Document:

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made by and between Gasco Energy, Inc., a Nevada corporation (the “Company”), and Michael K. Decker (“Executive”), and is effective as of February 8, 2011 (the “Effective Date”).

 

W I T N E S S E T H:

 

WHEREAS, Executive is currently employed by the Company and serves as Executive Vice President and Chief Operating Officer of the Company; and

 

WHEREAS, the Company desires to continue to employ Executive on the terms and conditions, and for the consideration, hereinafter set forth and Executive desires to continue to be employed by the Company on such terms and conditions and for such consideration.

 

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, the Company and Executive agree as follows:

 

ARTICLE I.
 DEFINITIONS

 

In addition to the terms defined in the body of this Agreement, for purposes of this Agreement, the following capitalized words shall have the meanings indicated below:

 

1.1.                            “Affiliate of Executive” shall mean and include Executive’s family by blood or marriage (including, without limitation: parents, spouse, siblings, children, and in-laws), and any business or business entity which is directly or indirectly owned or controlled by Executive or any member of Executive’s family or in which Executive or any member of Executive’s family has any direct or indirect financial interest whatsoever.

 

1.2.                            “Board” shall mean the Board of Directors of the Company.

 

1.3.                            “Cause” shall mean a determination by the Board that Executive (i) has engaged in any act of dishonesty with regard to the Company that is intended to result in his personal enrichment or any act of theft, fraud, embezzlement, misappropriation or willful breach of fiduciary duty to the Company, (ii) has been convicted of, pleaded no contest to or received adjudicated probation or deferred adjudication in connection with a crime involving fraud, dishonesty or moral turpitude or any felony (or a crime of similar import in a foreign jurisdiction), (iii) has intentionally failed or willfully refused (other than by reason of an impairment described in Section 4.1(a) of this Agreement) to perform Executive’s duties and responsibilities to the Company, (iv) has engaged in gross negligence or willful misconduct in the performance of Executive’s duties with respect to the Company, or (v) has materially breached any material provision of this Agreement or any written agreement or corporate policy or code of conduct established by the Company.

 

1.4.                            “Change in Control” shall mean and shall be deemed to have occurred if: (i) there shall be consummated (a) any consolidation or merger of the Company with another corporation or entity and as a result of such consolidation or merger less than 50% of the

 

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outstanding voting securities of the surviving or resulting corporation or entity shall be owned, directly or indirectly, in the aggregate by the stockholders of the Company, other than “affiliates,” as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of any party to such consolidation or merger, as the same shall have existed immediately prior to such consolidation or merger, or (b) any sale, lease, exchange, or other transfer (or in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company; (ii) the stockholders of the Company shall have approved any plan or proposal for the liquidation or dissolution of the Company; (iii) any “person” (as such term is used in Section 13(d) and 14(d)(2) of the Exchange Act) shall have become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of 50% or more of the Company’s outstanding common stock, without the prior approval of the Board; (iv) during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board shall have ceased for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company’s stockholders, of each new director was approved by vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; (v) a “Change in Control” of a nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act shall have occurred; or (vi) any consolidation or merger of the Company with another corporation or entity and as a result of such consolidation or merger Executive is not retained by the Board as the Executive Vice President and Chief Operating Officer of the Company; provided that the event constituting such “Change in Control” also constitutes a “change in the ownership or effective control” or “in the ownership of a substantial portion of the assets” of the Company within the meaning of Treasury Regulation Section 1.409A-3(i)(5).

 

1.5.                            “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

1.6.                            “Date of Termination” shall mean the date Executive’s employment with the Company is considered to have terminated pursuant to Article V.

 

1.7.                            “Good Reason” shall mean the occurrence of any of the following events:

 

(a)                                  a material diminution in Executive’s Base Salary;

 

(b)                                 a material diminution in Executive’s authority, duties, or responsibilities, compared to both (i) Executive’s authority, duties or responsibilities as they existed immediately prior to such diminution and (ii) the authority, duties or responsibilities of executive vice presidents and chief operating officers of similarly situated companies to the Company; or

 

(c)                                  the involuntary relocation of the geographic location of Executive’s principal place of employment to a location that is outside of Denver, Colorado;  or

 

(d)                                 a material breach by the Company of any material provision of this Agreement.

 

Notwithstanding the foregoing provisions of this Section 1.7 or any other provision in this Agreement to the contrary, any assertion by Executive of a termination of employment for “Good Reason” shall not be effective unless all of the following conditions are satisfied: (i) the condition described in Section 1.7(a), (b) (c), or (d) giving rise to Executive’s termination of employment must have arisen without Executive’s consent; (ii) Executive must provide written

 

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notice to the Company of such condition in accordance with Section 9.1 within 30 days of the initial existence of the condition; (iii) the condition specified in such notice must remain uncorrected for 30 days after receipt of such notice by the Company; and (iv) the date of Executive’s termination of employment must occur within 60 days after the initial existence of the condition specified in such notice.

 

1.8.                            “Notice of Termination” shall mean a written notice delivered to the other party indicating the specific termination provision in this Agreement relied upon for termination of Executive’s employment and the intended Date of Termination and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

 

1.9.                            “Related Parties” shall mean the Company and each of its subsidiaries.

 

1.10.                     “Section 409A Payment Date” shall mean the earlier of (a) the date of Executive’s death or (b) the date that is six months after the Date of Termination.

 

1.11.                     “Severance Amount” shall mean an amount equal to the Base Salary in effect immediately prior to Executive’s termination of employment (or, if greater and to the extent applicable, immediately prior to the occurrence of Good Reason) divided by twelve (12).

 

ARTICLE II.
 EMPLOYMENT AND DUTIES

 

2.1.                            Term. The Company agrees to continue the employment of Executive, and Executive agrees to continue to be employed by the Company, for a period (the “Employment Period”) commencing on the Effective Date and ending on the second anniversary of such date (the “Initial Term”), unless earlier terminated pursuant to Article IV below.  However, if no such termination has occurred, this Agreement shall automatically be extended on each anniversary of the Effective Date for an additional one year period (each a “Renewal Term”), unless earlier terminated pursuant to Article IV below, or unless either party gives written notice to the other party ninety (90) days prior to the expiration of the Initial Term or then-current Renewal Term, as applicable, that it or he intends for this Agreement to terminate at the end of such period.  In the event that this Agreement is continued for one or more Renewal Terms, such additional Renewal Term(s) shall be included in the term Employment Period.

 

2.2.                            Positions.  From and after the Effective Date, the Company shall employ Executive in the position of Executive Vice President and Chief Operating Officer of the Company or in such other position or positions as the parties mutually may agree.

 

2.3.                            Duties and Services.

 

(a)                                  Executive agrees to serve in the position(s) referred to in Section 2.2 and to perform diligently and to the best of Executive’s abilities the duties and services appertaining to such position(s), including the duties for such position(s) as described in the Bylaws of the corporation in effect from time to time, as well as such additional duties and services appropriate to such position(s) that the parties mutually may agree upon from time to time.

 

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(b)                                 In the performance of all Executive’s duties hereunder, Executive shall be subject to and shall comply with all of the Company’s policies, rules, and regulations applicable to its officers and employees generally.

 

2.4.                            Place of Employment.  Executive’s principal place of employment shall be in Denver, Colorado; provided, however, that Executive will undertake such incidental business travel as shall be reasonably necessary in the fulfillment of his obligations.

 

2.5.                            Other Interests.

 

(a)                                  Executive agrees, during the period of Executive’s employment by the Company, to devote substantially all of Executive’s business time, energy and best efforts to the business and affairs of the Company. Without the prior written consent of the Board, which shall not unreasonably be withheld, Executive shall not, directly or indirectly, during the Term of this Agreement engage in any activity competitive or adverse to the Company’s business, whether alone, as a partner or independent contractor, or as an officer, director, or employee of any other business entity.

 

(b)                                 Except with the prior written consent of the Board, Executive agrees not to serve on the board of directors or similar governing body of any business or businesses whether or not similar to that of the Company.

 

(c)                                  In order to induce the Company to enter into this Agreement, Executive represents and warrants to the Company that (i) Executive is not a party or subject to any employment or consulting agreement or arrangement with any other person, firm, company, corporation, or other business entity; and (ii) Executive is subject to no restraint, limitation, or restriction by virtue of any agreement or arrangement, or by virtue of any law or rule of law or otherwise which would impair Executive’s right or ability to enter the employ of the Company or to perform fully his duties and obligations pursuant to this Agreement.

 

(d)                                 Without the prior written consent of the Board in each instance, Executive will not authorize or permit the Company to engage the services of, or engage in any other business activity with, or provide any financial or other benefit to, any Affiliate of Executive.

 

(e)                                  Notwithstanding the foregoing in this Section 2.5, the parties acknowledge and agree that Executive may (i) engage in and manage Executive’s passive personal investments and (ii) engage in charitable and civic activities; provided, however, that such activities shall be permitted so long as such activities do not unreasonably conflict with the business and affairs of the Company or interfere with Executive’s performance of Executive’s duties hereunder.

 

2.6.                            Duty of Loyalty.  Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity and allegiance to act in the best interests of the Company and to do no act that would injure the business, interests, or reputation of the Company.  In keeping with these duties, Executive shall make full disclosure to the Company of all business opportunities pertaining to the business of the Company and shall not appropriate for Executive’s own benefit business opportunities concerning the subject matter of the fiduciary relationship.

 

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2.7.                            Company’s Authority.  Executive agrees to observe and comply with the reasonable rules and regulations of the Company as adopted by the Board or a committee of the Board, respecting performance of the Executive’s duties and to carry out and perform orders, directions, and policies of the Company as they may be, from time to time, stated to Executive either verbally or in writing.

 

ARTICLE III.
 COMPENSATION AND BENEFITS

 

3.1.                            Base Salary.  During the period of Executive’s employment hereunder, Executive shall receive an annualized base salary of $290,000 (the “Base Salary”). Executive’s Base Salary shall be reviewed periodically by the Board and, in the sole discretion of the Company, such Base Salary may be increased (but not decreased) effective as of any date determined by the Company.  Executive’s Base Salary shall be paid in equal installments in accordance with the Company’s standard policy regarding payment of compensation to executives but no less frequently than monthly.

 

3.2.                            Bonuses.  In addition to the Base Salary described in Section 3.1, Executive shall be entitled to full participation in the annual cash incentive plan available to executives of the Company and as established by the Company from time to time (the “Bonus Plan”).  Except to the extent that the Bonus Plan expressly provides to the contrary, no bonus, prorated or otherwise, shall accrue or be owed to Executive upon termination pursuant to Section 5.1 or otherwise.

 

3.3.                            Expenses.  The Company shall reimburse Executive for all reasonable business expenses incurred by Executive during Executive’s employment hereunder in performing services hereunder, including all expenses of travel while away from home on business at the request of and in the service of the Company, in accordance with Section 3.4.

 

3.4.                            Treatment of Reimbursements. Any expenses eligible for reimbursement under this Article III must be incurred and accounted for in accordance with the policies and procedures established by the Company.  Any such reimbursement of expenses shall be made by the Company upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to the Company (but in any event not later than the close of Executive’s taxable year following the taxable year in which the expense is incurred by Executive, provided that the required supporting documentation has been furnished prior thereto); provided, however, that upon Executive’s termination of employment with the Company, in no event shall any additional reimbursement be made prior to the Section 409A Payment Date to the extent such payment delay is required under section 409A(a)(2)(B)(i) of the Code.  Notwithstanding any provision of this Agreement to the contrary, (a) the amount of expenses eligible for reimbursement hereunder during one calendar year shall not affect the expenses eligible for reimbursement hereunder in any other calendar year, (b) Executive’s right to reimbursement pursuant this Section 3.4 shall not be subject to liquidation or exchange for any other benefit and (c) in no event shall Executive be entitled to reimbursement for any expenses after the first anniversary of the Date of Termination.

