Document:

Exhibit 10.1

 

BEHRINGER
HARVARD MULTIFAMILY REIT I, INC.

 

FORM OF
AMENDED AND RESTATED ADVISORY MANAGEMENT AGREEMENT

 

This AMENDED AND RESTATED ADVISORY MANAGEMENT
AGREEMENT (this “Agreement”) is entered into on
this the          day of
                          ,
2008, by and between BEHRINGER HARVARD MULTIFAMILY REIT I, INC., a
Maryland corporation (the “Company”), and
BEHRINGER HARVARD MULTIFAMILY ADVISORS I LP, a Texas limited partnership (the “Advisor”).

 

W I T N E S
S E T H

 

WHEREAS, the Company, the Advisor and Behringer Harvard Multifamily OP I LP,
entered into the Advisory Management Agreement effective as of November 22,
2006 and renewed the Agreement effective November 22, 2007 (the “Original
Agreement”);

 

WHEREAS, Behringer Harvard Multifamily OP I LP acknowledges that it is no longer
a party to this Agreement;

 

WHEREAS, the Company
will be issuing shares of its common stock, par value $0.0001, to the public,
such shares to be registered with the Securities and Exchange Commission and
may subsequently issue additional securities;

 

WHEREAS, the Company
has been formed to acquire and operate a diverse portfolio of real estate
assets at all stages of development with a focus on high quality multifamily,
student housing, age-restricted properties, commercial properties, such as
office buildings, shopping centers, business and industrial parks,
manufacturing facilities, warehouses and distribution facilities and motel and
hotel properties, originate or invest in mortgage, bridge, mezzanine or other
loans and Section 1031 tenant-in-common interests, or in entities that
make investments similar to the foregoing, and make investments with joint
venture partners.

 

WHEREAS, the Company
intends to qualify as a real estate investment trust and to invest its funds in
investments permitted by the terms of the Company’s Articles of Incorporation
and Sections 856 through 860 of the Internal Revenue Code;

 

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

 

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

 

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

 

 

 

ARTICLE ONE

 

DEFINITIONS

 

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

 

Acquisition Expenses.  Any and all expenses incurred by the Company,
the Advisor, or any Affiliate of either in connection with the selection and
acquisition of any Asset, whether or not acquired, including, without
limitation, legal fees and expenses, travel and communication expenses, costs
of appraisals, nonrefundable option payments on property not acquired,
accounting fees and expenses, title insurance premiums and other closing costs.

 

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

 

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

 

Advisor.  Behringer
Harvard Multifamily Advisors I LP, a Texas limited partnership, any successor
advisor to the Company, or any Person to which Behringer Harvard Multifamily
Advisors I LP or any successor advisor subcontracts all or substantially all of
its functions.

 

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

 

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

 

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

 

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

 

 

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

 

Board.  The Board
of Directors of the Company.

 

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

 

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

 

Closing Price.  On
any date, the last sale price for any class or series of the Company’s Common
Shares, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, for such Common
Shares, in either case as reported in the principal consolidated transaction
reporting system with respect to Common Shares listed or, if such Common Shares
are not listed, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the principal automated quotation
system or other quotation service that may then be in use or, if such Common
Shares are not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
such Common Shares selected by the Board.

 

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

 

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

 

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

 

Company Value.  The
actual value of the Company as a going concern based on the
difference between (a) the actual value of all of its assets as determined
in good faith by the Board, including a majority of the Independent Directors,
and (b) all of its liabilities as set forth on its balance sheet for the period
ended immediately prior to the determination date, provided that (i) if
the Company Value is being determined in connection with a Change of Control
that establishes the Company’s net worth, then the Company Value shall be the
net worth established thereby and (ii) if the Company Value is being
determined in connection with a Listing, then the Company Value shall be equal
to the number of outstanding Common Shares multiplied by the Closing Price of a
single Share averaged over a period of 30 trading days during
which the Common Shares are listed or quoted for trading after the date of
Listing.  For purposes hereof, 

 

 

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a “trading day” shall be any day on which the NYSE is open for trading
whether or not the Common Shares are then listed on the NYSE and whether or not
there is an actual trade of Common Shares on any such day.  If the holder of Convertible
Shares disagrees as to the Company Value as determined by the Board, then each
of the holder of Convertible Shares and the Company shall name one appraiser
and the two named appraisers shall promptly agree in good faith to the
appointment of one other appraiser whose determination of the Company Value
shall be final and binding on the parties as to the Company Value.  The cost of such appraisal shall be split
evenly between the Company and the Advisor.

 

Competitive Real Estate Commission.  A real estate or brokerage commission paid
or, if no commission is paid, the amount that customarily would be paid for the
purchase or sale of an Asset that is reasonable, customary, and competitive in
light of the size, type and location of the Asset (as determined by the Board,
including a majority of the Independent Directors).

 

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

 

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

 

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

 

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

 

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

 

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

 

Director.  A member of
the Board.

 

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

 

Exchange Act.  The Securities
Exchange Act of 1934, as amended from time to time, or any successor statute
thereto.  Reference to any provision of
the Exchange Act shall mean such provision as in effect 

 

 

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

 

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

 

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

 

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

 

Initial Investment.  Initial Investment shall have the meaning
ascribed to such term in Section 6.13.

 

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

 

Invested Capital.  The amount calculated by multiplying the
total number of Common Shares issued by the Company by the price paid for each
Common Share, reduced by an amount equal to the total number of Common Shares
repurchased from Stockholders by the Company (pursuant to the Company’s plan to
repurchase such Common Shares) multiplied by the price paid for each such
redeemed Common Share when initially purchased from the Company.

 

 

5

 

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

 

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

 

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

 

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

 

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

 

Net Sales Proceeds.  In the case of a transaction described in
clause (i)(A) of the definition of Sale, the proceeds of any such
transaction less the amount of selling expenses incurred by or on behalf of the
Company or the Operating Partnership, including all real estate commissions,
closing costs and legal fees and expenses. In the case of a transaction
described in clause (i)(B) of such definition, Net Sales Proceeds means
the proceeds of any such transaction less the amount of selling expenses
incurred by or on behalf of the Company or the Operating Partnership, including
any legal fees and expenses and other selling expenses incurred in connection
with such transaction. In the case of a transaction described in clause (i)(C) of
such definition, Net Sales Proceeds means the proceeds of any such transaction
actually distributed to the Company or the Operating Partnership from the Joint
Venture less the amount of any selling expenses, including legal fees and
expenses incurred by or on behalf of the Company or the Operating Partnership
(other than those paid by the Joint Venture). 
In the case of a transaction or series of transactions described in
clause (i)(D) of the definition of Sale, Net Sales Proceeds means the
proceeds of any such transaction (including the aggregate of all payments under
a Mortgage or other loan on or in satisfaction thereof other than regularly
scheduled interest payments) less the amount of selling expenses incurred by or
on behalf of the Company or the Operating Partnership, including all
commissions closing costs and legal fees and expenses.  In the case of a transaction described in
clause (i)(E) of such definition, Net Sales Proceeds means the proceeds of
any such transaction less the amount of selling expenses incurred by or on
behalf of the Company or the Operating Partnership, including any legal fees
and expenses and other selling expenses incurred in connection with such
transaction. In the case of a transaction described in clause (ii) of the
definition of Sale, Net Sales Proceeds means the proceeds of such transaction
or series of transactions less all amounts generated thereby which are
reinvested in one or more Assets within one hundred eighty (180) days
thereafter and less the amount of any real estate commissions, closing costs,
and legal fees and expenses and other selling expenses incurred by or allocated
to the Company or the Operating Partnership in connection with such transaction
or series of transactions.  Net Sales
Proceeds shall also include any consideration (including non-cash consideration
such as stock, notes, or other property or securities) that the Company
determines, in its discretion, to be economically equivalent to proceeds of a
Sale, valued in the reasonable determination of the Company. 

 

 

6

 

Net Sales Proceeds shall not include any reserves established by the
Company or the Operating Partnership in its sole discretion.

 

NYSE.  The New York Stock Exchange.

 

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

 

Operating Partnership. 
Behringer Harvard Multifamily OP I LP, a Delaware limited partnership,
through which the Company may own Assets.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

Securities Act.  The Securities Act of 1933, as amended from
time to time, or any successor statute thereto. 
Reference to any provision of the Securities Act shall mean the
provision as in effect from time to time, as the same may be amended, and any
successor provision thereto, as interpreted by any applicable regulations as in
effect from time to time.

 

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

 

Shares.  Shares of stock of the Company of any class
or series, including Common Shares, Preferred Shares or Convertible Shares.

 

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

 

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

 

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

 

Stockholders’ Return.  As of any date, an aggregate amount equal to
a cumulative, non-compounded, annual return on Invested Capital (calculated
like simple interest on a daily basis based on a 365-day year); provided,
however, that for purposes of calculating the Stockholders’ Return, Invested
Capital shall be determined for each day during the period for which the
Stockholders’ Return is being calculated net of Distributions attributable to
Net Sales Proceeds but (consistent with the definition of Invested Capital)
shall always exclude an amount equal to the total number of Common Shares
repurchased from 

 

 

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Stockholders by the Company (pursuant to any Company plan to repurchase
Common Shares) multiplied by the price paid for each such redeemed Common Share
when initially purchased from the Company.

