD COMMONS LP, a Texas

limited partnership.

 

        "BORROWER'S DEPOSIT" means the deposit, if any, required of Borrower

pursuant to SECTION 4.22.

 

        "BUSINESS DAY" means a day other than a Saturday, Sunday or other day on

which commercial banks in Dallas, Texas are authorized or required by law to

close.

 

        "CLOSING" means the Closing and funding of the Loan.

 

        "CLOSING DATE" means the date of this Loan Agreement.

 

        "CODE" means the Uniform Commercial Code as codified in the State of

Texas.

 

        "CONDEMNATION PROCEEDS" shall have the meaning assigned to such term in

SECTION 8.12 of this Loan Agreement.

 

        "CONSTRUCTION COMMITMENT TERMINATION DATE" means October 1, 2007.

 

        "CONSTRUCTION CONTRACT" means all construction contracts executed by

Borrower for the construction of all or any part of the Improvements.

 

        "CONTRACTOR" means Walton Construction Company, L.L.C., whose address is

3001 Knox Street, Suite 400, Dallas, Texas 75205, and each other person

contracting with Borrower to supply labor or materials for the construction of

all or any part of the Improvements, each of whom must be approved in writing by

Lender.

 

        "CONTRACTOR'S AFFIDAVIT AND SUBORDINATION" means an agreement in

substantially the form of EXHIBIT E attached hereto and incorporated herein by

reference, executed by each Contractor.

 

        "DEBTOR RELIEF LAWS" means any applicable relief, liquidation,

conservatorship, bankruptcy, moratorium, rearrangement, insolvency,

reorganization, or similar laws affecting the rights or remedies of creditors

generally, as in effect from time to time.

 

        "DECLARANT RIGHTS" means (i) the Development Rights (as defined in the

Master Condominium Declaration) and the Special Declarant Rights (as defined in

the Master Condominium Declaration) and

 

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(ii) the Residential Development Rights (as defined in the Residential

Condominium Declaration) and the Special Residential Rights (as defined in the

Residential Condominium Declaration).

 

        "DEFAULT RATE" means a per annum interest rate which shall from

day-to-day be equal to the Maximum Rate or, if no Maximum Rate exists, eighteen

percent.

 

        "DISCLOSED LITIGATION" means the matters listed on EXHIBIT I attached

hereto.

 

        "DISTRIBUTIONS" means, with respect to any Person, the payment of any

return on income or proceeds on or with respect to any partner's, shareholder's,

member's or other owner's investment and/or capital or other contribution to or

account with respect to such Person (whether by cash or other property), or the

purchase of any ownership interest in such Person, or any income or proceeds

therefrom.

 

        "DIVIDENDS" means dividends (whether by cash, property or preferred

stock) or other distributions of capital stock or partnership interests, or the

redemption or acquisition of stock or any partnership interest unless made

contemporaneously from the net proceeds of the sale of such stock or partnership

interest to an unaffiliated third party.

 

        "DOLLARS" and the sign "$" means lawful currency of the United States of

America.

 

        "ENVIRONMENTAL AUDIT" means the Phase 1 environmental audit of the

Aggregate Property commissioned by Lender, prepared by an environmental

engineering firm acceptable to Lender, in form, scope and substance acceptable

to Lender.

 

        "ENVIRONMENTAL INDEMNITY AGREEMENT" means the Environmental Indemnity

Agreement dated of even date herewith, and executed by Borrower and Guarantors,

as it may from time to time be amended, confirmed, supplemented or restated.

 

        "ERISA" means the Employee Retirement Income Security Act of 1974, as

amended, and the rules and regulations promulgated thereunder by any

Governmental Authority, as from time to time in effect.

 

        "ERISA AFFILIATE" means any organization, trade or business, or other

arrangement (whether or not incorporated) which is a member of a group of which

Borrower is also a member and which is treated as a single employer within the

meaning of IRC Section 414(b), (c), (m) or (o).

 

        "ERISA PLAN" means an employee benefit plan as defined in ERISA Section

3(3) maintained or contributed to by Borrower or any ERISA Affiliate for

employees of Borrower or any ERISA Affiliate.

 

        "EVENT(S) OF DEFAULT" has the meaning set forth in ARTICLE VII hereof.

 

        "FINANCIAL STATEMENTS" means, with respect to any Person, such balance

sheets, statements of operations, statements of cash flow, statements of changes

in partners' capital or shareholders' equity and other financial information

with respect to such Person as shall be reasonably required by Lender, and which

shall be prepared in accordance with GAAP, consistently applied for all periods.

 

        "FINANCING STATEMENTS" means financing statements to be filed with the

appropriate state and/or county offices for the perfection of a security

interest in any of the Property or any other collateral or security for the

Loan.

 

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        "FISCAL YEAR" means, for any Person, (a) the calendar year, or (b) such

other period as such Person may designate and Lender may approve in writing.

 

        "FUTURE DEVELOPMENT AREA UNIT" has the meaning assigned to it in the

Master Declaration.

 

        "GAAP" means those generally accepted accounting principles and

practices which are recognized as such by the American Institute of Certified

Public Accountants or by the Financial Accounting Standards Board or through

appropriate boards or committees thereof after the date hereof, and which are

consistently applied for all periods, so as to properly reflect the financial

position of a Person, except that any accounting principle or practice required

or permitted to be changed by the Financial Accounting Standards Board (or other

appropriate board or committee of that Board) in order to continue as a

generally accepted accounting principle or practice may be so changed.

 

         "GENERAL PARTNER" means Behringer Harvard Mockingbird Commons GP, LLC, a

Texas limited liability company.

 

        "GOVERNMENTAL AUTHORITY" means any federal, state, county, municipal,

parish, provincial, tribal or other government, or any department, commission,

board, court, agency (including, without limitation, the U. S. Environmental

Protection Agency), whether of the United States of America or any other

country, or any instrumentality of any of them, or any other political

subdivision thereof (a) in which any portion of the Property is located, (b) in

which any of Borrower, Guarantor or Lender, or any of their Affiliates, is

located or conducts business, or (c) exercising jurisdiction over Borrower,

Guarantor or Lender, or any of the Property, and any entity exercising

legislative, judicial, regulatory, or administrative functions of, or pertaining

to, government including, without limitation, any arbitration panel, any court

or any commission.

 

        "GOVERNMENTAL REQUIREMENTS" means all laws, ordinances, rules,

regulations, orders and directives of any Governmental Authority applicable to

any of Borrower, Guarantor, Lender or any of the Property, including, without

limitation, all applicable licenses, building codes, restrictive covenants,

zoning and subdivision ordinances, flood disaster, health and environmental laws

and regulations, and the ADA.

 

        "GUARANTORS" means, collectively, Behringer Harvard Mockingbird Commons

GP, LLC, a Texas limited liability company, Behringer Harvard Short Term

Opportunity Fund I LP, a Delaware limited partnership and any other Person at

any time guarantying all or any portion of the Obligation, and "GUARANTOR" shall

mean each of the Guarantors.

 

        "GUARANTY" means, collectively, those certain Guaranty Agreements of

even date herewith by Guarantors for the benefit of Lender and any other

guaranty at any time executed in connection with the Loan.

 

        "HOTEL/RETAIL PROPERTY" means that portion of the Aggregate Property

other than the Property.

 

         "IMPROVEMENTS" means the Residential Condominium and all of the

buildings, improvements, structures, equipment, and amenities which are or will

be constructed and/or installed in relation thereto.