 

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3.5.                            Other Benefits.  During Executive’s employment hereunder, Executive shall be permitted to participate in all benefit plans and programs of the Company, including improvements or modifications of the same, which are now, or may hereafter be, available to similarly situated employees of the Company, subject to the terms and conditions of the applicable plans and programs.  The Company shall not, however, by reason of this Section 3.5, be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such benefit plan or program, so long as such changes are similarly applicable to similar situated employees generally.

 

(a)                                  Medical Insurance.  Executive and his family shall be entitled to participate in any medical, dental, vision, life, long-term disability, other insurance or employee benefit program instituted or maintained by the Company for the benefit of its executive employees.

 

(b)                                 401(k) plan. Executive shall be entitled to participate in the Company’s 401(k) or other similar retirement benefit plan.

 

3.6.                            Vacation and Sick Leave.  During Executive’s employment hereunder, Executive shall be entitled to five (5) weeks paid vacation each calendar year.  Executive shall be entitled to receive payment for accrued vacation not taken during each calendar year during the Employment Period.

 

3.7.                            Offices.  Subject to Articles II, III, and IV hereof, Executive agrees to serve without additional compensation, if elected or appointed thereto, as a director of the Company and as a member of any committees of the board of directors or similar governing body of any such entities.

 

3.8.                            Dodd-Frank Act.  Notwithstanding anything in this Agreement or any other agreement between the Company and Executive to the contrary, Executive acknowledges that the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) has the effect of requiring certain executives of the Company to repay the Company, and for the Company to recoup from such executives, erroneously awarded amounts of incentive-based compensation.  If, and only to the extent, the Act, any rules or regulations promulgated thereunder by the Securities and Exchange Commission or any similar federal or state law requires the Company to recoup any erroneously awarded incentive-based compensation (including stock options and any other equity-based awards) that the Company has paid or granted to Executive, Executive hereby agrees, even if Executive has terminated his employment with the Company, to promptly repay such erroneously awarded incentive compensation to the Company upon its written request.  This Section 3.8 shall survive the termination of this Agreement.

 

ARTICLE IV.
 TERMINATION OF EMPLOYMENT

 

4.1.                            Company’s Right to Terminate.  The Company may terminate Executive’s employment under this Agreement at any time for any of the following reasons by providing Executive with a Notice of Termination:

 

(a)                                  upon Executive being unable to perform Executive’s duties or fulfill Executive’s obligations under this Agreement on a full-time basis by reason of any physical or mental

 

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impairment for a period of at least ninety (90) consecutive days as determined by the Company and certified in writing by a competent medical physician selected by the Company, and a failure by Executive to return to performance of duties and fulfillment of obligations within thirty (30) days after Notice of Termination is given (which may occur before or after the end of such ninety (90) consecutive day period) on a full-time basis; or

 

(b)                                 Executive’s death; or

 

(c)                                  for Cause; or

 

(d)                                 for any other reason whatsoever or for no reason at all, in the sole discretion of the Company, effective upon the earlier of forty-five (45) days following the date the Notice of Termination is given and such earlier date as Executive and the Company may mutually agree.

 

4.2.                            Executive’s Right to Terminate.  Executive shall have the right to terminate Executive’s employment under this Agreement for Good Reason or for any other reason whatsoever or for no reason at all, in the sole discretion of Executive, by providing the Company with a Notice of Termination.  In the case of a termination of employment by Executive pursuant to this Section 4.2, the Date of Termination specified in the Notice of Termination shall not be less than forty-five (45) nor more than ninety (90) days from the date such Notice of Termination is given, and the Company may require a Date of Termination earlier than that specified in the Notice of Termination (and, if such earlier Date of Termination is so required, it shall not change the basis for Executive’s termination nor be construed or interpreted as a termination of employment pursuant to Section 4.1).

 

4.3.                            Other Terminations. Executive’s employment with the Company shall be terminated upon the occurrence of any of the following events:

 

(a)                                  upon the expiration of the Employment Period following timely notice of non-renewal given by Executive in accordance with Section 2.1 (an  “Expiration”);  or

 

(b)                                 upon mutual agreement by the Company and Executive to terminate.

 

4.4.                            Deemed Resignations.  Unless otherwise agreed to in writing by the Company and Executive prior to the termination of Executive’s employment, any termination of Executive’s employment shall constitute (a) an automatic resignation of Executive as an officer of the Company and (b) an automatic resignation of Executive from the Board (if applicable), from the board of directors or similar governing body of any Related Party and from the board of directors or similar governing body of any corporation, limited liability entity or other entity in which the Company holds an equity interest and with respect to which board or similar governing body Executive serves as the Company’s designee or other representative.

 

4.5.                            Meaning of Termination of Employment.  For all purposes of this Agreement, Executive shall be considered to have terminated employment with the Company when Executive incurs a “separation from service” with the Company within the meaning of section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.  It is further intended that this Agreement (including all amendments hereto) comply with the provisions of Section 409A of the Code and Treasury Regulations promulgated thereunder, so

 

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that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to Executive.  This Agreement shall be interpreted and administered in a manner consistent with this intent.

 

ARTICLE V.
 EFFECT OF TERMINATION OF EMPLOYMENT ON COMPENSATION

 

5.1.                            Obligations of the Company upon Termination.

 

(a)                                  For Any Reason other than Without Cause or for Good Reason.  If (i) the Executive’s employment with the Company shall be terminated pursuant to Section 4.1(a), 4.1(b), or 4.1(c); (ii) the Executive terminates his employment for any reason other than Good Reason or causes an Expiration by giving notice of non-renewal in accordance with Section 2.1 at any time; or (iii) subject to Section 5.1(c), the Company causes an Expiration by giving notice of non-renewal in accordance with Section 2.1 and the Expiration occurs on or after the day before the fifth anniversary of the Effective Date, the Company shall have no further payment obligations to the Executive or his legal representatives, other than for payment of any portion of Executive’s Base Salary or bonus (or other incentive compensation) earned through the Date of Termination to the extent not theretofore paid and otherwise owed under the terms of the Bonus Plan (the “Accrued Amounts”).

 

(b)                                 Without Cause; For Good Reason, prior to or More than Twelve Months following a Change in Control.  If (i) during the Employment Period, the Executive’s employment with the Company shall be terminated by the Company pursuant to Section 4.1(d); (ii) Executive resigns for Good Reason; or (iii) the Company causes an Expiration by giving notice of non-renewal in accordance with Section 2.1 and the Expiration occurs prior to the day before the fifth anniversary of the Effective Date, then provided that a Change in Control has not occurred within the twelve (12) month period immediately preceding such termination, resignation or Expiration, the Company shall have no further payment obligations to the Executive or his legal representatives, other than:

 

(i)                                     Payment of any Accrued Amounts; plus

 

(ii)                                  Subject to (1) Section 9.16 and Section 9.17, (2) the execution and delivery of a release of any claims Executive may have against the Company in substantially the form attached hereto as Appendix A, together with such changes as the Company may reasonably require to make such release effective in light of any changes in applicable law from and after the date of this Agreement (in such revised form, a “Release”), (3) the expiration of any waiting periods for such a Release to become fully effective, and (4) continued compliance by Executive with all obligations of Executive under the provisions of this Agreement that survive termination of this Agreement, a monthly payment equal to the Severance Amount in effect at the time of termination of Executive’s employment, payable in accordance with the Company’s regular payroll practice for a period of months equal to the greater of (A) the remaining months in the Initial Term, or (B) eighteen (18) months; and

 

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(iii)                               All non-vested stock options, restricted stock and other equity-based awards issued by the Company and held by Executive shall immediately vest upon such termination, resignation or Expiration.

 

(c)                                  Without Cause; For Good Reason, within Twelve (12) Months following a Change in Control.  If, within the twelve (12) month period beginning upon a Change in Control, (i) the Executive’s employment with the Company shall be terminated by the Company pursuant to Section 4.1(d); (ii) an Expiration occurs as a result of the delivery of a notice of non-renewal by the Company (but not by Executive) in accordance with Section 2.1; or (iii) Executive resigns for Good Reason, the Company shall have no further payment obligations to the Executive or his legal representatives, other than for payment of:

 

(i)                                     Any Accrued Amounts; plus

 

(ii)                                  Subject to (1) Section 9.16 and Section 9.17, (2) the execution and delivery of a Release, and (3) the expiration of any waiting periods for such a Release to become fully effective, a single lump sum payment in an amount equal to the product of the Severance Amount in effect at the time of termination of Executive’s employment multiplied by thirty (30).  Such lump sum payment shall be paid to Executive at the time selected by the Company but in no event later than 60 days following Executive’s termination, resignation or Expiration; and

 

(iii)                               All non-vested stock options, restricted stock and other equity-based awards issued by the Company and held by Executive shall immediately vest upon such termination, resignation or Expiration.

 

(d)                                 Release as Condition.  If the release required by clause (ii) of subsection (b) or (c) preceding, as applicable, has not been delivered or any applicable waiting period thereunder has not terminated prior to the expiration of the sixty (60) day period following the Date of Termination, then the Company shall have no obligation to pay to Executive any compensation pursuant to clause (ii) of subsection (b) or (c).

 

ARTICLE VI.
 PROTECTION OF INFORMATION

 

6.1.                            Disclosure to and Property of the Company.  For purposes of this Article VI, the term “the Company” shall include the Company and any of the Related Parties, and any reference to “employment” or similar terms shall include a director and/or consulting relationship. All information, trade secrets, designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether patentable or not, that are conceived, made, developed, disclosed to or acquired by Executive, individually or in conjunction with others, during the period of Executive’s employment by the Company (whether during business hours or otherwise and whether on the Company’s premises or otherwise) that relate to the Company’s businesses, trade secrets, products or services (including, without limitation, all such information relating to corporate opportunities, strategies, business plans, product specifications, compositions, manufacturing and distribution methods and processes, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisition prospects, the identity

 

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of customers or their requirements, the identity of key contacts within the customer’s organizations or within the organization of acquisition prospects, or production, marketing and merchandising techniques, prospective names and marks) and all writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, “Confidential Information”) shall be disclosed to the Company and are and shall be the sole and exclusive property of the Company.  Notwithstanding any of the preceding provisions of this Section 6.1 to the contrary, the term “Confidential Information” does not include (a) any information that, at the time of disclosure by the Company, is available to the public other than as a result of any act of Executive or (b) any information that becomes available to Executive on a non-confidential basis from a source other than the Company, provided that such source is not known by Executive to be bound by a confidentiality agreement with or other obligation of secrecy to the Company.  Upon request by the Company, Executive shall promptly disclose and return all Confidential Information in Executive’s custody or control.  Moreover, all documents, videotapes, written presentations, brochures, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, drawings, architectural renditions, models and all other writings or materials of any type embodying any Confidential Information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, “Work Product”) are and shall be the sole and exclusive property of the Company.  Executive agrees to perform all actions reasonably requested by the Company to establish and confirm such exclusive ownership.  Upon termination of Executive’s employment with the Company, for any reason, Executive promptly shall deliver such Confidential Information and Work Product, and all copies thereof, to the Company.

 

6.2.                            Disclosure to Executive.  The Company and the Related Parties shall (a) disclose to Executive and place Executive in a position to have access to or develop Confidential Information and Work Product of the Company, including Confidential Information to which Executive did not have access prior to the Effective Date, (b) shall entrust Executive with business opportunities of the Company, including business opportunities to which Executive did not have access prior to the Effective Date, and (c) shall place Executive in a position to develop business good will on behalf of the Company.