 

Subordinated Disposition Fee.  The fee payable to the Advisor for services
provided in connection with the Sale of one or more Properties pursuant to Section 3.01(c).

 

Termination Date.  The date of termination of this Agreement.

 

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

 

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

 

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

 

ARTICLE II

 

THE ADVISOR

 

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

 

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

(f)            subject
to the provisions of Sections 2.02(h) and 2.03 hereof, (i) locate,
analyze and select potential investments in Assets, (ii) structure and
negotiate the terms and conditions of transactions pursuant to which investment
in Assets will be made; (iii) make investments in Assets on behalf of the
Company or the Operating Partnership in compliance with the investment
objectives and policies of the Company; (iv) arrange for financing and
refinancing and make other changes in the asset or capital structure of, and
dispose of, reinvest the proceeds from the sale of, or otherwise deal with the
investments in, Assets; and (v) enter into leases of Property and service
contracts for Assets with duly qualified and licensed Persons and, to the
extent necessary, perform all other operational functions for the maintenance
and administration of the Assets, including the servicing of Mortgages;

 

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

 

 

10

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.03         Authority
of Advisor.

 

(a)           Pursuant
to the terms of this Agreement (including the restrictions included in this Section 2.03
and in Section 2.06), and subject to the continuing and exclusive
authority of the Board over the management of the Company, the Board hereby
delegates to the Advisor the authority to (i) locate, analyze and select
investment opportunities, (ii) structure the terms and conditions of
transactions pursuant to which investments will be made or acquired for the 

 

 

11

 

Company or the Operating Partnership, (iii) acquire
Properties, make and acquire Mortgages and other loans and invest in other
Assets in compliance with the investment objectives and policies of the
Company, (iv) arrange for financing or refinancing of Assets, (v) enter
into leases for the Properties and service contracts for the Assets with duly
qualified and licensed non-affiliated and Affiliated Persons, including
oversight of non-affiliated and Affiliated Persons that perform property
management, acquisition, advisory, disposition or other services for the Company,
(vi) oversee duly qualified and licensed property managers and other
Persons who perform services for the Company, and (vii) arrange for, or
provide, accounting and other record-keeping functions at the Asset level.

 

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

 

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

 

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

 

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

 

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

 

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

 

2.06         Limitations
on Activities.  Anything
else in this Agreement to the contrary notwithstanding, the Advisor shall
refrain from taking any action which, in its sole judgment made in good faith,
would (a) adversely affect the status of the Company as a REIT, (b) subject
the Company to regulation under the Investment Company Act of 1940, as amended,
or (c) violate any law, rule, regulation or statement of policy of any
governmental body or agency having jurisdiction over the Company, the Shares or
any of the Company’s securities, or otherwise not be permitted by the Articles
of Incorporation or Bylaws, except if the action shall be ordered by the Board,
in which case the Advisor shall notify promptly the Board of the Advisor’s
judgment of the potential impact of the action and shall refrain from taking
the 

 

12

 

action until it receives further clarification or instructions from the
Board.  In such event the Advisor shall
have no liability for acting in accordance with the specific instructions of
the Board so given.  The Advisor, its
directors, officers, employees and stockholders, and the directors, officers,
employees and stockholders of the Advisor’s Affiliates shall not be liable to
the Company or to the Board or Stockholders for any act or omission by the
Advisor, its directors, officers, employees or stockholders, or for any act or
omission of any Affiliate of the Advisor, its directors, officers or employees
or stockholders except as provided in Section 5.02 of this Agreement.

 

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

 

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

 

2.09         Payment of Certain Organization and Offering Expenses.  The Company shall pay directly all
Organization and Offering Expenses considered underwriting compensation by the
Financial Industry Regulatory Authority, or FINRA.  Such payments, other than Selling Commissions
and the dealer manager fee, shall apply towards the limit on Organization and
Offering Expenses reimbursable by the Company to the Advisor pursuant to Section 3.02(a)(i) below.

 

ARTICLE III

 

COMPENSATION AND
REIMBURSEMENT OF SPECIFIED COSTS

 

3.01         Fees.

 

(a)           Asset Management Fee.  The Company shall pay the Advisor a monthly
Asset Management Fee on the 15th day of each month in an amount
equal to 1/12th of 0.75% of the sum of, for each and every Asset,
the higher of the Cost of Investment or the Value of Investment.  

 

 

13

 

The Advisor, in its sole
discretion, may waive, reduce or defer all or any portion of the Asset
Management Fee to which it would otherwise be entitled.

 

(b)           Acquisition and Advisory Fees.  The Company shall pay the Advisor a fee in
the amount of 1.75% of the Contract Purchase Price of each Asset as Acquisition
and Advisory Fees.  The total of all
Acquisition Fees and any Acquisition Expenses shall be limited in accordance
with the Articles of Incorporation. 
Acquisition and Advisory Fees shall be paid as follows: (1) for
real property (including properties where development/redevelopment is
expected), at the time of acquisition, (2) for development/redevelopment
projects (other than the initial acquisition of the real property), at the time
a final budget is approved, and (3) for loans and similar assets
(including without limitation mezzanine loans), quarterly based on the value of
loans made or acquired.  In the case of a
development/redevelopment project subject to clause (2) above, upon
completion of the development/redevelopment project, the Advisor shall
determine the actual amounts paid.  To
the extent the amounts actually paid vary from the budgeted amounts on which
the Acquisition and Advisory Fee was initially based, the Advisor will pay or
invoice the Company for 1.75% of the budget variance such
that the Acquisition and Advisory Fee is ultimately 1.75% of amounts
expended on such development/redevelopment project.  The Advisor, in its sole discretion, may
waive, reduce or defer all or any portion of the Acquisition and Advisory Fees
to which it would otherwise be entitled.

 

(c)           Subordinated
Disposition Fee.  If the Advisor or
an Affiliate provides a substantial amount of services (as determined by a
majority of the Independent Directors) in connection with the Sale of one or
more Assets, the Advisor or such Affiliate shall receive from the Company, as
applicable, subject to the satisfaction of the condition outlined below, a
Subordinated Disposition Fee (the “Contingent Subordinated
Disposition Fee”) in an amount equal to the lesser of (subject to
the limitation in the following paragraph) (A) one-half of the aggregate Competitive
Real Estate Commission (including the Subordinated Disposition Fee) or (B) three
percent (3%) of the sales price of such Property or Asset. The Contingent
Subordinated Disposition Fee will not be earned or paid unless and until the
Stockholders have received total Distributions in an amount equal to or in
excess of the sum of their aggregate Invested Capital plus the Stockholders’
Return of 7%.  To the extent that, in any
instance, the Contingent Subordinated Disposition Fees is not earned and paid
due to the foregoing limitation, the Contingent Subordinated Disposition Fees
that would have been earned and paid had the foregoing limitation not been in
place at the time of a Sale shall be a contingent liability of the Company,
which shall be paid if and only if the conditions set forth in this
subparagraph 3.01(c) have been satisfied and, upon the satisfaction of
such condition, the Company shall pay all such Contingent Subordination
Disposition Fees as if such condition had been satisfied with respect to each
such prior Sale.

 

The Subordinated Disposition Fee may be
payable in addition to real estate commissions paid to non-Affiliates, provided,
however, that the total real estate commissions paid to all Persons by the
Company (together with the Subordinated Disposition Fee) shall in no case
exceed an amount equal to the lesser of (i) six percent (6%) of the
Contract Purchase Price of an Asset or (ii) the aggregate Competitive Real
Estate Commission in respect of any Property or Asset.

 

In the event this Agreement is terminated
prior to such time as the Stockholders have received total Distributions in an
amount equal to or in excess of the sum of their aggregate Invested Capital
plus the Stockholders’ Return of 7% through the Termination Date, the Company
Value shall be determined and any contingent liabilities for the payment of
Contingent Subordinated Disposition Fees on Assets previously sold will be paid
if the Company Value plus total 

 

 

14

 

Distributions received prior to the
Termination Date equals or exceeds the sum of the aggregate Invested Capital
plus the Stockholders’ Return of 7% through the Termination Date and then only
to the extent of such excess.

 

Following Listing, and as soon as practicable
after determination of Market Value (defined below), any contingent liabilities
for the payment of the Contingent Subordinated Disposition Fees on Assets
previously sold will be earned and paid if and only if the Stockholders have
received or been deemed to have received total Distributions in an amount equal
to or in excess of the sum of the aggregate Invested Capital plus the
Stockholders’ Return of 7% through the date of Listing.  For purposes of the preceding sentence, in
addition to actual Distributions received, Stockholders will be deemed to have
received Distributions in the amount equal to the product of the total number
of Shares outstanding and the average Closing Price of the Shares over the
30-trading-day period beginning the date of Listing (the “Market Value”).  Once any Contingent Subordinated Disposition
Fees are actually paid, such amounts shall thereafter be referred to as “Subordinated
Disposition Fees.”

 

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

 

(e)           Development
Fee.  If the Advisor or an Affiliate
provides the development services, the Company shall pay the Advisor
Development Fees in amounts that are usual and customary for comparable
services rendered to similar projects in the geographic market; provided,
however, that a majority of the Independent Directors must determine that such
Development Fees are fair and reasonable and on terms and conditions not less
favorable than those available from unaffiliated third parties.  Development Fees will include the
reimbursement of the specified cost incurred by the Advisor of engaging third
parties for such services.  The Advisor,
in its sole discretion, may waive, reduce or defer all or any portion of the
Development Fee to which it would otherwise be entitled.  Notwithstanding the above, the Advisor may
engage (on behalf of the Company) third parties to provide development services
pursuant to its authority under Section 2.03 and pay such third parties
all applicable Development Fees.

