Document:

Escrow Agreement

EXHIBIT
10.4

 

ESCROW
AGREEMENT

Citibank
Texas, N.A.

One
Lincoln Park

8401
North Central Expressway

Suite
500

Dallas,
Texas 75225

Attention:
Mr. Michael McGee

Re:    Behringer
Harvard Opportunity REIT I, Inc. 

Ladies
and Gentlemen:

 

BEHRINGER
HARVARD OPPORTUNITY REIT I, INC., a Maryland corporation (the “Company”), will
issue in a public offering (the “Offering”) shares of its common stock (the
“Stock”) pursuant to a Registration Statement on Form S-11 filed by the Company
with the Securities and Exchange Commission. Behringer Securities LP, a Texas
limited partnership (the “Dealer Manager”), will act as dealer manager for the
offering of the Stock. The Company is entering into this agreement to set forth
the terms on which Citibank Texas, N.A. (the
“Escrow Agent”), will, except as otherwise provided herein, hold and disburse
the proceeds from subscriptions for the purchase of the Stock in the Offering
until such time as: (i) in the case of subscriptions received from all
nonaffiliates of the Company, the Company has received and accepted
subscriptions for Stock resulting in a total of 200,000 shares of common stock
sold in the offering (the “Required Capital”); and (ii) in the case of
subscriptions received from residents of Pennsylvania (“Pennsylvania
Subscribers”), the Company has received subscriptions for Stock from
nonaffiliates of the Company resulting in total minimum capital raised of
$23,800,000 (the “Pennsylvania Required Capital”); and (iii) in the case of
subscriptions received from residents of New York (“New York Subscribers”), the
Company has received subscriptions for Stock from nonaffiliates of the Company
resulting in total minimum capital raised of $2,500,000 (the “New York Required
Capital”).

 

The
Company hereby appoints Citibank Texas, N.A. as Escrow
Agent for purposes of holding the proceeds from the subscriptions for the Stock,
on the terms and conditions hereinafter set forth: 

 

1.    Until
such time as the Company has received subscriptions for Stock resulting in total
minimum capital raised equal to the Required Capital and such funds are
disbursed from the Escrow Account, as hereinafter defined, in accordance with
paragraph 3(a) hereof, persons subscribing to purchase the Stock (the
“Subscribers”) will be instructed by the Dealer Manager or any soliciting
dealers to remit the purchase price in the form of checks, drafts, wires,
Automated Clearing House (ACH) or money orders (hereinafter
“instruments
of payment”) payable to the order of “Citibank Texas, N.A., Escrow Agent for
Behringer Harvard Opportunity REIT I, Inc.,” or a recognizable contraction or
abbreviation thereof including, but not limited to, “Citibank Texas, N.A.,
Escrow Agent for BH Opp REIT.” After subscriptions are received resulting in
total minimum capital raised equal to the Required Capital and such funds are
disbursed from the Escrow Account in accordance with paragraph 3(a) hereof,
subscriptions shall continue to be so submitted unless otherwise instructed by
the Dealer Manager. Any checks, drafts or money orders received made payable to
a party other than the Escrow Agent (or after the Required Capital is received,
made payable to a party other than the party designated by the Dealer Manager)
shall be returned to the soliciting dealer who submitted the check, draft or
money order. The Dealer Manager and/or the Company will also provide or cause to
be provided to the Escrow Agent in connection with, and not later than five (5)
business days after the receipt by the Escrow Agent of, each 

 

 

 

 

instrument
of payment the payee’s/Subscriber’s name, address, and social security number.
Furthermore, not later than ten (10) business days prior to any required
disbursement of interest by the Escrow Agent to any Subscriber pursuant to
paragraph 3(f) hereof or other applicable provision herein, the Dealer Manager
and/or the Company will provide or cause to be provided to the Escrow Agent, an
executed IRS Form W-9 (which may be a Substitute Form W-9 as contained in the
subscription agreement provided such Substitute Form is in conformity with all
applicable Internal Revenue Service rules, regulations and guidelines) (“Form
W-9”), the calculation of the number of shares purchased, and purchase price
remitted or other documentation containing such information sufficient to
identify the respective Subscriber. The Company hereby indemnifies and holds
harmless the Escrow Agent from and against any and all claims, liabilities,
losses, damages, costs and expenses, including reasonable attorneys’ fees,
incurred or sustained by the Escrow Agent in connection with or arising out of
the acceptance by the Escrow Agent of Form W-9. The Escrow Agent shall not be
obligated to use any efforts to obtain such information from the Subscriber,
Company or Dealer Manager. If such information regarding a Subscriber is not
provided to the Escrow Agent in a timely manner after the Escrow Agent’s receipt
of the purchase price from such Subscriber, the Company and/or the Dealer
Manager shall cooperate with the Escrow Agent to return such funds to the
soliciting dealer or other applicable party who submitted the funds, unless such
information for a Subscriber is provided prior to the actual return of such
funds by the Escrow Agent, and no interest otherwise payable shall be due or
payable with respect to such funds under paragraph 3(f) hereof. All instruments
of payment from each such Subscriber shall, except as otherwise specified
herein, be deposited into a single interest-bearing money market account
entitled “ESCROW ACCOUNT FOR THE BENEFIT OF SUBSCRIBERS FOR COMMON STOCK OF
BEHRINGER HARVARD OPPORTUNITY REIT I, INC.” or such similar designation as the
parties may agree (the “Escrow Account”), which deposit shall occur within one
(1) business day after the Escrow Agent’s or the Dealer Manager’s receipt of the
instrument of payment (after the Required Capital is received, a new account may
be established in the name of the Company). The Escrow Agent will notify the
Company and cooperate with the Company and the Company’s transfer agent when it
is in receipt of any subscription that is not, in the Escrow Agent’s reasonable
discretion, in good order. Instruments of payment received from Pennsylvania
Subscribers (as identified as such by the Company) shall be accounted for
separately in a subaccount or zero balance account entitled “ESCROW ACCOUNT FOR
THE BENEFIT OF PENNSYLVANIA SUBSCRIBERS” (the “Pennsylvania Escrow Account”),
until such Pennsylvania Escrow Account has closed pursuant to
paragraph 3(a) hereof. Instruments of payment received from New York
Subscribers (as identified as such by the Company) shall be accounted for
separately in a subaccount or zero balance account entitled “ESCROW ACCOUNT FOR
THE BENEFIT OF NEW YORK SUBSCRIBERS” (the “New York Escrow Account”), until such
New York Escrow Account has closed pursuant to paragraph 3(a) hereof. Each
of the Escrow Account, the Pennsylvania Escrow Account, and New York Escrow
Account will be established and maintained in such a way as to permit the
interest income calculations described in paragraph 7. The Company shall
cooperate with the Escrow Agent in separately accounting for New York and
Pennsylvania subscription proceeds in the New York Escrow Account and the
Pennsylvania Escrow Account, respectively, and the Escrow Agent shall be
entitled to rely upon, and shall be held harmless and indemnified by the Company
in respect, of any information provided by the Company in this regard. In that
regard and in order to validate the identity and subscription of any Subscriber,
the Company shall allow the Escrow Agent or its agents, at all reasonable times
and upon reasonable notice, to inspect any of the documents, instruments or
agreements executed or delivered by a Subscriber or a Dealer Manager on behalf
of a Subscriber in connection with the Offering. 

 

2.    The
Escrow Agent agrees to promptly process for collection the instruments of
payment upon deposit into the Escrow Account, Pennsylvania Escrow Account, or
New York Escrow Account, as applicable. Deposits shall be held in the Escrow
Account, the Pennsylvania Escrow Account, and the New York Escrow Account until
such funds are disbursed in accordance with paragraph 3(a) hereof. Prior to
disbursement of the funds deposited in the Escrow Account, 

 

 

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the
Pennsylvania Escrow Account, or the New York Escrow Account, such funds shall
not be subject to claims by creditors of the Company or the Dealer Manager or
any of their affiliates. If any of the instruments of payment are returned to
the Escrow Agent for nonpayment prior to receipt of the Required Capital or, in
connection with subscriptions from Pennsylvania Subscribers, the Pennsylvania
Required Capital or, in connection with subscriptions from New York Subscribers,
the New York Required Capital, the Escrow Agent shall promptly notify the Dealer
Manager and the Company in writing via mail or facsimile of such nonpayment, and
is authorized to debit the Escrow Account, the Pennsylvania Escrow Account, or
the New York Escrow Account, as applicable, in the amount of such returned
payment as well as any interest earned on the amount of such payment.

 

3.    (a)    Subject
to the provisions of subparagraphs 3(b)-3(f) below: 

 

(i)    Once the
collected funds in the Escrow Account are an amount equal to or greater than the
Required Capital, the Escrow Agent shall promptly notify the Company and, upon
receiving written instructions and certification of approval by the Company that
the collected funds in the Escrow Account are an amount equal to or greater than
the Required Capital, (A) provide to the Company for delivery to the Director of
Banking and Finance of the State of Nebraska an affidavit in substantially the
form attached hereto as Exhibit A-1 (the “Escrow Agent Affidavit”) which states
that all of the conditions of this Agreement relating to the Escrow Account have
been met, (B) disburse to the Company, by check, ACH or wire transfer, the funds
in the Escrow Account representing the gross purchase price for the Stock,
provided however, that no funds in the Escrow Account from Subscribers who are
residents of Nebraska shall be disbursed to the Company until five days after
the Escrow Agent Affidavit and the Company Affidavit (as defined below) have
been provided to the Director of Banking and Finance of the State of Nebraska,
and (C) disburse to the Subscribers or the Company, as applicable, any interest
thereon pursuant to the provisions of subparagraph 3(f). Upon receipt by
the Company of notice from the Escrow Agent that the collected funds in the
Escrow Account are an amount equal to or greater than the Required Capital, the
Company shall (X) certify to the Escrow Agent that all of the conditions of this
Escrow Agreement have been met in substantially the form attached hereto as
Exhibit A-2 (the “Company Certificate”) and (Y) provide the Director of Banking
and Finance of the State of Nebraska (and provide a copy to the Escrow Agent) an
affidavit in substantially the form attached hereto as Exhibit B (the “Company
Affidavit”) which states that there have been no material omissions or changes
in the financial condition of the Company or other changes of circumstance, that
would render the Required Capital inadequate to finance the Company’s proposed
plan of operations or business, or render the representations in the Company’s
registration statement, as amended through such time, fraudulent, false or
misleading. The Company acknowledges and agrees that the Escrow Agent may rely
on the Company Certificate as a basis for issuing the Escrow Agent Affidavit to
the Director of Banking and Finance of the State of Nebraska as required herein
and shall be held harmless and indemnified by the Company in issuing the Escrow
Agent Affidavit in reliance therein. For purposes of this Agreement, the term
“collected funds” shall mean all funds received by the Escrow Agent that have
cleared normal banking channels and are in the form of cash or a cash
equivalent. After the satisfaction of the aforementioned provisions of this
paragraph 3(a)(i), in the event the Company receives subscriptions made payable
to the Escrow Agent (other than subscriptions that are to be deposited in the
Pennsylvania Escrow Account or the New York Escrow Account), subscription
proceeds may continue to be received in this account generally, but to the
extent such proceeds shall not be subject to escrow due to the satisfaction of
the aforementioned provisions of this paragraph 3(a)(i), 

 

 

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such
proceeds are not subject to this Escrow Agreement and at the instruction of the
Company to the Escrow Agent shall be transferred from the Escrow Account or
deposited directly into, as the case may be, a commercial deposit account in the
name of the Company with the Escrow Agent (the “Deposit Account”) that has been
previously established by the Company, unless otherwise directed by the Company.
The Company hereby covenants and agrees that it shall do all things necessary in
order to establish the Commercial Account, which shall be subject to the Escrow
Agent’s usual account guidelines and regulations, prior to its use. No
provisions of this Escrow Agreement shall apply to the Deposit Account.

 

(ii)    Regardless
of any closing of the Escrow Account, the Company and the Dealer Manager shall
continue to forward instruments of payment received from New York Subscribers
for deposit into the New York Escrow Account to the Escrow Agent until such time
as the Company notifies the Escrow Agent in writing that total subscription
proceeds (including the amount then in the New York Escrow Account, but
excluding the amount then in the Pennsylvania Escrow Account) equal or exceed
the New York Required Capital. Within five days after receipt by Escrow Agent of
such notice, the Escrow Agent shall (A) disburse to the Company, by check,
ACH or wire transfer, the funds then in the New York Escrow Account representing
the gross purchase price for the Stock, and (B) disburse to the New York
Subscribers or the Company, as applicable, any interest thereon pursuant to the
provisions of subparagraph 3(f). Following such disbursements, the Escrow
Agent shall close the New York Escrow Account, and thereafter any instruments of
payment made payable to the Escrow Agent received by the Escrow Agent from New
York Subscribers that are not subject to escrow due to the satisfaction of the
aforementioned provisions of this paragraph 3(a)(ii) shall not be subject to
this Escrow Agreement and at the instruction of the Company to the Escrow Agent
shall be transferred from the Escrow Account or deposited directly into, as the
case may be, the Deposit Account pursuant to the provisions of paragraph 3(a)(i)
herein.

 

(iii)    Regardless
of any closing of the Escrow Account or the New York Escrow Account, the Company
and the Dealer Manager shall continue to forward instruments of payment received
from Pennsylvania Subscribers for deposit into the Pennsylvania Escrow Account
to the Escrow Agent until such time as the Company notifies the Escrow Agent in
writing that total subscription proceeds (including the amount then in the
Pennsylvania Escrow Account) equal or exceed the Pennsylvania Required Capital.
Within five days after receipt by Escrow Agent of such notice, the Escrow Agent
shall (A) disburse to the Company, by check, ACH or wire transfer, the funds
then in the Pennsylvania Escrow Account representing the gross purchase price
for the Stock, and (B) disburse to the Pennsylvania Subscribers or the Company,
as applicable, any interest thereon pursuant to the provisions of
subparagraph 3(f). Following such disbursements, the Escrow Agent shall
close the Pennsylvania Escrow Account, and thereafter any instruments of payment
made payable to the Escrow Agent received by the Escrow Agent from Pennsylvania
Subscribers that are not subject to escrow due to the satisfaction of the
aforementioned provisions of this paragraph 3(a)(iii) shall not be subject to
this Escrow Agreement and at the instruction of the Company to the Escrow Agent
shall be transferred from the Escrow Account or deposited directly into, as the
case may be, the Deposit Account pursuant to the provisions of paragraph 3(a)(i)
herein.

 

 

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(iv)    In order
to induce the Escrow Agent to deposit into the Deposit Account any instruments
for payment payable to the Escrow Agent, the Company warrants and represents
that any subscription agreement or other disclosure provided to a subscriber of
Stock shall specify that notwithstanding such instruments for payment naming the
Escrow Agent as payee thereon, it shall not be maintained in an escrow account
with the Escrow Agent after the Required Capital, the New York Required Capital
or the Pennsylvania Required Capital has been achieved and the Company hereby
indemnifies and holds harmless the Escrow Agent from and against any and all
claims, liabilities, losses, damages, costs and expenses, including reasonable
attorneys’ fees, incurred or sustained by the Escrow Agent in connection with or
arising out of the deposit into the Deposit Account of instruments of payment
payable to the Escrow Agent.

