**Exhibit 10.1**

 

**BEHRINGERHARVARD MULTIFAMILY REIT I, INC.**

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**AMENDEDAND RESTATED ADVISORY MANAGEMENT AGREEMENT**

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This AMENDED AND RESTATED ADVISORY MANAGEMENTAGREEMENT (this “**Agreement**”) is entered into onthis the 2nd day of September, 2008, by and between BEHRINGER HARVARDMULTIFAMILY 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 SS E T H**

 

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

 

**WHEREAS**, Behringer HarvardMultifamily OP I LP acknowledges that it is no longer a party to thisAgreement;

 

**WHEREAS**, the Company will be issuing shares of itscommon stock, par value $0.0001, to the public, such shares to be registeredwith the Securities and Exchange Commission and may subsequently issueadditional securities;

 

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

 

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

 

**WHEREAS**, the Company desires to avail itself of theexperience, sources of information, advice, assistance and certain facilitiesavailable to the Advisor and to have the Advisor undertake the duties andresponsibilities hereinafter set forth, on behalf of, and subject to thesupervision of, the Board, all as provided herein; and

 

**WHEREAS**, the Advisor is willing to undertake toprovide these services, subject to the supervision of the Board, on the termsand conditions hereinafter set forth.

 

**NOW, THEREFORE**, in consideration of the foregoing and ofthe mutual covenants and agreements contained herein, and other good andvaluable consideration, the receipt and sufficiency of which is herebyacknowledged, the parties hereto agree as follows:

 

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**ARTICLE ONE**

 

**DEFINITIONS**

 

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

 

**Acquisition Expenses**.  A non-accountable acquisitionexpense reimbursement in the amount of: (i) 0.25% of the funds paid forpurchasing an Asset, including any debt attributable to the Asset, plus 0.25%of the funds budgeted for development, construction or improvement in the caseof 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 anyinvestment-related expenses due to third parties in the case of a completedinvestment, including, but not limited to legal fees and expenses, travel andcommunications expenses, costs of appraisals, accounting fees and expenses,third-party brokerage or finder’s fees, title insurance, premium expenses andother closing costs.

 

**Acquisition Fees**.  Any and all fees andcommissions, exclusive of Acquisition Expenses but including the Acquisitionand Advisory Fees, paid by any Person to any other duly qualified and licensedPerson (including any fees or commissions paid by or to any duly qualified andlicensed Affiliate of the Company or the Advisor) in connection with making or investing inMortgages or other loans or the purchase, development or construction of anAsset, including, without limitation, real estate commissions, selection fees,investment banking fees, third party seller’s fees (to the extent the Companyagrees to pay any such fees as part of an acquisition), Development Fees, Construction Fees, non-recurringmanagement fees, loan fees, points or any other fees of a similar nature.Excluded shall be Development Fees and Construction Fees paid to any Person notaffiliated with the Sponsor in connection with the actual development andconstruction of any Property.

 

**Acquisition and Advisory Fees**.  Thefees payable to the Advisor pursuant to Section 3.01(b).

 

**Advisor**.  BehringerHarvard Multifamily Advisors I LP, a Texas limited partnership, any successoradvisor to the Company, or any Person to which Behringer Harvard MultifamilyAdvisors I LP or any successor advisor subcontracts all or substantially all ofits functions.

 

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

 

**Articles of Incorporation**.  The Articles of Incorporationof the Company filed with the Maryland State Department of Assessments andTaxation in accordance with the Maryland General Corporation Law, as amended orrestated from time to time.

 

**Assets**.  Properties, Mortgages, loans and otherdirect or indirect investments (other than investments in bank accounts, moneymarket funds or other current assets)owned by the Company, directly or indirectly through one or more of itsAffiliates or Joint Ventures or through other investment interests.

 

**Asset Management Fee**.  The fee payable to the Advisorfor day-to-day professional management services in connection with the Companyand its investments in Assets pursuant to Section 3.01(a) of thisAgreement.

 

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**Average Invested Assets**.  For a specified period, theaverage of the aggregate book value of the Assets before deduction fordepreciation, bad debts or other non-cash reserves, computed by taking theaverage 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 ineffect from time to time.

 

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

 

**Closing Price**.  On any date, the last sale price for anyclass or series of the Company’s Common Shares, regular way, or, in case nosuch sale takes place on such day, the average of the closing bid and askedprices, regular way, for such Common Shares, in either case as reported in theprincipal consolidated transaction reporting system with respect to CommonShares listed or, if such Common Shares are not listed, the average of the highbid and low asked prices in the over-the-counter market, as reported by theprincipal automated quotation system or other quotation service that may thenbe 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 professionalmarket maker making a market in such Common Shares selected by the Board.

 

**Code**.  Internal Revenue Code of 1986, as amendedfrom time to time, or any successor statute thereto. Reference to any provisionof the Code shall mean the provision as in effect from time to time, as thesame may be amended, and any successor provision thereto, as interpreted by anyapplicable regulations as in effect from time to time.

 

**Common Shares**.  Any shares of the Company’scommon 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 indicatesotherwise, references to the Company shall include its direct and indirectsubsidiaries, including the Operating Partnership.

 

**Company Value**.  The actual value of the Company as a going concern based on the difference between (a) theactual 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 itsliabilities as set forth on its balance sheet for the period endedimmediately prior to the determination date, provided that (i) if theCompany Value is being determined in connection with a Change of Control thatestablishes the Company’s net worth, then the Company Value shall be the networth established thereby and (ii) if the Company Value is beingdetermined in connection with a Listing, then the Company Value shall be equalto the number of outstanding Common Shares multiplied by the Closing Price of asingle Share averaged over a period of30 trading days during 

 

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which the Common Shares are listed or quoted for trading after the dateof Listing.  For purposes hereof,a “trading day” shall be any day on which the NYSE is open for trading whetheror not the Common Shares are then listed on the NYSE and whether or not thereis an actual trade of Common Shares on any such day.  Ifthe holder of Convertible Shares disagrees as to the Company Value asdetermined by the Board, then each of the holder of Convertible Shares and theCompany shall name one appraiser and the two named appraisers shall promptlyagree in good faith to the appointment of one other appraiser whosedetermination of the Company Value shall be final and binding on the parties asto the Company Value.  The cost of suchappraisal shall be split evenly between the Company and the Advisor.