 

6.3.                            No Unauthorized Use or Disclosure.  Executive agrees to preserve and protect the confidentiality of all Confidential Information and Work Product of the Company.  Executive agrees that Executive will not, at any time during or after Executive’s employment with the Company, make any unauthorized disclosure of, and Executive shall not remove from the Company premises, Confidential Information or Work Product of the Company, or make any use thereof, except, in each case, in the carrying out of Executive’s responsibilities hereunder. Executive shall use all reasonable efforts to cause all persons or entities to whom any Confidential Information shall be disclosed by Executive hereunder to preserve and protect the confidentiality of such Confidential Information.  Executive shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent disclosure thereof is specifically required by law; provided, however, that in the event disclosure is required by applicable law, Executive shall provide the Company with prompt notice of such requirement prior to making any such disclosure, so that the Company may seek an appropriate protective order.  At the request of the Company at any time, Executive agrees to deliver to the Company all Confidential Information that Executive may possess or control. The Related Parties shall be

 

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third party beneficiaries of Executive’s obligations under this Article VI.  As a result of Executive’s employment by the Company, Executive may also from time to time have access to, or knowledge of, confidential information or work product of third parties, such as customers, suppliers, partners, joint venturers, and the like, of the Company. Executive also agrees to preserve and protect the confidentiality of such third party confidential information and work product.

 

6.4.                            Ownership by the Company.  If, during Executive’s employment by the Company, Executive creates any work of authorship fixed in any tangible medium of expression that is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to the Company’s business, products, or services, whether such work is created solely by Executive or jointly with others (whether during business hours or otherwise and whether on the Company’s premises or otherwise), including any Work Product, the Company shall be deemed the author of such work if the work is prepared by Executive in the scope of Executive’s employment; or, if the work relating to the Company’s business, products, or services is not prepared by Executive within the scope of Executive’s employment but is specially ordered by the Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and the Company shall be the author of the work.  If the work relating to the Company’s business, products, or services is neither prepared by Executive within the scope of Executive’s employment nor a work specially ordered that is deemed to be a work made for hire during Executive’s employment by the Company, then Executive hereby agrees to assign, and by these presents does assign, to the Company all of Executive’s worldwide right, title, and interest in and to such work and all rights of copyright therein.

 

6.5.                            Assistance by Executive.  During the period of Executive’s employment by the Company, Executive shall assist the Company and its nominee, at any time, in the protection of the Company’s worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee(s) and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries.  After Executive’s employment with the Company terminates, at the request and reasonable expense of the Company, Executive shall assist the Company or its nominee(s) in the protection of the Company’s worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries.

 

6.6.                            Remedies.  Executive acknowledges that money damages would not be a sufficient remedy for any breach of this Article VI by Executive, and the Company shall be entitled to enforce the provisions of this Article VI by terminating payments then owing to Executive under this Agreement or otherwise and to specific performance and injunctive relief as remedies for such breach or any threatened breach.  Such remedies shall not be deemed the exclusive remedies for a breach of this Article VI but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Executive and Executive’s

 

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agents. However, if it is determined that Executive has not committed a breach of this Article VI, then the Company shall resume the payments and benefits due under this Agreement and pay to Executive or Executive’s spouse, if applicable, all payments and benefits that had been suspended pending such determination.

 

ARTICLE VII.
 RESTRICTIVE COVENANTS

 

7.1.                            Definitions.  As used in this Article VII, the following terms shall have the following meanings:

 

“Business” means (a) during the period of Executive’s employment by the Company, (i) the exploitation, development and production of hydrocarbon resources and (ii)  any other business in which the Company or any of the Related Parties is engaged, or has specific plans to engage of which Executive is or reasonably should be aware during such period and (b) during the portion of the Prohibited Period that begins on the termination of Executive’s employment with the Company, (x) the products and services provided by the Company and the Related Parties at the time of such termination of employment and other products and services that are functionally equivalent to the foregoing and (y) any other business in which the Company or any of the Related Parties is engaged, or has specific plans to engage of which Executive is or reasonably should be aware during such period.

 

“Governmental Authority” means any governmental, quasi-governmental, state, county, city or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof.

 

“Legal Requirement” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization, or other directional requirement (including, without limitation, any of the foregoing that relates to environmental standards or controls, energy regulations and occupational, safety and health standards or controls including those arising under environmental laws) of any Governmental Authority.

 

“Prohibited Period” means the period during which Executive is employed by the Company hereunder and a period of one year following the end of Executive’s employment with the Company.

 

“Restricted Area” means the geographical areas within the states and counties set forth on Appendix B.

 

7.2.                            Non-Competition; Non-Solicitation.  Executive and the Company agree to the non-competition and non-solicitation provisions of this Article VII in consideration for the Confidential Information provided by the Company and the Related Parties to Executive pursuant to Section 6.2(a) of this Agreement and to protect the trade secrets and Confidential Information of the Company or the Related Parties disclosed or entrusted to Executive by the Company or any Related Party or created or developed by Executive for the Company or the Related Parties, as applicable, and as an express incentive for the Company to enter into this Agreement.

 

12

 

(a)                                  Subject to the exceptions set forth in Section 7.2(b) below, Executive expressly covenants and agrees that during the Prohibited Period (i) Executive will refrain from carrying on or engaging in, directly or indirectly, the Business in the Restricted Area and (ii) Executive will not, and Executive will cause all Affiliates of Executive not to, directly or indirectly, own, manage, operate, join, become an employee of, partner in, owner or member of (or an independent contractor to), control or participate in, be connected with or loan money to, sell or lease equipment or property to, or otherwise be affiliated with any business, individual, partnership, firm, corporation or other entity (other than the Related Parties) which engages in the Business in the Restricted Area.

 

(b)                                 Notwithstanding the restrictions contained in Section 7.2(a), subject to Section 2.5, Executive and Affiliates of Executive may own an aggregate of not more than 1% of the outstanding stock of any class of any entity engaged in the Business, if such stock is listed on a national securities exchange or regularly traded in the over-the-counter market by a member of a national securities exchange, without violating the provisions of Section 7.2(a), so long as neither Executive nor any Affiliate of Executive has the power, directly or indirectly, to control or direct the management or affairs of any such corporation and is not involved in the management of such corporation.

 

(c)                                  Executive further expressly covenants and agrees that during the Prohibited Period, Executive will not, and Executive will cause Affiliates of Executive not to, directly, indirectly or as agent for any other person or entity, (i) engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an officer, director or employee of the Company or any of the Related Parties or (ii) canvass, solicit, approach or entice away or cause to be canvassed, solicited, approached or enticed away from the Company or any of the Related Parties any person or entity who or which is a customer of any of such entities during the period during which Executive is employed by the Company.

 

(d)                                 Before accepting employment with any other person or entity during the Prohibited Period, the Executive will inform such person or entity of the restrictions contained in this Article VII.

 

7.3.                            Relief.  Executive and the Company agree and acknowledge that the limitations as to time, geographical area and scope of activity to be restrained as set forth in Section 7.2 are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of the Company.  Executive and the Company also acknowledge that money damages would not be sufficient remedy for any breach of this Article VII by Executive, and the Related Parties shall be entitled to enforce the provisions of this Article VII by terminating payments then owing to Executive under this Agreement or otherwise and to specific performance and injunctive relief as remedies for such breach or any threatened breach without bond or other security.  The Related Parties shall also have the right and remedy to require Executive to account for and pay over to the applicable Related Party all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive or his affiliates or family members as a result of any transaction constituting a breach of this Article VII.  Such remedies shall not be deemed the exclusive remedies for a breach of this Article VII but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Executive and Executive’s agents. However, if it is determined that Executive has not committed

 

13

 

a breach of this Article VII, then the Company shall resume the payments and benefits due under this Agreement and pay to Executive all payments and benefits that had been suspended pending such determination.

 

7.4.                            Reasonableness; Enforcement.  Executive hereby represents to the Company that Executive has read and understands, and agrees to be bound by, the terms of this Article VII.  Executive acknowledges that he shall be a member of the Company’s executive and management personnel, and that the geographic scope and duration of the covenants contained in this Section 7.4. are the result of arm’s-length bargaining and are fair and reasonable in light of (a) the nature and wide geographic scope of the operations of the Business, (b) Executive’s level of control over and contact with the Business in all jurisdictions in which it is conducted, (c) the fact that the Business is conducted throughout the Restricted Area and (d) the amount of Confidential Information that Executive is receiving in connection with the performance of Executive’s duties hereunder.  It is the desire and intent of the parties that the provisions of this Article VII be enforced to the fullest extent permitted under applicable Legal Requirements, whether now or hereafter in effect and therefore, to the extent permitted by applicable Legal Requirements, Executive and the Company hereby waive any provision of applicable Legal Requirements that would render any provision of this Article VII invalid or unenforceable.

 

7.5.                            Reformation.  The Company and Executive agree that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Article VII would cause irreparable injury to the Company.  Executive understands that the foregoing restrictions may limit Executive’s ability to engage in certain businesses in the Restricted Area during the Prohibited Period, but acknowledges Executive’s skills are such that Executive can be gainfully employed in non-competitive employment, and that the agreement not to compete will not prevent Executive from earning a living.  Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced.  By agreeing to this contractual modification prospectively at this time, the Company and Executive intend to make this provision enforceable under the law or laws of all applicable States, Provinces and other jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal.  Such modification shall not affect the payments made to Executive under this Agreement.

 

ARTICLE VIII.
 DISPUTE RESOLUTION

 

8.1.                            Arbitration.  If any dispute between Executive and the Company or its parents, subsidiaries and affiliates (including, without limitation, claims relating to the validity, scope, and enforceability of this Article VIII, claims arising under any federal, state or local law regarding the terms and conditions of employment or prohibiting discrimination in employment, claims relating to termination of employment or claims otherwise governing the employment relationship in any way) arises out of this Agreement or the relationship between the parties, either party may, by providing written notice (the “Arbitration Notice”) to the other party, demand arbitration of the dispute as set out below, and each party hereto expressly agrees to

 

14

 

submit to, and be bound by, such arbitration. Within ten days of the date of the Arbitration Notice, the dispute shall be submitted for final and binding arbitration in Arapahoe County, Colorado in accordance with the then-applicable rules for resolution of employment disputes of the American Arbitration Association (“AAA”).  The arbitration shall be conducted by a single arbitrator chosen pursuant to the then-applicable rules for resolution of employment disputes of the AAA, and all fees charged by the arbitrator and any AAA costs shall be borne equally by Executive and the Company.  Except as provided in the immediately preceding sentence, each party shall be responsible for its own attorney fees, expert fees or other fees incurred in connection with the arbitration.  The results of the arbitration and the decision of the arbitrator will be final and binding on the parties and each party agrees and acknowledges that these results shall be enforceable in a court of law.  No demand for arbitration may be made after the date when the institution of legal or equitable proceedings based on such claim or dispute would be barred by the applicable statute of limitations.  In the event either party must resort to the judicial process to enforce the award of an arbitrator or equitable relief granted by an arbitrator, the party seeking enforcement shall be entitled to recover from the other party all costs of litigation including, but not limited to, reasonable attorney’s fees and court costs.  All proceedings conducted pursuant to this Agreement to arbitrate, including any order, decision or award of the arbitrator, shall be kept confidential by all parties.  Notwithstanding the foregoing, Executive and the Company further acknowledge and agree that a court of competent jurisdiction residing in Arapahoe County, Colorado shall have the power to adjudicate claims for emergency, temporary or injunctive relief, including, without limitation, claims arising under Articles VI, VII and VIII hereunder and shall have the power to maintain the status quo pending the arbitration of any dispute under this Article VIII, and this Article VIII shall not require the arbitration of any application for emergency, temporary or preliminary injunctive relief (including temporary restraining orders) by either party pending arbitration, including, without limitation, any application for emergency, temporary or preliminary injunctive relief for any claim arising out of Articles VI, VII and VIII of this Agreement; provided, however, that the remainder of any such dispute beyond the application for emergency, temporary or preliminary injunctive relief shall be subject to arbitration under this Articles VIII.  THE PARTIES ACKNOWLEDGE THAT, BY SIGNING THIS AGREEMENT, THEY ARE KNOWINGLY AND VOLUNTARILY WAIVING ANY RIGHTS THEY MAY HAVE TO A JURY TRIAL.