 

(b)    Within
four business days of the close of business on the date that is one year
following commencement of the Offering (the “Expiration Date”), (such
commencement date shall be promptly provided to the Escrow Agent by the Company
after the commencement of the Offering), the Escrow Agent shall promptly notify
the Company if it is not in receipt of deposits for the purchase of Stock
providing for total purchase proceeds that equal or exceed the Required Capital
(from all sources but exclusive of any funds received from subscriptions for
Stock from entities which the Company has notified the Escrow Agent are
affiliated with the Company). The Company agrees that it will provide, or cause
to be provided, to the Escrow Agent an executed Form W-9 for each
Subscriber by the end of the ninth (9th) day
following the date of such notice if interest will be payable to any such
Subscribers. On the tenth (10th) day
following the date of such notice, the Escrow Agent shall promptly return
directly to each Subscriber the collected funds deposited in the Escrow Account,
the Pennsylvania Escrow Account and the New York Escrow Account on behalf of
such Subscriber (unless earlier disbursed in accordance with paragraph 3(c)
below), or shall return the instruments of payment delivered, but not yet
processed for collection prior to such time, in each case, together with
interest in the amounts calculated pursuant to paragraph 7 for each Subscriber
at the address provided by the Dealer Manager or the Company. However, the
Escrow Agent shall not be required to remit any payments until funds represented
by such payments have been collected. 

 

(c)    Notwithstanding
subparagraphs 3(a) and 3(b) above, if the Escrow Agent is not in receipt of
evidence of subscriptions accepted on or before the close of business on such
date that is 120 days after commencement of the Offering (the Company will
notify the Escrow Agent of the commencement date of the Offering) (the “Initial
Escrow Period”), and instruments of payment dated not later than that date, for
the purchase of Stock providing for total purchase proceeds from all
nonaffiliated sources that equal or exceed the Pennsylvania Required Capital,
the Escrow Agent shall promptly notify the Company. Thereafter, the Company
shall send to each Pennsylvania Subscriber by certified mail within ten (10)
calendar days after the end of the Initial Escrow Period a notification in the
form of Exhibit C. If, pursuant to such notification, a Pennsylvania Subscriber
requests the return of his or her subscription funds within ten (10) calendar
days after receipt of the notification (the “Request Period”) and the Escrow
Agent is not in possession of an executed Form W-9 for such Subscriber, the
Company shall provide the Escrow Agent with an executed Form W-9 from each such
Pennsylvania Subscriber within ten (10) calendar days after receiving notice
from such Pennsylvania Subscriber. The Escrow Agent shall promptly thereafter
refund directly to each Pennsylvania Subscriber the collected funds deposited in
the Pennsylvania Escrow Account on behalf of such Pennsylvania Subscriber, or
shall return the instruments of payment delivered, but not yet processed for
collection prior to such time, to the address provided by the Dealer Manager or
the Company, together with interest income in the amounts calculated pursuant to
paragraph 7. However, the Escrow Agent shall not 

 

 

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be
required to remit such payments until funds represented by such payments have
been collected by the Escrow Agent.

 

(d)    The
subscription funds of Pennsylvania Subscribers who do not request the return of
their subscription funds within the Request Period shall remain in the
Pennsylvania Escrow Account for successive 120-day escrow periods (a “Successive
Escrow Period”), each commencing automatically upon the termination of the prior
Successive Escrow Period, and the Company and Escrow Agent shall follow the
notification and payment procedure set forth in subparagraph 3(c) above with
respect to the Initial Escrow Period for each Successive Escrow Period until the
occurrence of the earliest of (i) the Expiration Date, (ii) the receipt and
acceptance by the Company of subscriptions for the purchase of Stock with total
purchase proceeds that equal or exceed the Pennsylvania Required Capital and the
disbursement of the Pennsylvania Escrow Account on the terms specified herein,
or (iii) all funds held in the Pennsylvania Escrow Account having been returned
to the Pennsylvania Subscribers in accordance with the provisions hereof.

 

(e)    If the
Company rejects any subscription for which the Escrow Agent has collected funds,
the Escrow Agent shall, upon the written request of the Company, promptly issue
a refund to the rejected Subscriber. If the Company rejects any subscription for
which the Escrow Agent has not yet collected funds but has submitted the
Subscriber’s check for collection, the Escrow Agent shall promptly return the
funds in the amount of the Subscriber’s check to the rejected Subscriber after
such funds have been collected. If the Escrow Agent has not yet submitted a
rejected Subscriber’s check for collection, the Escrow Agent shall promptly
remit the Subscriber’s check directly to the Subscriber. 

 

(f)    At any
time after funds are disbursed upon the Company’s acceptance of subscriptions
pursuant to subparagraph 3(a) above on the tenth (10th) day following the date
of such acceptance, but except as otherwise provided herein, the Escrow Agent
shall promptly provide directly to each Subscriber the amount of the interest
payable to the Subscriber, if any. If the Company determines that interest will
be payable to Subscribers, the Company agrees that it will inquire of the Escrow
Agent whether the Escrow Agent is in possession of all Subscribers’ executed
Form W-9 or such Subscriber’s federal tax identification number provided by the
Company, and agrees that it will not accept subscriptions of any Subscriber for
which the Escrow Agent is not in possession of an executed Form W-9 provided by
the Company, provided that the Escrow Agent has so informed the Company. The
Escrow Agent shall not be required to remit any payments until funds represented
by such payments have been collected by the Escrow Agent. The foregoing
notwithstanding, interest, if any, earned on subscription proceeds will be
payable to a Subscriber only if (i) the Subscriber’s funds have been held in
escrow by the Escrow Agent for at least 35 days, (ii) Escrow Agent has been in
receipt of a subscription agreement properly executed by the Subscriber for at
least 35 days and (iii) the Company has inputted such information as required by
the online CitiEscrow (“CitiEscrow”) product and has otherwise satisfied all the
terms and conditions thereof (the “1099 Requirements”) to enable the transfer of
the funds from the Escrow Account, the Pennsylvania Escrow Account or the New
York Escrow Account, as applicable into individual CitiEscrow subaccounts. Any
interest earned on accepted subscription proceeds that is not payable to the
Subscriber pursuant to the preceding sentence will be payable to the Company.
Provided the 1099 Requirements have been satisfied, the Escrow Agent shall issue
checks for interest earned on subscription proceeds and IRS Forms 1099 relating
thereto to Subscribers. 

 

 

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In the
event that instruments of payment are returned for nonpayment, the Escrow Agent
is authorized to debit the Escrow Account, the Pennsylvania Escrow Account, or
the New York Escrow Account, as applicable, in accordance with paragraph 2
hereof.

 

4.    The
Escrow Agent shall report to the Company up to daily but at least weekly as
instructed by the Company or the Dealer Manager on the account balances in each
of the Escrow Account, the Pennsylvania Escrow Account, and the New York Escrow
Account, and the activity in such accounts since the last report. 

 

5.    Prior to
the disbursement of funds deposited in the Escrow Account, the Pennsylvania
Escrow Account, or the New York Escrow Account in accordance with the provisions
of paragraph 3 hereof, the Escrow Agent shall invest all of the funds deposited
as well as earnings and interest derived therefrom in the Escrow Account, the
Pennsylvania Escrow Account, or the New York Escrow Account, as applicable, in
an interest-bearing money market account, unless the costs to the Company for
the making of such investment are reasonably expected to exceed the anticipated
interest earnings from such investment in which case the funds and interest
thereon shall remain in the respective escrow account until the balance in the
respective escrow account reaches the minimum amount necessary for the
anticipated interest earnings from such investment to exceed the costs to the
Company for the making of such investment, as determined by the Company based
upon applicable interest rates. The Escrow Agent shall not invest funds
deposited or any earnings or interest derived therefrom in any other investment
without the prior written direction or approval from the Company.

 

It is
hereby expressly agreed and stipulated by the parties hereto that the Escrow
Agent shall not be required to exercise any discretion hereunder and shall have
no investment or management responsibility and, accordingly, shall have no duty
to, or liability for its failure to, provide investment recommendations or
investment advice to the parties hereto. It is the intention of the parties
hereto that the Escrow Agent shall never be required to use, advance or risk its
own funds or otherwise incur financial liability in the performance of any of
its duties or the exercise of any of its rights and powers
hereunder.

 

6.    The
Escrow Agent is entitled to rely upon written instructions received from the
Company or the Dealer Manager, unless the Escrow Agent has actual knowledge that
such instructions are not valid or genuine; provided that, if in the Escrow
Agent’s opinion, any instructions from the Company or Dealer Manager are
unclear, the Escrow Agent may request clarification from the Company or Dealer
Manager, as the case may be, prior to taking any action. However, the Escrow
Agent shall not be required to disburse any funds attributable to instruments of
payment that have not been processed for collection, until such funds are
collected and then shall disburse such funds in compliance with the disbursement
instructions from the Company or the Dealer Manager.

 

7.    If the
Offering terminates prior to receipt of the Required Capital, or one or more
Pennsylvania Subscribers elects to have his or her subscription returned in
accordance with paragraph 3, interest income earned on subscription proceeds
deposited in the Escrow Account (the “Escrow Income”), the Pennsylvania Escrow
Account (the “Pennsylvania Escrow Income”), and the New York Escrow Account (the
“New York Escrow Income”), as applicable, shall be remitted to Subscribers, or
to the Company if the applicable Subscriber’s funds have been held in escrow by
the Escrow Agent for less than 35 days, in accordance with paragraph 3 and
without any deductions for escrow expenses. The Company shall reimburse the
Escrow Agent for all escrow expenses. The Escrow Agent shall remit all such
Escrow Income, Pennsylvania Escrow Income, and New York Escrow Income in
accordance with paragraph 3. If the Company chooses to leave the Escrow Account
open after receiving the Required Capital, then it shall make regular
acceptances of subscriptions therein, but no less frequently than monthly, and
the Escrow 

 

 

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Income
from the last such acceptance shall be calculated and remitted to the
Subscribers or the Company, as applicable, pursuant to the provisions of
paragraph 3(f).

 

8.    The
Escrow Agent shall receive compensation from the Company as set forth in
Exhibit D attached hereto. 

 

9.    The
duties, responsibilities and obligations of Escrow Agent shall be limited to
those expressly set forth herein and no duties, responsibilities or obligations
shall be inferred or implied. Escrow Agent shall not be subject to, nor required
to comply with, any other agreement between or among the Company or to which the
Company is a party, even though reference thereto may be made herein, or to
comply with any direction or instruction (other than those contained herein or
delivered in accordance with this Escrow Agreement) from the Company or the
Dealer Manager. Escrow Agent shall not be required to, and shall not, expend or
risk any of its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder 

 

10.    If at any
time Escrow Agent is served with any judicial or administrative order, judgment,
decree, writ or other form of judicial or administrative process which in any
way affects the property held in escrow hereunder (the “Escrow Property”)
(including but not limited to orders of attachment or garnishment or other forms
of levies or injunctions or stays relating to the transfer of Escrow Property),
Escrow Agent is authorized to comply therewith in any manner as it or its legal
counsel of its own choosing deems appropriate; and if Escrow Agent complies with
any such judicial or administrative order, judgment, decree, writ or other form
of judicial or administrative process, Escrow Agent shall not be liable to any
of the parties hereto or to any other person or entity even though such order,
judgment, decree, writ or process may be subsequently modified or vacated or
otherwise determined to have been without legal force or effect.

 

11.    (a)    Escrow
Agent shall not be liable for any action taken or omitted or for any loss or
injury resulting from its actions or its performance or lack of performance of
its duties hereunder in the absence of gross negligence or willful misconduct on
its part. In no event shall Escrow Agent be liable (i) for acting in accordance
with or relying upon any instruction, notice, demand, certificate or document
from the Company, (ii) for any consequential, punitive or special damages, (iii)
for the acts or omissions of its nominees, correspondents, designees, subagents
or subcustodians, or (iv) for an amount in excess of the value of the collected
funds in the Escrow Account, the New York Escrow Account, and the Pennsylvania
Escrow Account, valued as of the date of deposit.

 

(b)    If any
fees, expenses or costs incurred by, or any obligations owed to, Escrow Agent
hereunder are not promptly paid when due, Escrow Agent may reimburse itself
therefor from the collected funds in the Escrow Account, the New York Escrow
Account, and the Pennsylvania Escrow Account and may sell, convey or otherwise
dispose of any collected funds in the Escrow Account, the New York Escrow
Account, and the Pennsylvania Escrow Account for such purpose.

 

(c)    As
security for the due and punctual performance of any and all of the Company’s
obligations to Escrow Agent hereunder, now or hereafter arising, the Company
hereby pledges, assigns and grants to Escrow Agent a continuing security
interest in, and a lien on, the Company’s interest in the collected funds in the
Escrow Account, the New York Escrow Account, and the Pennsylvania Escrow Account
and all distributions thereon or additions thereto (whether such additions are
the result of deposits by Subscribers or the Company or the investment of
collected funds). The security interest of Escrow Agent shall at all times be
valid, 

 

 

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perfected
and enforceable by Escrow Agent against the Company and all third parties in
accordance with the terms of this Escrow Agreement. 

 

(d)    Escrow
Agent may consult with legal counsel at the expense of the Company as to any
matter relating to this Escrow Agreement, and Escrow Agent shall not incur any
liability in acting in good faith in accordance with any advice from such
counsel.

 

(e)    Escrow
Agent shall not incur any liability for not performing any act or fulfilling any
duty, obligation or responsibility hereunder by reason of any occurrence beyond
the control of Escrow Agent (including but not limited to any act or provision
of any present or future law or regulation or governmental authority, any act of
God or war, or the unavailability of the Federal Reserve Bank wire or telex or
other wire or communication facility).

 

12.    Unless
otherwise specifically set forth herein, Escrow Agent shall proceed as soon as
practicable to collect any checks or other collection items at any time
deposited hereunder. All such collections shall be subject to Escrow Agent’s
usual collection practices or terms regarding items received by Escrow Agent for
deposit or collection. Escrow Agent shall not be required, or have any duty, to
notify anyone of any payment or maturity under the terms of any instrument
deposited hereunder, nor to take any legal action to enforce payment of any
check, note or security deposited hereunder or to exercise any right or
privilege which may be afforded to the holder of any such security.

 

13.    Escrow
Agent shall not be responsible in any respect for the form, execution, validity,
value or genuineness of documents or securities deposited hereunder, or for any
description therein, or for the identity, authority or rights of persons
executing or delivering or purporting to execute or deliver any such document,
security or endorsement.

 

14.    The
Company shall be liable for and shall reimburse and indemnify Escrow Agent and
hold Escrow Agent harmless from and against any and all claims, losses,
liabilities, costs, damages or expenses (including reasonable attorneys’ fees
and expenses) (collectively, “Losses”) arising from or in connection with or
related to this Escrow Agreement or being Escrow Agent hereunder (including but
not limited to Losses incurred by Escrow Agent in connection with the submission
of the Escrow Agent Affidavit to the Director of Banking and Finance of the
State of Nebraska, its reliance on the Company Certificate in connection
therewith, and any Losses incurred by Escrow Agent in connection with its
successful defense, in whole or in part, of any claim of gross negligence or
willful misconduct on its part), provided, however, that nothing contained
herein shall require Escrow Agent to be indemnified for Losses caused by its
gross negligence or willful misconduct.