 

**Competitive Real Estate Commission**.  Areal estate or brokerage commission paid or, if no commission is paid, theamount that customarily would be paid for the purchase or sale of an Asset thatis reasonable, customary, and competitive in light of the size, type andlocation of the Asset (as determined by the Board, including a majority of theIndependent Directors).

 

**Construction Fee**.  A fee or other remunerationfor acting as general contractor and/or construction manager to constructimprovements, supervise and coordinate projects or to provide major repairs orrehabilitations on a Property.

 

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

 

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

 

**Cost of Investment.**  Foreach Asset, (i) with respect to an Asset wholly owned by the Company orany wholly owned subsidiary, the Fully Loaded Cost, and (ii) in the caseof an Asset owned by any Joint Venture or in some other manner in which theCompany is a co-venturer or partner or otherwise a co-owner, (A) the FullyLoaded Cost if the Company (or any subsidiary) controls the Asset; owns amajority interest, directly or indirectly, in the Asset; or provides a substantialamount of services in the acquisition, development, or management of the Asset(as determined by a majority of the Independent Directors) or (B) theportion of the Fully Loaded Cost that is attributable to the Company’sinvestment in the Joint Venture or other interest in such Asset if the Companydoes not control, own a majority of, or provide substantial services in theacquisition, development, or management of, the Asset.

 

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

 

**Development Fee**.  Afee for the packaging of an Asset, including the negotiation and approval ofplans, and any assistance in obtaining zoning and necessary variances andfinancing for a specific development Property, either initially or at a laterdate.

 

**Director**.  A member of the Board.

 

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

 

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

 

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

 

**Gross Proceeds**.  The aggregate purchase priceof all Common Shares sold for the account of the Company through an Offering,without deduction for Selling Commissions, volume discounts, any marketingsupport and due diligence expense reimbursement or Organization and OfferingExpenses.  For the purpose of computingGross Proceeds, the purchase price of any Common Share for which reducedSelling 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 thefull amount of the offering price per Common Share pursuant to the Prospectusfor the Offering without reduction.

 

**Independent Director**.  A Director who is not on the date of determination, and within the lasttwo years from the date of determination has not been, directly or indirectlyassociated with the Sponsor or the Advisor by virtue of (i) ownership ofan interest in the Sponsor, the Advisor or any of their Affiliates, other thanthe Company, (ii) employment by the Sponsor, the Company, the Advisor orany of their Affiliates, (iii) service as an officer or director of theSponsor, the Advisor or any of their Affiliates, other than as a Director ofthe Company, (iv) performance of services for the Company, other than as aDirector of the Company, (v) service as a director or trustee of more thanthree real estate investment trusts organized by the Sponsor or advised by theAdvisor, or (vi) maintenance of a material business or professionalrelationship with the Sponsor, the Advisor or any of their Affiliates.  Notwithstanding the foregoing, and consistentwith (v) above, serving as a director of or receiving director fees fromor owning an interest in a REIT or other real estate program organized by theSponsor or advised or managed by the Advisor or its Affiliates shall not, byitself, cause a Director to be deemed associated with the Sponsor or theAdvisor.  A business or professionalrelationship is considered material if the aggregate annual gross revenuederived 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 realestate program organized or advised or managed by the Advisor or itsAffiliates) exceeds five percent of either the Director’s annual gross incomeduring either of the last two years or the Director’s net worth on a fairmarket value basis. An indirect association with the Sponsor or the Advisorshall include circumstances in which a Director’s spouse, parent, child,sibling, mother- or father-in-law, son- or daughter-in-law, or brother- orsister-in-law is or has been associated with the Sponsor, the Advisor, any oftheir Affiliates, or the Company.

 

**Initial Investment**.  Initial Investment shall havethe meaning ascribed to such term in Section 6.13.

 

**Intellectual Property Rights**.  All rights, titles and interests, whetherforeign or domestic, in and to any and all trade secrets, confidentialinformation rights, patents, invention rights, copyrights, service marks,trademarks, know-how, or similar intellectual property rights and allapplications and rights to apply for such rights, as well as any and all moralrights, rights of privacy, publicity and similar rights and license rights ofany type under the laws or regulations of any governmental, regulatory, orjudicial authority, foreign or domestic and all renewals and extensionsthereof.

 

**Invested Capital**.  The amount calculated bymultiplying the total number of Common Shares issued by the Company by theprice paid for each Common Share, reduced by an amount equal to the totalnumber of Common Shares repurchased from Stockholders by the Company (pursuantto the Company’s plan to 

 

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

 

**Joint Ventures**.  Alegal organization formed to provide for the sharing of the risks and rewardsin an enterprise co-owned and operated for mutual benefit by two or morebusiness partners and established to acquire or hold Assets.

 

**Listing or Listed**.  Thefiling of a Form 8-A to register any class of the Company’s securities ona national securities exchange and an original listing application relatedthereto; provided, that the Shares shall not be deemed to be Listed untiltrading in the Shares shall have commenced on the relevant national securitiesexchange.

 

**Mortgages**.  In connection with mortgage financingprovided, invested in or purchased by the Company, all of the notes, deeds oftrust, security interests or other evidence of indebtedness or obligations,which are secured or collateralized by Real Property owned by the borrowersunder such notes, deeds of trust, security interests or other evidence ofindebtedness or obligations.

 

**NASAA REIT Guidelines****. **The Statement of Policy Regarding Real EstateInvestment Trusts adopted by the North American Securities AdministratorsAssociation on May 7, 2007, and in effect on the date hereof.