 

ARTICLE IX.
 MISCELLANEOUS

 

9.1.                            Notices.  All notices, requests, and demands hereunder shall be in writing and delivered by hand, by mail, or by telegram, and shall be deemed to have been duly given (a) if by hand delivery, upon such delivery, and (b) if by mail, forty-eight (48) hours after deposit in the United States mail, first class, registered or certified mail, postage prepaid and properly addressed to the party at the address set forth below:

 

	
To Executive:
    	
Michael   K. Decker
    
	
 
    	
625   Country Club Lane
    
	
 
    	
Castle   Rock Colorado, 80108
    

 

15

 

	
To the Company:
    	
Gasco   Energy, Inc.
    
	
 
    	
8   Inverness Drive East
    
	
 
    	
Suite 100
    
	
 
    	
Englewood,   CO 80112
    
	
 
    	
 
    
	
with a copies to:
    	
Jackson   Walker LLP
    
	
 
    	
901   Main Street, Suite 6000
    
	
 
    	
Dallas,   TX 75202
    
	
 
    	
Attention:   Jeffrey M. Sone
    
	
 
    	
Facsimile:   (214) 661-6697
    
	
 
    	
 
    
	
 
    	
Vinson &   Elkins LLP
    
	
 
    	
666   Fifth Ave., 26th Floor
    
	
 
    	
New   York, NY 10103
    
	
 
    	
Attention:   Caroline Blitzer
    
	
 
    	
Facsimile:   (917) 849-5317
    

 

Any party may change its address for purposes of this Section 9.1 by giving the other party written notice of the new address in the manner set forth above.

 

9.2.                            Assignment.  This Agreement is a personal contract, and the rights, interests and obligations of Executive hereunder may not be sold, transferred, assigned, pledged or hypothecated except as otherwise expressly permitted by the provisions of this Agreement.  Executive may, with the prior written consent of the Company (which shall not unreasonably be withheld), assign this Agreement to an entity (corporation, partnership or limited liability company) that is controlled by Executive.  Executive shall not under any circumstances have any option or right to require payment hereunder otherwise than in accordance with the terms hereof. Except as otherwise expressly provided herein, Executive shall not have any power of anticipation, alienation or assignment of payments contemplated hereunder, and all rights and benefits of Executive shall be for the sole personal benefit of Executive, and no other person shall acquire any right, title or interest hereunder by reason of any sale, assignment, transfer, claim or judgment or bankruptcy proceedings against Executive; provided, however, that in the event of Executive’s death, Executive’s estate, legal representatives or beneficiaries (as the case may be) shall have the right to receive all of the benefits that accrued to Executive pursuant to, and in accordance with, the terms of this Agreement.

 

9.3.                            Successors.  This Agreement may be assigned by the Company to any successor interest to its business. This Agreement shall bind and inure to the benefit of the Company’s successors and assigns as well.

 

9.4.                            Severability.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.

 

9.5.                            Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

 

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9.6.                            Amendment, Modification, or Revocation.  This Agreement may be amended, modified, or revoked in whole or in part, but only by a written instrument which specifically refers to this Agreement and expressly states that it constitutes an amendment, modification, or revocation hereof, as the case may be, and only if such written instrument has been signed by each of the parties to this Agreement.

 

9.7.                            Headings.  The headings in this Agreement are inserted for convenience only and are not to be considered in construction of the provisions hereof.

 

9.8.                            Genders and Plurals.  Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.

 

9.9.                            Applicable Law; Submission to Jurisdiction.

 

(a)                                  This Agreement, the entire relationship of the parties hereto, and any litigation between the parties (whether grounded in contract, tort, statute, law or equity) shall be governed by, construed in accordance with, and interpreted pursuant to the laws of the State of Colorado, without giving effect to its choice of laws principles.

 

(b)                                 This contract is wholly performable in Arapahoe County, Colorado.  Subject to the provisions of Article VIII, exclusive venue for any litigation between the parties hereto shall be in Arapahoe or Denver County, Colorado, and shall be brought in the State District Courts of Arapahoe County, Colorado or in the United States District Court for the District of Colorado.  The parties hereto waive any challenge to personal jurisdiction or venue (including without limitation a challenge based on inconvenience) in Arapahoe or Denver County, Colorado, and specifically consent to the jurisdiction of the State District Courts of Arapahoe County and the United States District Court for the District of Colorado.

 

9.10.                     Term.  Termination of this Agreement shall not affect any right or obligation of any party which is accrued or vested prior to such termination; provided, however, that to the extent any incentive or bonus plan provides otherwise with respect to any options, restricted stock or other equity-based incentives granted to Executive, the terms of such plan shall govern.  Without limiting the scope of the preceding sentence, the provisions of Article VI, Article VII, and Article VIII shall survive any termination of the employment relationship and/or of this Agreement.

 

9.11.                     Entire Agreement.  This Agreement contains the entire understanding among the parties and supersedes any prior written or verbal agreements between them respecting the subject matter hereof, including, without limitation, any prior verbal or written employment agreement between Executive and the Company. Upon the effectiveness hereof, any such prior verbal or written agreements shall terminate. No representations or warranties of any kind or nature relating to the Company or its affiliates or their respective businesses, assets, liabilities, operations, future plans, or prospects have been made by or on behalf of the Company to Executive; nor have any representations or warranties of any kind or nature been made by Executive to the Company, except as expressly set forth in this Agreement.

 

17

 

9.12.                     Attorneys’ Fees.  If any legal action is necessary to enforce the terms and conditions of this Agreement, the prevailing party in such action shall be entitled to recover all costs of suit and reasonable attorneys’ fees as determined by the arbitrator.

 

9.13.                     Further Assurances.  The parties shall execute such documents and take such other action as is necessary or appropriate to effectuate the provisions of this Agreement.

 

9.14.                     Waiver.  The waiver by either party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach.  No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

 

9.15.                     Indemnification. To the fullest extent permitted by law and the Company’s Certificate of Incorporation and Bylaws, the Company shall indemnify, defend, and hold harmless the Executive for all amounts (including, without limitation, judgments, fines, settlement payments, losses, damages, costs and expenses, including reasonable attorneys fees),  incurred or paid by Executive in connection with any action, proceeding, suit or investigation arising out of or relating to the performance by Executive of services for, or acting as, an officer or employee of the Company or any subsidiary thereof. The Company agrees to use its commercially reasonable efforts to maintain directors’ and officers’ liability insurance, but the failure of the Company to maintain such insurance or any portion thereof shall not negate nor diminish Company’s obligations as set forth in this paragraph.

 

9.16.                     Withholding of Taxes and Other Employee Deductions.  The Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city, and other taxes, and withholdings as may be required pursuant to any law or governmental regulation or ruling and all other customary deductions made with respect to the Company’s employees generally.

 

9.17.                     Internal Revenue Code Section 409A.  Notwithstanding anything contained in this Agreement to the contrary, to the maximum extent permitted by applicable law, amounts payable to the Executive pursuant to Section 5.1 are intended to be made in reliance upon Treas. Reg. § 409A-1(b)(9) (separation pay plans); provided, however, if any payment or benefit provided for herein would be subject to additional taxes and interest under section 409A of the Code if Executive’s receipt of such payment or benefit is not delayed until the Section 409A Payment Date, then such payment or benefit (or portion thereof) shall not be provided to Executive (or Executive’s estate, if applicable) until the Section 409A Payment Date.  The Company and the Executive intend that their exercise of authority or discretion under this Agreement shall comply with Section 409A of the Code.  If any provision of this Agreement does not satisfy the requirements of Section 409A, such provision shall nevertheless be applied in a manner consistent with those requirements.  If any provision of this Agreement would subject the Executive to additional tax or interest under Section 409A, then upon the request of Executive, the Company shall reform the provision to the extent such reformation is otherwise consistent with Section 409A and any applicable correction principles set forth in Notice 2010-6.   However, the Company shall maintain to the maximum extent practicable the original intent of

 

18

 

the applicable provision without subjecting the Executive to additional tax or interest, and the Company shall not be required to incur any additional compensation expense as a result of the reformed provision.  In no event whatsoever shall the Company be liable for any tax, interest or penalties that may be imposed on the Executive under Section 409A.  Notwithstanding the foregoing, no particular tax result for Executive with respect to any income recognized by Executive in connection with this Agreement is guaranteed.  Neither the Company nor any of its affiliates shall have any obligation to indemnify or otherwise hold the Executive harmless from any or all such taxes, interest, or penalties, or liability for any damages related thereto.  The Executive acknowledges that he has been advised to obtain independent legal, tax or other counsel in connection with Section 409A.  Each payment under this Agreement is intended to be a “separate payment” and not a series of payments for purposes of Section 409A.  References in this Agreement to Section 409A of the Code include rules, regulations, and guidance of general application issued by the Department of the Treasury under Code Section 409A.

 

9.18.                     Termination of Prior Agreements.  The parties hereby agree that any rights Executive may have with respect to compensation, bonuses or accruals or payments thereof which are not expressly set forth in this Agreement, including without limitation Executive’s rights to “Bonus Compensation” as defined in and calculated pursuant to any and all prior employment agreement(s) between the Company and Executive (as amended, the “Prior Agreements”), and the Prior Agreements themselves, are hereby terminated, and Executive hereby releases the Company from any liability or obligation in connection therewith.  Without limiting the generality of the foregoing, all provisions contained in the Prior Agreements relating to stock options (including the exercisability thereof) are hereby terminated and made null and void.

 

[Signatures appear on next page.]

 

19

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of February 8, 2011, effective for all purposes as provided above.

 

	
 
    	
GASCO   ENERGY, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   W. King Grant
    
	
 
    	
Name:
    	
W.   King Grant
    
	
 
    	
Title:
    	
President   and CEO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Michael K. Decker
    
	
 
    	
MICHAEL   K. DECKER
    

 

20

 

APPENDIX A

 

Form of Release

 

In exchange for good and valuable consideration set forth in that certain Employment Agreement (the “Employment Agreement”) between Michael K. Decker (“Employee”) and Gasco Energy, Inc., a Nevada corporation (the “Company”), the sufficiency of which such consideration is hereby acknowledged, Employee, on behalf of himself, his executors, heirs, administrators, assigns and anyone else claiming by, through or under Employee, irrevocably and unconditionally, fully and forever, releases and discharges the Company, its Related Parties (as defined in the Employment Agreement) and each of their respective predecessors, successors and related and affiliate entities, including, without limitation, direct and indirect parents and subsidiaries, and each of their respective directors, officers, stockholders, members, partners, employees, attorneys, insurers, employee benefit plans, fiduciaries, agents and representatives (collectively, the “Released Parties”), from, and with respect to, any and all debts, demands, actions, causes of action, suits, covenants, contracts, wages, bonuses, damages and any and all claims, demands, liabilities, and expenses (including, without limitation, attorneys’ fees and costs) whatsoever of any name or nature both in law and in equity (severally and collectively, “Claims”), to the extent waivable under applicable law, that Employee now has or ever had against any of the Released Parties by reason of any matter, cause or thing that has happened, developed or occurred, and any Claims that have arisen, before the signing of this Release, including but not limited to, any and all Claims (i) in tort or contract, whether by statute or common law, (ii) relating to salary, wages, bonuses and commissions, the breach of an oral or written contract, unjust enrichment, promissory estoppel, misrepresentation, defamation, and interference with prospective economic advantage, interference with contract, wrongful termination, intentional and negligent infliction of emotional distress, negligence, breach of the covenant of good faith and fair dealing, and/or (iii) arising out of, based on, or in connection with the Employment Agreement, Employee’s employment by the Company (or any of its direct or indirect affiliates, parents or subsidiaries or any other Released Parties) or the termination of that employment, including, without limitation, any Claims for unlawful employment discrimination of any kind, whether based on age, race, sex, disability or otherwise, including specifically and without limitation, Claims arising under or based on Title VII of the Civil Rights Act of 1964, as amended, the Age Discrimination In Employment Act of 1967, as amended, the Civil Rights Act of 1991, the Family and Medical Leave Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, the Equal Pay Act of 1963, the Texas Employment Discrimination Law, in each case as amended, and any other local, state or federal equal employment opportunity or anti-discrimination law, statute, policy, order, ordinance or regulation relating to employment matters, but subject in all respects to the limitations set forth in the next to the last paragraph of this Release.  For the avoidance of doubt, Employee hereby acknowledges and agrees that Employee hereby, irrevocably and unconditionally, fully and forever waives and releases any rights that he may have pursuant to the Employment Agreement except to the extent set forth in the next to the last paragraph of this Release.