 

3.02         Expenses.

 

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

 

(i)            Organization
and Offering Expenses; provided, however, that (i)  the Company shall not
reimburse the Advisor to the extent such reimbursement would cause the total
amount spent by the Company on Organization and Offering Expenses (other than
Selling Commissions and the dealer manager fee) to exceed 1.5% of the Gross
Proceeds as of the date of the reimbursement, (ii) within 60 days after
the end of the month in which an Offering terminates, the Advisor shall
reimburse the Company for any 

 

 

15

 

Organization and Offering Expenses (other
than Selling Commissions and the dealer manager fee) to the extent that such
Organization and Offering Expenses incurred by the Company exceed 1.5% of the
Gross Proceeds raised in the completed Offering, and (iii) such
Organization and Offering Expenses shall include organization
and offering expenses previously advanced by the Advisor related to a prior
offering of the Company’s shares, to the extent not reimbursed out of proceeds
from the prior offering, subject to the 1.5% of the Gross Proceeds as of
the date of the reimbursement limitation set forth above.

 

(ii)           Acquisition
Fees and Acquisition Expenses incurred in connection with the selection and
acquisition of Assets, including such expenses incurred related to assets
pursued or considered but not ultimately acquired by the Company;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

16

 

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

 

(xiv)        audit,
accounting and legal fees.

 

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

 

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

 

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

 

ARTICLE IV

 

TERM AND TERMINATION

 

4.01         Term; Renewal.  Subject to Section 4.02 hereof, this
Agreement shall continue in force until the first anniversary of the
date hereof.  Thereafter, this Agreement may
be renewed for an unlimited number of successive one-year terms
upon mutual consent of the parties.  It
is the duty of the Board to evaluate 

 

 

17

 

the performance of the Advisor annually
before renewing the Agreement, and each such renewal shall be for a term of no
more than one year.

 

4.02         Termination.  This Agreement will automatically terminate
upon Listing.  This agreement also may be
terminated at the option of either party upon 60 days written notice without
cause or penalty (if termination is by the Company, then the termination shall
be upon the approval of a majority of the Independent Directors).  Notwithstanding the foregoing, the provisions
of this Agreement which provide for payment to the Advisor of expenses, fees or
other compensation following the date of termination shall continue in full
force and effect until all amounts payable thereunder to the Advisor are paid
in full.

 

4.03         Payments to and Duties of Advisor upon Termination.

 

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

 

(b)           The
Advisor shall promptly upon termination:

 

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

 

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

 

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

 

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

 

ARTICLE V

 

INDEMNIFICATION

 

5.01         Indemnification
by the Company.

 

(a)                                  The Company shall
indemnify and hold harmless the Advisor and its Affiliates, including their
respective officers, directors, partners and employees, from all liability,
claims, damages or losses arising in the performance of their duties hereunder,
and related expenses, including reasonable attorneys’ fees, to the extent such
liability, claims, damages or losses and related expenses are not fully
reimbursed by insurance, subject to any limitations imposed by the laws of the
State of Maryland, the Articles of Incorporation and the NASAA REIT Guidelines.  Notwithstanding the foregoing, the Company
shall not indemnify or hold harmless the Advisor or its Affiliates, including
their respective officers, directors, partners and employees, for any liability
or loss suffered by the Advisor or its Affiliates, including their respective
officers, directors, partners and employees, nor shall it provide that the
Advisor or its Affiliates, including 

 

 

18

 

their respective officers, directors, partners
and employees, be held harmless for any loss or liability suffered by the
Company, unless all of the following conditions are met: (i) the Advisor
or its Affiliates, including their respective officers, directors, partners and
employees, have determined, in good faith, that the course of conduct which
caused the loss or liability was in the best interests of the Company; (ii) the
Advisor or its Affiliates, including their respective officers, directors,
partners and employees, were acting on behalf of or performing services of the
Company; (iii) the liability or loss was not the result of negligence or
misconduct by the Advisor or its Affiliates, including their respective
officers, directors, partners and employees; and (iv) the indemnification
or agreement to hold harmless is recoverable only out of the Company’s net
assets and not from stockholders. Notwithstanding the foregoing, the Advisor
and its Affiliates, including their respective officers, directors, partners
and employees, shall not be indemnified by the Company for any losses,
liability or expenses arising from or out of an alleged violation of federal or
state securities laws by such party unless one or more of the following
conditions are met: (i) there has been a successful adjudication on the
merits of each count involving alleged securities law violations as to the
particular indemnitee; (ii) such claims have been dismissed with prejudice
on the merits by a court of competent jurisdiction as to the particular
indemnitee; and (iii) a court of competent jurisdiction approves a
settlement of the claims against a particular indemnitee and finds that
indemnification of the settlement and the related costs should be made, and the
court considering the request for indemnification has been advised of the
position of the Securities and Exchange Commission and of the published
position of any state securities regulatory authority in which securities of
the Company were offered or sold as to indemnification for violations of
securities laws.

 

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

 

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

 

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

 

 

19

 

ARTICLE VI

 

MISCELLANEOUS

 

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

 

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

 

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

 

6.04         Notices.  Any notice, report or other communication
required or permitted to be given hereunder shall be in writing unless some
other method of giving such notice, report or other communication is required
by the Articles of Incorporation, the Bylaws, or accepted by the party to whom
it is given, and shall be given by being delivered by hand or by overnight mail
or other overnight delivery service to the addresses set forth herein:

 

	
  To the Directors and to
  the Company:

  	
   

  	
  Behringer Harvard
  Multifamily REIT I, Inc.

  
	
   

  	
   

  	
  15601 Dallas Parkway

  
	
   

  	
   

  	
  Suite 600

  
	
   

  	
   

  	
  Addison, Texas 75001

  

 

20

 

	
  To the Advisor:

  	
   

  	
  Behringer Harvard
  Multifamily Advisors I LP

  
	
   

  	
   

  	
  15601 Dallas Parkway

  
	
   

  	
   

  	
  Suite 600

  
	
   

  	
   

  	
  Addison, Texas 75001

  

 

Either party shall, as soon as reasonably practicable, give notice in
writing to the other party of a change in its address for the purposes of this Section 6.04.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

21

 

6.13         Initial
Investment.  The Advisor
or one of its Affiliates has contributed $200,001.69 (the “Initial
Investment”) in exchange for Shares of the Company. The Advisor or
its Affiliates may not sell any of the Shares purchased with the Initial Investment
while the Advisor acts in an advisory capacity to the Company. The restrictions
included above shall not apply to any Shares acquired by the Advisor or its
Affiliates other than the Shares acquired through the Initial Investment.
Neither the Advisor nor its Affiliates shall vote any Shares they now own, or
hereafter acquires, in any vote for the election of Directors or any vote
regarding the approval or termination of any contract with the Advisor or any
of its Affiliates.

 

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

 

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

 

6.16         Savings
Clause.  If any provision
of this Agreement is held unenforceable, then such provision will be modified
to reflect the parties' intention.  All
remaining provisions of this Agreement shall remain in full force and effect.

 

[The remainder of this  page intentionally blank]

 

 

22

 

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

 

	
   

  	
   

  	
  BEHRINGER HARVARD MULTIFAMILY REIT I, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Gerald J. Reihsen, III

  	
   

  
	
   

  	
   

  	
   

  	
  Executive Vice President — Corporate Development & Legal
  and Secretary

  

 

 

	
   

  	
   

  	
  BEHRINGER HARVARD MULTIFAMILY OP I LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Gerald J. Reihsen, III

  	
   

  
	
   

  	
   

  	
   

  	
  Executive Vice President — Corporate Development & Legal
  and Secretary

  

 

 

	
   

  	
   

  	
  BEHRINGER HARVARD MULTIFAMILY ADVISORS I LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Harvard Property Trust, LLC,

  
	
   

  	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  	
   

  

 

 

	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Gerald J. Reihsen, III

  	
   

  
	
   

  	
   

  	
   

  	
  Executive Vice President — Corporate Development & Legal
  and Secretary

  

 

 

23Exhibit 10.2

 

BEHRINGER HARVARD MULTIFAMILY REIT I, INC.

 

FORM OF AMENDED AND RESTATED PROPERTY

MANAGEMENT AGREEMENT

 

THIS AMENDED AND RESTATED PROPERTY
MANAGEMENT AGREEMENT (this “Agreement”) is made as of (although not necessarily
on) the      day of                 ,
2008, between BEHRINGER HARVARD MULTIFAMILY REIT I, INC. (the “Company”), a Maryland corporation,
BEHRINGER HARVARD MULTIFAMILY OP I LP (the “OP”),
a Delaware limited partnership (the Company and the OP collectively “Owner”)
and BEHRINGER HARVARD MULTIFAMILY MANAGEMENT SERVICES, LLC, a Texas limited
liability company (“Manager”).

 

WHEREAS, on March 17, 2008, HPT
MANAGEMENT SERVICES LP, a Texas limited partnership (“Former
Manager”) and with the consent of the Company and OP, assigned
any and all rights, duties and obligations to the Manager.

