Document:

EX-10.3

Exhibit
10.3

 

BLUEROCK ENHANCED MULTIFAMILY REIT, INC.

LONG TERM INCENTIVE PLAN

 

 

 

BLUEROCK ENHANCED MULTIFAMILY REIT, INC.

LONG TERM INCENTIVE PLAN

	 	 	 	 	 	 	 
	ARTICLE 1
	 	PURPOSE 	 	 	1	 
	1.1
	 	General 	 	 	1	 
	ARTICLE 2
	 	DEFINITIONS 	 	 	1	 
	2.1
	 	Definitions 	 	 	1	 
	ARTICLE 3
	 	EFFECTIVE TERM OF PLAN 	 	 	6	 
	3.1
	 	Effective Date 	 	 	6	 
	3.2
	 	Term of Plan 	 	 	6	 
	ARTICLE 4
	 	ADMINISTRATION 	 	 	7	 
	4.1
	 	Committee 	 	 	7	 
	4.2
	 	Actions and Interpretations by the Committee 	 	 	7	 
	4.3
	 	Authority of Committee 	 	 	7	 
	4.4
	 	Award Certificates 	 	 	8	 
	ARTICLE 5
	 	SHARES SUBJECT TO THE PLAN 	 	 	8	 
	5.1
	 	Number of Shares 	 	 	8	 
	5.2
	 	Share Counting 	 	 	8	 
	5.3
	 	Stock Distributed 	 	 	9	 
	ARTICLE 6
	 	ELIGIBILITY 	 	 	9	 
	6.1
	 	General 	 	 	9	 
	ARTICLE 7
	 	STOCK OPTIONS 	 	 	9	 
	7.1
	 	General 	 	 	9	 
	7.2
	 	Incentive Stock Options 	 	 	10	 
	ARTICLE 8
	 	STOCK APPRECIATION RIGHTS 	 	 	10	 
	8.1
	 	Grant of Stock Appreciation Rights 	 	 	10	 
	ARTICLE 9
	 	RESTRICTED STOCK, RESTRICTED STOCK
UNITS AND DEFERRED STOCK UNITS	 	 	11	 
	9.1
	 	Grant of Restricted Stock,
Restricted Stock Units and Deferred Stock Units	 	 	11	 
	9.2
	 	Issuance and Restrictions 	 	 	11	 
	9.3
	 	Forfeiture 	 	 	11	 
	9.4
	 	Delivery of Restricted Stock 	 	 	11	 

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	ARTICLE 10
	 	PERFORMANCE AWARDS 	 	 	12	 
	10.1
	 	Grant of Performance Awards 	 	 	12	 
	10.2
	 	Performance Goals 	 	 	12	 
	ARTICLE 11
	 	DIVIDEND EQUIVALENTS 	 	 	12	 
	11.1
	 	Grant of Dividend Equivalents 	 	 	12	 
	ARTICLE 12
	 	STOCK OR OTHER STOCK-BASED AWARDS 	 	 	12	 
	12.1
	 	Grant of Stock or Other Stock-Based Awards 	 	 	13	 
	ARTICLE 13
	 	PROVISIONS APPLICABLE TO AWARDS 	 	 	13	 
	13.1
	 	Term of Awards 	 	 	13	 
	13.2
	 	Form of Payment of Awards 	 	 	13	 
	13.3
	 	Limits on Transfer 	 	 	13	 
	13.4
	 	Beneficiaries 	 	 	13	 
	13.5
	 	Stock Trading Restrictions 	 	 	13	 
	13.6
	 	Acceleration for Any Reason 	 	 	14	 
	13.7
	 	Forfeiture Events 	 	 	14	 
	13.8
	 	Substitute Awards 	 	 	14	 
	ARTICLE 14
	 	CHANGES IN CAPITAL STRUCTURE 	 	 	14	 
	14.1
	 	Mandatory Adjustments 	 	 	14	 
	14.2
	 	Discretionary Adjustments 	 	 	14	 
	14.3
	 	General 	 	 	15	 
	ARTICLE 15
	 	AMENDMENT, MODIFICATION AND TERMINATION	 	 	15	 
	15.1
	 	Amendment, Modification and Termination 	 	 	15	 
	15.2
	 	Awards Previously Granted 	 	 	15	 
	15.3
	 	Compliance Amendments 	 	 	16	 
	ARTICLE 16
	 	GENERAL PROVISIONS 	 	 	16	 
	16.1
	 	Rights of Participants 	 	 	16	 
	16.2
	 	Withholding 	 	 	17	 
	16.3
	 	Special Provisions Related to Section 409A of the Code 	 	 	17	 
	16.4
	 	Unfunded Status of Awards 	 	 	18	 
	16.5
	 	Relationship to Other Benefits 	 	 	18	 
	16.6
	 	Expenses 	 	 	18	 

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	16.7
	 	Titles and Headings 	 	 	18	 
	16.8
	 	Gender and Number 	 	 	18	 
	16.9
	 	Fractional Shares 	 	 	18	 
	16.10
	 	Government and Other Regulations 	 	 	18	 
	16.11
	 	Governing Law 	 	 	20	 
	16.12
	 	Additional Provisions 	 	 	20	 
	16.13
	 	No Limitations on Rights of Company 	 	 	20	 
	16.14
	 	Indemnification 	 	 	20	 

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BLUEROCK ENHANCED MULTIFAMILY REIT, INC.

LONG TERM INCENTIVE PLAN

ARTICLE 1

PURPOSE

     1.1. GENERAL. The purpose of the Bluerock Enhanced Multifamily REIT, Inc. Long Term
Incentive Plan (the “Plan”) is to enable Bluerock Enhanced Multifamily REIT, Inc. (the “Company”)
and its Affiliates (as defined below) to (1) provide an incentive to employees, officers,
directors, consultants and advisors to increase the value of the Company’s common stock, (2) give
such persons a stake in the Company’s future that corresponds to the stake of each of the Company’s
stockholders, and (3) obtain or retain the services of these persons who are considered essential
to the Company’s long-term success, by offering such persons an opportunity to participate in the
Company’s growth through ownership of the Company’s common stock or through other equity-related
awards. Accordingly, the Plan permits the grant of incentive awards from time to time to selected
employees, officers, directors, consultants and advisors of the Company and its Affiliates.

ARTICLE 2

DEFINITIONS

     2.1. DEFINITIONS. When a word or phrase appears in this Plan with the initial letter
capitalized, and the word or phrase does not commence a sentence, the word or phrase shall
generally be given the meaning ascribed to it in this Section or in Section 1.1 unless a clearly
different meaning is required by the context. The following words and phrases shall have the
following meanings:

     (a) “Affiliate” means (i) any Subsidiary or Parent, or (ii) an entity that directly or
through one or more intermediaries controls, is controlled by or is under common control
with, the Company, as determined by the Committee.

     (b) “Award” means any Option, Stock Appreciation Right, Restricted Stock, Restricted
Stock Unit, Deferred Stock Unit, Performance Award, Dividend Equivalent, Other Stock-Based
Award, or any other right or interest relating to Stock or cash, granted to a Participant
under the Plan.

     (c) “Award Certificate” means a written document, in such form as the Committee
prescribes from time to time, setting forth the terms and conditions of an Award. Award
Certificates may be in the form of individual award agreements or certificates or a program
document describing the terms and provisions of an Awards or series of Awards under the
Plan. The Committee may provide for the use of electronic, internet or other non-paper
Award Certificates, and the use of electronic, internet or other non-paper means for the
acceptance thereof and actions thereunder by a Participant.

     (d) “Beneficial Owner” shall have the meaning given such term in Rule 13d-3 of the
General Rules and Regulations under the 1934 Act.

     (e) “Board” means the Board of Directors of the Company.

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     (f) “Cause” as a reason for a Participant’s termination of employment shall have the
meaning assigned such term in the employment, severance or similar agreement, if any,
between such Participant and the Company or an Affiliate, provided, however that if there
is no such employment, severance or similar agreement in which such term is defined, and
unless otherwise defined in the applicable Award Certificate, “Cause” shall mean any of the
following acts by the Participant, as determined by the Committee: gross neglect of duty,
prolonged absence from duty without the consent of the Company, material breach by the
Participant of any published Company code of conduct or code of ethics; or willful
misconduct, misfeasance or malfeasance of duty which is reasonably determined to be
detrimental to the Company. With respect to a Participant’s termination of directorship,
“Cause” means an act or failure to act that constitutes cause for removal of a director
under applicable Maryland law. The determination of the Committee as to the existence of
“Cause” shall be conclusive on the Participant and the Company.

     (g) “Change in Control” means and includes the occurrence of any one of the following
events but shall specifically exclude a Public Offering:

     (i) individuals who, on the Effective Date, constitute the Board (the
“Incumbent Directors”) cease for any reason to constitute at least a majority of
such Board, provided that any person becoming a director after the Effective Date
and whose election or nomination for election was approved by a vote of at least a
majority of the Incumbent Directors then on the Board shall be an Incumbent
Director; provided, however, that no individual initially elected
or nominated as a director of the Company as a result of an actual or threatened
election contest with respect to the election or removal of directors (“Election
Contest”) or other actual or threatened solicitation of proxies or consents by or
on behalf of any Person other than the Board (“Proxy Contest”), including by reason
of any agreement intended to avoid or settle any Election Contest or Proxy Contest,
shall be deemed an Incumbent Director; or

     (ii) any Person becomes a Beneficial Owner, directly or indirectly, of either
(A) 40% or more of the then-outstanding shares of common stock of the Company
(“Company Common Stock”) or (B) securities of the Company representing 40% or more
of the combined voting power of the Company’s then outstanding securities eligible
to vote for the election of directors (the “Company Voting Securities”);
provided, however, that for purposes of this subsection (ii), the
following acquisitions of Company Common Stock or Company Voting Securities shall
not constitute a Change in Control: (w) an acquisition directly from the Company,
(x) an acquisition by the Company or a Subsidiary, (y) an acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company or
any Subsidiary, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as
defined in subsection (iii) below); or

     (iii) the consummation of a reorganization, merger, consolidation, statutory
share exchange or similar form of corporate transaction involving the Company or a
Subsidiary (a “Reorganization”), or the sale or other disposition of all or
substantially all of the Company’s assets (a “Sale”) or the acquisition of assets
or stock of another corporation or other entity (an “Acquisition”), unless
immediately following such Reorganization, Sale or Acquisition: (A) all or
substantially all of the individuals and entities who were the Beneficial Owners,
respectively, of the outstanding Company Common Stock and outstanding

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Company Voting Securities immediately prior to such Reorganization, Sale or
Acquisition beneficially own, directly or indirectly, more than 40% of,
respectively, the then outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the entity resulting from such
Reorganization, Sale or Acquisition (including, without limitation, an entity which
as a result of such transaction owns the Company or all or substantially all of the
Company’s assets or stock either directly or through one or more subsidiaries, the
“Surviving Entity”) in substantially the same proportions as their ownership,
immediately prior to such Reorganization, Sale or Acquisition, of the outstanding
Company Common Stock and the outstanding Company Voting Securities, as the case may
be, and (B) no Person (other than (x) the Company or any Subsidiary, (y) the
Surviving Entity or its ultimate parent entity, or (z) any employee benefit plan
(or related trust) sponsored or maintained by any of the foregoing) is the
Beneficial Owner, directly or indirectly, of 40% or more of the total common stock
or 40% or more of the total voting power of the outstanding voting securities
eligible to elect directors of the Surviving Entity, and (C) at least a majority of
the members of the board of directors of the Surviving Entity were Incumbent
Directors at the time of the Board’s approval of the execution of the initial
agreement providing for such Reorganization, Sale or Acquisition (any
Reorganization, Sale or Acquisition which satisfies all of the criteria specified
in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

     (iv) approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.