 

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

 

**Net Sales Proceeds**.  In the case of a transactiondescribed in clause (i)(A) of the definition of Sale, the proceeds of anysuch transaction less the amount of selling expenses incurred by or on behalfof the Company or the Operating Partnership, including all real estatecommissions, closing costs and legal fees and expenses. In the case of atransaction described in clause (i)(B) of such definition, Net SalesProceeds means the proceeds of any such transaction less the amount of sellingexpenses incurred by or on behalf of the Company or the Operating Partnership,including any legal fees and expenses and other selling expenses incurred inconnection with such transaction. In the case of a transaction described inclause (i)(C) of such definition, Net Sales Proceeds means the proceeds ofany such transaction actually distributed to the Company or the OperatingPartnership from the Joint Venture less the amount of any selling expenses,including legal fees and expenses incurred by or on behalf of the Company orthe Operating Partnership (other than those paid by the Joint Venture).  In the case of a transaction or series oftransactions described in clause (i)(D) of the definition of Sale, NetSales Proceeds means the proceeds of any such transaction (including theaggregate of all payments under a Mortgage or other loan on or in satisfactionthereof other than regularly scheduled interest payments) less the amount ofselling expenses incurred by or on behalf of the Company or the OperatingPartnership, including all commissions closing costs and legal fees andexpenses.  In the case of a transactiondescribed in clause (i)(E) of such definition, Net Sales Proceeds meansthe proceeds of any such transaction less the amount of selling expensesincurred by or on behalf of the Company or the Operating Partnership, includingany legal fees and expenses and other selling expenses incurred in connectionwith such transaction. In the case of a transaction described in clause (ii) ofthe definition of Sale, Net Sales Proceeds means the proceeds of suchtransaction or series of transactions less all amounts generated thereby whichare reinvested in one or more Assets within one hundred eighty (180) daysthereafter and less the amount of any real estate commissions, closing costs,and legal fees and expenses and other selling expenses incurred by or allocatedto the Company or the Operating Partnership in connection with such transactionor series of transactions.  Net SalesProceeds shall also include any consideration (including non-cash considerationsuch as stock, notes, or other property or securities) that the Companydetermines, in its discretion, to be 

 

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

 

**NYSE**.  The NewYork Stock Exchange.

 

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

 

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

 

**Organization and Offering Expenses**.  Anyand all costs and expenses incurred by and to be paid by the Company inconnection with an Offering, the formation of the Company, and including thequalification and registration of the Offering and the marketing anddistribution of its Shares, including, without limitation:  total underwriting and brokerage discountsand commissions (including fees of the underwriters’ attorneys); expenses forprinting, engraving, amending registration statements and supplementingprospectuses; mailing and distribution costs; salaries of employees whileengaged in sales activity, such as preparing supplemental sales literature;telephone and other telecommunication costs; all advertising and marketingexpenses, including the costs related to investor and broker-dealer meetings;charges of transfer agents, registrars, trustees, escrow holders, depositoriesand experts; filing, registration and qualification fees and taxes relating tothe 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 otherlegal entity.

 

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

 

**Property****or P****roperties**.  Asthe context requires, any, or all, respectively, of the Real Property acquiredby the Company, either directly or indirectly (whether through Joint Venturesor other investment interests, regardless of whether the Company consolidatesthe financial results of these entities).

 

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

 

**Prospectus**. Prospectus has the meaning set forth in Section 2(a)(10) ofthe Securities Act, including a preliminary prospectus, an offering circular asdescribed in Rule 253 of the General Rules and Regulations under theSecurities Act, or, in the case of an intrastate offering, any document bywhatever name known, utilized for the purpose of offering and sellingsecurities 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 orused in connection with land and rights or interests in land.

 

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

 

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**Sale or Sales**.  (i) Any transaction orseries of transactions whereby: (A) the Company or the OperatingPartnership directly or indirectly (except as described in other subsections ofthis definition) sells, grants, transfers, conveys, or relinquishes itsownership of any Property or portion thereof, including the lease of anyProperty consisting of a building only, and including any event with respect toany Property which gives rise to a significant amount of insurance proceeds orcondemnation awards; (B) the Company or the Operating Partnership directlyor indirectly (except as described in other subsections of this definition)sells, grants, transfers, conveys, or relinquishes its ownership of all orsubstantially all of the interest of the Company or the Operating Partnershipin any Joint Venture in which it is a co-venturer or partner; (C) anyJoint Venture directly or indirectly (except as described in other subsectionsof this definition) in which the Company or the Operating Partnership as aco-venturer or partner sells, grants, transfers, conveys, or relinquishes itsownership of any Property or portion thereof, including any event with respectto any Property which gives rise to insurance claims or condemnation awards; (D) theCompany or the Operating Partnership directly or indirectly (except asdescribed in other subsections of this definition) sells, grants, conveys orrelinquishes its interest in any Mortgage or other loan or portion thereof(including with respect to any Mortgage or other loan, all payments thereunderor in satisfaction thereof other than regularly scheduled interest payments ofamounts owed pursuant to the Mortgage or other loan) and any event with respectto a Mortgage or other loan which gives rise to a significant amount ofinsurance proceeds or similar awards; or (E) the Company or the OperatingPartnership directly or indirectly (except as described in other subsections ofthis definition) sells, grants, transfers, conveys, or relinquishes itsownership of any other Asset not previously described in this definition or anyportion thereof, but (ii) not including any transaction or series oftransactions specified in clause (i) (A) through (E) above inwhich the proceeds of such transaction or series of transactions are reinvestedin one or more Assets within 180 days thereafter.

 

**Securities Act**.  TheSecurities Act of 1933, as amended from time to time, or any successor statutethereto.  Reference to any provision ofthe Securities Act shall mean the provision as in effect from time to time, asthe same may be amended, and any successor provision thereto, as interpreted byany applicable regulations as in effect from time to time.

 

**Selling Commissions**.  Anyand all commissions payable to underwriters, dealer managers or otherbroker-dealers in connection with the sale of Shares, including, withoutlimitation, commissions payable to Behringer Securities LP.

 

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

 

**Soliciting Dealers**.  Broker-dealers who are membersof the Financial IndustryRegulatory Authority, or thatare exempt from broker-dealer registration, and who, in either case, haveexecuted participating broker or other agreements with the Dealer Manager tosell Shares.

 

**Sponsor**.  Sponsor has the meaning ascribed to such termin the Articles of Incorporation.

 

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

 

**Stockholders’ Return**.  As of any date, an aggregateamount 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 whichthe Stockholders’ Return is being calculated net of Distributions attributableto Net Sales Proceeds but (consistent with the definition of Invested Capital)shall always exclude an amount equal to the total number of Common Sharesrepurchased from 

 

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

 

**Subordinated Disposition Fee.**  Thefee payable to the Advisor for services provided in connection with the Sale ofone or more Properties pursuant to Section 3.01(c).

