Exhibit 10.1

 

ADVISORY AGREEMENT

 

BETWEEN

 

LIGHTSTONE REAL ESTATE INCOME TRUST INC.

 

AND

 

LIGHTSTONE REAL ESTATE INCOME LLC

 

Dated as of March 4, 2015

 

 

 

 

TABLE OF CONTENTS

 

    Page       1. DEFINITIONS 1       2. APPOINTMENT 6       3. DUTIES OF THE
ADVISOR 6       4. AUTHORITY OF ADVISOR 10       5. FIDUCIARY RELATIONSHIP 10  
    6. NO PARTNERSHIP OR JOINT VENTURE 10       7. BANK ACCOUNTS 10       8.
RECORDS; ACCESS 10       9. LIMITATIONS ON ACTIVITIES 10       10. FEES 11      
11. EXPENSES 15       12. OTHER SERVICES 16       13. REIMBURSEMENTS 16      
14. OTHER ACTIVITIES OF THE ADVISOR 17       15. THE LIGHTSTONE NAME 18      
16. TERM OF AGREEMENT 18       17. TERMINATION BY THE PARTIES 18       18.
ASSIGNMENT TO AN AFFILIATE 18       19. PAYMENTS TO AND DUTIES OF ADVISOR UPON
TERMINATION 18       20. INCORPORATION OF THE ARTICLES OF INCORPORATION 19      
21. INDEMNIFICATION BY THE COMPANY 19       22. INDEMNIFICATION BY THE ADVISOR
21       23. NOTICES 21      

 

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24. MODIFICATION 22       25. SEVERABILITY 22       26. GOVERNING LAW 22      
27. ENTIRE AGREEMENT 22       28. NO WAIVER 22       29. PRONOUNS AND PLURALS 22
      30. HEADINGS 23       31. EXECUTION IN COUNTERPARTS 23

 

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ADVISORY AGREEMENT

 

THIS ADVISORY AGREEMENT, dated as of March 4, 2015 (this “Agreement”), is
entered into between Lightstone Real Estate Income Trust Inc., a Maryland
corporation (the “Company”) and Lightstone Real Estate Income LLC, a Delaware
limited liability company.

 

WITNESSETH

 

WHEREAS, the Company is a Maryland corporation created in accordance with the
Maryland General Corporation Law and intends to qualify as a REIT (as defined
below);

 

WHEREAS, the Company desires to avail itself of the experience, sources of
information, advice, assistance and certain facilities of the Advisor (as
defined below) and to have the Advisor undertake the duties and responsibilities
hereinafter set forth, on behalf of, and subject to the supervision of, the
Board of Directors of the Company, all as provided herein; and

 

WHEREAS, the Advisor is willing to render such services, subject to the
supervision of the Board of Directors of the Company, on the terms and subject
to the conditions hereinafter set forth;

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:

 

1.          DEFINITIONS. As used in this Agreement, the following terms have the
definitions set forth below:

 

“2%/25% Guidelines” has the meaning set forth in Section 13.

 

“Acquisition Expenses” has the meaning set forth in the Articles of
Incorporation.

 

“Acquisition Fee” means the fee payable to the Advisor or its Affiliates
pursuant to Section 10(a).

 

“Advisor” means Lightstone Real Estate Income LLC, a Delaware limited liability
company, any successor advisor to the Company, or any Person to which Lightstone
Real Estate Income LLC or any successor advisor subcontracts all or
substantially all its functions. Notwithstanding the foregoing, a Person hired
or retained by Lightstone Real Estate Income LLC to perform property management
and related services for the Company that is not hired or retained to perform
substantially all the functions of Lightstone Real Estate Income LLC with
respect to the Company as a whole shall not be deemed to be an Advisor.

 

“Affiliate” or “Affiliated” has the meaning set forth in the Articles of
Incorporation.

 

“Agreement” has the meaning set forth at the head of this Agreement, and such
term shall include any amendment or supplement hereto from time to time.

 

 

 

 

“Annual Subordinated Performance Fee” means the fees payable to the Advisor or
its assignees pursuant to Section 10(e).

 

“Articles of Incorporation” means the charter of the Company, as amended or
supplemented from time to time.

 

“Asset Management Fee” means the fees payable to the Advisor pursuant to Section
10(d).

 

“Asset Sale” means any transaction or series of transactions resulting in a
liquidation or the sale of all or substantially all the Investments and the
distribution of the Net Sales Proceeds therefrom to the holders of Common Shares
whereby: (a) the Company directly or indirectly sells, grants, transfers,
conveys or relinquishes its direct or indirect ownership of or interest in (i)
any real estate asset, including through any event with respect to any real
estate asset that gives rise to a significant amount of insurance proceeds or
condemnation awards, (ii) any Joint Venture, (iii) any Real Estate-Related Loan
or portion thereof (including all payments thereunder or in satisfaction thereof
other than regularly scheduled interest payments), including through any event
with respect to any Real Estate-Related Loan or portion thereof that gives rise
to a significant amount of insurance proceeds or similar awards, or (iv) any
other Investment not previously described in this definition, or any portion
thereof; or (b) any Joint Venture directly or indirectly sells, grants,
transfers, conveys or relinquishes its direct or indirect ownership of or
interest in any Investment described in this definition, or any portion thereof.

 

“Average Invested Assets” has the meaning set forth in the Articles of
Incorporation. For an equity interest owned in a Joint Venture, the calculation
of Average Invested Assets shall take into consideration the underlying Joint
Venture’s aggregate book value for the equity interest.

 

“Board of Directors” or “Board” means the Board of Directors of the Company.

 

“Business Day” means any day on which the New York Stock Exchange is open for
trading.

 

“Bylaws” means the bylaws of the Company, as amended from time to time.

 

“Cause” means (i) fraud, criminal conduct, willful misconduct or illegal or
grossly negligent breach of fiduciary duty by the Advisor, or (ii) if any of the
following events occur: (A) the Advisor shall breach any material provision of
this Agreement, and after written notice of such breach, shall not cure such
default within thirty (30) days or have begun action within thirty (30) days to
cure the default which shall be completed with reasonable diligence; (B) the
Advisor shall be adjudged bankrupt or insolvent by a court of competent
jurisdiction, or an order shall be made by a court of competent jurisdiction for
the appointment of a receiver, liquidator, or trustee of the Advisor, for all or
substantially all its property by reason of the foregoing, or if a court of
competent jurisdiction approves any petition filed against the Advisor for
reorganization, and such adjudication or order shall remain in force or unstayed
for a period of thirty (30) days; or (C) the Advisor shall institute proceedings
for voluntary bankruptcy or shall file a petition seeking reorganization under
the federal bankruptcy laws, or for relief under any law for relief of debtors,
or shall consent to the appointment of a receiver for itself or for all or
substantially all its property, or shall make a general assignment for the
benefit of its creditors, or shall admit in writing its inability to pay its
debts, generally, as they become due.