 

        "INDEBTEDNESS" means, with respect to any Person, without duplication,

(a) all indebtedness of such Person for borrowed money or for the deferred

purchase price of property or services (including, without limitation, all

obligations, contingent or otherwise, of such Person in connection with letter

of credit facilities, acceptance facilities or other similar facilities and in

connection with any agreement to purchase, redeem, exchange, convert or

otherwise acquire for value any capital stock of such Person or

 

                                      -6-

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any warrants, rights or options to acquire such capital stock, now or hereafter

outstanding), (b) all obligations of such Person evidenced by bonds, notes,

debentures or other similar instruments, (c) all indebtedness created or arising

under any conditional sale or other title retention agreement with respect to

property acquired by such Person (even though the rights and remedies of the

seller or lender under such agreement in the event of default are limited to

repossession or sale of such property), (d) all capital lease obligations of

such Person, (e) all obligations, contingent or otherwise, of such Person in

connection with indemnities, hold harmless agreements and similar arrangements

and in connection with interest rate exchange agreements and similar instruments

(provided that the obligations under such interest rate exchange agreements

shall be marked to market on a current basis), and (f) all Indebtedness of

another Person secured by (or for which the holder of such Indebtedness has an

existing right, contingent or otherwise, to be secured by) any lien, security

interest or other charge or encumbrance upon or in property (including, without

limitation, accounts and contract rights) owned by such Person, even though such

Person has not assumed or become liable for the payment of such Indebtedness,

but not in such event in excess of the value of such property. Notwithstanding

the foregoing, the term "INDEBTEDNESS" shall not include unearned deposits held

by Borrower for third parties not an Affiliate in the ordinary course of

Borrower's business and which are returned to such third parties as required by

the applicable agreement with third parties.

 

        "INITIAL ADVANCE" means an Advance made on the Closing Date in the

amount set forth in a Borrower's Statement prepared by the Title Company and

approved by Lender in Lender's discretion.

 

        "INITIAL FINANCIAL STATEMENTS" means the Financial Statements of each

Person delivered to Lender in connection with the application for the Loan.

 

         "INSPECTING ARCHITECT/ENGINEER" means such architects and engineers as

Lender shall select to conduct inspections of the Improvements from time to

time.

 

        "INSPECTING ARCHITECT/ENGINEER AUDIT" means an audit and review by the

Inspecting Architect/Engineer of the final plans and working drawings for all

improvements to be constructed on the Property and the Hotel/Retail Property

(including, without limitation, the Building, as that term is defined in the

Master Declaration) satisfactory to Lender in Lender's absolute and sole

discretion.

 

        "INSURANCE POLICIES" means satisfactory evidence (including appropriate

certificates and insurance digests summarizing policies) of insurance and

reinsurance policies (whether individual or blanket) issued by (a) responsible

and reputable insurance companies licensed to do business in Texas having a

Best's rating of at least A-:VII or such other rating as Lender may specifically

approve, or (b) other insurers reasonably acceptable to Lender. Such policies

shall include:

 

                (i)      during the course of construction of the Improvements,

        builder's completed value risk insurance against "all risks of physical

        loss," including collapse and transit coverage, with deductibles not to

        exceed $50,000, in nonreporting form, covering the total value of work

        to be performed and equipment, supplies and materials to be furnished;

 

                (ii)     insurance on real and personal property for limits

        reflecting 100% of the full replacement cost (exclusive of foundations

        and footings) as a so called "All Risk" form with coverage for flood and

        earthquake and such other hazards as Lender may reasonably require. Such

        insurance policies shall contain replacement cost coverage and agreed

        amount endorsements (with no reduction for depreciation), an endorsement

        providing building ordinance coverage, and an endorsement covering the

        cost of demolition and increased cost of construction due to the

        enforcement of building codes and ordinances;

 

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                (iii)    Borrower shall also furnish insurance providing boiler

        and machinery for all mechanical and electrical equipment at the

        Improvements insuring against breakdown or explosion of such equipment

        on a replacement cost value, which coverage shall include coverage for

        increased cost of construction, demolition and building laws. Borrower

        also shall furnish business interruption or loss of income insurance in

        connection with policies covering property and boiler & machinery, for a

        period of not less than one year, endorsed to provide a 180 day extended

        period of indemnity, which limit for business interruption shall be in

        addition to the replacement cost of the building. Not withstanding any

        provisions set forth in paragraphs (a) or (b) above, all insurance

        required under this paragraph shall be with companies, in amounts, and

        with coverage and deductibles reasonably satisfactory to Lender and all

        insurance required under this paragraph shall include endorsements

        naming Lender as a loss payee and shall have endorsed thereon a standard

        mortgage clause in favor of the Lender. All policies shall provide that

        insurance evidenced thereby shall not be canceled (including for

        non-payment) or modified without at least 30 days prior written notice

         from the insurance carrier to the Lender and no act or thing done by

        Borrower, Manager, or any Affiliate of any of them shall invalidate the

        policy against Lender. Borrower shall deliver renewal certificates for

        policies of insurance required under this paragraph at least 10 Business

        Days prior to the expiration of the then current policy;

 

                (iv)     Commercial General Liability (including contractual

        liability) covering the Property and Borrower's operations in an amount

        not less than $1,000,000 per occurrence and $2,000,000 in the aggregate

        per location;

 

                (v)      Worker's compensation insurance including liability and

        any other appropriate insurance normally carried by companies engaged in

        similar business and owning similar properties, in the statutory amount,

        covering all employees of Borrower, if any;

 

                (vi)     Commercial Automobile Liability with a limit of not less

         than $1,000,000 combined single limit and to be endorsed to cover owned,

        hired, and non-owned automobiles, and garagekeepers liability;

 

                (vii)    Borrower shall also furnish Umbrella Liability coverage

        in excess of the foregoing liability coverage with a limit of not less

        than $10,000,000 or such higher limits as Lender may reasonably require.

 

        Such insurance policies (other than those referred to in SUBPARAGRAPH

(V), above) shall name Lender, as loss-payee, mortgagee or additional insured,

as its interests may appear, as may be appropriate for the particular type of

insurance. At such time as any part of the Property or Aggregate Property is

used for the sale or dispensing of beer, wine or any other alcoholic beverages,

Liquor Liability insurance against claims arising out of such sale or dispensing

of beer, wine or other alcoholic beverages also shall be furnished.

 

        "INTEREST RESERVE" has the meaning assigned in SECTION 2.06(D).

 

        "IRC" means the Internal Revenue Code of 1986, as amended.

 

        "LAND" means the real property described on EXHIBIT A attached hereto

and incorporated herein by reference.

 

        "LATE PAYMENT FEE" has the meaning assigned in the Note.

 

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        "LEASES" means all present and future space leases, subleases or other

agreements or arrangements, whether written or oral, and all agreements for the

use or occupancy of any portion of the Property, together with any and all

extensions or renewals of said leases and agreements and any and all future

leases or agreements upon or covering the use or occupancy of all or a part of

the Property, but excluding (i) room rents and meeting room rentals and (ii) any

lease entered into or assumed by Borrower, as lessee, to lease Personal Property

for use in connection with the operation of the Property.

 

        "LEGAL OPINIONS" means favorable opinions of counsel for Borrower

reasonably acceptable to Lender as to form, scope and substance, and including

opinions as to Texas law.

 

        "LENDER" means Texans Commercial Capital, LLC, a Texas limited liability

company.

 

        "LENDER - MANAGER AGREEMENT" means an agreement between Lender and

Manager in form and content reasonably satisfactory to Lender and substantially

in the form of EXHIBIT L.

