Document:

Unassociated Document

    MANAGEMENT
AGREEMENT

    

    among

    

    Preferred
Apartment Communities, Inc.,

    

    Preferred
Apartment Communities Operating Partnership, L.P.

    

    and

    

    Preferred
Apartment Advisors, LLC

     

    
      
        

      

       

    

    Dated as
of
[                    ],
2010

     

    
      
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      TABLE OF
CONTENTS

       

      
        
          
            
              
                
                  	
                           

                        
	 
      	 
      	
                          Page

                        
	
                          Section
      1.

                        	
                          Definitions.

                        	
                          1

                        
	
                          Section
      2.

                        	
                          Appointment
      and Duties of the Manager.

                        	
                          6

                        
	
                          Section
      3.

                        	
                          Conduct
      Policies.

                        	
                          12

                        
	
                          Section
      4.

                        	
                          Additional
      Activities of the Manager; Non-Solicitation; Restrictions.

                        	
                          13

                        
	
                          Section
      5.

                        	
                          Bank
      Accounts.

                        	
                          14

                        
	
                          Section
      6.

                        	
                          Records;
      Confidentiality.

                        	
                          14

                        
	
                          Section
      7.

                        	
                          Compensation.

                        	
                          15

                        
	
                          Section
      8.

                        	
                          Expenses
      of the Company.

                        	
                          17

                        
	
                          Section
      9.

                        	
                          Limits
      of the Manager’s Responsibility; Indemnification.

                        	
                          19

                        
	
                          Section
      10.

                        	
                          No
      Joint Venture.

                        	
                          21

                        
	
                          Section
      11.

                        	
                          Term;
      Renewal; Termination Without Cause.

                        	
                          21

                        
	
                          Section
      12.

                        	
                          Assignments.

                        	
                          22

                        
	
                          Section
      13.

                        	
                          Termination
      for Cause.

                        	
                          23

                        
	
                          Section
      14.

                        	
                          Action
      Upon Termination.

                        	
                          24

                        
	
                          Section
      15.

                        	
                          Release
      of Money or Other Property Upon Written Request.

                        	
                          24

                        
	
                          Section
      16.

                        	
                          Miscellaneous.

                        	
                          25

                        

                

              

            

          

        

      

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    MANAGEMENT
AGREEMENT dated as of
[                    ], 2010, among Preferred
Apartment Communities, Inc., a Maryland corporation (“PAC”), Preferred Apartment
Communities Operating Partnership, L.P., a Delaware limited partnership (the
“Operating
Partnership”), and Preferred Apartment Advisors, LLC, a Delaware limited
liability company (the “Manager”).

     

    WITNESSETH:

     

    WHEREAS,
PAC is a newly formed corporation that intends to invest in Target Assets (as
defined below) and intends to qualify as a real estate investment trust for
federal income tax purposes and will elect to receive the tax benefits accorded
by Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (as
defined below);

     

    WHEREAS,
the Operating Partnership is a newly formed limited partnership that intends to
invest in Target Assets and will be a subsidiary of PAC;

     

    WHEREAS,
PAC and the Operating Partnership desire to retain the Manager to administer the
business activities and day-to-day operations of the Company (as defined below)
to perform services for the Company in the manner and on the terms set forth
herein; and

     

    WHEREAS,
the Manager wishes to be retained to administer such business activities and
day-to-day operations and to provide such services;

     

    NOW
THEREFORE, in consideration of the premises and agreements hereinafter set
forth, the parties hereto hereby agree as follows:

     

    Section 1.
Definitions.

     

    (a)           The
following terms shall have the respective meanings set forth below in this Section 1(a):

     

    “Above-Market Rates” has the
meaning set forth in Section 11(b).

    “Acquisition Expenses” means
any and all expenses, exclusive of Acquisition Fees, incurred by the Company,
the Manager or any of their respective Affiliates in connection with the
selection, evaluation, acquisition, origination, making or development of any
Investment, whether or not acquired, including legal fees and expenses, travel
and communications expenses, property inspection expenses, third party brokerage
or finder’s fees, costs of appraisals, nonrefundable option payments on property
not acquired, accounting fees and expenses, title insurance premiums and
expenses, survey expenses, closing costs and the costs of performing due
diligence.

     

    “Acquisition Fee” means the
fee payable to the Manager or its assignees pursuant to Section 7(a).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Affiliate” means, with respect to
a specified Person, (i) any Person directly or indirectly controlling,
controlled by, or under common control with such specified Person, (ii) any
general partner of such specified Person, and (iii) any Person for which such
specified Person acts as a general partner.  For purposes of this
definition, the terms “controlled”, “controlled by”, or “under common control
with” shall mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of an entity, whether through
the ownership of voting securities, by contract or credit arrangement, as
trustee or executor, or otherwise.

     

    “Agreement” means this Management
Agreement, as amended or supplemented from time to time.

     

    “AMEX” means NYSE
Amex.

     

    “Asset Management Fee” means
the fee payable to the Manager pursuant to Section 7(b).

     

    “Automatic Renewal Term” has the meaning set
forth in Section 11(a).

     

    “Bankruptcy Event” means, with respect to
any Person, (i) the filing by such Person of a voluntary petition seeking
liquidation, reorganization, arrangement or readjustment, in any form, of its
debts under Title 11 of the United States Code or any other U.S. federal or
state or foreign insolvency law, or such Person’s filing an answer consenting to
or acquiescing in any such petition, (ii) the making by such Person of any
assignment for the benefit of its creditors, (iii) the expiration of 60 days
after the filing of an involuntary petition under Title 11 of the Unites States
Code, an application for the appointment of a receiver for a material portion of
the assets of such Person, or an involuntary petition seeking liquidation,
reorganization, arrangement or readjustment of its debts under any other U.S.
federal or state or foreign insolvency law, provided that the same shall not
have been vacated, set aside or stayed within such 60-day period, or (iv) the
entry against such Person of a final and non-appealable order for relief under
any bankruptcy, insolvency or similar law now or hereinafter in
effect.

     

    “Board” means the board of
directors of PAC.  In every instance herein requiring approval of the
Board or referring to policies or directions of the Board, for purposes of this
Agreement, the Board shall be deemed to include any duly appointed and
constituted committee of the Board with respect to each and every act that under
the Governing Instruments or applicable law may be taken with the approval of a
duly appointed and constituted committee of the Board, and references herein to
the Board shall be deemed to include references to each such
committee.

     

    “Business Day” means any day except a
Saturday, a Sunday or a day on which banking institutions in New York, New York
or in Atlanta, Georgia are not required to be open.

    
       

      “Cause Termination
Notice” has
the meaning set forth in Section
13(a).

       

    

    “Change of Control” of an entity means a
change in the direct or indirect (i) beneficial ownership of more than 50% of
the combined voting power of such entity’s then outstanding equity interests, or
(ii) power to direct or cause the direction of the management and policies of
such entity, whether through the ownership of voting securities, by contract or
credit arrangement, as trustee or otherwise.

     

    “Claim” has the meaning set
forth in Section 9(c).

    
      
         

      

      
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    “Class A Common Stock” means the Class A
Common Stock, par value $0.01 per share, of PAC.

     

    “Closing Date” means the date of
closing of the Initial Public Offering.

     

    “Code” means the Internal
Revenue Code of 1986, as amended from time to time, or any successor statute
thereto.  Reference to any provision of the Code shall mean such
provision as in effect from time to time, as the same may be amended, and any
successor provision thereto, as interpreted by any applicable regulations as in
effect from time to time.

     

    “Company” means, collectively,
PAC and the Operating Partnership.

     

    “Company Entities” means,
collectively, PAC, the Operating Partnership and each of their respective
subsidiaries.

     

    “Company Indemnified
Party” has
meaning set forth in Section 9(b).

     

    “Competitive Real Estate
Commission” means a real estate or brokerage commission for the purchase
or sale of an asset which is reasonable, customary and competitive in light of
the size, type and location of the asset.

     

    “Conduct Policies” has the meaning set
forth in Section 3.

     

    “Confidential
Information” has the meaning set
forth in Section 6.

     

    “Construction Fee, Development Fee
and Landscaping Fee” means the fee payable to the Manager or its
assignees pursuant to Section 7(e).

     

    “Contract Sales Price” means
the total consideration received by any of the Company Entities for the sale of
an Investment, which total consideration shall include the amount of cash
received, the fair market value of any property received and the amount of debt
assumed by the purchaser to which a Company Entity is relieved of responsibility
upon such disposition.

     

    “Director” means a member of
the Board.

     

    “Disposition Fee on Sale of
Assets” means the fee payable to the Manager or its assignees pursuant to
Section 7(d).

     

    “Effective Termination
Date” has
the meaning set forth in Section 11(b).

     

    “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

     

    “Fees Accrued Upon
Termination” means the amounts
payable to the Manager or its assignees equal to the aggregate of any earned but
unpaid compensation and expense reimbursements accrued as of the date of
termination if this Agreement is terminated (i) pursuant to a Change of Control
of PAC, (ii) pursuant to a Termination Without Cause, (iii) by the Manager
pursuant to Section 13(b),
or (iv) based on a liquidation by the Company of all its
assets.

    
      
         

      

      
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      “Financing Transaction” means
any transaction with respect to any Investment involving any of the Company
Entities incurring any mortgage or other indebtedness, including the entering
into any line of credit, transaction involving the creation of any commercial
mortgage-backed security and mezzanine financing.

       

    

    “GAAP” means United States
generally accepted accounting principles, consistently applied.

     

    “General and Administrative Expenses
Fee” means the fee payable to the Manager or its assignees pursuant
to Section 8(b)(ii)
in connection with the administration of the day-to-day operations and the
performance and supervision of the performance of such other administrative
functions necessary to the management of the Company.

     

    “Governing Instruments” means, with regard to
any entity, the articles of incorporation or certificate of incorporation and
by-laws in the case of a corporation, the partnership agreement in the case of a
general or limited partnership, the certificate of formation and operating or
limited liability company agreement in the case of a limited liability company,
the declaration of trust or other comparable trust instrument in the case of a
trust, or similar governing documents in the case of another type of entity, in
each case, as the same may be amended from time to time.

     

    “Indemnified Party” has the meaning set
forth in Section 9(b).

     

    “Independent Director” means a member of the
Board who is “independent” in accordance with PAC’s Governing Instruments and
the rules of the AMEX or such other securities exchange on which the shares of
Class A Common Stock are listed.

     

    “Initial Public Offering” means PAC’s sale of
Class A Common Stock to the public through one or more underwriters pursuant to
the Registration Statement.

     

    “Initial Term” has the meaning set
forth in Section 11(a).

     

    “Investment” means any
investment by any Company Entity, directly or indirectly, in Real Estate Assets,
Real Estate Related Loans or any other asset.

     

    “Investment Committee” means the investment
committee formed by the Board.

     

    “Investment Company Act” means the Investment
Company Act of 1940, as amended.

     

    “Investment Guidelines” means the investment
guidelines approved by the Board, a copy of which is attached hereto as Exhibit A, as the
same may amended, restated, supplemented or waived pursuant to the approval of a
majority of the entire Board (which must include a majority of the Independent
Directors).

     

    “Investment Transaction” means
any purchase, acquisition, exchange, sale or disposition, merger or interest
exchange that results in the acquisition or disposition of, or other transaction
involving, an Investment.

    
      
         

      

      
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    “Joint Ventures” means the
joint venture or partnership or other similar arrangements (other than between
or among any Company Entity) in which a Company Entity is a co-venturer, member,
partner or other equity holder, which are established to own
Investments.

     

    “Losses” has the meaning set
forth in Section 9(a).

     

    “Manager” has the meaning set
forth at the head of this Agreement and shall include any successor in interest
thereto.

     

    “Manager Change of
Control” means a Change of
Control of the Manager; provided, however, that no
Manager Change of Control shall result from (i) any public offering of equity
interests of the Manager, or (ii) any assignment of this Agreement by the
Manager as permitted hereby and in accordance with the terms
hereof.

     

    “Manager Indemnified
Party” has
the meaning set forth in Section 9(a).

     

    “Manager Permitted Disclosure
Parties” has the meaning set
forth in Section 6(a).

     

    “Notice of Proposal to
Negotiate” has the meaning set
forth in Section 11(c).

     

    “Operating Partnership” has
the meaning at the head of this Agreement.

     

    “PAC” has the meaning at the
head of this Agreement.

     

    “Person” or “person” means any natural
person, corporation, partnership, association, limited liability company,
estate, trust or joint venture, any federal, state, county or municipal
government or any bureau, department or agency thereof, or any other legal
entity.

     

    “Property Management and Leasing
Fee” means the fee payable to the Manager or its assignees pursuant to
Section 7(c).

     

    “Real Estate Assets” means any
investments by any Company Entity in unimproved or improved Real Property
(including fee or leasehold interests, options and leases), directly, through
one or more subsidiaries or through a Joint Venture.

     

    “Real Estate Related Loans”
means any investments in mortgage loans and other types of real estate related
debt obligations, including mezzanine loans, bridge loans, convertible
mortgages, wraparound mortgage loans, construction mortgage loans, loans on
leasehold interests and participations in such loans, by any Company Entity,
directly, through one or more subsidiaries or through a Joint
Venture.

     

    “Real Property” means real
property owned from time to time by any Company Entity, directly, through one or
more subsidiaries or through a Joint Venture, which consists of (i) land
only, (ii) land, including the buildings located thereon,
(iii) buildings only, or (iv) such Investments the Board or the
Manager designates as Real Property to the extent such Investments could be
classified as Real Property.

    
      
         

      

      
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    “Registration Statement” means
PAC’s Registration Statement on Form S-11 (Registration No. 333-168407), as
amended from time to time, pursuant to which it is conducting or has conducted
the Initial Public Offering.

     

    “Regulation FD” means Regulation FD as
promulgated by the SEC.

     

    “REIT” means a “real estate
investment trust” as defined under the Code.

     

    “SEC” means the United States
Securities and Exchange Commission.

     

    “Securities Act” means the Securities
Act of 1933, as amended.

     

    “Target Assets” means the types of
assets described under “Business— Our Target Assets” in PAC’s prospectus
included in the Registration Statement, subject to, and including any changes
in, the Investment Guidelines.

     

    “Termination Notice” has the meaning set
forth in Section 11(b).

     

    “Termination Without
Cause” has
the meaning set forth in Section 11(b).

     

    (b)           As
used herein, accounting terms relating to any Company Entity not defined in
Section 1(a),
and accounting terms partly defined in Section 1(a), to
the extent not defined, shall have the respective meanings given to them under
GAAP.

     

    (c)           As
used herein, “calendar quarters” shall mean the periods from January 1 to March
31, April 1 to June 30, July 1 to September 30 and October 1 to December 31 of
the applicable year.

     

    (d)           The
words “hereof”, “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section references are to this
Agreement unless otherwise specified.

     

    (e)           The
meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

     

    (f)           The
words “include”, “includes” and “including” shall be deemed to be followed by
the phrase “without limitation.”

     

    (g)           A
reference to any gender shall be deemed to be a reference to all
genders.

     

    Section 2.
Appointment and Duties of the Manager.

     

    (a)           PAC
and the Operating Partnership hereby appoint the Manager to manage and
administer the Investments and day-to-day operations of the Company Entities,
subject at all times to the further terms and conditions set forth in this
Agreement and to the oversight of, and such further limitations or parameters
consistent with this Agreement as may be imposed from time to time by, the
Board.  The Manager will use commercially reasonable efforts to
perform each of its duties set forth herein, provided that funds are made
available by the Company for such purposes as set forth in Section 8.  The
Company shall not appoint any other Person except the Manager to perform the
duties and carry out the responsibilities of the Manager described herein,
except as may otherwise be permitted by this Agreement and except to the extent
that the Manager elects, in its sole and absolute discretion, subject to the
terms of this Agreement, to cause the duties of the Manager as set forth herein
to be provided by third parties.

    
      
         

      

      
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    (b)           The
Manager, in its capacity as manager of the Investments and the day-to-day
operations of the Company Entities, at all times will be subject to the
oversight and direction of the Board, will act in a manner that is compliant
with the provisions of the Governing Instruments of each Company Entity, will
use commercially reasonable efforts to present to the Company potential
investment opportunities and will perform its duties hereunder, including
managing the Company’s business affairs in conformity with the Investment
Guidelines and other policies that are determined and adopted by the
Board.  PAC, the Operating Partnership and the Manager hereby
acknowledge the adoption by the Board of the Investment Guidelines, including
the Company’s investment strategy with respect to Target Assets.  PAC,
the Operating Partnership and the Manager hereby acknowledge and agree that,
during the term of this Agreement, any proposed changes to the Company’s
investment strategy that would modify or expand the Target Assets shall require
a change in, or supplement to, the Investment Guidelines.  The Company
shall notify the Manager promptly of any amended, restated, supplemented or
waived Investment Guidelines, including any modification or revocation of the
Manager’s authority set forth in the Investment Guidelines; provided, however, that such
modification or revocation shall not be applicable to investment transactions to
which the Manager has committed any Company Entity prior to the date of receipt
by the Manager of such notification.

     

    (c)           The
Manager will be responsible for the day-to-day operations of the Company
Entities (which, for purposes of the Manager’s responsibilities in this
Agreement, includes their respective subsidiaries) and will perform (or cause to
be performed), subject to the Board’s oversight, such services and activities
relating to the Investments and the day-to-day operations of the Company
Entities as may be appropriate, which may include:

     

    (i)  (A)
proposing modifications to the Investment Guidelines to the Board, (B)
periodically reviewing the Company’s Investment portfolio for compliance with
the Investment Guidelines and reporting its findings to the Board, (C)
periodically reviewing and reporting to the Board regarding the diversification
of the Company’s Investment portfolio and the financing strategies, and (D)
conducting or overseeing the provision of the services and activities set forth
in this Section 2;

     

    (ii)  investigating,
analyzing, selecting, conducting due diligence with respect to, negotiating the
terms and conditions of (including negotiating the forms of definitive
agreements), arranging financing for and recommending to the Board in accordance
with procedures adopted by the Board possible Investment Transactions consistent
with the Investment Guidelines;

     

    (iii)  with
respect to prospective Investment Transactions and Financing Transactions,
conducting negotiations (including negotiation of definitive agreements) with
sellers, purchasers, prospective merger partners, lenders and other financing
sources and brokers and, if applicable, their respective agents and
representatives and closing Investment Transactions and Financing Transactions
on behalf of the Company;

    
      
         

      

      
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    (iv)  effecting
any private placement of interests in the Operating Partnership,
tenancy-in-common or other interests in Investments as may be approved by the
Board;

     

    (v)  delivering
to, or maintaining 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;

     

    (vi)  negotiating
and causing the Company to enter into, within the discretionary limits and
authority granted by the Board, repurchase agreements, interest rate swap
agreements, agreements relating to borrowings under programs established by the
U.S. Government and other agreements and instruments required to conduct the
business of the Company;

     

    (vii)  engaging
and supervising, at the expense of the Company, independent contractors that
provide investment banking, securities brokerage, mortgage brokerage, real
estate brokerage services, other financial services, due diligence services,
underwriting review services, legal and accounting services, and all other
services (including transfer agent and registrar services) as may be required
relating to the Company’s operations, Investments, Investment Transactions or
Financing Transactions;

     

    (viii)  advising
the Company on, preparing, negotiating and entering into, on behalf of the
Company, applications and agreements relating to programs established by the
U.S. Government;

     

    (ix)  coordinating
and managing operations of any joint venture or co-investment interests held by
the Company and conducting all matters with the joint venture or co-investment
partners;

     

    (x)  providing
executive and administrative personnel, office space and office services
required in rendering services to the Company;

     

    (xi)  entering
into on behalf of the Company leases and service contracts in connection with
the Investments and administering the day-to-day operations and performing and
supervising the performance of such other administrative functions necessary to
the Company’s management under oversight by the Board, including the collection
of revenues and the payment of the Company’s debts and obligations and
maintenance of appropriate computer services to perform such administrative
functions;

     

    (xii)  communicating
on the Company’s behalf with the holders of any equity or debt securities of PAC
or the Operating Partnership as required to satisfy the reporting and other
requirements of any governmental body or agency or trading market and to
maintain effective relations with such holders;

     

    (xiii)  evaluating
and recommending to the Board hedging strategies and engaging on the Company’s
behalf in hedging activities within the discretionary limits and authority as
granted by the Board, consistent with the Company’s qualification as a REIT and
with the Investment Guidelines;

    
      
         

      

      
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    (xiv)  counseling
the Board and the Company regarding the maintenance of PAC’s qualification as a
REIT and monitoring compliance with the various REIT qualification tests and
other rules set out in the Code and Treasury Regulations thereunder and using
commercially reasonable efforts to cause PAC to qualify for taxation as a
REIT;

     

    (xv)  counseling
the Board and the Company regarding the maintenance of PAC’s exemption from the
status of an investment company required to register under the Investment
Company Act, monitoring compliance with the requirements for maintaining such
exemption and using commercially reasonable efforts to cause PAC to maintain
such exemption from such status;

     

    (xvi)  furnishing
reports and statistical and economic research to the Board regarding the
activities and services performed for the Company by the Manager, including
reports with respect to potential conflicts of interest involving the Manager or
any of its Affiliates;

     

    (xvii)  monitoring
the performance of the Investments and providing periodic reports with respect
thereto to the Board, including comparative information with respect to such
operating performance and budgeted or projected operating results;

     

    (xviii)  investing
and reinvesting any moneys and securities of the Company within the
discretionary limits and authority as granted by the Board (including investing
in short-term investments pending investment in other Investments, payment of
fees, costs and expenses) and advising the Company with respect to its equity
and debt capitalization and its financing strategies, and the payments of
dividends or distributions to PAC’s stockholders and the Operating Partnership’s
partners;

     

    (xix)  causing
the Company to retain qualified accountants and legal counsel, as applicable, to
assist in developing appropriate accounting procedures and systems, internal
controls and other compliance procedures and testing systems with respect to
financial reporting obligations and compliance with the provisions of the Code
applicable to REITs and, if applicable, taxable REIT subsidiaries, and to
conduct quarterly compliance reviews with respect thereto;

     

    (xx)  assisting
the Company in qualifying to do business in all applicable jurisdictions and to
obtain and maintain all appropriate licenses;

     

    (xxi)  assisting
the Company in complying with all laws and regulatory requirements applicable to
the Company’s business activities, including preparing or causing to be prepared
all financial statements required under applicable regulations and contractual
undertakings and all reports and documents, if any, required under the Exchange
Act, the Securities Act, state or foreign securities laws or by the
AMEX;

    
      
         

      

      
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    (xxii)  assisting
the Company in taking all necessary action to enable the Company to make
required tax filings and reports, including soliciting information from
stockholders to the extent required by the provisions of the Code applicable to
REITs;

     

    (xxiii)  handling
and resolving all claims, disputes or controversies (including all litigation,
arbitration, settlement or other proceedings or negotiations) in which the
Company may be involved or to which the Company or the Company’s properties or
assets may be subject arising out of the Company’s day-to-day operations (other
than with the Manager or its Affiliates), subject to such limitations or
parameters as may be imposed from time to time by the Board;

     

    (xxiv)  using
commercially reasonable efforts to cause expenses incurred on behalf of the
Company to be commercially reasonable or commercially customary and within any
budgeted parameters or expense guidelines proposed by the Manager and approved
by the Board from time to time;

     

    (xxv)  advising
the Board regarding the Company’s equity and debt financings, hedging activities
and joint venture arrangements including (A) advising the Board on the
appropriateness of the Company’s leverage ratio, levels of preferred and common
equity financing, pricing of equity offerings, derivative positions and
strategies and off-balance sheet arrangements, and (B) seeking to execute on the
Company’s behalf Financing Transactions, equity offerings, hedging transactions
and joint ventures and off-balance sheet transactions consistent with the
Board’s directions and the Company’s financing policies as approved by the
Board;

     

    (xxvi)  providing
portfolio management services to the Company;

     

    (xxvii)  arranging
marketing materials, advertising, industry group activities (such as conference
participations and industry organization memberships) and other promotional
efforts designed to promote the Company’s business; and

     

    (xxviii)  performing
such other services as may be required from time to time for management and
other activities relating to the Company’s assets and business as the Board
shall reasonably request or the Manager shall deem appropriate under the
particular circumstances.