 

 2 

 

 

“Change of Control” means a change of control of the Company of a nature that
would be required to be reported in response to the disclosure requirements of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), as enacted and in force on the date
hereof, whether or not the Company is then subject to such reporting
requirements; provided, however, that, without limitation, a Change of Control
shall be deemed to have occurred if: (i) any “person” (within the meaning of
Section 13(d) of the Exchange Act, as enacted and in force on the date hereof)
is or becomes the “beneficial owner” (as that term is defined in Rule 13d-3, as
enacted and in force on the date hereof, under the Exchange Act) of securities
of the Company representing 9.8% or more of the combined voting power of the
Company’s securities then outstanding; (ii) there occurs a merger, consolidation
or other reorganization of the Company which is not approved by the Board of
Directors; (iii) there occurs a Sale, exchange, transfer or other disposition of
substantially all the assets of the Company to another Person, which disposition
is not approved by the Board of Directors; or (iv) there occurs a contested
proxy solicitation of the Stockholders that results in the contesting party
electing candidates to a majority of the Board of Directors’ positions next up
for election.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or
any successor statute thereto. Reference to any provision of the Code 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 regulations as
in effect from time to time.

 

“Common Shares” means shares of the Company’s common stock, par value $0.01 per
share.

 

“Company” has the meaning set forth at the head of this Agreement.

 

“Competitive Real Estate Commission” has the meaning set forth in the Articles
of Incorporation.

 

“Contract Sales Price” means the total consideration received by the Company for
the Sale of an Investment.

 

“Cost of Assets” means the amount funded by the Company for Investments,
including expenses and any financing attributable to such Investments, less any
principal received by the Company for such Investments.

 

“Dealer Manager” means the Person(s) selected by the Board of Directors to act
as the dealer manager for an Offering.

 

“Director” means a member of the Board of Directors.

 

“Disposition Fee” means the fee payable to the Advisor or any of its Affiliates
pursuant to Section 10(c).

 

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“Distributions” has the meaning set forth in the Articles of Incorporation.

 

“Excess Amount” has the meaning set forth in Section 13.

 

“Exchange Act” has the meaning set forth in the definition of “Change of
Control.”

 

“Funding Amount” has the meaning set forth in the Articles of Incorporation.

 

“Good Reason” means: (i) any failure to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform obligations under this
Agreement; or (ii) any material breach of this Agreement of any nature
whatsoever by the Company.

 

“Gross Proceeds” has the meaning set forth in the Articles of Incorporation.

 

“include,” “includes” and “including” shall be construed as if followed by the
phrase “without limitation.”

 

“Indemnitee” has the meaning set forth in Section 21(a).

 

“Independent Director” has the meaning set forth in the Articles of
Incorporation.

 

“Invested Capital” has the meaning set forth in the Articles of Incorporation.

 

“Investment” has the meaning set forth in the Articles of Incorporation.

 

“Investment Company Act” has the meaning set forth in Section 3(w).

 

“Investment Liquidity Event” means: (a) an Asset Sale; or (b) a Merger.

 

“Joint Venture” means any joint venture or partnership or other similar
arrangement in which the Company or any of its subsidiaries is a co-venturer,
member or partner, which is established to originate, acquire or hold
Investments.

 

“Listing” means the listing of the Common Shares or any other securities into or
for which the Common Shares are converted or exchanged on a national securities
exchange, or the inclusion of the Common Shares for trading in the
over-the-counter market.

 

“Loan” means any indebtedness or obligation in respect of borrowed money or
evidenced by a bond, note, debenture, deed of trust, letter of credit or similar
instrument, including any mortgage or mezzanine loan.

 

“Market Value” means: (a) in the case of a Listing, the weighted average closing
price per Common Share over the Measurement Period multiplied by the number of
Common Shares outstanding on the day trading first commences or commenced upon a
Listing; (b) in the case of a Merger, the value accorded to one Common Share in
the applicable transaction documents governing the Merger multiplied by the
number of Common Shares outstanding immediately prior to the effective time of
the Merger; and (c) in the case of an Asset Sale, the Net Sales Proceeds
distributed to the holders of Common Shares. Notwithstanding (a), if a
definitive agreement relating to a Merger or an Asset Sale shall be entered into
after a Listing, but before the Measurement Period shall be completed, then
Market Value shall be determined according to (b) or (c), as applicable.

 

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“Measurement Period” means the period beginning one hundred eighty (180)
calendar days after a Listing, and continuing for a period of thirty (30)
consecutive trading days.

 

“Merger” means any merger, reorganization, business combination, share exchange
or acquisition by any Person or related group of Persons of beneficial ownership
of all or substantially all the Common Shares in one or more related
transactions, or another similar transaction involving the Company, pursuant to
which the holders of Common Shares receive cash or the securities of another
issuer that are listed on a national securities exchange, as full or partial
consideration for their Common Shares.

 

“NASAA REIT Guidelines” means the Statement of Policy Regarding Real Estate
Investment Trusts as revised and adopted by the North American Securities
Administrators Association on May 7, 2007, as the same may be amended from time
to time.

 

“Net Income” has the meaning set forth in the Articles of Incorporation.

 

“Net Sales Proceeds” has the meaning set forth in the Articles of Incorporation.

 

“Notice” has the meaning set forth in Section 23.

 

“Offering” means a public offering of Shares pursuant to a Prospectus.

 

“Organization and Offering Expenses” means all costs and expenses to be paid by
the Company in connection with the formation of the Company and an Offering,
including (i) the Company’s legal, accounting, printing, mailing and filing
fees, (ii) charges of the Company’s escrow agent, (iii) reimbursements to the
Dealer Manager and participating broker-dealers for due diligence expenses set
forth on detailed and itemized invoices, (iv) amounts to reimburse the Advisor
for its portion of the salaries of the employees of its Affiliates who provide
services to the Advisor, and (v) other costs in connection with administrative
oversight of such Offering and the marketing process, such as preparing
supplemental sales materials, holding educational conferences and attending
retail seminars conducted by the Dealer Manager or participating broker-dealers.

 

“Person” has the meaning set forth in the Articles of Incorporation.

 

“Primary Offering” means the portion of an Offering other than the offering of
Common Shares pursuant to the Company’s distribution reinvestment program.

 

“Prospectus” means a final prospectus of the Company filed pursuant to Rule
424(b) of the Securities Act, as the same may be amended or supplemented from
time to time.

 

“Real Estate-Related Loan” means any investment in mortgage loans and other
types of real estate-related debt financing, including mezzanine loans, bridge
loans, convertible mortgages, wraparound mortgage loans, construction mortgage
loans, loans on leasehold interests and participations in such loans, by the
Company, directly, through one or more subsidiaries or through a Joint Venture.

 

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“REIT” has the meaning set forth in the Articles of Incorporation.

 

“Sale” has the meaning set forth in the Articles of Incorporation.

 

“Securities Act” means the Securities Act of 1933, as amended. “Shares” has the
meaning set forth in the Articles of Incorporation.

 

“Sponsor” means The Lightstone Group, LLC, a New Jersey limited liability
company.

 

“Stockholder” means a holder of record of the Shares, as maintained on the books
and records of the Company or its transfer agent.

 

“Subordinated Fee upon Termination” means the fee payable to the Advisor
pursuant to Section 10(h).

 

“Subordinated Incentive Listing Fee” means the fee payable to the Advisor
pursuant to Section 10(g).

 

“Subordinated Participation in Net Sales Proceeds” means the fee payable to the
Advisor pursuant to Section 10(f).