 

        "LIEN" means any lien, mortgage, security interest, assignment, tax

lien, pledge or encumbrance, or conditional sale or title retention agreement,

or any other interest in property designed to secure the repayment of

indebtedness, whether arising by agreement or under any statute or law, or

otherwise.

 

        "LOAN" means the loan by Lender to Borrower, in an amount not to exceed

the Loan Amount, in accordance with this Loan Agreement and the other Loan

Documents.

 

        "LOAN AGREEMENT" or "AGREEMENT" means this Construction Loan Agreement,

together with all amendments and modifications hereof and supplements and

attachments hereto.

 

        "LOAN AMOUNT" means Thirty-Four Million Forty-Seven Thousand Four

Hundred Fifty-Eight and No/100 Dollars ($34,047,458).

 

        "LOAN DOCUMENTS" means this Loan Agreement, the Note, the Mortgage, the

Financing Statements, the Environmental Indemnity Agreement, the Guaranty, the

Assignment of Leases and Rents, the Lender - Manager Agreement, and such other

instruments evidencing, securing, or pertaining to the Obligation, or any part

thereof, as shall, from time to time, be executed and delivered by Borrower,

Manager, Any Guarantor, or any other Person to Lender pursuant to or in

connection with this Loan Agreement or any other Loan Document.

 

        "MANAGER" means any manager of the Property pursuant to an Approved

Management Agreement, approved by Lender.

 

        "MASTER DECLARATION" means that certain Master Condominium Declaration

for M Central Master Condominium dated as of September 16, 2005, executed by

Borrower, as Declarant, recorded on September 16, 2005 in Volume 2005182, Page

111 in the Real Property Records of Dallas County, Texas.

 

         "MATERIAL AGREEMENT" means any contract or agreement with respect to the

ownership or operation of the Property requiring total consideration of $100,000

or more, which Lender reasonably determines has a material impact on the

ownership or operation of the Property.

 

        "MATURITY DATE" has the meaning assigned in the Note.

 

        "MAXIMUM RATE" means the maximum rate (or, if the context so requires,

an amount calculated at such rate) of interest which the holder of the Note is

allowed to contract for, charge, take, reserve, or

 

                                      -9-

<PAGE>

 

receive under applicable law after taking into account, to the extent required

by applicable law, any and all relevant payments or charges.

 

        "MINOR CONDEMNATION PROCEEDS" means, for all Condemnation Proceeds

resulting from any one (1) condemnation of the Property as described in SECTION

8.12, that such Condemnation Proceeds do not exceed Two Hundred Fifty Thousand

Dollars ($250,000.00).

 

        "MORTGAGE" means the certain Amended and Restated Deed of Trust,

Security Agreement, Financing Statement and Assignment of Rental, of even date

herewith, executed by Borrower for the benefit of Lender, covering the Property,

as it may, from time to time, be renewed, extended, modified, increased or

supplemented.

 

        "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in ERISA

Section 4001(a)(3) or IRC Section 414 to which Borrower or any ERISA Affiliate

contributes, has contributed since September 2, 1974, or is required to

contribute.

 

        "NOTE" means the promissory note issued by Borrower to Lender pursuant

to SECTION 2.03 hereof, as it may be renewed, extended, modified or increased.

 

        "OBLIGATION" means all present and future indebtedness, obligations, and

liabilities of Borrower to Lender, and all renewals and extensions thereof, or

any part thereof, arising (a) pursuant to this Loan Agreement or represented by

the Note, and all interest accruing thereon, and reasonable attorneys' fees

incurred in the drafting, negotiation, enforcement or collection thereof,

regardless of whether such indebtedness, obligations, and liabilities are

direct, indirect, fixed, contingent, joint, several or joint and several;

together with all indebtedness, obligations and liabilities of Borrower

evidenced or arising pursuant to any of the other Loan Documents, and all

renewals, modifications, increases and extensions thereof, or any part thereof,

(b) pursuant to any other loan and/or advances which Lender may hereafter make

to Borrower in connection with the Loan or the Property or any portion thereof,

and (c) pursuant to all other and additional debts, obligations and liabilities

of every kind and character of Borrower now or hereafter existing in favor of

Lender, in connection with the Loan or the Property or any portion thereof,

regardless of whether such debts, obligations and liabilities be direct or

indirect, primary or secondary, joint, several or joint and several, fixed or

contingent, and regardless of whether such present or future debt, obligations

and liabilities may, prior to their acquisition by Lender, be or have been

payable to or in favor of some other person or entity or have been acquired by

Lender in a transaction with one other than Borrower.

 

        "OFAC PROHIBITED PERSON" means, a country, territory, individual or

Person (i) listed on, included within or associated with any of the countries,

territories, individuals or entities referred to on The Office of Foreign Assets

Control's List of Specially Designated Nationals and Blocked Persons or any

other prohibited person lists maintained by governmental authorities, or

otherwise included within or associated with any of the countries, territories,

individuals or entities referred to in or prohibited by any other Anti-Terrorism

and Anti-Money Laundering Laws, or (ii) which is obligated or has any interest

to pay, donate, transfer or otherwise assign any property, money, goods,

services, or other benefits from the Mortgaged Property directly or indirectly,

to any countries, territories, individuals or entities on or associated with

anyone on such list or in such laws.

 

        "OPERATING AGREEMENTS" means any agreement entered into by or on behalf

of Borrower, other than the Management Agreement and the Scheduled Personal

Property Contracts, which relates to the ownership, operation or maintenance of

the Property, but excluding cash purchase agreements.

 

        "ORGANIZATIONAL DOCUMENTS" means:

 

                                      -10-

<PAGE>

 

        For any limited partnership, the following:

 

                (a)      Certificate of Limited Partnership and all amendments

        thereto, certified as complete and correct by the Secretary of State (or

        other appropriate officers) of the state of formation, together with a

        copy of the partnership agreement, and all amendments thereto, certified

        as complete and correct by the general partners of the partnership;

 

                (b)      Current certificates of existence and good standing

         issued by the appropriate state officer(s) of the state of formation and

        states in which the partnership does business; and

 

                (c)      Consents of partners to the extent necessary under the

        partnership agreement; and

 

         For any general partnership, the following:

 

                (a)      Certified copy of partnership agreement; and

 

                (b)      Consent of partners to the extent necessary under the

        partnership agreement.

 

        For any corporation, the following:

 

                (a)      Copy of the Articles of Incorporation of such

        corporation and all amendments thereto certified as complete and correct

        by the Secretary of State (or other appropriate officer) of the state of

         incorporation, together with a true copy of the By-laws of such

        corporation and all amendments thereto;

 

                (b)      A current certificate of corporate existence of such

        corporation and certificate evidencing the filing of all required

        franchise tax reports and the payment of all franchise taxes due, each

        issued by the appropriate officer or department of the state of

        incorporation;

 

                (c)      A signed certificate of the Secretary or Assistant

        Secretary of such corporation certifying the names of the officers of

        such corporation authorized to sign each of the Loan Documents to which

        it is a party and the other documents or certificates to be delivered

        pursuant to the Loan Documents to which it is a party, together with the

        true signatures of each such officer. Lender may conclusively rely on

        such certificate until Lender shall receive a further certificate of the

        Secretary or Assistant Secretary of such corporation canceling or

        amending the prior certificate and submitting the signatures of the

        officers named in such further certificate; and

 

                (d)      Resolutions of such corporation approving the execution,

        delivery and performance of the Loan Documents to which such corporation

        is a party and the transactions contemplated therein, duly adopted by

        the Board of Directors of such corporation and accompanied by a

        certificate of the Secretary or Assistant Secretary of such corporation

        stating that such Resolutions are true and correct, have not been

        altered or repealed and are in full force and effect.

