Exhibit 10.1


 


BEHRINGER HARVARD MULTIFAMILY REIT I, INC.


 


FORM OF AMENDED AND RESTATED ADVISORY MANAGEMENT
AGREEMENT


 


This
AMENDED AND RESTATED ADVISORY MANAGEMENT AGREEMENT (this “Agreement”) is entered into on this the     day
of             ,
2008, by and between BEHRINGER HARVARD MULTIFAMILY REIT I, INC., a
Maryland corporation (the “Company”),
and BEHRINGER HARVARD MULTIFAMILY ADVISORS I LP, a Texas limited partnership
(the “Advisor”).


 


W I T N E S S E T H


 


WHEREAS, the Company, the Advisor and Behringer Harvard Multifamily OP I LP,
entered into the Advisory Management Agreement effective as of November 22,
2006 and renewed the Agreement effective November 22, 2007 (the “Original
Agreement”);


 


WHEREAS, Behringer Harvard Multifamily OP I LP acknowledges that it is no
longer a party to this Agreement;


 


WHEREAS, the Company will be issuing shares of its common stock, par value
$0.0001, to the public, such shares to be registered with the Securities and
Exchange Commission and may subsequently issue additional securities;


 


WHEREAS, the Company has been formed to acquire and operate a diverse
portfolio of real estate assets at all stages of development with a focus on
high quality multifamily, student housing, age-restricted properties,
commercial properties, such as office buildings, shopping centers, business and
industrial parks, manufacturing facilities, warehouses and distribution
facilities and motel and hotel properties, originate or invest in mortgage,
bridge, mezzanine or other loans and Section 1031 tenant-in-common
interests, or in entities that make investments similar to the foregoing, and
make investments with joint venture partners.


 


WHEREAS, the Company intends to qualify as a real estate investment trust and
to invest its funds in investments permitted by the terms of the Company’s
Articles of Incorporation and Sections 856 through 860 of the Internal Revenue
Code;


 


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


 


WHEREAS, the Advisor is willing to undertake to provide these services,
subject to the supervision of the Board, on the terms and conditions
hereinafter set forth.


 


NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:


 

















 


ARTICLE ONE


 


DEFINITIONS


 


The
following defined terms used in this Agreement shall have the meanings
specified below:


 


Acquisition Expenses.  A non-accountable
acquisition expense reimbursement in the amount of: (i) 0.25% of the funds
paid for purchasing an Asset, including any debt attributable to the Asset,
plus 0.25% of the funds budgeted for development, construction or improvement
in the case of Assets that we acquire and intend to develop, construct or
improve or (ii) 0.25% of the funds advanced in respect of a loan or other
investment.   Acquisition Expenses also
include any investment-related expenses due to third parties in the case of a
completed investment, including, but not limited to legal fees and expenses,
travel and communications expenses, costs of appraisals, accounting fees and
expenses, third-party brokerage or finder’s fees, title insurance, premium
expenses and other closing costs.


 


Acquisition Fees.  Any and all fees and
commissions, exclusive of Acquisition Expenses but including the Acquisition
and Advisory Fees, paid by any Person to any other duly qualified and licensed
Person (including any fees or commissions paid by or to any duly qualified and
licensed Affiliate of the Company or the Advisor) in connection with making or
investing in Mortgages or other loans or the purchase, development or
construction of an Asset, including, without limitation, real estate
commissions, selection fees, investment banking fees, third party seller’s fees
(to the extent the Company agrees to pay any such fees as part of an
acquisition), Development Fees, Construction Fees, non-recurring management
fees, loan fees, points or any other fees of a similar nature. Excluded shall
be Development Fees and Construction Fees paid to any Person not affiliated
with the Sponsor in connection with the actual development and construction of
any Property.


 


Acquisition and Advisory Fees.  The
fees payable to the Advisor pursuant to Section 3.01(b).


 


Advisor.  Behringer Harvard Multifamily
Advisors I LP, a Texas limited partnership, any successor advisor to the
Company, or any Person to which Behringer Harvard Multifamily Advisors I LP or
any successor advisor subcontracts all or substantially all of its functions.


 


Affiliate or Affiliated.  As
to any Person, (i) any Person directly or indirectly owning, controlling
or holding, with the power to vote, 10% or more of the outstanding voting
securities of such other Person; (ii) any Person 10% or more of whose
outstanding voting securities are directly or indirectly owned, controlled or
held, with power to vote, by such other Person; (iii) any Person, directly
or indirectly, controlling, controlled by, or under common control with such
other Person; (iv) any executive officer, director, trustee or general
partner of such other Person; and (v) any legal entity for which such
Person acts as an executive officer, director, trustee or general partner.


 


Articles of Incorporation.  The
Articles of Incorporation of the Company filed with the Maryland State
Department of Assessments and Taxation in accordance with the Maryland General
Corporation Law, as amended or restated from time to time.


 


Assets.  Properties, Mortgages, loans
and other direct or indirect investments (other than investments in bank
accounts, money market funds or other current assets) owned by the Company,
directly or indirectly through one or more of its Affiliates or Joint Ventures
or through other investment interests.


 


Asset Management Fee.  The
fee payable to the Advisor for day-to-day professional management services in
connection with the Company and its investments in Assets pursuant to Section 3.01(a) of
this Agreement.


 


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Average Invested Assets.  For
a specified period, the average of the aggregate book value of the Assets
before deduction for depreciation, bad debts or other non-cash reserves,
computed by taking the average of the values at the end of each month during
the period.


 


Board.  The Board of Directors of the
Company.


 


Bylaws.  The bylaws of the Company, as
the same are in effect from time to time.


 


Change of Control.  Any (i) event
(including, without limitation, issue, transfer or other disposition of Common
Shares of capital stock of the Company or equity interests in the Operating
Partnership, merger, share exchange or consolidation) after which any “person”
(as that term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company or the
Operating Partnership representing greater than 50% of the combined voting
power of the Company’s or the Operating Partnership’s then outstanding
securities, respectively; provided, that, a Change of Control shall not be
deemed to occur as a result of any widely distributed public offering of the
Common Shares or (ii) direct or indirect sale, transfer, conveyance or
other disposition (other than pursuant to clause (i)), in one or a series of
related transactions, of all or substantially all of the properties or assets
of the Company or the Operating Partnership, taken as a whole, to any “person”
(as that term is used in Sections 13(d) and 14(d) of the Exchange
Act).


 


Closing Price.  On any date, the last sale
price for any class or series of the Company’s Common Shares, regular way, or,
in case no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, for such Common Shares, in either case as
reported in the principal consolidated transaction reporting system with
respect to Common Shares listed or, if such Common Shares are not listed, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the principal automated quotation system or other quotation service
that may then be in use or, if such Common Shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in such Common Shares selected by the
Board.


 


Code.  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 the 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.  Any shares of the Company’s
common stock, par value $0.0001 per share.


 


Company.  Behringer Harvard Multifamily
REIT I, Inc., a corporation organized under the laws of the State of
Maryland.  Unless the context clearly
indicates otherwise, references to the Company shall include its direct and
indirect subsidiaries, including the Operating Partnership.


 


Company Value.  The actual value of the
Company as a going concern based on the difference between (a) the actual
value of all of its assets as determined in good faith by the Board, including
a majority of the Independent Directors, and (b) all of its liabilities as
set forth on its balance sheet for the period ended immediately prior to the
determination date, provided that (i) if the Company Value is being
determined in connection with a Change of Control that establishes the Company’s
net worth, then the Company Value shall be the net worth established thereby
and (ii) if the Company Value is being determined in connection with a
Listing, then the Company Value shall be equal to the number of outstanding
Common Shares multiplied by the Closing Price of a single Share averaged over a
period of 30 trading days during 


 


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which
the Common Shares are listed or quoted for trading after the date of
Listing.  For purposes hereof, a “trading
day” shall be any day on which the NYSE is open for trading whether or not the
Common Shares are then listed on the NYSE and whether or not there is an actual
trade of Common Shares on any such day. 
If the holder of Convertible Shares disagrees as to the Company Value as
determined by the Board, then each of the holder of Convertible Shares and the
Company shall name one appraiser and the two named appraisers shall promptly
agree in good faith to the appointment of one other appraiser whose
determination of the Company Value shall be final and binding on the parties as
to the Company Value.  The cost of such
appraisal shall be split evenly between the Company and the Advisor.