 

“such as” shall be construed as if followed by the phrase “without limitation.”

 

“Termination Date” means the date of termination of this Agreement.

 

“Total Operating Expenses” has the meaning set forth in the Articles of
Incorporation. The definition of “Total Operating Expenses” set forth above is
intended to encompass only those expenses which are required to be treated as
Total Operating Expenses under the NASAA REIT Guidelines. As a result, and
notwithstanding the definition set forth above, any expense of the Company which
is not part of Total Operating Expenses under the NASAA REIT Guidelines shall
not be treated as part of Total Operating Expenses for purposes hereof.

 

2.          APPOINTMENT. The Company hereby appoints the Advisor to serve as its
advisor to perform the services set forth herein on the terms and subject to the
conditions set forth in this Agreement and subject to the supervision of the
Board, and the Advisor hereby accepts such appointment.

 

3.          DUTIES OF THE ADVISOR. The Advisor will use its reasonable best
efforts to find, evaluate, present and recommend to the Company investment
opportunities consistent with the Company’s investment policies and objectives
as adopted from time to time by the Board. In its performance of this
undertaking, subject to the supervision of the Board and consistent with the
provisions of the Articles of Incorporation and the Bylaws, the Advisor, either
directly or indirectly, shall, among other duties:

 

 6 

 

 

(a)          exercise absolute discretion, subject to the Board’s review, in
decisions to originate, acquire, retain or sell Investments; provided, that the
Advisor may originate or acquire on behalf of the Company any Investment with
purchase price that is less than $15,000,000 without the prior approval of the
Board (other than an Investment originated or acquired from the Advisor, a
Director, the Sponsor or their Affiliates, in which case the approval of the
Independent Directors will be required) if and to the extent that:

 

(i)          the proposed origination or acquisition would not, if consummated,
violate or conflict with the Company’s investment objectives;

 

(ii)         the proposed origination or acquisition would not, if consummated,
violate the limitations on borrowing set forth in the Articles of Incorporation;
and

 

(iii)        the consideration proposed to be paid for such Investment does not
exceed the fair market value of such Investment, as determined by a qualified
independent valuer selected in good faith by the Advisor and acceptable to the

Independent Directors;

 

(b)          provide daily management for the Company and perform and supervise
the various administrative functions necessary for the day-to-day management of
the operations of the Company;

 

(c)          investigate, select and, on behalf of the Company, engage and
conduct business with and supervise the performance of such Persons as the
Advisor deems necessary to the proper performance of its obligations hereunder
(including consultants, accountants, correspondents, lenders, technical
advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow
agents, depositaries, custodians, agents for collection, insurers, insurance
agents, banks, builders, developers, property owners, property managers, real
estate management companies, real estate operating companies, securities
investment advisors, mortgagors, the registrar and the transfer agent and any
and all agents for any of the foregoing), including Affiliates of the Advisor
and Persons acting in any other capacity deemed by the Advisor necessary or
desirable for the performance of any of the foregoing services (including
entering into contracts in the name of the Company with any of the foregoing);

 

(d)          consult with the officers and Directors of the Company and assist
the Directors in the formulation and implementation of the Company’s financial
policies, and, as necessary, furnish the Board with advice and recommendations
with respect to the making of Investments consistent with the investment
objectives and policies of the Company and in connection with any borrowings
proposed to be undertaken by the Company;

 

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(e)          subject to the provisions of Section 4, (i) present a continuing
and suitable investment program to the Board that is consistent with the
Company’s investment policies and objectives; (ii) locate, analyze and select
potential Investments; (iii) structure and negotiate the terms and conditions of
transactions pursuant to which originations, acquisitions and dispositions of
Investments will be made; (iv) research, identify, review and recommend
originations, acquisitions and dispositions of Investments to the Board and make
Investments on behalf of the Company in compliance with the investment
objectives and policies of the Company; (v) arrange for financing and
refinancing and make other changes in the asset or capital structure of, and
dispose of, reinvest the proceeds from the Sale of, or otherwise deal with,
Investments; (vi) perform all operational functions for the maintenance and
administration of Investments, including, with respect to Real Estate-Related
Loans, servicing; (vii) actively oversee and manage Investments for purposes of
meeting the Company’s investment objectives and reviewing and analyzing
financial information for each of the Investments and the overall portfolio;
(viii) select Joint Venture partners, structure corresponding agreements and
oversee and monitor these relationships; (ix) oversee Affiliated and
non-Affiliated Persons with whom the Advisor contracts to perform certain of the
services required to be performed under this Agreement; (x) manage accounting
and other recordkeeping functions for the Company, including generating an
annual budget for the Company; (xi) recommend various liquidity events to the
Board when appropriate; and (xii) source and structure Real Estate-Related Loans
(if the Company retains the servicing rights, the Advisor or one of its
Affiliates will service the Real Estate-Related Loan or select a third-party
provider to do so);

 

(f)          upon request, provide the Board with periodic reports regarding
prospective Investments;

 

(g)          make investments in, and dispositions of, Investments within the
discretionary limits and authority as granted by the Board;

 

(h)          perform a diligence review on each Investment prior to the closing
thereof;

 

(i)           negotiate on behalf of the Company with banks or other lenders for
Loans to be made to the Company or any of its subsidiaries, and negotiate with
investment banking firms and broker-dealers on behalf of the Company or any of
its subsidiaries, or negotiate private sales of Common Shares or obtain Loans
for the Company or any of its subsidiaries, but in no event in such a manner
that the Advisor shall be acting as broker-dealer or underwriter; provided,
however, that any fees and costs payable to third parties incurred by the
Advisor in connection with the foregoing shall be the responsibility of the
Company or any of its subsidiaries;

 

(j)          obtain reports (which may be, but are not required to be, prepared
by the Advisor or its Affiliates), where appropriate, concerning the value of
Investments or contemplated Investments of the Company;

 

(k)          from time to time, or at any time reasonably requested by the
Board, make reports to the Board of its performance of services to the Company
under this Agreement, including reports with respect to potential conflicts of
interest involving the Advisor or any of its Affiliates;

 

(l)           provide the Company with all necessary cash management services;

 

(m)          deliver to, or maintain on behalf of, the Company copies of all
valuation reports;

 

(n)           notify the Board of all proposed material transactions before they
are completed;

 

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(o)          effect any private placement of tenancy-in-common (TIC) or other
interests in Investments as may be approved by the Board;

 

(p)          perform investor relations and Stockholder communications functions
for the Company;

 

(q)          render such services as may be reasonably determined by the Board
of Directors consistent with the terms and conditions herein;

 

(r)          maintain the Company’s accounting and other records and assist the
Company in preparing, reviewing and filing all reports and returns required to
be filed by it with the Securities and Exchange Commission, the Internal Revenue
Service and other regulatory agencies;

 

(s)          do all things reasonably necessary to assure its ability to render
the services described in this Agreement;

 

(t)          make decisions regarding marketing methods with respect to the
initial public Offering, the termination or extension of the initial public
Offering, the initiation of a follow-on Offering, mergers and other Change of
Control transactions and certain significant press releases;

 

(u)          periodically review each Investment to determine the optimal time
to sell the Investment and generate a strong return;

 

(v)         administer the Company’s share repurchase program and, in connection
therewith, consider various factors in determining the amount of liquid assets
the Company should maintain, including but not limited to the Company’s receipt
of proceeds from sales of additional Common Shares, the Company’s cash flow from
operations, available borrowing capacity under a line of credit, if any, the
Company’s receipt of proceeds from any asset sale, and the use of cash to fund
repurchases;

 

(w)          continually review the Company’s investment activity to attempt to
ensure that the Company will not be regulated as an “investment company” under
the Investment Company Act of 1940, as amended (the “Investment Company Act”);
and

 

(x)          continuously monitor the Company’s capital needs and the amount of
available liquid assets relative to the Company’s current business, as well as
the volume of repurchase requests relative to the sales of new Common Shares.