     

    (d)           The
Manager may retain, for and on behalf, and at the sole cost and expense, of the
Company, such services of the Persons referred to in Section 8 as the
Manager deems necessary or advisable in connection with the management and
operations of the Company.  In performing its duties under this Section 2, the
Manager shall be entitled to rely reasonably on qualified experts and
professionals (including accountants, legal counsel and other professional
service providers) hired by the Manager at the Company’s sole cost and
expense.

    
      
         

      

      
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    (e)           The
Manager shall refrain from any action that, in its sole judgment made in good
faith, (i) is not in compliance with the Investment Guidelines, (ii) would
adversely and materially affect the qualification of PAC as a REIT or the
Operating Partnership as a partnership under the Code or the Company’s status as
an entity excluded from investment company status under the Investment Company
Act, or (iii) would conflict with or violate (A) any law, rule or
regulation of any governmental body or agency having jurisdiction over any
Company Entity, (B) any rule of any exchange on which the securities of the
Company may be listed, or (C) any applicable Governing
Instruments.  The Manager may proceed with taking an action described
above if further instructed to do so by the Board.  If the Manager is
ordered to take any action by the Board, the Manager promptly shall notify the
Board if it is the Manager’s judgment that such action would adversely and
materially affect such qualification or status or conflict with or violate any
such law, rule or regulation or Governing
Instruments.  Notwithstanding the foregoing, neither the Manager nor
any of its Affiliates shall be liable to any Company Entity, the Board, any of
the stockholders, partners, members or other holders of equity
interests of any Company Entity for any act or omission by the Manager or
any of its Affiliates, except as provided in Section 9.

       

    

    (f)           The
Manager shall notify the Board of all proposed Investment Transactions before
they are completed.  The Manager shall seek and obtain Board approval
of any Investment Transaction that does not meet the Investment
Guidelines.  Subject to this Section 7(f),
the Manager may execute without Board approval (but, in all cases, with advance
notice to the Board) any Investment Transaction that fits within the Investment
Guidelines.  If any transaction requires approval by the Independent
Directors, the Manager will deliver to the Independent Directors all documents
and other information reasonably required by them to evaluate properly the
proposed transaction.  With respect to Investment Transactions for
which Board approval is not required but advance notice is required, the Manager
shall provide to the Board a summary of its investment analysis with respect to
the proposed Investment Transaction.  The Board may, at any time upon
the giving of notice to the Manager, modify or revoke the authority set forth in
this Section 2(f);
provided, however, that such
modification or revocation shall be effective upon receipt by the Manager and
shall not be applicable to Investment Transactions to which the Manager has
committed the Company prior to the date of receipt by the Manager of such
notification.

     

    (g)           The
Company will take all actions reasonably required to permit and enable the
Manager to carry out its duties and obligations under this Agreement, including
all steps reasonably necessary to allow the Manager to file any registration
statement or other filing required to be made under the Securities Act, Exchange
Act, the AMEX’s Company Guide, the Code or other applicable law, rule or
regulation on behalf of the Company in a timely manner.  The Company
will use commercially reasonable efforts to make available to the Manager all
resources, information and materials reasonably requested by the Manager to
enable the Manager to satisfy its obligations hereunder, including its
obligations to deliver financial statements and any other information or reports
with respect to the Company.

     

    (h)           As
frequently as the Manager may deem necessary or advisable, or at the direction
of the Board, the Manager shall prepare (or, at the sole cost and expense of the
Company, cause to be prepared) reports and other information relating to any
proposed or consummated Investment.

     

    (i)           The
Manager shall prepare (or, at the sole cost and expense of the Company, cause to
be prepared) all reports, financial or otherwise, reasonably required by the
Board in order for the Company Entities to comply with their respective
Governing Instruments or as otherwise reasonably requested by the Board,
including an annual audit of PAC’s consolidated financial statements by a
nationally recognized independent accounting firm.

    
      
         

      

      
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    (j)           The
Manager shall prepare (or, at the sole cost and expense to the Company, cause to
be prepared) regular reports for the Board to enable the Board to review the
Company’s acquisitions, Investment portfolio composition and characteristics,
credit quality, performance and compliance with the Investment Guidelines and
policies approved by the Board.

     

    (k)           Officers,
employees and agents of the Manager and its Affiliates may serve as directors,
officers, agents, nominees or signatories for any Company Entity, to the extent
permitted by their respective Governing Instruments, by any resolutions duly
adopted by the Board, the Operating Partnership or such
subsidiary.  When executing documents or otherwise acting in such
capacities for any Company Entity, such Persons shall indicate in what capacity
they are executing on behalf of such Company Entity.  Without limiting
the foregoing, while this Agreement is in effect, the Manager will establish a
management team, including a chief executive officer and president or similar
positions, along with appropriate support personnel, to provide the management
services to be provided by the Manager to the Company Entities hereunder, who
shall devote such of their time to the management of the Investments and
consideration of the Investment Guidelines and policies as necessary and
appropriate, commensurate with the level of activity of the Company from time to
time.

     

    (l)           The
Manager, at its sole cost and expense, shall maintain reasonable and customary
“errors and omissions” insurance coverage and other customary insurance coverage
in respect to its obligations and activities under, or pursuant to, this
Agreement, naming PAC and the Operating Partnership as additional
insureds.

     

    (m)           The
Manager, at its sole cost and expense, shall provide such internal audit,
compliance and control services as may be required for the Company to comply
with applicable law (including the Securities Act and Exchange Act), regulation
(including SEC regulations) and the rules and requirements of the AMEX and as
otherwise reasonably requested by the Company or the Board from time to
time.

     

    (n)           The
Manager, at its sole cost and expense, shall maintain any required registration
of the Manager or any Affiliate with the Securities and Exchange Commission
under the Investment Advisers Act of 1940, as amended, or with any state
securities authority in any state in which the Manager or its Affiliate is
required to be registered as an investment advisor under applicable state
securities laws.

     

    Section 3. Conduct
Policies.

     

    
      The
Manager acknowledges receipt of the Company’s Code of Business Conduct and
Ethics and the Company’s Policy on Insider Trading (collectively, the “Conduct Policies”) and will
use commercially reasonable efforts to require the Persons who provide services
to the Company to comply with the Conduct Policies in the performance of such
services hereunder or such comparable policies as shall in substance hold such
Persons to at least the standards of conduct set forth in the Conduct
Policies.

       

      
        
          
             

          

          
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    Section 4.
Additional Activities of the Manager; Non-Solicitation;
Restrictions.

     

    (a)           Subject
to Section 4(c) and
except as may be provided in the Investment Guidelines, nothing in this
Agreement shall:  (i) prevent the Manager, any of its Affiliates
or any of their respective officers, directors or employees, from engaging in
other businesses or from rendering services of any kind to any other Person,
whether or not the investment objectives or policies of any such other Person
are similar to those of the Company; provided, however, that the Manager
devotes sufficient resources to the Company’s business to discharge its
obligations to the Company under this Agreement; or (ii) in any way bind or
restrict the Manager, any of its Affiliates or any of their respective officers,
directors or employees from buying, selling or trading any securities or
commodities for their own accounts or for the account of others for whom the
Manager, any of its Affiliates or any of their respective officers, directors or
employees may be acting.

     

    (b)           While
information and recommendations supplied to the Company shall, in the Manager’s
good faith judgment, be appropriate under the circumstances and in light of the
investment objectives and policies of the Company, they may be different from
the information and recommendations supplied by the Manager or any Affiliate of
the Manager to others.  The Company shall be entitled to equitable
treatment under the circumstances in receiving information, recommendations and
any other services, but the Company recognizes that the Company is not entitled
to receive preferential treatment as compared with the treatment given by the
Manager or any Affiliate of the Manager to others.

     

    (c)           The
Manager shall report to the Board any condition or circumstance, existing or
anticipated, of which it has knowledge, which creates or could create a conflict
of interest between the Manager’s obligations to the Company and its obligations
to or its interest in any other Person.  If the Manager or any of its
Affiliates sponsored any other investment program with similar investment
objectives to the Company that has investment funds available at the same time
as the Company, the Manager shall inform the Board of the method to be applied
by the Manager 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 Manager to competing programs in
order for the Board (including the Independent Directors) to evaluate that the
Manager is allocating such opportunities in accordance with such
method.

     

    (d)          In the
event of a Termination Without Cause of this Agreement by the Company pursuant
to Section 11(b),
for a period of two years from and after the date of such termination of this
Agreement, the Company shall not (and shall cause each of the Company Entities
to not), without the consent of the Manager, employ or otherwise retain
(directly or indirectly any Company Entity) any Person who was employed as an
executive by the Manager or any of its Affiliates on the date of such
termination or any Person who shall have been employed as an executive by the
Manager or any of its Affiliates at any time within the two-year period
immediately preceding the date on which such Person is scheduled to commence
employment with or otherwise be retained by the Company or any other Company
Entity.  The Company acknowledges and agrees that, in addition to any
damages, the Manager shall be entitled to equitable relief for any violation of
this Section 4(d) by
PAC or the Operating Partnership (directly or indirectly through any of their
respective subsidiaries), including injunctive relief.

      
        
          
             

          

          
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    Section 5. Bank
Accounts.

     

    At the
direction of the Board, the Manager may establish and maintain one or more bank
accounts in the name of any Company Entity, and may collect and deposit into any
such account or accounts, and disburse funds from any such account or accounts,
under such policies, terms and conditions as the Company may establish and the
Board may approve, provided that no
funds shall be commingled with the funds of the Manager or its
Affiliates.  The Manager shall from time to time render appropriate
accountings of such collections and payments to the Board and, upon request,
shall provide information regarding such account to the Company’s
auditors.

     

    Section 6. Records;
Confidentiality.

     

    (a)           The
Manager shall maintain appropriate books of accounts and records relating to
services performed hereunder, and such books of account and records shall be
accessible for inspection by representatives of the Company Entities at any time
during normal business hours.  The Manager shall keep confidential any
and all non-public information, written or oral, obtained by it in connection
with the services rendered hereunder (“Confidential
Information”) and shall not use
Confidential Information except in furtherance of its duties under this
Agreement or disclose Confidential Information, in whole or in part, to any
Person other than (i) to its Affiliates and the officers, directors, employees,
agents, representatives or advisors of the Manager or any of its Affiliates who
need to know such Confidential Information for the purpose of rendering services
hereunder, (ii) to appraisers, financing sources and others in the ordinary
course of the Company’s business ((i) and (ii) collectively, “Manager Permitted Disclosure
Parties”), (iii) in connection with any governmental or regulatory
filings of the Company, or filings with the AMEX or other applicable securities
exchange or market, (iv) in presentations or other disclosures to the Company’s
investors (subject to compliance with Regulation FD), (iv) to governmental
officials having jurisdiction over the Company, (v) as requested by law or legal
process to which the Manager or any Person to whom disclosure is permitted
hereunder is a party, or (vi) with the consent of the Company.  The
Manager will inform each of its Manager Permitted Disclosure Parties of the
non-public nature of the Confidential Information and to obtain agreement from
such Persons to treat such Confidential Information in accordance with the terms
hereof.

     

    (b)           Nothing
herein shall prevent any Manager Permitted Disclosure Party from disclosing
Confidential Information (i) upon the order of any court or administrative
agency, (ii) upon the request or demand of, or pursuant to any law or regulation
to, any regulatory agency or authority, (iii) to the extent reasonably required
in connection with the exercise of any remedy hereunder, or (iv) to its legal
counsel or independent auditors; provided, however, that with
respect to clauses (i) and (ii), it is agreed that, so long as not legally
prohibited, the Manager will provide PAC with prompt written notice of such
order, request or demand so that PAC may seek, at its sole expense, an
appropriate protective order and/or waive any Manager Permitted Disclosure
Party’s compliance with the provisions of this Agreement.  If, failing
the entry of a protective order or the receipt of a waiver hereunder, the
Manager is required to disclose Confidential Information, the Manager Permitted
Disclosure Party may disclose only that portion of such information that is
legally required without liability hereunder; provided, however, that the
Manager Permitted Disclosure Party agrees to exercise commercially reasonable
efforts to obtain reliable assurance that confidential treatment will be
accorded such information.

    
      
         

      

      
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    (c)           Notwithstanding
anything herein to the contrary, the following types of Confidential Information
shall be deemed to be excluded from provisions hereof:  (i) any
Confidential Information that is available to the public from a source other
than the Manager or its Affiliates, (ii) any Confidential Information that
is released in writing by any of the Company Entities to the public (except to
the extent exempt under, and in compliance with, Regulation FD) or to persons
who are not under similar obligation of confidentiality to any of the Company
Entities; and (iii) any Confidential Information that is obtained by the
Manager from a third party which, to the Manager’s knowledge, does not
constitute a breach by such third party of an obligation of confidence with
respect to the Confidential Information disclosed.

     

    (d)           The
provisions of this Section 6 shall
survive the expiration or earlier termination of this Agreement for a period of
two years thereafter, provided that the
parties will maintain trade secrets of the other party identified in writing as
trade secrets, and which in fact constitute trade secrets, for a period of no
longer than five years thereafter.

     

    Section 7.
Compensation.

     

    (a)           Acquisition
Fee.  The
Company shall pay an Acquisition Fee to the Manager or its assignees as
compensation for services rendered in connection with the investigation,
selection and acquisition (by purchase, investment or exchange) of
Investments.  The total Acquisition Fee payable to the Manager or its
assignees shall equal 1.0% of the purchase price of Real Estate Assets and 1.0%
of the amount advanced for Real Estate Related Loans or other Investments (other
than Real Estate Assets), along with reimbursement of Acquisition Expenses
actually incurred by the Manager or any of its Affiliates; provided, however, that no
Acquisition Fee will be payable until the Closing Date, although it may accrue
before the Closing Date.  The purchase price of Real Estate Assets
shall equal the amount paid or allocated to the acquisition (by purchase,
investment or exchange) of the Real Estate Assets inclusive of expenses related
thereto and the amount of debt assumed in connection with such Investment or to
which such Investment may be subject following such acquisition, but exclusive
of Acquisition Fees.  The purchase price allocable for an Investment
held through a Joint Venture shall equal the product of (i) the purchase price
of, or the amount advanced for, the Investment, as applicable, determined as
stated above, and (ii) the direct or indirect ownership percentage in the Joint
Venture held directly or indirectly by any Company Entity.  For
purposes of this paragraph, “ownership percentage” shall
be the percentage of capital stock, membership interests, partnership interests
or other equity interests held by any Company Entity, without regard to
classification of such equity interests.  The Company shall pay to the
Manager or its assignees the Acquisition Fee promptly upon the closing of the
Investment, subject to the proviso set forth above.

     

    (b)           Asset Management
Fee.  The Company shall pay a monthly Asset Management Fee to
the Manager or its assignees as compensation for services rendered in connection
with the management of the Investments.  The Asset Management Fee
shall be payable monthly in cash or shares of PAC’s Class A Common Stock, at the
option of the Manager, and shall be equal to one-twelfth of 0.50% of the total
value of the Company’s assets (including cash or cash equivalents) held as of
the last day of the immediately preceding month, based on the adjusted cost of
the Company’s assets before reduction for depreciation, amortization, impairment
charges and cumulative acquisition costs charged to expense in accordance with
GAAP (adjusted cost of Real Estate Assets and Real Estate Related Loans will
include the purchase price, Acquisition Expenses, capital expenditures and other
customarily capitalized costs) and as adjusted for appropriate closing dates for
individual asset acquisitions.  The Asset Management Fee will be
appropriately pro rated for any partial month.

    
      
         

      

      
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    (c)           Property Management and
Leasing Fee.  The Company shall pay a Property Management and
Leasing Fee to the Manager or its assignees as compensation for services
rendered in connection with the rental, leasing, operation and management of the
Company’s Real Estate Assets and the supervision of any non-Affiliates that are
engaged by the Manager to provide such services in an amount equal to 4.0% of
the gross revenues of properties managed per month.  The Manager may
subcontract the performance of its property management and leasing services
duties to third parties (including its Affiliates) and pay all or a portion of
the Property Management and Leasing Fee to such persons with whom it contracts
for these services. The Manager will be responsible for all fees payable to
third parties (including its Affiliates) in connection with subcontracted
property management and leasing duties. The Property Management and Leasing Fee
will be payable monthly in arrears, based on the actual gross revenues for the
prior month.

     

    (d)           Disposition Fee on Sale of
Assets.  In connection with a sale or other disposition of an
Investment (except for such Investments that are traded on a national securities
exchange) in which the Manager or any Affiliate of the Manager provides a
substantial amount of services, as determined by a majority of the Independent
Directors, the Company shall pay to the Manager or its assignees a Disposition
Fee on Sale of Assets up to the lesser of (i) one-half of a Competitive Real
Estate Commission and (ii) 1.0% of the Contract Sales Price of such Investment;
provided, however, that in no event may
the Disposition Fee on Sale of Assets paid to the Manager, its Affiliates and
non-Affiliates exceed the lesser of 6.0% of the Contract Sales Price and a
Competitive Real Estate Commission.  If the sale or disposition
involves the receipt of publicly traded securities or operating partnership
units that may be redeemed for or converted into publicly traded securities,
then the Disposition Fee on Sale of Assets shall be receivable upon the receipt
of such consideration, notwithstanding the fact that such consideration may at
that time be publicly traded or valued by reference to a publicly traded
security.

     

    (e)           Construction Fee,
Development Fee and Landscaping Fee.  The Company shall pay a
Construction Fee, Development Fee and/or Landscaping Fee to the Manager or its
assignees as compensation for services rendered in connection with the
construction, development or landscaping of the Real Estate Assets and the
supervision of any non-Affiliates that are engaged by then Manager to provide
such services in an amount equal to the customary and competitive market rates
in light of the size, type and location of the Real Estate Assets.

     

    (f)           Exclusion of Certain
Transactions.  If any Company Entity shall propose to enter
into any transaction in which the Manager, any Affiliate of the Manager or any
of the Manager’s directors or officers has a direct or indirect interest, then
such transaction shall be approved by a majority of the Board not otherwise
interested in such transaction, including a majority of the Independent
Directors.

