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pelletiermegan-cicagreem

CHANGE IN CONTROL SEVERANCE AGREEMENT  OF  MEGAN PELLETIER  THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (“Agreement”) is made  and entered into as of this first day of July 2022, by and between HomeTrust Bancshares, Inc,  Asheville, North Carolina (hereinafter referred to as the “Company”) and Megan Pelletier (the  “Employee”).  WHEREAS, the Employee serves as the EVP/Chief People Officer of HomeTrust Bank,  Asheville, North Carolina (the “Bank”); and  WHEREAS, the Board of Directors of the Company believes it is in the best interests of  the Company and the Bank to enter into this Agreement with the Employee; and    WHEREAS, the Board of Directors has approved and authorized the execution of this  Agreement with the Employee;  NOW, THEREFORE, in consideration of the foregoing and of the respective covenants  and agreements of the parties herein contained, it is AGREED as follows:  1. Definitions.  (a)  The term “Cash Compensation” shall mean the highest annual base salary  rate paid to the Employee at any time during their employment by the Company and its  Consolidated Subsidiaries, plus the higher of (i) the Employee’s annual bonus paid during the  year immediately preceding the Date of Termination, or (ii) the Employee’s target bonus for the  year in which the Date of Termination occurs, in each case including any salary or bonus  amounts deferred by the Employee.      (b) The term "Change in Control" means any of the following events: (1) any  person or persons acting as a group (within the meaning of Section 409A of the Code) acquires  (or has acquired during the 12-month period ending on the date of the most recent acquisition by  such person or persons) ownership of stock of the Company or the Bank possessing 30% or more  of the total voting power of the outstanding stock of the Company or the Bank; (2) individuals  who are members of the Board of Directors of the Company on the date hereof (the "Incumbent  Board") cease for any reason during any 12-month period to constitute at least a majority thereof,  provided that any person becoming a director subsequent to the date hereof whose election was  approved by a vote of at least a majority of the directors comprising the Incumbent Board, or  whose nomination for election by the Company’s stockholders was approved by the nominating  committee serving under an Incumbent Board, shall be considered a member of the Incumbent  Board; (3) any person or persons acting as a group (within the meaning of Section 409A of the  Code) acquires (or has acquired during the 12-month period ending on the date of the most  recent acquisition by such person or persons) assets of the Company or the Bank that have a  gross fair market value of 40% or more of the total gross fair market value of all of the assets of  the Company or the Bank immediately before such acquisition or acquisitions; or (4) any other  

 

2  event which is not covered by the foregoing subsections but which the Board of Directors  determines to affect control of the Company or the Bank and with respect to which the Board of  Directors adopts a resolution that the event constitutes a Change in Control for purposes of this  Agreement; provided that with respect to each of the events covered by clauses (1) through (4)  above, the event must also be deemed to be either a change in the ownership of the Company or  the Bank, a change in the effective control of the Company or the Bank or a change in the  ownership of a substantial portion of the assets of the Company or the Bank within the meaning  of Section 409A of the Code.      (c) The term “Code” means the Internal Revenue Code of 1986, as amended,  or any successor code thereto.  (d) The term “Consolidated Subsidiaries” means any subsidiary or  subsidiaries of the Company (or its successors) that are part of the consolidated group of the  Company (or its successors) for federal income tax reporting.  (e) The term “Date of Termination” means the date upon which the  Employee's employment with the Company and its Consolidated Subsidiaries ceases, as  specified in a written notice of termination, provided that all references in this Agreement to a  Date of Termination that results in the payment of severance shall mean the date of the  Executive’s involuntary Separation from Service.  (f) The term “Effective Date” means the date first written above.  (g) The term “Health Insurance Benefits” shall mean the following benefits to  be provided pursuant to Section 3(a) of this Agreement to the Employee and their dependents  who are covered by the Company or any of its Consolidated Subsidiaries at the time of the  Employee’s Involuntary Termination (each such person, including the Employee, a “Covered  Person” and collectively the “Covered Persons”): (i) the Company or the Bank shall pay 100% of  the premiums for COBRA coverage for each such Covered Person until the earlier of (A) the  expiration of the COBRA period or (B) the death of such person; or (ii) in the event that the  continued participation of the Covered Person in any insurance plan as provided in clause (i)  above is barred or would trigger the payment of an excise tax under Section 4980D of the Code,  or during the COBRA Period any such insurance plan is discontinued, then the Company and the  Bank shall at their election either (A) arrange to provide the Covered Person with alternative  benefits substantially similar to those which the Covered Person was entitled to receive under  such insurance plan immediately prior to the Date of Termination, provided that the alternative  benefits do not trigger the payment of an excise tax under Section 4980D of the Code, or (B) in  the event that the continuation of any insurance coverage as specified above would trigger the  payment of an excise tax under Section 4980D of the Code or in the event such continued  coverage is unable to be provided by the Company or the Bank, pay to the Employee within 30  days following the Date of Termination (or within 30 days following the discontinuation of the  benefits if later) a lump sum cash amount equal to the projected cost to the Company and the  Bank of providing continued coverage to the Covered Person until the expiration of the COBRA  Period, with the projected cost to be based on the costs being incurred immediately prior to the  Involuntary Termination (or the discontinuation of the benefits if later), as increased by 15% on  each scheduled renewal date. Any insurance premiums payable by the Company or the Bank as  specified above shall be payable at such times and in such amounts (except that the Company or  

 

3  the Bank shall also pay any employee portion of the premiums) as if the Employee was still an  employee of the Company or its Consolidated Subsidiaries, subject to any increases in such  amounts imposed by the insurance company or COBRA, and the amount of insurance premiums  required to be paid by the Company or the Bank in any taxable year shall not affect the amount  of insurance premiums required to be paid by the Company or the Bank in any other taxable  year.      (h) The term “Involuntary Termination” means a termination of the  employment of the Employee (i) by the Company without their express written consent; or (ii)  by the Employee by reason of a material diminution of or interference with their duties, titles,  responsibilities or benefits, including any of the following actions unless consented to in writing  by the Employee:  (1) a requirement that the Employee be based at any place other than  Charlotte, North Carolina, or within 20 miles thereof, except for reasonable travel on Company  or Bank business; (2) a material demotion of the Employee; or (3) a material reduction in the  Employee’s salary, other than prior to a Change in Control as part of an overall program applied  uniformly and with equitable effect to all members of the senior management of the Company or  the Bank; provided in each case that Involuntary Termination shall mean a cessation or reduction  in the Employee’s services for the Company and the Bank (and any other affiliated entities that  are deemed to constitute a “service recipient” as defined in Treasury Regulation §1.409A- 1(h)(3)) that constitutes a “Separation from Service” as determined under Section 409A of the  Code, taking into account all of the facts, circumstances, rules and presumptions set forth in  Treasury Regulation §1.409A-1(h) and that also constitutes an involuntary Separation from  Service under Treasury Regulation §1.409A-1(n).    In addition, before the Employee terminates  their employment pursuant to clauses (1) through (3) of the preceding sentence, the Employee  must first provide written notice to the Company within ninety (90) days of the initial existence  of the condition, describing the existence of such condition, and the Company shall thereafter  have the right to remedy the condition within thirty (30) days following the date it received the  written notice from the Employee.  If the Company remedies the condition within such thirty  (30) day cure period, then the Employee shall not have the right to terminate their employment  as the result of such event.  If the Company does not remedy the condition within such thirty (30)  day cure period, then the Employee may terminate their employment as the result of such event  at any time within sixty (60) days following the expiration of such cure period.  All references in  this Agreement to an Involuntary Termination that results in the payment of severance shall  mean an involuntary Separation from Service under Treasury Regulation §1.409A-1(n). The  term “Involuntary Termination” does not include Termination for Cause, termination of  employment due to death or permanent disability, or suspension or temporary or permanent  prohibition from participation in the conduct of the affairs of a depository institution under  Section 8 of the Federal Deposit Insurance Act.      (i) The term “Section 409A” means Section 409A of the Code and the  regulations and guidance of general applicability issued thereunder.    (j) The terms “Termination for Cause” and “Terminated for Cause” mean any  of the following: (i) the commission by the Employee of a willful act (including, without  limitation, a dishonest or fraudulent act) or a grossly negligent act, or the willful or grossly  negligent omission to act by the Employee, which is intended to cause, does cause or is  

 