 

Employee hereby knowingly and voluntarily waives and releases all rights and claims, known or unknown, arising under the Age Discrimination In Employment Act of 1967, as

 

21

 

amended, which he might otherwise have had against the Company or any of the other Released Parties regarding any actions which occurred prior to the date that Employee signed this Release, except that Employee is not prevented from cooperating in an investigation by the Equal Employment Opportunity Commission (“EEOC”) or from filing an EEOC charge other than for personal relief.

 

Employee hereby acknowledges that Employee may hereafter discover claims or facts in addition to or different from those which Employee now knows or believes to exist with respect to the subject matter of this Release and which, if known or suspected at the time of executing this Release, may have materially affected Employee’s decision to enter into this Release.  Nevertheless, Employee expressly waives any Claim, to the extent waivable under applicable law, that might arise as a result of such different or additional claims or facts, and Employee hereby acknowledges, understands and agrees that this Release extends to all Claims, whether known or unknown, suspected or unsuspected.  Employee further expressly waives and releases any rights and benefits which he has or may have under any law or rule of any jurisdiction pertaining to the matters released herein and expressly waives and releases any and all rights and benefits conferred upon Employee by the provisions of any law or rule of any jurisdiction designed to prevent the waiver of unknown claims.

 

It is the intention of Employee through this Release and with the advice of counsel to fully, finally and forever settle and release the Claims set forth above.  In furtherance of such intention, the releases herein given shall be and remain in effect as full and complete releases of such matters notwithstanding the discovery of any additional claims or facts relating thereto.

 

Employee warrants and represents that Employee has not assigned or transferred to any person or entity any of the Claims released by this Release, and Employee agrees to defend (by counsel of the Company’s (or any successor or assign thereof) choosing), and to indemnify and hold harmless, the Released Parties from and against any claims based on, in connection with, or arising out of any such assignment or transfer made, purported or claimed.

 

Notwithstanding anything to the contrary in this Release or the Employment Agreement, the foregoing release shall not cover, and Employee does not intend to release, (i) the rights of Employee to receive from the Company earned but unpaid base salary compensation, accrued but unpaid expense reimbursement and other Accrued Amounts (as defined in the Employment Agreement) pursuant to the Employment Agreement, (ii) the obligations of the Company to pay the [severance pay set forth in Section 5.1(b)(ii)] [the change in control payment set forth in Section 5.1(c)(ii)] of the Employment Agreement, (iii) any rights of Executive as a stockholder or holder of other securities; (iv) the rights of Executive under any stock option agreement or other agreement or instrument governing Executive’s ownership or right to acquire ownership in the Company; (v) the rights of Executive to continued health care coverage at Executive’s own expense to the extent provided by the Consolidated Omnibus Budget Reconciliation Act; (vi) the rights of Executive to payments under tax-qualified and non-qualified retirement plans; or (vii) Executive’s rights to indemnification pursuant to Section 9.15 of the Employment Agreement and any directors’ and officers’ liability insurance policy under which Executive is covered immediately prior to termination.

 

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EMPLOYEE HAS READ THIS RELEASE AND BEEN PROVIDED A FULL AND AMPLE OPPORTUNITY TO STUDY IT, AND EMPLOYEE UNDERSTANDS THAT THIS IS A FULL, COMPREHENSIVE AND GENERAL RELEASE AND INCLUDES ANY CLAIM UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT.  EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS BEEN ADVISED IN WRITING TO CONSULT WITH LEGAL COUNSEL BEFORE SIGNING THIS RELEASE AND THE EMPLOYMENT AGREEMENT, AND EMPLOYEE HAS CONSULTED WITH AN ATTORNEY.  EMPLOYEE WAS GIVEN A PERIOD OF AT LEAST TWENTY-ONE DAYS TO CONSIDER SIGNING THIS RELEASE, AND EMPLOYEE HAS SEVEN DAYS FROM THE DATE OF SIGNING TO REVOKE EMPLOYEE’S ACCEPTANCE BY DELIVERING TIMELY NOTICE OF HIS REVOCATION TO THE BOARD OF DIRECTORS OF THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS.  EMPLOYEE IS SIGNING THIS RELEASE VOLUNTARILY, WITHOUT COERCION, AND WITH FULL KNOWLEDGE THAT IT IS INTENDED, TO THE MAXIMUM EXTENT PERMITTED BY LAW, AS A COMPLETE AND FINAL RELEASE AND WAIVER OF ANY AND ALL CLAIMS (TO THE EXTENT WAIVABLE UNDER APPLICABLE LAW).  EMPLOYEE ACKNOWLEDGES AND AGREES THAT THE PAYMENTS SET FORTH IN THE EMPLOYMENT AGREEMENT ARE CONTINGENT UPON EMPLOYEE SIGNING THIS RELEASE AND WILL BE PAYABLE ONLY IF AND AFTER THE REVOCATION PERIOD HAS EXPIRED.

 

[SIGNATURE PAGE TO FOLLOW]

 

23

 

Employee has read this Release, fully understands it and freely and knowingly agrees to its terms.

 

Dated this            day of                         , 201    .

 

	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Michael   K. Decker
    
	
 
    	
 
    
	
 
    	
 
    
	
AGREED   AND ACCEPTED:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
GASCO   ENERGY, INC.
    	
 
    
	
 
    	
 
    
	
By:
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    

 

24

 

APPENDIX B

 

Restricted Area

 

Kern County, California

San Luis Obispo County, California

Elko County, Nevada

White Pine County, Nevada

Uintah County, Utah

 

25Exhibit 10.55

 

FORM OF THIRD AMENDED AND RESTATED

 

ADVISORY MANAGEMENT AGREEMENT

 

This THIRD AMENDED AND RESTATED ADVISORY MANAGEMENT AGREEMENT (this “Agreement”) is entered into on this the      day of June, 2011, by and between BEHRINGER HARVARD OPPORTUNITY REIT II, INC., a Maryland corporation (the “Company”), and BEHRINGER HARVARD OPPORTUNITY ADVISORS II, LLC, a Texas limited liability company (the “Advisor”).

 

W I T N E S S E T H

 

WHEREAS, the Company and the Advisor previously entered that certain Second Amended and Restated Advisory Management Agreement dated February 15, 2010 (the “Original Agreement”); and

 

WHEREAS, the Company is commencing the Follow-on Offering (as defined below) and in connection with such offering desires to amend certain terms of the Original Agreement; and

 

WHEREAS, the Company desires to continue to avail itself of the experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the Board, all as provided herein; and

 

WHEREAS, the Advisor is willing to undertake to provide these services, subject to the supervision of the Board, on the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby amend and restate the Original Agreement as follows:

 

ARTICLE ONE

 

DEFINITIONS

 

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

 

Acquisition Expenses.  A non-accountable acquisition expense reimbursement in the amount of: (i) 0.25% of the funds paid for purchasing an Asset, including any debt attributable to the Asset, plus 0.25% of the funds budgeted for development, construction or improvement in the case of Assets that the Company acquires and intends to develop, construct or improve or (ii) 0.25% of the funds advanced in respect of a loan or other investment.  In addition, to the extent the Advisor directly provides services formerly provided or usually provided by third parties, including without limitation accounting services related to the preparation of audits required by the Securities and Exchange Commission, property condition reports, title services, title insurance, insurance brokerage or environmental services related to the preparation of environmental assessments in connection with a prospective or completed investment (the “Additional Services”), the direct employee costs and burden to the Advisor of providing the Additional Services shall be Acquisition Expenses.  Acquisition Expenses also include any investment-related expenses due to third parties in the case of a completed investment, including, but not limited to 

 

 

legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, third-party brokerage or finder’s fees, title insurance, premium expenses and other closing costs.  Acquisition Expenses also include any payments made to (i) a prospective seller of an asset, (ii) an agent of a prospective seller of an asset, or (iii) a party that has the right to control the sale of an asset intended for investment by the Company that are not refundable and that are not ultimately applied against the purchase price for such asset (“Non-Refundable Payments”).

 

Acquisition Fees.  Any and all fees and commissions, exclusive of Acquisition Expenses but including the Acquisition and Advisory Fees, paid by any Person to any other duly qualified and licensed Person (including any fees or commissions paid by or to any duly qualified and licensed Affiliate of the Company or the Advisor) in connection with making or investing in Mortgages or other loans or the purchase, development or construction of an Asset, including, without limitation, real estate commissions, selection fees, investment banking fees, third party seller’s fees (to the extent the Company agrees to pay any such fees as part of an acquisition), Development Fees, Construction Fees, non-recurring management fees, loan fees, points or any other fees of a similar nature. Excluded shall be Development Fees and Construction Fees paid to any Person not affiliated with the Sponsor in connection with the actual development and construction of any Property.

 

Acquisition and Advisory Fees.  The fees payable to the Advisor pursuant to Section 3.01(b).

 

Advisor.  Behringer Harvard Opportunity Advisors II, LLC, a Texas limited liability company, any successor advisor to the Company, or any Person to which Behringer Harvard Opportunity Advisors II, LLC or any successor advisor subcontracts all or substantially all of its functions.

 

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

 

Articles of Incorporation.  The Articles of Incorporation of the Company filed with the Maryland State Department of Assessments and Taxation in accordance with the Maryland General Corporation Law, as amended or restated from time to time.

 

Assets.  Properties, Mortgages, loans and other direct or indirect investments (other than investments in bank accounts, money market funds or other current assets) owned by the Company, directly or indirectly through one or more of its Affiliates or Joint Ventures or through other investment interests.

 

Asset Management Fee.  The fee payable to the Advisor for day-to-day professional management services in connection with the Company and its investments in Assets pursuant to Section 3.01(a) of this Agreement.

 

Average Invested Assets.  For a specified period, the average of the aggregate book value of the Assets before deduction for depreciation, bad debts or other non-cash reserves, computed by taking the average of the values at the end of each month during the period.

 

Board.  The Board of Directors of the Company.

 

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

 

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

 

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

 

Company.  Behringer Harvard Opportunity REIT II, Inc., a corporation organized under the laws of the State of Maryland.  Unless the context clearly indicates otherwise, references to the Company shall include its direct and indirect subsidiaries, including the Partnership.

 

Construction Fee.  A fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitations on a Property.

 

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

 

Cost of Investment.  For each Asset, (i) with respect to an Asset wholly owned by the Company or any wholly owned subsidiary, the Fully Loaded Cost, and (ii) in the case of an Asset owned by any Joint Venture or in some other manner in which the Company is a co-venturer or partner or otherwise a co-owner, (A) the Fully Loaded Cost if the Company (or any subsidiary) controls the Asset; owns a majority interest, directly or indirectly, in the Asset; or provides a substantial amount of services in the acquisition, development, or management of the Asset (as determined by a majority of the Independent Directors) or (B) the portion of the Fully Loaded Cost that is attributable to the Company’s investment in the Joint Venture or other interest in such Asset if the Company does not control, own a majority of, or provide substantial services in the acquisition, development, or management of, the Asset.

 

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

 

Development Fee.  A fee for the packaging of an Asset, including the negotiation and approval of plans, and any assistance in obtaining zoning and necessary variances and financing for a specific development Property, either initially or at a later date.

 

Director.  A member of the Board.

 

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Distributions.  Any dividends or other distributions of money or other property by the Company to Stockholders, including distributions that may constitute a return of capital for federal income tax purposes but excluding distributions that constitute the redemption of any Shares and excluding distributions on any Shares before their redemption.