    
      
         

      

      
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    (g)           Limitation on Total Asset
Management Fees, Property Management and Leasing Fees and General and
Administrative Expenses Fee.  The total amount of the Asset
Management Fees, Property Management and Leasing Fees and General and
Administrative Expenses Fee payable in connection with the Company’s
investments paid or reimbursed to the Manager shall not exceed 1.50% of the
total value of the Company’s assets (including cash and cash equivalents) based
on the adjusted cost of the Company’s assets before reduction for depreciation,
amortization, impairment charges and cumulative acquisition costs charged to
expense in accordance with GAAP (adjusted cost will include the gross contract
purchase price, Acquisition Expenses, capital expenditures and other customarily
capitalized costs).

     

    (h)           General and Administrative
Expenses Fee.  The Company shall pay General and Administrative
Expenses Fee in an amount equal to 2.0% of the gross revenues of the
Company per month.

     

    Section 8. Expenses
of the Company.

     

    (a)           The
Manager shall be responsible for the expenses related to any and all personnel
of the Manager and its Affiliates who provide services to the Company pursuant
to this Agreement (including each of the officers and directors of the Company
who are also directors, officers, employees or agents of the Manager or any of
its Affiliates), including salaries, bonus and other wages, payroll taxes, the
cost of employee benefit plans of such personnel, and costs of insurance with
respect to such personnel.  For the avoidance of doubt, any equity
incentive plan of PAC or the Operating Partnership in which any person
referred to above participates shall be excluded from the operation of this
Section 8(a).

     

    (b)           The
Company shall pay (or cause to be paid) all the costs and expenses of each
Company Entity and shall reimburse the Manager or its Affiliates for expenses of
the Manager and its Affiliates incurred on behalf of any Company Entity,
excepting only those expenses that are specifically the responsibility of the
Manager pursuant to Section 8(a) and
subject to Section 7(g).  Without
limiting the generality of the foregoing, it is specifically agreed that the
following costs and expenses of the Company Entities shall be paid (or caused to
be paid) by the Company and shall not be paid by the Manager or Affiliates of
the Manager:

     

    (i)  Acquisition
Expenses incurred in connection with the selection and acquisition of
Investments;

     

    (ii)  General
and Administrative Expenses;

     

    (iii)  expenses
in connection with the issuance of securities of the Company, any Financing
Transaction and other costs incident to the acquisition, disposition and
financing of the Investments;

     

    (iv)  costs
of legal, tax, accounting, consulting, auditing and other similar services
rendered to the Company by providers retained by the Manager, or, if provided by
the Manager’s personnel, in amounts which are no greater than those which would
be payable to outside professionals or consultants engaged to perform such
services pursuant to agreements negotiated on an arm’s-length
basis;

     

    (v)  the
compensation and expenses of the Directors and the cost of liability insurance
to indemnify the Company and its officers and the Directors;

    
      
         

      

      
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    (vi)  expenses
connected with communications to holders of the securities of any Company Entity
and other bookkeeping and clerical work necessary in maintaining relations with
holders of such securities and in complying with the continuous reporting and
other requirements of governmental bodies or agencies, including all costs of
preparing and filing required reports with the SEC, the costs payable by the
Company to any transfer agent and registrar in connection with the listing
and/or trading of the Company’s securities on any exchange, the fees payable by
the Company to any such exchange in connection with its listing, costs of
preparing, printing and mailing PAC’s annual report to its stockholders or the
Operating Partnership’s partners, as applicable, and proxy materials with
respect to any meeting of PAC’s stockholders or the Operating Partnership’s
partners, as applicable;

     

    (vii)  costs
associated with any computer software or hardware, electronic equipment or
purchased information technology services from third-party vendors that is used
for the Company Entities;

     

    (viii)  expenses
incurred by managers, officers, personnel and agents of the Manager for travel
on the Company’s behalf and other out-of-pocket expenses incurred by managers,
officers, personnel and agents of the Manager in connection with the purchase,
financing, refinancing, sale or other disposition of an Investment or in
connection with any Financing Transaction;

     

    (ix)  costs
and expenses incurred with respect to market information systems and
publications, research publications and materials, and settlement, clearing and
custodial fees and expenses;

     

    (x)  the
costs of maintaining compliance with all federal, state and local rules and
regulations or any other regulatory agency;

     

    (xi)  all
taxes and license fees;

     

    (xii)  all
insurance costs incurred in connection with the operation of the Company’s
business except for the costs attributable to the insurance that the Manager
elects to carry for itself and its personnel;

     

    (xiii)  costs
and expenses incurred in contracting with third parties;

     

    (xiv)  all
other costs and expenses relating to the Company’s business and investment
operations, including the costs and expenses of owning, protecting, maintaining,
developing and disposing of Investments, including appraisal, reporting, audit
and legal fees;

     

    (xv)  expenses
relating to any office(s) or office facilities, including disaster backup
recovery sites and facilities, maintained for the Company Entities or the
Investments of the Company separate from the office or offices of the
Manager;

     

    (xvi)  expenses
connected with the payments of interest, dividends or distributions in cash or
any other form authorized or caused to be made by the Board, the Operating
Partnership or other governing body to or on account of holders of the
securities of any Company Entity, including in connection with any dividend
reinvestment plan;

    
      
         

      

      
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    (xvii)  any
judgment or settlement of pending or threatened proceedings (whether civil,
criminal or otherwise) against any Company Entity, or against any trustee,
director, partner, member or officer of such Company Entity in his capacity as
such for which such Company Entity is required to indemnify such trustee,
director, partner, member or officer pursuant to the applicable Governing
Instruments or any agreement or other instrument or by any court or governmental
agency; and

     

    (xviii)  all
other expenses actually incurred by the Manager (except as otherwise specified
herein) which are reasonably necessary or advisable for the performance by the
Manager of its duties and functions under this Agreement.

     

    (c)           Costs
and expenses incurred by the Manager on behalf of the Company shall be
reimbursed monthly to the Manager.  The Manager shall prepare a
written statement in reasonable detail documenting the costs and expenses of the
Company and those incurred by the Manager on behalf of the Company during each
month, and shall deliver such written statement to the Company within 30 days
after the end of each month.  The Company shall pay all amounts
payable to the Manager pursuant to this Section 8(c)
within five Business Days after the receipt of the written statement without
demand, deduction, offset or delay.  Cost and expense reimbursement to
the Manager shall be subject to adjustment at the end of each calendar year in
connection with the annual audit of the Company.  The provisions of
this Section 8 shall
survive the expiration or earlier termination of this Agreement to the extent
such expenses have previously been incurred or are incurred in connection with
such expiration or termination.

     

    Section 9. Limits
of the Manager’s Responsibility; Indemnification.

     

    (a)           The
Manager, its Affiliates and their respective directors, officers, employees,
partners, members, stockholders, other equity holders agents and representatives
(each, a “Manager Indemnified
Party”), will not be liable to any Company Entity or any of the
stockholders, partners, members or other holders equity interests of
any Company Entity for any acts or omissions by any Manager
Indemnified Party performed in accordance with and pursuant to this Agreement,
except by reason of any act or omission constituting bad faith, willful
misconduct or gross negligence on the part of such Manager Indemnified
Party.  The Company shall, to the fullest lawful extent, reimburse,
indemnify and hold harmless each Manager Indemnified Party, of and from any and
all expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever (including reasonable attorneys’ fees and costs of
investigation) (collectively “Losses”) in respect of or
arising from any acts or omissions of such Manager Indemnified Party performed
in good faith under this Agreement and not constituting bad faith, willful
misconduct or gross negligence on the part of such Manager Indemnified
Party.  In addition, the Company shall advance funds to a Manager
Indemnified Party for legal fees and other costs and expenses incurred as a
result of any claim, suit, action or proceeding for which indemnification is
being sought, provided that such Manager Indemnified Party undertakes to repay
the advanced funds to the Company, together with the applicable legal rate of
interest thereon, in cases in which such Manager Indemnified Party is found
pursuant to a final and non-appealable order or judgment to not be entitled to
indemnification.

    
      
         

      

      
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    (b)           The
Manager shall, to the fullest lawful extent, reimburse, indemnify and hold
harmless the Company (each, a “Company Indemnified Party”)
of and from any and all Losses in respect of or arising from (i) any acts or
omissions of the Manager constituting bad faith, willful misconduct or gross
negligence on the part of the Manager, or (ii) any claims by the Manager’s
employees relating to the terms and conditions of their employment by the
Manager.  The Manager assumes no responsibility under this Agreement
other than to render in good faith the services specifically designated as to be
provided by the Manager hereunder and shall not be responsible for any action of
the Board in following or declining to follow any advice or recommendations of
the Manager, including as set forth in the Investment Guidelines.  A
Manager Indemnified Party and a Company Indemnified Party are each sometimes
hereinafter referred to as an “Indemnified
Party.”

     

    (c)           In
case any such claim, suit, action or proceeding (a “Claim”) is brought against
any Indemnified Party in respect of which indemnification may be sought by such
Indemnified Party pursuant hereto, the Indemnified Party shall give prompt
written notice thereof to the indemnifying party, which notice shall include all
documents and information in the possession of or under the control of such
Indemnified Party reasonably necessary for the evaluation and/or defense of such
Claim and shall specifically state that indemnification for such Claim is being
sought under this Section 9; provided, however, that the
failure of the Indemnified Party to so notify the indemnifying party shall not
limit or affect such Indemnified Party’s rights except to the extent that the
indemnifying party is actually prejudiced thereby.  Upon receipt of
such notice of Claim (together with such documents and information from such
Indemnified Party), the indemnifying party shall, at its sole cost and expense,
in good faith defend any such Claim with counsel reasonably satisfactory to such
Indemnified Party, which counsel may, without limiting the rights of such
Indemnified Party pursuant to the next succeeding sentence of this Section, also
represent the indemnifying party in such investigation, action or
proceeding.  In the alternative, such Indemnified Party may elect to
conduct the defense of the Claim, if (i) such Indemnified Party reasonably
determines that the conduct of its defense by the indemnifying party could be
materially prejudicial to its interests, (ii) the indemnifying party refuses to
assume such defense (or fails to give written notice to the Indemnified Party
within ten days of receipt of a notice of Claim that the indemnifying party
assumes such defense), or (iii) the indemnifying party shall have failed, in
such Indemnified Party’s reasonable judgment, to defend the Claim in good
faith.  The indemnifying party may settle any Claim against such
Indemnified Party without such Indemnified Party’s consent, provided (A) such
settlement is without any Losses whatsoever to such Indemnified Party, (B) the
settlement does not include or require any admission of liability or culpability
by such Indemnified Party, (C) the indemnifying party obtains an effective
written release of liability for such Indemnified Party from the party to the
Claim with whom such settlement is being made, which release must be reasonably
acceptable to such Indemnified Party, and a dismissal with prejudice with
respect to all claims made by the party against such Indemnified Party in
connection with such Claim, and (D) such settlement does not provide for any
equitable relief.  The applicable Indemnified Party shall reasonably
cooperate with the indemnifying party, at the indemnifying party’s sole cost and
expense, in connection with the defense or settlement of any Claim in accordance
with the terms hereof.  If such Indemnified Party is entitled pursuant
to this Section 9 to
elect to defend such Claim by counsel of its own choosing and so elects, then
the indemnifying party shall be responsible for any good faith settlement of
such Claim entered into by such Indemnified Party.  Except as provided
in the immediately preceding sentence, no Indemnified Party may pay or settle
any Claim and seek reimbursement therefor under this Section 9.

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    (d)           The
provisions of this Section 9 shall
survive the expiration or earlier termination of this Agreement.

     

    Section 10. No
Joint Venture.

     

    The
parties to this Agreement are not partners or joint venturers with each other
and nothing herein shall be construed to make them partners or joint venturers
or impose any liability as such on either of them.

     

    Section 11. Term;
Renewal; Termination Without Cause.

     

    (a)           This
Agreement shall become effective on the Closing Date and shall continue in
operation, unless terminated in accordance with the terms hereof, until the
third anniversary of the Closing Date (the “Initial
Term”).  After the Initial Term, this Agreement shall be deemed
renewed automatically each year for an additional one-year period (an “Automatic Renewal Term”),
unless the Company or the Manager elects not to renew this Agreement in
accordance with Section 11(b) or
Section 11(d),
respectively.

     

    (b)           Notwithstanding
any other provision of this Agreement to the contrary, upon written notice
provided to the Manager no later than 180 days prior to the expiration of the
Initial Term or any Automatic Renewal Term (the “Termination Notice”), the
Company may, without cause, in connection with the expiration of the Initial
Term or the then current Automatic Renewal Term, decline to renew this Agreement
(any such nonrenewal, a “Termination Without Cause”)
upon the affirmative vote of at least two-thirds of the Independent Directors
that includes a finding by such two-thirds majority either that (i) there has
been unsatisfactory performance by the Manager that is materially detrimental to
the Company Entities, taken as a whole, or (ii) the fees payable to the Manager
under Section 7 are
not, taken as a whole, in accordance with then-current market rates charged by
asset management companies rendering services similar to those rendered by the
Manager (“Above-Market
Rates”), subject to Section 11(c)
and only after reasonable investigation by the Independent Directors as to the
market rates charged by similarly situated managers.  In the event of
a Termination Without Cause, the Company shall pay the Manager the Fees Accrued
Upon Termination before or on the last day of the Initial Term or such Automatic
Renewal Term, as the case may be (the “Effective Termination
Date”).  The Company may terminate this Agreement for cause
pursuant to Section 13 even
after a Termination Notice and, in such case, no Fees Accrued Upon Termination
shall be payable.

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    (c)           Notwithstanding
the provisions of Section 11(b),
if the reason for nonrenewal specified in the Company’s Termination Notice is
that two-thirds of the Independent Directors have determined that the fees
payable to the Manager under Section 7 are,
taken as a whole, at Above-Market Rates, then the Company shall not have the
foregoing nonrenewal right if the Manager agrees that it will continue to
perform its duties hereunder during the Automatic Renewal Term that would
commence upon the expiration of the Initial Term or then current Automatic
Renewal Term at rates that at least two-thirds of the Independent Directors
determine to be at or below market rates, taken as a whole; provided, however, that if the
Independent Directors have made such a determination, the Manager shall have the
right to renegotiate the rate of fees payable to the Manager under Section 7 as so
determined by the Independent Directors, by delivering to the Company, not less
than 120 days prior to the pending Effective Termination Date, written notice (a
“Notice of Proposal to
Negotiate”) of its intention to renegotiate the fees payable to the
Manager under Section 7.  Thereupon,
the Company and the Manager shall endeavor to negotiate the fees payable to the
Manager under Section 7 in
good faith.  Provided that the Company and the Manager agree to a
revised fee structure under Section 7 within
60 days following the Company’s receipt of the Notice of Proposal to Negotiate,
the Termination Notice from the Company shall be deemed of no force and effect,
and this Agreement shall continue in full force and effect on the terms stated
herein, except that the compensation structure shall be the revised compensation
structure as then agreed upon by the Company and the Manager.  The
Company and the Manager agree to execute and deliver an amendment of this
Agreement setting forth such revised fee structure promptly upon reaching an
agreement regarding same.  If the Company and the Manager are unable
to agree to a revised compensation structure during such 60-day period, this
Agreement shall terminate on the Effective Termination Date and the Company
shall be obligated to pay the Manager the Fees Accrued Upon Termination upon the
Effective Termination Date.

     

    (d)           No
later than 180 days prior to the expiration of the Initial Term or the then
current Automatic Renewal Term, the Manager may deliver written notice to the
Company informing the Company of the Manager’s intention to discontinue
performance of services pursuant to this Agreement as of the upcoming expiration
date, whereupon this Agreement shall not be renewed and extended and this
Agreement shall terminate effective on the anniversary date of this Agreement
next following the delivery of such notice.  The Company shall not be
required to pay to the Manager the Fees Accrued Upon Termination if the Manager
terminates this Agreement pursuant to this Section 11(d).

     

    (e)           Except
as set forth in this Section 11, a
non-renewal of this Agreement pursuant to this Section 11 shall
be without any further liability or obligation of any party to the others,
except as provided in Sections 6, 8, 9 and 15.

     

    (f)           The
Manager shall cooperate with the Company in executing an orderly transition of
the management of PAC’s consolidated assets to a new manager.

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    Section
12. Assignments.

     

    (a)           Assignments by the
Manager.  This Agreement shall terminate automatically without
payment of the Fees Accrued Upon Termination in the event of its assignment, in
whole or in part, by the Manager, unless such assignment has been consented to
in writing by (i) the Company with the consent of a majority of the Independent
Directors, and (ii) the Operating Partnership.  Any such permitted
assignment shall bind the assignee under this Agreement in the same manner as
the Manager is bound, and the Manager shall be liable to the Company for all
acts or omissions of the assignee under any such assignment to the same extent
had such delegation not occurred.  In addition, the assignee shall
execute and deliver to the Company a counterpart of this Agreement naming such
assignee as the Manager.  Notwithstanding the foregoing, the Manager
may, without the approval of the Company’s Independent Directors, (A) assign
this Agreement to an Affiliate of the Manager, and (B) delegate to one or more
of its Affiliates the performance of any of its responsibilities hereunder so
long as it remains liable for any such Affiliate’s performance to the same
extent had such delegation not occurred, in each case so long as assignment or
delegation does not require the Company’s approval under the Investment Company
Act (but if such approval is required, the Company shall not unreasonably
withhold, condition or delay its consent).  Nothing contained in this
Agreement shall preclude any pledge, hypothecation, assignment or other transfer
of any amounts payable to the Manager under this Agreement.

     

    (b)           Assignments by the
Company.  This Agreement shall not be assigned by the Company
without the prior written consent of the Manager, except in the case of
assignment by the Company to another REIT or other organization which is a
successor (by merger, consolidation, purchase of assets, or other transaction)
to the Company, in which case such successor organization shall be bound under
this Agreement and by the terms of such assignment in the same manner as the
Company is bound under this Agreement.

     

    Section 13.
Termination for Cause.

     

    (a)           The
Company may terminate this Agreement for cause effective upon 30 days’ prior
written notice of termination from the Company to the Manager (a “Cause Termination Notice”),
without payment of any Fees Accrued Upon Termination, upon the occurrence
of:

       

      (i) a breach
by the Manager, its agents or its assignees of any material provision of this
Agreement and such breach shall continue for a period of 60 days after written
notice thereof specifying such breach and requesting that the same be remedied
in such 60-day period (or 90 days after written notice of such breach if
the Manager takes steps to cure such breach within 60 days of the written
notice);

       

      (ii) a
Bankruptcy Event with respect to the Manager,

       

      (iii) a Manager
Change of Control which a majority of the Independent Directors has determined
to be materially detrimental to the Company Entities, taken as a
whole;

       

      (iv) the
dissolution of the Manager; or

       

      (v) (A) a
final determination by a court that the Manager has committed fraud against the
Company, the Manager has embezzled funds of the Company or the Manager has
otherwise acted, or failed to act, in a manner constituting bad faith, willful
misconduct, gross negligence or reckless disregard in the performance of its
duties under this Agreement, (B) which act of fraud, embezzlement or other act
or failure to act described in clause (v)(A)
above has had a material adverse effect on the consolidated business, operations
and financial condition of the Company, and (C) where a majority of the
Independent Directors of PAC has voted affirmatively to terminate this Agreement
for cause as a result of such fraud, embezzlement or other act or failure to
act, which vote shall have occurred within 30 days following the final
determination referred to in clause (v)(A)
above; provided, however, if such
fraud, embezzlement or other act or failure to act was committed by a person
other than an executive officer of the Manager, then the Manager can cure the
same by terminating the employment of such person on or prior to the 30th day
following such final determination, in which event the Company shall cease to
have the right to terminate this Agreement for cause pursuant to this Section 13(a) and any
Cause Termination Notice previously given in reliance on this clause (v)
automatically shall be deemed to have been rescinded and nugatory.

      

        
          
             

          

          
            23

            
              

            

          

          
             

          

        

      

       

    

    (b)           The
Manager may terminate this Agreement effective upon 60 days’ prior written
notice of termination to the Company if the Company shall default in the
performance or observance of any material term, condition or covenant contained
in this Agreement and such default shall continue for a period of 60 days after
written notice thereof specifying such default and requesting that the same be
remedied in such 60-day period.  The Company shall be required to pay
to the Manager the Fees Accrued Upon Termination if the termination of this
Agreement is made pursuant to this Section 13(b).

     

    (c)           The
Manager may terminate this Agreement if the Company becomes required to register
as an investment company under the Investment Company Act, with such termination
deemed to occur immediately before such event, in which case the Manager shall
not be entitled to payment of the Fees Accrued Upon Termination.

     

    Section
14. Action Upon
Termination.

     

    From and
after the effective date of termination of this Agreement pursuant to Section 11,
12 or 13, the Manager shall
not be entitled to compensation for further services hereunder.  If
the Manager is terminated pursuant to Sections 11(b)
or 13(b), it
shall be paid all Fees Accrued Upon Termination.  Upon any such
termination, the Manager shall forthwith:

     

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

     

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

     

    (c)           deliver
to the Board all property and documents of the Company Entities then in the
custody of the Manager; and

     

    (d)           cooperate
with the Company Entities to provide an orderly management
transition.

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    Section
15. Release of Money or
Other Property Upon Written Request.