 

15.    (a)    In the
event of any ambiguity or uncertainty hereunder or in any notice, instruction or
other communication received by Escrow Agent hereunder, Escrow Agent may, in its
sole discretion, refrain from taking any action other than retain possession of
the collected funds in the Escrow Account, the New York Escrow Account, and the
Pennsylvania Escrow Account, unless Escrow Agent receives written instructions,
signed by the Company, which eliminates such ambiguity or
uncertainty.

 

(b)    In the
event of any dispute between or conflicting claims by or among the Company
and/or any other person or entity with respect to any of the collected funds in
the Escrow Account, the New York Escrow Account, or the Pennsylvania Escrow
Account, Escrow Agent shall be entitled, in its sole discretion, to refuse to
comply with any and all claims, demands or instructions with respect to such
collected funds so long as such dispute or conflict shall continue, and Escrow
Agent shall not be or become liable in any way to the Company for failure or
refusal to comply with such conflicting claims, demands or instructions. Escrow
Agent 

 

 

-9-

 

 

shall be
entitled to refuse to act until, in its sole discretion, either (i) such
conflicting or adverse claims or demands shall have been determined by a final
order, judgment or decree of a court of competent jurisdiction, which order,
judgment or decree is not subject to appeal, or settled by agreement between the
conflicting parties as evidenced in a writing satisfactory to Escrow Agent or
(ii) Escrow Agent shall have received security or an indemnity satisfactory to
it sufficient to hold it harmless from and against any and all Losses which it
may incur by reason of so acting. Escrow Agent may, in addition, elect, in its
sole discretion, to commence an interpleader action or seek other judicial
relief or orders as it may deem, in its sole discretion, necessary. The costs
and expenses (including reasonable attorneys’ fees and expenses) incurred in
connection with such proceeding shall be paid by, and shall be deemed an
obligation of, the Company.

 

16.    All
communications and notices required or permitted by this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or by
messenger or by overnight delivery service or by facsimile evidenced by a
confirmation of successful transmission, in all cases addressed to the person
for whom it is intended at such person’s address set forth below or to such
other address as a party shall have designated by notice in writing to the other
party in the manner provided by this paragraph: 

(a)    if to the
Company: 

Behringer
Harvard Opportunity REIT I, Inc.

15601
Dallas Parkway, Suite. 600

Addison,
Texas 75001

Fax:
(214) 655-1600

Attention:
President and Chief Executive Officer

(b)    if to the
Dealer Manager: 

Behringer
Securities LP

15601
Dallas Parkway, Ste. 600

Addison,
Texas 75001

Fax:
(214) 655-6801

Attention:
Chief Operating Officer of Harvard Property Trust, LLC, General
Partner

(c)    if to the
Escrow Agent: 

Citibank
Texas, N.A.

One
Lincoln Park

8401
North Central Expressway

Suite
500

Dallas,
Texas 75225

Fax:
(972) 781-0822

Attention:
Mr. Michael McGee

 

Each
party hereto may, from time to time, change the address to which notices to it
are to be delivered or mailed hereunder by notice in accordance herewith to the
other parties. Escrow Agent is authorized to comply with and rely upon any
notices, instructions or other communications believed by it to have been sent
or given by the Company or the Dealer Manager or by a person or persons
authorized by such party. Whenever under the terms hereof the time for giving a
notice or performing an act falls upon a Saturday, Sunday, or banking holiday,
such time shall be extended to the next day on which Escrow Agent is open for
business.

 

 

-10-

 

 

17.    This
Agreement shall be interpreted, construed, enforced and administered in
accordance with the internal substantive laws (and not the choice of law rules)
of the State of Texas. The parties hereto hereby submit to the personal
jurisdiction of and agree that all proceedings relating hereto shall be brought
in courts located within the City and State of Texas. The parties hereto hereby
waive the right to trial by jury and to assert counterclaims in any such
proceedings. To the extent that in such jurisdiction the parties may be entitled
to claim, for itself or its assets, immunity from suit, execution, attachment
(whether before or after judgment) or other legal process, the parties hereby
irrevocably agree not to claim, and hereby waive, such immunity. The parties
hereto hereby waive personal service of process and consents to service of
process by certified or registered mail, return receipt requested, directed to
it at the address last specified for notices hereunder, and such service shall
be deemed completed ten (10) calendar days after the same is so
mailed.

 

18.    This
Agreement is for the exclusive benefit of the parties hereto and their
respective legal representatives, successors and assigns hereunder, and shall
not be deemed to give, either express or implied, any legal or equitable right,
remedy, or claim to any other entity or person whatsoever.

 

19.    This
Escrow Agreement and any amendment hereto may be executed by each of the parties
hereto in any number of counterparts, each of which counterpart, when so
executed and delivered, shall be deemed to be an original and all such
counterparts shall together constitute one and the same agreement.

 

20.    The
provisions set forth in paragraphs 8 through 32 of this Agreement shall survive
the termination of this Agreement and/or the resignation or removal of the
Escrow Agent.

 

21.    The
invalidity, illegality or unenforceability of any provision of this Agreement
shall in no way affect the validity, legality or enforceability of any other
provision; and if any provision is held to be enforceable as a matter of law,
the other provisions shall not be affected thereby and shall remain in full
force and effect.

 

22.    Unless
otherwise provided in this Agreement, final termination of this Escrow Agreement
shall occur on the date that all funds held in the Escrow Account, the
Pennsylvania Escrow Account and the New York Escrow Account are distributed
either (a) to the Company or to Subscribers and the Company has informed the
Escrow Agent in writing to close the Escrow Account, the Pennsylvania Escrow
Account and the New York Escrow Account pursuant to paragraph 3 hereof or (b) to
a successor escrow agent upon written instructions from the Company.

 

23.    The
Escrow Agent has no responsibility for accepting, rejecting, or approving
subscriptions. 

 

24.    The
Escrow Agent will reasonably cooperate with the Company in fulfilling any of the
Company’s obligations under the Sarbanes-Oxley Act of 2002, as such obligations
relate to the provision of services under this Agreement, including assistance
as to the documentation and auditing of Escrow Agent’s procedures.

 

25.    (a)    The
Company may remove Escrow Agent at any time by giving to Escrow Agent sixty (60)
calendar days’ prior notice in writing signed by the Company. Escrow Agent may
resign at any time by giving to the Company sixty (60) calendar days’ prior
written notice thereof.

 

(b)    Within
forty-five (45) calendar days after giving the foregoing notice of removal to
Escrow Agent or receiving the foregoing notice of resignation from Escrow Agent,
the 

 

 

-11-

 

 

Company
shall appoint a successor Escrow Agent. If a successor Escrow Agent has not
accepted such appointment by the end of such 45-day period, Escrow Agent may, in
its sole discretion, deliver the collected funds in the Escrow Account, the New
York Escrow Account, and the Pennsylvania Escrow Account to the Company at the
address provided herein or may apply to a court of competent jurisdiction for
the appointment of a successor Escrow Agent or for other appropriate relief. The
costs and expenses (including reasonable attorneys’ fees and expenses) incurred
by Escrow Agent in connection with such proceeding shall be paid by, and be
deemed an obligation of, the Company.

 

(c)    Upon
receipt of the identity of the successor Escrow Agent, Escrow Agent shall either
deliver the collected funds in the Escrow Account, the New York Escrow Account,
and the Pennsylvania Escrow Account then held hereunder to the successor Escrow
Agent, less Escrow Agent’s fees, costs and expenses or other obligations owed to
Escrow Agent, or hold such collected funds (or any portion thereof), pending
distribution, until all such fees, costs and expenses or other obligations are
paid.

 

(d)    Upon
delivery of the collected funds to successor Escrow Agent, Escrow Agent shall
have no further duties, responsibilities or obligations, other than as provided
hereunder.

 

26.    Except as
otherwise permitted herein, this Escrow Agreement may be modified only by a
written amendment signed by all the parties hereto, and no waiver of any
provision hereof shall be effective unless expressed in a writing signed by the
party to be charged.

 

27.    The
rights and remedies conferred upon the parties hereto shall be cumulative, and
the exercise or waiver of any such right or remedy shall not preclude or inhibit
the exercise of any additional rights or remedies. The waiver of any right or
remedy hereunder shall not preclude the subsequent exercise of such right or
remedy.

 

28.    Each
party hereto hereby represents and warrants (a) that this Escrow Agreement has
been duly authorized, executed and delivered on its behalf and constitutes its
legal, valid and binding obligation and (b) that the execution, delivery and
performance of this Escrow Agreement by it does not and will not violate any
applicable law or regulation.

 

29.    This
Agreement shall constitute the entire agreement of the parties with respect to
the subject matter and supersedes all prior oral or written agreements in regard
thereto.

 

30.    No
printed or other material in any language which mentions “Citibank Texas, N.A.”
by name or the rights, powers, or duties of the Escrow Agent under this
Agreement shall be issued by any other parties hereto, or on such party's
behalf, without the prior written consent of Escrow Agent, except that it shall
be mentioned in applicable prospectuses, subscription agreements and other
related documentation in order to accomplish the purposes of this
Agreement.

 

31.    The
headings contained in this Agreement are for convenience of reference only and
shall have no effect on the interpretation or operation hereof.

 

32.    The
Escrow Agent does not have any interest in the collected funds in the Escrow
Account, the New York Escrow Account, and the Pennsylvania Escrow Account but is
serving as escrow holder only and having only possession thereof. The Company
shall pay or reimburse the Escrow Agent upon request for any transfer taxes or
other taxes relating to the Escrow Property incurred in connection herewith and
shall indemnify and hold harmless the Escrow Agent for any amounts that it is
obligated to pay in the way of such taxes. Any payments of income from this
Escrow Account, the New York Escrow 

 

 

-12-

 

 

Account,
and the Pennsylvania Escrow Account shall be subject to withholding regulations
then in force with respect to United States taxes. The Company and/or the Dealer
Manager will provide the Escrow Agent with appropriate Forms W-9 for tax I.D.,
number certifications, or W-8 forms for non-resident alien certifications. All
Subscribers shall have a United States tax identification number, and no
subscriptions from Subscribers who do not have a United States tax
identification number shall be accepted by the Company, Dealer Manager or the
Escrow Agent without the written consent of the Escrow Agent. It is understood
that the Escrow Agent shall be responsible for income reporting only with
respect to income earned on investment of funds which are a part of the
collected funds and is not responsible for any other reporting.

 

[Signature
page follows]

 

 

 

 

-13-

 

Agreed to
as of the 2nd
day of September, 2005.

	 	 	 
	 	BEHRINGER
      HARVARD OPPORTUNITY REIT I, INC.
	 
 	 
 	 
 
		By:  	/s/ Gerald J. Reihsen,
      III
	 	
      

      Gerald J. Reihsen, III
	 	Executive Vice
      President 

	 	 	 
	 	BEHRINGER
      SECURITIES LP
	 
 	
      
By: 

       
	 
Harvard Property Trust,
      LLC, Its General Partner
		By:  	/s/ Gerald J. Reihsen,
      III
	 	
      

      Gerald J. Reihsen, III
	 	Executive Vice
      President 

 

The terms
and conditions contained above are hereby accepted and agreed to by:

 

	 	 	 
	 	CITIBANK TEXAS,
      N.A., AS ESCROW AGENT
	 
 	 
 	 
 
		By:  	/s/ James Michael
    McGee
	 	
      

      James Michael McGee, Vice President
	 	 

-14-

 

EXHIBIT
A-1

 

FORM
OF ESCROW AGENT AFFIDAVIT FOR NEBRASKA

 

STATE
OF      ____________________    

COUNTY
OF  ____________________    

ESCROW
AGENT AFFIDAVIT

 

____________________
(the “Affiant”), being duly sworn, deposes and says:

 

That the
Affiant is a duly appointed and authorized representative of ____________ (the
“Escrow Agent”);

 

That the
Escrow Agent is the duly appointed and authorized escrow agent for the public
offering of the securities (the “Offering”) of Behringer Harvard Opportunity
REIT I, Inc. (the “Company”);

 

That all
of the conditions of that certain Escrow Agreement entered into by and among the
Escrow Agent, the Company, and Behringer Securities LP in connection with the
Offering and effective as of the ____ day of August, 2005 (the “Agreement”) have
been met.

 

Affiant
makes this Affidavit to the State of Nebraska Department of Banking and Finance
pursuant to Nebraska regulations Chapter 25, Section 003.01C1 promulgated under
§8-1120(3) of the Securities Act of Nebraska.

 

IN
WITNESS WHEREOF, the
undersigned has duly executed this document this ____ day of _____________,
20__.

 

		 	 
	 	By:	___________________________________________
		Name:	___________________________________________
	 	
	 

      

Sworn to
and subscribed before me

this ____
day of ___________, 20__.

 

______________________________

Notary
Public

 

My
commission expires:____________

(NOTARIAL
SEAL)

 

 

EXHIBIT
A-2

 

FORM
OF COMPANY CERTIFICATE FOR ESCROW AGENT AFFIDAVIT FOR
NEBRASKA

 

COMPANY
CERTIFICATE FOR ESCROW AGENT AFFIDAVIT

 

The
undersigned, the duly authorized officer as indicated of Behringer Harvard
Opportunity REIT I, Inc., a Maryland corporation (the “Company”), hereby
certifies to Citibank Texas, N.A. (the “Escrow Agent”) under the Escrow
Agreement (as defined below) on behalf of the Company by the Company that all of
the conditions of that certain Escrow Agreement entered into by and among the
Escrow Agent, the Company, and Behringer Securities LP in connection with the
public offering of securities by the Company (the “Offering”) and effective as
of the ___ day of August, 2005 (the “Escrow Agreement”) have been
met.

 

The
Escrow Agent shall be entitled to rely on this Certificate in making its
Affidavit to the State of Nebraska Department of Banking and Finance pursuant to
Nebraska regulations Chapter 25, Section 003.01C1 promulgated under
§8-1120(3) of the Securities Act of Nebraska in connection with the Offering and
shall be held harmless and indemnified in respect thereof, as provided in the
Escrow Agreement.

 

IN
WITNESS WHEREOF, the
undersigned has duly executed this document this ____ day of _____________,
20__.

 

 

	 	 	 
	 	By:	___________________________________________
		Name:	___________________________________________
	 	
	 	

 

                                                 

 

 

EXHIBIT
B

 

FORM
OF COMPANY AFFIDAVIT

 

STATE
OF      ____________________    

COUNTY
OF  ____________________   

 

COMPANY
AFFIDAVIT

 

____________________
(the "Affiant"), being duly sworn, deposes and says:

 

That the
Affiant is a duly appointed and authorized officer of Behringer Harvard
Opportunity REIT I, Inc. (the “Company”);

 

That the
State of Nebraska Department of Banking and Finance declared effective the
public offering of the Company’s securities to residents of the state of
Nebraska (the “Offering”) as of the ____ day of _______________, 20__ (the
“Effective Date”);

 

That
since the Effective Date, there have been no material omissions or changes in
the financial condition of the Company, or other changes of circumstances, that
would render the amount of proceeds inadequate to finance the Company’s proposed
plan of operations, business, or enterprise;

 

That
since the Effective Date, there have been no material omissions or changes that
would render the representations in the Company’s registration statement
fraudulent, false, or misleading.