 

ARTICLE I

 

Engagement of Manager and Rental Responsibility

 

1.1           Engagements.  Subject to the restrictions of this Section 1.1,
Owner hereby engages Manager to manage the apartment communities in which Owner
now owns a direct or indirect equity interest or hereafter acquires a direct or
indirect equity interest (whether one or more, are referred to herein
collectively as the “Project”),
and Manager accepts such engagement and agrees to perform the services set
forth herein.   Such engagement shall not
commence with respect to any particular Project until Owner, in its sole
discretion, has the ability to appoint or hire the Manager.  Further, Owner may elect to exclude any
Project from the terms of this Agreement upon written notice to Manager
delivered by Owner within ten (10) days following the later of (i) Owner’s
acquisition of a direct or indirect equity interest in such Project or (ii) the
date on which Owner, in its sole discretion, has the ability to appoint or hire
the Manager with respect to such Project. 
Owner has the right to include any previously excluded Project ten (10) days
following delivery of written notice from Owner to Manager.  Notwithstanding the foregoing, Manager shall
be entitled to an Oversight Fee (as defined herein) pursuant to Section 3.1
with respect to any Project excluded from the terms of this Agreement, but only
after Owner, in its sole discretion, has the ability to appoint or hire the
Manager for such Project.

 

1.2           Status of Manager; Limitation on
Authority.  Manager shall act under
this Agreement as an independent contractor and not as Owner’s agent or
employee.  Manager shall not have the
right, power or authority to enter into agreements or incur liability on behalf
of Owner except as expressly set forth herein. 
Any personnel hired by Manager to maintain, operate and/or lease each
Project shall be the employees or independent contractors of Manager and not of
Owner.  Manager shall use due care in the
selection and supervision of such employees or independent contractors, who
shall be duly qualified and licensed, as necessary.  Any action taken by Manager which is not
expressly permitted by this Agreement shall not bind Owner.

 

1.3           Leasing of Premises.  Manager shall perform promotional, leasing
and management activities required to lease apartment units in the Project in
accordance with the parameters established by or otherwise approved in writing
by Owner (the “Approved Leasing
Parameters”).  Throughout the

 

 

 

term of this Agreement, Manager shall use its diligent efforts to lease
apartment units in the Project.  Subject
to reimbursement by Owner, Manager shall advertise the Project, or portions
thereof, prepare and secure advertising signs, space plans, circular matter,
marketing brochures and other forms of advertising.  Manager is authorized to advertise the
Project in conjunction with general advertising campaigns and to allocate the
cost of such campaigns on a pro rata basis
among the projects being advertised (to the extent authorized by the Annual
Business Plan (hereinafter defined)). 
All inquiries for any leases or renewals or agreements for the rental of
the Project or portions thereof shall be referred to Manager and all negotiations
connected therewith shall be conducted solely by or under the direction of
Manager in accordance with the parameters established by or otherwise approved
in writing by Owner.  Manager is hereby
authorized to execute, deliver and renew leases on behalf of Owner including,
but not limited to tenant and commercial leases (such as laundry room leases)
in accordance with the Approved Leasing Parameters.  Manager is authorized to utilize the services
of apartment locator services and pay compensation of duly qualified and
licensed leasing personnel responsible for the leasing of each Project; the
fees for such services shall be operating expenses of the Project and, to the
extent paid by Manager, reimbursable to Manager by Owner to the extent set
forth in the applicable Annual Business Plan.

 

1.4           Manager’s Standard of Care.  In performing Manager’s duties under this
Agreement, Manager shall exercise the same degree of care, prudence, and skill
as other professional property managers of similar properties in the area.  In no event shall Manager be liable to Owner
for any loss or damage, unless caused by the misconduct and/or negligence of
the Manager, its agents, servants, or employees.

 

1.5           Compliance With Laws;
Environmental Matters.

 

(a)           Owner assumes all
responsibility as to the compliance of the Project with all laws applicable to
the Project.  Owner agrees to defend and
indemnify and hold harmless Manager and its members, officers, directors,
employees, managers, successors and assigns (collectively, the “Manager
Indemnified Parties”) from and against any and all Losses (as defined in Section 2.8(e)(i) hereof)
arising out of any violation, breach or failure of the Project to comply with
any or all state or federal laws applicable to the Project, except for any
violations caused by the misconduct and/or negligence of the Manager, its
agents, servants, or employees.

 

(b)           Owner hereby
warrants and represents to Manager that to the best of Owner’s knowledge, no
Project, upon acquisition of an interest therein by Owner, nor any part
thereof, will be used to treat, deposit, store, dispose of or place any
hazardous substance that may subject Manager to liability or claims under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C.A. Section 9607) or any constitutional provision, statute,
ordinance, law, or regulation of any governmental body or of any order or
ruling of any public authority or official thereof, having or claiming to have
jurisdiction thereover.  Furthermore,
Owner agrees to indemnify, protect, defend, save and hold harmless Manager and
all of the other Manager Indemnified Parties from any and all Losses involving,
concerning or in any way related to any past, current or future allegations
regarding treatment, depositing, storage, disposal or placement by any duly
qualified and licensed person or entity other than Manager of hazardous
substances on any Project.

 

1.6           Treatment Under Texas Margin Tax.  For purposes of the Texas margin tax, Manager’s
performance of the services specified in this Agreement will cause Manager to
conduct part of the active trade or business of Owner, and Manager’s
compensation includes both the payment of fees due pursuant to Section 3.1
and the reimbursement of specified costs incurred in Manager’s conduct of the
active trade or business of the Owner. 
Therefore, Owner and Manager intend Manager to be, and shall treat
Manager as, a “management company” within the meaning of Section 171.0001(11)
of the Texas Tax Code.  Owner and Manager
will apply Sections 171.1011(m-1) and 171.1013(f)-(g) of the Texas Tax
Code to

 

 

2

 

Owner’s reimbursements paid to Manager pursuant to this Agreement of
specified costs and allocable wages and compensation.  Owner and Manager further recognize and
intend that as a result of the relationship created by this Agreement,
reimbursements paid to Manager pursuant to this Agreement include (i) “flow-though
funds” that Manager is mandated by law or fiduciary duty to distribute, within
the meaning of Section 171.1011(f) of the Texas Tax Code, and (ii) “flow-through
funds” that Manager is mandated by contract to distribute, within the meaning
of Section 171.1011(g).  The terms
of this Agreement shall be interpreted in a manner consistent with the characterization
of the Manager as a “management company” as defined in Section 171.0001(11),
and with the characterization of the reimbursements as “flow-though funds”
within the meaning of Section 171.1011(f)-(g) of the Texas Tax
Code.  “Texas Tax Code” means the  Texas Tax Code as amended by Texas H.B. 3, 79th
Leg., 3rd C.S. (2006), and reference to any provision of the Texas
Tax Code Act shall mean such provision as in effect from time to time, as the
same may be amended, and any successor provision thereto, as interpreted by any
applicable administrative rules as in effect from time to time.

 

ARTICLE II

 

Services to be Performed by Manager

 

2.1           Expense of Owner.  All acts performed by Manager in the
performance of its obligations under this Agreement shall be performed on
behalf of Owner, and all obligations or expenses incurred thereby, if included
in the Annual Business Plan or otherwise approved in writing by Owner, shall be
for the account of, on behalf of, and at the expense of Owner, except as
otherwise specifically provided in this Article II.  Owner shall not be obligated to reimburse
Manager for any expense allocable to (i) time spent on projects other than
the Project, or (ii) any personnel other than personnel located at the
Project site and personnel spending a portion of their working hours (to be
charged on a pro rata basis) at the Project
site or in specifically performing Manager’s obligations hereunder, whether on
or off the Project site.  Manager may use
employees normally assigned to other work centers or part-time employees to
properly staff the Project, whose wages and related expenses shall be
reimbursed on a pro rata basis for the time
actually spent at or for the Project to the extent set forth in the applicable
Annual Business Plan.  Owner shall
reimburse to Manager the costs and expenses incurred by Manager on Owner’s
behalf including the wages and salaries and other employee-related expenses and
benefits of all on-site and affiliate employees of Manager who are engaged in
the operation, management, maintenance and leasing or access of a Project,
including taxes, insurance and benefits and legal, travel and other
out-of-pocket expenses directly related to the management of a Project,
provided that such items are reflected in the Annual Business Plan.  Owner acknowledges that the following
miscellaneous expenses, when incurred with respect to the performance of
Manager’s obligations under this Agreement, shall be reimbursable to Manager by
Owner (which list of expenses is not intended to be all-inclusive) to the
extent set forth in the applicable Annual Business Plan:  courier services, postage, photocopies,
signage, check printing, marketing expenses, bank charges, telephone and
answering service (which may be allocated on a pro rata
basis among the Project and other projects managed by Manager).  All reimbursable payments made by Manager
hereunder shall be reimbursed by Owner from funds deposited in an account
established pursuant to Section 4.2 of this Agreement.  Manager shall not be obligated to make any
advance to or for the account of Owner or to pay any sums, except out of funds
held in an account maintained under Section 4.2, nor shall Manager be
obligated to incur any liability or obligation for the account of Owner without
assurance that the necessary funds for the discharge thereof will be provided
by Owner.  All debts and liabilities to
third persons incurred by Manager in the course of its operation and management
of the Project shall be the debts and liabilities of the Owner only, and
Manager shall not be liable for any such debt or liabilities, except to the
extent Manager has exceeded its 

 

 

3

 

authority hereunder.  Manager may
sub-contract any or all of its responsibilities hereunder, but Owner shall look
to Manager for the performance of such responsibilities in accordance with this
Agreement and Manager shall be solely responsible for paying the fees and
expenses of any  duly qualified and licensed person or entity  to which it
sub-contracts its responsibilities hereunder, except as otherwise agreed in
writing between Owner and Manager.