 

Notwithstanding the foregoing or anything else that may be to the contrary in
this Agreement, the Advisor may delegate any of the foregoing duties to any
Person so long as the Advisor or its Affiliate remains responsible for the
performance of the duties set forth in this Section 3.

 

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4.          AUTHORITY OF ADVISOR.

 

(a)          Pursuant to the terms of this Agreement (including the restrictions
included in this Section 4 and in Section 9), and subject to the continuing and
exclusive authority of the Board over the supervision of the Company, the
Company, acting on the authority of the Board of Directors, hereby delegates to
the Advisor the authority to perform the services described in Section 3.

 

(b)          If a transaction requires approval by the Independent Directors,
the Advisor will deliver to the Independent Directors all documents and other
information reasonably required by them to evaluate properly the proposed
transaction.

 

(c)          The Board may, at any time upon the giving of Notice to the
Advisor, modify or revoke the authority set forth in this Section 4; provided,
however, that such modification or revocation shall be effective upon receipt by
the Advisor and shall not be applicable to investment transactions to which the
Advisor has committed the Company prior to the date of receipt by the Advisor of
such notification.

 

5.          FIDUCIARY RELATIONSHIP. The Advisor, as a result of its relationship
with the Company pursuant to this Agreement, has a fiduciary responsibility and
duty to the Company and the Stockholders.

 

6.          NO PARTNERSHIP OR JOINT VENTURE. The parties to this Agreement are
not partners or joint venturers with each other and nothing herein shall be
construed to make them partners or joint venturers or impose any liability as
such on either of them.

 

7.          BANK ACCOUNTS. The Advisor may establish and maintain one or more
bank accounts in the name of the Company and may collect and deposit into any
such account or accounts, and disburse from any such account or accounts, any
money on behalf of the Company, under such terms and conditions as the Board may
approve; provided, that no funds shall be commingled with the funds of the
Advisor; and, upon request, the Advisor shall render appropriate accountings of
such collections and payments to the Board and to the auditors of the Company.

 

8.          RECORDS; ACCESS. The Advisor shall maintain appropriate records of
all its activities hereunder and make such records available for inspection by
the Directors and by counsel, auditors and authorized agents of the Company, at
any time and from time to time. The Advisor shall at all reasonable times have
access to the books and records of the Company.

 

9.          LIMITATIONS ON ACTIVITIES. Notwithstanding anything herein to the
contrary, the Advisor shall refrain from taking any action which, in its sole
judgment, or in the sole judgment of the Company, made in good faith, would (a)
adversely affect the status of the Company as a REIT, unless the Board has
determined that REIT qualification is not in the best interests of the Company
and its Stockholders, (b) subject the Company to regulation under the Investment
Company Act, or (c) violate any law, rule, regulation or statement of policy of
any governmental body or agency having jurisdiction over the Company or the
Shares, or otherwise not be permitted by the Articles of Incorporation or
Bylaws, except if such action shall be ordered by the Board, in which case the
Advisor shall notify promptly the Board of the Advisor’s judgment of the
potential impact of such action and shall refrain from taking such action until
it receives further clarification or instructions from the Board. In such event,
the Advisor shall have no liability for acting in accordance with the specific
instructions of the Board so given.

 

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10.         FEES.

 

(a)          Acquisition Fee. Subject to Section 10(b), the Company will pay to
the Advisor or its Affiliates one percent (1%) of the Funding Amount with
respect to each Investment originated or acquired. The Company shall pay to the
Advisor or its Affiliates the Acquisition Fee promptly upon the closing of the
Investment. If the Advisor is terminated without Cause pursuant to Section
17(a), the Advisor or its Affiliates shall be entitled to an Acquisition Fee for
any Investments originated or acquired after the Termination Date for which a
contract to originate or acquire any such Investment had been entered into at or
prior to the Termination Date. In the case of an Investment made through a Joint
Venture, the Acquisition Fee shall be calculated based on the direct or indirect
ownership percentage in the Joint Venture held by the Company. For purposes of
this Section 10(a), “ownership percentage” means the percentage of capital
stock, membership interests, partnership interests or other equity interests
held by the Company, without regard to classification of such equity interests.
Notwithstanding anything to the contrary in this Section 10(a), no Acquisition
Fee shall be payable with respect to any transaction between the Company and the
Sponsor, any affiliate of the Sponsor or any program sponsored by the Sponsor.

 

(b)          Limitation on Total Acquisition Fees and Acquisition Expenses;
Reinvestments. In no event will the total of all Acquisition Fees and
Acquisition Expenses payable with respect to a particular Investment be
unreasonable or exceed five percent (5%) of the Funding Amount. In addition,
subject to the final sentence of Section 10(a), if during the period ending two
years after the close of the initial Offering and any follow-on Offering, the
Company sells an Investment and then reinvests in other Investments, the Company
will pay to the Advisor or its Affiliates, as applicable, any Acquisition Fees
in respect of such other Investments, and will reimburse the Advisor for any
Acquisition Expenses in respect of such other Investments of the Advisor or any
of its Affiliates; provided, however, that in no event shall the total of all
Acquisition Fees and Acquisition Expenses payable in respect of such
reinvestment be unreasonable or exceed five percent (5%) of the Funding Amount.
Notwithstanding anything to the contrary in this Section 10(b), a majority of
the Directors (including a majority of the Independent Directors) not otherwise
interested in the transaction may approve fees and expenses in excess of the
limits set forth in this Section 10(b) if they determine the transaction to be
commercially competitive, fair and reasonable to the Company.

 

(c)          Disposition Fee. For substantial services in connection with the
Sale of an Investment, the Company will pay the Advisor or any of its Affiliates
a Disposition Fee equal to up to one percent (1%) of the Contract Sales Price of
each Investment sold; provided, however, that the disposition fees paid to the
Advisor, its Affiliates and non-Affiliates in respect of such Investment shall
not exceed the lesser of six percent (6%) of the Contract Sales Price or the
Competitive Real Estate Commission in respect of such Investment. The
Independent Directors will determine whether the Advisor or its Affiliates have
provided a substantial amount of services to the Company in connection with the
Sale of an Investment. A substantial amount of services in connection with the
Sale of an Investment includes the preparation by the Advisor or its Affiliates
of an investment package for the Investment (including an investment analysis,
an asset description and other due diligence information) or such other
substantial services performed by the Advisor or its Affiliates in connection
with a Sale. The Company will not pay a Disposition Fee upon the Sale of any
securities traded on a national securities exchange or included for trading in
the over-the-counter market. The Company will not pay a Disposition Fee upon the
maturity, prepayment, workout, modification or extension of a debt Investment
unless a corresponding fee is paid by the borrower, in which case the
Disposition Fee will be the lesser of: (i) 1% of the principal amount of the
debt prior to such transaction; and (ii) the amount of the fee paid by the
borrower in connection with such transaction. If the Company takes ownership of
a property as a result of a workout or foreclosure of debt, the Company will pay
a Disposition Fee upon the Sale of such property.