4  reasonably likely to cause material harm to the Company or any of its Consolidated Subsidiaries  (including harm to its business reputation); (ii) the indictment of the Employee for the  commission or perpetration by the Employee of any felony or any crime involving dishonesty,  moral turpitude or fraud; (iii) the material breach by the Employee of this Agreement; (iv) the  receipt of any formal written notice that any regulatory agency having jurisdiction over the  Company or the Bank intends to institute any formal regulatory action against the Employee, the  Company or the Bank (provided that the Board determines in good faith, with the Employee  abstaining from participating in the vote on the matter, that the subject matter of such action  involves acts or omissions by the Employee); (v) the exhibition by the Employee of a standard of  behavior within the scope of their employment that is materially disruptive to the orderly conduct  of the business operations of the Company or any of its Consolidated Subsidiaries (including,  without limitation, substance abuse or sexual misconduct) to a level which, in the Board’s good  faith and reasonable judgment, with the Employee abstaining from participating in the vote on  the matter, is materially detrimental to the best interests of the Company or any of its  Consolidated Subsidiaries; (vi) the failure of the Employee to devote their full business time and  attention to their employment as provided under this Agreement; or (vii) the failure of the  Employee to adhere to any policy or code of conduct of the Company or any of its Consolidated  Subsidiaries which causes, or is reasonably likely to cause, material harm to the Company or any  of its Consolidated Subsidiaries; provided that, if the Board of Directors determines in its good  faith discretion that the breach, behavior or failure specified in clauses (iii), (v) or (vi) above is  capable of being cured by the Employee, then Cause shall not be deemed to exist with respect to  such matter if the Employee cures the breach, behavior or failure to the satisfaction of the Board  of Directors within 10 days following written notice to the Employee of such breach, behavior or  failure. No act or failure to act by the Employee shall be considered willful unless the Employee  acted or failed to act with an absence of good faith and without a reasonable belief that their  action or failure to act was in the best interest of the Company or the Bank.  The Employee shall  not be deemed to have been Terminated for Cause unless and until there shall have been  delivered to the Employee a copy of a resolution, duly adopted by the affirmative vote of not less  than a majority of the entire membership of the Board of Directors at a meeting of the Board  duly called and held for such purpose (after reasonable notice to the Employee and an  opportunity for the Employee to present their views on the matter to the Board either in person  without counsel or in writing), stating that in the good faith opinion of the Board of Directors the  Employee has engaged in conduct described in the preceding sentence and specifying the  particulars thereof in detail.  The opportunity of the Employee to be heard before the Board shall  not affect the right of the Employee to arbitration as set forth in Section 13 of this Agreement.  The Board reserves the right to suspend the Employee with pay pending the determination of  Cause under this Section 1(j), as appropriate.   2. Term.  The initial term of this Agreement shall be from the Effective Date until  September 11, 2023, subject to earlier termination as provided herein.  On September 11 each  year, beginning September 11, 2022, the term shall be extended for a period of one year in  addition to the then-remaining term, provided that the Company has not given notice to the  Employee in writing at least 30 days prior to such annual anniversary date that the term of this  Agreement shall not be extended further, and provided further that the Employee has not  received an unsatisfactory performance review by either their manager, the Board of Directors or  the board of directors of the Bank.  

 

5  3. Severance Benefits.  (a) In the event of the Involuntary Termination of the Employee at the time of  or within 12 months following a Change in Control, the Company or the Bank shall, subject to  the Employee executing and not revoking a general release of claims pursuant to Section 3(b)  below, (i) pay to the Employee a lump sum cash amount equal to two times the Employee’s Cash  Compensation, with such lump sum payment to be made within 30 days following the date the  general release of claims is executed and the revocation period expires without the release being  revoked, except as otherwise set forth in Section 3(b) below, and (ii) provide Health Insurance  Benefits to each Covered Person. If the Employee is a “Specified Employee” (as defined in  Section 409A) at the time of their Separation from Service, then payments under this Section  3(a) which are not covered by either the separation pay plan exemption or the short-term deferral  exemption from Section 409A set forth in Treasury Regulations §1.409A-1(b)(9)(iii) and  §1.409A-1(b)(4), respectively, and as such constitute deferred compensation under Section  409A, shall not be paid until the 185th day following the Employee’s Separation from Service,  or their earlier death (the “Delayed Distribution Date”).  Any payments deferred on account of  the preceding sentence shall be accumulated without interest and paid with the first payment that  is payable in accordance with the preceding sentence and Section 409A.  To the extent permitted  by Section 409A, amounts payable under this Section 3(a) which are considered deferred  compensation shall be treated as payable after amounts which are not considered deferred  compensation (i.e., which are considered payable on account of an involuntary Separation from  Service as herein defined herein pursuant to a separation pay plan or pursuant to the short-term  deferral exemption).  (b) The  obligations of the Company and the Bank to pay severance or  provide benefits under Section 3(a) above is expressly conditioned upon the Employee executing  a general release of claims within the time period set forth in the release to be provided to him by  the Company and not revoking such release, with such general release to release any and all  claims, charges and complaints which the Employee may have against the Company and its  Consolidated Subsidiaries, as well as the directors, officers and employees of such entities, in  connection with the Employee’s employment with the Company and its Consolidated  Subsidiaries and the termination of such employment.  Notwithstanding any other provision  contained in this Agreement, in the event the time period that the Employee has to consider the  terms of such general release (including any revocation period under such release) commences in  one calendar year and ends in the succeeding calendar year, then the payments shall not  commence or be paid until the succeeding calendar year.    (c) Certain Reduction of Payments by the Bank.  (i) In the event that the aggregate payments or benefits to be provided  to the Employee pursuant to this Agreement, together with other payments and benefits which  the Employee has a right to receive from the Company or its Consolidated Subsidiaries or any  their successors are deemed to be parachute payments as defined in Section 280G of the Code or  any successor thereto (the “Severance Benefits”), then the aggregate present value of amounts  payable or distributable to or for the benefit of the Employee pursuant to this Agreement (such  amounts payable or distributable pursuant to this Agreement are hereinafter referred to as  

 

6  “Agreement Payments”) shall be reduced to the Reduced Amount.  The “Reduced Amount” shall  be an amount, not less than zero, expressed in present value which maximizes the aggregate  present value of Agreement Payments without causing any Severance Benefits to be  nondeductible by the Company because of Section 280G of the Code.  For purposes of this  Section 3(b), present value shall be determined in accordance with Section 280G(d)(4) of the  Code.     (ii) All determinations required to be made under this Section 3(b))  related to the application of Section 280G of the Code shall be made by the Company’s  independent auditors or by such other firm with recognized expertise as may be selected by the  Company (such auditors or, if applicable, such other firm are hereinafter referred to as the  “Advisory Firm”).  The Advisory Firm shall, within ten business days of the Date of Termination  or at such earlier time as is requested by the Company, provide to both the Company and the  Employee an opinion (and detailed supporting calculations) that the Company has substantial  authority to deduct for purposes of Section 280G of the Code (before taking into account any  amount not deductible under Section 162(m) of the Code) the full amount of the Agreement  Payments to be paid and that the Employee has substantial authority not to report on their federal  income tax return any excise tax imposed by Section 4999 of the Code with respect to the  Agreement Payments to be paid.  Any such determination and opinion by the Advisory Firm  shall be binding upon the Company and the Employee.  If the Agreement Payments are required  to be reduced to the Reduced Amount, then the cash severance payable pursuant to Section 3(a)  of this Agreement shall be reduced first. The Company and the Employee shall cooperate fully  with the Advisory Firm, including without limitation providing to the Advisory Firm all  information and materials reasonably requested by it, in connection with the making of the  determinations required under this Section 3(c).    (iii) As a result of uncertainty in the application of Section 280G of the  Code at the time of the initial determination by the Advisory Firm hereunder, it is possible that  Agreement Payments will have been made by the Company which should not have been made  (“Overpayment”) or that additional Agreement Payments will not have been made by the  Company which should have been made (“Underpayment”), in each case, consistent with the  calculations required to be made hereunder.  In the event that the Advisory Firm, based upon the  assertion by the Internal Revenue Service against the Employee of a deficiency which the  Advisory Firm believes has a high probability of success, determines that an Overpayment has  been made, any such Overpayment paid or distributed by the Company to or for the benefit of  the Employee shall be repaid by the Employee to the Company together with interest at the  applicable federal rate provided for in Section 1274 of the Code, with such repayment to be  made within 60 days following the date the amount of the Overpayment has been communicated  to the Employee. In the event that the Advisory Firm, based upon controlling precedent or other  substantial authority, determines that an Underpayment has occurred, any such Underpayment  shall be promptly paid by the Company to or for the benefit of the Employee together with  interest at the applicable federal rate provided for in Section 1274 of the Code, with such  payment to be made within 60 days following the date the amount of the Underpayment has been  communicated to the Company.    