 

        For any limited liability company, the following:

 

                 (a)      Copy of the Regulations or other formation document of

        such limited liability company and all amendments thereto certified as

        complete and correct by the Secretary of State (or other appropriate

        officer) of the state of formation;

 

                                      -11-

<PAGE>

 

                (b)      A current certificate of existence of such entity and

        certificate evidencing the filing of all required franchise tax reports

        and the payment of all franchise taxes due, each issued by the

        appropriate officer or department of the state of formation;

 

                (c)      A signed certificate of the manager of such entity

        certifying the names of the members or managers of such entity

        authorized to sign each of the Loan Documents to which it is a party and

        the other documents or certificates to be delivered pursuant to the Loan

        Documents to which it is a party, together with the true signatures of

        each such member or manager. Lender may conclusively rely on such

        certificate until Lender shall receive a further certificate of the

        Manager of such entity canceling or amending the prior certificate and

        submitting the signatures of the members or managers named in such

        further certificate; and

 

                (d)      Resolutions of the members of such entity approving the

        execution, delivery and performance of the Loan Documents to which such

        entity is a party and the transactions contemplated therein, duly

        adopted by the members of such entity and accompanied by a certificate

        of the manager of such entity stating that such resolutions are true and

        correct, have not been altered or repealed and are in full force and

        effect.

 

        "ORIGINATION FEE" means the Origination Fee required by and described in

SECTION 2.05 hereof.

 

        "PARTICIPANT" shall have the meaning given to such term in SECTION

9.09(B).

 

        "PAYMENT DATE" has the meaning assigned in the Note.

 

        "PBGC" means the Pension Benefit Guaranty Corporation, and any successor

to all or any of the Pension Benefit Guaranty Corporation's functions under

ERISA.

 

        "PERMITTED EXCEPTIONS" means the exceptions to title listed on EXHIBIT B

attached to the Mortgage.

 

        "PERMITTED INDEBTEDNESS" means (a) the Loan, (b) property taxes and

insurance premiums accrued but not delinquent, (c) indebtedness for items

permitted under the Approved Budget for which no Advance has yet been made for

payment and which is not past due, (d) the ANB Construction Loan and (e) trade

Indebtedness incurred in the ordinary course of business of operation and

maintenance of the Aggregate Property in an amount not to exceed $100,000.00,

which is not past due..

 

        "PERMITTED LIENS" means (a) the Permitted Exceptions, (b) Liens for

taxes, assessments, or governmental charges or levies not yet due or which

Borrower is actively contesting in good faith by appropriate proceedings and in

conformance with SECTIONS 4.10 and 4.11 hereof, (c) Liens for any other purpose

which Borrower is actively contesting in good faith by appropriate proceedings

and in conformance with SECTION 4.11 hereof and (d) Liens in favor of Lender and

ANB as contemplated in this Loan Agreement.

 

        "PERMITTED PERSONAL PROPERTY TRANSACTION" means (a) any sale,

assignment, trade, transfer, exchange or other disposition of any item of

Personal Property which (i) has become obsolete or worn beyond practical use,

and (ii) has been replaced by an adequate substitute having a value equal to or

greater than the replaced item when new, which replacement item is owned by

Borrower and is subject to a first, perfected security interest in favor of

Lender, and (b) sales of food and beverages and gift shop inventory, to the

extent such sales are made in the ordinary course of Borrower's business.

 

                                      -12-

<PAGE>

 

        "PERMITTED TRANSFER" means (a) any transfer of any limited partnership

interest in Borrower other than to an OFAC Prohibited Person (but not including

any conversion of a general partnership interest to a limited partnership

interest) provided that Behringer Harvard Mockingbird Commons Investors LP at

all times owns, directly or indirectly, at least fifty-one percent of the

ownership interests in Borrower, (b) any transfer of ownership interests in the

General Partner to any Affiliate of a Guarantor (so long as no transfer of

ownership interests [other than limited partnership interests] in said Guarantor

have occurred), and (c) any transfer of ownership interests to Behringer Harvard

Mockingbird Commons Investors LP or any Affiliate thereof.

 

        "PERSON" means any individual, corporation, partnership, joint venture,

association, joint stock company, trust, unincorporated organization, government

or any agency or political subdivision thereof, or any other form of entity.

 

        "PERSONAL PROPERTY" means all fixtures, building materials, machinery,

equipment, inventory, furniture, furnishings, and personal property used in

connection with or resulting from the operation of the Property.

 

        "PLANS" means the final working drawings and specifications as prepared

for the construction, renovation or reconstruction of the Improvements as

provided in SECTION 4.15.

 

        "POTENTIAL DEFAULT" means the occurrence of any event or circumstance

which, after the giving of notice or passage of time, or both, could constitute

an Event of Default.

 

        "PROHIBITED ERISA TRANSACTION" means a transaction that is prohibited

under IRC Section 4975 or ERISA Section 406 and not exempt under IRC Section

4975 or ERISA Section 408.

 

        "PROPERTY" means the Land, the Improvements, the Personal Property, all

other estates, easements, licenses, interests, rights, titles, powers and

privileges of every kind and character arising from or used in connection with

the ownership or operation of the Residential Condominium or the Future

Development Area Unit (as defined in the Master Declaration), and all accounts,

accounts receivable, inventory, instruments, chattel paper, documents, consumer

goods, insurance proceeds, Leases, contract rights and general intangibles used

in connection with or resulting from the ownership or operation of the

Residential Condominium, and all other property and appurtenances constituting

the "Mortgaged Property," as described in the Mortgage.

 

        "PURCHASER" means (a) any purchaser of all or any portion of the

Property at foreclosure or by deed in lieu of foreclosure, (b) Lender or any

Affiliate of Lender as the purchaser or successor owner of all or any portion of

the Property following foreclosure or deed in lieu of foreclosure, and any

transferee of any such Person which acquires the Property.

 

         "QUARTERLY PERIOD" means each fiscal quarter of Borrower.

 

        "REGULATION D" means Regulation D of the Board of Governors of the

Federal Reserve System, from time to time in effect, and shall include any

successor or other regulation relating to reserve requirements applicable to

member banks of the Federal Reserve System.

 

        "REGULATION U" means Regulation U promulgated by the Board of Governors

of the Federal Reserve System, 12 C.F.R. Part 221, or any other regulation

hereafter promulgated by said Board to replace the prior Regulation U and having

substantially the same function.

 

                                      -13-

<PAGE>

 

        "REGULATION X" means Regulation X promulgated by the Board of Governors

of the Federal Reserve System, 12 C.F.R. Part 224, or any other regulation

hereafter promulgated by said Board to replace the prior Regulation X and having

substantially the same function.

 

        "RENTS" means all rents, royalties, bonuses, income, accounts, accounts

receivable, receipts, revenues, issues, profits and other benefits derived from

the Property or any part thereof, or the occupation, use or enjoyment of the

Property, or any part thereof, or from any Lease, and all proceeds payable under

any policy of insurance covering the loss of rent or income resulting from

destruction of or damage to the Property.

 

        "REPORTABLE EVENT" shall have the meaning assigned to that term in Title

IV of ERISA.