 

 11 

 

 

(d)          Asset Management Fee. The Company shall pay the Advisor or its
assignees a monthly fee equal to one-twelfth (1/12) of one percent (1%) of the
Cost of Assets, calculated and payable on the first Business Day of each month.

 

(e)          Annual Subordinated Performance Fee. The Company shall pay the
Advisor an Annual Subordinated Performance Fee calculated on the basis of the
Company’s annual return to holders of Common Shares, payable annually in arrears
in any year in which holders of Common Shares receive payment of an eight
percent (8%) annual cumulative, pre-tax, non-compounded return on their
respective pro rata shares of Invested Capital, in an amount equal to fifteen
percent (15%) of the amount in excess of such eight percent (8%) annual return;
provided, however, that the Annual Subordinated Performance Fee shall not exceed
ten percent (10%) of the aggregate return for such year; and provided further,
however, that the Annual Subordinated Performance Fee will not be paid unless
holders of Common Shares receive a return of their respective pro rata shares of
Invested Capital. The Annual Subordinated Performance Fee shall be payable only
from Net Sales Proceeds.

 

(f)          Subordinated Participation in Net Sales Proceeds. Upon an
Investment Liquidity Event, the Company shall pay the Advisor, in one or more
payments solely out of Net Sales Proceeds, an amount equal to (i) fifteen
percent (15%) of the amount, if any, by which (A) the sum of (I) the Market
Value, plus (II) total distributions attributable to Net Sales Proceeds paid
through the date the Investment Liquidity Event is consummated on Common Shares
issued in all Offerings through such date, exceeds (B) the sum of (I) the Gross
Proceeds raised in all Offerings through the date the Investment Liquidity Event
is consummated (less amounts paid on or prior to such date to purchase or redeem
any Common Shares purchased in an Offering pursuant to the Company’s share
repurchase program), plus (II) the minimum amount of cash that, if distributed
to those Stockholders who purchased Common Shares in an Offering on or prior to
the date the Investment Liquidity Event is consummated, would have provided such
Stockholders an eight percent (8%) annual cumulative, pre-tax, non-compounded
return on the Gross Proceeds raised in all Offerings through the date the
Investment Liquidity Event is consummated, measured for the period from
inception through the date the Investment Liquidity Event is consummated, less
(ii) any prior payments to the Advisor of the Annual Subordinated Performance
Fee. The Subordinated Participation in Net Sales Proceeds will only be paid to
the Advisor if this Agreement has not been terminated by the Company or the
Advisor prior to the date the Investment Liquidity Event is consummated.

 

 12 

 

 

(g)          Subordinated Incentive Listing Fee. Upon a Listing, the Company
shall pay the Advisor, in one or more payments solely out of Net Sales Proceeds,
an amount equal to (i) fifteen percent (15%) of the amount, if any, by which (A)
the sum of (I) the Market Value, plus (II) total distributions attributable to
Net Sales Proceeds paid through the date of Listing on Common Shares issued in
all Offerings through such date, exceeds (B) the sum of (I) the Gross Proceeds
raised in all Offerings through the date of Listing (less amounts paid on or
prior to such date to purchase or redeem any Common Shares purchased in an
Offering pursuant to the Company’s share repurchase program), plus (II) the
minimum amount of cash that, if distributed to those Stockholders who purchased
Common Shares in an Offering on or prior to the date of Listing, would have
provided such Stockholders an eight percent (8%) annual cumulative, pre- tax,
non-compounded return on the Gross Proceeds raised in all Offerings through the
date of Listing, measured for the period from inception through the date of
Listing, less (ii) any prior payments to the Advisor of the Subordinated
Participation in Net Sales Proceeds or the Annual Subordinated Performance Fee,
as applicable. The Subordinated Incentive Listing Fee will only be paid to the
Advisor if this Agreement has not been terminated by the Company or the Advisor
prior to the date of Listing.

 

(h)          Subordinated Fee upon Termination. Upon termination or non-renewal
of this Agreement with or without Cause, the Company shall pay the Advisor, in
one or more payments solely out of Net Sales Proceeds, an amount equal to (i)
fifteen percent (15%) of the amount, if any, by which (A) the sum of (I) the
estimated market value (determined by the Company in accordance with the
Company’s valuation policy) of the Investments on the Termination Date, less
(II) any Loans secured by such Investments and any unsecured Loans, plus or
minus (III) any working capital surplus or deficit, as applicable, plus (IV)
total distributions attributable to Net Sales Proceeds paid through the
Termination Date on Common Shares issued in all Offerings through the
Termination Date, exceeds (B) the sum of (I) the Gross Proceeds raised in all
Offerings through the Termination Date (less amounts paid on or prior to the
Termination Date to purchase or redeem any Common Shares purchased in an
Offering pursuant to the Company’s share repurchase program), plus (II) the
minimum amount of cash that, if distributed to those Stockholders who purchased
Common Shares in an Offering on or prior to the Termination Date, would have
provided such Stockholders an eight percent (8%) annual cumulative, pre-tax,
non-compounded return on the Gross Proceeds raised in all Offerings through the
Termination Date, measured for the period from inception through the Termination
Date, less (ii) any prior payments to the Advisor of the Subordinated
Participation in Net Sales Proceeds or the Annual Subordinated Performance Fee,
as applicable; provided, however, that the Subordinated Fee upon Termination
will not be paid unless holders of Common Shares receive a return of their
respective pro rata shares of Invested Capital. In addition, on the Termination
Date, the Advisor may elect to defer its right to receive a Subordinated Fee
upon Termination until either a Listing or an Investment Liquidity Event occurs.

 

(i)          Coordination.

 

(i)          The Advisor shall not be entitled to earn both the Subordinated
Participation in Net Sales Proceeds and the Subordinated Incentive Listing Fee.
Any portion of the Subordinated Participation in Net Sales Proceeds that the
Company shall pay to the Advisor prior to a Listing shall offset any amount of
the Subordinated Incentive Listing Fee otherwise payable by the Company to the
Advisor. If the Advisor receives the Subordinated Fee upon Termination, the
Advisor shall not be entitled to any further payment of the Subordinated
Participation in Net Sales Proceeds or the Subordinated Incentive Listing Fee.

 

 13 

 

 

(ii)         Upon a Listing, any previous payments by the Company to the Advisor
of the Subordinated Participation in Net Sales Proceeds shall offset any amount
of the Subordinated Incentive Listing Fee otherwise payable by the Company to
the Advisor, and the Advisor shall not be entitled to any further payment of the
Subordinated Participation in Net Sales Proceeds or the Subordinated Fee upon
Termination.