     (h) “Charter” means the articles of incorporation of the Company, as such articles of
incorporation may be amended from time to time.

     (i) “Code” means the Internal Revenue Code of 1986, as amended from time to time. For
purposes of this Plan, references to sections of the Code shall be deemed to include
references to any applicable regulations thereunder and any successor or similar provision.

     (j) “Committee” means the committee of the Board described in Article 4.

     (k) “Company” means Bluerock Enhanced Multifamily REIT, Inc., a Maryland corporation,
or any successor corporation.

     (l) “Continuous Status as a Participant” means the absence of any interruption or
termination of service as an employee, officer, director, consultant or advisors of the
Company or any Affiliate, as applicable; provided, however, that for purposes of an
Incentive Stock Option “Continuous Status as a Participant” means the absence of any
interruption or termination of service as an employee of the Company or any Parent or
Subsidiary, as applicable, pursuant to applicable tax regulations. Continuous Status as a
Participant shall not be considered interrupted in the following cases: (i) a Participant
transfers employment between the Company and an Affiliate or between Affiliates, or (ii) in
the discretion of the Committee as specified at or prior to such occurrence, in the case of
a spin-off, sale or disposition of the Participant’s employer from the Company or any
Affiliate, or (iii) any leave of absence authorized in

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writing by the Company prior to its commencement; provided, however, that for purposes
of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed, on the 91st
day of such leave any Incentive Stock Option held by the Participant shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Whether military, government or other service or other leave of
absence shall constitute a termination of Continuous Status as a Participant shall be
determined in each case by the Committee at its discretion, and any determination by the
Committee shall be final and conclusive.

     (m) “Deferred Stock Unit” means a right granted to a Participant under Article 9 to
receive Shares of Stock (or the equivalent value in cash or other property if the Committee
so provides) at a future time as determined by the Committee, or as determined by the
Participant within guidelines established by the Committee in the case of voluntary
deferral elections.

     (n) “Disability” of a Participant means that the Participant (i) is unable to engage
in any substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months, or (ii) is, by reason of any medically
determinable physical or mental impairment which can be expected to result in death or can
be expected to last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an accident and
health plan covering employees of the Participant’s employer. If the determination of
Disability relates to an Incentive Stock Option, Disability means Permanent and Total
Disability as defined in Section 22(e)(3) of the Code. In the event of a dispute, the
determination whether a Participant is Disabled will be made by the Committee and may be
supported by the advice of a physician competent in the area to which such Disability
relates.

     (o) “Dividend Equivalent” means a right granted to a Participant under Article 11.

     (p) “Effective Date” has the meaning assigned such term in Section 3.1.

     (q) “Eligible Participant” means an employee, officer, consultant, advisor or director
of the Company or any Affiliate.

     (r) “Exchange” means any national securities exchange on which the Stock may from time
to time be listed or traded.

     (s) “Fair Market Value,” on any date, means (i) if the Stock is listed on a securities
exchange, the closing sales price on such exchange or over such system on such date or, in
the absence of reported sales on such date, the closing sales price on the immediately
preceding date on which sales were reported, or (ii) if the Stock is not listed on a
securities exchange, the mean between the bid and offered prices as quoted by Nasdaq for
such date, provided that if it is determined that the fair market value is not properly
reflected by such Nasdaq quotations, Fair Market Value will be determined by such other
method as the Committee determines in good faith to be reasonable and in compliance with
Code Section 409A.

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     (t) “Grant Date” of an Award means the first date on which all necessary corporate
action has been taken to approve the grant of the Award as provided in the Plan, or such
later date as is determined and specified as part of that authorization process. Notice of
the grant shall be provided to the grantee within a reasonable time after the Grant Date.

     (u) “Incentive Stock Option” means an Option that is intended to be an incentive stock
option and meets the requirements of Section 422 of the Code or any successor provision
thereto.

     (v) “Independent Director” means a director of the Company who is not a common law
employee of the Company and who meets the additional requirements set forth for an
“independent director” in the Charter.

     (w) “Nonstatutory Stock Option” means an Option that is not an Incentive Stock Option.

     (x) “Option” means a right granted to a Participant under Article 7 of the Plan to
purchase Stock at a specified price during specified time periods. An Option may be either
an Incentive Stock Option or a Nonstatutory Stock Option.

     (y) “Other Stock-Based Award” means a right, granted to a Participant under Article
12, that relates to or is valued by reference to Stock or other Awards relating to Stock.

     (z) “Parent” means a corporation, limited liability company, partnership or other
entity which owns or beneficially owns a majority of the outstanding voting stock or voting
power of the Company. Notwithstanding the above, with respect to an Incentive Stock Option,
Parent shall have the meaning set forth in Section 424(e) of the Code.

     (aa) “Participant” means a person who, as an employee, officer, director, consultant
or advisor of the Company or any Affiliate, has been granted an Award under the Plan;
provided that in the case of the death of a Participant, the term “Participant” refers to a
beneficiary designated pursuant to Section 13.4 or the legal guardian or other legal
representative acting in a fiduciary capacity on behalf of the Participant under applicable
state law and court supervision.

     (bb) “Performance Award” means any award granted under the Plan pursuant to Article
10.

     (cc) “Person” means any individual, entity or group, within the meaning of Section
3(a)(9) of the 1934 Act and as used in Section 13(d)(3) or 14(d)(2) of the 1934 Act.

     (dd) “Plan” means the Bluerock Enhanced Multifamily REIT, Inc. Long Term Incentive
Plan, as amended from time to time.

     (ee) “Public Offering” shall occur on the closing date of a public offering of any
class or series of the Company’s equity securities pursuant to a registration statement
filed by the Company under the 1933 Act.

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     (ff) “Restricted Stock” means Stock granted to a Participant under Article 9 that is
subject to certain restrictions and to risk of forfeiture.

     (gg) “Restricted Stock Unit” means a right granted to a Participant under Article 9 to
receive shares of Stock (or the equivalent value in cash or other property if the Committee
so provides) in the future, which right is subject to certain restrictions and to risk of
forfeiture.

     (hh) “Shares” means shares of the Company’s Stock. If there has been an adjustment or
substitution pursuant to Section 14.1, the term “Shares” shall also include any shares of
stock or other securities that are substituted for Shares or into which Shares are adjusted
pursuant to Section 14.1.

     (ii) “Stock” means the $0.01 par value common stock of the Company and such other
securities of the Company as may be substituted for Stock pursuant to Section 14.1.

     (jj) “Stock Appreciation Right” or “SAR” means a right granted to a Participant under
Article 8 to receive a payment equal to the difference between the Fair Market Value of a
Share as of the date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.

     (kk) “Subsidiary” means any corporation, limited liability company, partnership or
other entity of which a majority of the outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Company. Notwithstanding the above, with
respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in
Section 424(f) of the Code.

     (ll) “1933 Act” means the Securities Act of 1933, as amended from time to time.

     (mm) “1934 Act” means the Securities Exchange Act of 1934, as amended from time to
time.

ARTICLE 3

EFFECTIVE TERM OF PLAN

     3.1. EFFECTIVE DATE. The Plan shall be effective as of the date it is approved by
both the Board and the shareholders of the Company (the “Effective Date”).

     3.2. TERMINATION OF PLAN. The Plan shall terminate on the tenth anniversary of the
Effective Date unless earlier terminated as provided herein. The termination of the Plan on such
date shall not affect the validity of any Award outstanding on the date of termination, which shall
continue to be governed by the applicable terms and conditions of this Plan. Notwithstanding the
foregoing, no Incentive Stock Options may be granted more than ten (10) years after the earlier of
(a) adoption of this Plan by the Board, or (b) the Effective Date.

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ARTICLE 4

ADMINISTRATION

     4.1. COMMITTEE. The Plan shall be administered by a Committee appointed by the Board
(which Committee shall consist of at least two directors) or, at the discretion of the Board from
time to time, the Plan may be administered by the Board. The members of the Committee shall be
appointed by, and may be changed at any time and from time to time in the discretion of, the Board.
It is intended that at least two of the directors appointed to serve on the Committee shall be
shall be “non-employee directors” (within the meaning of Rule 16b-3 promulgated under the 1934 Act)
and that any such members of the Committee who do not so qualify shall abstain from participating
in any decision to make or administer Awards that are made to Eligible Participants who at the time
of consideration for such Award are persons subject to the short-swing profit rules of Section 16
of the 1934 Act. However, the mere fact that a Committee member shall fail to qualify as a
“non-employee director” or shall fail to abstain from such action shall not invalidate any Award
made by the Committee which Award is otherwise validly made under the Plan. The members of the
Committee shall be appointed by, and may be changed at any time and from time to time in the
discretion of, the Board. The Board may reserve to itself any or all of the authority and
responsibility of the Committee under the Plan or may act as administrator of the Plan for any and
all purposes. To the extent the Board has reserved any authority and responsibility or during any
time that the Board is acting as administrator of the Plan, it shall have all the powers of the
Committee hereunder, and any reference herein to the Committee (other than in this Section 4.1)
shall include the Board. To the extent any action of the Board under the Plan conflicts with
actions taken by the Committee, the actions of the Board shall control.

     4.2. ACTION AND INTERPRETATIONS BY THE COMMITTEE. For purposes of administering the
Plan, the Committee may from time to time adopt rules, regulations, guidelines and procedures for
carrying out the provisions and purposes of the Plan and make such other determinations, not
inconsistent with the Plan, as the Committee may deem appropriate. The Committee’s interpretation
of the Plan, any Awards granted under the Plan, any Award Certificate and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and conclusive on all
parties. Each member of the Committee is entitled to, in good faith, rely or act upon any report
or other information furnished to that member by any officer or other employee of the Company or
any Affiliate, the Company’s or an Affiliate’s independent certified public accountants, Company
counsel or any executive compensation consultant or other professional retained by the Company to
assist in the administration of the Plan.

     4.3. AUTHORITY OF COMMITTEE. The Committee has the exclusive power, authority and
discretion to:

     (a) Grant Awards;

     (b) Designate Participants;

     (c) Determine the type or types of Awards to be granted to each Participant;

     (d) Determine the number of Awards to be granted and the number of Shares or dollar
amount to which an Award will relate;

     (e) Determine the terms and conditions of any Award granted under the
Plan;

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     (f) Prescribe the form of each Award Certificate, which need not be identical for each
Participant;

     (g) Decide all other matters that must be determined in connection with an Award;

     (h) Establish, adopt or revise any rules, regulations, guidelines or procedures as it
may deem necessary or advisable to administer the Plan;

     (i) Make all other decisions and determinations that may be required under the Plan or
as the Committee deems necessary or advisable to administer the Plan;

     (j) Amend the Plan or any Award Certificate as provided herein; and

     (k) Adopt such modifications, procedures, and subplans as may be necessary or
desirable to comply with provisions of the laws of non-U.S. jurisdictions in which the
Company or any Affiliate may operate, in order to assure the viability of the benefits of
Awards granted to participants located in such other jurisdictions and to meet the
objectives of the Plan.

     4.4. AWARD CERTIFICATES. Each Award shall be evidenced by an Award Certificate. Each
Award Certificate shall include such provisions, not inconsistent with the Plan, as may be
specified by the Committee.

ARTICLE 5

SHARES SUBJECT TO THE PLAN

     5.1. NUMBER OF SHARES. Subject to adjustment as provided in Sections 5.2 and Section
14.1, the aggregate number of Shares reserved and available for issuance pursuant to Awards granted
under the Plan shall be 2,000,000. The maximum number of Shares that may be issued upon exercise
of Incentive Stock Options granted under the Plan shall be 2,000,000.