 


Competitive Real Estate Commission.  A
real estate or brokerage commission paid or, if no commission is paid, the
amount that customarily would be paid for the purchase or sale of an Asset that
is reasonable, customary, and competitive in light of the size, type and
location of the Asset (as determined by the Board, including a majority of the
Independent Directors).


 


Construction Fee.  A fee or other remuneration
for acting as general contractor and/or construction manager to construct
improvements, supervise and coordinate projects or to provide major repairs or
rehabilitations on a Property.


 


Contract Purchase Price.  The
amount (i) actually paid and/or budgeted in respect of the purchase,
development, construction or improvement of a Property, (ii) of funds
advanced with respect to a Mortgage or other loan or (iii) actually paid
and/or budgeted in respect to the purchase of other Assets, in each case
exclusive of Acquisition Fees and Acquisition Expenses but including any debt
attributable to such acquired Assets.


 


Convertible Shares.  Any
shares of the Company’s convertible stock, par value $0.0001 per share.


 


Cost of
Investment.  For each Asset, (i) with respect to an
Asset wholly owned by the Company or any wholly owned subsidiary, the Fully
Loaded Cost, and (ii) in the case of an Asset owned by any Joint Venture
or in some other manner in which the Company is a co-venturer or partner or
otherwise a co-owner, (A) the Fully Loaded Cost if the Company (or any
subsidiary) controls the Asset; owns a majority interest, directly or
indirectly, in the Asset; or provides a substantial amount of services in the
acquisition, development, or management of the Asset (as determined by a
majority of the Independent Directors) or (B) the portion of the Fully
Loaded Cost that is attributable to the Company’s investment in the Joint
Venture or other interest in such Asset if the Company does not control, own a
majority of, or provide substantial services in the acquisition, development,
or management of, the Asset.


 


Dealer Manager.  Behringer Securities LP, an
Affiliate of the Advisor, or such Person selected by the Board to act as the
dealer manager for an Offering.


 


Development Fee.  A fee for the packaging of an
Asset, including the negotiation and approval of plans, and any assistance in
obtaining zoning and necessary variances and financing for a specific
development Property, either initially or at a later date.


 


Director.  A member of the Board.


 


Distributions.  Any dividends or other
distributions of money or other property by the Company to holders of Common
Shares, including distributions that may constitute a return of capital for
federal income tax purposes but excluding distributions that constitute the
redemption of any Common Shares and excluding distributions on any Common
Shares before their redemption.


 


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Exchange Act.  The Securities Exchange Act of 1934, as
amended from time to time, or any successor statute thereto.  Reference to any provision of the Exchange
Act shall mean such provision as in effect from time to time, as the same may
be amended, and any successor provision thereto, as interpreted by any
applicable regulations as in effect from time to time.


 


Fully Loaded Cost.  The
Contract Purchase Price of an Asset at the time of acquisition (exclusive of closing
costs), plus the amount actually paid and/or budgeted for the development,
construction or improvement of the Asset, inclusive of expenses related
thereto, plus the amount of any subsequent debt attributable to such Asset.


 


Gross Proceeds.  The aggregate purchase price
of all Common Shares sold for the account of the Company through an Offering,
without deduction for Selling Commissions, volume discounts, any marketing
support and due diligence expense reimbursement or Organization and Offering Expenses.  For the purpose of computing Gross Proceeds,
the purchase price of any Common Share for which reduced Selling Commissions
are paid to the Dealer Manager or a Soliciting Dealer (where net proceeds to
the Company are not reduced) shall be deemed to be the full amount of the
offering price per Common Share pursuant to the Prospectus for the Offering
without reduction.


 


Independent Director.  A
Director who is not on the date of determination, and within the last two years
from the date of determination has not been, directly or indirectly associated
with the Sponsor or the Advisor by virtue of (i) ownership of an interest
in the Sponsor, the Advisor or any of their Affiliates, other than the Company,
(ii) employment by the Sponsor, the Company, the Advisor or any of their
Affiliates, (iii) service as an officer or director of the Sponsor, the
Advisor or any of their Affiliates, other than as a Director of the Company, (iv) performance
of services for the Company, other than as a Director of the Company, (v) service
as a director or trustee of more than three real estate investment trusts
organized by the Sponsor or advised by the Advisor, or (vi) maintenance of
a material business or professional relationship with the Sponsor, the Advisor
or any of their Affiliates. 
Notwithstanding the foregoing, and consistent with (v) above,
serving as a director of or receiving director fees from or owning an interest
in a REIT or other real estate program organized by the Sponsor or advised or
managed by the Advisor or its Affiliates shall not, by itself, cause a Director
to be deemed associated with the Sponsor or the Advisor.  A business or professional relationship is
considered material if the aggregate annual gross revenue derived by the
Director from the Sponsor, the Advisor and their Affiliates (excluding fees for
serving as a director of the Company or other REIT or real estate program
organized or advised or managed by the Advisor or its Affiliates) exceeds five
percent of either the Director’s annual gross income during either of the last
two years or the Director’s net worth on a fair market value basis. An indirect
association with the Sponsor or the Advisor shall include circumstances in
which a Director’s spouse, parent, child, sibling, mother- or father-in-law,
son- or daughter-in-law, or brother- or sister-in-law is or has been associated
with the Sponsor, the Advisor, any of their Affiliates, or the Company.


 


Initial Investment. 
Initial Investment shall have the meaning ascribed to such term in Section 6.13.


 


Intellectual Property Rights.  All
rights, titles and interests, whether foreign or domestic, in and to any and
all trade secrets, confidential information rights, patents, invention rights,
copyrights, service marks, trademarks, know-how, or similar intellectual
property rights and all applications and rights to apply for such rights, as
well as any and all moral rights, rights of privacy, publicity and similar
rights and license rights of any type under the laws or regulations of any
governmental, regulatory, or judicial authority, foreign or domestic and all
renewals and extensions thereof.


 


Invested Capital.  The amount calculated by
multiplying the total number of Common Shares issued by the Company by the
price paid for each Common Share, reduced by an amount equal to the total
number of Common Shares repurchased from Stockholders by the Company (pursuant
to the Company’s plan to 


 


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repurchase
such Common Shares) multiplied by the price paid for each such redeemed Common
Share when initially purchased from the Company.


 


Joint Ventures.  A legal organization formed to
provide for the sharing of the risks and rewards in an enterprise co-owned and
operated for mutual benefit by two or more business partners and established to
acquire or hold Assets.


 


Listing or Listed.  The
filing of a Form 8-A to register any class of the Company’s securities on
a national securities exchange and an original listing application related
thereto; provided, that the Shares shall not be deemed to be Listed until
trading in the Shares shall have commenced on the relevant national securities
exchange.


 


Mortgages.  In connection with mortgage
financing provided, invested in or purchased by the Company, all of the notes,
deeds of trust, security interests or other evidence of indebtedness or
obligations, which are secured or collateralized by Real Property owned by the
borrowers under such notes, deeds of trust, security interests or other
evidence of indebtedness or obligations.


 


NASAA REIT Guidelines.  The Statement of Policy Regarding Real Estate Investment Trusts adopted
by the North American Securities Administrators Association on May 7,
2007, and in effect on the date hereof.


 


Net Income. For any period, the Company’s total revenues applicable to that
period, less the total expenses applicable to the period other than additions
to reserves for depreciation, bad debts or other similar non-cash reserves and
excluding any gain from the sale of the Assets.