     

    The
Manager agrees that any money or other property of the Company (which, for the
purposes of this Section 15,
shall be deemed to include any and all of their respective subsidiaries, if any)
held by the Manager shall be held by the Manager as custodian for the Company,
and the Manager’s records shall be appropriately and clearly marked to reflect
the ownership of such money or other property by the Company.  Upon
the receipt by the Manager of a written request signed by a duly authorized
officer of the Company requesting the Manager to release to the Company any
money or other property then held by the Manager for the account of the Company
under this Agreement, the Manager shall release such money or other property to
the Company or within a reasonable period of time, but in no event later than 60
days following such request.  Upon delivery of such money or other
property to the Company, the Manager shall not be liable to the Company, the
Board, PAC’s stockholders, the Operating Partnership’s partners or any of the
directors or equity holders of any subsidiary of the Company for any acts or
omissions by the Company in connection with the money or other property released
to the Company in accordance with this Section 15.  The
Company shall indemnify the Manager Indemnified Parties against any and all
Losses which arise in connection with the Manager’s proper release of such money
or other property to the Company in accordance with the terms of this Section 15.  Indemnification
pursuant to this provision shall be in addition to any right of the Manager
Indemnified Parties to indemnification under Section 9.

     

    Section 16.
Miscellaneous.

     

    (a)           Notices.  All
notices, requests, communications and demands (each a “Notice”) to, with or upon any
of the respective parties shall be in writing and sent by (i) personal delivery,
(ii) reputable overnight courier, (iii) facsimile transmission with
telephonic confirmation (provided that such Notice also is sent
contemporaneously by another method provided for in this Section 16(a)),
or (iv) registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below (or to such other address as may be hereafter
notified by the respective parties hereto in accordance with this Section 16(a)):

     

    
      
        	
                PAC:

              	
                Preferred
      Apartment Communities, Inc.

                3625
      Cumberland Boulevard, Suite 400

                Atlanta,
      Georgia 30339

                Attention:  Leonard
      A. Silverstein, Esq.

                Attention:  Jeffrey
      R. Sprain, Esq.

                Fax:  (770)
      818-4105

                 

              
	
                with
      a copy to:

              	
                Proskauer
      Rose LLP

                1585
      Broadway

                New
      York, New York 10036

                Attention:  Peter
      M. Fass, Esq.

                Attention:  James
      P. Gerkis, Esq.

                Fax:  (212)
      969-2900

                 

              
	
                The
      Operating Partnership:

              	
                Preferred
      Apartment Communities, Inc.

                3625
      Cumberland Boulevard, Suite 400

                Atlanta,
      Georgia 30339

                Attention:  Leonard
      A. Silverstein, Esq.

                Attention:  Jeffrey
      R. Sprain, Esq.

                Fax:  (770)
      818-4105

                 

              
	
                with
      a copy to:

              	
                Proskauer
      Rose LLP

                1585
      Broadway

                New
      York, New York 10036

                Attention:  Peter
      M. Fass, Esq.

                Attention:  James
      P. Gerkis, Esq.

                Fax:  (212)
      969-2900

              

      

    

    

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    

    
      	
              The
      Manager:

            	
              Preferred
      Apartment Advisors, LLC

              3625
      Cumberland Boulevard, Suite 400

              Atlanta,
      Georgia 30339

              Attention:  Leonard
      A. Silverstein, Esq.

              Attention:  Jeffrey
      R. Sprain, Esq.

              Fax:  (770)
      818-4105

               

            
	
              with
      a copy to:

            	
              Bass,
      Berry & Sims PLC

              100
      Peabody Place, Suite 900

              Memphis,
      Tennessee 38103

              Attention:  John
      A. Good, Esq.

              Fax:  (901)
      543-5901

            

    

     

    Any
Notice sent as aforesaid shall be deemed given and effective upon actual receipt
(or refusal of receipt).

     

    (b)           Binding Nature of Agreement;
Successors and Assigns; No Third Party Beneficiaries.  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and permitted
assigns.  Except as provided in this Agreement with respect to
indemnification of Indemnified Parties hereunder, nothing in this Agreement
shall confer any rights upon any Person other than the parties hereto and their
respective heirs, legal representatives, successors and permitted
assigns.

     

    (c)           Integration.  This
Agreement contains the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof, and supersedes all prior
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.

     

    (d)           Amendments.  This
Agreement, nor any terms hereof, may not be amended or supplemented except in an
instrument in writing executed by the parties hereto.

     

    (e)           GOVERNING
LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.  EACH OF THE PARTIES HERETO
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
DELAWARE AND THE UNITED STATES DISTRICT COURT FOR ANY DISTRICT WITHIN SUCH STATE
FOR THE PURPOSE OF ANY ACTION OR JUDGMENT RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND TO THE LAYING OF
VENUE IN SUCH COURT.

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    (f)           WAIVER OF JURY
TRIAL.  EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO
ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR
RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.

     

    (g)           No Waiver; Cumulative
Remedies.  No failure to exercise and no delay in exercising,
on the part of a party hereto, any right, remedy, power or privilege hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.

     

    (h)           Costs and
Expenses.  Each party hereto shall bear its own costs and
expenses (including the fees and disbursements of counsel and accountants)
incurred in connection with the negotiations and preparation of this Agreement,
and all matters incident thereto.  If any party hereto initiates any
legal action arising out of or in connection with this Agreement, the prevailing
party shall be entitled to recover from the other party all reasonable
attorneys’ fees, expert witness fees and expenses incurred by the prevailing
party in connection therewith.

     

    (i)           Section Headings.  The
section and subsection headings in this Agreement are for convenience
in reference only and shall not be deemed to alter or affect the interpretation
of any provisions hereof.

     

    (j)           Counterparts.  This
Agreement may be executed (including by facsimile transmission) with counterpart
signature pages or in any number of separate counterparts, and all of which
taken together shall be deemed to constitute one and the same
instrument.

     

    (k)           Severability.  Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

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

     

    
      
        
          
            	
                    PREFERRED
      APARTMENT COMMUNITIES, INC.

                  
	 
      	 
      
	
                    By:

                  	
                     
        

                  
	 
      	
                    Name:

                  
	 
      	
                    Title:

                  

          

        

      

    

    

    
      
        
          
            	
                    PREFERRED
      APARTMENT COMMUNITIES

                    OPERATING
      PARTNERSHIP, L.P.

                  
	 
      	 
      	 
      
	
                    By:

                  	
                    Preferred
      Apartment Communities, Inc.

                  
	 
      	
                    its
      General Partner

                  
	 
      	 
      	 
      
	 
      	
                    By:

                  	 
        
	 
      	 
      	
                    Name:

                  
	 
      	 
      	
                    Title:

                  

          

        

      

    

    

    
      
        
          
            
              	
                      PREFERRED
      APARTMENT ADVISORS, LLC

                    
	 
      	 
      	 
      
	
                      By:

                    	
                      NELL
      Partners, Inc.

                    
	 
      	
                      its
      Managing Member

                    
	 
      	 
      	 
      
	 
      	
                      By:

                    	
                       
        

                    
	 
      	 
      	
                      Name:

                    
	 
      	 
      	
                      Title:

                    

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      Exhibit
A

    

     

    Investment
Guidelines

     

    

    
      	
              1.

            	
              No
      Investment shall be made by the Manager that would cause PAC to fail to
      qualify as a REIT under the Code.

            

    

     

    
      	
              2.

            	
              No
      Investment shall be made by the Manager that would cause either PAC or the
      Operating Partnership to be regulated as an investment company under the
      Investment Company Act.

            

    

     

    
      	
              3.

            	
              Until
      appropriate investments in Investments are identified, the Manager may
      invest the proceeds of the Initial Public Offering and any future
      offerings of PAC’s or the Operating Partnership’s securities for cash in
      interest-bearing, short-term, investment-grade investments, subject to the
      requirements for PAC’s qualification as a REIT under the
    Code.

            

    

     

    
      	
              4.

            	
              Investment
      Deployment Quantitative Limits:

            

    

     

    
      	
               
      

            	
              (a)

            	
              No
      more than 15% of the Company’s total assets may be invested by the Manager
      in any one single asset or
transaction.

            

    

     

    
      	
               
      

            	
              (b)

            	
              No
      more than 25% of the Company’s total assets may be invested by the
      Manager in any metropolitan statistical area
    (MSA).

            

    

     

    
      
        	
                 
      

              	
                (c)

              	
                
                  The
      Company’s aggregate borrowings (secured and unsecured) will not exceed 75%
      of the cost of its tangible assets at the time of any new
      borrowing.

                

              

      

       

    

    
      	
              5.

            	
              Investment
      Deployment Qualitative Guidelines:

            

    

     

    
      	
               
      

            	
              (a)

            	
              Multifamily
      related assets where the associated real property asset is located in an
      MSA with an aggregate population in excess of approximately
      1,000,000.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Multifamily
      related assets where the associated real property asset has at least 100
      units.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Multifamily
      related assets where the associated real property was built or
      substantially renovated after January 1, 1990 and, to the knowledge of the
      Manager, does not possess any design flaws and is not functionally
      obsolete.Unassociated Document

     

    
      PROSKAUER
DRAFT 11/1/10

    

     

    
      PREFERRED
APARTMENT COMMUNITIES, INC.

       

      
        
          

        

      

      FORM
OF 2010 STOCK INCENTIVE PLAN

       

      (effective
as of
[                   
], 2010)

       

      
        
          

        

      

      ARTICLE
I

       

      PURPOSE

       

      The
purpose of this 2010 Stock Incentive Plan is to enhance the profitability and
value of the Company for the benefit of its stockholders by enabling the Company
to offer Participants stock-based incentives in the Company to attract, retain
and reward such individuals and strengthen the mutuality of interests between
such individuals and the Company’s stockholders.

       

      ARTICLE
II

       

      DEFINITIONS

       

      For
purposes of the Plan, the following terms shall have the following
meanings:

       

      2.1           “Acquisition
Event” means a
merger or consolidation in which the Company is not the surviving entity, any
transaction that results in the acquisition of all or substantially all of the
Company’s outstanding Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or the sale or transfer of all or
substantially all of the Company’s assets.  The occurrence of an
Acquisition Event shall be determined by the Committee in its sole
discretion.

       

      2.2           “Affiliate” means each of the following:
 (a) Preferred Apartment Advisors, LCC or any of its
subsidiaries; (b) any Subsidiary; (c) any Parent; (d) any
corporation, trade or business (including, without limitation, a partnership or
limited liability company) that is directly or indirectly controlled 50% or more
(whether by ownership of stock, assets or an equivalent ownership interest or
voting interest) by the Company; (e) any corporation, trade or business
(including, without limitation, a partnership or limited liability company) that
directly or indirectly controls 50% or more (whether by ownership of stock,
assets or an equivalent ownership interest or voting interest) of the Company;
and (f) any other entity in which the Company or any of its Affiliates has
a material equity interest and that is designated as an “Affiliate” by
resolution of the Committee; provided, however, that the
Common Stock subject to any Award constitutes “service recipient stock” for
purposes of Section 409A of the Code or otherwise does not subject the Award to
Section 409A of the Code.

       

      2.3           “Award” means any award under the
Plan of any Stock Option, Stock Appreciation Right, Restricted Stock,
Performance Share or Other Stock-Based Award.  All Awards shall be
granted by, confirmed by, and subject to the terms of, a written or electronic
agreement executed by the Company and the Participant.  Any reference
herein to an agreement in writing shall be deemed to include an electronic
writing to the extent permitted by applicable law.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      2.4           “Board” means the Board of Directors
of the Company.

       

      2.5           “Cause” means with respect to a
Participant’s Termination of Employment or Termination of Consultancy, the
following: (a) in the case where there is no employment agreement, consulting
agreement, change in control agreement or similar agreement in effect between
the Company or an Affiliate and the Participant at the time of the grant of the
Award (or where there is such an agreement but it does not define “cause” (or
words of like import)), termination due to: (i) a Participant’s conviction of,
or plea of guilty or nolo contendere to, a felony; (ii) perpetration by a
Participant of an illegal act, dishonesty or fraud that could cause significant
economic injury to the Company; (iii) a Participant’s insubordination, refusal
to perform his or her duties or responsibilities for any reason other than
illness or incapacity or materially unsatisfactory performance of his or her
duties for the Company; (iv) continuing willful and deliberate failure by the
Participant to perform the Participant’s duties in any material respect,
provided that the Participant is given notice and an opportunity to effectuate a
cure as determined by the Committee; or (v) a Participant’s willful misconduct
with regard to the Company that could have a material adverse effect on the
Company; or (b) in the case where there is an employment agreement, consulting
agreement, change in control agreement or similar agreement in effect between
the Company or an Affiliate and the Participant at the time of the grant of the
Award that defines “cause” (or words of like import), “cause” as defined under
such agreement; provided, however, that with
regard to any agreement under which the definition of “cause” only applies on
occurrence of a change in control, such definition of “cause” shall not apply
until a change in control actually takes place and then only with regard to a
termination thereafter.  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.

       

      2.6           “Change in
Control” has the
meaning set forth in Section
12.2.

       

      2.7           “Change in
Control Price”
has the meaning set forth in Section
12.1.

       

      2.8           “Code” means the Internal Revenue
Code of 1986, as amended.  Any reference to any section of the Code
also shall be a reference to any successor provision and any Treasury Regulation
promulgated thereunder.

       

      2.9           “Committee”
means:  (a) prior to the first anniversary of the Registration Date,
the Board, or (b) following the first anniversary of the Registration Date, a
committee or subcommittee of the Board appointed from time to time by the Board,
which committee or subcommittee shall consist of two or more non-employee
directors, each of whom is intended to be (i) to the extent required by Rule
16b-3 promulgated under Section 16(b) of the Exchange Act, a “non-employee
director” as defined in Rule 16b-3, (ii) to the extent required Section 162(m)
of the Code, an “outside director” as defined in Section 162(m) of the Code, and
(iii) to the extent required by Sections 803(A)(2) and 805 of the Company Guide
of the NYSE Amex.  To the extent that no Committee exists that has the
authority to administer this Plan, the functions of the Committee shall be
exercised by the Board.  If for any reason the appointed Committee
does not meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such
noncompliance shall not affect the validity of Awards, grants, interpretations
or other actions of the Committee.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

         

      

      2.10           “Common
Stock” means the
Class A Common Stock, $0.01 par value per share, of the Company.

       

      2.11           “Company” means Preferred Apartment
Communities, Inc. a Maryland corporation, and its successors by operation of
law.

       

      2.12           “Consultant” means any natural person who
provides bona fide consulting or advisory services to the Company or its
Affiliates pursuant to a written agreement, which are not in connection with the
offer and sale of securities in a capital-raising transaction, and do not,
directly or indirectly, promote or maintain a market for the Company’s or its
Affiliates’ securities.

       

      2.13           “Detrimental
Activity”
means:

       

      
        	
                 
      

              	
                (a)

              	
                disclosing,
      divulging, furnishing or making available to anyone at any time, except as
      necessary in the furtherance of Participant’s responsibilities to the
      Company or any of its Affiliates, either during or subsequent to
      Participant’s service relationship with the Company or any of its
      Affiliates, any knowledge or information with respect to confidential or
      proprietary information, methods, processes, plans or materials of the
      Company or any of its Affiliates, or with respect to any other
      confidential or proprietary aspects of the business of the Company or any
      of its Affiliate, acquired by the Participant at any time prior to the
      Participant’s Termination;

              

      

       

      
        	
                 
      

              	
                (b)

              	
                any
      activity while employed or performing services that results, or if known
      could reasonably be expected to result, in the Participant’s Termination
      that is classified by the Company as a termination for
    Cause;

              

      

       

      
        	
                 
      

              	
                (c)

              	
                ((i)
      directly or indirectly soliciting, enticing or inducing any employee of
      the Company or of any of its Affiliates to be employed by a person or
      entity that is, directly or indirectly, in competition with the business
      or activities of the Company or any of its Affiliates; (ii) directly or
      indirectly approaching any such employee for these purposes; (iii)
      authorizing or knowingly approving the taking of any such action by a
      third party on behalf of any such person or entity, or assisting any such
      person or entity in taking such action; or (iv) directly or indirectly
      soliciting, raiding, enticing or inducing any person or entity (other than
      the U.S. Government or its agencies) that is, or at any time from and
      after the date of grant of the Award was, a customer of the Company or any
      of its Affiliates to become a customer of the Participant or a third party
      for the same or similar products or services that it purchased from the
      Company or any of its Affiliates, or approaching any customer of the
      Company or any of its Affiliates for such purpose, or authorizing or
      knowingly approving the taking of any action by a third party for such
      purpose;

              

      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (d)

              	
                the
      Participant’s Disparagement, or inducement of others to do so, of the
      Company or any of its Affiliates or their past and present officers,
      directors, employees or products;

              

      

       

      
        	
                 
      

              	
                (e)

              	
                the
      Participant’s owning, managing, controlling, participating in, consulting
      with, rendering services for, or in any manner engaging in, any business
      that, directly or indirectly, is competitive with the business conducted
      by the Company or any of its Affiliates within any metropolitan area in
      which the Company or any of its Affiliates engages or has definitive plans
      to engage in such business, or the rendering of services to such business
      if such business is otherwise prejudicial to or in conflict with the
      interests of the Company or any of its Affiliates;
  or

              

      

       

      
        	
                 
      

              	
                (f)

              	
                a
      material breach of any agreement between the Participant and the Company
      or any of its Affiliates (including, without limitation, any employment
      agreement or noncompetition or nonsolicitation or confidentiality
      agreement).

              

      

       

      Unless
otherwise determined by the Committee at grant, Detrimental Activity shall not
be deemed to occur after the end of the one-year period following the
Participant's Termination.

       

      For
purposes of clauses (a), (c), (e) and (f) above, the Chief Executive Officer of
the Company has the authority to provide the Participant with written
authorization to engage in the activities contemplated thereby and no other
person shall have authority to provide the Participant with such
authorization.  If it is determined by a court of competent
jurisdiction that any provision in the Plan in respect of Detrimental Activities
is excessive in duration or scope or otherwise is unenforceable, then such
provision may be modified or supplemented by the court to render it enforceable
to the maximum extent permitted by law.

       

      2.14           “Disability” means with respect to a
Participant’s Termination, a permanent and total disability as defined in
Section 22(e)(3) of the Code.  A Disability shall only be deemed to
occur at the time of the determination by the Committee of the
Disability.  Notwithstanding the foregoing, for Awards that are
subject to Section 409A of the Code, Disability shall mean that a Participant is
disabled under Section 409A(a)(2)(C)(i) or (ii) of the Code.

       

      2.15           “Disparagement” means making comments or
statements to the press, the Company’s or its Affiliates’ employees, consultants
or any individual or entity with whom the Company or its Affiliates has a
business relationship that could reasonably be expected to adversely affect in
any manner: (a) the conduct of the business of the Company or its Affiliates
(including, without limitation, any products or business plans or prospects); or
(b) the business reputation of the Company or its Affiliates, or any of their
products, or their past or present officers, directors or
employees.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

         

      

      2.16           “Effective
Date” means
the effective date of the Plan as defined in Article
XVI.

       

      2.17           “Eligible
Employee”
means an employee of the Company or an Affiliate.

       

      2.18           “Exchange
Act” means the
Securities Exchange Act of 1934, as amended, and all rules and regulations
promulgated thereunder.  Any references to any section of the Exchange
Act shall also be a reference to any successor provision.

       

      2.19           “Exercisable
Awards” has the
meaning set forth in Section
4.2(d).

       

      2.20           “Fair
Market Value”
means, unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder, as of any date and except as provided below, the
last sales price reported for the Common Stock on the applicable date: (a) as
reported on the principal national securities exchange in the United States on
which it is then traded or the NYSE Amex; or (b) if not traded
on any such national securities exchange or the NYSE Amex, as quoted on an
automated quotation system sponsored by the National Association of Securities
Dealers, Inc. or if the Common Stock shall not have been reported or quoted on
such date, on the first day prior thereto on which the Common Stock was reported
or quoted.  For purposes of the grant of any Award, the applicable
date shall be the trading day on which the Award is granted, or if such grant
date is not a trading day, the trading day immediately prior to the date on
which the Award is granted.  For purposes of the exercise of any
Award, the applicable date shall be the date a notice of exercise is received by
the Company or, if not a day on which the applicable market is open, the next
day that it is open.

       

      2.21           “Family
Member” means
“family member” as defined in Rule 701 under the Securities Act or, following
the filing of a Form S-8 pursuant to the Securities Act with respect to the
Plan, as defined in Section A.1.(5) of the general instructions of Form S-8, as
may be amended from time to time.

       

      2.22           “Incentive
Stock Option”
means any Stock Option awarded to an Eligible Employee of the Company, its
Subsidiaries and its Parent (if any) under the Plan intended to be and
designated as an “Incentive Stock Option” within the meaning of Section 422 of
the Code.

      
         

        2.23           “include”, “includes” and “including”share be construed
as if followed by the phrase “without
limitation”.

         

        2.24           “Limited
Stock Appreciation Right” has the meaning set forth in
Section 7.5.

         

      

      2.25           “Non-Employee
Director” means a
non-employee director of the Company as defined in Rule 16b-3.