 

7   (iv) Any payments made to the Employee pursuant to this Agreement,  or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. 1828(k) and  any regulations promulgated thereunder.   (d) Termination for Cause.  In the event of Termination for Cause, the  Company shall have no further obligation to the Employee under this Agreement after the Date  of Termination.  4. Attorneys Fees.  In the event of a dispute arising out of this Agreement,  reasonable legal fees and related expenses incurred by the Employee resulting from such dispute  shall be paid by the Company only if the Employee prevails in such dispute.  5. Non-Disclosure, Non-Competition and Non-Solicitation Provisions.  (a) Non-Disclosure.  The Employee acknowledges that he has acquired, and  will continue to acquire while employed by the Company and/or performing services for the  Consolidated Subsidiaries, special knowledge of the business, affairs, strategies and plans of the  Company and the Consolidated Subsidiaries which has not been disclosed to the public and  which constitutes confidential and proprietary business information owned by the Company and  the Consolidated Subsidiaries, including but not limited to, information about the customers,  customer lists, software, data, formulae, processes, inventions, trade secrets, marketing  information and plans, and business strategies of the Company and the Consolidated  Subsidiaries, and other information about the products and services offered or developed or  planned to be offered or developed by the Company and/or the Consolidated Subsidiaries  (“Confidential Information”).  The Employee agrees that, without the prior written consent of the  Company, he shall not, during the term of their employment or at any time thereafter, in any  manner directly or indirectly disclose any Confidential Information to any person or entity other  than the Company and the Consolidated Subsidiaries.  Notwithstanding the foregoing, if the  Employee is requested or required (including but not limited to by oral questions, interrogatories,  requests for information or documents in legal proceeding, subpoena, civil investigative demand  or other similar process) to disclose any Confidential Information, the Employee shall provide  the Company with prompt written notice of any such request or requirement so that the Company  and/or a Consolidated Subsidiary may seek a protective order or other appropriate remedy and/or  waive compliance with the provisions of this Section 5(a). If, in the absence of a protective order  or other remedy or the receipt of a waiver from the Company, the Employee is nonetheless  legally compelled to disclose Confidential Information to any tribunal or else stand liable for  contempt or suffer other censure or penalty, the Employee may, without liability hereunder,  disclose to such tribunal only that portion of the Confidential Information which is legally  required to be disclosed, provided that the Employee exercise their best efforts to preserve the  confidentiality of the Confidential Information, including without limitation by cooperating with  the Company and/or a Consolidated Subsidiary to obtain an appropriate protective order or other  reliable assurance that confidential treatment will be accorded the Confidential Information by  such tribunal.  Notwithstanding anything to the contrary herein, the parties hereto agree that  nothing contained in this Agreement limits the Employee’s ability to report information to or file  a charge or complaint with the Equal Employment Opportunity Commission, the Securities and  Exchange Commission, the Federal Deposit Insurance Corporation, the Board of Governors of  the Federal Reserve System or any other federal, state or local governmental agency or  commission that has jurisdiction over the Company or any Consolidated Subsidiary (the  

 

8  “Government Agencies”). The Employee further understands that this Agreement does not limit  their ability to communicate with any Government Agencies or otherwise participate in any  investigation or proceeding that may be conducted by any Government Agency, including  providing documents or other information, without notice to the Company and/or any  Consolidated Subsidiary. This Agreement does not limit the Employee’s right to receive an  award for information provided to any Government Agencies. In addition, pursuant to the  Defend Trade Secrets Act of 2016, the Employee understands that an individual may not be held  criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade  secret that (i) is made (A) in confidence to a federal, state or local government official, either  directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or  investigating a suspected violation of law; or (ii) is made in a complaint or other document that is  filed under seal in a lawsuit or other proceeding.  Further, an individual who files a lawsuit for  retaliation by an employer for reporting a suspected violation of law may disclose the employer's  trade secrets to the attorney and use the trade secret information in the court proceeding if the  individual (y) files any document containing the trade secret under seal; and (z) does not disclose  the trade secret, except pursuant to court order.  On the Date of Termination, the Employee shall  promptly deliver to the Company all copies of documents or other records (including without  limitation electronic records) containing any Confidential Information that is in their possession  or under their control, and shall retain no written or electronic record of any Confidential  Information.       (b) Non-Competition. As partial consideration for the severance payments and  benefits to be provided to the Employee pursuant to Section 3 of this Agreement, the Employee  agrees that during the one-year period next following the Date of Termination (the “Non- Competition Period”), the Employee shall not engage in, become interested in, directly or  indirectly, as a sole proprietor, as a partner in a partnership, or as a shareholder in a corporation,  or become associated with, in the capacity of employee, director, officer, principal, agent,  consultant, trustee or in any other capacity whatsoever, any enterprise or entity with an office  located within 50 miles of any office of the Company or any Consolidated Subsidiary during the  Non-Competition Period, which proprietorship, partnership, corporation, enterprise or other  entity is engaged in any line of business conducted by the Company or any banking subsidiary of  the Company during the Non-Competition Period, including but not limited to entities which  lend money and take deposits (in each case, a “Competing Business”), provided, however, that  this provision shall not prohibit the Employee from owning bonds, non-voting preferred stock or  up to five percent (5%) of the outstanding common stock of any Competing Business if such  common stock is publicly traded.      (c) Non-Solicitation.  As partial consideration for the severance payments and  benefits to be provided to the Employee pursuant to Section 3 of this Agreement, the Employee  agrees that during the two-year period next following the Date of Termination, the Employee  shall not directly or indirectly (i) solicit or induce, or cause others to solicit or induce, any  employee of the Company or any Consolidated Subsidiary to leave the employment of such  entities, or (ii) solicit (whether by mail, telephone, personal meeting or any other means,  excluding general solicitations of the public that are not based in whole or in part on any list of  customers of the Company or any Consolidated Subsidiary) any customer of the Company or any  Consolidated Subsidiary to transact business with any Competing Business, or to reduce or  refrain from doing any business with the Company or any Consolidated Subsidiary, or interfere  

 

9  with or damage (or attempt to interfere with or damage) any relationship between the Company  or any Consolidated Subsidiary and any such customers.   The provisions of this Section 5 shall survive any termination of the Employee’s  employment and any termination of this Agreement.  6. No Assignments.  (a) This Agreement is personal to each of the parties hereto, and neither party  may assign or delegate any of its rights or obligations hereunder without first obtaining the  written consent of the other party; provided, however, that the Company shall require any  successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise)  by an assumption agreement in form and substance satisfactory to the Employee, to expressly  assume and agree to perform this Agreement in the same manner and to the same extent that the  Company would be required to perform it if no such succession or assignment had taken place.   Failure of the Company to obtain such an assumption agreement prior to the effectiveness of any  such succession or assignment shall be a breach of this Agreement and shall entitle the Employee  to compensation and benefits from the Company in the same amount and on the same terms as  provided for upon an Involuntary Termination under Section 3 hereof.  For purposes of  implementing the provisions of this Section 6(a), the date on which any such succession becomes  effective shall be deemed the Date of Termination.  (b) This Agreement and all rights of the Employee hereunder shall inure to the  benefit of and be enforceable by the Employee’s personal and legal representatives, executors,  administrators, successors, heirs, distributees, devisees and legatees.    7. No Mitigation.  The Employee shall not be required to mitigate the amount of any  payment or benefit provided for in this Agreement by seeking other employment or otherwise,  nor shall the amount of any payment or benefit provided for in this Agreement be reduced by any  compensation earned by the Employee as the result of employment by another employer, by  retirement benefits after the Date of Termination or otherwise.  8. Notice.  For the purposes of this Agreement, notices and all other communications  provided for in this Agreement shall be in writing and shall be deemed to have been duly given  when personally delivered or sent by certified mail, return receipt requested, postage prepaid, to  the Company at its principal office, to the attention of the Board of Directors with a copy to the  Secretary of the Company, or, if to the Employee, to such home or other address as the  Employee has most recently provided in writing to the Company.  9. Amendments.  No amendments or additions to this Agreement shall be binding  unless in writing and signed by both parties, except as herein otherwise provided.    10. Headings.  The headings used in this Agreement are included solely for  convenience and shall not affect, or be used in connection with, the interpretation of this  Agreement.  

