Exhibit 10.1


 


BEHRINGER
HARVARD MULTIFAMILY REIT I, INC.


 


AMENDED
AND RESTATED ADVISORY MANAGEMENT AGREEMENT


 


This AMENDED AND RESTATED ADVISORY MANAGEMENT
AGREEMENT (this “Agreement”) is entered into on
this the 2nd day of September, 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 sales
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
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 


 


18

















 


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:

  	
   /s/
  Gerald J. Reihsen, III

  
	
   

  	
  Gerald J.
  Reihsen, III

  
	
   

  	
  Executive Vice President –
  Corporate

  Development & Legal and Assistant

  Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD MULTIFAMILY

  OP I LP

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  BHMF, Inc.,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald J. Reihsen, III

  
	
   

  	
   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: 

  	
  /s/ Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Gerald J.
  Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President –
  Corporate

  Development & Legal and Assistant

  Secretary

  
									



 


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