       

      2.26           “Non-Qualified
Stock Option”
means any Stock Option awarded under the Plan that is not an Incentive Stock
Option.

       

      2.27           “Other
Stock-Based Award” means an Award under Article X of the Plan
that is valued in whole or in part by reference to, or is payable in or
otherwise based on, Common Stock, including, without limitation, a restricted
stock unit or an Award valued by reference to an Affiliate.

       

      2.28           “Parent” means any parent corporation
of the Company within the meaning of Section 424(e) of the Code.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

         

      

      2.29           “Participant” means an Eligible Employee,
Non-Employee Director or Consultant to whom an Award has been granted pursuant
to the Plan.

       

      2.30           “Performance
Goals” has the
meaning set forth on Exhibit
A.

       

      2.31           “Performance
Period” means the
duration of the period during which receipt of an Award is subject to the
satisfaction of performance criteria, such period as determined by the Committee
in its sole discretion.

       

      2.32           “Performance
Share” means an
Award made pursuant to Article IX of the
Plan of the right to receive Common Stock or cash of an equivalent value at the
end of a specified Performance Period.

       

      2.33           “Person” means any individual,
corporation, partnership, limited liability company, firm, joint venture,
association, joint-stock company, trust, incorporated organization, governmental
or regulatory or other entity.

       

      2.34           “Plan” means this Preferred
Apartment Communities, Inc. 2010 Stock Incentive Plan, as amended from time to
time.

       

      2.35           “Other
Extraordinary Event”
has the meaning set forth in Section
4.2(b).

       

      2.36           “Reference
Stock Option” has
the meaning set forth in Section
7.1.

       

      2.37           “Registration
Date” means the
first date after the Effective Date on which (a) the Company sells its Common
Stock in a bona fide underwriting pursuant to a registration statement under the
Securities Act or (b) any class of common equity securities of the Company is
required to be registered under Section 12 of the Exchange Act.

       

      2.38           “Restricted
Stock” means a
share of Common Stock issued under the Plan that is subject to restrictions
under Article
VIII.

       

      2.39           “Restriction
Period” has the
meaning set forth in Section
8.3(a).

       

      2.40           “Retirement” means a voluntary
Termination of Employment or Termination of Consultancy at or after age 65 or
such earlier date after age 55 as may be approved by the Committee, in its sole
discretion, with respect to such Participant at the time of grant, or thereafter
provided that the exercise of such discretion does not make the applicable Award
subject to Section 409A of the Code, except that Retirement shall not include
any involuntary Termination of Employment or Termination of Consultancy by the
Company or an Affiliate for any reason with or without Cause.  With
respect to a Participant’s Termination of Directorship, Retirement means the
failure to stand for reelection or the failure to be reelected on or after the
date that a Participant has attained age 65 or, with the consent of the Board,
provided that the exercise of such discretion does not make the applicable Award
subject to Section 409A of the Code, before age 65 but after age
55.

       

      2.41           “Rule
16b-3” means Rule
16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor
provision.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

         

      

      2.42           “Section
162(m) of the Code” means the exception for
performance-based compensation under Section 162(m) of the Code and any
applicable Treasury regulations thereunder.

       

      2.43           “Section
4.2 Event” has
the meaning set forth in Section
4.2(b).

       

      2.44           “Securities
Act” means
the Securities Act of 1933, as amended, and all rules and regulations
promulgated thereunder.  Any reference to any section of the
Securities Act shall also be a reference to any successor
provision.

       

      2.45           “Special
Unvested Options or Rights” has the meaning set forth in
Section
11.1(a)(v).

       

      2.46           “Stock
Appreciation Right” means the right pursuant to
an Award granted under Article
VII.  A Tandem Stock Appreciation Right shall mean the right to
surrender to the Company all (or a portion) of a Stock Option in exchange for a
number of shares of Common Stock and/or cash, as determined by the Committee,
equal to the difference between (a) the Fair Market Value on the date such
Stock Option (or such portion thereof) is surrendered, of the Common Stock
covered by such Stock Option (or such portion thereof), and (b) the
aggregate exercise price of such Stock Option (or such portion
thereof).  A Non-Tandem Stock Appreciation Right shall mean the right
to receive a number of shares of Common Stock and/or cash, as determined by the
Committee, equal to the difference between (i) the Fair Market Value of a
share of Common Stock on the date such right is exercised, and (ii) the
aggregate exercise price of such right, otherwise than on surrender of a Stock
Option.

       

      2.47           “Stock
Option” or “Option” means any option to purchase
shares of Common Stock granted to Eligible Employees, Non-Employee Directors or
Consultants pursuant to Article
VI.

       

      2.48           “Subsidiary” means any subsidiary
corporation of the Company within the meaning of Section 424(f) of the
Code.

       

      2.49           “Tandem
Stock Appreciation Right” has the meaning set forth in
Section 7.1.

       

      2.50           “Ten
Percent Stockholder” means a person owning stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, its Subsidiaries or its Parent.

       

      2.51           “Termination” means a Termination of
Consultancy, Termination of Directorship or Termination of Employment, as
applicable.

       

      2.52           “Termination
of Consultancy”
means: (a) that the Consultant is no longer acting as a consultant to the
Company or an Affiliate; or (b) when an entity that is retaining a Participant
as a Consultant ceases to be an Affiliate unless the Participant otherwise is,
or thereupon becomes, a Consultant to the Company or another Affiliate at the
time the entity ceases to be an Affiliate.  In the event that a
Consultant becomes an Eligible Employee or a Non-Employee Director upon the
termination of his or her consultancy, unless otherwise determined by the
Committee, in its sole discretion, no Termination of Consultancy shall be deemed
to occur until such time as such Consultant is no longer a Consultant, an
Eligible Employee or a Non-Employee Director.  Notwithstanding the
foregoing, the Committee may, in its sole discretion, otherwise define
Termination of Consultancy in the Award agreement or, if no rights of a
Participant are reduced, may otherwise define Termination of Consultancy
thereafter.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

         

      

      2.53           “Termination
of Directorship” means that the
Non-Employee Director has ceased to be a director of the Company; except that if
a Non-Employee Director becomes an Eligible Employee or a Consultant upon the
termination of his or her directorship, his or her ceasing to be a director of
the Company shall not be treated as a Termination of Directorship unless and
until the Participant has a Termination of Employment or Termination of
Consultancy, as the case may be.

       

      2.54           “Termination
of Employment” means: (a) a
termination of employment (for reasons other than a military or personal leave
of absence granted by the Company) of a Participant from the Company and its
Affiliates; or (b) when an entity that is employing a Participant ceases to
be an Affiliate, unless the Participant otherwise is, or thereupon becomes,
employed by the Company or another Affiliate at the time the entity ceases to be
an Affiliate.  In the event that an Eligible Employee becomes a
Consultant or a Non-Employee Director upon the termination of his or her
employment, unless otherwise determined by the Committee, in its sole
discretion, no Termination of Employment shall be deemed to occur until such
time as such Eligible Employee is no longer an Eligible Employee, a Consultant
or a Non-Employee Director.  Notwithstanding the foregoing, the
Committee may, in its sole discretion, otherwise define Termination of
Employment in the Award agreement or, if no rights of a Participant are reduced,
may otherwise define Termination of Employment thereafter.

       

      2.55           “Transfer” means: (a) when used as a
noun, any direct or indirect transfer, sale, assignment, pledge, hypothecation,
encumbrance or other disposition (including the issuance of equity in a Person),
whether for value or no value and whether voluntary or involuntary (including by
operation of law), and (b) when used as a verb, to directly or indirectly
transfer, sell, assign, pledge, encumber, charge, hypothecate or otherwise
dispose of (including the issuance of equity in a Person) whether for value or
for no value and whether voluntarily or involuntarily (including by operation of
law).  “Transferred” and “Transferrable” shall have a correlative
meaning.

       

      2.56           “Transition
Period” means the
“reliance period” under Treasury Regulation Section 1.162-27(f)(2), which ends
on the earliest to occur of the following:  (a) the date of the first
annual meeting of stockholders of the Company at which directors are to be
elected that occurs after December 31, 2010; (b) the date the Plan is materially
amended for purposes of Treasury Regulation Section 1.162-27(h)(1)(iii); or (c)
the date all shares of Common Stock available for issuance under the Plan have
been allocated.

       

      ARTICLE
III

       

      ADMINISTRATION

       

      3.1           The
Committee.  The Plan shall be
administered and interpreted by the Committee.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

         

      

      3.2           Grants of
Awards.  The Committee shall have full authority to grant,
pursuant to the terms of the Plan, to Eligible Employees, Consultants and
Non-Employee Directors:  (1) Stock Options; (2) Stock
Appreciation Rights; (3) Restricted Stock; (4) Performance Shares; and
(5) Other Stock-Based Awards.  In particular, the Committee shall
have the authority:

       

      
        	
                 
      

              	
                (a)

              	
                to
      select the Eligible Employees, Consultants and Non-Employee Directors to
      whom Awards may from time to time be granted
  hereunder;

              

      

       

      
        	
                 
      

              	
                (b)

              	
                to
      determine whether and to what extent Awards are to be granted hereunder to
      one or more Eligible Employees, Consultants or Non-Employee
      Directors;

              

      

       

      
        	
                 
      

              	
                (c)

              	
                to
      determine, in accordance with the terms of the Plan, the number of shares
      of Common Stock to be covered by each Award granted
    hereunder;

              

      

       

      
        	
                 
      

              	
                (d)

              	
                to
      determine the terms and conditions, not inconsistent with the terms of the
      Plan, of any Award granted hereunder (including, but not limited to, the
      exercise or purchase price (if any), any restriction or limitation, any
      vesting schedule or acceleration thereof, or any forfeiture restrictions
      or waiver thereof, regarding any Award and the shares of Common Stock
      relating thereto, based on such factors, if any, as the Committee shall
      determine, in its sole discretion);

              

      

       

      
        	
                 
      

              	
                (e)

              	
                to
      determine whether, to what extent and under what circumstances grants of
      Options and other Awards under the Plan are to operate on a tandem basis
      and/or in conjunction with or apart from other awards made by the Company
      outside of the Plan;

              

      

       

      
        	
                 
      

              	
                (f)

              	
                to
      determine whether and under what circumstances a Stock Option may be
      settled in cash, Common Stock and/or Restricted Stock under Section 6.3(d);

              

      

       

      
        	
                 
      

              	
                (g)

              	
                to
      determine whether, to what extent and under what circumstances Common
      Stock and other amounts payable with respect to an Award under the Plan
      shall be deferred either automatically or at the election of the
      Participant in any case, in a manner intended to comply with Section 409A
      of the Code;

              

      

       

      
        	
                 
      

              	
                (h)

              	
                to
      determine whether a Stock Option is an Incentive Stock Option or
      Non-Qualified Stock Option;

              

      

       

      
        	
                 
      

              	
                (i)

              	
                to
      determine whether to require a Participant, as a condition of the granting
      of any Award, to not sell or otherwise dispose of shares acquired pursuant
      to an Award for a period of time as determined by the Committee, in its
      sole discretion, following the date of such Award;
  and

              

      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (j)

              	
                generally,
      to exercise such powers and to perform such acts as the Committee deems
      necessary or expedient to promote the best interests of the Company that
      are not in conflict with the provisions of the
  Plan.

              

      

       

      3.3           Guidelines.  Subject
to Article
XIII, the Committee shall, in its sole discretion, have the authority to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan and perform all acts, including the delegation of its
responsibilities (to the extent permitted by applicable law and applicable stock
exchange rules), as it shall, from time to time, deem advisable; to construe and
interpret the terms and provisions of the Plan and any Award issued under the
Plan (and any agreements relating thereto); and to otherwise supervise the
administration of the Plan.  The Committee may, in its sole
discretion, correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any agreement relating thereto in the manner and
to the extent it shall deem necessary to effectuate the purpose and intent of
the Plan.  The Committee may, in its sole discretion, adopt special
guidelines and provisions for persons who are residing in or employed in, or
subject to, the taxes of, any domestic or foreign jurisdictions to comply with
applicable tax and securities laws of such domestic or foreign
jurisdictions.  To the extent applicable, the Plan is intended to
comply with the applicable requirements of Rule 16b-3 and with respect to Awards
intended to be “performance-based,” the applicable provisions of Section 162(m)
of the Code, and the Plan shall be limited, construed and interpreted in a
manner so as to comply therewith.

       

      3.4           Decisions
Final.  Any decision, interpretation or other action made or
taken in good faith by or at the direction of the Company, the Board or the
Committee (or any of its members) arising out of or in connection with the Plan
shall be within the absolute discretion of all and each of them, as the case may
be, and shall be final, binding and conclusive on the Company and all employees
and Participants and their respective heirs, executors, administrators,
successors and assigns.

       

      3.5           Procedures.  If
the Committee is appointed, the Board shall designate one of the members of the
Committee as chairman and the Committee shall hold meetings, subject to the
By-Laws of the Company, at such times and places as it shall deem advisable,
including, without limitation, by telephone conference or by written consent to
the extent permitted by applicable law.  A majority of the Committee
members shall constitute a quorum.  All determinations of the
Committee shall be made by a majority of its members.  Any decision or
determination reduced to writing and signed by all the Committee members in
accordance with the By-Laws of the Company shall be as fully effective as if it
had been made by a vote at a meeting duly called and held.  The
Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem
advisable.

       

      3.6           Designation
of Consultants/Liability.

       

      
        	
                 
      

              	
                (a)

              	
                The
      Committee may, in its sole discretion, designate employees of the Company
      and professional advisors to assist the Committee in the administration of
      the Plan and (to the extent permitted by applicable law and applicable
      exchange rules) may grant authority to officers to grant Awards and/or
      execute agreements or other documents on behalf of the
      Committee.

              

      

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (b)

              	
                The
      Committee may, in its sole discretion, employ such legal counsel,
      consultants and agents as it may deem desirable for the administration of
      the Plan and may rely upon any opinion received from any such counsel or
      consultant and any computation received from any such consultant or
      agent.  Expenses incurred by the Committee or the Board in the
      engagement of any such counsel, consultant or agent shall be paid by the
      Company.  The Committee, its members and any person designated
      pursuant to Section 3.6(a)
      above shall not be liable for any action or determination made in good
      faith with respect to the Plan.  To the maximum extent permitted
      by applicable law, no officer of the Company or member or former member of
      the Committee or of the Board shall be liable for any action or
      determination made in good faith with respect to the Plan or any Award
      granted under it.

              

      

       

      3.7           Indemnification.  To
the maximum extent permitted by applicable law and the Certificate of
Incorporation and By-Laws of the Company and to the extent not covered by
insurance directly insuring such person, each officer or employee of the Company
or any Affiliate and member or former member of the Committee or the Board shall
be indemnified and held harmless by the Company against any cost or expense
(including reasonable fees of counsel reasonably acceptable to the Committee) or
liability (including any sum paid in settlement of a claim with the approval of
the Committee), and advanced amounts necessary to pay the foregoing at the
earliest time and to the fullest extent permitted, arising out of any act or
omission to act in connection with the administration of the Plan, except to the
extent arising out of such officer’s, employee’s, member’s or former member’s
fraud or bad faith.  Such indemnification shall be in addition to any
rights of indemnification the officers, employees, directors or members or
former officers, directors or members may have under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or any
Affiliate.  Notwithstanding anything else herein, this indemnification
will not apply to the actions or determinations made by an individual with
regard to Awards granted to him or her under the Plan.

       

       

      ARTICLE
IV

       

      SHARE
LIMITATION

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

         

      

      4.1           Shares.

       

      
        	
                 
      

              	
                (a)

              	
                General
      Limitations.  The aggregate number of shares of Common
      Stock that may be issued or used for reference purposes or with respect to
      which Awards may be granted under the Plan shall not exceed 10% of
      the oustanding shares of Common Stock (subject to any increase or
      decrease pursuant to Section 4.2),
      which may be either authorized and unissued Common Stock or Common Stock
      held in or acquired for the treasury of the Company or both.  If
      any Option, Stock Appreciation Right or Other Stock-Based Award granted
      under the Plan expires, terminates or is canceled for any reason without
      having been exercised in full, the number of shares of Common Stock
      underlying any unexercised Award shall again be available for the purpose
      of Awards under the Plan.  If any shares of Restricted Stock,
      Performance Shares or Other Stock-Based Awards, denominated in shares of
      Common Stock, granted under the Plan are forfeited for any reason, the
      number of forfeited shares of Restricted Stock, Performance Shares or such
      Other Stock-Based Awards shall again be available for the purposes of
      Awards under the Plan, as provided in this Section
      4.1(a).  If a Tandem Stock Appreciation Right or a
      Limited Stock Appreciation Right is granted in tandem with an Option, such
      grant shall only apply once against the maximum number of shares of Common
      Stock that may be issued under the Plan.  Notwithstanding
      anything herein to the contrary, any share of Common Stock that again
      becomes available for grant pursuant to this Section 4.1(a)
      shall be added back as one share of Common Stock to the maximum aggregate
      limit.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Individual Participant
      Limitations.

              

      

       

      (i)           The
maximum number of shares of Common Stock subject to any Award of Stock Options,
Stock Appreciation Rights or shares of Restricted Stock for which the grant of
such Award or the lapse of the relevant Restriction Period is subject to the
attainment of Performance Goals in accordance with Section 8.3(a)(ii),
which may be granted under the Plan during any fiscal year of the Company to
each Eligible Employee or Consultant shall be 100,000 shares per type of Award
(which shall be subject to any further increase or decrease pursuant to Section 4.2),
provided that the maximum number of shares of Common Stock for all types of
Awards does not exceed 250,000 (which shall be subject to any further increase
or decrease pursuant to Section 4.2) during
any fiscal year of the Company.  If a Tandem Stock Appreciation Right
is granted or a Limited Stock Appreciation Right is granted in tandem with a
Stock Option, it shall apply against the Eligible Employee's or Consultant's
individual share limitations for both Stock Appreciation Rights and Stock
Options.

       

      (ii)           The
maximum number of shares of Common Stock subject to any Award of Stock Options
(other than Incentive Stock Options), Stock Appreciation Rights or Other
Stock-Based Awards that may be granted under the Plan during any fiscal year of
the Company to each Non-Employee Director shall be 75,000 shares per type of
Award (which shall be subject to any further increase or decrease pursuant to
Section 4.2),
provided that the maximum number of shares of Common Stock for all types of
Awards does not exceed 75,000 (which shall be subject to any further increase or
decrease pursuant to Section 4.2) during
any fiscal year of the Company.  If a Tandem Stock Appreciation Right
is granted or a Limited Stock Appreciation Right is granted in tandem with a
Stock Option, it shall apply against the Non-Employee Director's individual
share limitations for both Stock Appreciation Rights and Stock
Options.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

         

      

      (iii)           There
are no annual individual Eligible Employee or Consultant share limitations on
Restricted Stock for which the grant of such Award or the lapse of the relevant
Restriction Period is not subject to attainment of Performance Goals in
accordance with Section
8.3(a)(ii).

       

      (iv)           The
maximum value at grant of Performance Shares that may be granted under the Plan
with respect to any fiscal year of the Company to each Eligible Employee or
Consultant shall be $500,000.  Each Performance Share shall be
referenced to one share of Common Stock and shall be charged against the
available shares under the Plan at the time the unit value measurement is
converted to a referenced number of shares of Common Stock in accordance with
Section
9.1.

       

      (v)           The
individual Participant limitations set forth in this Section 4.1(b) shall
be cumulative; that is, to the extent that shares of Common Stock for which
Awards are permitted to be granted to an Eligible Employee, Consultant or
Non-Employee Director during a fiscal year are not covered by an Award to
such Eligible Employee, Consultant or Non-Employee Director, in a fiscal year,
the number of shares of Common Stock available for Awards to such Eligible
Employee, Consultant or Non-Employee Director, shall automatically increase in
the subsequent fiscal years during the term of the Plan until used.

       

      (vi)           The
individual Participant limitations set forth in this Section 4.1(b) shall
not apply prior to the Registration Date and, following the Registration Date,
this Section
4.1(b) shall not apply until the expiration of the Transition
Period.

       

       

      4.2           Changes.

       

      
        	
                 
      

              	
                (a)

              	
                The
      existence of the Plan and the Awards granted hereunder shall not affect in
      any way the right or power of the Board or the stockholders of the Company
      to make or authorize (i) any adjustment, recapitalization, reorganization
      or other change in the Company’s capital structure or its business, (ii)
      any merger or consolidation of the Company or any Affiliate, (iii) any
      issuance of bonds, debentures, preferred or prior preference stock ahead
      of or affecting the Common Stock, (iv) the dissolution or liquidation of
      the Company or any Affiliate, (v) any sale or transfer of all or part of
      the assets or business of the Company or any Affiliate, (vi) any Section
      4.2 Event, or (vii) any other corporate act or
  proceeding.