 

10  11. Severability. The provisions of this Agreement shall be deemed severable and the  invalidity or unenforceability of any provision shall not affect the validity or enforceability of the  other provisions hereof.  12. Governing Law. This Agreement shall be governed by the laws of the State of  North Carolina.  13. Arbitration.  Any dispute or controversy arising under or in connection with this  Agreement (other than relating to the enforcement of the provisions of Section 5) shall be settled  exclusively by arbitration before a single arbitrator in Asheville, North Carolina under the  commercial arbitration rules of the American Arbitration Association (the “AAA”) then in effect.   Judgment may be entered on the arbitrator's award in any court having jurisdiction. The  arbitrator shall be selected by the mutual agreement of the parties within ten (10) business days  of the date when the parties shall first have the opportunity to select an arbitrator (the “Selection  Period”); provided, however, that if the parties fail to agree upon an arbitrator by the expiration  of the Selection Period, each party shall, within five (5) business days after the expiration of the  Selection Period, select an arbitrator from the list of arbitrators provided by the AAA and the two  arbitrators so selected by each party, acting independently, shall, as soon as practicable and  within thirty (30) days of both being selected, agree upon the selection of the arbitrator to  arbitrate the controversy or claim.  14. Equitable and Other Judicial Relief.    (a) It is the intention of the parties hereto that the provisions of this  Agreement shall be enforced to the fullest extent permissible under all applicable laws and public  policies, but that the unenforceability or the modification to conform with such laws or public  policies of any provision hereof shall not render unenforceable or impair the remainder of this  Agreement.  The covenants in Section 5(b) with respect to the geographic area surrounding each  office shall be deemed to be separate covenants with respect to each office, and should any court  of competent jurisdiction conclude or find that this Agreement or any portion is not enforceable  with respect to a particular office, such conclusion or finding shall in no way render invalid or  unenforceable the covenants herein with respect to any other office.  Accordingly, if any  provision shall be determined to be invalid or unenforceable either in whole or in part, including  without limitation the geographic scope or duration of such provision, the parties hereto agree  that the court or authority making such determination shall have the power to reduce the scope or  duration of such provision or to delete specific words or phrases as necessary (but only to the  minimum extent necessary) to cause such provision or part to be valid and enforceable. If such  court or authority does not have the legal authority to take the actions described in the preceding  sentence, the parties agree to negotiate in good faith a modified provision that would, in so far as  possible, reflect the original intent of this Agreement, including without limitation Section 5  hereof, without violating applicable law.     (b) The Employee acknowledges that any breach of Section 5 will result in  irreparable damage to the Company for which the Company will not have an adequate remedy at  law, especially in light of the impossibility of ascertaining exact money damages. In addition to  any other remedies and damages available to the Company, the Employee further acknowledges  that the Company shall be entitled to seek a temporary restraining order as well as preliminary  and permanent injunctive relief hereunder to enjoin any breach or threatened breach of Section 5  

 

11  of this Agreement, and the Employee hereby consents to any restraining order or injunction  issued in favor of the Company by any court of competent jurisdiction, without prejudice to any  other right or remedy to which the Company may be entitled.  In addition, in the event of a  breach of Section 5 of this Agreement by the Employee, the Employee acknowledges that in  addition to or in lieu of the Company seeking injunctive relief, the Company may also seek a  forfeiture of the cash severance payments paid or payable to the Employee pursuant to Section 3  of this Agreement with respect to the period of the breach in an amount equal to (i) the value  ascribed to the non-competition or non-solicitation provision in Section 5 that was breached,  multiplied by (ii) a fraction, the numerator of which is the period of time that the Employee was  in breach of such provision and the denominator of which is the total duration of such provision  in Section 5.  Each of the remedies available to the Company in the event of a breach by the  Employee shall be cumulative and not mutually exclusive.    15. Counterparts.  This Agreement may be executed in one or more counterparts, each  of which shall be deemed to be an original and all of which together will constitute one and the  same instrument.    16. Changes in Statutes or Regulations.  If any statutory or regulatory provision  referenced herein is subsequently changed or re-numbered, or is replaced by a separate  provision, then the references in this Agreement to such statutory or regulatory provision shall be  deemed to be a reference to such section as amended, re-numbered or replaced.    17. Entire Agreement.  This Agreement embodies the entire agreement between the  Company and the Employee with respect to the matters agreed to herein. All prior agreements  between the Company and the Employee with respect to the matters agreed to herein, including  the Prior Agreement, are hereby superseded and shall have no force or effect.      

 

12  IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and  year first written above.  THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH  MAY BE ENFORCED BY THE PARTIES.  HOMETRUST BANCSHARES, INC.        By: Dana Stonestreet  Its:  Chairman    EMPLOYEE    /s/ Megan Pelletier   Megan PelletierDocument

Exhibit 10.1

ADVISORY AGREEMENT
among
PACIFIC OAK RESIDENTIAL TRUST, INC., PORT OP LP, PACIFIC OAK RESIDENTIAL ADVISORS, LLC, PACIFIC OAK CAPITAL ADVISORS, LLC, KEITH D. HALL, and PETER MCMILLAN III
September 9, 2022