     5.2. SHARE COUNTING. Shares covered by an Award shall be subtracted from the Plan
share reserve as of the date of grant, but shall be added back to the Plan share reserve in
accordance with this Section 5.2.

     (a) To the extent that an Award is canceled, terminates, expires, is forfeited or
lapses for any reason, any unissued or forfeited Shares subject to the Award will again be
available for issuance pursuant to Awards granted under the Plan.

     (b) Shares subject to Awards settled in cash will again be available for issuance
pursuant to Awards granted under the Plan.

     (c) Shares withheld from an Award or delivered by a Participant to satisfy minimum tax
withholding requirements will again be available for issuance pursuant to Awards granted
under the Plan.

     (d) If the exercise price of an Option is satisfied by delivering Shares to the
Company (by either actual delivery or attestation), only the number of Shares issued to

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the Participant in excess of the Shares tendered (by delivery or attestation) shall be
considered for purposes of determining the number of Shares remaining available for
issuance pursuant to Awards granted under the Plan.

     (e) To the extent that the full number of Shares subject to an Option or SAR is not
issued upon exercise of the Option or SAR for any reason, including by reason of
net-settlement of the Award, only the number of Shares issued and delivered upon exercise
of the Option or SAR shall be considered for purposes of determining the number of Shares
remaining available for issuance pursuant to Awards granted under the Plan.

     (f) To the extent that the full number of Shares subject to an Award other than
an Option or SAR is not issued for any reason, including by reason of failure to achieve
maximum performance goals, only the number of Shares issued and delivered shall be
considered for purposes of determining the number of Shares remaining available for
issuance pursuant to Awards granted under the Plan.

     (g) Substitute Awards granted pursuant to Section 13.8 of the Plan shall not
count against the Shares otherwise available for issuance under the Plan under Section 5.1.

     5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may consist, in
whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open
market.

ARTICLE 6

ELIGIBILITY

     6.1. GENERAL. Awards may be granted only to Eligible Participants. Incentive Stock
Options may be granted to only to Eligible Participants who are employees of the Company or a
Parent or Subsidiary as defined in Section 424(e) and (f) of the Code. Eligible Participants who
are service providers to an Affiliate may be granted Options or SARs under this Plan only if the
Affiliate qualifies as an “eligible issuer of service recipient stock” within the meaning of
§1.409A-1(b)(5)(iii)(E) of the final regulations under Code Section 409A.

ARTICLE 7

STOCK OPTIONS

     7.1. GENERAL. The Committee is authorized to grant Options to Participants on the
following terms and conditions:

     (a) EXERCISE PRICE. The exercise price per Share under an Option shall be
determined by the Committee, provided that the exercise price for any Option (other than an
Option issued as a substitute Award pursuant to Section 13.8) shall not be less than the
Fair Market Value as of the Grant Date.

     (b) PROHIBITION ON REPRICING. Except as otherwise provided in Section 14.1,
the exercise price of an Option may not be reduced, directly or indirectly by cancellation
and regrant or otherwise, without the prior approval of the shareholders of
the Company.

9

 

     (c) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine the time
or times at which an Option may be exercised in whole or in part, subject to Section
7.1(e). The Committee shall also determine the performance or other conditions, if any,
that must be satisfied before all or part of an Option may be exercised or vested.

     (d) PAYMENT. The Committee shall determine the methods by which the exercise
price of an Option may be paid, the form of payment, including, without limitation, cash,
Shares, or other property (including “cashless exercise” arrangements), and the methods by
which Shares shall be delivered or deemed to be delivered to Participants.

     (e) EXERCISE TERM. Except for Nonstatutory Options granted to Participants
outside the United States, no Option granted under the Plan shall be exercisable for more
than ten years from the Grant Date.

     (f) NO DEFERRAL FEATURE. No Option shall provide for any feature for the
deferral of compensation other than the deferral of recognition of income until the
exercise or disposition of the Option.

     7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options granted under
the Plan must comply with the requirements of Section 422 of the Code. If all of the requirements
of Section 422 of the Code are not met, the Option shall automatically become a Nonstatutory Stock
Option.

ARTICLE 8

STOCK APPRECIATION RIGHTS

     8.1. GRANT OF STOCK APPRECIATION RIGHTS. The Committee is authorized to grant Stock
Appreciation Rights to Participants on the following terms and conditions:

     (a) RIGHT TO PAYMENT. Upon the exercise of a SAR, the Participant to whom it
is granted has the right to receive, for each Share with respect to which the SAR is being
exercised, the excess, if any, of:

     (1) The Fair Market Value of one Share on the date of exercise; over

     (2) The base price of the SAR as determined by the Committee, which shall not
be less than the Fair Market Value of one Share on the Grant Date.

     (b) PROHIBITION ON REPRICING. Except as otherwise provided in Section 14.1,
the base price of a SAR may not be reduced, directly or indirectly by cancellation and
regrant or otherwise, without the prior approval of the shareholders of the Company.

     (c) EXERCISE TERM. Except for SARs granted to Participants outside the United
States, no SAR shall be exercisable for more than ten years from the Grant Date.

10

 

     (d) NO DEFERRAL FEATURE. No SAR shall provide for any feature for
the deferral of compensation other than the deferral of recognition of income until
the exercise or disposition of the SAR.

     (e) OTHER TERMS. All SARs shall be evidenced by an Award Certificate.
Subject to the limitations of this Article 8, the terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other terms and conditions
of any SAR shall be determined by the Committee at the time of the grant of the Award and
shall be reflected in the Award Certificate.

ARTICLE 9

RESTRICTED STOCK, RESTRICTED STOCK UNITS

AND DEFERRED STOCK UNITS

     9.1. GRANT OF RESTRICTED STOCK, RESTRICTED STOCK UNITS AND DEFERRED STOCK UNITS. The
Committee is authorized to make Awards of Restricted Stock, Restricted Stock Units or Deferred
Stock Units to Participants in such amounts and subject to such terms and conditions as may be
selected by the Committee. An Award of Restricted Stock, Restricted Stock Units or Deferred Stock
Units shall be evidenced by an Award Certificate setting forth the terms, conditions, and
restrictions applicable to the Award.

     9.2. ISSUANCE AND RESTRICTIONS. Restricted Stock, Restricted Stock Units or Deferred
Stock Units shall be subject to such restrictions on transferability and other restrictions as the
Committee may impose (including, without limitation, limitations on the right to vote Restricted
Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse
separately or in combination at such times, under such circumstances, in such installments, upon
the satisfaction of performance goals or otherwise, as the Committee determines at the time of the
grant of the Award or thereafter. Except as otherwise provided in an Award Certificate or any
special Plan document governing an Award, the Participant shall have all of the rights of a
shareholder with respect to the Restricted Stock, and the Participant shall have none of the rights
of a shareholder with respect to Restricted Stock Units or Deferred Stock Units until such time as
Shares of Stock are paid in settlement of the Restricted Stock Units or Deferred Stock Units.
Unless otherwise provided in the applicable Award Certificate, awards of Restricted Stock will be
entitled to full dividend rights and any dividends paid thereon will be paid or distributed to the
holder no later than the end of the calendar year in which the dividends are paid to shareholders
or, if later, the 15th day of the third month following the date the dividends are paid
to shareholders.

     9.3. FORFEITURE. Except as otherwise determined by the Committee at the time of the
grant of the Award or thereafter, upon termination of Continuous Status as a Participant during the
applicable restriction period or upon failure to satisfy a performance goal during the applicable
restriction period, Restricted Stock or Restricted Stock Units that are at that time subject to
restrictions shall be forfeited.

     9.4. DELIVERY OF RESTRICTED STOCK. Shares of Restricted Stock shall be delivered to
the Participant at the time of grant either by book-entry registration or by delivering to the
Participant, or a custodian or escrow agent (including, without limitation, the Company or one or
more of its employees) designated by the Committee, a stock certificate or certificates registered
in the name of the Participant. If physical certificates representing shares of Restricted Stock
are registered in the name of the Participant, such certificates must bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such Restricted Stock.

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ARTICLE 10

PERFORMANCE AWARDS

     10.1. GRANT OF PERFORMANCE AWARDS. The Committee is authorized to grant any Award
under this Plan, including cash-based Awards, with performance-based vesting criteria, on such
terms and conditions as may be selected by the Committee. The Committee shall have the complete
discretion to determine the number of Performance Awards granted to each Participant and to
designate the provisions of such Performance Awards as provided in Section 4.3. All Performance
Awards shall be evidenced by an Award Certificate or a written program established by the
Committee, pursuant to which Performance Awards are awarded under the Plan under uniform terms,
conditions and restrictions set forth in such written program.

     10.2. PERFORMANCE GOALS. The Committee may establish performance goals for
Performance Awards which may be based on any criteria selected by the Committee. Such performance
goals may be described in terms of Company-wide objectives or in terms of objectives that relate to
the performance of the Participant, an Affiliate or a division, region, department or function
within the Company or an Affiliate. If the Committee determines that a change in the business,
operations, corporate structure or capital structure of the Company or the manner in which the
Company or an Affiliate conducts its business, or other events or circumstances render performance
goals to be unsuitable, the Committee may modify such performance goals in whole or in part, as the
Committee deems appropriate. If a Participant is promoted, demoted or transferred to a different
business unit or function during a performance period, the Committee may determine that the
performance goals or performance period are no longer appropriate and may (i) adjust, change or
eliminate the performance goals or the applicable performance period as it deems appropriate to
make such goals and period comparable to the initial goals and period, or (ii) make a cash payment
to the participant in an amount determined by the Committee.

ARTICLE 11

DIVIDEND EQUIVALENTS

     11.1. GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend
Equivalents with respect to Awards granted hereunder, subject to such terms and conditions as may
be selected by the Committee. Dividend Equivalents shall entitle the Participant to receive
payments equal to dividends with respect to all or a portion of the number of Shares subject to an
Award, as determined by the Committee. The Committee may provide that Dividend Equivalents be paid
or distributed when accrued or be deemed to have been reinvested in additional Shares, or otherwise
reinvested. Unless otherwise provided in the applicable Award Certificate, Dividend Equivalents
will be paid or distributed no later than the 15th day of the 3rd month
following the later of (i) the calendar year in which the corresponding dividends were paid to
shareholders, or (ii) the first calendar year in which the Participant’s right to such Dividends
Equivalents is no longer subject to a substantial risk of forfeiture.

ARTICLE 12

STOCK OR OTHER STOCK-BASED AWARDS

     12.1. GRANT OF STOCK OR OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other Awards that are
payable in, valued in whole or in part by reference to, or otherwise based on or related to Shares,
as deemed by the Committee to be consistent with the purposes of the Plan, including without
limitation Shares awarded purely as a “bonus” and not subject to any

12

 

restrictions or conditions, convertible or exchangeable debt securities, other rights convertible
or exchangeable into Shares, and Awards valued by reference to book value of Shares or the value of
securities of or the performance of specified Parents or Subsidiaries. The Committee shall
determine the terms and conditions of such Awards.

ARTICLE 13

PROVISIONS APPLICABLE TO AWARDS

     13.1. TERM OF AWARD. The term of each Award shall be for the period as determined by
the Committee, provided that in no event shall the term of any Option or a Stock Appreciation Right
exceed a period of ten years from its Grant Date.