 

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

 

FINRA.  Financial Industry Regulatory Authority.

 

Follow-on Offering.  The Company’s second public offering of primary Shares pursuant to Registration Statement no. 333-169345.

 

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

 

Gross Proceeds.  The aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Selling Commissions, volume discounts, any marketing support and due diligence expense reimbursement or Organization and Offering Expenses.  For the purpose of computing Gross Proceeds, the purchase price of any Share for which reduced Selling Commissions are paid to the Dealer Manager or a Soliciting Dealer (where net proceeds to the Company are not reduced) shall be deemed to be the full amount of the Offering price per Share pursuant to the Prospectus for the Offering without reduction.

 

Independent Director.  A Director who is not on the date of determination, and within the last two years from the date of determination has not been, directly or indirectly associated with the Sponsor or the Advisor by virtue of (i) ownership of an interest in the Sponsor, the Advisor or any of their Affiliates, other than the Company, (ii) employment by the Sponsor, the Company, the Advisor or any of their Affiliates, (iii) service as an officer or director of the Sponsor, the Advisor or any of their Affiliates, other than as a Director of the Company, (iv) performance of services for the Company, other than as a Director of the Company, (v) service as a director or trustee of more than three real estate investment trusts organized by the Sponsor or advised by the Advisor, or (vi) maintenance of a material business or professional relationship with the Sponsor, the Advisor or any of their Affiliates.  Notwithstanding the foregoing, and consistent with (v) above, serving as a director of or receiving director fees from or owning an interest in a REIT or other real estate program organized by the Sponsor or advised or managed by the Advisor or its Affiliates shall not, by itself, cause a Director to be deemed associated with the Sponsor or the Advisor.  A business or professional relationship is considered material if the aggregate annual gross revenue derived by the Director from the Sponsor, the Advisor and their Affiliates (excluding fees for serving as a director of the Company or other REIT or real estate program organized or advised or managed by the Advisor or its Affiliates) exceeds five percent of either the Director’s annual gross income during either of the last two years or the Director’s net worth on a fair market value basis.  An indirect association with the Sponsor or the Advisor shall include circumstances in which a Director’s spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law, or brother- or sister-in-law is or has been associated with the Sponsor, the Advisor, any of their Affiliates, or the Company.

 

Initial Offering.  The Company’s initial public offering of primary Shares pursuant to Registration Statement no. 333-140887.

 

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Intellectual Property Rights.  All rights, titles and interests, whether foreign or domestic, in and to any and all trade secrets, confidential information rights, patents, invention rights, copyrights, service marks, trademarks, know-how, or similar intellectual property rights and all applications and rights to apply for such rights, as well as any and all moral rights, rights of privacy, publicity and similar rights and license rights of any type under the laws or regulations of any governmental, regulatory, or judicial authority, foreign or domestic and all renewals and extensions thereof.

 

Joint Ventures.  A legal organization formed to provide for the sharing of the risks and rewards in an enterprise co-owned and operated for mutual benefit by two or more business partners and established to acquire or hold Assets.

 

Listing or Listed.  The filing of a Form 8-A to register any class of the Company’s securities on a national securities exchange and an original listing application related thereto; provided, that the Shares shall not be deemed to be Listed until trading in the Shares shall have commenced on the relevant national securities exchange.

 

Mortgages.  In connection with mortgage financing provided, invested in or purchased by the Company, all of the notes, deeds of trust, security interests or other evidence of indebtedness or obligations, which are secured or collateralized by Real Property owned by the borrowers under such notes, deeds of trust, security interests or other evidence of indebtedness or obligations.

 

NASAA Guidelines.  The Statement of Policy Regarding Real Estate Investment Trusts adopted by the North American Securities Administrators Association, Inc. on May 7, 2007, and in effect on the date hereof.

 

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

 

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

 

Organization and Offering Expenses.  Any and all costs and expenses incurred by and to be paid by the Company in connection with an Offering, the formation of the Company, and including the qualification and registration of the Offering and the marketing and distribution of its Shares, including, without limitation:  total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); expenses for printing, engraving, amending registration statements and supplementing prospectuses; mailing and distribution costs; reimbursement of bona fide due diligence expenses of broker-dealers; salaries of employees while engaged in sales activity, such as preparing supplemental sales literature; telephone and other telecommunication costs; all advertising and marketing expenses, including the costs related to investor and broker-dealer meetings; charges of transfer agents, registrars, trustees, escrow holders, depositories and experts; filing, registration and qualification fees and taxes relating to the Offering under federal and state laws; and accountants’ and attorneys’ fees.

 

Partnership.  Behringer Harvard Opportunity OP II, LP, a Delaware limited partnership, through which the Company may own Assets or otherwise conduct its operations.

 

Person.  An individual, corporation, association, business trust, estate, trust, partnership, limited liability company or other legal entity.

 

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Property or Properties.  As the context requires, any, or all, respectively, of the Real Property acquired by the Company, either directly or indirectly (whether through Joint Ventures or other investment interests, regardless of whether the Company consolidates the financial results of these entities).

 

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

 

Prospectus.  Prospectus has the meaning set forth in Section 2(a)(10) of the Securities Act, including a preliminary prospectus, an offering circular as described in Rule 253 of the General Rules and Regulations under the Securities Act or, in the case of an intrastate offering, any document by whatever name known, utilized for the purpose of offering and selling securities of the Company.

 

Real Property or Real Estate.  Land, rights in land (including leasehold interests), and any buildings, structures, improvements, furnishings, fixtures and equipment located on or used in connection with land and rights or interests in land.

 

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

 

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

 

Securities Act.  The Securities Act of 1933, as amended from time to time, or any successor statute thereto.  Reference to any provision of the Securities Act shall mean the provision as in effect from

 

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time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

 

Selling Commissions.  Any and all commissions payable to underwriters, dealer managers or other broker-dealers in connection with the sale of Shares, including, without limitation, commissions payable to Behringer Securities LP.

 

Shares.  Any shares of the Company’s common stock, par value $0.0001 per share.

 

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

 

Sponsor.  Sponsor has the meaning ascribed to such term in the Articles of Incorporation.

 

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

 

Termination Date.  The date of termination of this Agreement.

 

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

 

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

 

Value of Investment.  For each Asset, if available, (i) with respect to an Asset wholly owned by the Company or any wholly owned subsidiary, the Asset’s value established by the most recent independent valuation report (without reduction for depreciation, bad debts or other non-cash reserves), and (ii) in the case of an Asset owned by any Joint Venture or in some other manner in which the Company is a co-venturer or partner or otherwise a co-owner, (A) the Asset’s value established by the most recent independent valuation report (without reduction for depreciation, bad debts or other non-cash reserves) if the Company (or any subsidiary) controls the Asset; owns a majority interest, directly or indirectly, in the Asset; or provides a substantial amount of services in the acquisition, development, or management of the Asset (as determined by a majority of the Independent Directors) or (B) the portion of the Asset’s value established by the most recent independent valuation report (without reduction for depreciation, bad debts or other non-cash reserves) that is attributable to the Company’s investment in the Joint Venture or other interest in such Asset if the Company does not control, own a majority of, or provide substantial services in the acquisition, development, or management of, the Asset.  Nothing in

 

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this definition is intended to obligate the Advisor to obtain independent valuations at any point in time beyond those specified in the Company’s Prospectus.

 

ARTICLE II

 

THE ADVISOR

 

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

 

2.02        Duties of the Advisor.  The Advisor shall be deemed to be in a fiduciary relationship to the Company and its Stockholders.  Subject to Section 2.08, the Advisor undertakes to use its commercially reasonable best efforts to present to the Company potential investment opportunities consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board.  In performing its duties, subject to the supervision of the Board and consistent with the provisions of the Company’s most recent Prospectus for Shares, the Articles of Incorporation and Bylaws, the Advisor shall, either directly or by engaging a duly qualified and licensed Affiliate of the Advisor or other duly qualified and licensed Person:

 

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

 

(b)           manage the Company’s day-to-day operations and perform and supervise the various administrative functions reasonably necessary for the management and operations of the Company;

 

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

 

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

 

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

 

(f)            subject to the provisions of Sections 2.02(h) and 2.03 hereof, (i) locate, analyze and select potential investments in Assets, (ii) structure and negotiate the terms and conditions of 

 

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transactions pursuant to which investment in Assets will be made; (iii) make investments in Assets on behalf of the Company or the Partnership in compliance with the investment objectives and policies of the Company; (iv) arrange for financing and refinancing and make other changes in the asset or capital structure of, and dispose of, reinvest the proceeds from the sale of, or otherwise deal with the investments in, Assets; and (v) enter into leases of Property and service contracts for Assets with duly qualified and licensed Persons and, to the extent necessary, perform all other operational functions for the maintenance and administration of the Assets, including the servicing of Mortgages;

 

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

 

(h)           obtain the prior approval of the Board (including a majority of all Independent Directors) for any and all investments in Assets;

 

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

 

(j)            obtain reports (which may be prepared by or for the Advisor or its Affiliates), where appropriate, concerning the value of investments or contemplated investments of the Company in Assets;

 

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

 

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

 

(m)          deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the investments in Assets;

 

(n)           upon request of the Company, act, or obtain the services of duly qualified and licensed others to act, as attorney-in-fact or agent of the Company in making, acquiring and disposing of Assets, disbursing, and collecting the funds, paying the debts and fulfilling the obligations of the Company and retaining counsel or other advisors to assist in handling, prosecuting and settling any claims of the Company, including foreclosing and otherwise enforcing mortgage and other liens and security interests comprising any of the Assets;

 

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

 

(p)           provide office space, equipment and personnel as required for the performance of the foregoing services as Advisor;

 

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

 

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

 

2.03        Authority of Advisor.

 

(a)           Pursuant to the terms of this Agreement (including the restrictions included in this Section 2.03 and in Section 2.06), and subject to the continuing and exclusive authority of the Board over the management of the Company, the Board hereby delegates to the Advisor the authority to (i) locate, analyze and select investment opportunities, (ii) structure the terms and conditions of transactions pursuant to which investments will be made or acquired for the Company or the Partnership, (iii) acquire Properties, make and acquire Mortgages and other loans and invest in other Assets in compliance with the investment objectives and policies of the Company, (iv) arrange for financing or refinancing of Assets, (v) enter into leases for the Properties and service contracts for the Assets with duly qualified and licensed non-affiliated and Affiliated Persons, including oversight of non-affiliated and Affiliated Persons that perform property management, acquisition, advisory, disposition or other services for the Company, (vi) oversee duly qualified and licensed property managers and other Persons who perform services for the Company, and (vii) arrange for, or provide, accounting and other record-keeping functions at the Asset level.

 

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

 

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

 

(d)           If a transaction requires approval by the Board, the Advisor will deliver to the Directors all documents required by them to properly evaluate the proposed transaction.

 

The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority set forth in this Section 2.03.  If and to the extent the Board so modifies or revokes the authority contained herein, the Advisor shall henceforth submit to the Board for prior approval the proposed transactions involving investments in Assets as thereafter require prior approval; provided, however, that the modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of the notification.

 

2.04        Bank Accounts.  The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or in the name of the Company and may collect and deposit into any account or accounts, and disburse from any account or accounts, any money on behalf of the Company, under the terms and conditions as the Board may approve; provided that no funds of the Company or the Partnership shall be commingled nor shall any of such funds be commingled with the funds of the Advisor; and the Advisor shall from time to time render accountings of the collections and payments to the Board, its Audit Committee and the auditors of the Company.

 

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2.05        Records; Access.  The Advisor shall maintain records of all its activities hereunder and make the records available for inspection by the Board and by counsel, auditors and authorized agents of the Company, at any time or from time to time during normal business hours.  The Advisor shall at all reasonable times have access to the books and records of the Company.