 


Net Sales Proceeds.  In
the case of a transaction described in clause (i)(A) of the definition of
Sale, the proceeds of any such transaction less the amount of selling expenses
incurred by or on behalf of the Company or the Operating Partnership, including
all real estate commissions, closing costs and legal fees and expenses. In the
case of a transaction described in clause (i)(B) of such definition, Net
Sales Proceeds means the proceeds of any such transaction less the amount of
selling expenses incurred by or on behalf of the Company or the Operating
Partnership, including any legal fees and expenses and other selling expenses
incurred in connection with such transaction. In the case of a transaction
described in clause (i)(C) of such definition, Net Sales Proceeds means
the proceeds of any such transaction actually distributed to the Company or the
Operating Partnership from the Joint Venture less the amount of any selling
expenses, including legal fees and expenses incurred by or on behalf of the
Company or the Operating Partnership (other than those paid by the Joint
Venture).  In the case of a transaction
or series of transactions described in clause (i)(D) of the definition of
Sale, Net Sales Proceeds means the proceeds of any such transaction (including
the aggregate of all payments under a Mortgage or other loan on or in
satisfaction thereof other than regularly scheduled interest payments) less the
amount of selling expenses incurred by or on behalf of the Company or the
Operating Partnership, including all commissions closing costs and legal fees
and expenses.  In the case of a
transaction described in clause (i)(E) of such definition, Net Sales
Proceeds means the proceeds of any such transaction less the amount of selling
expenses incurred by or on behalf of the Company or the Operating Partnership,
including any legal fees and expenses and other selling expenses incurred in
connection with such transaction. In the case of a transaction described in
clause (ii) of the definition of Sale, Net Sales Proceeds means the proceeds
of such transaction or series of transactions less all amounts generated
thereby which are reinvested in one or more Assets within one hundred eighty
(180) days thereafter and less the amount of any real estate commissions,
closing costs, and legal fees and expenses and other selling expenses incurred
by or allocated to the Company or the Operating Partnership in connection with
such transaction or series of transactions. 
Net Sales Proceeds shall also include any consideration (including
non-cash consideration such as stock, notes, or other property or securities)
that the Company determines, in its discretion, to be 


 


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economically
equivalent to proceeds of a Sale, valued in the reasonable determination of the
Company. Net Sales Proceeds shall not include any reserves established by the
Company or the Operating Partnership in its sole discretion.


 


NYSE.  The New York Stock Exchange.


 


Offering. Any public offering of Shares pursuant to an effective registration
statement filed under the Securities Act, other than a public offering of
Shares under a distribution reinvestment plan.


 


Operating Partnership.  Behringer Harvard Multifamily OP I LP, a Delaware limited partnership,
through which the Company may own Assets.


 


Organization and Offering Expenses.  Any
and all costs and expenses incurred by and to be paid by the Company in
connection with an Offering, the formation of the Company, and including the
qualification and registration of the Offering and the marketing and
distribution of its Shares, including, without limitation:  total underwriting and brokerage discounts
and commissions (including fees of the underwriters’ attorneys); expenses for
printing, engraving, amending registration statements and supplementing
prospectuses; mailing and distribution costs; salaries of employees while
engaged in sales activity, such as preparing supplemental sales literature;
telephone and other telecommunication costs; all advertising and marketing
expenses, including the costs related to investor and broker-dealer meetings;
charges of transfer agents, registrars, trustees, escrow holders, depositories
and experts; filing, registration and qualification fees and taxes relating to
the Offering under federal and state laws; and accountants’ and attorneys’
fees.


 


Person.  An individual, corporation,
association, business trust, estate, trust, partnership, limited liability
company or other legal entity.


 


Preferred Shares.  Any shares of the Company’s
preferred stock, par value $0.0001 per share.


 


Property or Properties.  As
the context requires, any, or all, respectively, of the Real Property acquired
by the Company, either directly or indirectly (whether through Joint Ventures
or other investment interests, regardless of whether the Company consolidates
the financial results of these entities).


 


Proprietary Property.  All
modeling algorithms, tools, computer programs, know-how, methodologies,
processes, technologies, ideas, concepts, skills, routines, subroutines,
operating instructions and other materials and aides used in performing the
duties set forth in Section 2.02 that relate to advice regarding current
and potential Assets, and all modifications, enhancements and derivative works
of the foregoing.


 


Prospectus. Prospectus has the meaning set forth in Section 2(a)(10) of
the Securities Act, including a preliminary prospectus, an offering circular as
described in Rule 253 of the General Rules and Regulations under the
Securities Act, or, in the case of an intrastate offering, any document by
whatever name known, utilized for the purpose of offering and selling
securities of the Company.


 


Real Property or Real Estate. 
Land, rights in land (including leasehold interests), and any buildings,
structures, improvements, furnishings, fixtures and equipment located on or
used in connection with land and rights or interests in land.


 


REIT.  A corporation, trust,
association or other legal entity (other than a real estate syndication) that
is engaged primarily in investing in interests in Real Estate (including fee
ownership and leasehold interests) or in loans secured by Real Estate or both
in accordance with Sections 856 through 860 of the Code.


 


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Sale or Sales.  (i) Any transaction or
series of transactions whereby: (A) the Company or the Operating
Partnership directly or indirectly (except as described in other subsections of
this definition) sells, grants, transfers, conveys, or relinquishes its
ownership of any Property or portion thereof, including the lease of any
Property consisting of a building only, and including any event with respect to
any Property which gives rise to a significant amount of insurance proceeds or
condemnation awards; (B) the Company or the Operating Partnership directly
or indirectly (except as described in other subsections of this definition)
sells, grants, transfers, conveys, or relinquishes its ownership of all or
substantially all of the interest of the Company or the Operating Partnership
in any Joint Venture in which it is a co-venturer or partner; (C) any
Joint Venture directly or indirectly (except as described in other subsections
of this definition) in which the Company or the Operating Partnership as a
co-venturer or partner sells, grants, transfers, conveys, or relinquishes its
ownership of any Property or portion thereof, including any event with respect
to any Property which gives rise to insurance claims or condemnation awards; (D) the
Company or the Operating Partnership directly or indirectly (except as
described in other subsections of this definition) sells, grants, conveys or
relinquishes its interest in any Mortgage or other loan or portion thereof
(including with respect to any Mortgage or other loan, all payments thereunder
or in satisfaction thereof other than regularly scheduled interest payments of
amounts owed pursuant to the Mortgage or other loan) and any event with respect
to a Mortgage or other loan which gives rise to a significant amount of
insurance proceeds or similar awards; or (E) the Company or the Operating
Partnership directly or indirectly (except as described in other subsections of
this definition) sells, grants, transfers, conveys, or relinquishes its
ownership of any other Asset not previously described in this definition or any
portion thereof, but (ii) not including any transaction or series of
transactions specified in clause (i) (A) through (E) above in
which the proceeds of such transaction or series of transactions are reinvested
in one or more Assets within 180 days thereafter.


 


Securities Act.  The Securities Act of 1933, as
amended from time to time, or any successor statute thereto.  Reference to any provision of the Securities
Act shall mean the 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.


 


Selling Commissions.  Any
and all commissions payable to underwriters, dealer managers or other
broker-dealers in connection with the sale of Shares, including, without
limitation, commissions payable to Behringer Securities LP.


 


Shares.  Shares of stock of the Company of any class
or series, including Common Shares, Preferred Shares or Convertible Shares.


 


Soliciting Dealers. 
Broker-dealers who are members of the Financial Industry Regulatory
Authority, or that are exempt from broker-dealer registration, and who, in
either case, have executed participating broker or other agreements with the
Dealer Manager to sell Shares.


 


Sponsor.  Sponsor has the meaning
ascribed to such term in the Articles of Incorporation.


 


Stockholders.  The record holders of the
Company’s Shares as maintained in the books and records of the Company or its
transfer agent.