     13.2. FORM OF PAYMENT FOR AWARDS. At the discretion of the Committee, payment of
Awards may be made in cash, Stock, a combination of cash and Stock, or any other form of property
as the Committee shall determine. In addition, payment of Awards may include such terms,
conditions, restrictions and/or limitations, if any, as the Committee deems appropriate, including,
in the case of Awards paid in the form of Stock, restrictions on transfer and forfeiture
provisions. Further, payment of Awards may be made in the form of a lump sum, or in installments,
as determined by the Committee.

     13.3. LIMITS ON TRANSFER. No right or interest of a Participant in any unexercised or
restricted Award may be pledged, encumbered, or hypothecated to or in favor of any party other than
the Company or an Affiliate, or shall be subject to any lien, obligation, or liability of such
Participant to any other party other than the Company or an Affiliate. No unexercised or
restricted Award shall be assignable or transferable by a Participant other than by will or the
laws of descent and distribution; provided, however, that the Committee may (but need not) permit
other transfers (other than transfers for value) where the Committee concludes that such
transferability (i) does not result in accelerated taxation, (ii) does not cause any Option
intended to be an Incentive Stock Option to fail to be described in Code Section 422(b), and (iii)
is otherwise appropriate and desirable, taking into account any factors deemed relevant, including
without limitation, state or federal tax or securities laws applicable to transferable Awards.

     13.4. BENEFICIARIES. Notwithstanding Section 13.3, a Participant may, in the manner
determined by the Committee, designate a beneficiary to exercise the rights of the Participant and
to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary,
legal guardian, legal representative, or other person claiming any rights under the Plan is subject
to all terms and conditions of the Plan and any Award Certificate applicable to the Participant,
except to the extent the Plan and Award Certificate otherwise provide, and to any additional
restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been
designated or survives the Participant, payment shall be made to the Participant’s estate. Subject
to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time
provided the change or revocation is filed with the Committee.

     13.5. STOCK TRADING RESTRICTIONS. All Stock issuable under the Plan is subject to any
stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply
with federal or state securities laws, rules and regulations and the rules of any national
securities exchange or automated quotation system on which the Stock is listed, quoted, or traded.
The Committee may place legends on any Stock certificate or issue instructions to the transfer
agent to reference restrictions applicable to the Stock.

13

 

     13.6. ACCELERATION FOR ANY REASON. Subject to Article 11 as to Qualified
Performance-Based Awards, the Committee may in its sole discretion at any time determine that all
or a portion of a Participant’s Options, SARs, and other Awards in the nature of rights that may be
exercised shall become fully or partially exercisable, that all or a part of the time-based vesting
restrictions on all or a portion of the outstanding Awards shall lapse, and/or that any
performance-based criteria with respect to any Awards shall be deemed to be wholly or partially
satisfied, in each case, as of such date as the Committee may, in its sole discretion, declare.
The Committee may discriminate among Participants and among Awards granted to a Participant in
exercising its discretion pursuant to this Section 13.6. Notwithstanding anything in the Plan,
including this Section 13.6, the Committee may not accelerate the payment of any Award if such
acceleration would violate Section 409A(a)(3) of the Code.

     13.7. FORFEITURE EVENTS. The Committee may specify in an Award Certificate that the
Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition
to any otherwise applicable vesting or performance conditions of an Award. Such events shall
include, but shall not be limited to, termination of employment for cause, violation of material
Company or Affiliate policies, breach of noncompetition, confidentiality or other restrictive
covenants that may apply to the Participant, or other conduct by the Participant that is
detrimental to the business or reputation of the Company or any Affiliate.

     13.8. SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution for stock and stock-based awards held by employees of another entity who become
employees of the Company or an Affiliate as a result of a merger or consolidation of the former
employing entity with the Company or an Affiliate or the acquisition by the Company or an Affiliate
of property or stock of the former employing corporation. The Committee may direct that the
substitute awards be granted on such terms and conditions as the Committee considers appropriate in
the circumstances.

ARTICLE 14

CHANGES IN CAPITAL STRUCTURE

     14.1. MANDATORY ADJUSTMENTS. In the event of a nonreciprocal transaction between the
Company and its shareholders that causes the per-share value of the Stock to change (including,
without limitation, any stock dividend, stock split, spin-off, rights offering, or large
nonrecurring cash dividend), the authorization limits under Section 5.1 shall be adjusted
proportionately, and the Committee shall make such adjustments to the Plan and Awards as it deems
necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately
resulting from such transaction. Action by the Committee may include: (i) adjustment of the number
and kind of shares that may be delivered under the Plan; (ii) adjustment of the number and kind of
shares subject to outstanding Awards; (iii) adjustment of the exercise price of outstanding Awards
or the measure to be used to determine the amount of the benefit payable on an Award; and (iv) any
other adjustments that the Committee determines to be equitable. Without limiting the foregoing,
in the event of a subdivision of the outstanding Stock (stock-split), a declaration of a dividend
payable in Shares, or a combination or consolidation of the outstanding Stock into a lesser number
of Shares, the authorization limits under Section 5.1 shall automatically be adjusted
proportionately, and the Shares then subject to each Award shall automatically, without the
necessity for any additional action by the Committee, be adjusted proportionately without any
change in the aggregate purchase price therefor.

     14.2 DISCRETIONARY ADJUSTMENTS. Upon the occurrence or in anticipation of any
corporate event or transaction involving the Company (including, without limitation, any

14

 

merger, reorganization, recapitalization, combination or exchange of shares, or any
transaction described in Section 14.1), the Committee may, in its sole discretion, provide (i) that
Awards will be settled in cash rather than Stock, (ii) that Awards will become immediately vested
and exercisable and will expire after a designated period of time to the extent not then exercised,
(iii) that Awards will be assumed by another party to a transaction or otherwise be equitably
converted or substituted in connection with such transaction, (iv) that outstanding Awards may be
settled by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the
underlying Stock, as of a specified date associated with the transaction, over the exercise price
of the Award, (v) that performance targets and performance periods for Performance Awards will be
modified, or (vi) any combination of the foregoing. The Committee’s determination need not be
uniform and may be different for different Participants whether or not such Participants are
similarly situated.

     14.3 GENERAL. Any discretionary adjustments made pursuant to this Article 14 shall be
subject to the provisions of Section 15.2. To the extent that any adjustments made pursuant to
this Article 14 cause Incentive Stock Options to cease to qualify as Incentive Stock Options, such
Options shall be deemed to be Nonstatutory Stock Options.

ARTICLE 15

AMENDMENT, MODIFICATION AND TERMINATION

     15.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee may, at any
time and from time to time, amend, modify or terminate the Plan without shareholder approval;
provided, however, that if an amendment to the Plan would, in the reasonable opinion of the Board
or the Committee, either (i) materially increase the number of Shares available under the Plan,
(ii) expand the types of awards under the Plan, (iii) materially expand the class of participants
eligible to participate in the Plan, (iv) materially extend the term of the Plan, or (v) otherwise
constitute a material change requiring shareholder approval under applicable laws, policies or
regulations or the applicable listing or other requirements of an Exchange, then such amendment
shall be subject to shareholder approval; and provided, further, that the Board or Committee may
condition any other amendment or modification on the approval of shareholders of the Company for
any reason, including by reason of such approval being necessary or deemed advisable (i) to comply
with the listing or other requirements of an Exchange, or (ii) to satisfy any other tax, securities
or other applicable laws, policies or regulations.

     15.2. AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the Committee may
amend, modify or terminate any outstanding Award without approval of the Participant; provided,
however:

     (a) Subject to the terms of the applicable Award Certificate, such amendment,
modification or termination shall not, without the Participant’s consent, reduce or
diminish the value of such Award determined as if the Award had been exercised, vested,
cashed in or otherwise settled on the date of such amendment or termination (with the
per-share value of an Option or SAR for this purpose being calculated as the excess, if
any, of the Fair Market Value as of the date of such amendment or termination over the
exercise or base price of such Award);

     (b) The original term of an Option or SAR may not be extended without the prior
approval of the shareholders of the Company;

15

 

     (c) Except as otherwise provided in Section 14.1, the exercise price of an
Option or SAR may not be reduced, directly or indirectly, without the prior approval
of the shareholders of the Company; and

     (d) No termination, amendment, or modification of the Plan shall adversely affect any
Award previously granted under the Plan, without the written consent of the Participant
affected thereby. An outstanding Award shall not be deemed to be “adversely affected” by a
Plan amendment if such amendment would not reduce or diminish the value of such Award
determined as if the Award had been exercised, vested, cashed in or otherwise settled on
the date of such amendment (with the per-share value of an Option or SAR for this purpose
being calculated as the excess, if any, of the Fair Market Value as of the date of such
amendment over the exercise or base price of such Award).

     15.3. COMPLIANCE AMENDMENTS. Notwithstanding anything in the Plan or in any Award
Certificate to the contrary, the Board may amend the Plan or an Award Certificate, to take effect
retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan
or Award Certificate to any present or future law relating to plans of this or similar nature
(including, but not limited to, Section 409A of the Code), and to the administrative regulations
and rulings promulgated thereunder. By accepting an Award under this Plan, a Participant agrees to
any amendment made pursuant to this Section 15.3 to any Award granted under the Plan without
further consideration or action.

ARTICLE 16

GENERAL PROVISIONS

     16.1. RIGHTS OF PARTICIPANTS.

     (a) No Participant or any Eligible Participant shall have any claim to be granted any
Award under the Plan. Neither the Company, its Affiliates nor the Committee is obligated
to treat Participants or Eligible Participants uniformly, and determinations made under the
Plan may be made by the Committee selectively among Eligible Participants who receive, or
are eligible to receive, Awards (whether or not such Eligible Participants are similarly
situated).

     (b) Nothing in the Plan, any Award Certificate or any other document or statement made
with respect to the Plan, shall interfere with or limit in any way the right of the Company
or any Affiliate to terminate any Participant’s employment or status as an officer, or any
Participant’s service as a director, at any time, nor confer upon any Participant any right
to continue as an employee, officer, or director of the Company or any Affiliate, whether
for the duration of a Participant’s Award or otherwise.

     (c) Neither an Award nor any benefits arising under this Plan shall constitute an
employment contract with the Company or any Affiliate and, accordingly, subject to Article
15, this Plan and the benefits hereunder may be terminated at any time in the sole and
exclusive discretion of the Committee without giving rise to any liability on the part of
the Company or an of its Affiliates.

     (d) No Award gives a Participant any of the rights of a shareholder of the Company
unless and until Shares are in fact issued to such person in connection with such Award.

16

 

     16.2. WITHHOLDING. The Company or any Affiliate shall have the authority and
the right to deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes (including the Participant’s FICA obligation)
required by law to be withheld with respect to any exercise, lapse of restriction or other taxable
event arising as a result of the Plan. With respect to withholding required upon any taxable event
under the Plan, the Committee may, at the time the Award is granted or thereafter, require or
permit that any such withholding requirement be satisfied, in whole or in part, by withholding from
the Award Shares having a Fair Market Value on the date of withholding equal to the minimum amount
(and not any greater amount) required to be withheld for tax purposes, all in accordance with such
procedures as the Committee establishes. All such elections shall be subject to any restrictions
or limitations that the Committee, in its sole discretion, deems appropriate.

     16.3. SPECIAL PROVISIONS RELATED TO SECTION 409A OF THE CODE.

     (a) It is intended that the payments and benefits provided under the Plan and any Award shall
either be exempt from the application of, or comply with, the requirements of Section 409A of the
Code. The Plan and all Award Certificates shall be construed in a manner that effects such intent.
Nevertheless, the tax treatment of the benefits provided under the Plan or any Award is not
warranted or guaranteed. Neither the Company, its Affiliates nor their respective directors,
officers, employees or advisers shall be held liable for any taxes, interest, penalties or other
monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award.