 

2.06        Limitations on Activities.  Anything else in this Agreement to the contrary notwithstanding, the Advisor shall refrain from taking any action which, in its sole judgment made in good faith, would (a) adversely affect the status of the Company as a REIT, (b) subject the Company to regulation under the Investment Company Act of 1940, as amended, or (c) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, the Shares or any of the Company’s securities, or otherwise not be permitted by the Articles of Incorporation or Bylaws, except if the action shall be ordered by the Board, in which case the Advisor shall notify promptly the Board of the Advisor’s judgment of the potential impact of the action and shall refrain from taking the action until it receives further clarification or instructions from the Board. In such event the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given.  The Advisor, its directors, officers, employees and stockholders, and the directors, officers, employees and stockholders of the Advisor’s Affiliates shall not be liable to the Company or to the Board or Stockholders for any act or omission by the Advisor, its directors, officers, employees or stockholders, or for any act or omission of any Affiliate of the Advisor, its directors, officers or employees or stockholders except as provided in Section 5.02 of this Agreement.

 

2.07        Relationship with Directors.  Directors, officers and employees of the Advisor or an Affiliate of the Advisor may serve as Directors, officers or employees of the Company, except that no director, officer or employee of the Advisor or its Affiliates who also is a Director shall receive any compensation from the Company for serving as a Director other than reasonable reimbursement for travel and related expenses incurred in attending meetings of the Board.

 

2.08        Other Activities of the Advisor.  Nothing herein contained shall prevent the Advisor or its Affiliates from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates; nor shall this Agreement limit or restrict the right of any director, officer, employee, or stockholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein.  The Advisor shall report to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, which creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.  The Advisor or its Affiliates shall promptly disclose to the Board knowledge of such condition or circumstance.  The Advisor shall inform the Board at least quarterly of the investment opportunities that have been offered to other programs with similar investment objectives sponsored by the Sponsor, Advisor, Director or their Affiliates.  If the Sponsor, Advisor, Director or Affiliates thereof have sponsored other investment programs with similar investment objectives which have investment funds available at the same time as the Company, it shall be the duty of the Board (including the Independent Directors) to adopt the method set forth in the Company’s most recent Prospectus for its Shares or another reasonable method by which investments are to be allocated to the competing investment entities and to use their best efforts to apply such method fairly to the Company.

 

2.09        Payment of Certain Organization and Offering Expenses.  The Company shall pay directly all Organization and Offering Expenses considered underwriting compensation by FINRA.  Such payments, other than Selling Commissions and the dealer manager fee, shall apply towards the limit on 

 

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Organization and Offering Expenses reimbursable by the Company to the Advisor pursuant to Section 3.02(a)(i) below.

 

ARTICLE III

 

COMPENSATION AND REIMBURSEMENT OF SPECIFIED COSTS

 

3.01        Fees.

 

(a)           Asset Management Fee.  The Company shall pay the Advisor a monthly Asset Management Fee on the 15th day of each month in an amount equal to 1/12 th of 1.0% of the sum of, for each and every Asset, the higher of the Cost of Investment or the Value of Investment.  The Advisor, in its sole discretion, may waive, reduce or defer all or any portion of the Asset Management Fee to which it would otherwise be entitled.

 

(b)           Acquisition and Advisory Fees.  The Company shall pay the Advisor a fee in the amount of 2.5% of the Contract Purchase Price of each Asset as Acquisition and Advisory Fees.  The total of all Acquisition Fees and any Acquisition Expenses shall be limited in accordance with the Articles of Incorporation.  Acquisition and Advisory Fees shall be paid as follows: (1) for real property (including properties where development/redevelopment is expected), at the time of acquisition, (2) for development/redevelopment projects (other than the initial acquisition of the real property), at the time a final budget is approved, and (3) for loans and similar assets (including without limitation mezzanine loans), quarterly based on the value of loans made or acquired.  In the case of a development/redevelopment project subject to clause (2) above, upon completion of the development/redevelopment project, the Advisor shall determine the actual amounts paid.  To the extent the amounts actually paid vary from the budgeted amounts on which the Acquisition and Advisory Fee was initially based, the Advisor will pay or invoice the Company for 2.5% of the budget variance such that the Acquisition and Advisory Fee is ultimately 2.5% of amounts expended on such development/redevelopment project.  The Advisor, in its sole discretion, may waive, reduce or defer all or any portion of the Acquisition and Advisory Fees to which it would otherwise be entitled.

 

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

 

(d)           Development Fee.  If the Advisor or an Affiliate provides the development services, the Company shall pay the Advisor Development Fees in amounts that are usual and customary for comparable services rendered to similar projects in the geographic market; provided, however, that a majority of the Independent Directors must determine that such Development Fees are fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties.  Development Fees will include the reimbursement of the specified cost incurred by the Advisor of engaging third parties for such services.  The Advisor, in its sole discretion, may waive, reduce or defer all or any portion of the Development Fee to which it would otherwise be entitled.  Notwithstanding the above, the Advisor may engage 

 

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(on behalf of the Company) third parties to provide development services pursuant to its authority under Section 2.03 and pay such third parties all applicable Development Fees.

 

3.02        Expenses.

 

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

 

(i)            Organization and Offering Expenses;

 

(ii)           Acquisition Fees and Acquisition Expenses;

 

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

 

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

 

(v)           taxes and assessments on income or property and taxes as an expense of doing business;

 

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

 

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

 

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

 

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

 

(x)            expenses connected with payments of Distributions in cash or otherwise made or caused to be made by the Company to the Stockholders;

 

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

 

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

 

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(xiii)         personnel and related employment costs incurred by the Advisor or its Affiliates in performing the services described herein, including but not limited to reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services; provided, that no reimbursement shall be made for costs of such employees of the Advisor or its Affiliates to the extent that such employees perform services for which the Advisor receives a separate fee other than in connection with the Advisor directly providing the Additional Services; and

 

(xiv)        audit, accounting and legal fees.

 

(b)           Expenses, other than Organization and Offering Expenses (which shall be reimbursed in accordance with subsection (c) herein), incurred by the Advisor on behalf of the Company and payable pursuant to this Section 3.02 shall be reimbursed no less than quarterly to the Advisor within 60 days after the end of each quarter.  The Advisor shall prepare a statement documenting the expenses of the Company during each quarter, including Organization and Offering Expenses, and shall deliver the statement to the Company within 45 days after the end of each quarter.

 

(c)           Selling Commissions and the dealer manager fee, which are included in the definition of Organization and Offering Expenses, shall be paid by the Company in accordance with Section 2.09 herein and the dealer manager agreement or similar agreement or agreements that the Company enters in connection with any Offering.  Organization and Offering Expenses (other than Selling Commissions and the dealer manager fee) incurred by the Advisor on behalf of the Company on or after January 1, 2009 and payable pursuant to Section 3.02(a) shall be reimbursed no less than quarterly to the Advisor within 60 days after the end of each quarter until an aggregate of $7,500,000 of such Organization and Offering Expenses have been reimbursed to the Advisor.  Thereafter, no such Organization and Offering Expenses shall be reimbursed to the Advisor until the Advisor has prepared and delivered to the Company within 90 days after the end of the year in which the Follow-on Offering ends a reconciliation of amounts of Organization and Offering Expenses incurred in connection with the Initial Offering and Follow-on Offering and the reimbursement obligations of the Company therefor under this Agreement, unless the terms of this Agreement are amended upon renewal to provide otherwise in connection with any subsequent Offering.  The Advisor, on behalf of itself and its Affiliates, and its and their respective successors and assigns, hereby waives the Company’s obligation to pay $3,500,000 of Organization and Offering Expenses (other than Selling Commissions and the dealer manager fee) incurred by the Advisor on behalf of the Company through December 31, 2008. Notwithstanding the foregoing, upon receipt of the reconciliation discussed above, the Company shall reimburse the Advisor for Organization and Offering Expenses (other than Selling Commissions and the dealer manager fee) to the extent such reimbursement would not cause the total amount spent by the Company on Organization and Offering Expenses (other than Selling Commissions and the dealer manager fee and excluding the $3,500,000 of Organization and Offering Expenses reimbursement waived by the Advisor as set forth above) to exceed 1.5% of the Gross Proceeds raised in the completed Initial Offering and Follow-on Offering; provided however, that the Advisor shall reimburse the Company for any Organization and Offering Expenses (other than Selling Commissions and the dealer manager fee) to the extent that such Organization and Offering Expenses (other than Selling Commissions and the dealer manager fee) paid by the Company exceed 1.5% of the Gross Proceeds raised in the completed Initial Offering and Follow-on Offering;

 

(d)           Notwithstanding anything to the contrary in this Section 3.02, (i) the Advisor will be responsible for paying all of the investment-related expenses that the Company or the Advisor 

 

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incurs that are due to third parties or in connection with providing the Additional Services with respect to investments the Company does not make other than Non-Refundable Payments and (ii) the Company shall be responsible for paying directly or reimbursing the Advisor for all Non-Refundable Payments.

 

3.03        Other Services.  Should the Board request that the Advisor or any director, officer or employee thereof render services for the Company other than set forth in Section 2.02, the services shall be separately compensated at the rates and in the amounts as are agreed by the Advisor and the Independent Directors, subject to the limitations contained in the Articles of Incorporation, and shall not be deemed to be services pursuant to the terms of this Agreement.

 

3.04        Reimbursement to the Advisor.  The Company shall not reimburse the Advisor for Total Operating Expenses to the extent that Total Operating Expenses (including the Asset Management Fee), in the four consecutive fiscal quarters then ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of 2% of Average Invested Assets or 25% of Net Income for that period of four consecutive fiscal quarters.  Any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company.  Reimbursement of all or any portion of the Total Operating Expenses that exceed the limitation set forth in the preceding sentence may, at the option of the Advisor, be deferred without interest and may be reimbursed in any subsequent Expense Year where such limitation would permit such reimbursement if the Total Operating Expense were incurred during such period.  Notwithstanding the foregoing, if there is an Excess Amount in any Expense Year and the Independent Directors determine that all or a portion of such excess was justified, based on unusual and nonrecurring factors which they deem sufficient, the Excess Amount may be reimbursed to the Advisor.  If the Independent Directors determine such excess was justified, then, after the end of any fiscal quarter of the Company for which there is an Excess Amount for the 12 months then ended paid to the Advisor, the Advisor, at the direction of the Independent Directors, shall cause such fact to be disclosed in the next quarterly report of the Company or in a separate writing and sent to the Stockholders within 60 days of such quarter end, together with an explanation of the factors the Independent Directors considered in determining that such Excess Amount was justified. Such determination shall be reflected in the minutes of the meetings of the Board.  The Company will not reimburse the Advisor or its Affiliates for services for which the Advisor or its Affiliates are entitled to compensation in the form of a separate fee.  All figures used in any computation pursuant to this Section 3.04 shall be determined in accordance with generally accepted accounting principles applied on a consistent basis.