 

**Termination Date**.  The date of termination ofthis Agreement.

 

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

 

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

 

**Value of Investment****.**  For each Asset, if available, (i) withrespect 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 othermanner in which the Company is a co-venturer or partner or otherwise aco-owner, (A) the Asset’s value established by the most recent independentvaluation report (without reduction for depreciation, bad debts or othernon-cash reserves) if the Company (or any subsidiary) controls the Asset; ownsa majority interest, directly or indirectly, in the Asset; or provides asubstantial amount of services in the acquisition, development, or managementof the Asset (as determined by a majority of the Independent Directors) or (B) theportion of the Asset’s value established by the most recent independentvaluation report (without reduction for depreciation, bad debts or othernon-cash reserves) that is attributable to the Company’s investment in theJoint 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 obtainindependent valuations at any point in time beyond those specified in theCompany’s Prospectus.

 

**ARTICLE II**

 

**THE ADVISOR**

 

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

 

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2.02         **Duties ofthe Advisor**.  The Advisorshall be deemed to be in a fiduciary relationship to the Company and itsStockholders.  Subject to Section 2.08,the Advisor undertakes to use its commercially reasonable best efforts topresent to the Company potential investment opportunities consistent with theinvestment objectives and policies of the Company as determined and adoptedfrom time to time by the Board.  Inperforming its duties, subject to the supervision of the Board and consistentwith the provisions of the Company’s most recent Prospectus for Shares, theArticles of Incorporation and Bylaws, the Advisor shall, either directly or byengaging a duly qualified and licensed Affiliate of the Advisor or other dulyqualified and licensed Person:

 

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

 

(b)           managethe Company’s day-to-day operations and perform and supervise the variousadministrative functions reasonably necessary for the management and operationsof the Company;

 

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

 

(d)           investigate,select, and, on behalf of the Company, engage and conduct business with theduly qualified and licensed Persons as the Advisor deems necessary to theproper performance of its obligations hereunder, including but not limited toduly 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 anyof the foregoing, including duly qualified and licensed Affiliates of theAdvisor, and duly qualified and licensed Persons acting in any other capacitydeemed by the Advisor necessary or desirable for the performance of any of theforegoing services, including but not limited to entering into contracts in thename of the Company with any of the foregoing;

 

(e)           consultwith the officers and the Board and assist the Board in the formulation andimplementation of the Company’s financial policies, and, as necessary, furnishthe Board with advice and recommendations with respect to the making ofinvestments consistent with the investment objectives and policies of the Companyand in connection with any borrowings proposed to be undertaken by the Company;

 

(f)            subjectto the provisions of Sections 2.02(h) and 2.03 hereof, (i) locate,analyze and select potential investments in Assets, (ii) structure andnegotiate the terms and conditions of transactions pursuant to which investmentin Assets will be made; (iii) make investments in Assets on behalf of theCompany or the Operating Partnership in compliance with the investmentobjectives and policies of the Company; (iv) arrange for financing andrefinancing and make other changes in the asset or capital structure of, anddispose of, reinvest the proceeds from the sale of, or otherwise deal with theinvestments in, Assets; and (v) enter into leases of Property and servicecontracts for Assets with duly qualified and licensed Persons and, to theextent necessary, perform all other operational functions for the maintenanceand administration of the Assets, including the servicing of Mortgages;

 

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

 

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(h)           obtainthe prior approval of the Board (including a majority of all IndependentDirectors) for any and all investments in Assets;

 

(i)            negotiateon behalf of the Company with banks or lenders for loans to be made to theCompany, negotiate on behalf of the Company with investment banking firms andbroker-dealers, and negotiate private sales of Shares and other securities ofthe Company or obtain loans for the Company, as and when appropriate, but in noevent in such a way so that the Advisor shall be acting as broker-dealer orunderwriter; and provided, further, that any fees and costs payable to thirdparties incurred by the Advisor in connection with the foregoing shall be theresponsibility of the Company;

 

(j)            obtainreports (which may be prepared by or for the Advisor or its Affiliates), whereappropriate, concerning the value of investments or contemplated investments ofthe Company in Assets;

 

(k)           fromtime to time, or at any time reasonably requested by the Board, make reports tothe Board of its performance of services to the Company under this Agreement;

 

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

 

(m)          deliverto or maintain on behalf of the Company copies of all appraisals obtained inconnection with the investments in Assets;

 

(n)           upon request of the Company, act, or obtain the servicesof duly qualifiedand licensed others to act, as attorney-in-fact or agent of the Companyin making, acquiring and disposing of Assets, disbursing, and collecting thefunds, paying the debts and fulfilling the obligations of the Company andretaining counsel or other advisors to assist in handling, prosecuting andsettling any claims of the Company, including foreclosing and otherwiseenforcing mortgage and other liens and security interests comprising any of theAssets;

 

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

 

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

 

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

 

(r)            doall things necessary to assure its ability to render the services described inthis Agreement.

 

2.03         **Authorityof Advisor**.

 

(a)           Pursuantto the terms of this Agreement (including the restrictions included in this Section 2.03and in Section 2.06), and subject to the continuing and exclusive authority ofthe Board over the management of the Company, the Board hereby delegates to theAdvisor the authority to (i) locate, analyze and select investmentopportunities, (ii) structure the terms and conditions of transactionspursuant to which investments will be made or acquired for the 

 

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

 

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

 

(c)           Theprior approval of a majority of the Independent Directors and a majority of theBoard not otherwise interested in the transaction will be required for eachtransaction with the Advisor or its Affiliates.

 

(d)           Ifa transaction requires approval by the Board, the Advisor will deliver to theDirectors all documents required by them to properly evaluate the proposedtransaction.

 

The Board may, at any time upon the giving ofnotice 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 containedherein, the Advisor shall henceforth submit to the Board for prior approval theproposed transactions involving investments in Assets as thereafter requireprior approval, provided however, that the modification or revocation shall beeffective upon receipt by the Advisor and shall not be applicable to investmenttransactions to which the Advisor has committed the Company prior to the dateof receipt by the Advisor of the notification.