 

Affiant
makes this Affidavit to the State of Nebraska Department of Banking and Finance
pursuant to Nebraska regulations Chapter 25, Section 003.01C2 promulgated under
§8-1120(3) of the Securities Act of Nebraska.

 

IN
WITNESS WHEREOF, the
undersigned has duly executed this document this ____ day of _____________,
20__.

 

 

		 	 
	 	By:	___________________________________________
		Name:	___________________________________________
	 	
	 	

 

Sworn to
and subscribed before me

this ____
day of ___________, 20__.

 

______________________________

Notary
Public

My
commission expires:____________

(NOTARIAL
SEAL)

 

 

EXHIBIT
C

 

FORM
OF NOTICE TO PENNSYLVANIA SUBSCRIBERS 

 

 

You have
tendered a subscription to purchase shares of common stock of Behringer Harvard
Opportunity REIT I, Inc. (the “Company”). Your subscription is currently being
held in escrow. The guidelines of the Pennsylvania Securities Commission do not
permit the Company to accept subscriptions from Pennsylvania residents until an
aggregate of $23,800,000 of gross offering proceeds have been received by the
Company. The Pennsylvania guidelines provide that until this minimum amount of
offering proceeds is received by the Company, every 120 days during the offering
period Pennsylvania Subscribers may request that their subscription be returned.

 

If you
wish to continue your subscription in escrow until the Pennsylvania minimum
subscription amount is received, nothing further is required. 

 

If you
wish to terminate your subscription for the Company’s common stock and have your
subscription returned please so indicate below, sign, date, and return to the
Escrow Agent at Citibank Texas, N.A., _______________________, Attn:
_______________. 

 

I hereby
terminate my prior subscription to purchase shares of common stock of Behringer
Harvard Opportunity REIT I, Inc. and request the return of my subscription
funds. I certify to Behringer Harvard Opportunity REIT I, Inc. that I am a
resident of Pennsylvania. 

 

 

		Signature: 	 ____________________________________________
	 		
		Name:	
      ____________________________________________

                                           
      (please print)

	 	
       

      Date: 
	____________________________________________
	 	
	 	

 

Please
send the subscription refund to: 

 

______________________________

______________________________

______________________________

______________________________

 

 

EXHIBIT
D

 

ESCROW
AGENT COMPENSATION

Acceptance
Fee:                                                   $1,000.00

For
initial services including examination of the Escrow Agreement and all
supporting documents as well as database development. This is a one-time fee
payable upon the execution of the Escrow Agreement.

Annual
Administration Fee:                                               $3,000.00

This
annual administration fee covers standard services required under the documents.
Also includes periodic disbursements to company. An additional charge of $500
per subaccount will be billed for accounts opened in connection with certain
state regulations (estimate of 2-3). Transaction charges noted below apply for
certain responsibilities including payments to subscribers. This fee is payable
upon the execution of the Escrow Agreement and annually thereafter for any
12-month period or portion thereof. This fee shall be reviewed at the end of the
first year and may be renegotiated in accordance with new volume
estimates.

Transaction
Fees:

	
      Wire
      transfer of funds to investors
	
      $15.00
      per item

	
      Check
      transfer of funds to investors
	
      $15.00
      per item

	
      Receipt
      and posting of incoming wires
	
      No
      charge

	
      Receipt
      and posting of incoming check
	
      No
      charge

	
      Asset
      transactions (purchases/sales/calls/deposit/withdrawals,
    etc.)
	
      $25.00
      per transaction

	
      1099
      INT Tax reporting
	
      $25.00
      per form

	
      ACH
      transfer of funds
	
      No
      charge

	
      Electronic
      predetermined reports
	
      No
      charge

	
      Interest
      calculations
	
      No
      charge

Extraordinary
Services:

Additional
reasonable compensation will be charged for extraordinary services based on the
then current standard hourly charge. Extraordinary services include, but are not
limited to, attending escrow closings, processing assignments of escrow
interest, specialized reports (e.g., tax reporting other than 1099s), unusual
certifications, reviewing and accepting modifications or amendments to the
escrow agreement, and letter of credit draws, etc. You will be informed in
advance of Citibank Texas, N.A.’s performance
of services that are considered extraordinary.

Any
overdrafts caused by failed or incomplete wires of funds or failed or incomplete
securities deliveries will be reimbursable to Citibank Texas, N.A. at prime
plus two percent (2%).

All
out-of-pocket expenses incurred in the administration of the account, including,
but not limited to, postage, telephone charges, insurance, photocopies,
supplies, and legal fees with the exception of legal fees incurred at the
inception of the account, will be billed to the customer at cost.

Billings
over 30 days past due are subject to a 1.5% per month late payment penalty of
the balance due.Unassociated Document

 

EXHIBIT 10.5

Behringer
Harvard Opportunity REIT I, Inc.

Amended
and Restated 2004 Incentive Award Plan

 

Section
1.

Purpose

 

The
purpose of this Plan is to promote the interests of the Company by providing the
opportunity to purchase or receive Shares, to receive Units, or to receive
compensation that is based upon appreciation in the value of Shares or Units to
Eligible Recipients in order to attract and retain Eligible Recipients by
providing an incentive to work to increase the value of Shares and Units and a
stake in the future of the Company that corresponds to the stake of each of the
Company's stockholders. The Plan provides for the grant of Incentive Stock
Options, Non-Qualified Stock Options, Restricted Stock Awards, Restricted Stock
Units, Restricted Unit Awards, and Stock Appreciation Rights to aid the Company
in obtaining these goals.

 

Section
2.

Definitions

 

Each term
set forth in this Section shall have the meaning set forth opposite such term
for purposes of this Plan and any Incentive Award Agreements under this Plan
(unless noted otherwise), and for purposes of such definitions, the singular
shall include the plural and the plural shall include the singular, and
reference to one gender shall include the other gender. Note that some
definitions may not be used in this Plan, and may be inserted here solely for
possible use in Incentive Award Agreements issued under this Plan.

 

2.1       
Affiliate means
BHO Partners, LLC, Behringer Harvard Opportunity OP I, LP, Behringer Harvard
Opportunity Advisors I LP, Behringer Harvard Partners, LLC, Behringer Securities
LP, and HPT Management Services LP.

 

2.2       
Board means
the Board of Directors of the Company.

 

2.3       
Cause shall
mean an act or acts by an Eligible Recipient involving (a) the use for profit or
disclosure to unauthorized persons of confidential information or trade secrets
of the Company, a Parent or a Subsidiary, (b) the breach of any contract with
the Company, a Parent or a Subsidiary, (c) the violation of any fiduciary
obligation to the Company, a Parent or a Subsidiary, (d) the unlawful trading in
the securities of the Company, a Parent or a Subsidiary, or of another
corporation based on information gained as a result of the performance of
services for the Company, a Parent or a Subsidiary, (e) a felony conviction or
the failure to contest prosecution of a felony, or (f) willful misconduct,
dishonesty, embezzlement, fraud, deceit or civil rights violations, or other
unlawful acts.

 

2.4       
Change
of Control means
either of the following:

 

(a)       
any
transaction or series of transactions pursuant to which the Company sells,
transfers, leases, exchanges or disposes of substantially all (i.e., at least
eighty-five percent (85%)) of its assets for cash or property, or for a
combination of cash and property, or for other consideration; or

 

(b)       
any
transaction pursuant to which persons who are not current stockholders of the
Company acquire by merger, consolidation, reorganization, division or other
business combination or transaction, or by a purchase of an interest in the
Company, an interest in the Company so that after such transaction, the
stockholders of the Company immediately prior to such transaction no longer have
a controlling (i.e., 50% or
more) voting interest in the Company.

 

2.5       
Code means
the Internal Revenue Code of 1986, as amended.

 

2.6       
Committee means
any committee appointed by the Board to administer the Plan, as specified in
Section 5 hereof. Any such committee shall be comprised entirely of
Directors.

 

 

2.7       
Common
Stock means
the common stock of the Company.

 

2.8       
Company means
Behringer Harvard Opportunity REIT I, Inc., a Maryland corporation, and any
successor to such organization. 

 

2.9        Constructive
Discharge means a
termination of employment with the Company by an Employee due to any of the
following events if the
termination occurs within thirty (30) days of such event:

 

(a)      
Forced
Relocation or Transfer. The
Employee may continue employment with the Company, a Parent or a Subsidiary (or
a successor employer), but such employment is contingent on the Employee’s being
transferred to a site of employment which is located further than 50 miles from
the Employee’s current site of employment. For this purpose, an Employee’s site
of employment shall be the site of employment to which they are assigned as
their home base, from which their work is assigned, or to which they report, and
shall be determined by the Committee in its sole discretion on the basis of the
facts and circumstances.

 

(b)       
Decrease
in Salary or Wages. The
Employee may continue employment with the Company, a Parent or a Subsidiary (or
a successor employer), but such employment is contingent upon the Employee’s
acceptance of a salary or wage rate which is less than the Employee’s prior
salary or wage rate.

 

(c)      
Significant
and Substantial Reduction in Benefits. The
Employee may continue employment with the Company, a Parent or a Subsidiary (or
a successor employer), but such employment is contingent upon the Employee’s
acceptance of a reduction in the pension, welfare or fringe benefits provided
which is both significant and substantial when expressed as a dollar amount or
when expressed as a percentage of the Employee’s cash compensation. The
determination of whether a reduction in pension, welfare or fringe benefits is
significant and substantial shall be made on the basis of all pertinent facts
and circumstances, including the entire benefit (pension, welfare and fringe)
package provided to the Employee, and any salary or wages paid to the Employee.
However, notwithstanding the preceding, any modification or elimination of
benefits which results solely from the provision of new benefits to an Employee
by a successor employer as a result of a change of the Employee’s employment
from employment with the Company to employment with such successor shall not be
deemed a Significant and Substantial Reduction in Benefits where such new
benefits are identical to the benefits provided to similarly situated Employees
of the successor.

 

2.10      
Director means a
member of the Board. 

 

2.11      
Eligible
Recipient means an
Employee and/or a Key Person.

 

2.12      
Employee means a
common law employee of the Company, a Subsidiary, a Parent or an Affiliate.

 

2.13      
Exchange
Act means
the Securities Exchange Act of 1934, as amended. 

 

2.14      Exercise
Price means
the price that shall be paid to purchase one (1) Share upon the exercise of an
Option granted under this Plan. 

 

2.15      
Fair
Market Value of each
Share on any date means the price determined below as of the close of business
on such date (provided, however, if for any reason, the Fair Market Value per
share cannot be ascertained or is unavailable for such date, the Fair Market
Value per share shall be determined as of the nearest preceding date on which
such Fair Market Value can be ascertained): 

 

(a)       
If the
Share is listed or traded on any established stock exchange or a national market
system, including without limitation the National Market of the National
Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System,
its Fair Market Value shall be the closing sale price for the Share (or the mean
of the closing bid and ask prices, if no sales were reported), on such exchange
or system on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or

 

(b)       
If the
Share is not listed or traded on any established stock exchange or a national
market system, its Fair Market Value shall be the average of the closing dealer
"bid" and "ask" prices of a Share as reflected on 

2

 

the
NASDAQ interdealer quotation system of the National Association of Securities
Dealers, Inc. on the date of such determination; or

 

(c)       
In the
absence of an established public trading market for the Share, the Fair Market
Value of a Share shall be determined in good faith by the Board.

 

2.16      
FLSA
Exclusion means the
provisions of Section 7(e) of the Fair Labor Standards Act of 1938 (the “FLSA”)
that exempt certain stock-based compensation from inclusion in overtime
determinations under the FLSA. 

 

2.17      
Incentive
Award means an
ISO, a NQSO, a Restricted Stock Award, a Restricted Stock Unit, a Restricted
Unit Award, or a Stock Appreciation Right. 

 

2.18      
Incentive
Award Agreement means an
agreement between the Company, a Parent or a Subsidiary, and a Participant
evidencing an award of an Incentive Award. 

 

2.19     
Initial
Limited Partner shall
mean HPT Management LP, a Texas limited partnership.

 

2.20      
Insider means an
individual who is, on the relevant date, an officer, director or ten percent
(10%) beneficial owner of any class of the Company’s equity securities that is
registered pursuant to Section 12 of the Exchange Act, all as defined under
Section 16 of the Exchange Act. 

 

2.21      
ISO means an
option granted under this Plan to purchase Shares that is intended by the
Company to satisfy the requirements of Code §422 as an incentive stock option.

 

2.22      
Key
Person means
(1) a member of the Board who is not an Employee, or (2) a consultant or
advisor; provided, however, that such consultant or advisor must be a natural
person who is providing or will be providing bona
fide services
to the Company, a Subsidiary, a Parent or an Affiliate, with such services (1)
not being in connection with the offer or sale of securities in a
capital-raising transaction, and (2) not directly or indirectly promoting or
maintaining a market for securities of the Company, a Subsidiary, a Parent or an
Affiliate, within the meaning of the general instructions to SEC Form S-8.

 

2.23      
NQSO means an
option granted under this Plan to purchase Shares that is not intended by the
Company to satisfy the requirements of Code §422. 

 

2.24      
Option means an
ISO or a NQSO. 

 

2.25      
Outside
Director means a
Director who is not an Employee and who qualifies as (1) a “non-employee
director” under Rule 16b-3(b)(3) under the 1934 Act, as amended from time to
time, and (2) an “outside director” under Code §162(m) and the regulations
promulgated thereunder. 

 

2.26      
Parent means
any corporation (other than the corporation employing a Participant) in an
unbroken chain of corporations ending with the corporation employing a
Participant if, at the time of the granting of the Incentive Award, each of the
corporations other than the corporation employing the Participant owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporation in such chain. However, for
purposes of interpreting any Incentive Award Agreement issued under this Plan as
of a date of determination, Parent shall mean any corporation (other than the
corporation employing a Participant) in an unbroken chain of corporations ending
with the corporation employing a Participant if, at the time of the granting of
the Incentive Award and thereafter through such date of determination, each of
the corporations other than the corporation employing the Participant owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporation in such chain.

 

2.27      
Participant means an
individual who receives an Incentive Award hereunder. 

 

2.28      
Performance-Based
Exception means
the performance-based exception from the tax deductibility limitations of Code
§162(m). 

3

 

 

2.29      
Plan means
the Behringer Harvard Opportunity REIT I, Inc. Amended and Restated 2004
Incentive Award Plan, as may be amended from time to time. 

 

2.30      
Restricted
Stock Award means an
award of Shares granted to a Participant under this Plan whereby the Participant
has immediate rights of ownership in the Shares underlying the award, but such
Shares are subject to restrictions in accordance with the terms and provisions
of this Plan and the Incentive Award Agreement pertaining to the award and may
be subject to forfeiture by the individual until the earlier of (a) the time
such restrictions lapse or are satisfied, or (b) the time such shares are
forfeited, pursuant to the terms and provisions of the Incentive Award Agreement
pertaining to the award. 