 


Stockholders’ Return.  As
of any date, an aggregate amount equal to a cumulative, non-compounded, annual
return on Invested Capital (calculated like simple interest on a daily basis
based on a 365-day year); provided, however, that for purposes of calculating
the Stockholders’ Return, Invested Capital shall be determined for each day
during the period for which the Stockholders’ Return is being calculated net of
Distributions attributable to Net Sales Proceeds but (consistent with the
definition of Invested Capital) shall always exclude an amount equal to the
total number of Common Shares repurchased from 


 


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Stockholders
by the Company (pursuant to any Company plan to repurchase Common Shares)
multiplied by the price paid for each such redeemed Common Share when initially
purchased from the Company.


 


Subordinated Disposition Fee.  The
fee payable to the Advisor for services provided in connection with the Sale of
one or more Properties pursuant to Section 3.01(c).


 


Termination Date.  The date of termination of
this Agreement.


 


Texas Tax Code.  The Texas Tax Code as amended
by Texas H.B. 3, 79th Leg., 3rd C.S. (2006).  Reference to any provision of the Texas Tax
Code Act shall mean the provision as in effect from time to time, as the same
may be amended, and any successor provision thereto, as interpreted by any
applicable administrative rules as in effect from time to time.


 


Total Operating Expenses. All costs and expenses paid or incurred by
the Company, as determined under generally accepted accounting principles,
which are in any way related to the operation of the Company or to Company
business, including the Asset Management Fee, but excluding (i) the
expenses of raising capital such as Organization and Offering Expenses, legal,
audit, accounting, underwriting, brokerage, listing, registration, and other
fees, printing and other expenses and tax incurred in connection with the
issuance, distribution, transfer, registration and Listing of the Shares, (ii) interest
payments, (iii) taxes, (iv) non-cash expenditures such as
depreciation, amortization and bad debt reserves, (v) Acquisition Fees and
Acquisition Expenses, (vi) real estate commissions on the Sale of Assets
(including the Subordinated Disposition Fee), and (vii) other fees and
expenses connected with the acquisition, disposition, management and ownership
of real estate interests, mortgage loans or other property (including the costs
of foreclosure, insurance premiums, legal services, maintenance, repair and
improvement of property).


 


Value of Investment.  For
each Asset, if available, (i) with respect to an Asset wholly owned by the
Company or any wholly owned subsidiary, the Asset’s value established by the
most recent independent valuation report (without reduction for depreciation,
bad debts or other non-cash reserves), and (ii) in the case of an Asset
owned by any Joint Venture or in some other manner in which the Company is a
co-venturer or partner or otherwise a co-owner, (A) the Asset’s value
established by the most recent independent valuation report (without reduction
for depreciation, bad debts or other non-cash reserves) if the Company (or any
subsidiary) controls the Asset; owns a majority interest, directly or
indirectly, in the Asset; or provides a substantial amount of services in the
acquisition, development, or management of the Asset (as determined by a
majority of the Independent Directors) or (B) the portion of the Asset’s
value established by the most recent independent valuation report (without
reduction for depreciation, bad debts or other non-cash reserves) that is
attributable to the Company’s investment in the Joint Venture or other interest
in such Asset if the Company does not control, own a majority of, or provide
substantial services in the acquisition, development, or management of, the
Asset.  Nothing in this definition is
intended to obligate the Advisor to obtain independent valuations at any point
in time beyond those specified in the Company’s Prospectus.


 


ARTICLE II


 


THE ADVISOR


 


2.01         Appointment.  The Company hereby appoints the Advisor to
serve as its advisor on the terms and conditions set forth in this Agreement,
and the Advisor hereby accepts such appointment.


 


9

















 


2.02         Duties
of the Advisor.  The
Advisor shall be deemed to be in a fiduciary relationship to the Company and
its Stockholders.  Subject to Section 2.08,
the Advisor undertakes to use its commercially reasonable best efforts to
present to the Company potential investment opportunities consistent with the
investment objectives and policies of the Company as determined and adopted
from time to time by the Board.  In
performing its duties, subject to the supervision of the Board and consistent
with the provisions of the Company’s most recent Prospectus for Shares, the
Articles of Incorporation and Bylaws, the Advisor shall, either directly or by
engaging a duly qualified and licensed Affiliate of the Advisor or other duly
qualified and licensed Person:


 


(a)           provide the Company with research and
economic and statistical data in connection with the Assets and investment
policies;


 


(b)           manage the Company’s day-to-day
operations and perform and supervise the various administrative functions
reasonably necessary for the management and operations of the Company;


 


(c)           maintain and preserve the books and
records of the Company, including stock books and records reflecting a record
of the Stockholders and their ownership of the Company’s Shares


 


(d)           investigate, select, and, on behalf
of the Company, engage and conduct business with the duly qualified and
licensed Persons as the Advisor deems necessary to the proper performance of
its obligations hereunder, including but not limited to duly qualified and
licensed 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, mortgagors, property management
companies, transfer agents and any and all agents for any of the foregoing,
including duly qualified and licensed Affiliates of the Advisor, and duly
qualified and licensed Persons acting in any other capacity deemed by the
Advisor necessary or desirable for the performance of any of the foregoing
services, including but not limited to entering into contracts in the name of
the Company with any of the foregoing;


 


(e)           consult with the officers and the
Board and assist the Board 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;


 


(f)            subject to the provisions of
Sections 2.02(h) and 2.03 hereof, (i) locate, analyze and select
potential investments in Assets, (ii) structure and negotiate the terms
and conditions of transactions pursuant to which investment in Assets will be
made; (iii) make investments in Assets on behalf of the Company or the
Operating Partnership in compliance with the investment objectives and policies
of the Company; (iv) 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 the investments in, Assets;
and (v) enter into leases of Property and service contracts for Assets
with duly qualified and licensed Persons and, to the extent necessary, perform
all other operational functions for the maintenance and administration of the
Assets, including the servicing of Mortgages;


 


(g)           provide the Board with periodic
reports regarding prospective investments in Assets;


 


10
















 


(h)                                 obtain the prior approval of the Board
(including a majority of all Independent Directors) for any and all investments
in Assets;


 


(i)                                     negotiate on behalf of the Company with banks
or lenders for loans to be made to the Company, negotiate on behalf of the
Company with investment banking firms and broker-dealers, and negotiate private
sales of Shares and other securities of the Company or obtain loans for the
Company, as and when appropriate, but in no event in such a way so that the
Advisor shall be acting as broker-dealer or underwriter; and provided, further,
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;


 


(j)                                     obtain reports (which may be prepared by or
for the Advisor or its Affiliates), where appropriate, concerning the value of
investments or contemplated investments of the Company in Assets;


 


(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;


 


(l)                                     assist the Company in arranging for all
necessary cash management services;


 


(m)                               deliver to or maintain on behalf of the
Company copies of all appraisals obtained in connection with the investments in
Assets;


 


(n)                                 upon request of the Company, act, or obtain
the services of duly qualified and licensed others to act, as attorney-in-fact
or agent of the Company in making, acquiring and disposing of Assets,
disbursing, and collecting the funds, paying the debts and fulfilling the
obligations of the Company and retaining counsel or other advisors to assist in
handling, prosecuting and settling any claims of the Company, including
foreclosing and otherwise enforcing mortgage and other liens and security
interests comprising any of the Assets;


 


(o)                                 supervise the preparation and filing and
distribution of returns and reports to governmental agencies and to
Stockholders and other investors and act on behalf of the Company;


 


(p)                                 provide office space, equipment and duly
qualified and licensed personnel as required for the performance of the
foregoing services as Advisor;


 


(q)                                 assist the Company in preparing all reports
and returns required by the Securities and Exchange Commission, Internal
Revenue Service and other state or federal governmental agencies; and


 


(r)                                    do all things necessary to assure its ability
to render the services described in this Agreement.