 

2.04         **BankAccounts**.  The Advisor mayestablish and maintain one or more bank accounts in its own name for the accountof the Company or in the name of the Company and may collect and deposit intoany account or accounts, and disburse from any account or accounts, any moneyon behalf of the Company, under the terms and conditions as the Board mayapprove, provided that no funds of the Company or the Operating Partnershipshall be commingled nor shall any of such funds be commingled with the funds ofthe Advisor; and the Advisor shall from time to time render accountings of thecollections and payments to the Board, its Audit Committee and the auditors ofthe Company.

 

2.05         **Records;Access**.  The Advisor shallmaintain records of all its activities hereunder and make the records availablefor inspection by the Board and by counsel, auditors and authorized agents ofthe Company, at any time or from time to time during normal businesshours.  The Advisor shall at allreasonable times have access to the books and records of the Company.

 

2.06         **Limitationson Activities**.  Anythingelse in this Agreement to the contrary notwithstanding, the Advisor shallrefrain 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) subjectthe Company to regulation under the Investment Company Act of 1940, as amended,or (c) violate any law, rule, regulation or statement of policy of anygovernmental body or agency having jurisdiction over the Company, the Shares orany of the Company’s securities, or otherwise not be permitted by the Articlesof 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’sjudgment of the potential impact of the action and shall refrain from takingthe 

 

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action until it receives further clarification or instructions from theBoard.  In such event the Advisor shallhave no liability for acting in accordance with the specific instructions ofthe Board so given.  The Advisor, itsdirectors, officers, employees and stockholders, and the directors, officers,employees and stockholders of the Advisor’s Affiliates shall not be liable tothe Company or to the Board or Stockholders for any act or omission by theAdvisor, its directors, officers, employees or stockholders, or for any act oromission of any Affiliate of the Advisor, its directors, officers or employeesor stockholders except as provided in Section 5.02 of this Agreement.

 

2.07         **Relationshipwith Directors**. Directors, officers and employees of the Advisor or an Affiliate of theAdvisor may serve as Directors, officers or employees of the Company, exceptthat no director, officer or employee of the Advisor or its Affiliates who alsois a Director shall receive any compensation from the Company for serving as aDirector other than reasonable reimbursement for travel and related expensesincurred in attending meetings of the Board.

 

2.08         **OtherActivities of the Advisor**. Nothing herein contained shall prevent the Advisor or its Affiliatesfrom engaging in other activities, including, without limitation, the renderingof advice to other Persons (including other REITs) and the management of otherprograms advised, sponsored or organized by the Advisor or its Affiliates; norshall this Agreement limit or restrict the right of any director, officer,employee, or stockholder of the Advisor or its Affiliates to engage in anyother business or to render services of any kind to any other Person.  The Advisor may, with respect to anyinvestment in which the Company is a participant, also render advice andservice to each and every other participant therein.  The Advisor shall report to the Board theexistence of any condition or circumstance, existing or anticipated, of whichit has knowledge, which creates or could create a conflict of interest betweenthe Advisor’s obligations to the Company and its obligations to or its interestin any other Person.  The Advisor or itsAffiliates shall promptly disclose to the Board knowledge of such condition orcircumstance.  The Advisor shall informthe Board at least quarterly of the investment opportunities that have beenoffered to other programs with similar investment objectives sponsored by theSponsor, Advisor, Director or their Affiliates. If the Sponsor, Advisor, Director or Affiliates thereof have sponsoredother investment programs with similar investment objectives which haveinvestment funds available at the same time as the Company, it shall be theduty of the Board (including the Independent Directors) to adopt the method setforth in the Company’s most recent Prospectus for its Shares or anotherreasonable method by which investments are to be allocated to the competinginvestment entities and to use their best efforts to apply such method fairlyto the Company.

 

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

 

**ARTICLE III**

 

**COMPENSATION ANDREIMBURSEMENT OF SPECIFIED COSTS**

 

3.01         **Fees**.

 

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

 

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

 

(b)           Acquisition and Advisory Fees.  The Company shall pay the Advisor a fee inthe amount of 1.75% of the Contract Purchase Price of each Asset as Acquisitionand Advisory Fees.  The total ofall Acquisition Fees and any Acquisition Expenses shall be limited in accordancewith the Articles of Incorporation. Acquisition and Advisory Fees shall be paid as follows: (1) forreal property (including properties where development/redevelopment isexpected), at the time of acquisition, (2) for development/redevelopmentprojects (other than the initial acquisition of the real property), at the timea final budget is approved, and (3) for loans and similar assets(including without limitation mezzanine loans), quarterly based on the value ofloans made or acquired.  In the case of adevelopment/redevelopment project subject to clause (2) above, uponcompletion of the development/redevelopment project, the Advisor shalldetermine the actual amounts paid.  Tothe extent the amounts actually paid vary from the budgeted amounts on whichthe Acquisition and Advisory Fee was initially based, the Advisor will pay orinvoice the Company for 1.75%of the budget variance such that the Acquisition and Advisory Fee is ultimately1.75% of amounts expended onsuch development/redevelopment project. The Advisor, in its sole discretion, may waive, reduce or defer all orany portion of the Acquisition and Advisory Fees to which it would otherwise beentitled.

 

(c)           SubordinatedDisposition Fee.  If the Advisor oran Affiliate provides a substantial amount of services (as determined by amajority of the Independent Directors) in connection with the Sale of one ormore Assets, the Advisor or such Affiliate shall receive from the Company, asapplicable, subject to the satisfaction of the condition outlined below, aSubordinated Disposition Fee (the “**Contingent SubordinatedDisposition Fee**”) in an amount equal to the lesser of (subject tothe limitation in the following paragraph) (A) one-half of the aggregateCompetitive Real Estate Commission (including the Subordinated Disposition Fee)or (B) three percent (3%) of the sales price of such Property orAsset.  The Contingent SubordinatedDisposition Fee will not be earned or paid unless and until the Stockholdershave received total Distributions in an amount equal to or in excess of the sumof their aggregate Invested Capital plus the Stockholders’ Return of 7%.  To the extent that, in any instance, theContingent Subordinated Disposition Fees is not earned and paid due to theforegoing limitation, the Contingent Subordinated Disposition Fees that wouldhave been earned and paid had the foregoing limitation not been in place at thetime of a Sale shall be a contingent liability of the Company, which shall bepaid if and only if the conditions set forth in this subparagraph 3.01(c) havebeen satisfied and, upon the satisfaction of such condition, the Company shallpay all such Contingent Subordination Disposition Fees as if such condition hadbeen satisfied with respect to each such prior Sale.