 

(iii)        If the Advisor elects to defer its right to receive a Subordinated
Fee upon Termination and there is a subsequent Listing, then the Advisor shall
be entitled to receive a Subordinated Fee upon Termination, payable in one or
more payments solely out of Net Sales Proceeds, in an amount equal to (A)
fifteen percent (15%) of the amount, if any, by which (I) the sum of (x) the
Market Value, plus (y) total distributions attributable to Net Sales Proceeds
paid through the date of Listing on Common Shares issued in all Offerings
through the Termination Date, exceeds (II) the sum of (x) the Gross Proceeds
raised in all Offerings through the Termination Date (less amounts paid on or
prior to the date of Listing to purchase or redeem any Common Shares purchased
in an Offering on or prior to the Termination Date pursuant to the Company’s
share repurchase program), plus (y) the minimum amount of cash that, if
distributed to those Stockholders who purchased Common Shares in an Offering on
or prior to the Termination Date, would have provided such Stockholders an eight
percent (8%) annual cumulative, pre-tax, non-compounded return on the Gross
Proceeds raised in all Offerings through the Termination Date, measured for the
period from inception through the date of Listing, less (B) any prior payments
to the Advisor of the Subordinated Participation in Net Sales Proceeds, the
Subordinated Incentive Listing Fee or the Annual Subordinated Performance Fee,
as applicable; provided, however, that the Subordinated Fee upon Termination
will not be paid unless holders of Common Shares receive a return of their
respective pro rata shares of Invested Capital.

 

(iv)        If the Advisor elects to defer its right to receive a Subordinated
Fee upon Termination and there is a subsequent Investment Liquidity Event, then
the Advisor shall be entitled to receive a Subordinated Fee upon Termination,
payable in one or more payments solely out of Net Sales Proceeds, in an amount
equal to (A) fifteen percent (15%) of the amount, if any, by which (I) the sum
of (x) the Market Value, plus (y) total distributions attributable to Net Sales
Proceeds paid through the date the Investment Liquidity Event is consummated on
Common Shares issued in all Offerings through the Termination Date, exceeds (II)
the sum of (x) the Gross Proceeds raised in all Offerings through the
Termination Date (less amounts paid on or prior to the date the Investment
Liquidity Event is consummated to purchase or redeem any Common Shares purchased
in an Offering on or prior to the Termination Date pursuant to the Company’s
share repurchase program), plus (y) the minimum amount of cash that, if
distributed to those Stockholders who purchased Common Shares in an Offering on
or prior to the Termination Date, would have provided such Stockholders an eight
percent (8%) annual cumulative, pre-tax, non-compounded return on the Gross
Proceeds raised in all Offerings through the Termination Date, measured for the
period from inception through the date the Investment Liquidity Event is
consummated, less (B) any prior payments to the Advisor of the Subordinated
Participation in Net Sales Proceeds or the Annual Subordinated Performance Fee,
as applicable; provided, however, that the Subordinated Fee upon Termination
will not be paid unless holders of Common Shares receive a return of their
respective pro rata shares of Invested Capital.

 

 14 

 

 

11.         EXPENSES.

 

(a)          In addition to the compensation paid to the Advisor pursuant to
Section 10, the Company shall pay directly or reimburse the Advisor for all the
expenses paid or incurred by the Advisor or its Affiliates in connection with
the services it provides to the Company pursuant to this Agreement, including
the following:

 

(i)          Organization and Offering Expenses (including third-party due
diligence fees related to a Primary Offering, as set forth in detailed and
itemized invoices);

 

(ii)         Acquisition Expenses, subject to the limitations set forth in
Section10(b);

 

(iii)        the actual cost of goods and services used by the Company and
obtained from entities not Affiliated with the Advisor;

 

(iv)        interest and other costs for Loans, including discounts, points and
other similar fees;

 

(v)         taxes and assessments on income of the Company or Investments;

 

(vi)        costs associated with insurance required in connection with the
business of the Company or by the Board;

 

(vii)       expenses of managing and operating Investments owned by the Company,
whether payable to an Affiliate of the Company or a non-Affiliated Person;

 

(viii)      all expenses in connection with payments to the Directors for
attending meetings of the Board and Stockholders;

 

(ix)         expenses associated with a Listing, if applicable, or with the
issuance and distribution of Shares, such as selling commissions and fees,
advertising expenses, taxes, legal and accounting fees and Listing and
registration fees;

 

(x)          expenses connected with payments of Distributions;

 

(xi)         expenses of organizing, revising, amending, converting, modifying
or terminating the Company or any subsidiary thereof or the Articles of
Incorporation, Bylaws or governing documents of the Company or any subsidiary of
the Company;

 

 15 

 

 

(xii)        expenses of maintaining communications with Stockholders, including
the cost of preparing, printing and mailing annual reports and other Stockholder
reports, proxy statements and other reports required by governmental entities;

 

(xiii)       administrative service expenses, including all costs and expenses
incurred by the Advisor or its Affiliates in fulfilling its duties hereunder,
including reasonable salaries and wages, benefits and overhead of all employees
directly involved in the performance of such services; provided, however, that
no reimbursement shall be made for (A) services for which the Advisor or its
Affiliates are entitled to compensation in the form of a separate fee or (B) the
salaries and benefits of the Company’s named executive officers; and

 

(xiv)      audit, accounting and legal fees.

 

(b)          Commencing twelve (12) months after the commencement of the initial
Offering, the Company will reimburse the Advisor’s costs of providing
administrative services at the end of each fiscal quarter, subject to the
limitation set forth in Section 13, and provided, that the initial Offering has
first broken escrow.

 

12.         OTHER SERVICES. Should the Board request that the Advisor or any
director, officer or employee thereof render services for the Company other than
as set forth in Section 3, such services shall be separately compensated at such
customary rates and in such customary amounts as are agreed upon by the Advisor
and the Board, including a majority of the Independent Directors, subject to the
limitations contained in the Articles of Incorporation, and shall not be deemed
to be services pursuant to the terms of this Agreement.

 

13.         REIMBURSEMENTS. The Company shall not reimburse the Advisor at the
end of any fiscal quarter in which Total Operating Expenses incurred by the
Advisor for the four consecutive fiscal quarters then ended exceed (the “Excess
Amount”) the greater of two percent (2%) of Average Invested Assets and
twenty-five percent (25%) of Net Income (the “2%/25% Guidelines”) for such year.
Within 60 days after the end of any fiscal quarter for which there is an Excess
Amount which the Independent Directors conclude was justified and reimbursable
to the Advisor based on such unusual and non-recurring factors that the
Independent Directors deem sufficient, there shall be sent to the holders of
Common Shares a written disclosure of such fact, together with an explanation of
the factors the Independent Directors considered in determining that such Excess
Amount was justified. If the Independent Directors do not determine that excess
expenses are justified, the Advisor shall reimburse the Corporation at the end
of the twelve-month period the amount by which the expenses exceeded the 2%/25%
Guidelines.