     (b) Notwithstanding anything in the Plan or in any Award Certificate to the contrary, to the
extent that any amount or benefit that would constitute non-exempt “deferred compensation” for
purposes of Section 409A of the Code would otherwise be payable or distributable, or a different
form of payment (e.g., lump sum or installment) would be effected, under the Plan or any Award
Certificate by reason of the occurrence of a Change in Control, or the Participant’s Disability or
separation from service, such amount or benefit will not be payable or distributable to the
Participant, and/or such different form of payment will not be effected, by reason of such
circumstance unless the circumstances giving rise to such Change in Control, Disability or
separation from service meet any description or definition of “change in control event”,
“disability” or “separation from service”, as the case may be, in Section 409A of the Code and
applicable regulations (without giving effect to any elective provisions that may be available
under such definition). This provision does not prohibit the vesting of any Award upon a Change in
Control, Disability or separation from service, however defined. If this provision prevents the
payment or distribution of any amount or benefit, such payment or distribution shall be made on the
next earliest payment or distribution date or event specified in the Award Certificate that is
permissible under Section 409A of the Code. If this provision prevents the application of a
different form of payment of any amount or benefit, such payment shall be made in the same form as
would have applied absent such designated event or circumstance.

     (c) If any one or more Awards granted under the Plan to a Participant could qualify for any
separation pay exemption described in Treas. Reg. Section 1.409A-1(b)(9), but such Awards in the
aggregate exceed the dollar limit permitted for the separation pay exemptions, the Company (acting
through the Committee) shall determine which Awards or portions thereof will be subject to such
exemptions.

     (d) Notwithstanding anything in the Plan or in any Award Certificate to the contrary, if any
amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section
409A of the Code would otherwise be payable or distributable under this Plan or any

17

 

Award Certificate by reason of a Participant’s separation from service during a period in
which the Participant is a Specified Employee (as defined below), then, subject to any permissible
acceleration of payment by the Committee under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic
relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):

     (i) the amount of such non-exempt deferred compensation that would otherwise be payable during
the six-month period immediately following the Participant’s separation from service will be
accumulated through and paid or provided on the first day of the seventh month following
the Participant’s separation from service (or, if the Participant dies during such period,
within 30 days after the Participant’s death) (in either case, the “Required Delay Period”),
and

     (ii) the normal payment or distribution schedule for any remaining payments or distributions
will resume at the end of the Required Delay Period.

     For purposes of this Plan, the term “Specified Employee” has the meaning given such term in
Section 409A of the Code and the final regulations thereunder, provided, however, that, as
permitted in such final regulations, the Company’s Specified Employees and its application of the
six-month delay rule of 409A(a)(2)(B)(i) of the Code shall be determined in accordance with rules
adopted by the Board or any committee of the Board, which shall be applied consistently with
respect to all nonqualified deferred compensation arrangements of the Company, including this Plan.

     16.4. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for
incentive and deferred compensation. With respect to any payments not yet made to a Participant
pursuant to an Award, nothing contained in the Plan or any Award Certificate shall give the
Participant any rights that are greater than those of a general creditor of the Company or any
Affiliate. This Plan is not intended to be subject to ERISA.

     16.5. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into
account in determining any benefits under any pension, retirement, savings, profit sharing, group
insurance, welfare or benefit plan of the Company or any Affiliate unless provided otherwise in
such other plan.

     16.6. EXPENSES. The expenses of administering the Plan shall be borne by the Company
and its Affiliates.

     16.7. TITLES AND HEADINGS. The titles and headings of the Sections in the Plan are
for convenience of reference only, and in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.

     16.8. GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall include the singular
and the singular shall include the plural.

     16.9. FRACTIONAL SHARES. No fractional Shares shall be issued and the Committee shall
determine, in its discretion, whether cash shall be given in lieu of fractional Shares or whether
such fractional Shares shall be eliminated by rounding up or down.

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     16.10. GOVERNMENT AND OTHER REGULATIONS.

     (a) Notwithstanding any other provision of the Plan, no Participant who acquires
Shares pursuant to the Plan may, during any period of time that such Participant is an
affiliate of the Company (within the meaning of the rules and regulations of the Securities
and Exchange Commission under the 1933 Act), sell such Shares, unless such offer and sale
is made (i) pursuant to an effective registration statement under the 1933 Act, which is
current and includes the Shares to be sold, or (ii) pursuant to an appropriate exemption
from the registration requirement of the 1933 Act, such as that set forth in Rule 144
promulgated under the 1933 Act.

     (b) Notwithstanding any other provision of the Plan, if at any time the Committee
shall determine that the registration, listing or qualification of the Shares covered by an
Award upon any Exchange or under any foreign, federal, state or local law or practice, or
the consent or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Award or the purchase or receipt
of Shares thereunder, no Shares may be purchased, delivered or received pursuant to such
Award unless and until such registration, listing, qualification, consent or approval shall
have been effected or obtained free of any condition not acceptable to the Committee. Any
Participant receiving or purchasing Shares pursuant to an Award shall make such
representations and agreements and furnish such information as the Committee may request to
assure compliance with the foregoing or any other applicable legal requirements. The
Company shall not be required to issue or deliver any certificate or certificates for
Shares under the Plan prior to the Committee’s determination that all related requirements
have been fulfilled. The Company shall in no event be obligated to register any securities
pursuant to the 1933 Act or applicable state or foreign law or to take any other action in
order to cause the issuance and delivery of such certificates to comply with any such law,
regulation or requirement.

     16.11. GOVERNING LAW. To the extent not governed by federal law, the Plan and all
Award Certificates shall be construed in accordance with and governed by the laws of the State of
Maryland.

     16.12. ADDITIONAL PROVISIONS. Each Award Certificate may contain such other terms and
conditions as the Committee may determine; provided that such other terms and conditions are not
inconsistent with the provisions of the Plan.

     16.13. NO LIMITATIONS ON RIGHTS OF COMPANY. The grant of any Award shall not in any
way affect the right or power of the Company to make adjustments, reclassification or changes in
its capital or business structure or to merge, consolidate, dissolve, liquidate, sell or transfer
all or any part of its business or assets. The Plan shall not restrict the authority of the
Company, for proper corporate purposes, to draft or assume awards, other than under the Plan, to or
with respect to any person. If the Committee so directs, the Company may issue or transfer Shares
to an Affiliate, for such lawful consideration as the Committee may specify, upon the condition or
understanding that the Affiliate will transfer such Shares to a Participant in accordance with the
terms of an Award granted to such Participant and specified by the Committee pursuant to the
provisions of the Plan.

     16.14. INDEMNIFICATION. Each person who is or shall have been a member of the
Committee or of the Board shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her
in connection with or resulting from any claim, action, suit, or proceeding to which he or she

19

 

may be a party or in which he or she may be involved by reason of any action taken or failure
to act under the Plan and against and from any and all amounts paid by him or her in settlement
thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any
such action, suit, or proceeding against him or her, provided he or she shall give the Company an
opportunity, at its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a
result of his or her own willful misconduct or except as expressly provided by statute. The
foregoing right of indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company’s charter or bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them harmless.

20

 

     The foregoing is hereby acknowledged as being the Bluerock Enhanced Multifamily REIT, Inc.
Long Term Incentive Plan as adopted by the Board on                 , 2008 and by the shareholders on
                , 2008.

	 	 	 	 	 
	 	BLUEROCK ENHANCED MULTIFAMILY REIT, INC.

 	 
	 	By:  	 	 
	 	 	 	 
	 	Its:EX-10.4

Exhibit 10.4

ADVISORY AGREEMENT

AMONG

BLUEROCK ENHANCED MULTIFAMILY REIT, INC.,

BLUEROCK ENHANCED MULTIFAMILY HOLDINGS, LP,

AND

BLUEROCK ENHANCED MULTIFAMILY ADVISOR, LLC

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	1. Definitions
	 	 	1	 
	 
	2. Appointment
	 	 	7	 
	 
	3. Duties of the Advisor
	 	 	7	 
	 
	4. Authority of Advisor
	 	 	10	 
	 
	5. Bank Accounts
	 	 	10	 
	 
	6. Records; Access
	 	 	11	 
	 
	7. Limitations on Activities
	 	 	11	 
	 
	8. Relationship with Director
	 	 	11	 
	 
	9. Fees
	 	 	11	 
	 
	10. Expenses
	 	 	13	 
	 
	11. Other Services
	 	 	14	 
	 
	12. Reimbursement to the Advisor
	 	 	15	 
	 
	13. Business Combination
	 	 	15	 
	 
	14. Other Activities of the Advisor
	 	 	16	 
	 
	15. The Bluerock Name
	 	 	16	 
	 
	16. Term of Agreement
	 	 	17	 
	 
	16. Termination by the Parties
	 	 	17	 
	 
	17. Assignment to an Affiliate
	 	 	17	 
	 
	18. Payments to and Duties of Advisor Upon Termination
	 	 	17	 
	 
	19. Indemnification by the Company and the Operating Partnership
	 	 	18	 
	 
	20. Indemnification by Advisor
	 	 	19	 
	 
	21. Notices
	 	 	19	 
	 
	22. Modification
	 	 	20	 
	 
	23. Severability
	 	 	20	 

 

 

	 	 	 	 	 
	24. Construction
	 	 	20	 
	 
	25. Entire Agreement
	 	 	20	 
	 
	26. Indulgences, Not Waivers
	 	 	21	 
	 
	27. Gender
	 	 	21	 
	 
	28. Titles Not to Affect Interpretation
	 	 	21	 
	 
	29. Execution in Counterparts
	 	 	21	 

- 3 -

 

ADVISORY AGREEMENT

     THIS ADVISORY AGREEMENT (this “Agreement”), dated as of the [l] day of
[l], 2008 (the “Effective Date”), is entered into by and among Bluerock Enhanced
Multifamily REIT, Inc., a Maryland corporation (the “Company”), Bluerock Enhanced
Multifamily Holdings, L.P., a Delaware limited partnership (the “Operating Partnership”),
and Bluerock Enhanced Multifamily Advisor, LLC, a Delaware limited liability company (the
“Advisor”). Capitalized terms used herein shall have the meanings ascribed to them in
Section 1 below.

W I T N E S S E T H

     WHEREAS, the Company intends to qualify as a REIT, and to invest its funds in investments
permitted by the terms of Sections 856 through 860 of the Code;

     WHEREAS, the Company is the general partner, and its wholly owned subsidiary, Bluerock REIT
Holdings, LLC, is the sole limited partner of the Operating Partnership, and the Company intends to
conduct all of its business and make all Investments through the Operating Partnership;

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

     WHEREAS, the Advisor is willing to undertake to render such services, subject to the
supervision of the Board of Directors, 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, intending to be legally bound, hereby agree as follows:

     1. DEFINITIONS. As used in this Agreement, the following terms have the definitions
hereinafter indicated:

     Acquisition Expenses. Any and all expenses, exclusive of Acquisition Fees, incurred
by the Company, the Operating Partnership, the Advisor, or any of their Affiliates in connection
with the selection, evaluation, acquisition, origination, making or development of any Investments,
whether or not acquired, including, without limitation, legal fees and expenses, travel and
communications expenses, costs of appraisals, nonrefundable option payments on property not
acquired, accounting fees and expenses, title insurance premiums, and the costs of performing due
diligence.

     Acquisition Fee. The term “Acquisition Fee” shall mean the fees payable to the
Advisor pursuant to Section 9(a).