 

The Subordinated Disposition Fee may bepayable in addition to real estate commissions paid to non-Affiliates,provided, however, that the total real estate commissions paid to all Personsby the Company (together with the Subordinated Disposition Fee) shall in no caseexceed an amount equal to the lesser of (i) six percent (6%) of the salesprice of an Asset or (ii) the aggregate Competitive Real Estate Commissionin respect of any Property or Asset.

 

In the event this Agreement is terminatedprior to such time as the Stockholders have received total Distributions in anamount equal to or in excess of the sum of their aggregate Invested Capitalplus the Stockholders’ Return of 7% through the Termination Date, the CompanyValue shall be determined and any contingent liabilities for the payment ofContingent Subordinated Disposition Fees on Assets previously sold will be paidif the Company Value plus total Distributions received prior to the TerminationDate equals or exceeds the sum of the aggregate 

 

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

 

Following Listing, and as soon as practicableafter determination of Market Value (defined below), any contingent liabilitiesfor the payment of the Contingent Subordinated Disposition Fees on Assetspreviously sold will be earned and paid if and only if the Stockholders havereceived or been deemed to have received total Distributions in an amount equalto or in excess of the sum of the aggregate Invested Capital plus theStockholders’ Return of 7% through the date of Listing.  For purposes of the preceding sentence, inaddition to actual Distributions received, Stockholders will be deemed to havereceived Distributions in the amount equal to the product of the total numberof Shares outstanding and the average Closing Price of the Shares over the30-trading-day period beginning the date of Listing (the “**Market Value**”).  Once any Contingent Subordinated DispositionFees are actually paid, such amounts shall thereafter be referred to as “SubordinatedDisposition Fees.”

 

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

 

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

 

3.02         **Expenses**.

 

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

 

(i)            Organizationand Offering Expenses; provided, however, that (i)  the Company shall notreimburse the Advisor to the extent such reimbursement would cause the totalamount spent by the Company on Organization and Offering Expenses (other thanSelling Commissions and the dealer manager fee) to exceed 1.5% of the GrossProceeds as of the date of the reimbursement, (ii) within 60 days afterthe end of the month in which an Offering terminates, the Advisor shallreimburse the Company for any Organization and Offering Expenses (other thanSelling Commissions and the dealer 

 

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

 

(ii)           AcquisitionFees and Acquisition Expenses;

 

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

 

(iv)          interestand other costs for borrowed money, including discounts, points and othersimilar fees;

 

(v)           taxesand assessments on income or property and taxes as an expense of doingbusiness;

 

(vi)          costsassociated with insurance required in connection with the business of theCompany or by the Board;

 

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

 

(viii)        allexpenses in connection with payments to the Board for attendance at meetings ofthe Board and Stockholders;

 

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

 

(x)            expensesconnected with payments of Distributions in cash or otherwise made or caused tobe made by the Company to the Stockholders;

 

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

 

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

 

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

 

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employees of the Advisor or its Affiliates tothe extent that such employees perform services for which the Advisor receivesa separate fee; and

 

(xiv)        audit,accounting and legal fees.

 

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

 

(c)           Notwithstandinganything to the contrary in this Section 3.02, the Advisor will beresponsible for paying all of the investment-related expenses that the Companyor the Advisor incurs that are due to third parties with respect to investmentsthe Company does not make.

 

3.03         **OtherServices**.  Should theBoard request that the Advisor or any director, officer or employee thereofrender services for the Company other than set forth in Section 2.02, theservices shall be separately compensated at the rates and in the amounts as areagreed by the Advisor and the Independent Directors, subject to the limitationscontained in the Articles of Incorporation, and shall not be deemed to beservices pursuant to the terms of this Agreement.

 

3.04         **Reimbursement to the Advisor**. The Company shall not reimburse the Advisorfor Total Operating Expenses to the extent that Total Operating Expenses(including the Asset Management Fee), in the four consecutive fiscal quartersthen ended (the “**Expense Year**”)exceed (the “**Excess Amount**”) thegreater of 2% of Average Invested Assets or 25% of Net Income for that periodof four consecutive fiscal quarters. Any Excess Amount paid to the Advisorduring a fiscal quarter shall be repaid to the Company. Reimbursement of all orany portion of the Total Operating Expenses that exceed the limitation setforth in the preceding sentence may, at the option of the Advisor, be deferredwithout interest and may be reimbursed in any subsequent Expense Year wheresuch limitation would permit such reimbursement if the Total Operating Expensewere incurred during such period. Notwithstanding the foregoing, if there is anExcess Amount in any Expense Year and the Independent Directors determine thatall or a portion of such excess was justified, based on unusual andnonrecurring factors which they deem sufficient, the Excess Amount may bereimbursed to the Advisor.  If theIndependent Directors determine such excess was justified, then, after the endof any fiscal quarter of the Company for which there is an Excess Amount forthe 12 months then ended paid to the Advisor, the Advisor, at the direction ofthe Independent Directors, shall cause such fact to be disclosed in the nextquarterly report of the Company or in a separate writing and sent to theStockholders within 60 days of such quarter end, together with an explanationof the factors the Independent Directors considered in determining that suchExcess Amount was justified. Such determination shall be reflected in theminutes of the meetings of the Board. The Company will not reimburse theAdvisor or its Affiliates for services for which the Advisor or its Affiliatesare entitled to compensation in the form of a separate fee. All figures used inany computation pursuant to this Section 3.04 shall be determined inaccordance with generally accepted accounting principles applied on aconsistent basis.