 

2.31      
Restricted
Stock Unit means a
contractual right granted to a Participant under this Plan to receive a Share
that is subject to restrictions of this Plan and the applicable Incentive Award
Agreement. 

 

2.32      
Restricted
Unit Award means an
award of Units granted to a Participant under this Plan whereby the Participant
has immediate rights of ownership in the Units underlying the award, but such
Units are subject to restrictions in accordance with the terms and provisions of
this Plan and the Incentive Award Agreement pertaining to the award and may be
subject to forfeiture by the individual until the earlier of (a) the time such
restrictions lapse or are satisfied, or (b) the time such shares are forfeited,
pursuant to the terms and provisions of the Incentive Award Agreement pertaining
to the award.

 

2.33      
SAR
Exercise Price means
the amount per Share specified in an Incentive Award Agreement with respect to a
Stock Appreciation Right, the excess of the Fair Market Value of a Share over
and above such amount, the holder of such Stock Appreciation Right may be able
to receive upon the exercise or payment of such Stock Appreciation Right.

 

2.34       
Share means a
share of the Common Stock of the Company. 

 

2.35       
Stock
Appreciation Right means a
right granted to a Participant pursuant to the terms and provisions of this Plan
whereby the individual, without payment to the Company (except for any
applicable withholding or other taxes), receives cash, Shares, a combination
thereof, or such other consideration as the Board may determine, in an amount
equal to the excess of the Fair Market Value per Share on the date on which the
Stock Appreciation Right is exercised over the exercise price per Share noted in
the Stock Appreciation Right for each Share subject to the Stock Appreciation
Right. 

 

2.36       
Subsidiary means
any corporation (other than the corporation employing such Participant) in an
unbroken chain of corporations beginning with the corporation employing such
Participant if, at the time of the granting of the Incentive Award, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain. However, for
purposes of interpreting any Incentive Award Agreement issued under this Plan as
of a date of determination, Subsidiary shall mean any corporation (other than
the corporation employing such Participant) in an unbroken chain of corporations
beginning with the corporation employing such Participant if, at the time of the
granting of the Incentive Award and thereafter through such date of
determination, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

2.37       
Ten
Percent Stockholder means a
person who owns (after taking into account the attribution rules of Code
§424(d)) more than ten percent (10%) of the total combined voting power of all
classes of shares of stock of either the Company, a Subsidiary or a Parent.

 

2.38      
Unit shall
mean a “Profits Interest Unit” that represents the right to receive profits and
appreciation earned by, or which inure to, the Initial Limited Partner after the
date of issuance of such Unit.

4

 

 

Section
3.

Shares
& Units Subject to Incentive Awards

 

Shares
Subject to Incentive Awards. The
total number of Shares that may be issued pursuant to Incentive Awards under
this Plan (and the total number of Shares that may be issued pursuant to the
exercise of ISOs under this Plan) shall not exceed eleven million, as adjusted
pursuant to Section 10. Such Shares shall be reserved, to the extent that the
Company deems appropriate, from authorized but unissued Shares, and from Shares
which have been reacquired by the Company. Furthermore, any Shares subject to an
Incentive Award that remain after the cancellation, expiration or exchange of
such Incentive Award thereafter shall again become available for use under this
Plan. Notwithstanding anything herein to the contrary, no Participant may be
granted Incentive Awards covering an aggregate number of Shares in excess of
five million in any calendar year, and any Shares subject to an Incentive Award
which again become available for use under this Plan after the cancellation,
expiration or exchange of such Incentive Award thereafter shall continue to be
counted in applying this calendar year Participant limitation.

 

Section
4.

Effective
Date

 

The
effective date of this Plan shall be the date it is adopted by the Board, as
noted in resolutions effectuating such adoption, provided the stockholders of
the Company approve this Plan within twelve (12) months after such effective
date. If such effective date comes before such stockholder approval, any
Incentive Awards granted under this Plan before the date of such approval
automatically shall be granted subject to such approval. 

 

Section
5.

Administration

 

5.1       
General
Administration. This
Plan shall be administered by the Board. The Board, acting in its absolute
discretion, shall exercise such powers and take such action as expressly called
for under this Plan. The Board shall have the power to interpret this Plan and,
subject to the terms and provisions of this Plan, to take such other action in
the administration and operation of the Plan as it deems equitable under the
circumstances. The Board's actions shall be binding on the Company, on each
affected Eligible Recipient, and on each other person directly or indirectly
affected by such actions.

 

5.2       
Authority
of the Board. Except
as limited by law or by the Articles of Incorporation or Bylaws of the Company,
and subject to the provisions herein, the Board shall have full power to select
Eligible Recipients who shall participate in the Plan, to determine the sizes
and types of Incentive Awards in a manner consistent with the Plan, to determine
the terms and conditions of Incentive Awards in a manner consistent with the
Plan, to construe and interpret the Plan and any agreement or instrument entered
into under the Plan, to establish, amend or waive rules and regulations for the
Plan’s administration, and to amend the terms and conditions of any outstanding
Incentive Awards as allowed under the Plan and such Incentive Awards. Further,
the Board may make all other determinations that may be necessary or advisable
for the administration of the Plan.

 

5.3       
Delegation
of Authority. The
Board may delegate its authority under the Plan, in whole or in part, to a
Committee appointed by the Board consisting of not less
than one (1) Director or to one or more other persons to whom the powers of the
Board hereunder may be delegated in accordance with applicable law. The members
of the Committee and any other persons to whom authority has been delegated
shall be appointed from time to time by, and shall serve at the discretion of,
the Board. The Committee or other delegate (if appointed) shall act according to
the policies and procedures set forth in the Plan and to those policies and
procedures established by the Board, and the Committee or other delegate shall
have such powers and responsibilities as are set forth by the Board. Reference
to the Board in this Plan shall specifically include reference to the Committee
or other delegate where the Board has delegated its authority to the Committee
or other delegate, and any action by the Committee or other delegate pursuant to
a delegation of authority by the Board shall be deemed an action by the Board
under the Plan. Notwithstanding the above, the Board may assume the powers and
responsibilities granted to the Committee or other delegate at any time, in
whole or in part. With respect to Committee appointments and composition, only a
Committee (or a sub-committee thereof) comprised solely of two (2) or more
Outside Directors may grant Incentive Awards that will meet the
Performance-Based Exception, and only a 

5

 

Committee
comprised solely of Outside Directors may grant Incentive Awards to Insiders
that will be exempt from Section 16(b) of the Exchange Act. 

 

5.4       
Decisions
Binding. All
determinations and decisions made by the Board (or its delegate) pursuant to the
provisions of this Plan and all related orders and resolutions of the Board
shall be final, conclusive and binding on all persons, including the Company,
its stockholders, Directors, Eligible Recipients, Participants, and their
estates and beneficiaries, and the Initial Limited Partner, its partners, and
their estates and beneficiaries.

 

5.5       
Indemnification
for Decisions. No
member of the Board or the Committee (or a sub-committee thereof) shall be
liable in connection with or by reason of any act or omission performed or
omitted to be performed on behalf of the Company in such capacity, provided,
that the Board has determined, in good faith, that the course of conduct that
caused the loss or liability was in the best interests of the Company. Service
on the Committee (or a sub-committee thereof) shall constitute service as a
director of the Company so that the members of the Committee (or a sub-committee
thereof) shall be entitled to indemnification and reimbursement as directors of
the Company pursuant to its articles of incorporation, bylaws and applicable
law. In addition, the members of the Board, Committee (or a sub-committee
thereof) shall be indemnified by the Company against the following losses or
liabilities reasonably incurred in connection with or by reason of any act or
omission performed or omitted to be performed on behalf of the Company in such
capacity, provided, that the Board has determined, in good faith, that the
course of conduct which caused the loss or liability was in the best interests
of the Company: (a) the reasonable expenses, including attorneys’ fees actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, any Incentive
Award granted hereunder, and (b) against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such individual is
liable for gross negligence or misconduct in the performance of his duties,
provided that within 60 days after institution of any such action, suit or
proceeding a Committee member or delegatee shall in writing offer the Company
the opportunity, at its own expense, to handle and defend the same. The Company
shall not indemnify or hold harmless the member of the Board or the Committee
(or a subcommittee thereof) if: (a) in the case of a director (other than an
independent director of the Company), the loss or liability was the result of
negligence or misconduct by the director, or (b) in the case that the director
is an independent director of the Company, the loss or liability was the result
of gross negligence or willful misconduct by the director. Any indemnification
of expenses or agreement to hold harmless may be paid only out of the net assets
of the Company, and no portion may be recoverable from the
Stockholders.

 

5.6       
Units
as Incentive Awards. To the
extent that any Incentive Awards involve Units, the Board, acting for the
Company as manager of the Initial Limited Partner, shall cause the Initial
Limited Partner to issue Units pursuant to the terms and provisions of the
Plan.

 

Section
6.

Eligibility

 

Eligible
Recipients selected by the Board shall be eligible for the grant of Incentive
Awards under this Plan, but no Eligible Recipient shall have the right to be
granted an Incentive Award under this Plan merely as a result of his or her
status as an Eligible Recipient. Only Employees of the Company, a Parent or a
Subsidiary, shall be eligible to receive a grant of ISO’s.

 

Section
7

Terms
of Incentive Awards

 

7.1.       
Terms
and Conditions of All Incentive Awards.

(a)       
Grants
of Incentive Awards. The
Board, in its absolute discretion, shall grant Incentive Awards under this Plan
from time to time and shall have the right to grant new Incentive Awards in
exchange for outstanding Incentive Awards, including, but not limited to,
exchanges of Stock Options for the purpose of achieving a lower Exercise Price.
Incentive Awards shall be granted to Eligible Recipients selected by the Board,
and the Board shall 

6

be under
no obligation whatsoever to grant any Incentive Awards, or to grant Incentive
Awards to all Eligible Recipients, or to grant all Incentive Awards subject to
the same terms and conditions.

(b)       
Shares
& Units Subject to Incentive Awards. The
number of Shares or Units as to which an Incentive Award shall be granted shall
be determined by the Board in its sole discretion, subject to the provisions of
Section 3 as to the total number of Shares available for grants under the
Plan. 

(c)       
Incentive
Award Agreements. Each
Incentive Award shall be evidenced by an Incentive Award Agreement executed by
the Company, a Parent or a Subsidiary, and the Participant, which shall be in
such form and contain such terms and conditions as the Board in its discretion
may, subject to the provisions of the Plan, from time to time determine.

(d)       
Date
of Grant. The date
an Incentive Award is granted shall be the date on which the Board (1) has
approved the terms and conditions of the Incentive Award Agreement, (2) has
determined the recipient of the Incentive Award and the number of Shares or
Units covered by the Incentive Award and (3) has taken all such other action
necessary to direct the grant of the Incentive Award.

 

	 	
      7.2
	
      Terms
      and Conditions of Options. 
      

 

(a)       
Necessity
of Incentive Award Agreements. Each
grant of an Option shall be evidenced by an Incentive Award Agreement that shall
specify whether the Option is an ISO or NQSO, and incorporate such other terms
and conditions as the Board, acting in its absolute discretion, deems consistent
with the terms of this Plan, including (without limitation) a restriction on the
number of Shares subject to the Option that first become exercisable during any
calendar year. The Board and/or the Company shall have complete discretion to
modify the terms and provisions of an Option in accordance with Section 12 of
this Plan even though such modification may change the Option from an ISO to a
NQSO.

 

(b)       
Determining
Optionees. In
determining Eligible Recipient(s) to whom an Option shall be granted and the
number of Shares to be covered by such Option, the Board may take into account
the recommendations of the Chief Executive Officer of the Company and its other
officers, the duties of the Eligible Recipient, the present and potential
contributions of the Eligible Recipient to the success of the Company, and other
factors deemed relevant by the Board, in its sole discretion, in connection with
accomplishing the purpose of this Plan. An Eligible Recipient who has been
granted an Option to purchase Shares, whether under this Plan or otherwise, may
be granted one or more additional Options. If the Board grants an ISO and a NQSO
to an Eligible Recipient on the same date, the right of the Eligible Recipient
to exercise one such Option shall not be conditioned on his or her failure to
exercise the other such Option.

 

(c)       
Exercise
Price. Subject
to adjustment in accordance with Section 10 and the other provisions of
this Section, the Exercise Price shall be as set forth in the applicable
Incentive Award Agreement.  With respect to each grant of an ISO to a
Participant who is not a Ten Percent Stockholder, the Exercise Price shall not
be less than the Fair Market Value on the date the ISO is granted. With respect
to each grant of an ISO to a Participant who is a Ten Percent Stockholder, the
Exercise Price shall not be less than one hundred ten percent (110%) of the Fair
Market Value on the date the ISO is granted. If an Option is a NQSO, the
Exercise Price for each Share shall be no less than (1) the minimum price
required by applicable state law, or (2) the minimum price required by the
Company's governing instrument, or (3) $0.01, whichever price is greater. Any
Option intended to meet the Performance-Based Exception must be granted with an
Exercise Price equivalent to or greater than the Fair Market Value of the Shares
subject thereto determined as of the date of such grant. Any Option intended to
meet the FLSA Exclusion must be granted with an Exercise Price equivalent to or
greater than eighty-five percent (85%) of the Fair Market Value of the Shares
subject thereto on the date granted determined as of the date of such grant. Any
Option that is intended to avoid taxation under Code §409A as a “nonqualified
deferred compensation plan” must be granted with an Exercise Price equivalent to
or greater than the Fair Market Value of the Shares subject thereto determined
as of the date of such grant.

 

(d)       
Option
Term. 
Each Option granted under this Plan shall be exercisable in whole or in part at
such time or times as set forth in the related Incentive Award Agreement, but no
Incentive Award Agreement shall:

 

(i)       
make an
Option exercisable before the date such Option is granted; or

7

 

(ii)       
make an
Option exercisable after the earlier of:

 

(A)       
the date
such Option is exercised in full, or

 

(B)       
the date
that is the tenth (10th) anniversary of the date such Option is granted, if such
Option is a NQSO or an ISO granted to a non-Ten Percent Stockholder, or the date
that is the fifth (5th) anniversary of the date such Option is granted, if such
Option is an ISO granted to a Ten Percent Stockholder. An Incentive Award
Agreement may provide for the exercise of an Option after the employment of an
Employee has terminated for any reason whatsoever, including death or
disability. The Employee’s rights, if any, upon termination of employment will
be set forth in the applicable Incentive Award Agreement. 