 

 16 

 

 

14.         OTHER ACTIVITIES OF THE ADVISOR.

 

(a)          Except as set forth in this Section 14, nothing herein contained
shall prevent the Advisor or any of its Affiliates from engaging in or earning
fees from other activities, including the rendering of advice to other Persons
(including other REITs) and the management of other programs advised, sponsored
or organized by the Sponsor or its Affiliates; nor shall this Agreement limit or
restrict the right of any director, officer, member, partner, employee or
stockholder of the Advisor or any of its Affiliates to engage in or earn fees
from any other business or to render services of any kind to any other Person
and earn fees for rendering such services; provided, however, that the Advisor
must devote sufficient resources to the Company’s business to discharge its
obligations to the Company under this Agreement; and provided, further, however,
that before the Advisor and all Persons controlled by the Advisor may take
advantage of an opportunity for their own account or present or recommend it to
others, they are obligated to present such opportunity to the Company if (i)
such opportunity is compatible with the Company’s investment objectives and
policies, (ii) such opportunity is of a character which could be taken by the
Company, and (iii) the Company has the financial resources to take advantage of
such opportunity. The Advisor may, with respect to any Investment in which the
Company is a participant, also render advice and service to each and every other
participant therein, and earn fees for rendering such advice and service.
Specifically, it is contemplated that the Company may enter into Joint Ventures
or other similar co-investment arrangements with certain Persons, and pursuant
to the agreements governing such Joint Ventures or arrangements, the Advisor may
be engaged to provide advice and service to such Persons, in which case the
Advisor will earn fees for rendering such advice and service.

 

(b)          If an investment opportunity becomes available that is suitable for
both the Company and a public or private entity with which the Advisor or its
Affiliates are Affiliated for which both entities have sufficient uninvested
funds, and the requirements of the second proviso in Section 14(a) have been
satisfied, then the entity that has had uninvested funds for the longest period
of time will first be offered the investment opportunity. An investment
opportunity will not be considered suitable for an entity if the 2%/25%
Guidelines could not be satisfied if the entity were to make the investment. In
determining whether or not an investment opportunity is suitable for more than
one entity, the Board and the Advisor will examine such factors, among others,
as the cash requirements of each entity, the effect of the origination or
acquisition both on diversification of each entity’s investments, the policy of
each entity relating to leverage, the anticipated cash flow of each entity, the
income tax effects of the origination or acquisition to each entity, the size of
the investment, the amount of funds available to each program and the length of
time such funds have been available for investment. If a subsequent development,
such as a delay in the closing of the origination or acquisition, causes any
such investment, in the opinion of the Board and the Advisor, to be more
appropriate for an entity other than the entity that committed to make the
investment, then the Advisor may determine that the other entity Affiliated with
the Advisor or its Affiliates will make the investment. It shall be the duty of
the Board, including the Independent Directors, to ensure that the method used
by the Advisor for the allocation of investment opportunities among two or more
affiliated programs seeking to originate or acquire similar types of Investments
is applied fairly to the Company.

 

 17 

 

 

15.         THE LIGHTSTONE NAME. The Advisor and its Affiliates have or may have
a proprietary interest in the name “Lightstone.” The Advisor hereby grants to
the Company, to the extent of any proprietary interest the Advisor may have in
the name “Lightstone,” a non- transferable, non-assignable, non-exclusive,
royalty-free right and license to use the name “Lightstone” during the term of
this Agreement. The Company agrees that the Advisor and its Affiliates will have
the right to approve any use by the Company of the name “Lightstone,” such
approval not to be unreasonably withheld or delayed. Accordingly, and in
recognition of this right, if at any time the Company ceases to retain the
Advisor or one of its Affiliates to perform advisory services for the Company,
the Company will, promptly after receipt of a written request from the Advisor,
cease to conduct business under or use the name “Lightstone” or any derivative
thereof and the Company shall change its name and the names of any of its
subsidiaries to a name that does not contain the name “Lightstone” or any other
word or words that might, in the reasonable discretion of the Advisor, be
susceptible of indication of some form of relationship between the Company and
the Advisor or any its Affiliates. At such time, the Company also will make any
changes to any trademarks, servicemarks or other marks necessary to remove any
references to the word “Lightstone.” Consistent with the foregoing, it is
specifically recognized that the Advisor or one or more of its Affiliates has in
the past and may in the future organize, sponsor or otherwise permit to exist
other investment vehicles (including vehicles for investment in real estate) and
financial and service organizations having the name “Lightstone” as a part of
their name, all without the need for any consent (and without the right to
object thereto) by the Company. Neither the Advisor nor any of its Affiliates
makes any representation or warranty, express or implied, with respect to the
name “Lightstone” licensed hereunder or the use thereof (including as to whether
the use of the name “Lightstone” will be free from infringement of the
intellectual property rights of third parties). Notwithstanding the preceding,
the Advisor represents and warrants that it is not aware of any pending claims
or litigation or of any claims threatened in writing regarding the use or
ownership of the name “Lightstone.”

 

16.         TERM OF AGREEMENT. This Agreement shall continue in force for a
period of one year from the date hereof. Thereafter, the term may be renewed for
an unlimited number of successive one-year terms upon mutual consent of the
parties.

 

17.         TERMINATION BY THE PARTIES. This Agreement may be terminated upon
sixty (60) days’ prior written Notice (a) by the Independent Directors of the
Company or the Advisor, without Cause and without penalty, (b) by the Advisor
for Good Reason, or (c) by the Advisor upon a Change of Control; provided, that
termination of this Agreement with Cause shall be upon forty-five (45) days’
prior written Notice. The provisions of Sections 15 and 19 through 31
(inclusive) of this Agreement shall survive any expiration or earlier
termination of this Agreement.

 

18.         ASSIGNMENT TO AN AFFILIATE. This Agreement may be assigned by the
Advisor to an Affiliate with the approval of a majority of the Directors
(including a majority of the Independent Directors). The Advisor may assign any
rights to receive fees or other payments under this Agreement to any Person
without obtaining the approval of the Directors. This Agreement shall not be
assigned by the Company without the consent of the Advisor, except in the case
of an assignment by the Company to a Person which is a successor to all the
assets, rights and obligations of the Company, in which case such successor
Person shall be bound hereunder and by the terms of said assignment in the same
manner as the Company is bound by this Agreement.

 

19.         PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION.

 

(a)          Amounts Owed. After the Termination Date, the Advisor shall be
entitled to receive from the Company within thirty (30) days after the effective
date of such termination all amounts then accrued and owing to the Advisor,
including all its interest in the Company’s income, losses, distributions and
capital by payment of an amount equal to the then-present fair market value of
the Advisor’s interest, subject to the 2%/25% Guidelines to the extent
applicable.

 

 18 

 

 

(b)          Advisor’s Duties. The Advisor shall promptly upon termination of
this Agreement:

 

(i)          pay over to the Company all money collected and held for the
account of the Company pursuant to this Agreement, after deducting any accrued
compensation and reimbursement for its expenses to which it is then entitled;

 

(ii)         deliver to the Board a full accounting, including a statement
showing all payments collected by it and a statement of all money held by it,
covering the period following the date of the last accounting furnished to the
Board;

 

(iii)        deliver to the Board all assets, including all Investments, and
documents of the Company then in the custody of the Advisor; and

 

(iv)        cooperate with the Company and the Board and take all reasonable
steps requested to provide an orderly transition of the advisory function.