 

2.2           Covenants Concerning Payment of
Operating Expenses.  Owner covenants
to pay all sums for operating expenses in excess of gross receipts required to
operate the Project in accordance with the Annual Business Plan upon written
notice and demand from Manager within ten (10) days after receipt of such
written notice.  Owner further recognizes
that the Project may be operated in conjunction with other properties, and
costs may be allocated or shared between such other properties on a more
efficient or less expensive basis.  In
such regard, Owner consents to the allocation of costs and/or the sharing of
any expenses in an effort to save costs or operate the Project in a more
efficient manner so long as such allocation is done on an equitable basis and
so long as the computations of such allocations are provided to Owner for its
approval pursuant to Section 2.12 hereof.

 

2.3           Employment of Personnel.  Manager shall use its diligent efforts to
investigate, hire, pay, supervise and discharge duly qualified and licensed  personnel
necessary to be employed by it to properly maintain, operate and lease the
Project, including without limitation, a property manager or business manager
at the Project.  Owner has no right of
supervision or direction of agents or employees of the Manager whatsoever.  All Owner directives shall be communicated to
Manager’s senior level management employees. 
Manager and all personnel of Manager who handle or who are responsible
for handling Owner’s monies shall be duly qualified and licensed, bonded under
a fidelity bond or a crime/employee dishonesty insurance policy or equivalent
in favor of Owner.  Manager shall furnish
such fidelity bond/insurance policy at Manager’s sole expense and shall provide
Owner Two Million Dollars ($2,000,000.00) per occurrence coverage with no more
than a Ten Thousand Dollar ($10,000.00) deductible.  Manager shall execute and file when due all
forms, reports, and returns required by law relating to the employment of its
personnel.

 

2.4           Utility and Service Contracts.  Manager shall make, at Owner’s expense and in
Owner’s name or in Manager’s name, as an authorized representative for Owner,
contracts for water, electricity, gas, fuel, oil, telephone, vermin
extermination, trash removal, cable television, security protection and other
services deemed by Manager to be necessary or advisable for the operation of
the Project.  Manager shall also place
orders in the name of Owner for such equipment, tools, appliances, materials,
and supplies as are reasonable and necessary to properly maintain the
Project.  Manager may make such contracts
and place such orders in Owner’s name or in its own name, as Owner’s authorized
representative.  In addition, Owner
agrees to specifically assume in writing all obligations under all such
contracts so entered into by Manager, on behalf of Owner, upon the termination
of this Agreement, and Owner shall indemnify, protect, save, defend and hold
harmless Manager and the other Manager Indemnified Parties harmless from and
against any and all Losses resulting from, arising out of or in any way related
to such contracts and that relate to or concern matters occurring after
termination of this Agreement, but excluding matters arising out of the
misconduct and/or negligence of the Manager, its agents, servants, or
employees.  Owner agrees to pay or
reimburse Manager for all expenses and liabilities incurred in accordance with
this Section 2.4.

 

2.5           Maintenance and Repair of a
Project.  Manager shall use its
diligent efforts to maintain, at Owner’s expense, the buildings, appurtenances
and grounds of the Project in good condition and repair and in accordance with
standards established by Owner in writing from time to time, including interior
and exterior cleaning, painting and decorating, plumbing, carpentry and such
other normal maintenance and repair work as may be reasonably desirable taking
into consideration the amount allocated therefore in the Annual Business
Plan.  With respect to any expenditure
not contemplated by the Annual Business 

 

 

4

 

Plan, Manager shall not incur any individual item for repair or
replacement in excess of Five Thousand Dollars ($5,000.00) unless authorized in
writing by Owner, excepting, however, that emergency repairs immediately
necessary for the preservation and safety of the Project or to avoid the
suspension of any service to the Project or danger of injury to persons or
damage to property may be made by Manager upon written notice to Owner, but
without the approval of Owner.  Manager
shall not be obligated by this Section to perform any major capital
improvements.

 

2.6           Supervision of Capital
Improvements or Major Repairs.  When
requested by the Owner or set forth in an Annual Business Plan, Manager, at
Owner’s expense and in Owner’s name, shall supervise the installation and
construction of all capital improvements or major repairs to the Project where
such work constitutes other than normal maintenance and repair, for additional
compensation as set forth in a separate agreement between Owner and
Manager.  In such events, Manager may
negotiate contracts with all contractors, subcontractors, materialmen,
suppliers, architects, and engineers approved by Owner, on behalf of, and in
the name of, Owner, and may compromise and settle any dispute or claim arising
therefrom on behalf of and in the name of Owner; provided only that the Manager
shall act in good faith and in the best interest of the Owner at all
times.  Manager will furnish all
personnel necessary for proper supervision of the work and may assign personnel
located at the Project to such supervisory work (and such assignment shall not
reduce or abate any other fees or compensation owed to Manager under this
Agreement).

 

2.7           Controlling Agreements.  Manager has received copies of (and will be
provided with copies of future) articles of incorporation, agreements of
limited partnership, joint venture agreements, operating agreements, loan
agreements, deeds of trust or mortgages, each as may be amended from time to
time, of Owner, as applicable (the “Controlling Agreements”) and is and will be
familiar with the terms thereof.  Manager
shall use reasonable care to avoid any act or omission that, in the performance
of its duties hereunder, shall in any way conflict with the terms of
Controlling Agreements.

 

2.8           Insurance and Indemnification.

 

(a)           Insurance
to be Carried.

 

(i)            Manager shall obtain and keep in
full force and effect insurance on the Project against such hazards as Owner
and Manager shall deem appropriate, but in any event insurance sufficient to
comply with the leases and other agreements with respect to the Project and the
Controlling Agreements shall be maintained.  
All liability policies shall provide sufficient insurance satisfactory
to both Owner and Manager and shall contain waivers of subrogation for the
benefit of Manager.

 

(ii)           Manager shall obtain and keep in full
force and effect, in accordance with the laws of the state in which such
Project is located, workers’ compensation and employer’s liability insurance
applicable to and covering all employees of Manager at the Project and all
persons engaged in the performance of any work required hereunder, and Manager
shall furnish Owner certificates of insurance evidencing that such insurance is
in effect.  If any work under this
Agreement is subcontracted as permitted herein, Manager shall include in each
subcontract a provision that the subcontractor shall also furnish Owner with
such a certificate.

 

(b)           Insurance
Expenses.  Premiums and other
expenses of such insurance, as well as any applicable payments in respect of
deductibles, shall be borne by Owner.

 

 

5

 

(c)           Cooperation with
Insurers.  Manager shall cooperate
with and provide reasonable access to the Project to representatives of
insurance companies and insurance brokers or agents with respect to insurance
that is in effect or for which application has been made.  Manager shall use its best efforts to comply
with all requirements of insurers.

 

(d)           Accidents and
Claims.  Manager shall promptly
investigate and shall report in detail to Owner all accidents and claims for
damage relating to the ownership, operation or maintenance of the Project, and
any damage or destruction to the Project and the estimated costs of repair
thereof, and shall prepare for approval by Owner all reports required by an
insurance company in connection with any such accident, claim, damage, or
destruction.  Such reports shall be given
to Owner promptly, and shall be noted in the monthly reports delivered to Owner
pursuant to Section  2.14 below. 
Manager is authorized to settle any claim against an insurance company
arising out of any policy and, in connection with such claim, to execute proofs
of loss and adjustments of loss and to collect and receipt for loss proceeds.

 

(e)           Indemnification.

 

(i)            On Termination.  In the event this Agreement is terminated for
any reason prior to the expiration of its original term or any renewal term,
Owner shall indemnify, protect, defend, save and hold harmless Manager and all
of the other Manager Indemnified Parties from and against any and all claims,
causes of action, demands, suits, proceedings, loss, judgments, damage, awards,
liens, fines, costs, attorney’s fees and expenses, of every kind and nature
whatsoever (collectively, “Losses”), that may be imposed on or incurred by
reason of the willful misconduct, gross negligence and/or unlawful acts (such
unlawfulness having been adjudicated by a court of proper jurisdiction) of
Owner, its agents, servants, or employees.

 

(ii)           Property Damage and Injury to
Person.  Owner agrees to indemnify,
defend, protect, save and hold harmless Manager and all of the other Manager
Indemnified Parties from any and all Losses in connection with or in any way
related to each Project and from liability for damage to each Project and
injuries to or death of any person whomsoever, and damage to property;
provided, however, that such indemnification and exculpation shall not extend
to any such Losses arising out of the misconduct and/or negligence of Manager,
its agents, servants, or employees; provided, further, that such
indemnification and exculpation shall be limited to the extent that Manager
recovers insurance proceeds with respect to such matter.  Manager shall not be liable for any error of
judgment or for any mistake of fact or law, or for any thing that it may do or
refrain from doing, except in cases of misconduct and/or negligence.  Manager agrees to indemnify, defend, protect,
save and hold harmless Owner and its stockholders, officers, directors,
employees, managers, successors and assigns from any and all claims or
liability for any injury or damage to any person or property whatsoever for
which Manager is responsible occurring in, on, or about the Project when such
injury or damage shall be caused by the willful misconduct, gross negligence
and/or unlawful acts (such unlawfulness having been adjudicated by a court of
proper jurisdiction) of Manager, its agents, servants, or employees, except to
the extent that Owner recovers insurance proceeds with respect to such matter.