 

(e)      
Payment. 
Options shall be exercised by the delivery of a written notice of exercise to
the Company, setting forth the number of Shares with respect to which the Option
is to be exercised accompanied by full payment for the Shares. Payment for
shares of Stock purchased pursuant to exercise of an Option shall be made in
cash or, unless the Incentive Award Agreement provides otherwise, by delivery to
the Company of a number of Shares that have been owned and completely paid for
by the holder for at least six (6) months prior to the date of exercise
(i.e., “mature
shares” for accounting purposes) having an aggregate Fair Market Value equal to
the amount to be tendered, or a combination thereof. In addition, unless the
Incentive Award Agreement provides otherwise, the Option may be exercised
through a brokerage transaction following registration of the Company's equity
securities under Section 12 of the Exchange Act as permitted under the
provisions of Regulation T applicable to cashless exercises promulgated by the
Federal Reserve Board, unless prohibited by Section 402 of the Sarbanes-Oxley
Act of 2002. However, notwithstanding the foregoing, with respect to any Option
recipient who is an Insider, a tender of shares or a cashless exercise must (1)
have met the requirements of an exemption under Rule 16b-3 promulgated under the
Exchange Act, or (2) be a subsequent transaction the terms of which were
provided for in a transaction initially meeting the requirements of an exemption
under Rule 16b-3 promulgated under the Exchange Act. Unless the Incentive Award
Agreement provides otherwise, the foregoing exercise payment methods shall be
subsequent transactions approved by the original grant of an Option. Except as
provided in subparagraph (f) below, payment shall be made at the time that
the Option or any part thereof is exercised, and no Shares shall be issued or
delivered upon exercise of an Option until full payment has been made by the
Participant.  The holder of an Option, as such, shall have none of the
rights of a stockholder. 

 

(f)       
Conditions
to Exercise of an Option. 
Each Option granted under the Plan shall vest and shall be exercisable at such
time or times, or upon the occurrence of such event or events, and in such
amounts, as the Board shall specify in the Incentive Award Agreement; provided,
however, that subsequent to the grant of an Option, the Board, at any time
before complete termination of such Option, may accelerate the time or times at
which such Option may vest or be exercised in whole or in part. Notwithstanding
the foregoing, an Option intended to meet the FLSA Exclusion shall not be
exercisable for at least six (6) months following the date it is granted, except
by reason of death, disability, retirement, a change in corporate ownership or
other circumstances permitted under regulations promulgated under the FLSA
Exclusion. Furthermore, if the recipient of an Option receives a hardship
distribution from a Code §401(k) plan of the Company, or any Parent or
Subsidiary, the Option may not be exercised during the six (6) month period
following the hardship distribution, unless the Company determines that such
exercise would not jeopardize the tax-qualification of the Code §401(k) plan.
The Board may impose such restrictions on any Shares acquired pursuant to the
exercise of an Option as it may deem advisable, including, without limitation,
vesting or performance-based restrictions, rights of the Company to re-purchase
Shares acquired pursuant to the exercise of an Option, voting restrictions,
investment intent restrictions, restrictions on transfer, “first refusal” rights
of the Company to purchase Shares acquired pursuant to the exercise of an Option
prior to their sale to any other person, “drag along” rights requiring the sale
of shares to a third party purchaser in certain circumstances, “lock up” type
restrictions in the case of an initial public offering of the Company’s stock,
restrictions or limitations or other provisions that would be applied to
stockholders under any applicable agreement among the stockholders, and
restrictions under applicable federal securities laws, under the requirements of
any stock exchange or market upon which such Shares are then listed and/or
traded, and/or under any blue sky or state securities laws applicable to such
Shares. 

 

(g)       
Transferability
of Options. 
An Option shall not be transferable or assignable except by will or by the laws
of descent and distribution and shall be exercisable, during the Participant's
lifetime, only by the Participant; provided, however, that in the event the
Participant is incapacitated and unable to exercise his or her Option, if such
Option is a NQSO, such Option may be exercised by such Participant's legal
guardian, legal representative, or other 

8

 

representative
whom the Board deems appropriate based on applicable facts and circumstances.
The determination of incapacity of a Participant and the determination of the
appropriate representative of the Participant who shall be able to exercise the
Option if the Participant is incapacitated shall be determined by the Board in
its sole and absolute discretion. Notwithstanding the foregoing, except as
otherwise provided in the Incentive Award Agreement, a NQSO may also be
transferred by a Participant as a bona fide gift (i) to his spouse, lineal
descendant or lineal ascendant, siblings and children by adoption, (ii) to a
trust for the benefit of one or more individuals described in clause (i) and no
other persons, or (iii) to a partnership of which the only partners are one or
more individuals described in clause (i), in which case the transferee shall be
subject to all provisions of the Plan, the Incentive Award Agreement and other
agreements with the Participant in connection with the exercise of the Option
and purchase of Shares. In the event of such a gift, the Participant shall
promptly notify the Board of such transfer and deliver to the Board such written
documentation as the Board may in its discretion request, including, without
limitation, the written acknowledgment of the donee that the donee is subject to
the provisions of the Plan, the Incentive Award Agreement and other agreements
with the Participant. 

 

(h)       
Special
Provisions for Certain Substitute Options. 
Notwithstanding anything to the contrary in this Section, any Option in
substitution for a stock option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code §424(a)
is applicable, may provide for an exercise price computed in accordance with
Code §424(a) and the regulations thereunder and may contain such other terms and
conditions as the Board may prescribe to cause such substitute Option to contain
as nearly as possible the same terms and conditions (including the applicable
vesting and termination provisions) as those contained in the previously issued
stock option being replaced thereby. 

 

(i)       
ISO
Tax Treatment Requirements. With
respect to any Option that purports to be an ISO, to the extent that the
aggregate Fair Market Value (determined as of the date of grant of such Option)
of stock with respect to which such Option is exercisable for the first time by
any individual during any calendar year exceeds one hundred thousand dollars
($100,000.00), such Option shall not be treated as an ISO in accordance with
Code §422(d). The rule of the preceding sentence is applied in the order in
which Options are granted. Also, with respect to any Option that purports to be
an ISO, such Option shall not be treated as an ISO if the Participant disposes
of shares acquired thereunder within two (2) years from the date of the granting
of the Option or within one (1) year of the exercise of the Option, or if the
Participant has not met the requirements of Code §422(a)(2).

 

(j)       
Potential
Repricing of Stock Options. With
respect to any Option granted pursuant to, and under, this Plan, the Board (or a
committee thereof) may determine that the repricing of all or any portion of
existing outstanding Options is appropriate without the need for any additional
approval of the Stockholders of the Company. For this purpose, “repricing” of
Options shall include, but not be limited to, any of the following actions (or
any similar action): (1) lowering the Exercise Price of an existing Option; (2)
any action which would be treated as a “repricing” under generally accepted
accounting principles; or (3) canceling of an existing Option at a time when its
Exercise Price exceeds the Fair Market Value of the underlying stock subject to
such Option, in exchange for another Option, a Restricted Stock Award, or other
equity in the Company. 

7.3       
Terms
and Conditions of Stock Appreciation Rights. A Stock
Appreciation Right may be granted in connection with all or any portion of a
previously or contemporaneously granted Option or not in connection with an
Option.  A Stock Appreciation Right shall entitle the Participant to
receive upon exercise or payment the excess of the Fair Market Value of a
specified number of Shares at the time of exercise, over a SAR Exercise
Price that shall be not less than the Exercise Price for that number of Shares
in the case of a Stock Appreciation Right granted in connection with a
previously or contemporaneously granted Option, or in the case of any other
Stock Appreciation Right, not less than one hundred percent (100%) of the Fair
Market Value of that number of Shares at the time the Stock Appreciation Right
was granted. The exercise of a Stock Appreciation Right shall result in a pro
rata surrender of the related Option to the extent the Stock Appreciation Right
has been exercised.

(a)       
Payment. Upon
exercise or payment of a Stock Appreciation Right, the Company shall pay to the
Participant the appreciation in cash or Shares (at the aggregate Fair Market
Value on the date of payment or exercise) as provided in the Incentive Award
Agreement or, in the absence of such provision, as the Board may determine. To
the extent that a Stock Appreciation Right is paid in cash, it shall nonetheless
be deemed paid in Shares for purposes of Section 3 hereof.

9

(b)       
Conditions
to Exercise. Each
Stock Appreciation Right granted under the Plan shall be exercisable at such
time or times, or upon the occurrence of such event or events, and in such
amounts, as the Board shall specify in the Incentive Award Agreement; provided,
however, that subsequent to the grant of a Stock Appreciation Right, the Board,
at any time before complete termination of such Stock Appreciation Right, may
accelerate the time or times at which such Stock Appreciation Right may be
exercised in whole or in part. The exercisability of a Stock Appreciation Right
that is intended to avoid taxation under Code §409A as a “nonqualified deferred
compensation plan” must be carefully restricted in accordance with Code §409A
requirements. Furthermore, if the recipient of a Stock Appreciation Right
receives a hardship distribution from a Code §401(k) plan of the Company, or any
Parent or Subsidiary, the Stock Appreciation Right may not be exercised during
the six (6) month period following the hardship distribution, unless the Company
determines that such exercise would not jeopardize the tax-qualification of the
Code §401(k) plan. 

(c)      
Transferability
of Stock Appreciation Rights. Except
as otherwise provided in a Participant’s Incentive Award Agreement, no Stock
Appreciation Right granted under the Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant’s Incentive Award Agreement, all Stock Appreciation Rights granted
to a Participant under the Plan shall be exercisable, during the Participant's
lifetime, only by the Participant; provided,
however, that in
the event the Participant is incapacitated and unable to exercise his or her
Stock Appreciation Right, such Stock Appreciation Right may be exercised by such
Participant's legal guardian, legal representative, or other representative whom
the Board deems appropriate based on applicable facts and circumstances in
accordance with the terms and provisions of the Incentive Award Agreement
governing such Stock Appreciation Right.. The determination of incapacity of a
Participant and the determination of the appropriate representative of the
Participant shall be determined by the Board in its sole and absolute
discretion. Notwithstanding the foregoing, except as otherwise provided in the
Incentive Award Agreement, (A) a Stock Appreciation Right which is granted in
connection with the grant of a NQSO may be transferred, but only with the NQSO,
and (B) a Stock Appreciation Right which is not granted in connection with the
grant of a NQSO, may be transferred by the Participant as a bona fide gift (i)
to his spouse, lineal descendant or lineal ascendant, siblings and children by
adoption, (ii) to a trust for the benefit of one or more individuals described
in clause (i), or (iii) to a partnership of which the only partners are one or
more individuals described in clause (i), in which case the transferee shall be
subject to all provisions of the Plan, the Incentive Award Agreement and other
agreements with the Participant in connection with the exercise of the Stock
Appreciation Right. In the event of such a gift, the Participant shall promptly
notify the Board of such transfer and deliver to the Board such written
documentation as the Board may in its discretion request, including, without
limitation, the written acknowledgment of the donee that the donee is subject to
the provisions of the Plan, the Incentive Award Agreement and other agreements
with the Participant in connection with the exercise of the Stock Appreciation
Right.

(d)      
Special
Provisions for Tandem SAR’s. A Stock
Appreciation Right granted in connection with an Option may only be exercised to
the extent that the related Option has not been exercised. A Stock Appreciation
Right granted in connection with an ISO (1) will expire no later than the
expiration of the underlying ISO, (2) may be for no more than the difference
between the exercise price of the underlying ISO and the Fair Market Value of
the Shares subject to the underlying ISO at the time the Stock Appreciation
Right is exercised, (3) may be transferable only when, and under the same
conditions as, the underlying ISO is transferable, and (4) may be exercised only
(i) when the underlying ISO could be exercised and (ii) when the Fair Market
Value of the Shares subject to the ISO exceeds the exercise price of the
ISO.

(e)       
Code
§409A Requirements. A Stock
Appreciation Right must meet certain restrictions contained in Code §409A if it
is to avoid taxation under Code §409A as a “nonqualified deferred compensation
plan.” No Stock Appreciation Right should be granted under this Plan without
careful consideration of the impact of Code §409A with respect to such grant
upon both the Company and the recipient of the Stock Appreciation
Right.

7.4       
Terms
and Conditions of Restricted Stock Awards. 

(a)       
Grants
of Restricted Stock Awards. Shares
awarded pursuant to Restricted Stock Awards shall be subject to such
restrictions as determined by the Board for periods determined by the
Board.  Restricted Stock Awards issued under the Plan may have restrictions
which lapse based upon the service of a Participant, or based upon the
attainment (as determined by the Board) of performance goals established
pursuant to the business criteria listed in 

10

Section
14, or based upon any other criteria that the Board may determine appropriate.
Any Restricted Stock Award which becomes exercisable based on the attainment of
performance goals must be granted by a Committee, must have its performance
goals determined by such a Committee based upon one or more of the business
criteria listed in Section 14, and must have the attainment of such performance
goals certified in writing by such a Committee in order to meet the
Performance-Based Exception. The Board may require a cash payment from the
Participant in exchange for the grant of a Restricted Stock Award or may grant a
Restricted Stock Award without the requirement of a cash payment; provided,
however, if the recipient of a Restricted Stock Award receives a hardship
distribution from a Code §401(k) plan of the Company, or any Parent or
Subsidiary, the recipient may not pay any amount for such Restricted Stock Award
during the six (6) month period following the hardship distribution, unless the
Company determines that such payment would not jeopardize the tax-qualification
of the Code §401(k) plan.

(b)       
Acceleration
of Award. The
Board shall have the power to permit, in its discretion, an acceleration of the
expiration of the applicable restrictions or the applicable period of such
restrictions with respect to any part or all of the Shares awarded to a
Participant. 

(c)       
Necessity
of Incentive Award Agreement. Each
grant of a Restricted Stock Award shall be evidenced by an Incentive Award
Agreement that shall specify the terms, conditions and restrictions regarding
the Shares awarded to a Participant, and shall incorporate such other terms and
conditions as the Board, acting in its absolute discretion, deems consistent
with the terms of this Plan. The Board shall have complete discretion to modify
the terms and provisions of Restricted Stock Awards in accordance with Section
12 of this Plan.

(d)       
Restrictions
on Shares Awarded. Shares
awarded pursuant to Restricted Stock Awards shall be subject to such
restrictions as determined by the Board for periods determined by the Board. The
Board may impose such restrictions on any Shares acquired pursuant to a
Restricted Stock Award as it may deem advisable, including, without limitation,
vesting or performance-based restrictions, rights of the Company to re-purchase
Shares acquired pursuant to the Restricted Stock Award, voting restrictions,
investment intent restrictions, restrictions on transfer, “first refusal” rights
of the Company to purchase Shares acquired pursuant to the Restricted Stock
Award prior to their sale to any other person, “drag along” rights requiring the
sale of shares to a third party purchaser in certain circumstances, “lock up”
type restrictions in connection with public offerings of the Company’s stock,
restrictions or limitations or other provisions that would be applied to
stockholders under any applicable agreement among the stockholders, and
restrictions under applicable federal securities laws, under the requirements of
any stock exchange or market upon which such Shares are then listed and/or
traded, and/or under any blue sky or state securities laws applicable to such
Shares.

(e)       
Transferability
of Restricted Stock Awards. A
Restricted Stock Award may not be transferred by the holder Participant, except
upon the death of the holder Participant by will or by the laws of descent and
distribution.

(f)       
Voting,
Dividend & Other Rights. Unless
the applicable Incentive Award Agreement provides otherwise, holders of
Restricted Stock Awards shall be entitled to vote and shall receive dividends
during the periods of restriction. 