 

        "RESIDENTIAL CONDOMINIUM" means a ten-story, 59 unit residential

condominium, and related amenities, to be constructed by Borrower on a portion

of the Property and comprising the Residential Unit under the Master Declaration

(excluding Level 2 and Level 3 of Retail/Loft Building, as defined in the Master

Declaration).

 

        "RESIDENTIAL CONDOMINIUM DECLARATION" means that certain Residential

Condominium Declaration for the M Central Residences, a Condominium, dated as of

September 16, 2005, executed by Borrower, as Declarant, recorded on September

16, 2005 in Volume 2005182, Page 204 in the Real Property Records of Dallas

County, Texas.

 

        "SOILS REPORT" means a report prepared by a competent engineer

certifying that the soils of the Property are adequate to support the

Improvements.

 

        "SUBSIDIARY" means, with respect to any Person, any other Person

directly or indirectly owned by such Person.

 

        "SURVEY" means a current, certified survey of the Land and Improvements

in form and substance, including certification, acceptable to Lender and meeting

the requirements of EXHIBIT G attached hereto.

 

        "TAX INFORMATION" means tax certificates from the tax

assessor-collectors of all taxing authorities having jurisdiction over all or

any part of the Property setting forth all outstanding ad valorem taxes against

such property.

 

        "TERM" means the period commencing on the Closing Date and ending on the

Maturity Date.

 

        "TITLE COMPANY" means First American Title Insurance Company.

 

        "TITLE INSURANCE COMMITMENT" means the commitment to issue the Title

Insurance Policy issued by the Title Company, along with copies of all

instruments creating or evidencing exceptions or encumbrances to title.

 

        "TITLE INSURANCE POLICY" means a Mortgagee Title Insurance Policy from

the Title Company and insuring the priority and sufficiency of the Mortgage as a

first Lien upon the Land and Improvements (a) in an amount equal to the Loan

Amount, (b) showing all easements or other matters affecting the Property, all

subject only to such exceptions or qualifications as are acceptable to Lender in

its sole discretion, (c) insuring unconditionally against contractors',

suppliers, and mechanics' lien claims recorded prior to the date hereof, as well

as matters related to the Survey; (d) contain any endorsements or assurances

that Lender may reasonably request for protection of its interests including,

but not limited to, (i) comprehensive endorsement, (ii) variable rate

endorsement, and (iii) an access endorsement, insuring

 

                                      -14-

<PAGE>

 

that there will be at least one location at the Residential Condominium with

unlimited vehicular ingress and egress to an adjacent publicly dedicated street.

 

        "UCC SEARCHES" means central and local current financing statement

searches from Texas and such other jurisdictions as Lender may request, covering

the Borrower and any other known owner of the Property during the past five

years, together with copies of all financing statements listed in said search.

 

        1.02     OTHER DEFINITIONAL PROVISIONS.

 

                (a)      All terms defined in this Loan Agreement shall have the

        above-defined meanings when used in the Notes or any of the other Loan

        Documents, or in any other certificate, report or other document made or

         delivered pursuant to this Loan Agreement, unless the context therein

        shall otherwise require.

 

                (b)      Defined terms used in the singular shall import the

        plural and VICE VERSA.

 

                (c)      The words "hereof," "herein," "hereunder" and similar

        terms when used in this Loan Agreement shall refer to this Loan

        Agreement as a whole and not to any particular provision of this Loan

        Agreement.

 

                (d)      Any accounting terms used in this Loan Agreement which

        are not separately defined shall have the meanings customarily given

        them in accordance with GAAP.

 

                                   ARTICLE II

 

                                    THE LOAN

 

        2.01      THE LOAN.

 

                (a)      Subject to the terms and conditions of this Loan

        Agreement and relying upon the representations and warranties herein set

        forth, and provided that no Potential Default or Event of Default has

        occurred and is continuing, Lender agrees to advance the Initial Advance

        to Borrower on the Closing Date and to make Advances to Borrower from

        time to time as set forth in this Loan Agreement. The Advances for which

        Borrower qualifies hereunder shall be made from time to time from the

        date hereof to and including the Construction Commitment Termination

        Date. Lender shall have no obligation to make any advance hereunder

        after the Construction Commitment Termination Date. Notwithstanding

        anything herein to the contrary, the commitment of Lender to make

        Advances shall terminate if Borrower has not satisfied all conditions

        precedent to the first of the Advances contemplated in SECTION 2.12 on

         or before November 1, 2005. The Loan is not revolving and any principal

        payment or prepayment made may not be reborrowed.

 

                (b)      Lender shall advance the Initial Advance on the Closing

        Date by wire transfer in immediately available funds to the Title

        Company for the benefit of Borrower.

 

        2.02     INTEREST ON THE LOAN. The Loan shall bear interest as provided

in the Note.

 

        2.03     NOTE; REPAYMENTS. The Loan shall be evidenced by and payable as

provided in the Note. After the maturity of the Loan, the obligations of

Borrower and the rights and privileges of Lender under

 

                                      -15-

<PAGE>

 

this Loan Agreement, the Note and all other Loan Documents shall continue in

full force and effect until the Note and the remaining Obligation have been paid

and performed in full.

 

        2.04     MANNER AND APPLICATION OF PAYMENTS. All payments of principal of

and interest on the Loan, and of all other amounts payable under this Loan

Agreement or the other Loan Documents by Borrower to or for the account of

Lender, shall be made by Borrower to Lender, before 1:00 p.m. (Dallas, Texas

time) in federal or other immediately available funds. Should any payment

required hereby become due and payable on a day other than a Business Day, the

maturity thereof shall be extended to the next succeeding Business Day. Funds

received after 1:00 p.m. (Dallas, Texas time) shall be treated for all purposes

as having been received by Lender on the first Business Day next following

receipt of such funds. All payments made on the Loan so long as no Event of

Default has occurred and is continuing shall be applied (except as may be

otherwise required by applicable Governmental Requirements) first to any payment

on the Loan (including principal, interest, costs, fees and expenses) then due

and owing, second to any past-due payment on the Loan, and third, to the

remaining Obligation in such order and manner as Lender may determine, any

instructions from Borrower or any other Person to the contrary notwithstanding.

All payments made on the Loan while an Event of Default has occurred and is

continuing shall be applied (except as may be otherwise required by applicable

Governmental Requirements) to the Obligation in such order and manner as Lender

may determine, any instructions from Borrower or any other Person to the

contrary notwithstanding. Subject to the foregoing limitations, Lender may, in

its sole and absolute discretion, apply payments first to satisfy the portion of

the Obligation, if any, for which Borrower or any other Person has no personal,

partnership or corporate liability, if any, and then to the remaining

Obligation.

 

        2.05     ORIGINATION FEE. Contemporaneously with its execution of this

Agreement, Borrower shall pay to Lender an ORIGINATION FEE (herein so called) in

the amount of Three Hundred Forty Thousand Four Hundred Seventy-Five Dollars

($340,475.00), in consideration for the agreement of Lender to enter into this

Agreement.

 

        2.06     ADVANCES..

 

                (a)      TIMING OF ADVANCES. Advances for the payment of the cost

        of labor, materials, and services supplied for the construction of the

        Improvements shall be made by Lender upon compliance by Borrower with

        the terms and conditions contained in this Loan Agreement after actual

        commencement of construction of the Improvements for work actually done

        during the preceding period. From time to time, but no more frequently

        than monthly, Borrower may submit to Lender an Application for Advance

        requesting an Advance under the Loan for the payment of the cost of

        labor, materials, and services supplied for the construction of the

        Improvements and for the payment of other costs and expenses incident to

        the Loan or the construction of the Improvements and specified in the

        Approved Budget. Lender may require an inspection of, and favorable

        report on, the Improvements by the Inspecting Architect/Engineer prior

        to making any Advance. Each Application for Advance shall be submitted

        by Borrower to Lender a reasonable time (but not less than five (5)

        Business Days) prior to the date upon which the Advance requested is

         desired by Borrower. Borrower shall be entitled to an Advance only in an

        amount approved by Lender.