 

20.         INCORPORATION OF THE ARTICLES OF INCORPORATION. To the extent that
the Articles of Incorporation impose obligations or restrictions on the Advisor
or grant the Advisor certain rights which are not set forth in this Agreement,
the Advisor shall abide by such obligations or restrictions and such rights
shall inure to the benefit of the Advisor with the same force and effect as if
they were set forth herein. To the extent that a provision of the Articles of
Incorporation conflicts with a provision of this Agreement, the provision of the
Articles of Incorporation shall prevail.

 

21.         INDEMNIFICATION BY THE COMPANY.

 

(a)          The Company shall indemnify and hold harmless the Advisor and every
Affiliate of the Advisor (collectively, the “Indemnitees,” and each, an
“Indemnitee”), from all liabilities, claims, damages or losses arising in the
performance of their duties hereunder, and related expenses, including
reasonable attorneys’ fees, to the extent such liabilities, claims, damages or
losses and related expenses are not fully reimbursed by insurance, and to the
extent that such indemnification would not be inconsistent with the laws of the
State of New York or the Articles of Incorporation. Notwithstanding the
foregoing, the Company shall not provide for indemnification of an Indemnitee
for any loss or liability suffered by such Indemnitee, nor shall the Company
provide that an Indemnitee be held harmless for any loss or liability suffered
by the Company, unless all the following conditions are met:

 

(i)          the Indemnitee has determined, in good faith, that the course of
conduct that caused the loss or liability was in the best interest of the
Company;

 

(ii)         the Indemnitee was acting on behalf of, or performing services for,
the Company;

 

 19 

 

 

(iii)        such liability or loss was not the result of negligence or
misconduct by the Indemnitee; and

 

(iv)        such indemnification or agreement to hold harmless is recoverable
only out of the Company’s net assets and not from the Stockholders.

 

(b)          Notwithstanding the foregoing, an Indemnitee shall not be
indemnified by the Company for any loss, liability or expense arising from or
out of an alleged violation of federal or state securities laws by such
Indemnitee unless one or more of the following

conditions is met:

 

(i)          there has been a successful adjudication on the merits of each
count involving alleged securities law violations as to the Indemnitee;

 

(ii)         such claims have been dismissed with prejudice on the merits by a
court of competent jurisdiction as to the Indemnitee; or

 

(iii)        a court of competent jurisdiction has approved a settlement of the
claims against the Indemnitee and found that indemnification of the settlement
and the related costs should be made, and the court considering the request for
indemnification has been advised of the position of the Securities and Exchange
Commission and of the published position of any state securities regulatory
authority of a jurisdiction in which securities of the Company were offered or
sold as to indemnification for violations of securities laws.

 

(c)          In addition, the advancement of the Company’s funds to an
Indemnitee for reasonable legal expenses and other costs incurred in advance of
the final disposition of a proceeding for which indemnification is being sought
is permissible only if all the following conditions are satisfied:

 

(i)          the proceeding relates to acts or omissions with respect to the
performance of duties or services on behalf of the Company;

 

(ii)         the Indemnitee provides the Company with a written affirmation of
the Indemnitee’s good faith belief that the standard of conduct necessary for
indemnification has been met;

 

(iii)        the legal proceeding is initiated by a third party who is not a
Stockholder or, if the legal action is initiated by a Stockholder acting in such
Stockholder’s capacity as such, a court of competent jurisdiction approves such
advancement; and

 

(iv)        the Indemnitee provides the Company with a written undertaking to
repay the advanced funds to the Company, together with the applicable legal rate
of interest thereon, if it is ultimately determined that such Indemnitee is not
entitled to indemnification.

 

 20 

 

 

22.         INDEMNIFICATION BY THE ADVISOR. The Advisor shall indemnify and hold
harmless the Company from all liabilities, claims, damages or losses, and
related expenses, including reasonable attorneys’ fees, to the extent that such
liabilities, claims, damages or losses and related expenses are not fully
reimbursed by insurance and are incurred by reason of the Advisor’s bad faith,
fraud, willful misfeasance, intentional misconduct, gross negligence or reckless
disregard of its duties; provided, however, that the Advisor shall not be held
responsible for any action of the Board in following or declining to follow any
advice or recommendation given by the Advisor.

 

23.         NOTICES. Unless some other method of giving Notice is required by
the Articles of Incorporation or the Bylaws, any notice, report, approval,
waiver or other communication (each, a “Notice”) required or permitted to be
given hereunder shall be in writing and shall be sent by hand, by courier or
overnight carrier or by registered or certified mail to the addresses set forth
below:

 

To the Company: Lightstone Real Estate Income Trust Inc.   1985 Cedar Bridge
Avenue   Suite 1   Lakewood, New Jersey 08701   Attention: Joseph E. Teichman,
Esq.     General Counsel and Secretary         with copies to:       Proskauer
Rose LLP   Eleven Times Square   New York, New York 10036   Attention: Peter M.
Fass, Esq.       Proskauer Rose LLP   Three First National Plaza   70 West
Madison, Suite 3800   Chicago, IL 60602   Attention: Michael J. Choate. Esq.    
To the Advisor: Lightstone Real Estate Income LLC   1985 Cedar Bridge Avenue  
Suite 1   Lakewood, New Jersey 08701   Attention: Joseph E. Teichman, Esq.    
General Counsel and Secretary       with copies to:

 

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  Proskauer Rose LLP Eleven Times Square   New York, New York 10036   Attention:
Peter M. Fass, Esq.       Proskauer Rose LLP   Three First National Plaza   70
West Madison, Suite 3800   Chicago, IL 60602   Attention: Michael J. Choate.
Esq.

 

Either party may at any time give Notice in writing to the other party of a
change in its address for the purposes of this Section 23. Each Notice shall be
deemed given and effective upon actual receipt (or refusal of receipt).

 

24.         MODIFICATION. This Agreement shall not be amended, supplemented,
terminated or discharged, in whole or in part, except by an instrument in
writing signed by the parties hereto, or their respective successors or
assignees.

 

25.         SEVERABILITY. The provisions of this Agreement are independent of
and severable from each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any other or
others of them may be invalid or unenforceable in whole or in part.

 

26.         GOVERNING LAW. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of New York as at the
time in effect, without regard to the principles of conflicts of laws thereof.

 

27.         ENTIRE AGREEMENT. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.

 

28.         NO WAIVER. Neither the failure nor any delay on the part of a party
to exercise any right, remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise of the
same or of any other right, remedy, power or privilege, nor shall any waiver of
any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. No

waiver shall be effective unless it is in writing and is signed by the party
asserted to have granted such waiver.

 

29.         PRONOUNS AND PLURALS. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.

 

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30.         HEADINGS. The titles of sections and subsections contained in this
Agreement are for convenience only, and they neither form a part of this
Agreement nor are to be used in the construction or interpretation hereof.

 

31.         EXECUTION IN COUNTERPARTS. This Agreement may be executed (including
by facsimile transmission) with counterpart signature pages or in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.

 

  LIGHTSTONE REAL ESTATE INCOME TRUST INC.         By: /S/ David Lichtenstein  
Name: David Lichtenstein      Title: Chief Executive Officer

 

  LIGHTSTONE REAL ESTATE INCOME LLC         By: /S/ David Lichtenstein   Name:
David Lichtenstein     Title: Chief Executive Officer

 

Lightstone Real Estate Income Trust Inc. -Advisory Agreement