7.5       
Terms
and Conditions of Restricted Stock Units. 

(a)       
Grants
of Restricted Stock Units. A
Restricted Stock Unit shall entitle the Participant to receive one Share at such
future time and upon such terms as specified by the Board in the Incentive Award
Agreement evidencing such award. Restricted Stock Units issued under the Plan
may have restrictions which lapse based upon the service of a Participant, or
based upon other criteria that the Board may determine appropriate. The Board
may require a cash payment from the Participant in exchange for the grant of
Restricted Stock Units or may grant Restricted Stock Units without the
requirement of a cash payment; provided, however, if the recipient of a
Restricted Stock Unit receives a hardship distribution from a Code §401(k) plan
of the Company, or any Parent or Subsidiary, no payment for the Restricted Stock
Unit may be made by the recipient during the six (6) month period following the
hardship distribution, unless the Company determines that such payment would not
jeopardize the tax-qualification of the Code §401(k) plan. 

(b)       
Vesting
of Restricted Stock Units. The
Board shall establish the vesting schedule applicable to Restricted Stock Units
and shall specify the times, vesting and performance goal requirements. Until
the end of the 

11

period(s)
of time specified in the vesting schedule and/or the satisfaction of any
performance criteria, the Restricted Stock Units subject to such Incentive Award
Agreement shall remain subject to forfeiture.

(c)       
Acceleration
of Award. The
Board shall have the power to permit, in its sole discretion, an acceleration of
the applicable restrictions or the applicable period of such restrictions with
respect to any part or all of the Restricted Stock Units awarded to a
Participant. 

(d)       
Necessity
of Incentive Award Agreement. Each
grant of Restricted Stock Unit(s) shall be evidenced by an Incentive Award
Agreement that shall specify the terms, conditions and restrictions regarding
the Participant's right to receive Share(s) in the future, and shall incorporate
such other terms and conditions as the Board, acting in its sole discretion,
deems consistent with the terms of this Plan. The Board shall have sole
discretion to modify the terms and provisions of Restricted Stock Unit(s) in
accordance with Section 12 of this Plan.

(e)       
Transferability
of Restricted Stock Units. Except
as otherwise provided in a Participant's Restricted Stock Unit Award, no
Restricted Stock Unit granted under the Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated by the holder Participant,
except upon the death of the holder Participant by will or by the laws of
descent and distribution. 

(f)       
Voting,
Dividend & Other Rights. Unless
the applicable Incentive Award Agreement provides otherwise, holders of
Restricted Stock Units shall not be entitled to vote or to receive dividends
until they become owners of the Shares pursuant to their Restricted Stock Units.

(g)       
Code
§409A Requirements. A
Restricted Stock Unit must meet certain restrictions contained in Code §409A if
it is to avoid taxation under Code §409A as a “nonqualified deferred
compensation plan.” No Restricted Stock Unit should be granted under this Plan
without careful consideration of the impact of Code §409A with respect to such
grant upon both the Company and the recipient of the Restricted Stock
Unit.

 

7.6       
Terms
and Conditions of Restricted Unit Awards. 

(a)       
Grants
of Restricted Stock Units. Units
awarded pursuant to Restricted Unit Awards shall be subject to such restrictions
as determined by the Board for periods determined by the Board. Restricted Unit
Awards issued under the Plan may have restrictions that lapse based upon the
service of a Participant, or based upon the attainment (as determined by the
Board) or performance goals established pursuant to the business criteria listed
in Section 14, or based upon any other criteria that the Board may determine
appropriate. Any Restricted Stock Unit which becomes exercisable based on the
attainment of performance goals must be granted by a Committee, must have its
performance goals determined by such a Committee based upon one or more of the
business criteria listed in Section 14, and must have the attainment of such
performance goals certified in writing by such a Committee in order to meet the
Performance-Based Exception. 

(b)       
Acceleration
of Award. The
Board shall have the power to permit, in its discretion, an acceleration of the
expiration of he applicable restrictions or the applicable period of such
restrictions with respect to any part or all of the Units awarded to a
Participant.

(c)       
Necessity
of Incentive Award Agreement. Each
grant of a Restricted Unit Award shall be evidenced by an Incentive Award
Agreement that shall specify the terms, conditions and restrictions regarding
the Units awarded to a Participant, and shall incorporate such other terms and
conditions as the Board, acting in its absolute discretion, deems consistent
with the terms of this Plan. The Board shall have complete discretion to modify
the terms and provisions of Restricted Unit Awards in accordance with Section 12
of this Plan.

(d)       
Restrictions
on Units Awarded. Units
awarded pursuant to Restricted Unit Awards shall be subject to such restrictions
as determined by the Board for periods determined by the Board. The Board may
impose such restrictions on any Units acquired pursuant to a Restricted Stock
Award as it may deem advisable, including, without limitation, vesting or
performance-based restrictions, rights of the Company to re-purchase Units
acquired pursuant to the Restricted Units Award, voting restrictions, investment
intent restrictions, restrictions on transfer, “first refusal” rights of the
Company to purchase Units acquired pursuant to the Restricted Unit Award prior
to their sale to any other person, 

12

“drag
along” rights requiring the sale of Units to a third party purchaser in certain
circumstances, restrictions or limitations or other provisions that would be
applied to other holders of Units under any applicable agreement among the
holders of Units or under the limited liability company agreement of the Initial
Limited Partner, and restrictions under applicable federal securities laws,
and/or under any blue sky or state securities laws applicable to such
Units.

(e)       
Transferability
of Restricted Unit Awards. A
Restricted Unit Award may not be transferred by the holder Participant, except
upon the death of the holder Participant by will or by the laws of descent and
distribution.

(f)       
Other
Rights. The
holders of Restricted Unit Awards shall be entitled to only such rights as are
afforded such holders under the limited liability company agreement of the
Initial Limited Partner.

(g)       
Code
§409A Requirements. A
Restricted Unit Award must meet certain restrictions contained in Code §409A if
it is to avoid taxation under Code §409A as a “nonqualified deferred
compensation plan.” No Restricted Unit Award should be granted under this Plan
without careful consideration of the impact of Code §409A with respect to such
grant upon both the Company and the recipient of the Restricted Unit
Award.

 

Section
8.

Securities
Regulation

 

Each
Incentive Award Agreement may provide that, upon the receipt of Shares or Units
as a result of the exercise of an Incentive Award or otherwise, the Participant
shall, if so requested by the Company, hold such Shares or Units for investment
and not with a view of resale or distribution to the public and, if so requested
by the Company, shall deliver to the Company and/or the Initial Limited Partner
a written statement satisfactory to the Company to that effect. Each Incentive
Award Agreement may also provide that, if so requested by the Company, the
Participant shall make a written representation to the Company and/or the
Initial Limited Partner that he or she will not sell or offer to sell any of
such Shares or Units unless a registration statement shall be in effect with
respect to such Shares or Units under the Securities Act of 1933, as amended
("1933 Act"), and any applicable state securities law or, unless he or she shall
have furnished to the Company an opinion, in form and substance satisfactory to
the Company, of legal counsel acceptable to the Company, that such registration
is not required. Certificates representing the Shares or Units transferred upon
the exercise of an Incentive Award granted under this Plan may at the discretion
of the Company bear a legend to the effect that such Shares or Units have not
been registered under the 1933 Act or any applicable state securities law and
that such Shares or Units may not be sold or offered for sale in the absence of
an effective registration statement as to such Shares or Units under the 1933
Act and any applicable state securities law or an opinion, in form and substance
satisfactory to the Company, of legal counsel acceptable to the Company, that
such registration is not required.

 

Section
9.

Life
of Plan

 

No
Incentive Award shall be granted under this Plan on or after the earlier of:

 

(a)       
the tenth
(10th) anniversary of the effective date of this Plan (as determined under
Section 4 of this Plan), in which event this Plan otherwise thereafter shall
continue in effect until all outstanding Incentive Awards have been exercised in
full or no longer are exercisable, or

 

(b)       
the date
on which all of the Shares reserved under Section 3 of this Plan have (as a
result of the exercise of Incentive Awards granted under this Plan or lapse of
all restrictions under a Restricted Stock Award or Restricted Unit Award or
Restricted Stock Unit) been issued or no longer are available for use under this
Plan, in which event this Plan also shall terminate on such date.

 

This Plan
shall continue in effect until all outstanding Incentive Awards have been
exercised in full or are no longer exercisable and all Restricted Stock Awards
or Restricted Stock Units or Restricted Unit Awards have vested or been
forfeited.

13

 

 

Section
10.

Adjustment

 

Notwithstanding
anything in Section 12 to the contrary, the number of Shares reserved under
Section 3 of this Plan, the limit on the number of Shares that may be granted
during a calendar year to any individual under Section 3 of this Plan, the
number of Shares or Units subject to Incentive Awards granted under this Plan,
and the Exercise Price of any Options and the SAR Exercise Price of any Stock
Appreciation Rights, shall be adjusted by the Board in an equitable manner to
reflect any change in the capitalization of the Company or the Initial Limited
Partner, including, but not limited to, such changes as stock dividends or stock
splits. Furthermore, the Board shall have the right to adjust (in a manner that
satisfies the requirements of Code §424(a)) the number of Shares reserved under
Section 3, and the number of Shares or Units subject to Incentive Awards granted
under this Plan, and the Exercise Price of any Options and the SAR Exercise
Price of any Stock Appreciation Rights in the event of any corporate transaction
described in Code §424(a) that provides for the substitution or assumption of
such Incentive Awards. If any adjustment under this Section creates a fractional
Share or a right to acquire a fractional Share or Unit, such fractional Share or
Unit shall be disregarded, and the number of Shares or Units reserved under this
Plan and the number subject to any Incentive Awards granted under this Plan
shall be the next lower number of Shares or Units, rounding all fractions
downward. An adjustment made under this Section by the Board shall be conclusive
and binding on all affected persons and, further, shall not constitute an
increase in the number of Shares reserved under Section 3.

 

 

Section
11.

Change
of Control of the Company

 

11.1       
General
Rule for Options. Except
as otherwise provided in an Incentive Award Agreement, if a Change of Control
occurs, and if the agreements effectuating the Change of Control do not provide
for the assumption or substitution of all Options granted under this Plan, with
respect to any Option granted under this Plan that is not so assumed or
substituted (a “Non-Assumed Option”), the Committee, in its sole and absolute
discretion, may, with respect to any or all of such Non-Assumed Options, take
any or all of the following actions to be effective as of the date of the Change
of Control (or as of any other date fixed by the Committee occurring within the
thirty (30) day period ending on the date of the Change of Control, but only if
such action remains contingent upon the effectuation of the Change of Control)
(such date referred to as the “Action Effective Date”):

 

(a)       
Accelerate
the vesting and/or exercisability of such Non-Assumed Option; and/or

 

(b)       
Unilaterally
cancel any such Non-Assumed Option which has not vested and/or which has not
become exercisable as of the Action Effective Date; and/or

 

(c)     
Unilaterally
cancel such Non-Assumed Option in exchange for:

 

(i)       
whole
and/or fractional Shares (or for whole Shares and cash in lieu of any fractional
Share) that, in the aggregate, are equal in value to the excess of the Fair
Market Value of the Shares that could be purchased subject to such Non-Assumed
Option determined as of the Action Effective Date (taking into account vesting
and/or exercisability) over the aggregate Exercise Price for such Shares;
or

 

(ii)       
cash or
other property equal in value to the excess of the Fair Market Value of the
Shares that could be purchased subject to such Non-Assumed Option determined as
of the Action Effective Date (taking into account vesting and/or exercisability)
over the aggregate Exercise Price for such Shares; and/or 

 

(d)       
Unilaterally
cancel such Non-Assumed Option after providing the holder of such Option with
(1) an opportunity to exercise such Non-Assumed Option to the extent vested
and/or exercisable within a specified period prior to the date of the Change of
Control, and (2) notice of such opportunity to exercise prior to the
commencement of such specified period; and/or

14

 

(e)       
Unilaterally
cancel such Non-Assumed Option and notify the holder of such Option of such
action, but only if the Fair Market Value of the Shares that could be purchased
subject to such Non-Assumed Option determined as of the Action Effective Date
(taking into account vesting and/or exercisability) does not exceed the
aggregate Exercise Price for such Shares.

 

However,
notwithstanding the foregoing, to the extent that the recipient of a Non-Assumed
Option is an Insider, payment of cash in lieu of whole or fractional Shares or
shares of a successor may only be made to the extent that such payment (1) has
met the requirements of an exemption under Rule 16b-3 promulgated under the
Exchange Act, or (2) is a subsequent transaction the terms of which were
provided for in a transaction initially meeting the requirements of an exemption
under Rule 16b-3 promulgated under the Exchange Act. Unless an Incentive Award
Agreement provides otherwise, the payment of cash in lieu of whole or fractional
Shares or in lieu of whole or fractional shares of a successor shall be
considered a subsequent transaction approved by the original grant of an
Option.

 

11.2       
General
Rule for SARs. Except
as otherwise provided in an Incentive Award Agreement, if a Change of Control
occurs, and if the agreements effectuating the Change of Control do not provide
for the assumption or substitution of all Stock Appreciation Rights granted
under this Plan, with respect to any Stock Appreciation Right granted under this
Plan that is not so assumed or substituted (a “Non-Assumed SAR”), the Committee,
in its sole and absolute discretion, may, with respect to any or all of such
Non-Assumed SARs, take either or both of the following actions to be effective
as of the date of the Change of Control (or as of any other date fixed by the
Committee occurring within the thirty (30) day period ending on the date of the
Change of Control, but only if such action remains contingent upon the
effectuation of the Change of Control) (such date referred to as the “Action
Effective Date”):

 

(a)       
Accelerate
the vesting and/or exercisability of such Non-Assumed SAR; and/or 

 

(b)       
Unilaterally
cancel any such Non-Assumed SAR which has not vested or which has not become
exercisable as of the Action Effective Date; and/or

 

(c)       
Unilaterally
cancel such Non-Assumed SAR in exchange for:

 

(i)       
whole
and/or fractional Shares (or for whole Shares and cash in lieu of any fractional
Share) that, in the aggregate, are equal in value to the excess of the Fair
Market Value of the Shares subject to such Non-Assumed SAR determined as of the
Action Effective Date (taking into account vesting and/or exercisability) over
the SAR Exercise Price for such Non-Assumed SAR; or

 

(ii)      
cash or
other property equal in value to the excess of the Fair Market Value of the
Shares subject to such Non-Assumed SAR determined as of the Action Effective
Date (taking into account vesting and/or exercisability) over the SAR Exercise
Price for such Non-Assumed SAR; and/or

 

(d)       
Unilaterally
cancel such Non-Assumed SAR after providing the holder of such SAR with (1) an
opportunity to exercise such Non-Assumed SAR to the extent vested and/or
exercisable within a specified period prior to the date of the Change of
Control, and (2) notice of such opportunity to exercise prior to the
commencement of such specified period; and/or

 

(e)       
Unilaterally
cancel such Non-Assumed SAR and notify the holder of such SAR of such action,
but only if the Fair Market Value of the Shares that could be purchased subject
to such Non-Assumed SAR determined as of the Action Effective Date (taking into
account vesting and/or exercisability) does not exceed the SAR Exercise Price
for such Non-Assumed SAR.