 

(iii)          Limitations.  Notwithstanding anything to the contrary in
this Agreement, any indemnification and exculpation by the Owner under this
Agreement is subject to any limitations imposed under the Company’s Articles of
Incorporation or any amendments thereto.

 

 

6

 

2.9           Collection of Monies.  Manager shall use its diligent efforts to
collect all rents and other charges due from tenants, users of garage spaces
(if any), storage spaces, commercial lessees (if any) and concessionaires (if
any) in respect of the Project and otherwise due Owner with respect to the
Project in the ordinary course of business, provided that Manager does not
guarantee the creditworthiness of any tenants, users, lessees, concessionaires
or collectibility of accounts receivable from any of the foregoing.  Owner authorizes Manager to request, demand,
collect, receive and provide a receipt for all such rent and other charges and
to institute legal proceedings in the name of Owner, and at Owner’s expense,
for the collection thereof, and for the dispossession of tenants and other
persons from the Project or to cancel or terminate any lease, license or
concession agreement for breach or default thereunder, and such expense may
include the engaging of legal counsel approved by Owner in writing for any such
matter.  All monies collected by Manager
shall be deposited in the separate bank account referred to in Section 4.2
herein.

 

2.10         Manager Disbursements.

 

(a)           Manager shall, from
the funds collected and deposited, cause to be disbursed regularly and
punctually (1) Manager’s compensation, together with all sales or other
taxes (other than income) which Manager is obligated, presently or in the
future, to collect and pay to any applicable governmental authority, (2) the
amounts reimbursable to Manager under this Agreement, (3) the amount of all
real estate taxes and other impositions levied by appropriate authorities
which, if not escrowed with any mortgagee, shall be paid upon specific written
direction of Owner before interest begins to accrue thereon, (4) debt
service related to any mortgages of the Project; and (5) amounts otherwise
due and payable as operating expenses of the Project authorized to be incurred
under the terms of this Agreement.  After
(i) making disbursements as herein specified and (ii) establishing a
cash reserve to pay taxes, insurance, and/or other costs and expenses
incidental to the operation of the Project, including nonrecurring emergency
repairs and capital expenditures which shall become due and payable within the
succeeding calendar month and for which the cash to make such payments may not
be generated by operations during such period, any balance remaining at the end
of each calendar month during the term of this Agreement shall be disbursed or
transferred as generally or specifically directed from time to time by Owner.

 

(b)           All costs, expenses,
debts and liabilities owed to third persons that are incurred by Manager
pursuant to the terms of this Agreement and in the course of managing, leasing
and operating the Project shall be the responsibility of Owner and not
Manager.  Owner agrees to provide
sufficient working capital funds to Manager so that all amounts due and owing
may be promptly paid by Manager.  Manager
is not obligated to advance any funds. 
As of the first day of each month of this Agreement, Manager will
project the cash requirements for such month and (if it shall reasonably
determine that collections will be insufficient to meet such cash requirements)
request the necessary additional funds from the Owner, which funds will be
deposited with the Manager in the segregated bank account referred to in Section 4.2
on or before ten (10) days following the receipt of such request.  If at any month end, the bank balance exceeds
the projected cash requirements, such excess shall be returned to the Owner within
five days.  If at any time there is not
sufficient cash in the account with which to promptly pay the bills due and
owing, the Manager will request that the necessary additional funds be
deposited in an amount sufficient to create an operating reserve pursuant to Section 4.4.  Owner will deposit the additional funds
requested by the Manager within five (5) days following the receipt of
such request.

 

2.11         Use and Maintenance of Premises.  Manager agrees that it will not knowingly
permit the use of the Project for any purpose which might void any policy of
insurance held by Owner or which might render any loss thereunder
uncollectible, or which would be in violation of any government restriction or
any covenant or restriction of any lease of the Project.  Manager shall use its good faith 

 

 

7

 

efforts to secure substantial compliance by the tenants with the terms
and conditions of their respective leases.

 

2.12         Annual Business Plan.

 

(a)           On or before October 1
of each calendar year during the term of this Agreement, Manager shall prepare
and submit to Owner for Owner’s approval, an Annual Business Plan (herein so
called) for the Project for the promotion, leasing, operations, repair and
maintenance of the Project for each calendar year during which this Agreement
is in effect.  The Annual Business Plan
shall include a detailed budget of projected income and expenses for the
Project for such calendar year (the “Operating Budget”) and a
detailed budget of projected capital improvements for the Project for such
calendar year (the “Capital Budget”). 
Within 30 days following the purchase of a Project by Owner, after the
approval of the Annual Business Plan for such calendar year, Manager shall
prepare and submit to Owner a comparable business plan for such Project and
Manager and Owner must follow the procedure set forth in (b) below with
respect to approving any such additional business plan.

 

(b)           Manager shall meet
with Owner to discuss the proposed Annual Business Plan and Owner shall notify
Manager with respect to the approval or disapproval of the proposed Annual
Business Plan within 20 days following the receipt of the Annual Business
Plan.  Any notice which disapproves a proposed
Annual Business Plan must contain specific objections in reasonable
detail.  If Owner fails to provide
approval of a proposed Annual Business Plan within such 20 day period, the
proposed Annual Business Plan shall be deemed to be disapproved and the Annual
Business Plan in effect for the previous calendar year shall remain in effect
until Owner approves a new Annual Business Plan for such Project.  Owner acknowledges that the Operating Budget
is intended only to be a reasonable estimate of the Project’s income and
expenses for the ensuing calendar year. 
Manager shall not be deemed to have made any guarantee, warranty or
representation whatsoever in connection with the Operating Budget.

 

(c)           Manager may revise
the Operating Budget from time to time, as necessary, to reflect any unpredicted
significant changes, variables or events or to include significant additional,
unanticipated items of revenue and expense. 
Any such revision shall be subject to the prior written approval of
Owner.

 

(d)           Manager agrees to
use diligence and to employ all reasonable efforts to ensure that the actual
costs of maintaining and operating the Project shall not exceed the Operating
Budget which is a part of the approved Annual Business Plan either in total or
in any one accounting category.  Any
expense causing or likely to cause a variance of greater than ten percent (10%)
or $2,000, whichever is greater, in any one accounting category on a cumulative
year-to-date basis shall be promptly explained to Owner by Manager in the next
monthly report submitted by Manager to Owner under Section 2.14(a) below.  During the calendar year Manager shall inform
Owner of any major increases or decreases in costs, expenses, and income that
were not reflected in the Annual Business Plan.

 

2.13         Records.  Manager shall maintain all office records and
books of account and shall record therein, and keep copies of, each invoice
received from services, work and supplies ordered in connection with the
maintenance and operation of the Project. 
Such records shall be maintained on a double entry basis.  Owner and persons designated by Owner shall
at all reasonable times have access to and the right to audit and make
independent examinations of such records, books and accounts and all vouchers,
files and all other material pertaining to the Project and this Agreement, all
of which Manager agrees to keep safe, available and separate from any records
not pertaining to the Project, at a place recommended by Manager and approved
by Owner.

 

 

8

 

2.14         Financial Reports.

 

(a)           Monthly Reports.  On or before the 10th day after
the end of each month during the term of this Agreement, Manager shall prepare
and submit to Owner the following reports and statements:

 

(i)            rental collection record;

 

(ii)           monthly operating and cash flow
statement;

 

(iii)          copy of cash disbursements ledger
entries for such period, if requested;

 

(iv)          copy of cash receipts ledger entries
for such period, if requested;

 

(v)           the original copies of all contracts
entered into by Manager on behalf of Owner during such period, if requested;
and

 

(vi)          copy of ledger entries for such period
relating to security deposits maintained by Manager, if requested.

 

In addition to the above, Manager shall
deliver to Owner such other reports and statements as are reasonably requested
by Owner.

 

(b)           Annual Report.  Within 60 days after the end of each calendar
year of the Project, Manager shall deliver to Owner a statement showing the
results of operations for the calendar year or portion thereof during which the
provisions of this Agreement were in effect. 
Manager shall cooperate with and submit to Owner at such times as may be
required (monthly or annually, as applicable) such other information, reports
or statements requested by Owner regarding the Project or as may be necessary
to comply with any reporting requirements of Owner or prepare any balance
sheets, operating statements or disclosure statements which may be required to
be prepared or filed by Owner.

 

(c)           Returns Required
by Law.  Manager shall execute and
file punctually when due all forms, reports and returns required by law
relating to the employment of personnel.