 


2.03                           Authority of Advisor.


 


(a)                                  Pursuant to the terms of this Agreement
(including the restrictions included in this Section 2.03 and in Section 2.06),
and subject to the continuing and exclusive authority of the Board over the
management of the Company, the Board hereby delegates to the Advisor the
authority to (i) locate, analyze and select investment opportunities, (ii) structure
the terms and conditions of transactions pursuant to which investments will be
made or acquired for the


 


11

















 


Company
or the Operating Partnership, (iii) acquire Properties, make and acquire
Mortgages and other loans and invest in other Assets in compliance with the
investment objectives and policies of the Company, (iv) arrange for
financing or refinancing of Assets, (v) enter into leases for the
Properties and service contracts for the Assets with duly qualified and
licensed non-affiliated and Affiliated Persons, including oversight of
non-affiliated and Affiliated Persons that perform property management,
acquisition, advisory, disposition or other services for the Company, (vi) oversee
duly qualified and licensed property managers and other Persons who perform
services for the Company, and (vii) arrange for, or provide, accounting
and other record-keeping functions at the Asset level.


 


(b)                                 Notwithstanding the foregoing, any investment
in Assets by the Company or the Operating Partnership (as well as any financing
acquired by the Company or the Operating Partnership in connection with the
investment), will require the prior approval of the Board (including a majority
of the Independent Directors).


 


(c)                                  The prior approval of a majority of the
Independent Directors and a majority of the Board not otherwise interested in
the transaction will be required for each transaction with the Advisor or its
Affiliates.


 


(d)                                 If a transaction requires approval by the
Board, the Advisor will deliver to the Directors all documents required by them
to properly evaluate the proposed transaction.


 


The
Board may, at any time upon the giving of notice to the Advisor, modify or
revoke the authority set forth in this Section 2.03. If and to the extent the
Board so modifies or revokes the authority contained herein, the Advisor shall
henceforth submit to the Board for prior approval the proposed transactions
involving investments in Assets as thereafter require prior approval, provided
however, that the 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 the notification.


 


2.04                           Bank Accounts.  The
Advisor may establish and maintain one or more bank accounts in its own name
for the account of the Company or in the name of the Company and may collect
and deposit into any account or accounts, and disburse from any account or
accounts, any money on behalf of the Company, under the terms and conditions as
the Board may approve, provided that no funds of the Company or the Operating
Partnership shall be commingled nor shall any of such funds be commingled with
the funds of the Advisor; and the Advisor shall from time to time render
accountings of the collections and payments to the Board, its Audit Committee
and the auditors of the Company.


 


2.05                           Records; Access.  The
Advisor shall maintain records of all its activities hereunder and make the
records available for inspection by the Board and by counsel, auditors and
authorized agents of the Company, at any time or from time to time during
normal business hours.  The Advisor shall
at all reasonable times have access to the books and records of the Company.


 


2.06                           Limitations on Activities. 
Anything else in this Agreement to the contrary notwithstanding, the
Advisor shall refrain from taking any action which, in its sole judgment made
in good faith, would (a) adversely affect the status of the Company as a
REIT, (b) subject the Company to regulation under the Investment Company Act of
1940, as amended, or (c) violate any law, rule, regulation or statement of
policy of any governmental body or agency having jurisdiction over the Company,
the Shares or any of the Company’s securities, or otherwise not be permitted by
the Articles of Incorporation or Bylaws, except if the 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 the action and shall refrain from
taking the


 


12

















 


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.  The Advisor, its directors,
officers, employees and stockholders, and the directors, officers, employees
and stockholders of the Advisor’s Affiliates shall not be liable to the Company
or to the Board or Stockholders for any act or omission by the Advisor, its
directors, officers, employees or stockholders, or for any act or omission of
any Affiliate of the Advisor, its directors, officers or employees or
stockholders except as provided in Section 5.02 of this Agreement.


 


2.07                           Relationship with Directors. 
Directors, officers and employees of the Advisor or an Affiliate of the
Advisor may serve as Directors, officers or employees of the Company, except
that no director, officer or employee of the Advisor or its Affiliates who also
is a Director shall receive any compensation from the Company for serving as a
Director other than reasonable reimbursement for travel and related expenses
incurred in attending meetings of the Board.


 


2.08                           Other Activities of the
Advisor.  Nothing herein contained shall prevent the
Advisor or its Affiliates from engaging in other activities, including, without
limitation, the rendering of advice to other Persons (including other REITs)
and the management of other programs advised, sponsored or organized by the
Advisor or its Affiliates; nor shall this Agreement limit or restrict the right
of any director, officer, employee, or stockholder of the Advisor or its Affiliates
to engage in any other business or to render services of any kind to any other
Person.  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.  The Advisor shall report to the Board the
existence of any condition or circumstance, existing or anticipated, of which
it has knowledge, which creates or could create a conflict of interest between
the Advisor’s obligations to the Company and its obligations to or its interest
in any other Person.  The Advisor or its
Affiliates shall promptly disclose to the Board knowledge of such condition or
circumstance.  The Advisor shall inform
the Board at least quarterly of the investment opportunities that have been
offered to other programs with similar investment objectives sponsored by the
Sponsor, Advisor, Director or their Affiliates. 
If the Sponsor, Advisor, Director or Affiliates thereof have sponsored
other investment programs with similar investment objectives which have
investment funds available at the same time as the Company, it shall be the
duty of the Board (including the Independent Directors) to adopt the method set
forth in the Company’s most recent Prospectus for its Shares or another
reasonable method by which investments are to be allocated to the competing
investment entities and to use their best efforts to apply such method fairly
to the Company.


 


2.09                           Payment of Certain
Organization and Offering Expenses.  The Company shall pay directly
all Organization and Offering Expenses considered underwriting compensation by
the Financial Industry Regulatory Authority, or FINRA.  Such payments, other than Selling Commissions
and the dealer manager fee, shall apply towards the limit on Organization and Offering
Expenses reimbursable by the Company to the Advisor pursuant to Section 3.02(a)(i) below.


 


ARTICLE III


 


COMPENSATION
AND REIMBURSEMENT OF SPECIFIED COSTS


 


3.01                           Fees.


 


(a)                                  Asset Management Fee.  The
Company shall pay the Advisor a monthly Asset Management Fee on the 15th
day of each month in an amount equal to 1/12th of 0.75% of the sum
of, for each and every Asset, the higher of the Cost of Investment or the Value
of Investment.


 


13

















 


The Advisor, in its sole discretion, may waive,
reduce or defer all or any portion of the Asset Management Fee to which it
would otherwise be entitled.


 


(b)                                 Acquisition and Advisory Fees.  The
Company shall pay the Advisor a fee in the amount of 1.75% of the Contract
Purchase Price of each Asset as Acquisition and Advisory Fees.  The total of all Acquisition Fees and any
Acquisition Expenses shall be limited in accordance with the Articles of
Incorporation.  Acquisition and Advisory
Fees shall be paid as follows: (1) for real property (including properties
where development/redevelopment is expected), at the time of acquisition, (2) for
development/redevelopment projects (other than the initial acquisition of the
real property), at the time a final budget is approved, and (3) for loans
and similar assets (including without limitation mezzanine loans), quarterly
based on the value of loans made or acquired. 
In the case of a development/redevelopment project subject to clause (2) above,
upon completion of the development/redevelopment project, the Advisor shall
determine the actual amounts paid.  To
the extent the amounts actually paid vary from the budgeted amounts on which
the Acquisition and Advisory Fee was initially based, the Advisor will pay or
invoice the Company for 1.75% of the budget variance such that the Acquisition
and Advisory Fee is ultimately 1.75% of amounts expended on such
development/redevelopment project.  The
Advisor, in its sole discretion, may waive, reduce or defer all or any portion
of the Acquisition and Advisory Fees to which it would otherwise be entitled.