 

However,
notwithstanding the foregoing, to the extent that the recipient of a Non-Assumed
SAR is an Insider, payment of cash in lieu of whole or fractional Shares or
shares of a successor may only be made to the extent that such payment (1) has
met the requirements of an exemption under Rule 16b-3 promulgated under the
Exchange Act, or (2) is a subsequent transaction the terms of which were
provided for in a transaction initially meeting the requirements of an exemption
under Rule 16b-3 promulgated under the Exchange Act. Unless an Incentive Award
Agreement provides otherwise, the payment of cash in lieu of whole or fractional
Shares or in lieu of whole or fractional shares of a successor shall be
considered a subsequent transaction approved by the original grant of a
SAR.

15

 

 

11.3       
General
Rule for Restricted Stock Units. Except
as otherwise provided in an Incentive Award Agreement, if a Change of Control
occurs, and if the agreements effectuating the Change of Control do not provide
for the assumption or substitution of all Restricted Stock Units granted under
this Plan, with respect to any Restricted Stock Unit granted under this Plan
that is not so assumed or substituted (a “Non-Assumed RSU”), the Committee, in
its sole and absolute discretion, may, with respect to any or all of such
Non-Assumed RSUs, take either or both of the following actions to be effective
as of the date of the Change of Control (or as of any other date fixed by the
Committee occurring within the thirty (30) day period ending on the date of the
Change of Control, but only if such action remains contingent upon the
effectuation of the Change of Control) (such date referred to as the “Action
Effective Date”):

 

(a)       
Accelerate
the vesting of such Non-Assumed RSU; and/or 

 

(b)       
Unilaterally
cancel any such Non-Assumed RSU which has not vested as of the Action Effective
Date; and/or

 

(c)     
Unilaterally
cancel such Non-Assumed RSU in exchange for:

 

(i)       
whole
and/or fractional Shares (or for whole Shares and cash in lieu of any fractional
Share) that are equal to the number of Shares subject to such Non-Assumed RSU
determined as of the Action Effective Date (taking into account vesting);
or

 

(ii)      
cash or
other property equal in value to the Fair Market Value of the Shares subject to
such Non-Assumed RSU determined as of the Action Effective Date (taking into
account vesting); and/or

 

(d)       
Unilaterally
cancel such Non-Assumed RSU and notify the holder of such RSU of such action,
but only if the Fair Market Value of the Shares that were subject to such
Non-Assumed RSU determined as of the Action Effective Date (taking into account
vesting) is zero.

 

However,
notwithstanding the foregoing, to the extent that the recipient of a Non-Assumed
RSU is an Insider, payment of cash in lieu of whole or fractional Shares or
shares of a successor may only be made to the extent that such payment (1) has
met the requirements of an exemption under Rule 16b-3 promulgated under the
Exchange Act, or (2) is a subsequent transaction the terms of which were
provided for in a transaction initially meeting the requirements of an exemption
under Rule 16b-3 promulgated under the Exchange Act. Unless an Incentive Award
Agreement provides otherwise, the payment of cash in lieu of whole or fractional
Shares or in lieu of whole or fractional shares of a successor shall be
considered a subsequent transaction approved by the original grant of an
RSU.

 

11.4       
General
Rule for Other Incentive Award Agreements. If a
Change of Control occurs, then, except to the extent otherwise provided in the
Incentive Award Agreement pertaining to a particular Incentive Award or as
otherwise provided in this Plan, each Incentive Award shall be governed by
applicable law and the documents effectuating the Change of Control.

 

Section
12.

Amendment
or Termination

 

This Plan
may be amended by the Board from time to time to the extent that the Board deems
necessary or appropriate; provided, however, no such amendment shall be made
absent the approval of the stockholders of the Company (a) to increase the
number of Shares reserved under Section 3, except as set forth in Section 10,
(b) to extend the maximum life of the Plan under Section 9 or the maximum
exercise period under Section 7, (c) to decrease the minimum Exercise Price
under Section 7, or (d) to change the designation of Eligible Recipients
eligible for Incentive Awards under Section 6. Stockholder approval of other
material amendments (such as an expansion of the types of awards available under
the Plan, an extension of the term of the Plan, a change to the method of
determining the Exercise Price of Options issued under the Plan, or a change to
the provisions of Section 7.2(j)) may also be required pursuant to rules
promulgated by an established stock exchange or a national market system if the
Company is, or become, listed or traded on any such established stock exchange
or national market system, or for the Plan to continue to be able to issue
Incentive Awards which meet the Performance-Based Exception. The Board also may
suspend the granting of Incentive Awards under this Plan at any time and may
terminate this Plan at any time. The Company shall have the right to

16

 

modify,
amend or cancel any Incentive Award after it has been granted if (I) the
modification, amendment or cancellation does not diminish the rights or benefits
of the Incentive Award recipient under the Incentive Award (provided, however,
that a modification, amendment or cancellation that results solely in a change
in the tax consequences with respect to an Incentive Award shall not be deemed
as a diminishment of rights or benefits of such Incentive Award), (II) the
Participant consents in writing to such modification, amendment or cancellation,
(III) there is a dissolution or liquidation of the Company, (IV) this Plan
and/or the Incentive Award Agreement expressly provides for such modification,
amendment or cancellation, or (V) the Company would otherwise have the right to
make such modification, amendment or cancellation by applicable law.

 

Section
13.

Miscellaneous

 

13.1       
Stockholder
or Unit-holder Rights. No
Participant shall have any rights as a stockholder of the Company or a Unit
holder of the Initial Limited Partner as a result of the grant of an Incentive
Award to him or to her under this Plan or his or her exercise of such Incentive
Award pending the actual delivery of Shares or Units subject to such Incentive
Award to such Participant.

 

13.2       
No
Guarantee of Continued Relationship. The
grant of an Incentive Award to a Participant under this Plan shall not
constitute a contract of employment and shall not confer on a Participant any
rights upon his or her termination of employment or relationship with the
Company in addition to those rights, if any, expressly set forth in the
Incentive Award Agreement that evidences his or her Incentive
Award.

 

13.3       
Withholding. The
Company shall have the power and the right to deduct or withhold, or require a
Participant to remit to the Company as a condition precedent for the fulfillment
of any Incentive Award, an amount sufficient to satisfy Federal, state and local
taxes, domestic or foreign, required by law or regulation to be withheld with
respect to any taxable event arising as a result of this Plan and/or any action
taken by a Participant with respect to an Incentive Award. Whenever Shares are
to be issued to a Participant upon exercise of an Option or a Stock Appreciation
Right, or satisfaction of conditions under a Restricted Stock Unit, or grant of
or substantial vesting of a Restricted Stock Award, the Company shall have the
right to require the Participant to remit to the Company, as a condition of
exercise of the Option or Stock Appreciation Right, or as a condition to the
fulfillment of the Restricted Stock Unit, or as a condition to the grant or
substantial vesting of the Restricted Stock Award, an amount in cash (or, unless
the Incentive Award Agreement provides otherwise, in Shares) sufficient to
satisfy federal, state and local withholding tax requirements at the time of
such exercise, satisfaction of conditions, or grant or substantial vesting.
However, notwithstanding the foregoing, to the extent that a Participant is an
Insider, satisfaction of withholding requirements by having the Company withhold
Shares may only be made to the extent that such withholding of Shares (1) has
met the requirements of an exemption under Rule 16b-3 promulgated under the
Exchange Act, or (2) is a subsequent transaction the terms of which were
provided for in a transaction initially meeting the requirements of an exemption
under Rule 16b-3 promulgated under the Exchange Act. Unless the Incentive Award
Agreement provides otherwise, the withholding of shares to satisfy federal,
state and local withholding tax requirements shall be a subsequent transaction
approved by the original grant of an Incentive Award. Notwithstanding the
foregoing, in no event shall payment of withholding taxes be made by a retention
of Shares by the Company unless the Company retains only Shares with a Fair
Market Value equal to the minimum amount of taxes required to be
withheld.

 

13.4       
Notification
of Disqualifying Dispositions of ISO Options. If a
Participant sells or otherwise disposes of any of the Shares acquired pursuant
to an Option that is an ISO on or before the later of (1) the date two (2) years
after the date of grant of such Option, or (2) the date one (1) year after the
exercise of such Option, then the Participant shall immediately notify the
Company in writing of such sale or disposition and shall cooperate with the
Company in providing sufficient information to the Company for the Company to
properly report such sale or disposition to the Internal Revenue Service. The
Participant acknowledges and agrees that he may be subject to federal, state
and/or local tax withholding by the Company on the compensation income
recognized by Participant from any such early disposition, and agrees that he
shall include the compensation from such early disposition in his gross income
for federal tax purposes. Participant also acknowledges that the Company may
condition the exercise of any Option that is an ISO on the Participant’s express
written agreement with these provisions of this Plan.

17

 

 

13.5       
Transfer. The
transfer of an Employee between or among the Company, a Subsidiary or a Parent
shall not be treated as a termination of his or her employment under this Plan.
The transfer of an Employee between or among the Company and the Initial Limited
Partner shall also not be treated as a termination of his or her employment
under this Plan. However, notwithstanding the foregoing, a termination of
employment may nonetheless occur for purposes of determining whether an Option
will satisfy the requirements of the Code to be an ISO.

 

13.6       
Construction. This
Plan shall be construed under the laws of the State of Maryland.

 

Section
14.

Performance
Criteria

 

14.1       
Performance
Goal Business Criteria. Unless
and until the Board proposes for stockholder vote and stockholders approve a
change in the general performance measures set forth in this Section, the
attainment of which may determine the degree of payout and/or vesting with
respect to Incentive Awards to Employees and Key Persons pursuant to this Plan
which are designed to qualify for the Performance-Based Exception, the
performance measure(s) to be used by a Committee composed of two (2) or more
Outside Directors for purposes of such grants shall be chosen from among the
following:

 

(a)       
Earnings
per share;

 

(b)       
Net
income (before or after taxes);

 

(c)       
Return
measures (including, but not limited to, return on assets, equity or
sales);

 

(d)       
Cash flow
return on investments which equals net cash flows divided by owners
equity;

 

(e)       
Earnings
before or after taxes, depreciation and/or amortization;

 

(f)       
Gross
revenues;

 

(g)       
Operating
income (before or after taxes);

 

(h)       
Total
stockholder returns;

 

(i)       
Corporate
performance indicators (indices based on the level of certain services provided
to customers);

 

(j)       
Cash
generation, profit and/or revenue targets;

 

(k)       
Growth
measures, including revenue growth, as compared with a peer group or other
benchmark;

 

(l)       
Share
price (including, but not limited to, growth measures and total stockholder
return); and/or

 

(m)       
Pre-tax
profits.

 

14.2       
Discretion
in Formulation of Performance Goals. The
Board shall have the discretion to adjust the determinations of the degree of
attainment of the pre-established performance goals; provided, however, that
Incentive Awards that are to qualify for the Performance-Based Exception may not
be adjusted upward (although the Committee shall retain the discretion to adjust
such Incentive Awards downward).

 

14.3       
Performance
Periods. The
Board shall have the discretion to determine the period during which any
performance goal must be attained with respect to an Incentive Award. Such
period may be of any length, and must be 

18

 

established
prior to the start of such period or within the first ninety (90) days of such
period (provided that the performance criteria is not in any event set after 25%
or more of such period has elapsed).

 

14.4       
Modifications
to Performance Goal Business Criteria. In the
event that the applicable tax and/or securities laws change to permit Board
discretion to alter the governing performance measures noted above without
obtaining stockholder approval of such changes, the Board shall have sole
discretion to make such changes without obtaining stockholder approval. In
addition, in the event that the Board determines that it is advisable to grant
Incentive Awards that shall not qualify for the Performance-Based Exception, the
Board may make such grants without satisfying the requirements of Code §162(m);
otherwise, a Committee composed exclusively of two (2) of more Outside Directors
must make such grants.

19

 

APPENDIX
A

1.       
Option
Grant Upon Appointment as Outside Director:  As of
the date on which an individual becomes an Outside Director (the “Appointment
Grant Date”), such individual shall automatically, without any further action
necessary on the part of the Board or any committee thereof, be granted an
Option effective as of the Appointment Grant Date to purchase a number of shares
equal to five thousand (5,000) shares of common stock of the Company multiplied
the number of full calendar months from the Appointment Grant Date until the
following June 1 and divided by 12, provided that such individual is not an
employee of the Company as of such date.

2.       
Option
Grant Upon Election as Outside Director:  Subject
to paragraph 3 below, as of the date on which an individual is elected or
re-elected by the stockholders of the Company to serve as an Outside Director
and becomes or continues as an Outside Director, such individual shall
automatically, without any further action necessary on the part of the Board or
any committee thereof, be granted an Option to purchase five thousand (5,000)
shares of common stock of the Company effective as of such date, provided that
such individual is not an employee of the Company as of such date. 

3.       
Exercise
Price for Options:  The
exercise price for each option automatically granted under the foregoing
provisions shall be at or above the fair market value of the underlying shares
of common stock on the date of grant. Until such time as the earlier of (a) the
Company begins having appraisals by an independent third party, (b) the Company
has filed a registration statement for a firm commitment, underwritten public
offering of its shares of common stock or (c) the shares of common stock are
listed on a national stock exchange or national market system (the “New
Valuation Date”), the Company has determined that an exercise price that equals
or exceeds the price per share at which the Company is then offering or last
offered shares of its common stock in a best efforts, registered public
offering, less related selling commissions, dealer manager fees and maximum
organization and offering expense reimbursement allowance shall be at or above
the fair market value of an underlying share of common stock. The Company is
currently offering shares of common stock in a registered public offering at an
offering price of $10.00 per share, with selling commissions, a dealer manager
fee and maximum offering expense reimbursement allowance of $0.70, $0.20 and
$0.20 per share, respectively. Therefore, any exercise per share in excess of
$8.90 shall be at or above the fair market value of an underlying share of
common stock until the New Valuation Date. Until changed by the Board, before
the New Valuation Date, the Options to be granted pursuant to this Appendix A
shall be granted with an exercise price of $9.10 per share. After New Valuation
Date, the fair market value shall be, as applicable, (i) 100% of the net asset
value per share, as determined by the appraisals, (ii) the maximum offering
price under the registration statement for a firm commitment, underwritten
public offering of its shares of common stock or (iii) the fair market value for
such shares as determined in accordance with section 2.15 of the Plan and the
exercise price of Options granted under this Appendix A shall be such fair
market value.

4.       
Vesting: Options
granted automatically under the foregoing provisions shall vest and become fully
exercisable on the first anniversary of the date of grant. Except as provided by
the Board or the Committee at the time of grant or thereafter, in the event an
Outside Director’s service to the Company terminates before the Options have
vested, any Option granted to such Outside Director that has not vested shall be
cancelled and the Outside Director shall have no further right or interest in
such forfeited Option. 

5.       
Term
of Options: Each
Option granted automatically under the foregoing provisions shall remain
outstanding until the tenth anniversary of the date of grant. Except as provided
by the Board or the Committee at the time of grant or thereafter, in the event
an Outside Director’s service to the Company terminates for any reason, any
vested Option then held by such Outside Director shall be cancelled upon the
first to occur of (i) the first anniversary of the date that shares of the
Common Stock are first listed on a national stock exchange or a national market
system, and (ii) the tenth anniversary of the date of grant.

 

 

 

20

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