 

                (b)      LIMITATION ON ADVANCES. Advances for payment of the cost

        of construction of the Improvements shall not exceed the aggregate of

        (i) the cost of labor, materials, and services incorporated into the

        Improvements in a manner acceptable to Lender and as specified in the

        Approved Budget, PLUS (ii) the purchase price of all uninstalled

        materials to be utilized in the construction of the Improvements and

        stored upon the Property, or elsewhere with the written consent of, and

        in a manner acceptable to, Lender, LESS (iii) retainage of not less than

        ten percent (10%), and LESS (iv) all prior Advances made for payment of

        the cost of labor, materials, and services

 

                                      -16-

<PAGE>

 

        for the construction of the Improvements. No Advances shall be made

        after the Construction Commitment Termination Date.

 

                (c)      FINAL ADVANCE. The final Advance, including all

        retainage, will not be made until the expiration of thirty (30) days

        from the date of final completion and acceptance by Lender of the

         Improvements, and in any event not until Lender has received the

        following with respect to the Improvements and the Loan; (i) a

        certificate from the Inspecting Architects/Engineers certifying to

        Lender that the Improvements have been completed substantially in

        accordance with the Plans, (ii) evidence that no mechanic's or

        materialman's liens or other encumbrances have been filed and remain in

        effect against the Improvements, (iii) evidence that all Governmental

        Requirements have been satisfied, including without limitation, delivery

        to Lender of a Certificate of Occupancy permitting the Improvements to

        be legally occupied, and (iv) a liens paid affidavit executed by

        Borrower and the Contractor to the effect that (and/or, at Lender's

        request, final lien releases or waivers evidencing to Lender's

        satisfaction that) all subcontractors, materialmen, and other parties

        who have supplied labor, materials, or services for the construction of

        the Improvements, or who otherwise might be entitled to claim a

        contractual, statutory, or constitutional lien against the Property,

        have been paid in full with respect to the Improvements, or Borrower, at

        its option, may provide to Lender a Bond indemnifying Against Liens

        (pursuant to Tex. Property Code ss.53.171) in such amount as Lender may

        reasonably require.

 

                (d)      INTEREST RESERVE ADVANCES. Borrower acknowledges and

        agrees that the sum of One Million and No/100 Dollars ($1,000,000.00) of

        the Loan as specified or to be specified in the Approved Budget

        represents a reserve for the payment of interest upon the full amount of

         the Advances of the Loan (the "INTEREST RESERVE") pursuant to this Loan

        Agreement. Borrower hereby authorizes Lender, and Lender shall have the

        right, to disburse and charge (or cause to be disbursed and charged) the

        Interest Reserve in reimbursement of Borrower for the interest payments

        made by Borrower under this Loan Agreement and the other Security

        Documents on each interest payment date as such interest payments become

        due and payable pursuant to the terms hereof and of the Note. Such

        disbursements shall be made as Advances of the Loan, in amounts equal to

        the accrued interest which has been paid on each of such interest

        payment dates. Interest as provided in the Note will be charged on any

        disbursed portion of the Interest Reserve as and when disbursed, but

        interest will not be charged on the undisbursed portion of the Interest

        Reserve. If, at any time during the term of the Loan, the Interest

        Reserve shall become depleted or shall be deemed by Lender to be

        insufficient to reimburse Borrower for the interest payments on the Loan

        as they are made, interest shall be payable on each interest payment

        date in accordance with the terms of the Loan Agreement and the Note,

        and Lender shall have no obligation to make any Advance to Borrower for

        any such interest payments from the remaining proceeds of the Loan. The

        Interest Reserve shall be available only for disbursement of the

        periodic payments of accrued interest due to Lender on the Loan pursuant

        to the terms of this Loan Agreement and the Note, and for no other

        purpose. If, at any time, Lender shall not have received on the date

         due, any payment of interest upon the Loan, Lender may, at its sole

        option, disburse the Interest Reserve directly in payment of such

        interest amount. Advances of the Interest Reserve shall be subject to

        the terms and conditions of this Loan Agreement, including, without

        limitation, the conditions precedent set forth in SECTIONS 2.11 and

        2.12.

 

        2.07     PREPAYMENT OF LOAN.

 

                (a)      At any time and from time to time Borrower may, upon

        five (5) Business Days' written notice to Lender, prepay the principal

        of the Loan then outstanding, in whole or in part, without penalty or

        premium; PROVIDED, HOWEVER, thateach prepayment of less than the full

        outstanding principal balance of the Loan shall be in an amount equal to

        at least One Million Dollars ($1,000,000) and integral multiples

        thereof.

 

                                      -17-

<PAGE>

 

                (b)      All prepayments under this SECTION 2.07 shall also be

        subject to the other terms of this Loan Agreement.

 

                (c)      All prepayments by Borrower hereunder shall be made by

        Borrower to Lender, before 1:00 p.m. (Dallas, Texas time) in federal or

        other immediately available funds. Funds received after 1:00 p.m.

        (Dallas, Texas time) shall be treated for all purposes as having been

        received by Lender on the first Business Day next following receipt of

        such funds. All prepayments made on the Loan hereunder shall be made

        together with interest accrued (through the date of such prepayment) on

        the principal amount prepaid, and shall be applied by Lender in the

        manner described in SECTION 2.04 hereof.

 

        2.08     TAXES.

 

                (a)      Any and all payments by Borrower hereunder and under the

        other Loan Documents shall be made free and clear of and without

        deduction for any and all present or future taxes, levies, imposts,

        deductions, charges or withholdings, and all liabilities with respect

        thereto, BUT EXCLUDING, with respect to Lender, (i) taxes imposed on its

        income, and franchise taxes imposed on it, by the jurisdiction under the

        laws of which Lender is organized or any political subdivision thereof

        and, taxes imposed on its income, and franchise taxes imposed on it, by

        the jurisdiction of Lender's applicable lending office or any political

        subdivision thereof and (ii) income and franchise taxes and any other

        taxes imposed by the United States of America by means of withholding at

        the source if and to the extent that such taxes shall be in effect and

        shall be applicable, on the date hereof, to payments to be made to

        Lender (all such taxes, levies, imposts, deductions, charges,

        withholdings and liabilities except as so excluded being hereinafter

        referred to as "TAXES"). If Borrower shall be required by law to deduct

        any Taxes from or in respect of any sum payable hereunder to Lender, (A)

        the sum payable shall be increased as may be necessary so that after

        making all required deductions (including deductions applicable to

        additional sums payable under this SECTION 2.08) Lender receives an

        amount equal to the sum it would have received had no such deductions

        been made, (B) Borrower shall make such deductions and (C) Borrower

        shall pay the full amount deducted to the relevant taxation authority or

        other authority in accordance with applicable law.

 

                (b)      In addition, Borrower agrees to pay any present or

        future stamp or documentary taxes or any other excise or property taxes,

        charges or similar levies which arise from any payment made hereunder or

        from the execution, delivery or registration of, or otherwise with

        respect to, this Loan Agreement or any other Loan Document (hereinafter

        referred to as "OTHER TAXES").