 

**ARTICLE IV**

 

**TERM AND TERMINATION**

 

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

 

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the performance of the Advisor annuallybefore renewing the Agreement, and each such renewal shall be for a term of nomore than one year.

 

4.02         **Termination**.  This Agreement will automatically terminateupon Listing.  This agreement also may beterminated at the option of either party upon 60 days written notice withoutcause or penalty (if termination is by the Company, then the termination shallbe upon the approval of a majority of the Independent Directors).  Notwithstanding the foregoing, the provisionsof this Agreement which provide for payment to the Advisor of expenses, fees orother compensation following the date of termination shall continue in fullforce and effect until all amounts payable thereunder to the Advisor are paidin full.

 

4.03         **Payments to and Duties of Advisor upon Termination**.

 

(a)           Afterthe Termination Date, the Advisor shall not be entitled to compensation forfurther services hereunder except it shall be entitled to and receive from theCompany within 30 days after the effective date of the termination all unpaidreimbursements of expenses, subject to the provisions of Section 3.04hereof, and all contingent liabilities related to fees payable to the Advisorprior to termination of this Agreement.

 

(b)           TheAdvisor shall promptly upon termination:

 

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

 

(ii)           deliverto the Board a full accounting, including a statement showing all paymentscollected by it and a statement of all money held by it, covering the periodfollowing the date of the last accounting furnished to the Board;

 

(iii)          deliverto the Board all assets, including the Assets, and documents of the Companythen in the custody of the Advisor; and

 

(iv)          cooperatewith the Company and take all reasonable actions requested by the Company toprovide an orderly management transition.

 

**ARTICLE V**

 

**INDEMNIFICATION**

 

5.01         **Indemnificationby the Company**.

 

(a)                                  The Company shall indemnify and hold harmlessthe Advisor and its Affiliates, including their respective officers, directors,partners and employees, from all liability, claims, damages or losses arisingin the performance of their duties hereunder, and related expenses, includingreasonable attorneys’ fees, to the extent such liability, claims, damages orlosses and related expenses are not fully reimbursed by insurance, subject toany limitations imposed by the laws of the State of Maryland, the Articles ofIncorporation and the NASAA REIT Guidelines.  Notwithstanding the foregoing, the Companyshall not indemnify or hold harmless the Advisor or its Affiliates, includingtheir respective officers, directors, partners and employees, for any liabilityor loss suffered by the Advisor or its Affiliates, including their respectiveofficers, directors, partners and employees, nor shall it provide that theAdvisor or its Affiliates, including 

 

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their respective officers,directors, partners and employees, be held harmless for any loss or liabilitysuffered by the Company, unless all of the following conditions are met: (i) theAdvisor or its Affiliates, including their respective officers, directors,partners and employees, have determined, in good faith, that the course ofconduct which caused the loss or liability was in the best interests of theCompany; (ii) the Advisor or its Affiliates, including their respectiveofficers, directors, partners and employees, were acting on behalf of orperforming services of the Company; (iii) the liability or loss was notthe result of negligence or misconduct by the Advisor or its Affiliates,including their respective officers, directors, partners and employees; and (iv) theindemnification or agreement to hold harmless is recoverable only out of theCompany’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 orstate securities laws by such party unless one or more of the followingconditions are met: (i) there has been a successful adjudication on themerits of each count involving alleged securities law violations as to the particularindemnitee; (ii) such claims have been dismissed with prejudice on themerits by a court of competent jurisdiction as to the particular indemnitee;and (iii) a court of competent jurisdiction approves a settlement of theclaims against a particular indemnitee and finds that indemnification of thesettlement and the related costs should be made, and the court considering therequest for indemnification has been advised of the position of the Securitiesand Exchange Commission and of the published position of any state securitiesregulatory authority in which securities of the Company were offered or sold asto indemnification for violations of securities laws.

 

(b)                                 TheCompany may advance funds to the Advisor or its Affiliates, including theirrespective officers, directors, partners and employees, for legal expenses andother costs incurred as a result of any legal action for which indemnificationis being sought is permissible only if all of the following conditions aresatisfied: (i) the legal action relates to acts or omissions with respectto the performance of duties or services on behalf of the Company; (ii) thelegal action is initiated by a third-party who is not a stockholder or thelegal action is initiated by a stockholder acting in his or her capacity assuch and a court of competent jurisdiction specifically approves suchadvancement; (iii) the Advisor or its Affiliates, including theirrespective officers, directors, partners and employees, undertake to repay theadvanced funds to the Company together with the applicable legal rate ofinterest thereon, in cases in which the Advisor or its Affiliates, includingtheir respective officers, directors, partners and employees, are found not tobe entitled to indemnification.

 

(c)                                  Notwithstandingthe provisions of this Section 5.01, the Advisor shall not be entitled toindemnification or be held harmless pursuant to this Section 5.01 for anyactivity which the Advisor shall be required to indemnify or hold harmless theCompany pursuant to Section 5.02.

 

5.02         **Indemnificationby Advisor**.  The Advisorshall 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 andrelated expenses are not fully reimbursed by insurance and are incurred byreason of the Advisor’s bad faith, fraud, misfeasance, misconduct, grossnegligence or reckless disregard of its duties, but the Advisor shall not be heldresponsible for any action of the Board in following or declining to follow anyadvice or recommendation given by the Advisor.

 

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**ARTICLE VI**

 

**MISCELLANEOUS**

 