 


(c)                                  Subordinated Disposition Fee.  If
the Advisor or an Affiliate provides a substantial amount of services (as
determined by a majority of the Independent Directors) in connection with the
Sale of one or more Assets, the Advisor or such Affiliate shall receive from
the Company, as applicable, subject to the satisfaction of the condition
outlined below, a Subordinated Disposition Fee (the “Contingent Subordinated Disposition Fee”) in an amount equal
to the lesser of (subject to the limitation in the following paragraph) (A) one-half
of the aggregate Competitive Real Estate Commission (including the Subordinated
Disposition Fee) or (B) three percent (3%) of the sales price of such
Property or Asset.  The Contingent
Subordinated Disposition Fee will not be earned or paid unless and until the
Stockholders have received total Distributions in an amount equal to or in
excess of the sum of their aggregate Invested Capital plus the Stockholders’
Return of 7%.  To the extent that, in any
instance, the Contingent Subordinated Disposition Fees is not earned and paid
due to the foregoing limitation, the Contingent Subordinated Disposition Fees
that would have been earned and paid had the foregoing limitation not been in
place at the time of a Sale shall be a contingent liability of the Company,
which shall be paid if and only if the conditions set forth in this
subparagraph 3.01(c) have been satisfied and, upon the satisfaction of
such condition, the Company shall pay all such Contingent Subordination
Disposition Fees as if such condition had been satisfied with respect to each
such prior Sale.


 


The
Subordinated Disposition Fee may be payable in addition to real estate
commissions paid to non-Affiliates, provided, however, that the total real
estate commissions paid to all Persons by the Company (together with the
Subordinated Disposition Fee) shall in no case exceed an amount equal to the
lesser of (i) six percent (6%) of the Contract Purchase Price of an Asset
or (ii) the aggregate Competitive Real Estate Commission in respect of any
Property or Asset.


 


In
the event this Agreement is terminated prior to such time as the Stockholders
have received total Distributions in an amount equal to or in excess of the sum
of their aggregate Invested Capital plus the Stockholders’ Return of 7% through
the Termination Date, the Company Value shall be determined and any contingent
liabilities for the payment of Contingent Subordinated Disposition Fees on
Assets previously sold will be paid if the Company Value plus total
Distributions received prior to the Termination Date equals or exceeds the sum
of the aggregate


 


14

















 


Invested
Capital plus the Stockholders’ Return of 7% through the Termination Date and
then only to the extent of such excess.


 


Following
Listing, and as soon as practicable after determination of Market Value
(defined below), any contingent liabilities for the payment of the Contingent
Subordinated Disposition Fees on Assets previously sold will be earned and paid
if and only if the Stockholders have received or been deemed to have received
total Distributions in an amount equal to or in excess of the sum of the
aggregate Invested Capital plus the Stockholders’ Return of 7% through the date
of Listing.  For purposes of the
preceding sentence, in addition to actual Distributions received, Stockholders
will be deemed to have received Distributions in the amount equal to the
product of the total number of Shares outstanding and the average Closing Price
of the Shares over the 30-trading-day period beginning the date of Listing (the
“Market Value”).  Once any Contingent Subordinated Disposition
Fees are actually paid, such amounts shall thereafter be referred to as “Subordinated
Disposition Fees.”


 


(d)                                 Debt Financing Fee.  In
the event of any debt financing obtained by or for the Company (including any
refinancing of debt), the Company will pay to the Advisor a debt financing fee
equal to one percent (1%) of the amount available under the financing.  The Debt Financing Fee includes the
reimbursement of the specified cost incurred by the Advisor of engaging third
parties to source debt financing, and nothing herein shall prevent the Advisor
from entering fee-splitting arrangements with third parties with respect to the
Debt Financing Fee.  The Advisor, in its
sole discretion, may waive, reduce or defer all or any portion of the Debt
Financing Fee to which it would otherwise be entitled.


 


(e)                                  Development Fee.  If
the Advisor or an Affiliate provides the development services, the Company
shall pay the Advisor Development Fees in amounts that are usual and customary
for comparable services rendered to similar projects in the geographic market;
provided, however, that a majority of the Independent Directors must determine
that such Development Fees are fair and reasonable and on terms and conditions
not less favorable than those available from unaffiliated third parties.  Development Fees will include the
reimbursement of the specified cost incurred by the Advisor of engaging third
parties for such services.  The Advisor,
in its sole discretion, may waive, reduce or defer all or any portion of the
Development Fee to which it would otherwise be entitled.  Notwithstanding the above, the Advisor may
engage (on behalf of the Company) third parties to provide development services
pursuant to its authority under Section 2.03 and pay such third parties
all applicable Development Fees.


 


3.02                           Expenses.


 


(a)                                  In addition to the compensation paid to the
Advisor pursuant to Section 3.01 hereof and except as noted in Section 2.09
above, the Company shall pay directly or reimburse the Advisor for all of the
costs and expenses paid or incurred by the Advisor that are in any way related
to the operations of the Company or the business of the Company or the services
the Advisor provides to the Company pursuant to this Agreement, including, but
not limited to:


 


(i)                                     Organization and Offering Expenses; provided,
however, that (i)  the Company shall not reimburse the Advisor to the
extent such reimbursement would cause the total amount spent by the Company on
Organization and Offering Expenses (other than Selling Commissions and the
dealer manager fee) to exceed 1.5% of the Gross Proceeds as of the date of the reimbursement,
(ii) within 60 days after the end of the month in which an Offering
terminates, the Advisor shall reimburse the Company for any Organization and
Offering Expenses (other than Selling Commissions and the dealer


 


15

















 


manager
fee) to the extent that such Organization and Offering Expenses incurred by the
Company exceed 1.5% of the Gross Proceeds raised in the completed Offering, and
(iii) such Organization and Offering Expenses shall include organization
and offering expenses previously advanced by the Advisor related to a prior
offering of the Company’s shares, to the extent not reimbursed out of proceeds
from the prior offering, subject to the 1.5% of the Gross Proceeds as of the
date of the reimbursement limitation set forth above.


 


(ii)                                  Acquisition Fees and Acquisition Expenses;


 


(iii)                               the actual cost of goods, services and
materials used by the Company and obtained from Persons not affiliated with the
Advisor, other than Acquisition Expenses, including brokerage fees paid in
connection with the purchase and sale of Shares or other securities;


 


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


 


(v)                                 taxes and assessments on income or property
and taxes as an expense of doing business;


 


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


 


(vii)                           expenses of managing and operating Assets
owned by the Company, whether or not payable to an Affiliate of the Advisor;


 


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


 


(ix)                                except as otherwise limited by the Articles
of Incorporation, expenses associated with Listing or with the issuance and
distribution of Shares and other securities of the Company, such as selling
commissions and fees, advertising expenses, taxes, legal and accounting fees
and Listing and registration fees, but excluding Organization and Offering
Expenses;


 


(x)                                   expenses connected with payments of
Distributions in cash or otherwise made or caused to be made by the Company to
the Stockholders;


 


(xi)                                expenses of organizing, reorganizing,
liquidating or dissolving the Company and the expenses of filing or amending
the Articles of Incorporation;


 


(xii)                             expenses of any third party transfer agent
for the Shares and of maintaining communications with Stockholders, including
the cost of preparation, printing, and mailing annual reports and other
Stockholder reports, proxy statements and other reports required by
governmental entities;


 


(xiii)                          personnel employment costs incurred by the
Advisor or its Affiliates in performing the services described herein,
including but not limited to reasonable salaries and wages, benefits and overhead
of all employees directly involved in the performance of such services;
provided, that no reimbursement shall be made for costs of such


 


16

















 


employees
of the Advisor or its Affiliates to the extent that such employees perform
services for which the Advisor receives a separate fee; and


 


(xiv)                         audit, accounting and legal fees.


 


(b)                                 Expenses incurred by the Advisor on behalf of
the Company and payable pursuant to this Section 3.02 shall be reimbursed
no less than quarterly to the Advisor within 60 days after the end of each
quarter.  The Advisor shall prepare a
statement documenting the expenses of the Company during each quarter, and
shall deliver the statement to the Company within 45 days after the end of each
quarter.


 


(c)                                  Notwithstanding anything to the contrary in
this Section 3.02, the Advisor will be responsible for paying all of the
investment-related expenses that the Company or the Advisor incurs that are due
to third parties with respect to investments the Company does not make.