 

                (c)      Borrower will indemnify Lender for the full amount of

        Taxes or Other Taxes (including, without limitation, any Taxes or Other

        Taxes imposed by any jurisdiction on amounts payable under this SECTION

        2.08) paid by Lender and any liability (including penalties, interest

        and expenses) arising therefrom or with respect thereto except as a

        result of the gross negligence or willful misconduct of Lender, whether

        or not such Taxes or Other Taxes were correctly or legally asserted.

        This indemnification shall be made within thirty (30) days from the date

        Lender makes written demand therefor.

 

                (d)      Within thirty (30) days after the date of any payment of

        Taxes by or at the direction of Borrower, Borrower will furnish to

        Lender, at its address referred to in SECTION 9.01 hereof, the original

        or a certified copy of a receipt evidencing payment thereof.

 

                                      -18-

<PAGE>

 

                 (e)      Lender shall endeavor in good faith (consistent with its

        internal policies and legal and regulatory restrictions) to select a

        jurisdiction for its lending office or change the jurisdiction for its

        lending office, as the case may be, so as to avoid the imposition of any

        Taxes or Other Taxes or to reduce the amount of any such additional

        amounts which may thereafter accrue; PROVIDED that no such selection or

        change of the jurisdiction for its lending office shall be made if, in

        the judgment of Lender, such selection or change would be

        disadvantageous to Lender.

 

                (f)      Without prejudice to the survival of any other agreement

        of Borrower hereunder, the agreements and obligations of Borrower

        contained in this SECTION 2.08 shall survive the payment in full of the

        Obligation.

 

        2.09     LENDING OFFICE. Lender may change its lending offices from time

to time by notice to Borrower. Any such change in Lender's principal office or

lending office which is a result of an election by Lender for its internal

corporate convenience shall not increase the cost of the Loan to Borrower.

 

        2.10     CONDITIONS PRECEDENT FOR THE BENEFIT OF LENDER. All conditions

precedent to the obligation of Lender to make the Loan or any Advance are

imposed hereby solely for the benefit of Lender, and no other party may require

satisfaction of any such condition precedent or be entitled to assume that

Lender will refuse to make the Loan or any Advance in the absence of strict

compliance with such conditions precedent. All requirements of this Loan

Agreement may be waived by Lender, in whole or in part, at any time in Lender's

sole discretion.

 

        2.11     CONDITIONS TO THE INITIAL ADVANCE. As a condition precedent to

the Initial Advance under the Loan, Borrower must satisfy the conditions

required hereunder and execute and deliver to, procure for and deposit with, and

pay to Lender, and if appropriate, record in the proper records with all filing

and recording fees paid, the documents, certificates, and other items described

in ARTICLE VI, together with such other documents, instruments and certificates

as Lender may reasonably require from time to time.

 

        2.12     CONDITIONS TO SUBSEQUENT ADVANCES. As a condition precedent to

each Advance subsequent to the Initial Advance, and in addition to all other

requirements herein, Borrower must satisfy the following requirements:

 

                (a)      All conditions precedent to the Initial Advance shall

        have been satisfied;

 

                (b)      Borrower shall have delivered to Lender the following:

 

                        (i)      the Plans;

 

                        (ii)     the Construction Contract, executed by all

                parties;

 

                        (iii)    the Contractor's Affidavit and Subordination,

                executed by Borrower;

 

                        (iv)     the Assignment of Plans and Specifications,

                executed by Borrower and acknowledged and consented to by the

                Architect;

 

                        (v)      the Assignment of Rights under Construction

                Contract, executed by Borrower;

 

                        (vi)     a building permit for the construction of the

                Improvements and all related amenities; and

 

                                      -19-

<PAGE>

 

                        (vii)    the Approved Budget;

 

                (c)      There shall exist no Event of Default or Potential

        Default;

 

                (d)      The representations and warranties made in this Loan

        Agreement shall be true and correct on and as of the date of each

        Advance, with the same effect as if made on such date;

 

                 (e)      If any agreement or other instrument binding upon

        Borrower requires that a consent of any third party be obtained before

        Borrower may execute, deliver or perform this Loan Agreement, the Note

        or the other Loan Documents executed by such party, then such consent

        shall be delivered to Lender;

 

                (f)      Borrower shall procure and deliver to Lender, the

        Inspecting Architect/Engineer and the Title Company releases or waivers

        of mechanic's liens and receipted bills showing payment to all parties

        who have furnished materials or services or performed labor of any kind

        in connection with the construction of any of the Improvements;

 

                (g)      Promptly upon preparation thereof, Borrower shall

        deliver to Lender copies of any inspection reports prepared by the

        Inspecting Architect/Engineer, and/or any Governmental Authority having

        jurisdiction over the Improvements;

 

                (h)       Borrower shall procure and deliver to Lender, if

        required by Lender, evidence reasonably satisfactory to Lender that the

        amount theretofore invested by Borrower in the Property, together with

        the funds remaining to be advanced by Lender under the terms of this

        Loan Agreement, or sums which Borrower agrees to make available, are

        adequate to meet all costs incurred and to be incurred in connection

        with the construction of the Improvements;

 

                (i)      Borrower shall procure and deliver to Lender inspection

        reports, in form and substance acceptable to Lender, from the Inspecting

        Architect/Engineer at not less than thirty (30)-day intervals; and

 

                (j)      Borrower shall have deposited into the Borrower's

        Deposit such funds as Lender may have required pursuant to SECTION 4.22

        hereof.

 

        2.13     REALLOCATION OF APPROVED BUDGET. At any time that an Event of

Default has occurred and is continuing, Lender shall have the right from time to

time to make Advances which are allocated to any of the designated items in the

Approved Budget for such other purposes or in such different proportions as

Lender may, in its sole discretion, deem necessary or advisable. Borrower may

not reallocate items of cost or make changes in the Approved Budget without the

prior written consent of Lender, except that upon presentation to Lender of

reasonable evidence of demonstrated cost savings in a line item, the Borrower

may reallocate the cost savings in that line item to another line item.

 

        2.14     NO WAIVER. No Advance shall constitute a waiver of any condition

precedent to the obligation of Lender to make any further Advance or preclude

Lender from thereafter declaring the failure of Borrower to satisfy such

conditions precedent to be an Event of Default.

 

        2.15     SUBORDINATION. Lender shall not be obligated to make, nor shall

Borrower be entitled to receive, any Advance until such time as Lender shall

have received, to the extent requested by Lender, the Contractor Affidavit and

Subordination from the Contractor, and subordination agreements from all other

persons furnishing labor, materials, or services for the design or construction

of the Improvements,

 

                                       -20-

<PAGE>

 

subordinating to the lien of the Mortgage any lien, claim or charge which such

party may have against Borrower or the Property.

 

                                   ARTICLE III

 

                   REPRESENTATIONS AND WARRANTIES OF BORROWER

 

        To induce Lender to enter into this Loan Agreement and to make the Loan

hereunder, Borrower hereby represents and warrants to Lender as of the Closing

Date the matters set forth in this ARTICLE III.

 

        3.01     ORGANIZATION.

 

                (a)      BORROWER. Borrower is a limited partnership duly formed,

validly existing and in good standing under the laws of the State of Texas, in

accordance with the Organizational Documents of Borrower. The business which

Borrower carries on and which it proposes to carry on may be conducted in

limited partnership form by Borrower. General Partner is the sole general

partner of Borrower (with a 0.1% general partnership interest), and Realty

America Group (Mockingbird Commons) LP (with a 30% limited partnership

interest), Behringer Harvard Mockingbird Commons Investors LP (with a 69.9%

limited partnership interest) are the only limited partners of Borrower.