              

      

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (b)

              	
                Subject
      to the provisions of Section
      4.2(d), if there shall occur any such change in the capital
      structure of the Company by reason of any stock split, reverse stock
      split, stock dividend, subdivision, combination or reclassification of
      shares that may be issued under the Plan, any recapitalization, any
      merger, any consolidation, any spin off, any reorganization or any partial
      or complete liquidation, or any other corporate transaction or event
      having an effect similar to any of the foregoing (a “Section 4.2
      Event”), then (i) the aggregate number and/or kind of shares that
      thereafter may be issued under the Plan, (ii) the number and/or kind of
      shares or other property (including cash) to be issued upon exercise of an
      outstanding Award or under other Awards granted under the Plan, (iii) the
      purchase price thereof, and/or (iv) the individual Participant limitations
      set forth in Section
      4.1(b) (other than those based on cash limitations) shall be
      appropriately adjusted.  In addition, subject to Section 4.2(d), if there shall
      occur any change in the capital structure or the business of the Company
      that is not a Section 4.2 Event (an “Other Extraordinary
      Event”), including by reason of any extraordinary dividend (whether
      cash or stock), any conversion, any adjustment, any issuance of any class
      of securities convertible or exercisable into, or exercisable for, any
      class of stock, or any sale or transfer of all or substantially all the
      Company’s assets or business, then the Committee, in its sole discretion,
      may adjust any Award and make such other adjustments to the
      Plan.  Any adjustment pursuant to this Section 4.2 shall be consistent
      with the applicable Section 4.2 Event or the applicable Other
      Extraordinary Event, as the case may be, and in such manner as the
      Committee may, in its sole discretion, deem appropriate and equitable to
      prevent substantial dilution or enlargement of the rights granted to, or
      available for, Participants under the Plan.  Any such adjustment
      determined by the Committee shall be final, binding and conclusive on the
      Company and all Participants and their respective heirs, executors,
      administrators, successors and permitted assigns.  Except as
      expressly provided in this Section 4.2 or
      in the applicable Award agreement, a Participant shall have no rights by
      reason of any Section 4.2 Event or any Other Extraordinary
      Event.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Fractional
      shares of Common Stock resulting from any adjustment in Awards pursuant to
      Section
      4.2(a) or Section 4.2(b)
      shall be aggregated until, and eliminated at, the time of exercise by
      rounding-down for fractions less than one-half and rounding-up for
      fractions equal to or greater than one-half.  No cash
      settlements shall be made with respect to fractional shares eliminated by
      rounding.  Notice of any adjustment shall be given by the
      Committee to each Participant whose Award has been adjusted and such
      adjustment (whether or not such notice is given) shall be effective and
      binding for all purposes of the
Plan.

              

      

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (d)

              	
                In
      the event of an Acquisition Event, the Committee may, in its sole
      discretion, terminate all outstanding and unexercised Stock Options or
      Stock Appreciation Rights or any Other Stock Based Award that provides for
      a Participant elected exercise (“Exercisable
      Awards”) effective as of the date of the Acquisition Event, by
      delivering notice of termination to each Participant at least 20 days
      prior to the date of consummation of the Acquisition Event, in which case
      during the period from the date on which such notice of termination is
      delivered to the consummation of the Acquisition Event, each such
      Participant shall have the right to exercise his or her Exercisable Awards
      that are then outstanding to the extent vested as of the date on which
      such notice of termination is delivered (or, at the discretion of the
      Committee, without regard to any limitations on exercisability otherwise
      contained in the Award agreements), but any such exercise shall be
      contingent on the occurrence of the Acquisition Event, and, provided that,
      if the Acquisition Event does not take place within a specified period
      after giving such notice for any reason whatsoever, the notice and
      exercise pursuant thereto shall be null and void.  For the
      avoidance of doubt, in the event of an Acquisition Event, the Committee
      may, in its sole discretion, terminate any Exercisable Award for which the
      exercise price is equal to or exceeds the Fair Market Value without
      payment of consideration therefor.

              

      

       

      If an
Acquisition Event occurs but the Committee does not terminate the outstanding
Awards pursuant to this Section 4.2(d), then
the applicable provisions of Section 4.2(b) and
Article XII
shall apply.

       

      4.3           Minimum
Purchase Price.  Notwithstanding any provision of the Plan to
the contrary, if authorized but previously unissued shares of Common Stock are
issued under the Plan, such shares shall not be issued for a consideration that
is less than as permitted under applicable law.

       

      ARTICLE
V

       

      ELIGIBILITY
AND GENERAL REQUIREMENTS FOR AWARDS

       

      5.1           General
Eligibility.  All Eligible Employees, Consultants, Non-Employee
Directors and prospective employees and consultants are eligible to be granted
Awards, subject to the terms and conditions of the Plan.  Eligibility
for the grant of Awards and actual participation in the Plan shall be determined
by the Committee in its sole discretion.

       

      5.2           Incentive
Stock Options.  Notwithstanding anything herein to the
contrary, only Eligible Employees of the Company, its Subsidiaries and its
Parent (if any) are eligible to be granted Incentive Stock Options under the
Plan.  Eligibility for the grant of an Incentive Stock Option and
actual participation in the Plan shall be determined by the Committee in its
sole discretion.

       

      5.3           General
Requirement.  The vesting and exercise of Awards granted to a
prospective employee or consultant are conditioned upon such individual actually
becoming an Eligible Employee or Consultant.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      ARTICLE
VI

       

      STOCK
OPTIONS

       

      6.1           Options.  Each
Stock Option granted under the Plan shall be one of two types: (a) an
Incentive Stock Option; or (b) a Non-Qualified Stock Option.

       

      6.2           Grants.  The
Committee shall, in its sole discretion, have the authority to grant to any
Eligible Employee (subject to Section 5.2)
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options.  The Committee shall, in its sole discretion, have the
authority to grant any Consultant or Non-Employee Director Non-Qualified Stock
Options.  To the extent that any Stock Option does not qualify as an
Incentive Stock Option (whether because of its provisions or the time or manner
of its exercise or otherwise), such Stock Option or the portion thereof that
does not qualify shall constitute a separate Non-Qualified Stock
Option.

       

      6.3           Terms of
Options.  Options granted under the Plan shall be subject to
the following terms and conditions and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee, in its sole discretion, shall deem desirable:

       

      
        	
                 
      

              	
                (a)

              	
                Exercise
      Price.  The exercise price per share of Common Stock
      subject to a Stock Option shall be determined by the Committee at the time
      of grant, provided that the per share exercise price of a Stock Option
      shall not be less than 100% (or, in the case of an Incentive Stock Option
      granted to a Ten Percent Stockholder, 110%) of the Fair Market Value of
      the Common Stock at the time of
grant.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Stock Option
      Term.  The term of each Stock Option shall be fixed by
      the Committee, provided that no Stock Option shall be exercisable more
      than 10 years after the date the Option is granted; and provided further
      that the term of an Incentive Stock Option granted to a Ten Percent
      Stockholder shall not exceed five
years.

              

      

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (c)

              	
                Exercisability.  Stock
      Options shall be exercisable at such time or times and subject to such
      terms and conditions as shall be determined by the Committee at
      grant.  If the Committee provides, in its discretion, that any
      Stock Option is exercisable subject to certain limitations (including,
      without limitation, that such Stock Option is exercisable only in
      installments or within certain time periods or upon attainment of certain
      financial results), the Committee may waive such limitations on the
      exercisability at any time at or after grant in whole or in part
      (including, without limitation, waiver of the installment exercise
      provisions or acceleration of the time at which such Stock Option may be
      exercised), based on such factors, if any, as the Committee shall
      determine, in its sole discretion.  Unless otherwise determined
      by the Committee at grant, the Option agreement shall provide that
      (i) if the Participant engages in Detrimental Activity prior to any
      exercise of the Stock Option, all Stock Options held by the Participant
      shall thereupon terminate and expire, (ii) as a condition of the exercise
      of a Stock Option, the Participant shall be required to certify (or shall
      be deemed to have certified) at the time of exercise in a manner
      acceptable to the Company that the Participant is in compliance with the
      terms and conditions of the Plan and that the Participant has not engaged
      in, and does not intend to engage in, any Detrimental Activity, and
      (iii) if the Participant engages in Detrimental Activity during the
      one-year period commencing on the later of the date the Stock Option is
      exercised or the date of the Participant’s Termination, the Company shall
      be entitled to recover from the Participant at any time within one year
      after such date, and the Participant shall pay over to the Company, an
      amount equal to any gain realized as a result of the exercise (whether at
      the time of exercise or
thereafter).

              

      

       

      
        	
                 
      

              	
                (d)

              	
                Method of
      Exercise.  Subject to whatever installment exercise and
      waiting period provisions apply under Section 6.3(c) above, to the
      extent vested, Stock Options may be exercised in whole or in part at any
      time during the Option term, by giving written notice of exercise to the
      Company specifying the number of shares of Common Stock to be
      purchased.  Such notice shall be accompanied by payment in full
      of the purchase price as follows: (i) in cash or by check, bank draft or
      money order payable to the order of the Company; (ii) solely to the extent
      permitted by applicable law, if the Common Stock is traded on a national
      securities exchange, the NYSE Amex or quoted on a national quotation
      system sponsored by the National Association of Securities Dealers, and
      the Committee authorizes, through a procedure whereby the Participant
      delivers irrevocable instructions to a broker reasonably acceptable to the
      Committee to deliver promptly to the Company an amount equal to the
      purchase price; or (iii) on such other terms and conditions as may be
      acceptable to the Committee (including, without limitation, the
      relinquishment of Stock Options or by payment in full or in part in the
      form of Common Stock owned by the Participant based on the Fair Market
      Value of the Common Stock on the payment date as determined by the
      Committee, in its sole discretion).  No shares of Common Stock
      shall be issued until payment therefor, as provided herein, has been made
      or provided for.

              

      

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (e)

              	
                Non-Transferability of
      Options.  No Stock Option shall be Transferable by the
      Participant otherwise than by will or by the laws of descent and
      distribution, and all Stock Options shall be exercisable, during the
      Participant’s lifetime, only by the
      Participant.  Notwithstanding the foregoing, the Committee may
      determine, in its sole discretion, at the time of grant or thereafter that
      a Non-Qualified Stock Option that is otherwise not Transferable pursuant
      to this Section is Transferable to a Family Member in whole or in part and
      in such circumstances, and under such conditions, as determined by the
      Committee, in its sole discretion.  A Non-Qualified Stock Option
      that is Transferred to a Family Member pursuant to the preceding sentence
      (i) may not be subsequently Transferred otherwise than by will or by the
      laws of descent and distribution and (ii) remains subject to the terms of
      the Plan and the applicable Award agreement.  Any shares of
      Common Stock acquired upon the exercise of a Non-Qualified Stock Option by
      a permissible transferee of a Non-Qualified Stock Option or a permissible
      transferee pursuant to a Transfer after the exercise of the Non-Qualified
      Stock Option shall be subject to the terms of the Plan and the applicable
      Award agreement.

              

      

       

      
        	
                 
      

              	
                (f)

              	
                Incentive Stock Option
      Limitations.  To the extent that the aggregate Fair
      Market Value (determined as of the time of grant) of the Common Stock with
      respect to which Incentive Stock Options are exercisable for the first
      time by an Eligible Employee during any calendar year under the Plan
      and/or any other stock option plan of the Company, any Subsidiary or any
      Parent exceeds $100,000, such Options shall be treated as Non-Qualified
      Stock Options.  Should any provision of the Plan not be
      necessary in order for the Stock Options to qualify as Incentive Stock
      Options, or should any additional provisions be required, the Committee
      may, in its sole discretion, amend the Plan accordingly, without the
      necessity of obtaining the approval of the stockholders of the
      Company.

              

      

       

      
        	
                 
      

              	
                (g)

              	
                Form, Modification,
      Extension and Renewal of Stock Options.  Subject to the
      terms and conditions and within the limitations of the Plan, Stock Options
      shall be evidenced by such form of agreement or grant as is approved by
      the Committee, and the Committee may, in its sole discretion (i) modify,
      extend or renew outstanding Stock Options granted under the Plan (provided
      that the rights of a Participant are not reduced without his or her
      consent and provided further that such action does not subject the Stock
      Options to Section 409A of the Code), and (ii) accept the surrender of
      outstanding Stock Options (up to the extent not theretofore exercised) and
      authorize the granting of new Stock Options in substitution therefor (to
      the extent not theretofore exercised).  Notwithstanding the
      foregoing, an outstanding Option may not be modified to reduce the
      exercise price thereof nor may a new Option at a lower price be
      substituted for a surrendered Option (other than adjustments or
      substitutions in accordance with Section 4.2),
      unless such action is approved by the stockholders of the
      Company.

              

      

       

      
        	
                 
      

              	
                (h)

              	
                Early
      Exercise.  The Committee may provide that a Stock Option
      include a provision whereby the Participant may elect at any time before
      the Participant’s Termination to exercise the Stock Option as to any part
      or all of the shares of Common Stock subject to the Stock Option prior to
      the full vesting of the Stock Option and such shares shall be subject to
      the provisions of Article VI and
      treated as Restricted Stock.  Any unvested shares of Common
      Stock so purchased may be subject to a repurchase option in favor of the
      Company or to any other restriction the Committee determines to be
      appropriate.

              

      

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (i)

              	
                Other Terms and
      Conditions.  Stock Options may contain such other
      provisions, which shall not be inconsistent with any of the terms of the
      Plan, as the Committee shall, in its sole discretion, deem
      appropriate.

              

      

       

      ARTICLE
VII

       

      STOCK
APPRECIATION RIGHTS

       

      7.1           Tandem
Stock Appreciation Rights.  Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option (a “Reference Stock
Option”) granted under the Plan (“Tandem Stock Appreciation
Rights”).  In the case of a Non-Qualified Stock Option, such rights
may be granted either at or after the time of the grant of such Reference Stock
Option.  In the case of an Incentive Stock Option, such rights may be
granted only at the time of the grant of such Reference Stock
Option.

       

      7.2           Terms and
Conditions of Tandem Stock Appreciation Rights.  Tandem Stock
Appreciation Rights granted hereunder shall be subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Committee in its sole discretion, and the
following:

       

      
        	
                 
      

              	
                (a)

              	
                Exercise
      Price.  The exercise price per share of Common Stock
      subject to a Tandem Stock Appreciation Right shall be determined by the
      Committee at the time of grant, provided that the per share exercise price
      of a Tandem Stock Appreciation Right shall not be less than 100% of the
      Fair Market Value of the Common Stock at the time of
  grant.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Term.  A
      Tandem Stock Appreciation Right or applicable portion thereof granted with
      respect to a Reference Stock Option shall terminate and no longer be
      exercisable upon the termination or exercise of the Reference Stock
      Option, except that, unless otherwise determined by the Committee, in its
      sole discretion, at the time of grant, a Tandem Stock Appreciation Right
      granted with respect to less than the full number of shares covered by the
      Reference Stock Option shall not be reduced until and then only to the
      extent the exercise or termination of the Reference Stock Option causes
      the number of shares covered by the Tandem Stock Appreciation Right to
      exceed the number of shares remaining available and unexercised under the
      Reference Stock Option.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Exercisability.  Tandem
      Stock Appreciation Rights shall be exercisable only at such time or times
      and to the extent that the Reference Stock Options to which they relate
      shall be exercisable in accordance with the provisions of Article VI, and
      shall be subject to the provisions of Section
      6.3(c).

              

      

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (d)

              	
                Method of
      Exercise.  A Tandem Stock Appreciation Right may be
      exercised by the Participant by surrendering the applicable portion of the
      Reference Stock Option.  Upon such exercise and surrender, the
      Participant shall be entitled to receive the payment determined in the
      manner prescribed in this Section
      7.2.  Stock Options that have been so surrendered, in
      whole or in part, shall no longer be exercisable to the extent the related
      Tandem Stock Appreciation Rights have been
  exercised.

              

      

       

      
        	
                 
      

              	
                (e)

              	
                Payment.  Upon
      the exercise of a Tandem Stock Appreciation Right, a Participant shall be
      entitled to receive up to, but no more than, an amount in cash and/or
      shares of Common Stock (as chosen by the Committee in its sole discretion
      at grant, or thereafter if no rights of a Participant are reduced) equal
      in value to the excess of the Fair Market Value of one share of Common
      Stock over the Option exercise price per share specified in the Reference
      Stock Option agreement, multiplied by the number of shares in respect of
      which the Tandem Stock Appreciation Right shall have been
      exercised.

              

      

       

      
        	
                 
      

              	
                (f)

              	
                Deemed Exercise of
      Reference Stock Option.  Upon the exercise of a Tandem
      Stock Appreciation Right, the Reference Stock Option or part thereof to
      which such Stock Appreciation Right is related shall be deemed to have
      been exercised for the purpose of the limitation set forth in Article IV of
      the Plan on the number of shares of Common Stock to be issued under the
      Plan.

              

      

       

      
        	
                 
      

              	
                (g)

              	
                Non-Transferability.  Tandem
      Stock Appreciation Rights shall be Transferable only when and to the
      extent that the underlying Stock Option would be Transferable under Section 6.3(e)
      of the Plan.

              

      

       

      7.3           Non-Tandem
Stock Appreciation Rights.  Non-Tandem Stock Appreciation
Rights may also be granted without reference to any Stock Options granted under
the Plan.

       

      7.4           Terms and
Conditions of Non-Tandem Stock Appreciation Rights.  Non-Tandem
Stock Appreciation Rights granted hereunder shall be subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Committee in its sole discretion, and the
following:

       

      
        	
                 
      

              	
                (a)

              	
                Exercise
      Price.  The exercise price per share of Common Stock
      subject to a Non-Tandem Stock Appreciation Right shall be determined by
      the Committee at the time of grant, provided that the per share exercise
      price of a Non-Tandem Stock Appreciation Right shall not be less than 100%
      of the Fair Market Value of the Common Stock at the time of
      grant.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Term.  The
      term of each Non-Tandem Stock Appreciation Right shall be fixed by the
      Committee, but shall not be greater than 10 years after the date the right
      is granted.

              

      

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (c)

              	
                Exercisability.  Non-Tandem
      Stock Appreciation Rights shall be exercisable at such time or times and
      subject to such terms and conditions as shall be determined by the
      Committee at grant.  If the Committee provides, in its
      discretion, that any such right is exercisable subject to certain
      limitations (including, without limitation, that it is exercisable only in
      installments or within certain time periods), the Committee may waive such
      limitations on the exercisability at any time at or after grant in whole
      or in part (including, without limitation, waiver of the installment
      exercise provisions or acceleration of the time at which such right may be
      exercised), based on such factors, if any, as the Committee shall
      determine, in its sole discretion.  Unless otherwise
      determined by the Committee at grant, the Award agreement shall provide
      that (i) in the event the Participant engages in Detrimental Activity
      prior to any exercise of the Non-Tandem Stock Appreciation Right, all
      Non-Tandem Stock Appreciation Rights held by the Participant shall
      thereupon terminate and expire, (ii) as a condition of the exercise of a
      Non-Tandem Stock Appreciation Right, the Participant shall be required to
      certify (or shall be deemed to have certified) at the time of exercise in
      a manner acceptable to the Company that the Participant is in compliance
      with the terms and conditions of the Plan and that the Participant has not
      engaged in, and does not intend to engage in, any Detrimental Activity,
      and (iii) in the event the Participant engages in Detrimental Activity
      during the one-year period commencing on the later of the date the
      Non-Tandem Stock Appreciation Right is exercised or the date of the
      Participant’s Termination, the Company shall be entitled to recover from
      the Participant at any time within one year after such date, and the
      Participant shall pay over to the Company, an amount equal to any gain
      realized as a result of the exercise (whether at the time of exercise or
      thereafter).

              

      

       

      
        	
                 
      

              	
                (d)

              	
                Method of
      Exercise.  Subject to whatever installment exercise and
      waiting period provisions apply under Section 7.4(c) above, Non-Tandem
      Stock Appreciation Rights may be exercised in whole or in part at any time
      in accordance with the applicable Award agreement, by giving written
      notice of exercise to the Company specifying the number of Non-Tandem
      Stock Appreciation Rights to be
exercised.

              

      

       

      
        	
                 
      

              	
                (e)

              	
                Payment.  Upon
      the exercise of a Non-Tandem Stock Appreciation Right a Participant shall
      be entitled to receive, for each right exercised, up to, but no more than,
      an amount in cash and/or shares of Common Stock (as chosen by the
      Committee in its sole discretion at grant, or thereafter if no rights of a
      Participant are reduced) equal in value to the excess of the Fair Market
      Value of one share of Common Stock on the date the right is exercised over
      the Fair Market Value of one share of Common Stock on the date the right
      was awarded to the Participant.

              

      

       

      
        	
                 
      

              	
                (f)

              	
                Non-Transferability.  No
      Non-Tandem Stock Appreciation Rights shall be Transferable by the
      Participant otherwise than by will or by the laws of descent and
      distribution, and all such rights shall be exercisable, during the
      Participant’s lifetime, only by the
Participant.

              

      

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

         

      

      7.5           Limited
Stock Appreciation Rights.  The Committee may, in its sole
discretion, grant Tandem and Non-Tandem Stock Appreciation Rights either as a
general Stock Appreciation Right or as a limited stock appreciation right (a
“Limited Stock Appreciation
Right”).  Limited
Stock Appreciation Rights may be exercised only upon the occurrence of a Change
in Control or such other event as the Committee may, in its sole discretion,
designate at the time of grant or thereafter.  Upon the exercise of
Limited Stock Appreciation Rights, except as otherwise provided in an Award
agreement, the Participant shall receive in cash or Common Stock, as determined
by the Committee, an amount equal to the amount (a) set forth in Section 7.2(e) with
respect to Tandem Stock Appreciation Rights, or (b) set forth in Section 7.4(e) with
respect to Non-Tandem Stock Appreciation Rights, as applicable.