TABLE OF CONTENTS
Page
						
	Article 1    DEFINITIONS
	1

	Article 2    APPOINTMENT
	6

	Article 3    DUTIES OF THE ADVISOR
	6

	3.01    Organizational and Offering Services
	7

	3.02    Acquisition Services
	7

	3.03    Asset Management Services
	7

	Article 4    AUTHORITY OF THE ADVISOR
	9

	4.01    General
	9

	4.02    Powers of the Advisor
	9

	4.03    Approval by the Board
	9

	4.04    Modification or Revocation of Authority of Advisor
	10

	Article 5    BANK ACCOUNTS
	10

	Article 6    RECORDS AND FINANCIAL STATEMENTS
	10

	Article 7    LIMITATION ON ACTIVITIES
	10

	Article 8    FEES
	10

	8.01    Acquisition Fees
	10

	8.02    Asset Management Fees
	11

	8.03    Disposition Fees
	11

	8.04    Incentive Fees
	11

	8.05    Legacy Incentive Fees
	11

	8.06    Offering Incentive Fees
	12

	8.07    Hall and McMillan Fee Reduction
	13

	8.08    Election of Payment in Shares
	13

	Article 9    EXPENSES
	14

	9.01    General
	14

	9.02    Timing of and Additional Limitations on Reimbursements
	15

	9.03    Advancement of Other Organization and Offering Expenses
	15

	Article 10    RELATIONSHIP OF the ADVISOR AND the COMPANY; OTHER ACTIVITIES OF THE ADVISOR
	15

	10.01    Relationship
	15

	10.02    Time Commitment
	15

	Article 11    THE PACIFIC OAK NAME
	15

	Article 12    CHANGE OF CONTROL
	16

	12.01    Change of Control
	16

	Article 13    TERM AND TERMINATION OF THE AGREEMENT
	16

	13.01    Term
	16

	13.02    Termination by Either Party
	16

	13.03    Payments on Termination and Survival of Certain Rights and Obligations
	16

	Article 14    ASSIGNMENT
	17

	Article 15    INDEMNIFICATION AND LIMITATION OF LIABILITY
	17

	15.01    Indemnification
	17

	15.02    Limitation on Payment of Expenses
	17

i

						
	Article 16    MISCELLANEOUS
	17

	16.01    Notices
	17

	16.02    Modification
	18

	16.03    Severability
	18

	16.04    Construction
	18

	16.05    Entire Agreement
	18

	16.06    Waiver
	18

	16.07    Gender
	18

	16.08    Titles Not to Affect Interpretation
	18

	16.09    Counterparts
	18

ii

ADVISORY AGREEMENT
This Advisory Agreement, entered into as of September 9, 2022, but effective as of September 1, 2022 (this “Agreement”), is among Pacific Oak Residential Trust, Inc., a Maryland corporation (the “Company”); PORT OP LP, a Delaware limited partnership (the “Partnership”); Pacific Oak Residential Advisors, LLC, a Delaware limited liability company (the “Advisor”); for purposes of Article 8, Messrs. Keith D. Hall and Peter McMillan III; and for purposes of Article 9, Pacific Oak Capital Advisors, LLC, a Delaware limited liability company (the “Sponsor”).
W I T N E S S E T H
WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities set forth herein; and 
WHEREAS, the Advisor is willing to undertake to render these services on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree:
Article 1
DEFINITIONS
The following defined terms used in this Agreement shall have the meanings specified below:
“Acquisition Expenses” means any and all expenses, excluding the fees payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Partnership, the Advisor or any of their Affiliates in connection with the selection, acquisition or development of any Property, or other Residential Asset, whether or not acquired, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, due diligence, nonrefundable option payments on assets not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to the selection, acquisition or development of any Property or other potential investment.
“Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with investing in Residential Assets. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be development fees and construction fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property. The Advisor shall not be entitled to more than one Acquisition Fee for each Property. 
“Affiliate” or “Affiliated” shall mean, with respect 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 the 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.
“BPT Unit Issuance Value” means $3,026,497. 
“BPT Unit Redemption Value” means $6,477,147.
“BPT Units” means 510,816 limited partnership units in the Partnership previously issued to BPT Holdings LLC, a Delaware limited liability company, and assigned to the Partnership on June 27, 2022 in consideration of the BPT Unit Redemption Value.
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“Board of Directors” or “Board” means persons holding such office, as of any particular time, under the Charter, whether they be the Directors named therein or additional or successor Directors.
“Bylaws” means the bylaws of the Company, as amended from time to time.
“Cause” means (a) if the Company or the Advisor materially breaches any provision of this Agreement and the breach continues for a period of thirty days after written notice thereof by the non-breaching party specifying the breach and requesting that the breach be remedied in the thirty-day period or (b) a Change of Control.
“Change of Control” means the occurrence of any of the following: (i) any “person” (within the meaning of Section 13(d) of the Exchange Act, as enacted and in force on the date hereof), other than POSOR or its Affiliates, is or becomes the “beneficial owner” (as that term is defined in Rule 13d-3, as enacted and in force on the date hereof, under the Exchange Act) of securities of the Company representing more than 50% of the combined voting power of the Company’s securities then outstanding; (ii) there occurs a merger, consolidation or other reorganization of the Company which is not approved by the Board of Directors; (iii) there occurs a sale, exchange, transfer or other disposition of substantially all the assets of the Company to another Person, which disposition is not approved by the Board of Directors; or (iv) there occurs a contested proxy solicitation of the Stockholders that results in the contesting party electing candidates to a majority of the Board of Directors’ positions next up for election.
“Change of Control Termination Notice” shall have the meaning set forth in Article 12 of this Agreement.
“Charter” means the charter of the Company.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.
“Common Shares” means the shares of common stock of the Company, par value $.001 per share.
“Company” means Pacific Oak Residential Trust, Inc., a corporation organized under the laws of the State of Maryland.
“Competitive Real Estate Commission” means a real estate or brokerage commission for the purchase or Sale of property that is reasonable, customary, and competitive in light of the size, type, and location of the property.
“Contract Sales Price” means the total consideration received by the Partnership for the Sale of a Residential Asset or other Permitted Investment. 
“Cost of Residential Assets” means the sum of (i) with respect to Residential Assets wholly owned, directly or indirectly, by the Partnership, the amount actually paid by the Partnership for the purchase of each Residential Asset, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus amounts funded or budgeted at the time of acquisition for capital expenditures for the development, construction or improvement of Residential Assets and (ii) in the case of Residential Assets owned by any Joint Venture in which the Partnership is, directly or indirectly, a co-venturer, the portion of the amount actually paid for the purchase of each Residential Asset, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus amounts funded or budgeted at the time of acquisition for capital expenditures for the development, construction or improvement of Residential Assets, that is attributable to the Partnership’s investment in the Joint Venture. The Cost of Residential Assets is computed without regard to whether any portion of the cost is funded using debt financing secured by, or attributable to, the Residential Asset.
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“Dealer Manager” means (i) Pacific Oak Capital Markets, LLC, a Delaware limited liability company, or (ii) any successor dealer manager to the Company.
“Director” means a member of the Board of Directors of the Company.
“Distributions” shall have the meaning set forth in the Company’s Charter.
“Distribution Fees” means ongoing distribution fees paid to the Dealer Manager in connection with Class T Common Shares sold in the Private Offering.
“GAAP” means accounting principles generally accepted in the United States.
“Hall and McMillan Interest” shall have the meaning described in Article 8.
“Hall and McMillan Fee Reduction” shall have the meaning described in Article 8.
“Initial Capitalization in November 2019” means $55,000,000.
“IPO” means an initial public offering of Common Shares in the public markets with a concurrent Listing of Common Shares.
“Joint Venture” means any arrangement between the Company or any Affiliate including the Partnership on the one hand and a third party on the other hand pursuant to which the Company and the third party invest in Residential Assets or other Permitted Investments.
“Legacy Catch-Up” shall have the meaning described in Article 8. 
“Legacy Excess Profits” shall have the meaning described in Article 8. 
“Legacy Hurdle Amount” means that amount that results in a 5% cumulative, non-compounded, annual return on Legacy Invested Capital (calculated like simple interest on a daily basis based on a three hundred sixty-five day year). For purposes of calculating the Legacy Hurdle Amount, Legacy Invested Capital shall be determined for each day during the period for which the Legacy Hurdle Amount is being calculated.
“Legacy Incentive Fee” shall have the meaning described in Article 8.
“Legacy Invested Capital” means (a) the Initial Capitalization in November 2019 (which is deemed invested on November 5, 2019), plus the BPT Unit Issuance Value (which is deemed invested on July 1, 2020), plus additional amounts invested by POSOR in Common Shares and/or OP Units since November 5, 2019, reduced by (b) the BPT Unit Redemption Value (which was paid to repurchase the BPT Units on June 27, 2022) plus any amounts paid by the Company to redeem or repurchase Common Shares from POSOR, plus any amounts paid by the Partnership to redeem or repurchase OP Units from POSOR (other than the BPT Units).
“Legacy Total Return” shall have the meaning described in Article 8. 
“Listed” or “Listing” shall mean the listing of any or all of the Common Shares on a national securities exchange.
“Market Value” means: in the case of an IPO, (a) the value of the outstanding Common Shares of the Company that are Listed measured by taking the average closing price or the average of the bid and ask prices, as the case may be, over a period of 30 days during which the Common Shares are traded with the period beginning 30 days after the date that the Common Shares are Listed plus (b) with respect to any classes of Common Shares that are not Listed and/or any outstanding OP Units held by third parties other than the Company, the value of such outstanding securities using a methodology that is reasonably based on the valuation determined in (a) above.
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“Merger or Sale Consideration Amount” means: (a) (i) in the case of a merger or sale for all or substantially all of the Company’s equity interests or Properties in which the consideration consists solely of cash, the total consideration to be received by holders of Common Shares outstanding immediately prior to the closing of such merger or sale; (ii) in the case of a merger or share exchange in which the consideration consists of securities traded on a national securities exchange, the product of (x) the number of shares of such securities received by the Stockholders at the closing of the merger or share exchange and (y) the market value of such securities, measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 20 consecutive days during which such securities are traded, with such 20-trading day period ending on the trading day prior to the closing date of the merger or share exchange; (iii) in the case of a merger or share exchange in which the consideration consist of securities that are not traded on a national securities exchange, the value ascribed to such securities in the merger agreement; and (iv) in the case of a merger, sale or share exchange in which the consideration is some combination of that described above, the sum of clauses (i) through (iii), as applicable plus (b) with respect to any outstanding OP Units held by third parties other than the Company, the value of such outstanding securities using a methodology that is reasonably based on the valuation determined in (a) above.
“MGCL” means the Maryland General Corporation Law, as amended from time to time.
“NAV” means net asset value as calculated in accordance with the valuation guidelines approved by the Board of Directors.
“NAV REIT” means a REIT that is not publicly traded on a stock exchange, regularly calculates and discloses the NAV of its shares, conducts offerings of its stock at prices based on the NAV per share, and repurchases its shares of stock at prices based on the NAV per share. 
“Offering Catch-Up” shall have the meaning described in Article 8. 
“Offering Excess Profits” shall have the meaning described in Article 8. 
“Offering Hurdle Amount” means that amount that results in a 5% cumulative, non-compounded, annual return on Offering Invested Capital (calculated like simple interest on a daily basis based on a three hundred sixty-five day year). For purposes of calculating the Offering Hurdle Amount, Offering Invested Capital shall be determined for each day during the period for which the Offering Hurdle Amount is being calculated.
“Offering Incentive Fee” shall have the meaning described in Article 8.
“Offering Invested Capital” means the amount calculated by multiplying the total number of OP Units issued by the Partnership from the commencement of the Private Offering to the Trigger Date (other than any OP Units issued to POSOR, or issued to the Company in connection with an issuance of Common Shares to POSOR) by the most recently disclosed NAV per unit as of the date of issuance (including OP Units issued to the Company), reduced by any amounts paid by the Partnership to redeem or repurchase OP Units (other than any OP Units redeemed or repurchased from POSOR, or redeemed or repurchased from the Company in connection with an redemption or repurchase of Common Shares from POSOR) (including OP Units redeemed or repurchased from the Company).
“Offering Total Return” shall have the meaning described in Article 8. 
“OP Units” means units of limited partnership interest in the Partnership.
“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with any offering of its Common Shares, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting or placement agent fees, brokerage discounts and commissions (including fees of counsel to the underwriter or placement agent); any expense allowance granted by the Company to the underwriter or placement agent or any reimbursement of expenses of the underwriter, placement agent, Sponsor or Advisor by the Company; legal fees; due diligence expenses; marketing expenses; expenses for printing, engraving and mailing; 
4

charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under federal and state laws, including taxes and fees and the fees and expenses of accountants and attorneys.
“Other Organization and Offering Expenses” means all Organization and Offering Expenses excluding total underwriting or placement agent fees, brokerage discounts and commissions.
“Partnership” means PORT OP LP, a Delaware limited partnership formed to own and operate investments in Residential Assets and other Permitted Investments on behalf of the Company.
“POSOR” means Pacific Oak Strategic Opportunity REIT, Inc., a Maryland corporation.
“Permitted Investments” means all investments in which the Company may acquire an interest, either directly or indirectly, including Properties, Single Family Housing Interests and short-term investments acquired for purposes of cash management, and including ownership interests in a Joint Venture.
“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
“Private Offering” means the private offering of Common Shares made pursuant to the Company’s private offering of up to $500 million of Common Shares in the primary offering, and $50 million of Common Shares through the distribution reinvestment plan, expected to commence in the second or third quarter of 2022.
“Private Placement Memorandum” means a confidential private placement memorandum, as amended or supplemented, pursuant to which the Company offers its Common Shares or other equity securities.
“Property” or “Properties” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, or any real property acquired, transferred or conveyed to a Joint Venture in which the Company is, directly or indirectly, a co-venturer.
“Property Manager” means an entity that has been retained to perform and carry out property-management services at one or more of the Properties.
“Public NAV REIT Conversion” means conversion of the Company to a publicly-offered perpetual life NAV REIT. 
“REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.
“Residential Assets” means Single Family Rental Properties and Single Family Housing Interests.
“Sale” means any transaction or series of related transactions whereby: (A) the Company, directly or indirectly, including through the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, and including any event with respect to any Property or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction; (B) the Company, directly or indirectly, including through the Partnership, sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest in any Joint Venture in which it is, directly or 
5