 

 

     Advisor. Advisor shall mean Bluerock Enhanced Multifamily Advisor, LLC, a Delaware
limited liability company, any successor advisor to the Company, the Operating Partnership or any
Person to which Bluerock Enhanced Multifamily Advisor, LLC or any successor advisor subcontracts
substantially all of its functions. Notwithstanding the foregoing, a Person hired or retained by
Bluerock Enhanced Multifamily Advisor, LLC to perform property management and related services for
the Company or the Operating Partnership that is not hired or retained to perform substantially all
of the functions of Bluerock Enhanced Multifamily Advisor, LLC with respect to the Company or the
Operating Partnership as a whole shall not be deemed to be an Advisor.

     Affiliate or Affiliated. With respect to any Person, (i) any Person directly or
indirectly owning, controlling or holding, with the power to vote, ten percent (10%) or more of the
outstanding voting securities of such other Person; (ii) any Person ten percent (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.

     Articles of Incorporation. The Articles of Incorporation of the Company, as amended
from time to time.

     Asset Management Fee. The term “Asset Management Fee” shall mean the fees payable to
the Advisor pursuant to Section 9(e).

     Average Invested Assets. For a specified period, the average of the aggregate book
value of the assets of the Company invested, directly or indirectly, in Investments before
deducting depreciation, bad debts or other non-cash reserves, computed by taking the average of
such values at the end of each month during such period.

     Board of Directors or Board. The individuals holding such office, as of any
particular time, under the Articles of Incorporation, whether they be the Directors named therein
or additional or successor Directors.

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

     Cause. With respect to the termination of this Agreement, fraud, criminal conduct,
willful misconduct or willful or negligent breach of fiduciary duty by the Advisor, or a material
breach of this Agreement by the Advisor.

     Code. Internal Revenue Code of 1986, as amended from time to time, or any successor
statute thereto. Reference to any provision of the Code shall mean 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.

- 2 -

 

     Company. Company shall mean Bluerock Enhanced Multifamily REIT, Inc., a Maryland
corporation.

     Competitive Real Estate Commission. A real estate or brokerage commission for the
purchase or sale of property which is reasonable, customary, and competitive in light of the size,
type, and location of the property.

     Contract Sales Price. The total consideration received by the Company for the sale of
an Investment.

     Dealer Manager. Select Capital Corporation, or such other Person or entity selected
by the Board to act as the dealer manager for the Offering.

     Dealer Manager Fee. 2.5% of Gross Proceeds from the sale of Shares in the Primary
Offering, payable to the Dealer Manager for serving as the dealer manager of such Offering.

     Director. A member of the Board of Directors of the Company.

     Disposition Fee. The term “Disposition Fee” shall mean the fees payable to the
Advisor pursuant to Section 9(d).

     Distributions. Any distributions of money or other property by the Company to
Stockholders, including distributions that may constitute a return of capital for federal income
tax purposes.

     Effective Date. Effective Date shall have the meaning set forth in the preamble.

     Excess Amount. Excess Amount shall have the meaning set forth in Section 12.

     Expense Year. Expense Year shall have the meaning set forth in Section 12.

     Financing Fee. The term “Financing Fee” shall mean the fees payable to the Advisor
pursuant to Section 9(g).

     Funds From Operations. As defined by the National Association of Real Estate
Investment Trusts, Funds From Operations means net income computed in accordance with GAAP,
excluding gains (or losses) from sales of property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures in which the REIT holds an interest.

     GAAP. Generally accepted accounting principles as in effect in the United States of
America from time to time.

     Gross Proceeds. The aggregate purchase price of all Shares sold for the account of
the Company through all Offerings, without deduction for Selling Commissions, volume discounts, any
marketing support and due diligence expense reimbursement or Organization and Offering

- 3 -

 

Expenses. For the purpose of computing Gross Proceeds, the purchase price of any Share for
which reduced Selling Commissions are paid to the Dealer Manager or a Participating Dealer (where
net proceeds to the Company are not reduced) shall be deemed to be the full amount of the offering
price per Share pursuant to the Prospectus for such Offering without reduction.

     Indemnitee. The terms “Indemnitee” and “Indemnitees” shall have the meaning set forth
in Section 20.

     Independent Director. Independent Director shall have the meaning set forth in the
Articles of Incorporation.

     Invested Capital. The original issue price paid for the Shares reduced by prior
Distributions from the sale or financing of the Investments.

     Investments. Any investments by the Company or the Operating Partnership in Real
Estate Assets, Real Estate Related Loans or any other asset.

     Joint Ventures. The joint venture or partnership arrangements (other than with the
Operating Partnership) in which the Company or any of its subsidiaries is a co-venturer or general
partner which are established to own Investments.

     Listing. The listing of the Shares on a national securities exchange or the receipt
by the Stockholders of securities that are listed on a national securities exchange in exchange for
the Company’s common stock. Upon such Listing, the Shares shall be deemed “Listed.”

     Loans. Any indebtedness or obligations in respect of borrowed money or evidenced by
bonds, notes, debentures, deeds of trust, letters of credit or similar instruments, including
mortgages and mezzanine loans.

     NASAA REIT Guidelines. The Statement of Policy Regarding Real Estate Investment
Trusts published by the North American Securities Administrators Association on May 7, 2007, as may
be amended from time to time.

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

     Offering. The public offering of Shares pursuant to a Prospectus.

     Operating Partnership. Operating Partnership shall mean Bluerock Enhanced Multifamily
Holdings, L.P., a Delaware limited partnership.

     Operating Partnership Agreement. The Operating Partnership Agreement between the
Company and Bluerock REIT Holdings, LLC.

- 4 -

 

     OP Units. Units of limited partnership interest in the Operating Partnership.

     Organization and Offering Expenses. Organization and Offering Expenses means all
expenses (other than the Selling Commission and the Dealer Manager Fee) to be paid by the Company
in connection with the Offering, including legal, accounting, printing, mailing and filing fees,
charges of the escrow holder and transfer agent, charges of the Advisor for administrative services
related to the issuance of Shares in the Offering, reimbursement of the Advisor for costs in
connection with preparing supplemental sales materials, the cost of bona fide training and
education meetings held by the Company (primarily the travel, meal and lodging costs of the
registered representatives of broker-dealers), attendance and sponsorship fees and cost
reimbursement for employees of the Company’s Affiliates to attend retail seminars conducted by
broker-dealers and, in special cases, reimbursement to participating broker-dealers for technology
costs associated with the Offering, costs and expenses related to such technology costs, and costs
and expenses associated with facilitation of the marketing of the Shares and the ownership of
Shares by such broker-dealer’s customers.

     Origination Fee. The term “Origination Fee” shall mean the fees payable to the Advisor
pursuant to Section 9(b).

     Oversight Fee. The term “Oversight Fee” shall mean the fees payable to the Advisor
pursuant to Section 9(f).

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

     Person. An individual, corporation, partnership, trust, joint venture, limited
liability company or other entity.

     Primary Offering. The portion of an Offering other than the Shares offered pursuant
to the Company’s distribution reinvestment plan.

     Property Management Fee. The term “Property Management Fee” shall mean the fees
payable to the Advisor pursuant to Section 9(f).

     Prospectus. A “Prospectus” under Section 2(10) of the Securities Act, including a
preliminary Prospectus, an offering circular as described in Rule 253 of the General Rules and
Regulations under the Securities Act or, in the case of an intrastate offering, any document by
whatever name known, utilized for the purpose of offering and selling securities to the public.

     Real Estate Assets. Any investment by the Company or the Operating Partnership in
unimproved and improved Real Property (including, without limitation, fee or leasehold interests,
options and leases) either directly or through a Joint Venture.

- 5 -

 

     Real Estate Related Loans. Any investments in, or origination of, mortgage loans and
other types of real estate related debt financing, including, without limitation, mezzanine loans,
bridge loans, convertible mortgages, wraparound mortgage loans, construction mortgage loans, loans
on leasehold interests and participations in such loans, by the Company or the Operating
Partnership.

     Real Property. Real property owned from time to time by the Company or the Operating
Partnership, either directly or through joint venture arrangements or other partnerships, which
consists of (i) land only, (ii) land, including the buildings located thereon, (iii) buildings only
or (iv) such investments the Board and the Advisor mutually designate as Real Property to the
extent such investments could be classified as Real Property.

     REIT. A “real estate investment trust” under Sections 856 through 860 of the Code.

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

     Securities Act. The Securities Act of 1933, as amended.

     Selling Commission. 7.0% of Gross Proceeds from the sale of Shares in the Primary
Offering payable to the Dealer Manager and reallowable to Participating Dealers with respect to
Shares sold by them.

- 6 -

 

     Shares. The shares of the Company’s capital stock, par value $0.01 per share.

     Special Committee. The term “Special Committee” shall have the meaning as provided in
Section 13(a).

     Sponsors. Sponsors shall mean Bluerock Real Estate, L.L.C, a Delaware limited
liability company and Orion Residential, LLC, a Delaware limited liability company.

     Stockholders. The registered holders of the Shares.

     Termination Date. The date of termination of this Agreement.

     Total Operating Expenses. All costs and expenses paid or incurred by the Company, as
determined under GAAP, that are in any way related to the operation of the Company or its business,
including asset management fees and other fees paid to the Advisor, but excluding (i) the expenses
of raising capital such as Organization and Offering Expenses, legal, audit, accounting,
underwriting, brokerage, listing, registration, and other fees, printing and other such expenses
and taxes incurred in connection with the issuance, distribution, transfer, registration and
Listing, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation,
amortization and bad debt reserves, (v) incentive fees paid in compliance with the NASAA REIT
Guidelines, (vi) Acquisition Fees, Origination Fees and Acquisition Expenses and (vii) other fees
and expenses connected with the acquisition, disposition, management and ownership of real estate
interests, mortgages or other property (including the costs of foreclosure, insurance premiums,
legal services, maintenance, repair, and improvement of property). The definition of “Total
Operating Expenses” set forth above is intended to encompass only those expenses which are required
to be treated as Total Operating Expenses under the NASAA REIT Guidelines. As a result, and
notwithstanding the definition set forth above, any expense of the Company which is not part of
Total Operating Expenses under the NASAA REIT Guidelines shall not be treated as part of Total
Operating Expenses for purposes hereof.

     2%/25% Guidelines. 2%/25% Guidelines shall have the meaning set forth in Section 12.

     2. APPOINTMENT. The Company and the Operating Partnership hereby appoint the Advisor to serve
as their advisor on the terms and conditions set forth in this Agreement, and the Advisor hereby
accepts such appointment.