 


3.03                           Other Services. 
Should the Board request that the Advisor or any director, officer or
employee thereof render services for the Company other than set forth in Section 2.02,
the services shall be separately compensated at the rates and in the amounts as
are agreed by the Advisor and 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.


 


3.04                           Reimbursement to the Advisor. The Company shall not reimburse the Advisor
for Total Operating Expenses to the extent that Total Operating Expenses
(including the Asset Management Fee), in the four consecutive fiscal quarters
then ended (the “Expense Year”) exceed
(the “Excess Amount”) the greater
of 2% of Average Invested Assets or 25% of Net Income for that period of four
consecutive fiscal quarters. Any Excess Amount paid to the Advisor during a
fiscal quarter shall be repaid to the Company. Reimbursement of all or any
portion of the Total Operating Expenses that exceed the limitation set forth in
the preceding sentence may, at the option of the Advisor, be deferred without
interest and may be reimbursed in any subsequent Expense Year where such
limitation would permit such reimbursement if the Total Operating Expense were
incurred during such period. Notwithstanding the foregoing, if there is an
Excess Amount in any Expense Year and the Independent Directors determine that
all or a portion of such excess was justified, based on unusual and
nonrecurring factors which they deem sufficient, the Excess Amount may be
reimbursed to the Advisor.  If the
Independent Directors determine such excess was justified, then, after the end
of any fiscal quarter of the Company for which there is an Excess Amount for
the 12 months then ended paid to the Advisor, the Advisor, at the direction of
the Independent Directors, shall cause such fact to be disclosed in the next
quarterly report of the Company or in a separate writing and sent to the
Stockholders within 60 days of such quarter end, together with an explanation
of the factors the Independent Directors considered in determining that such
Excess Amount was justified. Such determination shall be reflected in the
minutes of the meetings of the Board. The Company will not reimburse the
Advisor or its Affiliates for services for which the Advisor or its Affiliates
are entitled to compensation in the form of a separate fee. All figures used in
any computation pursuant to this Section 3.04 shall be determined in
accordance with generally accepted accounting principles applied on a
consistent basis.


 


ARTICLE IV


 


TERM AND
TERMINATION


 


4.01                           Term; Renewal. 
Subject to Section 4.02 hereof, this Agreement shall continue in
force until the first anniversary of the date hereof.  Thereafter, this Agreement may be renewed for
an unlimited number of successive one-year terms upon mutual consent of the
parties.  It is the duty of the Board to
evaluate


 


17

















 


the performance of the Advisor annually before renewing the Agreement,
and each such renewal shall be for a term of no more than one year.


 


4.02                           Termination.  This
Agreement will automatically terminate upon Listing.  This agreement also may be terminated at the
option of either party upon 60 days written notice without cause or penalty (if
termination is by the Company, then the termination shall be upon the approval
of a majority of the Independent Directors). 
Notwithstanding the foregoing, the provisions of this Agreement which
provide for payment to the Advisor of expenses, fees or other compensation
following the date of termination shall continue in full force and effect until
all amounts payable thereunder to the Advisor are paid in full.


 


4.03                           Payments to and Duties of
Advisor upon Termination.


 


(a)                                  After the Termination Date, the Advisor shall
not be entitled to compensation for further services hereunder except it shall
be entitled to and receive from the Company within 30 days after the effective
date of the termination all unpaid reimbursements of expenses, subject to the
provisions of Section 3.04 hereof, and all contingent liabilities related
to fees payable to the Advisor prior to termination of this Agreement.


 


(b)                                 The Advisor shall promptly upon termination:


 


(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
the Assets, and documents of the Company then in the custody of the Advisor;
and


 


(iv)                              cooperate with the Company and take all
reasonable actions requested by the Company to provide an orderly management
transition.


 


ARTICLE V


 


INDEMNIFICATION


 


5.01                           Indemnification by the
Company.


 


(a)                                  The Company shall indemnify and hold harmless
the Advisor and its Affiliates, including their respective officers, directors,
partners and employees, from all liability, claims, damages or losses arising in
the performance of their duties hereunder, and related expenses, including
reasonable attorneys’ fees, to the extent such liability, claims, damages or
losses and related expenses are not fully reimbursed by insurance, subject to
any limitations imposed by the laws of the State of Maryland, the Articles of
Incorporation and the NASAA REIT Guidelines. 
Notwithstanding the foregoing, the Company shall not indemnify or hold
harmless the Advisor or its Affiliates, including


 


18

















 


their
respective officers, directors, partners and employees, for any liability or
loss suffered by the Advisor or its Affiliates, including their respective
officers, directors, partners and employees, nor shall it provide that the
Advisor or its Affiliates, including their respective officers, directors,
partners and employees, be held harmless for any loss or liability suffered by
the Company, unless all of the following conditions are met: (i) the
Advisor or its Affiliates, including their respective officers, directors,
partners and employees, have determined, in good faith, that the course of
conduct which caused the loss or liability was in the best interests of the
Company; (ii) the Advisor or its Affiliates, including their respective
officers, directors, partners and employees, were acting on behalf of or
performing services of the Company; (iii) the liability or loss was not
the result of negligence or misconduct by the Advisor or its Affiliates,
including their respective officers, directors, partners and employees; and (iv) the
indemnification or agreement to hold harmless is recoverable only out of the
Company’s net assets and not from stockholders. Notwithstanding the foregoing,
the Advisor and its Affiliates, including their respective officers, directors,
partners and employees, shall not be indemnified by the Company for any losses,
liability or expenses arising from or out of an alleged violation of federal or
state securities laws by such party unless one or more of the following
conditions are met: (i) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee; (ii) such claims have been dismissed with prejudice
on the merits by a court of competent jurisdiction as to the particular
indemnitee; and (iii) a court of competent jurisdiction approves a
settlement of the claims against a particular indemnitee and finds 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 in which securities of
the Company were offered or sold as to indemnification for violations of
securities laws.


 


(b)                                 The Company may advance funds to the Advisor
or its Affiliates, including their respective officers, directors, partners and
employees, for legal expenses and other costs incurred as a result of any legal
action for which indemnification is being sought is permissible only if all of
the following conditions are satisfied: (i) the legal action relates to
acts or omissions with respect to the performance of duties or services on
behalf of the Company; (ii) the legal action is initiated by a third-party
who is not a stockholder or the legal action is initiated by a stockholder
acting in his or her capacity as such and a court of competent jurisdiction
specifically approves such advancement; (iii) the Advisor or its
Affiliates, including their respective officers, directors, partners and
employees, undertake to repay the advanced funds to the Company together with
the applicable legal rate of interest thereon, in cases in which the Advisor or
its Affiliates, including their respective officers, directors, partners and
employees, are found not to be entitled to indemnification.


 


(c)                                  Notwithstanding the provisions of this Section 5.01,
the Advisor shall not be entitled to indemnification or be held harmless
pursuant to this Section 5.01 for any activity which the Advisor shall be
required to indemnify or hold harmless the Company pursuant to Section 5.02.


 


5.02                           Indemnification by Advisor.  The
Advisor shall indemnify and hold harmless the Company from contract or other
liability, claims, damages, taxes or losses and related expenses including
attorneys’ fees, to the extent that the liability, claims, damages, taxes or
losses and related expenses are not fully reimbursed by insurance and are
incurred by reason of the Advisor’s bad faith, fraud, misfeasance, misconduct,
gross negligence or reckless disregard of its duties, but 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.