       

      ARTICLE
VIII

       

      RESTRICTED
STOCK

       

      8.1           Awards of
Restricted Stock.  Shares of Restricted Stock may be issued
either alone or in addition to other Awards granted under the
Plan.  The Committee shall, in its sole discretion, determine the
Eligible Employees, Consultants and Non-Employee Directors, to whom, and the
time or times at which, grants of Restricted Stock shall be made, the number of
shares to be awarded, the price (if any) to be paid by the Participant (subject
to Section
8.2), the time or times within which such Awards may be subject to
forfeiture, the vesting schedule and rights to acceleration thereof, and all
other terms and conditions of the Awards.  The Committee may condition
the grant or vesting of Restricted Stock upon the attainment of specified
performance targets (including, the Performance Goals specified in Exhibit A attached
hereto) or such other factors as the Committee may determine, in its sole
discretion, including to comply with the requirements of Section 162(m) of the
Code.

       

      Unless
otherwise determined by the Committee at grant, each Award of Restricted Stock
shall provide that in the event the Participant engages in Detrimental Activity
prior to, or during the one-year period after, any vesting of Restricted Stock,
the Committee may direct that all unvested Restricted Stock shall be immediately
forfeited to the Company and that the Participant shall pay over to the Company
an amount equal to the Fair Market Value at the time of vesting of any
Restricted Stock that had vested in the period referred to above.

       

      8.2           Awards
and Certificates.  Eligible Employees, Consultants and
Non-Employee Directors selected to receive Restricted Stock shall not have any
rights with respect to such Award, unless and until such Participant has
delivered a fully executed copy of the agreement evidencing the Award to the
Company and has otherwise complied with the applicable terms and conditions of
such Award.  Further, such Award shall be subject to the following
conditions:

       

      
        	
                 
      

              	
                (a)

              	
                Purchase
      Price.  The purchase price of Restricted Stock shall be
      fixed by the Committee.  Subject to Section 4.3,
      the purchase price for shares of Restricted Stock may be zero to the
      extent permitted by applicable law, and, to the extent not so permitted,
      such purchase price may not be less than par
  value.

              

      

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (b)

              	
                Acceptance.  Awards
      of Restricted Stock must be accepted within a period of 60 days (or such
      other period as the Committee may specify) after the grant date, by
      executing a Restricted Stock agreement and by paying whatever price (if
      any) the Committee has designated
thereunder.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Legend.  Each
      Participant receiving Restricted Stock shall be issued a stock certificate
      in respect of such shares of Restricted Stock, unless the Committee elects
      to use another system, such as book entries by the transfer agent, as
      evidencing ownership of shares of Restricted Stock.  Such
      certificate shall be registered in the name of such Participant, and
      shall, in addition to such legends required by applicable securities laws,
      bear an appropriate legend referring to the terms, conditions, and
      restrictions applicable to such Award, substantially in the following
      form:

              

      

       

      “The
anticipation, alienation, attachment, sale, transfer, assignment, pledge,
encumbrance or charge of the shares of stock represented hereby are subject to
the terms and conditions (including forfeiture) of the Preferred Apartment
Communities, Inc. (the “Company”) 2010 Stock
Incentive Plan (as the same may be amended or amended and restated from time to
time, the “Plan”) and an
agreement entered into between the registered owner and the Company dated
__________.  Copies of such Plan and agreement are on file at the
principal office of the Company.”

       

      
        	
                 
      

              	
                (d)

              	
                Custody.  If
      stock certificates are issued in respect of shares of Restricted Stock,
      the Committee may require that any stock certificates evidencing such
      shares be held in custody by the Company until the restrictions thereon
      shall have lapsed, and that, as a condition of any grant of Restricted
      Stock, the Participant shall have delivered a duly signed stock power,
      endorsed in blank, relating to the Common Stock covered by such
      Award.

              

      

       

      8.3           Restrictions
and Conditions.  The shares of Restricted Stock awarded
pursuant to the Plan shall be subject to the following restrictions and
conditions:

       

      
        	
                 
      

              	
                (a)

              	
                (i)  Restriction
      Period.  The Participant shall not be permitted to
      Transfer shares of Restricted Stock awarded under the Plan during the
      period or periods set by the Committee (the “Restriction
      Period”) commencing on the date of such Award, as set forth in the
      Restricted Stock Award agreement and such agreement shall set forth a
      vesting schedule and any events that would accelerate vesting of the
      shares of Restricted Stock.  Within these limits, based on
      service, attainment of performance goals pursuant to Section
      8.3(a)(ii) and/or such other factors or criteria as the Committee
      may determine in its sole discretion, the Committee may condition the
      grant or provide for the lapse of such restrictions in installments in
      whole or in part, or may accelerate the vesting of all or any part of any
      Restricted Stock Award and/or waive the deferral limitations for all or
      any part of any Restricted Stock
Award.

              

      

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

         

      

      (ii)           Objective Performance Goals,
Formulae or Standards.  If the grant of shares of Restricted
Stock or the lapse of restrictions is based on the attainment of Performance
Goals, the Committee shall establish the Performance Goals and the applicable
vesting percentage of the Restricted Stock Award applicable to each Participant
or class of Participants in writing prior to the beginning of the applicable
fiscal year or at such later date as otherwise determined by the Committee and
while the outcome of the Performance Goals are substantially
uncertain.  Such Performance Goals may incorporate provisions for
disregarding (or adjusting for) changes in accounting methods, corporate
transactions (including, without limitation, dispositions and acquisitions) and
other similar type events or circumstances.  With regard to a
Restricted Stock Award that is intended to comply with Section 162(m) of the
Code, to the extent any such provision would create impermissible discretion
under Section 162(m) of the Code or otherwise violate Section 162(m) of the
Code, such provision shall be of no force or effect.  The applicable
Performance Goals shall be based on one or more of the performance criteria set
forth in Exhibit
A hereto.

       

      
        	
                 
      

              	
                (b)

              	
                Rights as a
      Stockholder.  Except as provided in this Section 8.3(b) and Section 8.3(a) above and as
      otherwise determined by the Committee, the Participant shall have, with
      respect to the shares of Restricted Stock, all of the rights of a holder
      of shares of Common Stock of the Company including, without limitation,
      the right to receive any dividends, the right to vote such shares and,
      subject to and conditioned upon the full vesting of shares of Restricted
      Stock, the right to tender such shares.  The Committee may, in
      its sole discretion, determine at the time of grant that the payment of
      dividends shall be deferred until, and conditioned upon, the expiration of
      the applicable Restriction Period.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Lapse of
      Restrictions.  If and when the Restriction Period expires
      without a prior forfeiture of the Restricted Stock, the certificates for
      such shares shall be delivered to the Participant.  All legends
      shall be removed from said certificates at the time of delivery to the
      Participant, except as otherwise required by applicable law or other
      limitations imposed by the
Committee.

              

      

       

      ARTICLE
IX

       

      PERFORMANCE
SHARES

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

         

      

      9.1           Award of
Performance Shares.  Performance Shares may be awarded either
alone or in addition to other Awards granted under the Plan.  The
Committee shall, in its sole discretion, determine the Eligible Employees,
Consultants and Non-Employee Directors, to whom, and the time or times at which,
Performance Shares shall be awarded, the number of Performance Shares to be
awarded to any person, the Performance Period during which, and the conditions
under which, receipt of the Shares will be deferred, and the other terms and
conditions of the Award in addition to those set forth in Section
9.2.

       

      Unless
otherwise determined by the Committee at grant, each Award of Performance Shares
shall provide that in the event the Participant engages in Detrimental Activity
prior to, or during the one-year period after the later of the date of any
vesting of Performance Shares or the date of the Participant’s Termination, the
Committee may direct (at any time within one year thereafter) that all unvested
Performance Shares shall be immediately forfeited to the Company and that the
Participant shall pay over to the Company an amount equal to any gain the
Participant realized from any Performance Shares that had vested in the period
referred to above.

       

      Except as
otherwise provided herein, the Committee shall condition the right to payment of
any Performance Share upon the attainment of objective performance goals
established pursuant to Section 9.2(c).

       

      9.2           Terms and
Conditions.  Performance Shares awarded pursuant to this Article IX shall be
subject to the following terms and conditions:

       

      
        	
                 
      

              	
                (a)

              	
                Earning of Performance
      Share Award.  At the expiration of the applicable
      Performance Period, the Committee shall determine the extent to which the
      performance goals established pursuant to Section 9.2(c)
      are achieved and the percentage of each Performance Share Award that has
      been earned.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Non-Transferability.  Subject
      to the applicable provisions of the Award agreement and the Plan,
      Performance Shares may not be Transferred during the Performance
      Period.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Objective Performance
      Goals, Formulae or Standards.  The Committee shall
      establish the objective Performance Goals for the earning of Performance
      Shares based on a Performance Period applicable to each Participant or
      class of Participants in writing prior to the beginning of the applicable
      Performance Period or at such later date as permitted under Section 162(m)
      of the Code and while the outcome of the Performance Goals are
      substantially uncertain.  Such Performance Goals may
      incorporate, if and only to the extent permitted under Section 162(m) of
      the Code, provisions for disregarding (or adjusting for) changes in
      accounting methods, corporate transactions (including, without limitation,
      dispositions and acquisitions) and other similar type events or
      circumstances.  To the extent any such provision would create
      impermissible discretion under Section 162(m) of the Code or otherwise
      violate Section 162(m) of the Code, such provision shall be of no force or
      effect.  The applicable Performance Goals shall be based on one
      or more of the performance criteria set forth in Exhibit A
      hereto.

              

      

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (d)

              	
                Dividends.  Unless
      otherwise determined by the Committee at the time of grant, amounts equal
      to any dividends declared during the Performance Period with respect to
      the number of shares of Common Stock covered by a Performance Share will
      not be paid to the Participant.

              

      

       

      
        	
                 
      

              	
                (e)

              	
                Payment.  Following
      the Committee’s determination in accordance with Section 9.5(a), shares of Common
      Stock or, as determined by the Committee in its sole discretion, the cash
      equivalent of such shares shall be delivered to the Eligible Employee,
      Consultant or Non-Employee Director, or his legal representative, in an
      amount equal to such individual’s earned Performance
      Share.  Notwithstanding the foregoing, the Committee may, in its
      sole discretion, award an amount less than the earned Performance Share
      and/or subject the payment of all or part of any Performance Share to
      additional vesting, forfeiture and deferral conditions as it deems
      appropriate.

              

      

       

      
        	
                 
      

              	
                (f)

              	
                Accelerated
      Vesting.  Based on service, performance and/or such other
      factors or criteria, if any, as the Committee may determine, the Committee
      may, in its sole discretion, at or after grant, accelerate the vesting of
      all or any part of any Performance Share Award and/or waive the deferral
      limitations for all or any part of such
Award.

              

      

       

      ARTICLE
X

       

      OTHER
STOCK-BASED AWARDS

       

      10.1           Other
Awards.  The Committee, in its sole discretion, is authorized
to grant to Eligible Employees, Consultants and Non-Employee Directors Other
Stock-Based Awards that are payable in, valued in whole or in part by reference
to, or otherwise based on or related to shares of Common Stock, including, but
not limited to, shares of Common Stock awarded purely as a bonus and not subject
to any restrictions or conditions, shares of Common Stock in payment of the
amounts due under an incentive or performance plan sponsored or maintained by
the Company or an Affiliate, performance units, dividend equivalent units, stock
equivalent units, restricted stock units and deferred stock units.  To
the extent permitted by law, the Committee may, in its sole discretion, permit
Eligible Employees and/or Non-Employee Directors to defer all or a portion of
their cash compensation in the form of Other Stock-Based Awards granted under
the Plan, subject to the terms and conditions of any deferred compensation
arrangement established by the Company, which shall be intended to comply with
Section 409A of the Code.  Other Stock-Based Awards may be granted
either alone or in addition to or in tandem with other Awards granted under the
Plan.

       

      Unless
otherwise determined by the Committee at grant, each Other Stock-based Award
shall provide that in the event the Participant engages in Detrimental Activity
prior to, or during the one-year period after the later of the date of any
vesting of Performance Shares or the date of the Participant’s Termination, the
Committee may direct (at any time within one year thereafter) that any unvested
portion of such Award shall be immediately forfeited to the Company and that the
Participant shall pay over to the Company an amount equal to any gain the
Participant realized from any such Award that had vested in the period referred
to above.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

         

      

      Subject
to the provisions of the Plan, the Committee shall, in its sole discretion, have
authority to determine the Eligible Employees, Consultants and Non-Employee
Directors, to whom, and the time or times at which, such Awards shall be made,
the number of shares of Common Stock to be awarded pursuant to such Awards, and
all other conditions of the Awards.  The Committee may also provide
for the grant of Common Stock under such Awards upon the completion of a
specified performance period.

       

      The
Committee may condition the grant or vesting of Other Stock-Based Awards upon
the attainment of specified Performance Goals set forth on Exhibit A as the
Committee may determine, in its sole discretion; provided that to the extent
that such Other Stock-Based Awards are intended to comply with Section 162(m) of
the Code, the Committee shall establish the objective Performance Goals for the
vesting of such Other Stock-Based Awards based on a performance period
applicable to each Participant or class of Participants in writing prior to the
beginning of the applicable performance period or at such later date as
permitted under Section 162(m) of the Code and while the outcome of the
Performance Goals are substantially uncertain.  Such Performance Goals
may incorporate, if and only to the extent permitted under Section 162(m) of the
Code, provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation, dispositions and
acquisition) and other similar type events or circumstances.  To the
extent any such provision would create impermissible discretion under Section
162(m) of the Code or otherwise violate Section 162(m) of the Code, such
provision shall be of no force or effect.  The applicable Performance
Goals shall be based on one or more of the performance criteria set forth in
Exhibit A
hereto.

       

      10.2           Terms and
Conditions.  Other Stock-Based Awards made pursuant to this
Article X shall
be subject to the following terms and conditions:

       

      
        	
                 
      

              	
                (a)

              	
                Non-Transferability.  Subject
      to the applicable provisions of the Award agreement and the Plan, shares
      of Common Stock subject to Awards made under this Article X may
      not be Transferred prior to the date on which the shares are issued, or,
      if later, the date on which any applicable restriction, performance or
      deferral period lapses.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                Dividends.  Unless
      otherwise determined by the Committee at the time of Award, subject to the
      provisions of the Award agreement and the Plan, the recipient of an Award
      under this Article X shall
      not be entitled to receive, currently or on a deferred basis, dividends or
      dividend equivalents with respect to the number of shares of Common Stock
      covered by the Award.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Vesting.  Any
      Award under this Article X and
      any Common Stock covered by any such Award shall vest or be forfeited to
      the extent so provided in the Award agreement, as determined by the
      Committee, in its sole discretion.

              

      

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (d)

              	
                Price.  Common
      Stock issued on a bonus basis under this Article X may
      be issued for no cash consideration; Common Stock purchased pursuant to a
      purchase right awarded under this Article X shall
      be priced, as determined by the Committee in its sole
      discretion.

              

      

       

      
        	
                 
      

              	
                (e)

              	
                Payment.  Form
      of payment for the Other Stock-Based Award shall be specified in the Award
      agreement.

              

      

       

      ARTICLE
XI

       

      TERMINATION

       

      11.1           Termination.  The
following rules apply with regard to the Termination of a
Participant.

       

      
        	
                 
      

              	
                (a)

              	
                Rules Applicable to Stock
      Option and Stock Appreciation Rights.  Unless otherwise
      determined by the Committee at grant (or, if no rights of the Participant
      are reduced, thereafter):

              

      

       

      (i)           Termination by Reason of Death,
Disability or Retirement.  If a Participant’s Termination is by
reason of death, Disability or the Participant’s Retirement, all Stock Options
or Stock Appreciation Rights that are held by such Participant that are vested
and exercisable at the time of the Participant’s Termination may be exercised by
the Participant (or, in the case of death, by the legal representative of the
Participant’s estate) at any time within a one-year period from the date of such
Termination, but in no event beyond the expiration of the stated term of such
Stock Options or Stock Appreciation Rights; provided, however, if the
Participant dies within such exercise period, all unexercised Stock Options or
Stock Appreciation Rights held by such Participant shall thereafter be
exercisable, to the extent to which they were exercisable at the time of death,
for a period of one year from the date of such death, but in no event beyond the
expiration of the stated term of such Stock Options or Stock Appreciation
Rights.

       

      (ii)           Involuntary Termination Without
Cause.  If a Participant’s Termination is by involuntary
termination without Cause, all Stock Options or Stock Appreciation Rights that
are held by such Participant that are vested and exercisable at the time of the
Participant’s Termination may be exercised by the Participant at any time within
a period of 90 days from the date of such Termination, but in no event beyond
the expiration of the stated term of such Stock Options or Stock Appreciation
Rights.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

         

      

      (iii)           Voluntary
Termination.  If a Participant’s Termination is voluntary
(other than a voluntary termination described in Section
11.2(a)(iv)(2), or a Retirement), all Stock Options or Stock Appreciation
Rights that are held by such Participant that are vested and exercisable at the
time of the Participant’s Termination may be exercised by the Participant at any
time within a period of 30 days from the date of such Termination, but in no
event beyond the expiration of the stated terms of such Stock Options or Stock
Appreciation Rights.

       

      (iv)           Termination for
Cause.  If a Participant’s Termination: (A) is for Cause, or
(B) is a voluntary Termination (as provided in Section 11.1(a)(iii)) or a Retirement
after the occurrence of an event that would be grounds for a Termination for
Cause, all Stock Options or Stock Appreciation Rights, whether vested or not
vested, that are held by such Participant shall thereupon terminate and expire
as of the date of such Termination.

       

      (v)           Unvested Stock Options and Stock
Appreciation Rights.  Stock Options or Stock Appreciation
Rights that are not vested as of the date of a Participant’s Termination for any
reason shall terminate and expire as of the date of such
Termination.  Notwithstanding the foregoing, if a Participant is
deemed to have experienced a Termination of Employment in accordance with the
last sentence of Section 2.54 of the
Plan, then (A) any Stock Options and any Stock Appreciation Rights that are not
vested as of the date of such Participant’s Termination of Employment in
accordance with the last sentence of Section 2.54 of the
Plan (“Special
Unvested Options or Rights”) shall not terminate or expire as of the date
of such Termination of Employment and shall remain outstanding until a
Participant experiences a Termination of Employment (other than on account of
the last sentence of Section 2.54 of the
Plan), but in no event beyond the expiration of the stated term of any such
Special Unvested Options or Rights, and (B) no Special Unvested Options or
Rights will thereafter vest except as set forth in the next succeeding
sentence.  If, after a Termination of Employment in accordance with
the last sentence of Section 2.54 of the
Plan, (1) a Participant remains continuously employed by the Company or any of
its Affiliates, and (2) subsequent thereto, such Participant becomes regularly
scheduled to work more than 24 hours per week, then any Special Unvested Options
or Rights shall immediately vest as to any shares of Common Stock that did not
vest under the terms of such Special Unvested Options or Rights between the date
of such Participant’s Termination of Employment in accordance with the last
sentence of Section
2.54 of the Plan and the date such Participant became regularly scheduled
to work more than 24 hours per week solely as a result of the application of the
immediately preceding sentence.

       

      
        	
                 
      

              	
                (b)

              	
                Rules Applicable to Restricted
      Stock, Performance Shares and Other Stock-Based Awards.  Unless otherwise
      determined by the Committee at grant or thereafter, upon a Participant’s
      Termination for any reason:  (i) during the relevant
      Restriction Period, all Restricted Stock still subject to restriction
      shall be forfeited; and (ii) any unvested Performance Shares or Other
      Stock-Based Awards shall be
forfeited.

              

      

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

         

      

      ARTICLE
XII

       

      CHANGE IN
CONTROL PROVISIONS

       

      12.1           Benefits.  In
the event of a Change in Control of the Company, and except as otherwise
provided by the Committee in an Award agreement or in a written employment
agreement between the Company and a Participant, a Participant’s unvested Award
shall vest in full and a Participant’s Award shall be treated in accordance with
one of the following methods as determined by the Committee in its sole
discretion:

       

      
        	
                 
      

              	
                (a)

              	
                Awards,
      whether or not vested by their terms or pursuant to the preceding
      sentence, shall be continued, assumed, have new rights substituted
      therefor or be treated in accordance with Section 4.2(d),
      as determined by the Committee in its sole discretion, and restrictions to
      which any shares of Restricted Stock or any other Award granted prior to
      the Change in Control are subject shall not lapse upon a Change in Control
      (other than with respect to vesting pursuant to the foregoing provisions
      of this Section
      12.1) and the Restricted Stock or other Award shall, where
      appropriate in the sole discretion of the Committee, receive the same or
      other appropriate distribution as other Common Stock on such terms as
      determined by the Committee in its sole discretion; provided, however, that,
      the Committee may, in its sole discretion, decide to award additional
      Restricted Stock or other Award in lieu of any cash
      distribution.  Notwithstanding anything to the contrary herein,
      for purposes of Incentive Stock Options, any assumed or substituted Stock
      Option shall comply with the requirements of Treasury Regulation § 
      1.424-1 (and any amendments
thereto).