6.01         **Assignmentto an Affiliate**.  ThisAgreement and any rights, duties, liabilities and obligations hereunder and thefees and compensation related thereto may be assigned by the Advisor, in wholeor in part, to a duly qualified and licensed Affiliate of the Advisor withoutobtaining the approval of the Board.  Anyother assignment shall be made only with the approval of a majority of theBoard (including a majority of the Independent Directors).  The Advisor may assign any rights to receivefees or other payments under this Agreement without obtaining the approval ofthe Board.  This Agreement shall not beassigned by the Company without the consent of the Advisor, except in the caseof an assignment by the Company to a corporation or other organization which isa successor to all of the assets, rights and obligations of the Company, inwhich case the successor organization shall be bound hereunder and by the termsof said assignment in the same manner as the Company is bound by thisAgreement.  This Agreement shall bebinding on successors to the Company resulting from a Change of Control or saleof all or substantially all the assets of the Company or the OperatingPartnership, 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 isentered into and ending one year following the termination of this Agreement,the Company shall not, without the Advisor’s prior written consent, directly orindirectly, (i) solicit or encourage any person to leave the employment orother service of the Advisor or any of its affiliates, or (ii) hire, onbehalf of the Company or any other person or entity, any person who has leftthe employment of the Advisor or any of its affiliates within the one-yearperiod following the termination of that person’s employment with the Advisoror any of its affiliates.  During theperiod commencing on the date hereof through and ending one year following thetermination of this Agreement, the Company will not, whether for its ownaccount or for the account of any other person, firm, corporation or otherbusiness organization, intentionally interfere with the relationship of theAdvisor or any of its affiliates with, or endeavor to entice away from theAdvisor or any of its affiliates, any person who during the term of thisAgreement is, or during the preceding one-year period was, a tenant,co-investor, co-developer, joint venturer or other customer of the Advisor or anyof its affiliates.

 

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

 

6.04         **Notices**.  Any notice, report or other communicationrequired or permitted to be given hereunder shall be in writing unless someother method of giving such notice, report or other communication is requiredby the Articles of Incorporation, the Bylaws, or accepted by the party to whomit is given, and shall be given by being delivered by hand or by overnight mailor 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                            |

 

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| 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 inwriting 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 byboth parties hereto, or their respective successors or permitted assignees.

 

6.06         **Severability**.  The provisions of this Agreement areindependent of and severable from each other, and no provision shall beaffected or rendered invalid or unenforceable by virtue of the fact that forany reason any other or others of them may be invalid or unenforceable in wholeor in part.

 

6.07         **Choice ofLaw; Venue**.  Theprovisions of this Agreement shall be construed and interpreted in accordancewith the laws of the State of Texas, and venue for any action brought withrespect to any claims arising out of this Agreement shall be broughtexclusively in Dallas County, Texas.

 

6.08         **Entire Agreement**.  This Agreement contains the entire agreementand understanding among the parties hereto with respect to the subject matterhereof, and supersedes all prior and contemporaneous agreements,understandings, inducements and conditions, express or implied, oral orwritten, of any nature whatsoever with respect to the subject matterhereof.  The express terms hereof controland supersede any course of performance and/or usage of the trade inconsistentwith any of the terms hereof. This Agreement may not be modified or amendedother than by an agreement in writing signed by each of the parties hereto.

 

6.09         **Waiver**.  Neither the failure nor any delay on the partof a party to exercise any right, remedy, power or privilege under thisAgreement shall operate as a waiver thereof, nor shall any single or partialexercise of any right, remedy, power or privilege preclude any other or furtherexercise of the same or of any other right, remedy, power or privilege, norshall any waiver of any right, remedy, power or privilege with respect to anyoccurrence be construed as a waiver of the right, remedy, power or privilegewith respect to any other occurrence.  Nowaiver shall be effective unless it is in writing and is signed by the partyasserted to have granted the waiver.

 

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

 

6.11         **Headings**.  The titles and headings of sections andsubsections contained in this Agreement are for convenience only, and theyneither form a part of this Agreement nor are they to be used in theconstruction or interpretation hereof.

 

6.12         **Executionin Counterparts**.  ThisAgreement may be executed in multiple counterparts, each of which shall bedeemed 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 oneor more counterparts hereof, individually or taken together, shall bear thesignatures of all of the parties reflected hereon as the signatories.

 

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

 

6.14         **Ownership of Proprietary Property**.  The Advisor retains ownership of and reservesall Intellectual Property Rights in the Proprietary Property.  To the extent that the Company has orobtains any claim to any right, title or interest in the Proprietary Property,including without limitation in any suggestions, enhancements or contributionsthat Company may provide regarding the Proprietary Property, the Company herebyassigns and transfers exclusively to the Advisor all right, title and interest,including without limitation all Intellectual Property Rights, free and clearof any liens, encumbrances or licenses in favor of the Company or any otherparty, in and to the Proprietary Property. In addition, at the Advisor’s expense, the Company will perform any actsthat may be deemed desirable by the Advisor to evidence more fully the transferof ownership of right, title and interest in the Proprietary Property to theAdvisor, including but not limited to the execution of any instruments or documentsnow or hereafter requested by the Advisor to perfect, defend or confirm theassignment described herein, in a form determined by the Advisor.

 

6.15         **TreatmentUnder Texas Margin Tax.** For purposes of the Texas margin tax,the Advisor’s performance of the services specified in this Agreement willcause the Advisor to conduct part of the active trade or business of theCompany, and the compensation specified in Article III includes both thepayment of management fees and the reimbursement of specified costs incurred inthe Advisor’s conduct of the active trade or business of the Company.  Therefore, the Advisor and Company intendAdvisor to be, and shall treat Advisor as, a “management company” within themeaning of Section 171.0001(11) of the Texas Tax Code.  The Company and the Advisor will applySections 171.1011(m-1) and 171.1013(f)-(g) of the Texas Tax Code to theCompany’s reimbursements paid to the Advisor pursuant to this Agreement ofspecified costs and wages and compensation. The Advisor and the Company further recognize and intend that (i) asa result of the fiduciary relationship created by this Agreement andacknowledged in Section 2.02, reimbursements paid to the Advisor pursuantto this Agreement are “flow-though funds” that the Advisor is mandated by lawor fiduciary duty to distribute, within the meaning of Section 171.1011(f) ofthe Texas Tax Code, and (ii) as a result of Advisor’s contractual dutiesunder this Agreement, certain reimbursements under this Agreement are “flow-throughfunds” mandated by contract to be distributed within the meaning of Section 171.1011(g) ofthe Texas Tax Code.  The terms of thisAgreement shall be interpreted in a manner consistent with the characterizationof 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         **SavingsClause.**  If any provision of this Agreement is heldunenforceable, then such provision will be modified to reflect the parties’intention.  All remaining provisions of this Agreement shall remainin full force and effect.

 

***[The remainder of this  page intentionally blank]***

 

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**IN WITNESS WHEREOF**, the parties hereto have executed thisAdvisory 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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