 

2.15         Compliance with Legal Requirements.  Manager shall execute and file when due all
forms, reports, and returns required by law relating to the employment of its
personnel.  Manager shall promptly, and
in no event later than 72 hours from the time of receipt, notify Owner in
writing of all notices of violation or other notices relating the Project from
any governmental authority, board of fire underwriters or insurance company,
and shall make such recommendations regarding compliance with such notice as
shall be appropriate.  Manager shall be
responsible for notifying Owner in the event it receives notice that any
improvement on the Project or any equipment therein does not comply with the
requirements of any statute, ordinance, law or regulation of any governmental
body or of any public authority or official thereof having or claiming to have
jurisdiction thereover.  Manager shall promptly
forward to Owner any complaints, warnings, notices or summonses received by it
relating to such matters.  Owner
represents that to the best of its knowledge each of the Project and any
equipment thereon will upon acquisition by Owner comply with all such
requirements.  Owner authorizes Manager
to disclose the ownership of each Project by Owner to any such officials.  Owner agrees to indemnify, protect, defend,
save and hold harmless Manager and the other Manager Indemnified Parties from
and against any and all Losses that may be imposed on them or any or all of
them by reason of the failure of Owner to correct any present or future
violation or alleged violation of any and all present or future laws,
ordinances, statutes, 

 

 

9

 

or regulations of any public authority or official thereof, having or
claiming to have jurisdiction thereover, of which it has actual notice.

 

Owner
acknowledges that Manager does not hold itself out to be an expert or
consultant with respect to, or represent that, the Project currently complies
with applicable ordinances, regulations, rules, statutes, or laws of
governmental entities having jurisdiction over the Project or the requirements
of the board of fire underwriters or other similar bodies (collectively, “Governmental Requirements”).  Manager shall take such action as may be
reasonably necessary to comply with any Governmental Requirements applicable to
Manager, including the collection and payment of all sales and other taxes
(other than income taxes) which may be assessed or charged by any governmental
entities in the state in which the Project is located in connection with
Manager’s Compensation (set forth in Article III below).  If Manager discovers the Project does not
comply with any Governmental Requirements, Manager shall take such action as
may be reasonably necessary to bring the Project into compliance with such
Governmental Requirements, subject to the limitation contained in Section 2.5
of this Agreement regarding the making of alterations and repairs.  Manager, however, shall not take any such
action as long as Owner is contesting or has affirmed its intention to contest
and promptly institute proceedings contesting any such order or requirement.  If, however, failure to comply promptly with
any such order or requirement would or might expose Manager to civil or
criminal liability, Manager shall have the right, but not the obligation, to
cause the same to be complied with and Owner agrees to indemnify and hold
harmless Manager and the other Manager Indemnified Parties from and against any
and all Losses that may be imposed on them or any or all for taking such
actions and to promptly reimburse Manager for expenses incurred thereby.  The Manager also shall not be liable for any
effort or judgment or for any mistake of fact of law, or for anything which it
may do or refrain from doing hereinafter, except in cases of misconduct and/or
negligence of Manager, its agents, servants, or employees.

 

2.16         Dealings
with Advisor.  Unless Owner specifically
informs Manager to the contrary, Behringer Harvard Multifamily Advisors I LP,
or its successor as advisor to the Company, may perform any of the obligations
or exercise any of the rights of Owner under this Agreement.

 

ARTICLE III

 

Manager’s Compensation, Term

 

3.1           Management Fee.  Commencing on the date hereof, Owner shall
pay Manager a monthly management fee (“Management Fee”)
equal to three and three-quarters percent (3-3/4%) of Gross Revenue (as defined
below) for each Project for such month payable monthly in arrears.  The term “Gross
Revenues” shall mean all amounts actually collected as rents or
other charges for use and occupancy of apartment units and from users of garage
spaces (if any), leases of other non-dwelling facilities in each Project and
concessionaires (if any) in respect of each Project, including furniture
rental, parking fees, forfeited security deposits, application fees, late
charges, income from coin operated machines, proceeds from rental interruption
insurance, and other miscellaneous income collected at each Project; but shall
exclude all other receipts, including but not limited to, income derived from
interest on investments or otherwise, proceeds of claims on account of
insurance policies (other than rental interruption[s] insurance), abatement of
taxes, and awards arising out of eminent domain proceedings, discounts and
dividends on insurance policies.  In the
event that Owner contracts directly with a non-affiliated third-party property
manager in respect of a Project for which the Owner, in its sole discretion,
has the ability to appoint or hire the Manager, Owner shall pay Manager an
oversight fee (“Oversight Fee”)
equal to one percent (1%) of Gross Revenues of such Project.  In no event will Owner pay both a Management
Fee and an Oversight Fee to Manager with respect to any Project.  If Manager subcontracts its responsibilities
hereunder to another person or entity, Manager shall be solely responsible for
the payment to such third party.  The
Management Fee includes the reimbursement of the specified cost 

 

 

10

 

incurred by the Manger of engaging another person or entity to perform
Manager’s responsibilities hereunder; provided, however, that Manager shall be
responsible for payment of all such amounts to such third parties.  Nothing herein shall prevent Manager from
entering fee-splitting arrangements with third parties with respect to the
Management Fee.

 

3.2           Term  This Agreement commenced as of November 22,
2006, and shall thereafter continue for a period of seven years from said
commencement date, unless otherwise terminated as provided herein.  If no party gives written notice to the other
at least thirty (30) days prior to the expiration date hereof that this
Agreement is to terminate, then this Agreement shall automatically continue
thereafter for consecutive five-year periods until terminated by any party by
written notice given at least 30 days in advance of such termination.  Provided, however, that in the event the
Company terminates its advisory management agreement with Behringer Harvard
Multifamily Advisors I LP, Manager, upon at least thirty (30) days prior
written notice, shall have the right to terminate this Agreement.  In addition,
and notwithstanding the foregoing, Owner may terminate this Agreement (i) at
any time upon delivery of written notice to Manager not less than thirty (30)
days prior to the effective date of termination, in the event of (and only in
the event of) a showing by Owner of willful misconduct, gross negligence or
deliberate malfeasance of the Manager, its agents, servants or employees in the
performance of Manager’s duties hereunder and (ii) immediately upon the
occurrence of any of the following:

 

(a)           A decree or order is
rendered by a court having jurisdiction (i) adjudging Manager as bankrupt
or insolvent, or (ii) approving as properly filed a petition seeking
reorganization, readjustment, arrangement, composition or similar relief for
Manager under the federal bankruptcy laws or any similar applicable law or
practice, or (iii) appointing a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of Manager or a substantial part of the
property of Manager, or for the winding up or liquidating of its affairs; or

 

(b)           Manager (i) institutes
proceedings to be adjudicated a voluntary bankrupt or an insolvent, (ii) consents
to the filing of a bankruptcy proceeding against it, (iii) files a
petition or answer or consent seeking reorganization, readjustment,
arrangement, composition or relief under any similar applicable law or
practice, (iv) consents to the filing of any such petition, or to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency for it or for a substantial part of its property, (v) makes an
assignment for the benefit of creditors, (vi) is unable to or admits in
writing its inability to pay its debts generally as they become due unless such
inability shall be the fault of the other party, or (iv) takes corporate
or other action in furtherance of any of the aforesaid purposes; or

 

(c)           With respect to any
particular Project, the sale of such Project.

 

If Owner shall materially breach its obligations hereunder, and such
breach remains uncured for a period of 10 days after written notification of
such breach, then Manager may terminate this Agreement by giving written notice
to Owner and Owner agrees to pay Manager the fees due to Manager pursuant to Section 3.1  for the unexpired portion of the term.

 

3.3           Manager’s
Obligations Upon Termination.  Upon
the termination of this Agreement, Manager shall have the following duties:

 

(a)           Manager shall
deliver to Owner or its designee, all books and records with respect to the
Project.

 

 

11

 

(b)           Manager shall
transfer and assign to Owner, or its designee, all service contracts and
personal property relating to or used in the operation and maintenance of the
Project, except personal property paid for and owned by Manager.  Manager shall also, for a period of sixty
(60) days immediately following the date of such termination, make itself
available to consult with and advise Owner, or its designee, regarding the
operation, maintenance and leasing of the Project.

 

(c)           Manager shall render
to Owner an accounting of all funds of Owner in its possession and shall
deliver to Owner a statement of all fees and reimbursements claimed to be due
to Manager and shall cause funds of Owner held by Manager relating to the
Project to be paid to Owner or its designee.

 

(d)           Within sixty (60)
days immediately following the date of such termination, Manager shall deliver
to Owner the report required by Section 2.14(a) for any period not
covered by such a report at the time of termination, and within sixty (60) days
immediately following the date of such termination, Manager shall deliver to
Owner, as required by Section 2.14(b), the statement of operations for the
fiscal year or portion thereof ending on the date of termination.

 

3.4           Owner’s
Obligations Upon Termination.  Upon
any termination of this Agreement by Owner other than under subparagraph (i) of
the introductory paragraph to this Section 3.2, Manager shall be entitled
to receive all compensation and reimbursements, if any, due to Manager through
the date of termination.  Such amounts
will be due Manager no later than 30 days from the date of such
termination.  All provisions of this
Agreement that require Owner to have insured, or to protect, defend, save, hold
and indemnify or to reimburse Manager shall survive any expiration or
termination of this Agreement, but only to the extent the applicable claim or
cause of action is based on an event occurring prior to the date of
termination.

 

The
parties understand and agree that Manager may withhold funds for sixty (60)
days after the end of the month in which this Agreement is terminated to pay
bills previously incurred but not yet invoiced and to close accounts. Should
the funds withheld be insufficient to meet the obligation of Manager to pay
bills previously incurred, Owner will, upon demand, advance sufficient funds to
Manager to ensure fulfillment of Manager’s obligation to do so, within ten (10) days
of receipt of notice and an itemization of such unpaid bills.