 


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ARTICLE VI


 


MISCELLANEOUS


 


6.01                           Assignment to an Affiliate.  This
Agreement and any rights, duties, liabilities and obligations hereunder and the
fees and compensation related thereto may be assigned by the Advisor, in whole
or in part, to a duly qualified and licensed Affiliate of the Advisor without
obtaining the approval of the Board.  Any
other assignment shall be made only with the approval of a majority of the
Board (including a majority of the Independent Directors).  The Advisor may assign any rights to receive
fees or other payments under this Agreement without obtaining the approval of
the Board.  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 corporation or other organization which is
a successor to all of the assets, rights and obligations of the Company, in
which case the successor organization shall be bound hereunder and by the terms
of said assignment in the same manner as the Company is bound by this
Agreement.  This Agreement shall be
binding on successors to the Company resulting from a Change of Control or sale
of all or substantially all the assets of the Company or the Operating
Partnership, and shall likewise be binding upon any successor to the Advisor.


 


6.02                           Non-Solicitation. 
During the period commencing on the date on which this Agreement is
entered into and ending one year following the termination of this Agreement,
the Company shall not, without the Advisor’s prior written consent, directly or
indirectly, (i) solicit or encourage any person to leave the employment or
other service of the Advisor or any of its affiliates, or (ii) hire, on
behalf of the Company or any other person or entity, any person who has left
the employment of the Advisor or any of its affiliates within the one-year
period following the termination of that person’s employment with the Advisor
or any of its affiliates.  During the
period commencing on the date hereof through and ending one year following the
termination of this Agreement, the Company will not, whether for its own
account or for the account of any other person, firm, corporation or other
business organization, intentionally interfere with the relationship of the
Advisor or any of its affiliates with, or endeavor to entice away from the
Advisor or any of its affiliates, any person who during the term of this
Agreement is, or during the preceding one-year period was, a tenant,
co-investor, co-developer, joint venturer or other customer of the Advisor or
any of its affiliates.


 


6.03                           Relationship of Advisor and
Company.  The Company and the Advisor are not partners
or joint venturers with each other, and nothing in this Agreement shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.


 


6.04                           Notices.  Any
notice, report or other communication required or permitted to be given
hereunder shall be in writing unless some other method of giving such notice,
report or other communication is required by the Articles of Incorporation, the
Bylaws, or accepted by the party to whom it is given, and shall be given by
being delivered by hand or by overnight mail or other overnight delivery
service to the addresses set forth herein:


 


	
  To the Directors and to the Company:

  	
   

  	
  Behringer Harvard Multifamily REIT I, Inc.

  
	
   

  	
   

  	
  15601 Dallas Parkway

  
	
   

  	
   

  	
  Suite 600

  
	
   

  	
   

  	
  Addison, Texas 75001

  



 


20

















 


	
  To
  the Advisor:

  	
   

  	
  Behringer
  Harvard Multifamily Advisors I LP

  
	
   

  	
   

  	
  15601
  Dallas Parkway

  
	
   

  	
   

  	
  Suite 600

  
	
   

  	
   

  	
  Addison,
  Texas 75001

  



 


Either
party shall, as soon as reasonably practicable, give notice in writing to the
other party of a change in its address for the purposes of this Section 6.04.


 


6.05                           Modification.  This
Agreement shall not be changed, modified, or amended, in whole or in part,
except by an instrument in writing signed by both parties hereto, or their
respective successors or permitted assignees.


 


6.06                           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.


 


6.07                           Choice of Law; Venue.  The
provisions of this Agreement shall be construed and interpreted in accordance
with the laws of the State of Texas, and venue for any action brought with
respect to any claims arising out of this Agreement shall be brought
exclusively in Dallas County, Texas.


 


6.08                           Entire Agreement.  This
Agreement contains the entire agreement and understanding among 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 and/or usage of the
trade inconsistent with any of the terms hereof. This Agreement may not be
modified or amended other than by an agreement in writing signed by each of the
parties hereto.


 


6.09                           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 the 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 the
waiver.


 


6.10                           Gender; Number. 
Words used herein regardless of the number and gender specifically used,
shall be deemed and construed to include any other number, singular or plural,
and any other gender, masculine, feminine or neuter, as the context requires.


 


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


 


6.12                           Execution in Counterparts.  This
Agreement may be executed in multiple 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.  This Agreement shall become binding when one
or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.


 


21

















 


6.13                           Initial Investment.  The
Advisor or one of its Affiliates has contributed $200,001.69 (the “Initial Investment”) in exchange for Shares
of the Company. The Advisor or its Affiliates may not sell any of the Shares
purchased with the Initial Investment while the Advisor acts in an advisory
capacity to the Company. The restrictions included above shall not apply to any
Shares acquired by the Advisor or its Affiliates other than the Shares acquired
through the Initial Investment.  Before
becoming a stockholder, Behringer Harvard Holdings, an affiliate of the
Advisor, the Advisor, the Company’s directors and officers and their affiliates
must agree not to vote their shares regarding (1) the removal of any of
these affiliates and (2) any transaction between them and the Company.


 


6.14                           Ownership of Proprietary
Property.  The Advisor retains ownership of and reserves
all Intellectual Property Rights in the Proprietary Property.  To the extent that the Company has or obtains
any claim to any right, title or interest in the Proprietary Property,
including without limitation in any suggestions, enhancements or contributions
that Company may provide regarding the Proprietary Property, the Company hereby
assigns and transfers exclusively to the Advisor all right, title and interest,
including without limitation all Intellectual Property Rights, free and clear
of any liens, encumbrances or licenses in favor of the Company or any other
party, in and to the Proprietary Property. 
In addition, at the Advisor’s expense, the Company will perform any acts
that may be deemed desirable by the Advisor to evidence more fully the transfer
of ownership of right, title and interest in the Proprietary Property to the Advisor,
including but not limited to the execution of any instruments or documents now
or hereafter requested by the Advisor to perfect, defend or confirm the
assignment described herein, in a form determined by the Advisor.


 


6.15                             Treatment
Under Texas Margin Tax. For purposes of the Texas margin tax,
the Advisor’s performance of the services specified in this Agreement will
cause the Advisor to conduct part of the active trade or business of the
Company, and the compensation specified in Article III includes both the
payment of management fees and the reimbursement of specified costs incurred in
the Advisor’s conduct of the active trade or business of the Company.  Therefore, the Advisor and Company intend
Advisor to be, and shall treat Advisor as, a “management company” within the
meaning of Section 171.0001(11) of the Texas Tax Code.  The Company and the Advisor will apply
Sections 171.1011(m-1) and 171.1013(f)-(g) of the Texas Tax Code to the
Company’s reimbursements paid to the Advisor pursuant to this Agreement of
specified costs and wages and compensation. 
The Advisor and the Company further recognize and intend that (i) as
a result of the fiduciary relationship created by this Agreement and
acknowledged in Section 2.02, reimbursements paid to the Advisor pursuant
to this Agreement are “flow-though funds” that the Advisor is mandated by law
or fiduciary duty to distribute, within the meaning of Section 171.1011(f) of
the Texas Tax Code, and (ii) as a result of Advisor’s contractual duties
under this Agreement, certain reimbursements under this Agreement are “flow-through
funds” mandated by contract to be distributed within the meaning of Section 171.1011(g) of
the Texas Tax Code.  The terms of this
Agreement shall be interpreted in a manner consistent with the characterization
of the Advisor as a “management company” as defined in Section 171.0001(11),
and with the characterization of the reimbursements as “flow-though funds”
within the meaning of Section 171.1011(f)-(g) of the Texas Tax Code.


 


6.16                           Savings Clause.  If any provision of this Agreement is
held unenforceable, then such provision will be modified to reflect
the parties’ intention.  All remaining provisions of this
Agreement shall remain in full force and effect.


 


[The remainder of this  page intentionally blank]


 


22

















 


IN WITNESS WHEREOF, the parties hereto have executed this Advisory Management Agreement as
of the date first above written.


 


	
   

  	
  BEHRINGER HARVARD MULTIFAMILY

  REIT I, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President – Corporate

  Development & Legal and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD MULTIFAMILY

  OP I LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President – Corporate

  Development & Legal and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD MULTIFAMILY

  ADVISORS I LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Harvard
  Property Trust, LLC,

  
	
   

  	
   

  	
  its
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President – Corporate

  Development & Legal and Assistant Secretary

  
						



 


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