indirectly, a co-venturer; or (C) any Joint Venture in which the Company, directly or indirectly, through the Partnership is, a co-venturer, sells, grants, transfers, conveys, or relinquishes its ownership of any Property or other Permitted Investment or portion thereof, including any event with respect to any Property or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by the Joint Venture or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction.
“SEC” means the United States Securities and Exchange Commission.
“Single Family Rental Properties” means a residential building consisting of one to four units for rent.
“Single Family Housing Interest” means securities or other interests that generate cash flow derived from single family housing such as mortgages secured by single family homes, subordinated, mezzanine or bridge loans made to owners or investors in single family homes and other related structured investments.
“Sponsor” means Pacific Oak Capital Advisors, LLC, a Delaware limited liability company.
“Stockholders” means the record holders of the Common Shares or any other series of class of stock of the Company.
“Termination Date” means the date of termination of the Agreement determined in accordance with Article 13 hereof.
“Total Incentive Fee” shall have the meaning described in Article 8. 
“Trigger Date” means the effective date of any subordinated incentive fee becoming due pursuant to Article 8.
“Triggering Event” means an event which triggers the Company’s obligation to pay a subordinated incentive fee pursuant to Article 8 to the Advisor: (1) an IPO, a sale of all or substantially all of the Company’s equity interests or Properties, a merger, or a share exchange, in a transaction that provides Stockholders with any combination of cash and/or securities of a publicly traded company in exchange for their Common Shares; (2) a Public NAV REIT Conversion; or (3) if this Agreement is terminated (including through non-renewal) (except for cause) by the Company.
Article 2
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.
Article 3
DUTIES OF THE ADVISOR
The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets, subject to the condition that any investment advisory services provided with respect to securities shall be provided by a registered investment adviser. The Advisor undertakes to make investment decisions on behalf of the Company subject to the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:
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3.01Organizational and Offering Services. The Advisor shall perform all services related to the organization of the Company or any Offering, other than services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.
3.02    Acquisition Services.
(i)Provide the Company with relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;
(ii)Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Residential Assets and other Permitted Investments will be made; (c) cause the Company to, directly or indirectly, acquire Residential Assets and other Permitted Investments; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Residential Assets and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Residential Assets and other Permitted Investments, or to engage an approved Property Manager;
(iii)Perform due diligence on prospective investments;
(iv)Prepare reports regarding prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments;
(v)Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Company; and
(vi)Deliver to or maintain on behalf of the Company copies of all appraisals or valuations obtained in connection with the Company’s investments.
3.03    Asset Management Services.
(vii)Real Estate and Related Services:
(a)Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;
(b)Negotiate any borrowings that the Company, directly or indirectly, makes and to cause the Company or the underlying borrower to pay any amounts due on the borrowings;
(c)Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company;
(d)Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s investments;
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(e)Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Residential Assets and other Permitted Investments on an overall portfolio basis;
(f)Consult with the Company’s officers and the Board and assist the Board in formulating and implementing the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, 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;
(g)Oversee and evaluate the performance by the Property Manager(s) of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;
(h)Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties;
(i)Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget;
(j)Coordinate and manage relationships between the Company and any co-venturers; and
(k)Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, Sale and refinancing opportunities.
(i)Accounting and Other Administrative Services:
(l)Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company;
(m)From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement;
(n)Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations;
(o)Provide financial and operational planning services;
(p)Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the Internal Revenue Service and any other regulatory agency;
(q)Maintain and preserve all appropriate books and records of the Company;
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(r)Provide services necessary to ensure the Company’s compliance with the rules and regulations governing qualification as a REIT, including any asset, income and shareholder testing, and addressing with the Board, if necessary, any actions required to maintain REIT compliance;
(s)Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related tax matters;
(t)Provide the Company with all necessary cash management services;
(u)Manage and coordinate with the transfer agent payment of dividends and other distributions to Stockholders;
(v)Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining necessary insurance coverage based upon risk management determinations;
(w)Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters;
(x)Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto;
(y)Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law;
(z)Notify the Board of all proposed material transactions before they are completed; and
(aa)Do all things necessary to assure its ability to render the services described in this Agreement.
Article 4
AUTHORITY OF THE ADVISOR
4.01    General. All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter. Notwithstanding the foregoing, any investment advisory services provided with respect to securities shall be provided by a registered investment adviser.
4.02    Powers of the Advisor. Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.
4.03    Approval by the Board. Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized committees 
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thereof if the Charter or the MGCL require the prior approval of the Board. If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.
4.04    Modification or Revocation of Authority of Advisor. The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.
Article 5
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 such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor. The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.
Article 6
RECORDS AND FINANCIAL STATEMENTS
The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company or persons with rights to inspect the books and records, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees paid or reimbursements made under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor delivers to the Company for distribution to Stockholders shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests.
Article 7
LIMITATION ON ACTIVITIES
Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Common Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, (v) violate the Charter or Bylaws, or (vi) cause the Company’s parent, Pacific Oak Strategic Opportunity REIT, Inc., to violate its charter (the “SOR Charter”).
Article 8
FEES
8.01    Acquisition Fees. As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Residential Assets and other Permitted Investments, the Company shall pay the Advisor an Acquisition Fee for each such investment equal to 1.0% of the Cost of Residential Assets for any given transaction. With respect to the acquisition 
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of any Residential Asset or other Permitted Investment through any Joint Venture in which the Partnership is, directly or indirectly, a partner, member or stockholder the Acquisition Fee payable to the Advisor shall equal 1.0% of each investment in the Joint Venture. The Advisor shall submit an invoice to the Company following the closing or closings of each investment. Generally, the Acquisition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company. The Advisor may, in its discretion, waive or defer any Acquisition Fee, in whole or in part, in its sole discretion. All or any portion of the Acquisition Fees deferred shall not bear interest and may be paid by the Company in the Joint Venture in such other fiscal year as the Advisor shall determine.
8.02    Asset Management Fees. 
(i)    Subject to Section 8.02(ii) below, as compensation for the services described in Section 3.03 the Company shall pay the Advisor an asset management fee equal to 0.25% quarterly (1% annually) on the aggregate value of the Partnership’s Residential Assets and other Permitted Investments, as determined in accordance with the valuation guidelines approved by the Board of Directors, for the quarter most recently ended. The Advisor shall submit an invoice to the Company, accompanied by a computation of the fees for the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last day of such quarter, or the first business day following the last day of such quarter. In the event this Agreement commences on a date other than the first day of a quarter, the Advisor will be entitled to receive its prorated asset management fee calculated from the date of commencement. In the event this Agreement is terminated or its term expires without renewal, the Adviser will be entitled to receive its prorated asset management fee through the date of termination. Such pro ration shall take into account the number of days of any partial quarter for which this Agreement was in effect.
(ii)    If a Triggering Event has not occurred within two years following the termination of the Private Offering, the asset management fee described in Section 8.01(i) shall be reduced to an asset management fee equal to 0.1875% quarterly (0.75% annually) on the aggregate value of the Partnership’s Residential Assets and other Permitted Investments, as determined in accordance with the valuation guidelines approved by the Board of Directors, for the quarter most recently ended. 
8.03    Disposition Fees. If the Advisor or any of its Affiliates provide a substantial amount of services in connection with a Sale, the Advisor or such Affiliate shall receive a fee at the closing (the “Disposition Fee”) equal to 1% of the Contract Sales Price; provided, however, that if in connection with such Sale commissions are paid to third parties other than the Advisor or its Affiliates, the fee paid to the Advisor or any of its Affiliates may not exceed the commissions paid to such unaffiliated third parties. Any Disposition Fee payable under this Section 8.03 may be paid in addition to commissions paid to non-Affiliates, provided that the total commissions (including such Disposition Fee) paid to all Persons by the Company for each Sale shall not exceed an amount equal to the lesser of (i) 6% of the aggregate Contract Sales Price of each Residential Asset or other Permitted Investment or (ii) the Competitive Real Estate Commission for each Residential Asset or other Permitted Investment.
8.04    Incentive Fees. Upon a Triggering Event, the Company shall pay to the Advisor a Total Incentive Fee, as calculated following the methodology below. If the Company pays the Advisor the Total Incentive Fee associated with one Triggering Event, the Company will not pay the Advisor any further incentive fees. For each Triggering Event, the Total Incentive Fee is equal to the sum of (x) the applicable Legacy Incentive Fee described in Section 8.05, subject to the Hall and McMillan Fee Reduction described in Section 8.07, and (y) the applicable Offering Incentive Fee described in Section 8.06. Any Total Incentive Fee due on Public NAV REIT Conversion will be payable to the Advisor in Common Shares and such shares will be subordinate to repurchase requests from other Stockholders under the Company’s share repurchase plan (although no deduction for early repurchase will apply to the Advisor’s Common Shares).
8.05    Legacy Incentive Fees.
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(i)Legacy Incentive Fee Due on IPO, Sale, or Merger. In the event of an IPO, a sale of all or substantially all of the Company’s equity interests or Properties, a merger, or a share exchange, in a transaction that provides Stockholders with any combination of cash and/or securities of a publicly traded company in exchange for their Common Shares, then a Legacy Incentive Fee shall be due to the Advisor using the formula below under Section 8.05(ii), but the Market Value or the Merger or Sale Consideration Amount, as applicable, of the OP Units and/or Common Shares held by POSOR will be used instead of the then-current NAV of the OP Units and/or Common Shares held by POSOR when calculating Legacy Total Return.
(ii)Legacy Incentive Fee Due on Public NAV REIT Conversion. If the Company completes a Public NAV REIT Conversion, and has satisfied all properly submitted requests under the Company’s share repurchase program for the 12 months prior to the Trigger Date, the Advisor will be entitled to a Legacy Incentive Fee equal to 12.5% of the Legacy Total Return, subject to a 5% Legacy Hurdle Amount with a Legacy Catch-Up. Specifically, the Legacy Incentive Fee will equal: 
(a)First, if the Legacy Total Return exceeds the Legacy Hurdle Amount (any such excess, the “Legacy Excess Profits”), 100% of such Legacy Excess Profits until the total amount allocated to the Advisor hereunder equals 12.5% of the sum of (x) the Legacy Hurdle Amount and (y) any amount due to the Advisor pursuant to this clause (this is referred to as a “Legacy Catch-Up”); and 
(b)Second, to the extent there are remaining Legacy Excess Profits, 12.5% of such remaining Legacy Excess Profits. 
(c)“Legacy Total Return” shall equal the sum of (i) all distributions accrued or paid (without duplication) on OP Units and Common Shares held by POSOR between November 5, 2019 and the Trigger Date, plus (ii) all distributions accrued or paid (without duplication) on OP Units held by BPT Holdings LLC between November 5, 2019 and the commencement of the Private Offering, plus (iii) the amount by which (a) the sum of the then-current NAV of the outstanding OP Units and/or Common Shares held by POSOR, plus any amounts POSOR received from the Company or the Partnership upon repurchase or redemption of Common Shares or OP Units, plus the BPT Unit Redemption Value exceeds (b) the sum of the Initial Capitalization in November 2019 and all subsequent amounts POSOR invested in the Company and/or the Partnership in exchange for Common Shares and/or OP Units, plus the BPT Unit Issuance Value, plus (iv) the accrued Legacy Incentive Fee, if any (after taking into account the fee reduction in Section 8.07).
(iii)    Legacy Incentive Fee Due on Termination. The Legacy Incentive Fee calculated pursuant to 8.05(ii) above will also be due if this Agreement is terminated (including through non-renewal) (except for cause) by the Company. If a fee is due, the Company will only pay the amounts due from the proceeds from the Sale of one or more assets or with the excess proceeds from financing or refinancing the Company’s assets. Amounts not paid will not bear interest and will only be paid from the excess proceeds from future asset Sales, financings or refinancing.
8.06    Offering Incentive Fees.
(i)    Offering Incentive Fee Due on IPO, Sale, or Merger. In the event of an IPO, a sale of all or substantially all of the Company’s equity interests or Properties, a merger, or a share exchange, in a transaction that provides Stockholders with any combination of cash and/or securities of a publicly traded company in exchange for their Common Shares, then an Offering Incentive Fee shall be due to the Advisor using the formula below under Section 8.06(ii), but the Market Value or the Merger or Sale Consideration Amount, as applicable, of the OP Units and/or Common Shares held by parties other than the Company or POSOR will be used instead of the then-current NAV of the OP Units and/or Common Shares held by parties other than the Company or POSOR when calculating Offering Total Return.
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(ii)    Offering Incentive Fee Due on Public NAV REIT Conversion. If the Company completes a Public NAV REIT Conversion, and has satisfied all properly submitted requests under the Company’s share repurchase program for the 12 months prior to the Trigger Date, the Advisor will be entitled to an Offering Incentive Fee equal to 12.5% of the Offering Total Return, subject to a 5% Offering Hurdle Amount with an Offering Catch-Up. Specifically, the Offering Incentive Fee will equal: 
(a)First, if the Offering Total Return exceeds the Offering Hurdle Amount (any such excess, the “Offering Excess Profits”), 100% of such Offering Excess Profits until the total amount allocated to the Advisor hereunder equals 12.5% of the sum of (x) the Offering Hurdle Amount and (y) any amount due to the Advisor pursuant to this clause (this is commonly referred to as an “Offering Catch-Up”); and 
(b)Second, to the extent there are remaining Offering Excess Profits, 12.5% of such remaining Offering Excess Profits. 
(c)“Offering Total Return” shall equal the sum of (i) all distributions accrued or paid (without duplication) on outstanding OP Units and Common Shares held by parties other than the Company or POSOR between commencement of the Private Offering and the Trigger Date, plus (ii) the amount by which (a) the sum of the then-current NAV of the outstanding OP Units and/or Common Shares held by parties other than the Company or POSOR, plus any amounts parties other than the Company or POSOR received from the Company or the Partnership upon repurchase or redemption of Common Shares or OP Units exceeds (b) the sum of the NAV, at the time of purchase, of the OP Units and/or Common Shares purchased by parties other than the Company or POSOR from the commencement of the Private Offering, plus (iii) the accrued Offering Incentive Fee, if any, plus (iv) all Distribution Fees paid to the Dealer Manager in connection with Common Shares sold in the Private Offering.
(iii)    Offering Incentive Fee Due on Termination. The Offering Incentive Fee calculated pursuant to 8.06(ii) above will also be due if this Agreement is terminated (including through non-renewal) (except for cause) by the Company. If a fee is due, the Company will only pay the amounts due from the proceeds from the Sale of one or more assets or with the excess proceeds from financing or refinancing the Company’s assets. Amounts not paid will not bear interest and will only be paid from the excess proceeds from future asset Sales, financings or refinancing.
8.07    Hall and McMillan Fee Reduction. Messrs. Peter McMillan and Keith Hall have an economic interest in the cash flows of BPT Holdings, LLC, which in turn owns 100% of Pacific Oak Residential, Inc. (“PORI”), which in turn owns 100% of the Advisor (the “Hall and McMillan Interest”). As of the date of this Agreement, the Hall and McMillan Interest is 52%. If a Legacy Incentive Fee becomes due pursuant to Article 8, and the Hall and McMillan Interest is at least 52% at that time, the Company will pay to the Advisor the sum of (i) the Legacy Incentive Fee, reduced by that portion of the Legacy Incentive Fee which is equivalent to the Hall and McMillan Interest, and (ii) the Offering Incentive Fee. If a Legacy Incentive Fee becomes due pursuant to Article 8 and the Hall and McMillan Interest is less than 52% at that time, the Company shall pay the Advisor the sum of (i) 48% of the Legacy Incentive Fee and (ii) the Offering Incentive Fee. In addition, Messrs. McMillan and Hall undertake and agree not to share, directly or indirectly, in the portion of the Legacy Incentive Fee paid by the Company to the Advisor, but rather that it shall be distributed in its entirety to the other members of BPT Holdings, LLC. Messrs. McMillan and Hall agree and PORA agrees, on behalf of itself and its direct and indirect owners, to work in good faith with the other members of BPT Holdings, LLC to ensure that Messrs. McMillan and Hall are not responsible for paying income tax on such amount, as it will be distributed to other members of BPT Holdings, LLC and not to Messrs. McMillan and Hall.
8.08    Election of Payment in Shares. Subject to Section 8.04, the Advisor may elect, in its sole discretion, to receive payment of any fees described herein in cash or cash equivalent aggregate NAV amounts of Class A Common Shares, with the value per Class A Common Share equal to the most recent NAV per Class A Common Share determined in accordance with the Company’s valuation guidelines. 
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Such Common Shares issued to the Advisor are eligible to participate in the Company’s share repurchase program, subject to the applicable limits, holding period and early repurchase deduction therein, provided that in the applicable repurchase period all repurchase requests made in good order from unaffiliated stockholders are satisfied first as a priority.
Article 9
EXPENSES
9.01General. In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, but subject to Section 9.03 below, the Company shall pay directly or reimburse the Advisor for Other Organization and Offering Expenses incurred by the Advisor or its Affiliates in connection with the Offering and for all of the third-party expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement; provided, however, neither the Advisor nor any of its Affiliates shall be entitled to any reimbursement for any cost or expenses for salaries, bonuses and benefits of persons employed by the Advisor or its Affiliates who perform services for the Company or in any way related to the overhead or operations of the Advisor or its Affiliates; provided further that any expenses incurred by the Dealer Manager or relating to its activities must be pre-approved by the Company in order to be eligible for reimbursement pursuant to this section. The third-party expenses for which payment or reimburse will be allowed include, but are not limited to:
(i)    Acquisition Expenses incurred in connection with the selection and acquisition of Residential Assets and other Permitted Investments, including expenses incurred related to assets pursued or considered but not ultimately acquired by the Company;
(ii)    The cost of goods and services used by the Company and obtained from third parties other than the Advisor or its Affiliates;
(iii)    Interest and other costs for borrowed money, including discounts, points and other similar fees;
(iv)    Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;
(v)    All expenses, except expenses incurred by any Property Manager affiliated with the Advisor, of managing, improving, developing, operating and selling Residential Assets and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to the Residential Assets and other Permitted Investments;
(vi)    All expenses in connection with payments to the Board and meetings of the Board and Stockholders;
(vii)    Expenses of providing services for and maintaining communications with Stockholders, including the cost of preparing, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;
(viii)    Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and directors;
(ix)    Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board or any committee of the Board;
(x)    Expenses for the Company to comply with all applicable laws, regulations and ordinances;
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(xi)    Expenses connected with payments of Distributions and stock dividends made or caused to be made by the Company to the Stockholders;
(xii)    Expenses of merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and
(xiii)    All other third-party out-of-pocket costs incurred by the Advisor in performing its duties hereunder.
9.02Timing of and Additional Limitations on Reimbursements.
(i)    Expenses incurred by the Advisor on behalf of the Company and reimbursable to the Advisor pursuant to this Article 9 shall be reimbursed upon delivery by the Advisor to the Board of a statement documenting the reimbursable expenses for the prior quarter; provided that the statement shall be delivered within 45 days after the end of each quarter.
9.03Advancement of Other Organization and Offering Expenses. 
(i)    The Sponsor will advance the Company’s Other Organization and Offering Expenses through the first anniversary of the date of the commencement of the Private Offering. 
(ii)    The Company will reimburse the Sponsor for such advanced expenses ratably over the 60 months following the first anniversary of the date of the commencement of the Private Offering. 
Article 10
RELATIONSHIP OF THE ADVISOR AND THE COMPANY; OTHER ACTIVITIES OF THE ADVISOR
10.01Relationship. 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 partners or joint venturers. This Agreement shall not limit or restrict the right of any manager, director, officer, employee or equity holder 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 promptly disclose to the Board the existence of any additional condition or circumstance, existing or anticipated, of which it has knowledge that 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.
10.02Time Commitment. The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.
Article 11
THE PACIFIC OAK NAME
The Advisor and its Affiliates have a proprietary interest in the name “Pacific Oak.” The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “Pacific Oak” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “Pacific Oak” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “Pacific Oak” or any other word or words that might, in the 
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reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any of its Affiliates. At such time, the Company will also make any changes to any trademarks, service marks or other marks necessary to remove any references to the word “Pacific Oak.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “Pacific Oak” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.
Article 12
CHANGE OF CONTROL
12.01    Change of Control. Notwithstanding any other provisions of this Agreement to the contrary, in the event of a Change of Control of the Company, either the Company or the Advisor shall have the right, subject to the Company’s and the Partnership’s right to assign this Agreement in accordance with Section 14, upon sixty (60) days prior written notice to the other (the “Change of Control Termination Notice”), to terminate this Agreement. If the Advisor or the Company so elects to terminate this Agreement pursuant to this Section 12, the Termination Date shall be the date specified in the Change of Control Termination Notice, but in any event no later than thirty (30) days after the Change of Control of the Company.
Article 13
TERM AND TERMINATION OF THE AGREEMENT
13.01    Term. The term of this Agreement is effective as of September 1, 2022 and shall have a term of two years and may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties. The Company will evaluate the performance of the Advisor before renewing this Agreement, and each such renewal shall be for a term of no more than one year. Any such renewal must be approved by the Board of Directors.
13.02    Termination by Either Party. This Agreement may be terminated for Cause upon 60 days written notice by either the Company or the Advisor. The provisions of Articles 1, 11, 13, 15 and 16 shall survive termination of this Agreement.
13.03    Payments on Termination and Survival of Certain Rights and Obligations.
(i)    After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination (a) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement and (b) any incentive fees due under Article 8 hereunder. Notwithstanding the foregoing, no incentive fee will be paid if this Agreement is terminated for Cause by the Company in accordance with Section 13.02 following an event described in clause (a) of the definition of Cause.
(ii)    The Advisor shall promptly upon termination:
(a)    pay over to the Company all monies, if any, after deducting any accrued fees and reimbursement for its expenses to which it is then entitled;
(b)    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;
(c)    deliver to the Board all documents including, but not limited to those related to the Company’s assets then in the custody of the Advisor; and
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(d)    cooperate with the Company to provide an orderly transition of advisory functions.
Article 14
ASSIGNMENT
This Agreement may be assigned by the Advisor to an Affiliate with the consent 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 that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of the assignment in the same manner as the Company is bound by this Agreement.
Article 15
INDEMNIFICATION AND LIMITATION OF LIABILITY
15.01Indemnification. The Company shall, to the fullest extent to which the Company many indemnify its directors under the MGCL, indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, partners, agents and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, incurred by these persons or entities to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance.
15.02Limitation on Payment of Expenses. The Company shall pay or reimburse the reasonable legal expenses and other costs incurred by the Advisor or its Affiliates in advance of the final disposition of a proceeding subject to the limitations and requirements set forth in the MGCL.
Article 16
MISCELLANEOUS
16.01    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 Charter, the Bylaws or is 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 Company or the Board:
Pacific Oak Residential Trust, Inc.
13901 Sutton Park Dr S. Suite B 160
Jacksonville, FL 32224
Email: mgough@pac-oak.com
Attention: Michael Gough
To the Advisor:
Pacific Oak Residential Advisors, LLC
13901 Sutton Park Dr S. Suite B 160
Jacksonville, FL 32224
Email: baitkenhead@pac-oak.com
Attention: Benedict Aitkenhead 
Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 16.01.
17