     3. DUTIES OF THE ADVISOR. As of the Effective Date, the Advisor undertakes to use its best
efforts to present to the Company and the Operating Partnership potential investment opportunities
and to provide 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.
In performance of this undertaking, subject to the supervision of the Board and consistent with the
provisions of the Articles of Incorporation and Bylaws of the Company and the Operating Partnership
Agreement, the Advisor shall, either directly or by engaging an Affiliate:

- 7 -

 

          (a) serve as the Company’s and the Operating Partnership’s investment and financial advisor;

          (b) provide the daily management for the Company and the Operating Partnership and perform and
supervise the various administrative functions reasonably necessary for the management of the
Company and the Operating Partnership;

          (c) investigate, select, and, on behalf of the Company and the Operating Partnership, engage
and conduct business with and supervise the performance of such Persons as the Advisor deems
necessary to the proper performance of its obligations hereunder, including, but not limited to,
consultants, accountants, correspondents, lenders, technical advisors, attorneys, brokers,
underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for
collection, insurers, insurance agents, banks, builders, developers, property owners, real estate
management companies, real estate operating companies, securities investment advisors, mortgagors,
registrar and transfer agent and any and all agents for any of the foregoing, including Affiliates
of the Advisor, and Persons acting in any other capacity deemed by the Advisor necessary or
desirable for the performance of any of the foregoing services, including, but not limited to,
entering into contracts in the name of the Company and the Operating Partnership with any of the
foregoing;

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

          (e) subject to the provisions of Section 4 hereof, (i) participate in formulating an
investment strategy and asset allocation framework, (ii) locate, analyze and select potential
Investments, (iii) structure and negotiate the terms and conditions of transactions pursuant to
which acquisitions and dispositions of Investments will be made; (iv) research, identify, review
and recommend acquisitions and dispositions of Investments to the Board and make Investments on
behalf of the Company and the Operating Partnership in compliance with the investment objectives
and policies of the Company; (v) arrange for financing and refinancing and make other changes in
the asset or capital structure of, and dispose of, reinvest the proceeds from the sale of, or
otherwise deal with, Investments; (vi) enter into leases and service contracts for Real Estate
Assets and, to the extent necessary, perform all other operational functions for the maintenance
and administration of such Real Estate Assets; (vii) actively oversee and manage Investments for
purposes of meeting the Company’s investment objectives and reviewing and analyzing financial
information for each of the Investments and the overall portfolio; (viii) select Joint Venture
partners, structure corresponding agreements and oversee and monitor these relationships; (ix)
oversee, supervise and evaluate Affiliated and non-Affiliated property managers who perform
services for the Company or the Operating Partnership; (x) oversee Affiliated and non-Affiliated
Persons with whom the Advisor contracts to perform certain of the services required to be performed
under this Agreement; (xi) manage accounting and other record-keeping functions for the Company and
the Operating Partnership, including reviewing

- 8 -

 

and analyzing the capital and operating budgets for the Real Estate Assets and generating an
annual budget for the Company; (xii) recommend various liquidity events to the Board when
appropriate and (xiii) source and structure Real Estate Related Loans;

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

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

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

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

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

          (k) provide the Company and the Operating Partnership with all necessary cash management
services;

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

          (m) deliver to, or maintain on behalf of, the Company copies of all appraisals obtained in
connection with the investments in any Real Estate Assets as may be required to be obtained by the
Board;

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

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

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

- 9 -

 

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

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

     4. AUTHORITY OF ADVISOR.

          (a) Pursuant to the terms of this Agreement (including the restrictions included in this
Section 4 and in Section 7), and subject to the continuing and exclusive authority of the Board
over the management of the Company, the Board hereby delegates to the Advisor the authority to
perform the services described in Section 3.

          (b) Notwithstanding the foregoing, any investment in Real Estate Assets, including any
financing thereof, will require the prior approval of the Board, any particular Directors specified
by the Board or any committee of the Board, as the case may be.

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

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

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

     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 the Operating Partnership or in the name of the Company and
the Operating Partnership 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 or the Operating
Partnership, under such terms and conditions as the Board may approve, provided that no funds shall
be commingled with the funds of the Advisor; and the Advisor shall from time to time render
appropriate accountings of such collections and payments to the Board and to the auditors of the
Company.

     6. RECORDS; ACCESS. The Advisor shall maintain appropriate records of all its activities
hereunder and make such records available
for inspection by the Directors and by counsel, auditors and authorized agents of the Company,
at any time or from time to time during

- 10 -

 

normal business hours. The Advisor shall at all reasonable
times have access to the books and records of the Company and the Operating Partnership.

     7. LIMITATIONS ON ACTIVITIES. Anything else in this Agreement to the contrary
notwithstanding, the Advisor shall refrain from taking any action which, in its sole judgment made
in good faith, would (a) adversely affect the status of the Company as a REIT unless the Board has
determined that REIT, qualification is not in the best interests of the Company and its
Stockholders, (b) subject the Company to regulation under the Investment Company Act of 1940, as
amended, or (c) violate any law, rule, regulation or statement of policy of any governmental body
or agency having jurisdiction over the Company or its Shares, or otherwise not be permitted by the
Articles of Incorporation or Bylaws of the Company, except if such action shall be ordered by the
Board, in which case the Advisor shall notify promptly the Board of the Advisor’s judgment of the
potential impact of such action and shall refrain from taking such action until it receives further
clarification or instructions from the Board. In such event, the Advisor shall have no liability
for acting in accordance with the specific instructions of the Board so given. Notwithstanding the
foregoing, the Advisor, its directors, officers, employees and members, and the partners,
directors, officers, members and stockholders of the Advisor’s Affiliates shall not be liable to
the Company or to the Directors or Stockholders for any act or omission by the Advisor, its
directors, officers, employees, or members, and the partners, directors, officers, members or
stockholders of the Advisor’s Affiliates taken or omitted to be taken in the performance of their
duties under this Agreement except as provided in Section 20 of this Agreement.

     8. RELATIONSHIP WITH DIRECTORS. Subject to Section 7 of this Agreement and to restrictions
advisable with respect to the qualification of the Company as a REIT, directors, officers and
employees of the Advisor or an Affiliate of the Advisor or any corporate parent of an Affiliate,
may serve as a Director and as officers of the Company, except that no director, officer or
employee of the Advisor or its Affiliates who also is a Director or officer of the Company shall
receive any compensation from the Company for serving as a Director or officer other than
reasonable reimbursement for travel and related expenses incurred in attending meetings of the
Board and no such Director shall be deemed an Independent Director for purposes of satisfying the
Director independence requirement set forth in the Articles of Incorporation.

     9. FEES.

          (a) Acquisition Fees. The Advisor shall receive an Acquisition Fee payable by the
Company as compensation for services rendered in connection with the investigation, selection and
acquisition (by purchase, investment or exchange) of Investments. The total Acquisition Fees
payable to the Advisor or its Affiliates shall equal 1.5% of the purchase price. The purchase
price of an Investment shall equal the amount paid or allocated to the purchase, development,
construction or improvement of a property, inclusive of expenses related thereto, and the amount of
debt associated with such Investment. The purchase price allocable for a joint venture investment
shall equal the product of (i) the purchase price in the underlying Real Estate
Asset and (ii) the Company’s ownership percentage in the joint venture. For purposes of this
section, “ownership percentage” shall be the percentage of capital stock owned by the Company,

- 11 -

 

without regard to classification of such capital stock. With respect to investments in and
originations of Real Estate Related Loans, the Company will pay the Advisor an Origination Fee in
lieu of the Acquisition Fee. The Advisor shall submit an invoice to the Company following the
closing or closings of each Investment, accompanied by a computation of the Acquisition Fee. The
Company shall pay the Acquisition Fee promptly following receipt of the invoice.

          (b) Origination Fees. As compensation for the investigation, selection, sourcing and
acquisition or origination of Real Estate Related Loans, the Company shall pay an Origination Fee
to the Advisor for each such acquisition or origination equal to 1.5% of (i) the amount funded by
the Company to originate the Real Estate Related Loan or (ii) the purchase price of any Real Estate
Related Loan that the Company acquires. The Company will not pay an Acquisition Fee with respect
to any such Real Estate Related Loan. The Company will not pay an Origination Fee to the Advisor
with respect to any transaction pursuant to which the Company is required to pay the Advisor an
Acquisition Fee. Notwithstanding anything herein to the contrary, the payment of Origination Fees
by the Company shall be subject to the limitations on Acquisition Fees contained in the Company’s
Articles of Incorporation. The Advisor shall submit an invoice to the Company following the closing
or closings of each Real Estate Related Loan, accompanied by a computation of the Origination Fee.
The Company shall pay the Origination Fee to the Advisor promptly following receipt of the invoice.

          (c) Limitation on Total Acquisition Fees, Origination Fees and Acquisition Expenses.
Pursuant to the NASAA REIT Guidelines, the total of all Acquisition Fees, Origination Fees and
Acquisition Expenses payable in connection with any Investment shall not exceed 6.0% of the
“contract purchase price,” as defined in the Articles of Incorporation, of the Investment acquired.

          (d) Disposition Fee. In connection with a Sale of an Investment in which the Advisor
or any Affiliate of the Advisor provides a substantial amount of services, as determined by the
Independent Directors, the Company shall pay to the Advisor or its Affiliate a Disposition Fee
equal to the lesser of (i) one-half of a Competitive Real Estate Commission or (ii) 3.0% of the
Contract Sales Price of such Investment. Any Disposition Fee payable under this Section 9(d) may
be paid in addition to real estate commissions paid to non-Affiliates, provided that the total real
estate commissions (including such Disposition Fee) paid to all Persons by the Company for the Sale
of each Investment shall not exceed 6.0% of the Contract Sales Price. Substantial assistance in
connection with a Sale may include the preparation of an investment package (for example, for a
Sale, a package including a new investment analysis, rent rolls, tenant information regarding
credit, a property title report, an environmental report, a structural report and exhibits) or
other such substantial services performed in connection with a Sale.

          (e) Asset Management Fee. The Advisor shall receive the Asset Management Fee as
compensation for services rendered in connection with the management of the Company’s assets. The
Asset Management Fee shall be equal to an annual fee of 1.0%, payable monthly, of the higher of (A)
the aggregate cost of each Real Estate Asset the Company acquires, excluding acquisition fees and
expenses but including any debt attributable to the asset (including debt encumbering the asset
after its acquisition) and the outstanding principal amount of the Loans acquired or originated and
other Investments,, and (B) the fair market value of each
Real Estate Asset or Investment (before non-cash reserves, bad debt and depreciation) as
determined by an independent valuation report, if available). The Asset Management Fee will be

- 12 -

 

based only on the portion of the cost or value attributable to the Company’s investment in an asset
if the Company does not own all of an asset.

          (f) Property Management Fee. The Advisor shall receive a Property Management Fee
equal to 4.0% of the monthly gross income from any Real Property it manages, payable monthly. In
the alternative, should the Company contract property management services for certain Real
Properties to non-Affiliated third parties, the Advisor shall receive an Oversight Fee equal to
1.0% of monthly gross income of such Real Properties so managed.

          (g) Financing Fee. The Advisor shall receive a Financing Fee equal to 1.0% of the
amount made available to the Company under any Loan made available to it. The Advisor may reallow
some or all of this Financing Fee to reimburse third parties with whom it may subcontract to
procure any such Loan.

          (h) Exclusion of Certain Transactions. In the event the Company or the Operating
Partnership shall propose to enter into any transaction in which the Advisor, any Affiliate of the
Advisor or any of the Advisor’s directors or officers has a direct or indirect interest, then such
transaction shall be approved by a majority of the members of the Board not otherwise interested in
such transaction, including a majority of the Independent Directors.

     10. EXPENSES.

          (a) In addition to the compensation paid to the Advisor pursuant to Section 9 hereof, the
Company or the Operating Partnership shall pay directly or reimburse the Advisor for all of the
expenses paid or incurred by the Advisor or its Affiliates in connection with the services it
provides to the Company and the Operating Partnership pursuant to this Agreement, including, but
not limited to:

               (i) Organization and Offering Expenses; provided, however, that the Company shall not
reimburse the Advisor to the extent such reimbursement would cause the total amount of Organization
and Offering Expenses paid by the Company and the Operating Partnership to exceed 15.0% of the
Gross Proceeds raised as of the date of the reimbursement;

               (ii) Acquisition Expenses incurred in connection with the selection and acquisition of
Investments subject to the aggregate 6.0% cap on Acquisition Fees, Origination Fees and Acquisition
Expenses set forth in Section 9(c);

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

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

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

- 13 -

 

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

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

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

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

               (x) expenses connected with payments of Distributions;

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

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

               (xiii) administrative service expenses (including (a) personnel costs; provided, however, that
no reimbursement shall be made for costs of personnel to the extent that such personnel perform
services in transactions for which the Advisor receives Acquisition Fees, Origination Fees or
Disposition Fees, and (b) the Company’s allocable share of other overhead of the Advisor such as
rent and utilities); and

               (xiv) audit, accounting and legal fees.