 

3.05        Audit of Advisor Payments.  It is the intention of the parties hereto to conform strictly to the applicable provisions hereof as to fees, reimbursements and any other amounts (the “Advisor Payments”) to be paid to the Advisor hereunder.  However, at any time, either party shall have the right, upon reasonable written notice, to engage a separate audit, on a confidential basis, of its own and the other party’s records, books and accounts in respect of Advisor Payments to ascertain whether the Advisor Payments were properly determined and paid.  An audit may be engaged only once in any 12-month period regardless of which party engages the audit.  Any such audit shall be conducted by an independent certified public accounting firm of recognized national standing designated by the party requesting the audit (the “Requesting Party”), other than the then current auditor of its or any of its Affiliates’ financial statements, and shall be conducted during regular business hours and in such a manner so as not to interfere with the Company’s or the Advisor’s regular business activities.  The Requesting Party shall bear the costs of the audit unless the audit conclusively reveals an underpayment or overpayment of Advisor Payments adverse to the Requesting Party in an amount greater than 10% of the total amount of Advisor Payments owed for the period being inspected, in which case the other party shall bear the costs of the audit.  Any auditor who is engaged to perform an audit shall not be compensated on a contingent basis or any other basis that would tend to give the auditor an interest in the outcome of the audit, and the auditor shall perform its audit on an impartial basis and certify in writing as 

 

15

 

such.  If the audit conclusively reveals an overpayment or underpayment of Advisor Payments, the Company or the Advisor shall promptly pay to the other party the amount of the overpayment or underpayment, as the case may be, without interest; provided, however, that in the event that the audit conclusively reveals an overpayment of Advisor Payments and the Advisor has at any time previously waived or forgiven in writing any Advisor Payments that it would otherwise have been entitled to hereunder (including the $3,500,000 waiver of Organization and Offering Expense reimbursement set forth in Section 3.02(c) above), the Company shall credit against the overpayment any amounts previously waived or forgiven, without interest, and the Advisor shall not be obligated to repay the Company to the extent that the overpayments do not exceed the aggregate of the waived or forgiven amounts not already so credited.  Any underpayment or overpayment under this Agreement shall not be a breach of this Agreement unless and until an audit performed in accordance with this Section 3.05 is completed and the party who may be obligated to make a payment hereunder as a result of such audit shall have failed to promptly make any required payment.

 

ARTICLE IV

 

TERM AND TERMINATION

 

4.01        Term; Renewal.  Subject to Section 4.02 hereof, this Agreement shall continue in force until January 4, 2012.  Thereafter, this Agreement may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties.  It is the duty of the Board to evaluate the performance of the Advisor annually before renewing the Agreement, and each such renewal shall be for a term of no more than one year.

 

4.02        Termination.  This Agreement will automatically terminate upon Listing.  This agreement also may be terminated at the option of either party upon 60 days’ written notice without cause or penalty (if termination is by the Company, then the termination shall be upon the approval of a majority of the Independent Directors).  Notwithstanding the foregoing, the provisions of Section 4.03, Article V and Article VI shall continue in full force and effect and shall survive the termination or expiration of this Agreement.

 

4.03        Payments to and Duties of Advisor upon Termination.

 

(a)           After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to and receive from the Company within 30 days after the effective date of the termination all unpaid reimbursements of expenses, subject to the provisions of Section 3.04 hereof, and all contingent liabilities related to fees payable to the Advisor prior to termination of this Agreement.

 

(b)           The Advisor shall promptly upon termination:

 

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

 

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

 

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

 

(iv)          cooperate with the Company and take all reasonable actions requested by the Company to provide an orderly management transition.

 

(c)           In the event that this Agreement is terminated or allowed to expire without renewal, which termination or expiration occurs prior to the Company’s or the Advisor’s reimbursement of Organization and Offering Expenses pursuant to the provisions of Section 3.02(c), the appropriate party, within 90 days after the end of the year in which the Follow-on Offering terminates, shall make the necessary reimbursement.

 

ARTICLE V

 

INDEMNIFICATION

 

5.01        Indemnification by the Company.

 

(a)           The Company shall indemnify and hold harmless the Advisor and its Affiliates, including their respective officers, directors, partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance, subject to any limitations imposed by the laws of the State of Maryland, the Articles of Incorporation and the NASAA Guidelines. Notwithstanding the foregoing, the Company shall not indemnify or hold harmless the Advisor or its Affiliates, including their respective officers, directors, partners and employees, for any liability or loss suffered by the Advisor or its Affiliates, including their respective officers, directors, partners and employees, nor shall it provide that the Advisor or its Affiliates, including their respective officers, directors, partners and employees, be held harmless for any loss or liability suffered by the Company, unless all of the following conditions are met: (i) the Advisor or its Affiliates, including their respective officers, directors, partners and employees, have determined, in good faith, that the course of conduct which caused the loss or liability was in the best interests of the Company; (ii) the Advisor or its Affiliates, including their respective officers, directors, partners and employees, were acting on behalf of or performing services of the Company; (iii) the liability or loss was not the result of negligence or misconduct by the Advisor or its Affiliates, including their respective officers, directors, partners and employees; and (iv) the indemnification or agreement to hold harmless is recoverable only out of the Company’s net assets and not from stockholders. Notwithstanding the foregoing, the Advisor and its Affiliates, including their respective officers, directors, partners and employees, shall not be indemnified by the Company for any losses, liability or expenses arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; and (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Securities and Exchange Commission and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.

 

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(b)           The Company may advance funds to the Advisor or its Affiliates, including their respective officers, directors, partners and employees, for legal expenses and other costs incurred as a result of any legal action for which indemnification is being sought is permissible only if all of the following conditions are satisfied: (i) the legal action relates to acts or omissions with respect to the performance of duties or services on behalf of the Company; (ii) the legal action is initiated by a third-party who is not a stockholder or the legal action is initiated by a stockholder acting in his or her capacity as such and a court of competent jurisdiction specifically approves such advancement; (iii) the Advisor or its Affiliates, including their respective officers, directors, partners and employees, undertake to repay the advanced funds to the Company together with the applicable legal rate of interest thereon, in cases in which the Advisor or its Affiliates, including their respective officers, directors, partners and employees, are found not to be entitled to indemnification.

 

(c)           Notwithstanding the provisions of this Section 5.01, the Advisor shall not be entitled to indemnification or be held harmless pursuant to this Section 5.01 for any activity which the Advisor shall be required to indemnify or hold harmless the Company pursuant to Section 5.02.

 

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

 

ARTICLE VI

 

MISCELLANEOUS

 

6.01        Assignment to an Affiliate.  This Agreement and any rights, duties, liabilities and obligations hereunder and the fees and compensation related thereto may be assigned by the Advisor, in whole or in part, to a duly qualified and licensed Affiliate of the Advisor without obtaining the approval of the Board.  Any other assignment shall be made only with the approval of a majority of the Board (including a majority of the Independent Directors).  The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board.  This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization which is a successor to all of the assets, rights and obligations of the Company, in which case the successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement.  This Agreement shall be binding on successors to the Company resulting from a Change of Control or sale of all or substantially all the assets of the Company or the Partnership, and shall likewise be binding upon any successor to the Advisor.

 

6.02        Relationship of Advisor and Company.  The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers or impose any liability as such on either of them.

 

6.03        Notices.  Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other 

 

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communication is required by the Articles of Incorporation, the Bylaws, or accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:

 

	
To the Directors and to the Company:
    	
Behringer Harvard Opportunity REIT II, Inc.
    
	
 
    	
15601 Dallas Parkway
    
	
 
    	
Suite 600
    
	
 
    	
Addison, Texas 75001
    
	
 
    	
 
    
	
To the Advisor:
    	
Behringer Harvard Opportunity Advisors II, LLC
    
	
 
    	
15601 Dallas Parkway
    
	
 
    	
Suite 600
    
	
 
    	
Addison, Texas 75001
    

 

Either party shall, as soon as reasonably practicable, give notice in writing to the other party of a change in its address for the purposes of this Section 6.03.

 

6.04        Modification.  This Agreement shall not be changed, modified, or amended, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assignees.

 

6.05        Severability.  The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

 

6.06        Choice of Law; Venue.  The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Texas, and venue for any action brought with respect to any claims arising out of this Agreement shall be brought exclusively in Dallas County, Texas.

 

6.07        Entire Agreement.  This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof.  The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof.  This Agreement may not be modified or amended other than by an agreement in writing signed by each of the parties hereto.

 

6.08        Waiver.  Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of the right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted the waiver.

 

6.09        Gender; Number.  Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

 

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6.10        Headings.  The titles and headings of sections and subsections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

 

6.11        Execution in Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.  This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

 

6.12        Initial Investment.  The Advisor or one of its Affiliates has contributed $200,000 (the “Initial Investment”) in exchange for the initial issuance of Shares of the Company.  The Advisor or its Affiliates may not sell any of the Shares purchased with the Initial Investment while the Advisor acts in an advisory capacity to the Company.  The restrictions included above shall not apply to any Shares acquired by the Advisor or its Affiliates other than the Shares acquired through the Initial Investment.  Neither the Advisor nor its Affiliates shall vote any Shares they now own, or hereafter acquire, in any vote regarding removal of the Advisor or its Affiliates or the approval of any transaction between the Company and the Advisor or its Affiliates.

 

6.13        Ownership of Proprietary Property.  The Advisor retains ownership of and reserves all Intellectual Property Rights in the Proprietary Property.  To the extent that the Company has or obtains any claim to any right, title or interest in the Proprietary Property, including without limitation in any suggestions, enhancements or contributions that Company may provide regarding the Proprietary Property, the Company hereby assigns and transfers exclusively to the Advisor all right, title and interest, including without limitation all Intellectual Property Rights, free and clear of any liens, encumbrances or licenses in favor of the Company or any other party, in and to the Proprietary Property. In addition, at the Advisor’s expense, the Company will perform any acts that may be deemed desirable by the Advisor to evidence more fully the transfer of ownership of right, title and interest in the Proprietary Property to the Advisor, including but not limited to the execution of any instruments or documents now or hereafter requested by the Advisor to perfect, defend or confirm the assignment described herein, in a form determined by the Advisor.

 

6.14        Treatment Under Texas Margin Tax.  For purposes of the Texas margin tax, the Advisor’s performance of the services specified in this Agreement will cause the Advisor to conduct part of the active trade or business of the Company, and the compensation specified in Article III includes both the payment of management fees and the reimbursement of specified costs incurred in the Advisor’s conduct of the active trade or business of the Company.  Therefore, the Advisor and Company intend Advisor to be, and shall treat Advisor as, a “management company” within the meaning of Section 171.0001(11) of the Texas Tax Code.  The Company and the Advisor will apply Sections 171.1011(m-1) and 171.1013(f)-(g) of the Texas Tax Code to the Company’s reimbursements paid to the Advisor pursuant to this Agreement of specified costs and wages and compensation.  The Advisor and the Company further recognize and intend that (i) as a result of the fiduciary relationship created by this Agreement and acknowledged in Section 2.02, reimbursements paid to the Advisor pursuant to this Agreement are “flow-though funds” that the Advisor is mandated by law or fiduciary duty to distribute, within the meaning of Section 171.1011(f) of the Texas Tax Code, and (ii) as a result of Advisor’s contractual duties under this Agreement, certain reimbursements under this Agreement are “flow-through funds” mandated by contract to be distributed within the meaning of Section 171.1011(g) of the Texas Tax Code.  The terms of this Agreement shall be interpreted in a manner consistent with the characterization of the Advisor as a “management company” as defined in Section 171.0001(11), and with the characterization of the reimbursements as “flow-though funds” within the meaning of Section 171.1011(f)-(g) of the Texas Tax Code.

 

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6.15        Non-Solicitation.  During the period commencing on January 4, 2008 and ending one year following the termination of this Agreement, the Company shall not, without the Advisor’s prior written consent, directly or indirectly, (i) solicit or encourage any person to leave the employment or other service of the Advisor or its affiliates or (ii) hire, on behalf of the Company or any other person or entity, any person who has left the employment within the one year period following the termination of that person’s employment the Advisor or its affiliates.  During the period commencing on January 4, 2008 and ending one year following the termination of this Agreement, the Company shall not, whether for its own account or for the account of any other person, firm, corporation or other business organization, intentionally interfere with the relationship of the Advisor or it affiliates with, or endeavor to entice away from the Advisor or its affiliates, any person who during the term of the Agreement is, or during the preceding one-year period was, a customer of the Advisor or its affiliates.

 

[The remainder of this page intentionally blank]

 

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

 

	
 
    	
BEHRINGER HARVARD OPPORTUNITY REIT   II, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Gerald J. Reihsen, III
    
	
 
    	
 
    	
Executive Vice President — Corporate   Development & Legal
    
	
 
    	
 
    
	
 
    	
BEHRINGER HARVARD OPPORTUNITY   ADVISORS II, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Gerald J. Reihsen, III
    
	
 
    	
 
    	
Executive Vice President — Corporate   Development & Legal and Assistant Secretary
    

 

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