              

      

       

      
        	
                 
      

              	
                (b)

              	
                The
      Committee, in its sole discretion, may provide for the purchase of any
      Awards by the Company or an Affiliate (or the cancellation and
      extinguishment thereof pursuant to the terms of a merger agreement entered
      into by the Company) for an amount of cash equal to the excess of the
      Change in Control Price (as defined below) of the shares of Common Stock
      covered by such Awards, over the aggregate exercise price of such
      Awards.  For purposes of this Section 12.1,
      “Change in
      Control Price” shall mean the highest price per share of Common
      Stock paid in any transaction related to a Change in Control of the
      Company.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                The
      Committee may, in its sole discretion, provide for the cancellation of any
      particular Award or Awards without payment, if the Change in Control Price
      is less than the Fair Market Value of such Award(s) on the date of
      grant.

              

      

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (d)

              	
                Notwithstanding
      anything else herein, the Committee may, in its sole discretion, provide
      for accelerated vesting or lapse of restrictions, of an Award at the time
      of grant or at any time thereafter.

              

      

       

      12.2           Change in
Control.  Unless otherwise determined by the Committee in the
applicable Award agreement or other written agreement approved by the Committee,
a “Change in Control” shall be deemed to occur following any transaction
if:  (a) any “person” as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of Common Stock of the
Company), becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 40% or more of the combined voting
power of the then outstanding securities of the Company (or its successor
corporation); or (b) the
stockholders of the Company approve a plan of complete liquidation of the
Company or the consummation of the sale or disposition by the Company of all or
substantially all of the Company’s assets other than (i) the sale or disposition
of all or substantially all of the assets of the Company to a person or persons
who beneficially own, directly or indirectly, at least 50% or more of the
combined voting power of the outstanding voting securities of the Company at the
time of the sale, or (ii) pursuant to a spin-off type transaction, directly or
indirectly, of such assets to the stockholders of the Company.

       

      ARTICLE
XIII

       

      TERMINATION
OR AMENDMENT OF PLAN

       

      13.1           Termination
or Amendment.  Notwithstanding any other provision of the Plan,
the Board or the Committee may at any time, and from time to time, amend, in
whole or in part, any or all of the provisions of the Plan (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article XV), or
suspend or terminate it entirely, retroactively or otherwise; provided, however, that, unless
otherwise required by law or specifically provided herein, the rights of a
Participant with respect to Awards granted prior to such amendment, suspension
or termination, may not be impaired without the consent of such Participant and,
provided further, without the approval of the stockholders of the Company in
accordance with the laws of the State of Maryland, to the extent required by the
applicable provisions of Rule 16b-3 or Section 162(m) of the Code, pursuant to
the requirements of any applicable stock exchange rule, or, to the extent
applicable to Incentive Stock Options, Section 422 of the Code, no amendment may
be made that would:

       

      
        	
                 
      

              	
                (a)

              	
                increase
      the aggregate number of shares of Common Stock that may be issued under
      the Plan pursuant to Section 4.1
      (except by operation of Section
      4.2);

              

      

       

      
        	
                 
      

              	
                (b)

              	
                increase
      the maximum individual Participant limitations for a fiscal year under
      Section
      4.1(b) (except by operation of Section
      4.2);

              

      

       

      
        	
                 
      

              	
                (c)

              	
                change
      the classification of Eligible Employees or Consultants eligible to
      receive Awards under the Plan;

              

      

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (d)

              	
                decrease
      the minimum option price of any Stock Option or Stock Appreciation
      Right;

              

      

       

      
        	
                 
      

              	
                (e)

              	
                extend
      the maximum option period under Section
      6.3;

              

      

       

      
        	
                 
      

              	
                (f)

              	
                alter
      the Performance Goals for the Award of Restricted Stock, Performance
      Shares or Other Stock-Based Awards subject to satisfaction of Performance
      Goals as set forth in Exhibit
      A;

              

      

       

      
        	
                 
      

              	
                (g)

              	
                award
      any Stock Option or Stock Appreciation Right in replacement of a canceled
      Stock Option or Stock Appreciation Right with a higher exercise price,
      except in accordance with Section 6.3(g);
      or

              

      

       

      
        	
                 
      

              	
                (h)

              	
                require
      stockholder approval in order for the Plan to continue to comply with the
      applicable provisions of Section 162(m) of the Code or, to the extent
      applicable to Incentive Stock Options, Section 422 of the
      Code.  In no event may the Plan be amended without the approval
      of the stockholders of the Company in accordance with the applicable laws
      of the State of Maryland to increase the aggregate number of shares of
      Common Stock that may be issued under the Plan, decrease the minimum
      exercise price of any Stock Option or Stock Appreciation Right, or to make
      any other amendment that would require stockholder approval under NYSE
      Amex rules, or the rules of any other exchange or system on which the
      Company's securities are listed or traded at the request of the
      Company.

              

      

       

      The
Committee may amend the terms of any Award theretofore granted, prospectively or
retroactively, but, subject to Article IV or as
otherwise specifically provided herein, no such amendment or other action by the
Committee shall adversely impair the rights of any holder without the holder’s
consent.  Notwithstanding anything herein to the contrary, the Board
or the Committee may amend the Plan or any Award granted hereunder at any time
without a Participant’s consent to comply with Code Section 409A or any other
applicable law.

       

       

      ARTICLE
XIV

       

      UNFUNDED
PLAN

       

      14.1           Unfunded
Status of Plan.  The Plan is an “unfunded” plan for incentive
and deferred compensation.  With respect to any payments as to which a
Participant has a fixed and vested interest but that are not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general unsecured
creditor of the Company.

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

         

      

      ARTICLE
XV

       

      GENERAL
PROVISIONS

       

      15.1           Legend.  The
Committee may require each person receiving shares of Common Stock pursuant to
an Award granted under the Plan to represent to and agree with the Company in
writing that the Participant is acquiring the shares without a view to
distribution thereof and such other securities law-related representations as
the Committee shall request.  In addition to any legend required by
the Plan, the certificates and/or book entry accounts for such shares may
include any legend that the Committee, in its sole discretion, deems appropriate
to reflect any restrictions on Transfer.

       

      All
certificates and/or book entry accounts for shares of Common Stock delivered
under the Plan shall be subject to such stop transfer orders and other
restrictions as the Committee may, in its sole discretion, deem advisable under
the rules, regulations and other requirements of the Securities and Exchange
Commission, the NYSE Amex stock market or any national securities exchange
system upon whose system the Common Stock is then quoted, any applicable Federal
or state securities law, and any applicable corporate law, and the Committee may
cause a legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.

       

      15.2           Other
Plans.  Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.

       

      15.3           No Right
to Employment/Directorship/Consultancy.  Neither the Plan nor
the grant of any Option or other Award hereunder shall give any Participant or
other employee, Consultant or Non-Employee Director any right with respect to
continuance of employment, consultancy or directorship by the Company or any
Affiliate, nor shall they be a limitation in any way on the right of the Company
or any Affiliate by which an employee is employed or a Consultant or
Non-Employee Director is retained to terminate his or her employment,
consultancy or directorship at any time.

       

      15.4           Withholding
of Taxes.  The Company shall have the right to deduct from any
payment to be made pursuant to the Plan, or to otherwise require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld.  Upon the vesting of Restricted Stock
(or other Award that is taxable upon vesting), or upon making an election under
Section 83(b) of the Code, a Participant shall pay all required withholding to
the Company.  Any statutorily required withholding obligation with
regard to any Participant may be satisfied, subject to the advance consent of
the Committee, by reducing the number of shares of Common Stock otherwise
deliverable or by delivering shares of Common Stock already
owned.  Any fraction of a share of Common Stock required to satisfy
such tax obligations shall be disregarded and the amount due shall be paid
instead in cash by the Participant.

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

         

      

      15.5           No
Assignment of Benefits.  No Award or other benefit payable
under the Plan shall, except as otherwise specifically provided by law or
permitted by the Committee, be Transferable in any manner, and any attempt to
Transfer any such benefit shall be void, and any such benefit shall not in any
manner be liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person who shall be entitled to such benefit, nor
shall it be subject to attachment or legal process for or against such
person.

       

      15.6           Listing
and Other Conditions.

       

      
        	
                 
      

              	
                (a)

              	
                Unless
      otherwise determined by the Committee, as long as the Common Stock is
      listed on a national securities exchange or system sponsored by a national
      securities association, the issue of any shares of Common Stock pursuant
      to an Award shall be conditioned upon such shares being listed on such
      exchange or system.  The Company shall have no obligation to
      issue such shares unless and until such shares are so listed, and the
      right to exercise any Option or other Award with respect to such shares
      shall be suspended until such listing has been
  effected.

              

      

       

      
        	
                 
      

              	
                (b)

              	
                If
      at any time counsel to the Company shall be of the opinion that any sale
      or delivery of shares of Common Stock pursuant to an Option or other Award
      is or may in the circumstances be unlawful or result in the imposition of
      excise taxes on the Company under the statutes, rules or regulations of
      any applicable jurisdiction, the Company shall have no obligation to make
      such sale or delivery, or to make any application or to effect or to
      maintain any qualification or registration under the Securities Act or
      otherwise, with respect to shares of Common Stock or Awards, and the right
      to exercise any Option or other Award shall be suspended until, in the
      opinion of said counsel, such sale or delivery shall be lawful or will not
      result in the imposition of excise taxes on the
  Company.

              

      

       

      
        	
                 
      

              	
                (c)

              	
                Upon
      termination of any period of suspension under this Section 15.6,
      any Award affected by such suspension that shall not then have expired or
      terminated shall be reinstated as to all shares available before such
      suspension and as to shares that would otherwise have become available
      during the period of such suspension, but no such suspension shall extend
      the term of any Award.

              

      

       

      
        	
                 
      

              	
                (d)

              	
                A
      Participant shall be required to supply the Company with any certificates,
      representations and information that the Company requests and otherwise
      cooperate with the Company in obtaining any listing, registration,
      qualification, exemption, consent or approval the Company deems necessary
      or appropriate.

              

      

       

      15.7           Governing
Law.  The Plan and actions taken in connection herewith shall
be governed and construed in accordance with the laws of the State of Maryland
(regardless of the law that might otherwise govern under applicable Maryland
principles of conflict of laws).

       

      15.8           Construction.  Wherever
any words are used in the Plan in the masculine gender they shall be construed
as though they were also used in the feminine gender in all cases where they
would so apply, and wherever any words are used herein in the singular form they
shall be construed as though they were also used in the plural form in all cases
where they would so apply.

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

         

      

      15.9           Other
Benefits.  No Award granted or paid out under the Plan shall be
deemed compensation for purposes of computing benefits under any retirement plan
of the Company or its Affiliates nor affect any benefits under any other benefit
plan now or subsequently in effect under which the availability or amount of
benefits is related to the level of compensation.

       

      15.10           Costs.  The
Company shall bear all expenses associated with administering the Plan,
including expenses of issuing Common Stock pursuant to any Awards
hereunder.

       

      15.11           No Right
to Same Benefits.  The provisions of Awards need not be the
same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.

       

      15.12           Death/Disability.  The Committee may
in its sole discretion require the transferee of a Participant to supply it with
written notice of the Participant’s death or Disability and to supply it with a
copy of the will (in the case of the Participant’s death) or such other evidence
as the Committee deems necessary to establish the validity of the transfer of an
Award.  The Committee may, in its discretion, also require the
agreement of the transferee to be bound by all of the terms and conditions of
the Plan.

       

      15.13           Section
16(b) of the Exchange Act.  On and after the Registration Date,
all elections and transactions under the Plan by persons subject to Section 16
of the Exchange Act involving shares of Common Stock are intended to comply with
any applicable exemptive condition under Rule 16b-3.  The
Committee may, in its sole discretion, establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the Exchange Act, as it may deem necessary or proper for the administration
and operation of the Plan and the transaction of business
thereunder.

       

      15.14           Section
409A of the Code.  Although the Company does not guarantee the
particular tax treatment of an Award granted under the Plan, Awards made under
the Plan are intended to comply with, or be exempt from, the applicable
requirements of Section 409A of the Code and the Plan and any Award agreement
hereunder shall be limited, construed and interpreted in accordance with such
intent.  Notwithstanding anything herein to the contrary, any
provision in the Plan that is inconsistent with Section 409A of the Code shall
be deemed to be amended to comply with Section 409A of the Code and to the
extent such provision cannot be amended to comply therewith, such provision
shall be null and void.

       

      15.15           Successor
and Assigns.  The Plan shall be binding on all successors and
permitted assigns of a Participant, including, without limitation, the estate of
such Participant and the executor, administrator or trustee of such
estate.

       

      15.16           Severability
of Provisions.  If any provision of the Plan shall be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provisions hereof, and the Plan shall be construed and enforced as if
such provisions had not been included.

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

         

      

      15.17           Payments
to Minors, Etc.  Any benefit
payable to or for the benefit of a minor, an incompetent person or other person
incapable of receipt thereof shall be deemed paid when paid to such person’s
guardian or to the party providing or reasonably appearing to provide for the
care of such person, and such payment shall fully discharge the Committee, the
Board, the Company, its Affiliates and their employees, agents and
representatives with respect thereto.

       

      15.18           Headings
and Captions.  The headings and captions herein are provided
for reference and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.

       

      15.19           Transition
Period.  The Plan has been
adopted by the Board and approved by its stockholders, both of which occurred
prior to the occurrence of a Registration Date.  The Plan is intended
to constitute a plan described in Treasury Regulation Section 1.162-27(f)(1),
pursuant to which the deduction limits under Section 162(m) of the Code do not
apply during the applicable reliance period.  The reliance period
shall end on the earliest date identified in the definition of “Transition
Period” contained in Section 2.56 of the
Plan.

       

      ARTICLE
XVI

       

      EFFECTIVE
DATE OF PLAN

       

      The Plan
shall become effective upon adoption by the Board or such later date as provided
in the adopting resolution, subject to the approval of the Plan by the
stockholders of the Company within 12 months before or after adoption of the
Plan by the Board in accordance with the laws of the State of
Maryland.

       

      ARTICLE
XVII

       

      TERM OF
PLAN

       

      The Plan
was adopted by the Board on
[                                                                                     ],
and was approved by the Company’s stockholders on [].  No Award shall
be granted pursuant to the Plan on or after [], but Awards granted prior to such
date may, and the Committee’s authority to administer the terms of such Awards,
extend beyond that date; provided, however, that no
Award (other than a Stock Option or Stock Appreciation Right) that is intended
to be “performance-based” under Section 162(m) of the Code shall be granted on
or after the fifth anniversary of the stockholder approval of the Plan unless
the Performance Goals set forth on Exhibit A are
reapproved (or other designated performance goals are approved) by the
stockholders no later than the first stockholder meeting that occurs in the
fifth year following the year in which stockholders approve the Performance
Goals set forth on Exhibit
A.

       

      ARTICLE
XVIII

       

      NAME OF
PLAN

       

      The Plan
shall be known as the “Preferred Apartment Communities, Inc. 2010 Stock
Incentive Plan.”

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

      

      EXHIBIT
A

       

      PERFORMANCE
GOALS

       

      To the
extent permitted under Section 162(m) of the Code, performance goals established
for purposes of the grant or vesting of Awards of Restricted Stock, Other
Stock-Based Awards and/or Performance Shares, each intended to be
“performance-based” under Section 162(m) of the Code, shall be based on the
attainment of certain target levels of, or a specified increase or decrease (as
applicable) in one or more of the following performance goals (“Performance
Goals”):

       

      
        	
                 
      

              	
                (a)

              	
                earnings
      per share;

              

      

       

      
        	
                 
      

              	
                (b)

              	
                operating
      income;

              

      

       

      
        	
                 
      

              	
                (c)

              	
                net
      income;

              

      

       

      
        	
                 
      

              	
                (d)

              	
                cash
      flow;

              

      

       

      
        	
                 
      

              	
                (e)

              	
                gross
      profit;

              

      

       

      
        	
                 
      

              	
                (f)

              	
                gross
      profit return on investment;

              

      

       

      
        	
                 
      

              	
                (g)

              	
                gross
      margin return on investment;

              

      

       

      
        	
                 
      

              	
                (h)

              	
                gross
      margin;

              

      

       

      
        	
                 
      

              	
                (i)

              	
                working
      capital;

              

      

       

      
        	
                 
      

              	
                (j)

              	
                earnings
      before interest and taxes;

              

      

       

      
        	
                 
      

              	
                (k)

              	
                earnings
      before interest, tax, depreciation and
  amortization;

              

      

       

      
        	
                 
      

              	
                (l)

              	
                return
      on equity;

              

      

       

      
        	
                 
      

              	
                (m)

              	
                return
      on assets;

              

      

       

      
        	
                 
      

              	
                (n)

              	
                return
      on capital;

              

      

       

      
        	
                 
      

              	
                (o)

              	
                return
      on invested capital;

              

      

       

      
        	
                 
      

              	
                (p)

              	
                net
      revenues;

              

      

       

      
        	
                 
      

              	
                (q)

              	
                gross
      revenues;

              

      

       

      
        	
                 
      

              	
                (r)

              	
                revenue
      growth;

              

      

       

      
        	
                 
      

              	
                (s)

              	
                total
      shareholder return;

              

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

         

      

      
        	
                 
      

              	
                (t)

              	
                economic
      value added;

              

      

       

      
        	
                 
      

              	
                (u)

              	
                specified
      objectives with regard to limiting the level of increase in all or a
      portion of the Company’s bank debt or other long-term or short-term public
      or private debt or other similar financial obligations of the Company,
      which may be calculated net of cash balances and/or other offsets and
      adjustments as may be established by the Committee in its sole
      discretion;

              

      

       

      
        	
                 
      

              	
                (v)

              	
                the
      fair market value of the shares of the Company’s Common
    Stock;

              

      

       

      
        	
                 
      

              	
                (w)

              	
                the
      growth in the value of an investment in the Company’s Common Stock
      assuming the reinvestment of dividends;
or

              

      

       

      
        	
                 
      

              	
                (x)

              	
                reduction
      in expenses.

              

      

       

      To the
extent permitted under Section 162(m) of the Code, the Committee may, in its
sole discretion, also exclude, or adjust to reflect, the impact of an event or
occurrence that the Committee determines should be appropriately excluded or
adjusted, including:

       

      (i)           restructurings,
discontinued operations, extraordinary items or events, and other unusual or
non-recurring charges as described in Accounting Principles Board Opinion No. 30
and/or management’s discussion and analysis of financial condition and results
of operations appearing or incorporated by reference in the Company’s Form 10-K
for the applicable year;

       

      (ii)           an
event either not directly related to the operations of the Company or not within
the reasonable control of the Company’s management; or

       

      (iii)           a
change in tax law or accounting standards required by generally accepted
accounting principles.

       

      Performance
goals may also be based upon individual Participant performance goals, as
determined by the Committee, in its sole discretion.

       

      In
addition, such Performance Goals may be based upon the attainment of specified
levels of Company (or subsidiary, division, other operational unit or
administrative department of the Company) performance under one or more of the
measures described above relative to the performance of other
corporations.  To the extent permitted under Section 162(m) of the
Code, but only to the extent permitted under Section 162(m) of the Code
(including, without limitation, compliance with any requirements for stockholder
approval), the Committee may also:

       

      (a)           designate
additional business criteria on which the performance goals may be based;
or

       

      (b)           adjust,
modify or amend the aforementioned business criteria.

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

      

      TABLE OF
CONTENTS

       

       

      
        	ARTICLE I PURPOSE	1
	 	 
	ARTICLE II DEFINITIONS	1
	 	 
	ARTICLE III ADMINISTRATION	8
	 	 
	ARTICLE IV SHARE
      LIMITATION	11
	 	 
	ARTICLE V ELIGIBILITY AND
      GENERAL REQUIREMENTS FOR AWARDS	15
	 	 
	ARTICLE VI STOCK
      OPTIONS	16
	 	 
	ARTICLE VII STOCK APPRECIATION
      RIGHTS	19
	 	 
	ARTICLE VIII RESTRICTED
      STOCK	22
	 	 
	ARTICLE IX PERFORMANCE
      SHARES	24
	 	 
	ARTICLE X OTHER STOCK-BASED
      AWARDS	26
	 	 
	ARTICLE XI TERMINATION	28
	 	 
	ARTICLE XII CHANGE IN CONTROL
      PROVISIONS	30
	 	 
	ARTICLE XIII TERMINATION OR
      AMENDMENT OF PLAN	31
	 	 
	ARTICLE XIV UNFUNDED
      PLAN	32
	 	 
	ARTICLE XV GENERAL
      PROVISIONS	33
	 	 
	ARTICLE XVI EFFECTIVE DATE OF
      PLAN	36
	 	 
	ARTICLE XVII TERM OF
      PLAN	36
	 	 
	ARTICLE XVIII NAME OF
      PLAN	36
	 	 
	EXHIBIT
      A  PERFORMANCE
      GOALS	i
	 	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      
        PREFERRED
APARTMENT COMMUNITIES, INC.

         

        
          
            

          

        

        2010
STOCK INCENTIVE PLAN

         

        (effective
as of
[                   
], 2010)

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