          (b) Expenses incurred by the Advisor on behalf of the Company and the Operating Partnership
and payable pursuant to this Section 10 shall be reimbursed no less than monthly to the Advisor.

          (c) The Advisor shall prepare a statement documenting the expenses of the Company and the
Operating Partnership during each quarter, and shall deliver such statement to the Company and the
Operating Partnership within 45 days after the end of each quarter.

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

- 14 -

 

     12. REIMBURSEMENT TO THE ADVISOR. The Company shall not reimburse the Advisor at the end of
any fiscal quarter in which Total Operating Expenses for the four consecutive fiscal quarters then
ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of 2% of
Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for such year. Any
Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company or, at the
option of the Company, subtracted from the Total Operating Expenses reimbursed during the
subsequent fiscal quarter. If there is an Excess Amount in any Expense Year and the Independent
Directors determine that such excess was justified based on unusual and nonrecurring factors which
they deem sufficient, then the Excess Amount may be carried over and included in Total Operating
Expenses in subsequent Expense Years and reimbursed to the Advisor in one or more of such years,
provided that there shall be sent to the Stockholders a written disclosure of such fact, together
with an explanation of the factors the Independent Directors considered in determining that such
excess expenses were justified. Such determination shall be reflected in the minutes of the
meetings of the Board. All figures used in the foregoing computation shall be determined in
accordance with GAAP applied on a consistent basis.

     13. BUSINESS COMBINATION.

          (a) Business Combination with Advisor. The Company shall consider becoming a
self-administered REIT once the Company’s assets and income are, in the view of the Board, of
sufficient size such that internalizing the management functions performed by the Advisor is in the
best interests of the Company and the Stockholders. If the Board should make this determination in
the future, the Company shall pay one-half, and the Advisor shall pay the other one-half, of the
cost of an independent investment banking firm, which shall jointly advise the Company and the
Advisor on the value of the Advisor. After the investment banking firm completes its analyses, the
Company shall require it to prepare a written report and make a formal presentation to the Board.
Following the presentation by the investment banking firm, the Board shall form a special committee
(the “Special Committee”) comprised entirely of Independent Directors to consider a
possible business combination with the Advisor. The Board shall, subject to applicable law,
delegate all of its decision-making power and authority to the Special Committee with respect to
matters relating to a possible business combination with the Advisor. The Special Committee also
shall be authorized to retain its own financial advisors and legal counsel to, among other things,
negotiate with representatives of the Advisor regarding a possible business combination with the
Advisor.

          (b) Conditions to Completion of Business Combination with Advisor. Before the Company
may complete any business combination with the Advisor in accordance with this Section 13, the
following conditions shall be satisfied:

               (i) the Special Committee formed in accordance with Section 13(a) hereof receives an opinion
from a qualified investment banking firm, separate and distinct from the firm jointly retained by
the Company and the Advisor to provide a valuation analysis in accordance
with Section 13(a) hereof, concluding that the consideration to be paid to acquire the Advisor is
fair to the Stockholders from a financial point of view;

- 15 -

 

               (ii) the Board determines that such business combination is advisable and in the best
interests of the Company and the Stockholders; and

               (iii) such business combination is approved by the Stockholders entitled to vote thereon in
accordance with the Company’s Articles of Incorporation and Bylaws.

     14. OTHER ACTIVITIES OF THE ADVISOR. Nothing herein contained shall prevent the Advisor or
any of its Affiliates from engaging in or earning fees from other activities, including, without
limitation, the rendering of advice to other Persons (including other REITs) and the management of
other programs advised, sponsored or organized by the Advisor or its Affiliates; nor shall this
Agreement limit or restrict the right of any director, officer, member, partner, employee, or
stockholder of the Advisor or its Affiliates to engage in or earn fees from any other business or
to render services of any kind to any other partnership, corporation, firm, individual, trust or
association and earn fees for rendering such services; provided, however, that the Advisor must
devote sufficient resources to the Company’s business to discharge its obligations to the Company
under this Agreement. The Advisor may, with respect to any investment in which the Company is a
participant, also render advice and service to each and every other participant therein, and earn
fees for rendering such advice and service. Specifically, it is contemplated that the Company may
enter into joint ventures or other similar co-investment arrangements with certain Persons, and
pursuant to the agreements governing such joint ventures or arrangements, the Advisor may be
engaged to provide advice and service to such Persons, in which case the Advisor will earn fees for
rendering such advice and service.

     The Advisor shall report to the Board the existence of any condition or circumstance, existing
or anticipated, of which it has knowledge, which creates or could create a conflict of interest
between the Advisor’s obligations to the Company and its obligations to or its interest in any
other partnership, corporation, firm, individual, trust or association. The Advisor or its
Affiliates shall promptly disclose to the Board knowledge of such condition or circumstance. If
the Advisor, Director or Affiliates thereof have sponsored other investment programs with similar
investment objectives which have investment funds available at the same time as the Company, the
Advisor shall inform the Board of the method to be applied by the Advisor in allocating investment
opportunities among the Company and competing investment entities and shall provide regular updates
to the Board of the investment opportunities provided by the Advisor to competing programs in order
for the Board (including the Independent Directors) to fulfill its duty to ensure that the Advisor
and its Affiliates use their best efforts to apply such method fairly to the Company.

     15. THE BLUEROCK NAME. The Advisor and its Affiliates have a proprietary interest in the name
“Bluerock.” The Advisor hereby grants to the Company a non-transferable, non-assignable,
non-exclusive, royalty-free right and license to use the name “Bluerock” 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
“Bluerock” 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 “Bluerock” or any other word or words
that might, in the reasonable discretion of the

- 16 -

 

Advisor, be susceptible of indication of some form
of relationship between the Company and the Advisor or any its Affiliates. At such time, the
Company will also make any changes to any trademarks, servicemarks or other marks necessary to
remove any references to the word “Bluerock.” 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 “Bluerock” as a part of
their name, all without the need for any consent (and without the right to object thereto) by the
Company.

     16. TERM OF AGREEMENT. This Agreement shall continue in force for a period of one year from
the date of the Prospectus pursuant to which the initial Offering is made, subject to an unlimited
number of successive one-year renewals upon mutual consent of the parties.

     17. TERMINATION BY THE PARTIES. This Agreement may be terminated upon 60 days written notice
without Cause and without penalty by the Independent Directors of the Company or the Advisor. The
provisions of Sections 18 through 30 of this Agreement survive termination of this Agreement.

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

     19. PAYMENTS TO AND DUTIES OF ADVISOR UPON TERMINATION.

          (a) After the Termination Date, the Advisor shall not be entitled to compensation for further
services hereunder except it shall be entitled to receive from the Company or the Operating
Partnership within 30 days after the effective date of such termination all unpaid reimbursements
of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this
Agreement, subject to the 2%/25% Guidelines to the extent applicable.

          (b) The Advisor shall promptly upon termination:

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

- 17 -

 

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

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

               (iv) cooperate with the Company and the Operating Partnership to provide an orderly management
transition.

     20. INDEMNIFICATION BY THE COMPANY AND THE OPERATING PARTNERSHIP. The Company and the
Operating Partnership shall indemnify and hold harmless the Advisor and its Affiliates, including
their respective directors (the “Indemnitees,” and each an “Indemnitee”), from all
liability, claims, damages or losses arising in the performance of their duties hereunder, and
related expenses, including reasonable attorneys’ fees, to the extent such liability, claims,
damages or losses and related expenses are not fully reimbursed by insurance, and to the extent
that such indemnification would not be inconsistent with the laws of the State of Maryland, the
Articles of Incorporation or the provisions of Section II.G of the NASAA REIT Guidelines.
Notwithstanding the foregoing, the Company and the Operating Partnership shall not provide for
indemnification of an Indemnitee for any loss or liability suffered by such Indemnitee, nor shall
they provide that an Indemnitee be held harmless for any loss or liability suffered by the Company
and the Operating Partnership, unless all of the following conditions are met:

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

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

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

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

     Notwithstanding the foregoing, an Indemnitee shall not be indemnified by the Company and the
Operating Partnership for any losses, liabilities or expenses arising from or out of an alleged
violation of federal or state securities laws by such Indemnitee unless one or more of the
following conditions are met:

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

- 18 -

 

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

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

     In addition, the advancement of the Company’s or the Operating Partnership’s funds to an
Indemnitee for legal expenses and other costs incurred as a result of any legal action for which
indemnification is being sought is permissible only if all of the following conditions are
satisfied:

          (a) the legal action relates to acts or omissions with respect to the performance of duties or
services on behalf of the Company or the Operating Partnership;

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

          (c) the Indemnitee undertakes to repay the advanced funds to the Company or the Operating
Partnership, together with the applicable legal rate of interest thereon, in cases in which such
Indemnitee is found not to be entitled to indemnification.

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

     22. NOTICES. Any notice, report or other communication required or permitted to be given
hereunder shall be in writing unless some other
method of giving such notice, report or other communication is required by the Articles of
Incorporation, the Bylaws, or accepted by the party to whom it is given, and shall be given by
being delivered by hand, by facsimile transmission, by courier or overnight carrier or by
registered or certified mail to the addresses set forth herein:

- 19 -

 

	 	 	 
	To the Directors and to the Company:

	 	Bluerock Enhanced Multifamily REIT, Inc.
	 

	 	680 Fifth Avenue, 16th Floor
	 

	 	New York, New York 10019
	 

	 	Telephone: (212) 843-1601
	 

	 	Facsimile: (646) 278-4220
	 

	 	Attention: R. Ramin Kamfar,
	 

	 	                 Chief Executive Officer
	 
	 	 
	To the Operating Partnership:

	 	Bluerock Enhanced Multifamily Holdings, L.P.
	 

	 	c/o Bluerock Enhanced Multifamily REIT, Inc.
	 

	 	680 Fifth Avenue, 16th Floor
	 

	 	New York, New York 10019
	 

	 	Telephone: (212) 843-1601
	 

	 	Facsimile: (646) 278-4220
	 

	 	Attention: R. Ramin Kamfar,
	 

	 	                 Chief Executive Officer
	 
	 	 
	To the Advisor:

	 	Bluerock Enhanced Multifamily Advisor, LLC
	 

	 	680 Fifth Avenue, 16th Floor
	 

	 	New York, New York 10019
	 

	 	Telephone: (212) 843-1601
	 

	 	Facsimile: (646) 278-4220
	 

	 	Attention: R. Ramin Kamfar,
	 

	 	                 Chief Executive Officer

     Any party may at any time give notice in writing to the other parties of a change in its
address for the purposes of this Section 22.

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

     24. 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.

     25. CONSTRUCTION. The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of Maryland.

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

- 20 -

 

     27. INDULGENCES, NOT WAIVERS. 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.

     28. 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.

     29. TITLES NOT TO AFFECT INTERPRETATION. The titles of Sections and Subsections contained in
this Agreement are for convenience only, and they neither form a part of this Agreement nor are
they to be used in the construction or interpretation hereof.

     30. EXECUTION IN 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.

[Remainder of page intentionally left blank]

- 21 -

 

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

	 	 	 	 	 	 	 
	 	 	Bluerock Enhanced Multifamily REIT, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	R. Ramin Kamfar	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Bluerock Enhanced Multifamily Holdings, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Bluerock Enhanced Multifamily REIT, Inc.
its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	R. Ramin Kamfar	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	Bluerock Enhanced Multifamily Advisor, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Bluerock Real Estate, L.L.C.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Orion Residential, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:

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