16.02    Modification. This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns.
16.03    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.
16.04    Construction. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.
16.05    Entire Agreement. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance 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.
16.06    Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
16.07    Gender. 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.
16.08    Titles Not to Affect Interpretation. The titles of Articles and Sections 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.
16.09    Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date and year first above written.
PACIFIC OAK RESIDENTIAL TRUST, INC.
By: /s/ Michael S. Gough
Name:    Michael S. Gough
Title:    Director, Chief Executive Officer and President
PORT OP LP

By: Pacific Oak Residential Trust, Inc., its general partner

 By: /s/ Michael S. Gough
 Name:    Michael S. Gough
 Title:    Director, Chief Executive Officer and President
PACIFIC OAK RESIDENTIAL ADVISORS, LLC
																								
	By:	 		 	Pacific Oak Residential, Inc., sole Member	
				
		 		 	By:	 	/s/ Michael S. Gough	
		 		 		 	Michael S. Gough, President	

PACIFIC OAK CAPITAL ADVISORS, LLC
																								
	By:	 		 	Pacific Oak Holding Group, LLC, sole Member	
				
		 		 	By:	 	/s/ Peter McMillan III	
		 		 		 	Peter McMillan III, Member	
				
		 		 	By:		/s/ Keith D. Hall	
		 		 		 	Keith D. Hall, Member	

By: /s/ Keith D. Hall
Name:    Keith D. Hall

By: /s/ Peter McMillan III
Name:    Peter McMillan III
    
[Signature Page to Advisory Agreement]

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