Borrower is duly authorized to conduct business in Texas and in each other

jurisdiction, if any, in which the nature of its properties, assets or

activities require such authorization. Except as disclosed in writing to Lender,

neither General Partner nor Behringer Harvard Mockingbird Commons Investors LP

have transferred, assigned, pledged or mortgaged its interest in Borrower or any

profits or proceeds therefrom.

 

                (b)      GUARANTORS. Behringer Harvard Mockingbird Commons GP,

LLC is a limited liability company duly formed, validly existing and in good

standing under the laws of the State of Texas in accordance with the

Organizational Documents of such person. The business which Any Guarantor

carries on and which it proposes to carry on may be conducted in limited

liability company form by such Guarantor. In addition, each Guarantor is duly

authorized to conduct business in Texas and in each other jurisdiction in which

the nature of its properties, assets or activities require such authorization.

Except as disclosed in writing to Lender, no partner or member of Any Guarantor

has transferred, assigned, pledged or mortgaged its interest in such Guarantor

or any profits or proceeds therefrom.

 

        3.02     AUTHORIZATION AND POWER. Each of Borrower and each Guarantor has

the power and requisite authority to execute, deliver, and perform its

respective obligations under this Loan Agreement and the other Loan Documents to

which it is a party; each of Borrower and each Guarantor is duly authorized to,

and has taken all action necessary to authorize it to, execute, deliver and

perform under this Loan Agreement and each of the other Loan Documents to which

it is a party and is and will continue to be duly authorized to perform under

this Loan Agreement and the other Loan Documents to which it is a party.

 

        3.03     VALID AND BINDING OBLIGATION. All of the Loan Documents, and all

other documents referred to herein to which Borrower, any Guarantor, or any

Partner is a party, upon execution and delivery by such Person, will constitute

valid and binding obligations of such Person, enforceable in accordance with

their terms, except as limited by Debtor Relief Laws and by general principles

of equity (regardless of whether such enforceability is considered in a

proceeding at law or in equity).

 

        3.04     CONFLICTS. Neither the execution and delivery of this Loan

Agreement, the Note or the other Loan Documents to which Borrower, any Guarantor

or any Partner is a party, nor consummation of any of the transactions herein or

therein contemplated nor compliance with the terms and provisions hereof or with

the terms and provisions thereof, will contravene any provision of law, statute,

rule or

 

                                      -21-

<PAGE>

 

regulation to which such Person is subject or any judgment, decree, license,

order or permit applicable to such Person, or will conflict or be inconsistent

with, or will result in any breach of any of the terms of the covenants,

conditions or provisions of, or constitute a delay under, or result in the

creation or imposition of a Lien (except Liens in favor of Lender) upon any of

the property or assets of such Person pursuant to the terms of any indenture,

mortgage, deed of trust, agreement or other instrument to which such Person is a

party or by which such Person may be bound, or to which such Person may be

subject, or violate any provision of the Organizational Documents of such

Person.

 

        3.05     CONSENTS, ETC. No consent, approval, authorization or order of

any court or governmental authority or any third party (other than those which

have been obtained prior to the date hereof and of which Borrower has notified

Lender in writing on the date hereof) is required in connection with the

execution and delivery by Borrower or any Guarantor of this Loan Agreement or

the other Loan Documents, or to consummate the transactions contemplated hereby

or thereby.

 

        3.06     PENDING LITIGATION. Other than the Disclosed Litigation, there

are no material proceedings pending, or to Borrower's knowledge, threatened,

against or affecting Borrower, any Guarantor, or the Property or any portion

thereof, in any case in any court or before any Governmental Authority or

arbitration board or tribunal which involve the possibility of materially and

adversely affecting (a) the assets, business, prospects, profits or condition

(financial or otherwise) of Borrower, any Guarantor, or the ability of any such

Person to perform its respective obligations under the Loan Documents or any

Organizational Document of any such Person, or (b) the Property or the

Residential Condominium. Neither Borrower, any Guarantor, nor the Property is in

default with respect to any order of any court, Governmental Authority or

arbitration board or tribunal.

 

        3.07     PRINCIPAL OFFICE, ETC. The chief executive office, principal

office and principal place of business of Borrower is at 15601 Dallas Parkway,

Suite 600, Addison, Texas 75001. The addresses of Borrower and Guarantors set

forth in SECTION 9.01 hereof are accurate, true and correct.

 

        3.08     CONTROL PERSONS. Borrower is not, and no Person having "control"

(as that term is defined in 12 U.S.C. ss.375b or in regulations promulgated

pursuant thereto) of Borrower is, an "executive officer," "director," or "person

who directly or indirectly or in concert with one or more persons, owns,

controls, or has the power to vote more than 10% of any class of voting

securities" (as those terms are defined in 12 U.S.C. ss.375b or in regulations

promulgated pursuant thereto) of Lender, of a holding company of which Lender is

a subsidiary, or of any other subsidiary of a holding company of which Lender is

a subsidiary, of any bank at which Lender maintains a correspondent account, or

of any bank which maintains a correspondent account with any Lender.

 

        3.09     GOVERNMENT REGULATION.

 

                (a)      Borrower is not an "investment company" or a company

        "controlled" by an "investment company," within the meaning of the

        Investment Company Act of 1940.

 

                (b)      Borrower is not a "public-utility company," or a

        "holding company," or a "subsidiary company" of a "holding company," or

        an "affiliate" of a "holding company" or of a "subsidiary company" of a

        "holding company," within the meaning of the Public Utility Holding

        Company Act of 1935.

 

                (c)      Borrower is not engaged principally, or as one of its

        important activities, in the business of extending, or arranging for the

        extension of, credit for the purpose of "purchasing or carrying any

        margin stock," within the meaning of Regulation U of the Board of

        Governors of the Federal Reserve System. No portion of the assets of

        Borrower consists of any such margin stock,

 

                                      -22-

<PAGE>

 

        and no part of the proceeds of any Loan will be used to purchase or

        carry any such margin stock within the meaning of said regulation or to

        extend credit to others for such purpose.

 

                (d)      Neither Borrower, any Guarantor or any Person who owns a

        controlling interest in or otherwise controls Borrower or any Guarantor

        is an OFAC Prohibited Person. Borrower has implemented appropriate

        procedures and policies to ensure compliance with the requirements of

        the Anti-Terrorism and Anti-Money Laundering Laws.

 

        3.10     INSIDER. Neither Borrower nor any general partner of Borrower is

an "executive officer", "director", or "person who directly or indirectly or

acting through or in concert with one or more persons, owns, controls, or has

the power to vote more than ten percent (10%) of any class of voting securities"

(as those terms are defined in 12 U.S.C. ss. 375b or in regulations promulgated

pursuant thereto) of Lender, of any bank holding company of which Lender is a

subsidiary, or of any subsidiary of a bank holding company of which Lender is a

subsidiary, of any bank at which Lender maintains a correspondent account or

which maintains a correspondent account with any Lender.

 

        3.11     O.S.H.A. Each of Borrower, each Guarantor, and the Property,

have (or within thirty (30) days of the Closing Date will have) duly complied

with, and their respective facilities, business assets, property, leaseholds and

equipment are (or within thirty (30) days of the Closing Date will be) in

compliance in all material respects with, the provisions of the Federal

Occupational Safety and Health Act and all rules and regulations thereunder and

all similar state and local laws, rules and regulations, to the extent required

thereby; there are no outstanding citations, no