 

ARTICLE IV

 

Procedures for Handling Receipts and Operating Capital

 

4.1           Security Deposits.  Tenant security deposits shall be held by
Manager in accordance with the laws of the jurisdiction in which the Project is
located.  Owner agrees to indemnify and
hold harmless Manager and the other Manager Indemnified Parties from and
against any and all Losses with respect to any use by Owner of the tenant
security deposits that is inconsistent with the terms of the lease and
applicable laws.

 

4.2           Separation of Owner’s Monies.  Manager shall establish and maintain, in a
bank of Manager’s choice whose deposits are insured by the Federal Deposit
Insurance Corporation, and in a manner to indicate the custodial nature
thereof, a separate bank account for the deposit of all monies of Owner.  Manager shall also establish such other
special bank accounts as may be reasonably required by Owner.  All monies deposited from time to time in
these accounts shall be deemed trust funds and shall be and remain the property
of Owner and shall be withdrawn and dispersed by Manager for the account of
Owner only as expressly permitted by this Agreement for the purposes of
performing the obligations of 

 

 

12

 

Manager hereunder.  No monies
collected by Manager on Owner’s behalf shall be commingled with the funds of
Manager.

 

4.3           Depository Accounts.  Owner and Manager agree that Manager shall
have no liability for loss of funds of Owner contained in the bank accounts for
the Project maintained by Manager pursuant to this Agreement due to insolvency
of the bank or financial institution in which its accounts are kept, whether or
not the amounts in such accounts exceed the maximum amount of federal or other
deposit insurance applicable with respect to the financial institution in
question.

 

4.4           Working Capital.  In addition to the funds derived from the
operation of the Project, Owner shall furnish and maintain in the operating
accounts of the Project such other funds as may be necessary to discharge
financial commitments required to efficiently operate the Project and to meet
all payrolls and satisfy, before delinquency, and to discharge all accounts
payable.  Manager shall have no
responsibility or obligation with respect to the furnishing of any such funds.  Nevertheless, Manager shall have the right,
but not the obligation, to advance funds or contribute property on behalf of
Owner to satisfy obligations of Owner in connection with this Agreement and the
Project.  Manager shall keep appropriate
records to document all reimbursable expenses paid by Manager, which records
shall be made available for inspection by Owner or its agents on request.  Owner agrees to reimburse Manager upon demand
for money paid or property contributed in connection with the Project and this
Agreement.

 

4.5           Authorized Signatures.  Any persons from time to time designated by
Manager shall be authorized signatories on all bank accounts established by
Manager pursuant to this Agreement and shall have authority to make
disbursements from such accounts.  Funds
may be withdrawn from all bank accounts established by Manager, in accordance
with this Article IV, only upon the signature of an individual who has
been granted that authority by Manager and funds may not be withdrawn from such
accounts by Owner unless Manager is in default hereunder.

 

ARTICLE V

 

Miscellaneous

 

5.1           Assignment.  Manager may delegate partially or in full its
duties and rights under this Agreement but only with the prior written consent
of Owner.  Owner acknowledges and agrees that any or all of the duties of Manager
as contained herein may be delegated by Manager and performed by a person or
entity (“Submanager”) with whom Manager contracts for the purpose of performing
such duties.  Owner specifically grants Manager the authority to enter
into such a contract with a Submanager; provided that, unless Owner otherwise
agrees in writing with such Submanager, Owner shall have no liability or
responsibility to any such Submanager for the payment of the Submanager’s fee
or for reimbursement to the Submanager of its expenses or to indemnify the
Submanager in any manner for any matter; and provided further that Manager
shall require such Submanager to agree, in the written agreement setting forth
the duties and obligations of such Submanager, to indemnify Owner for all Losses
incurred by Owner as a result of the willful misconduct or gross negligence of
the Submanager, except that such indemnity shall not be required to the extent
that Owner recovers issuance proceeds with respect to such matter.  Any
contract entered into between Manager and a Submanager pursuant to this Section 5.1
shall be consistent with the provisions of this Agreement, except to the extent
Owner otherwise specifically agrees in writing.  This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.

 

5.2           Non-Solicitation.  During the period
commencing on the date on which this Agreement is entered into and ending one
year following the termination of this Agreement, the Company and OP shall not,
without the Manager’s prior written consent, directly or indirectly, (i) solicit
or encourage any person 

 

 

13

 

to
leave the employment or other service of the Manager or any of its affiliates,
or (ii) hire, on behalf of the Company or OP or any other person or
entity, any person who has left the employment of the Manager or any of its
affiliates within the one-year period following the termination of that person’s
employment with the Manager or any of its affiliates.  During the period commencing on the date
hereof through and ending one year following the termination of this Agreement,
the Company and OP will not, whether for its or their own account or for the
account of any other person, firm, corporation or other business organization,
intentionally interfere with the relationship of the Manager or any of its
affiliates with, or endeavor to entice away from the Manager or any of its
affiliates, any person who during the term of this Agreement is, or during the
preceding one-year period was, a tenant, co-investor, co-developer, joint
venturer or other customer of the Manager or any of its affiliates.

 

5.3           Notices.  All notices required or permitted by this
Agreement shall be in writing and shall be sent by registered or certified
mail, addressed in the case of Owner to 15601 Dallas Parkway, Suite 600,
Addison, Texas 75001, and in the case of Manager to 15601 Dallas Parkway, Suite 600,
Addison, Texas 75001, or to such other address as shall, from time to time,
have been designated by written notice by either party given to the other party
as herein provided.

 

5.4           Entire Agreement.  This Agreement shall constitute the entire
agreement between the parties hereto and no modification thereof shall be
effective unless in writing executed by the parties hereto.

 

5.5           No Partnership.  Nothing contained in this Agreement shall
constitute or be construed to be or create a partnership or joint venture
between the Owner, its successors or assigns, on the one part, and Manager, its
successors and assigns, on the other part.

 

5.6           No Third Party Beneficiary.  Neither this Agreement nor any part hereof
nor any service relationship shall inure to the benefit of any third party, to
any trustee in bankruptcy, to any assignee for the benefit of creditors, to any
receiver by reason of insolvency, to any other fiduciary or officer
representing a bankrupt or insolvent estate of either party, or to the
creditors or claimants of such an estate. 
Without limiting the generality of the foregoing sentence, it is
specifically understood and agreed that insolvency or bankruptcy of either
party hereto shall, at the option of the other party, void all rights of such
insolvent or bankrupt party hereunder (or so many of such rights  as the other party shall elect to void).

 

5.7           Severability.  If any one or more of the provisions of this
Agreement, or the applicability of any such provision to a specific situation
shall be held invalid or unenforceable, such provision should be modified to
the minimum extent necessary to make it or its application valid and
enforceable, and the validity and enforceability of all other provisions of
this Agreement and all other applications of such provisions shall not be
affected thereby.

 

5.8           Captions, Plural Terms.  Unless the context clearly requires
otherwise, the singular number herein shall include the plural, the plural
number shall include the singular and any gender shall include all genders.  Titles and captions herein shall not affect
the construction of this Agreement.

 

5.9           Attorneys’ Fees.  Should either party employ an attorney to
enforce any of the provisions of this Agreement, or to recover damages for
breach of this Agreement, the non-prevailing party in any action agrees to pay
to the prevailing party all reasonable costs, damages and expenses, including
reasonable attorneys’ fees, expended or incurred by the prevailing party in
connection therewith.

 

 

14

 

5.10         Signs.  Manager shall have the right to place signs
on the Project in accordance with applicable Governmental Requirements stating
that Manager is the manager and leasing agent for the Project.

 

5.11         Survival of Indemnities.  The indemnification obligations of the
parties to this Agreement shall survive the termination of this Agreement to
the extent of any claim or cause of action based on an event occurring prior to
the date of termination.

 

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

 

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

 

“Proprietary Property” means all modeling algorithms,
tools, computer programs, know-how, methodologies, processes, technologies,
ideas, concepts, skills, routines, subroutines, operating instructions and
other materials and aides used by Manager in performing its duties set forth in
this Agreement that relate to management advice, services and techniques regarding
current and potential Projects, and all modifications, enhancements and
derivative works of the foregoing.

 

5.13         Governing Law, Venue.  This Agreement shall be construed under and
in accordance with the laws of the State of Texas and is fully performable in
Dallas County, Texas.

 

5.14         Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original.

 

5.15         Savings Clause.  If any provision of this Agreement is held
unenforceable, then such provision will be modified to reflect the parties'
intention. By way of example and without limitation, if any provision requiring
the reimbursement of  certain of the
Manager's expenses should be deemed unenforceable, the parties shall take such
action to reach an agreement for Owner to pay such reimbursable expenses.  All remaining provisions of this Agreement
shall remain in full force and effect.

 

[REST
OF PAGE INTENTIONALLY LEFT BLANK]

 

 

15

 

IN WITNESS WHEREOF, the parties hereto
have caused this instrument to be duly executed by their duly authorized
representatives.

 

	
  “OWNER”

  	
   

  	
  “MANAGER”

  
	
   

  	
   

  	
   

  
	
  BEHRINGER HARVARD MULTIFAMILY

  REIT I, INC.

  	
   

  	
  BEHRINGER HARVARD MULTIFAMILY

  MANAGEMENT SERVICES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Gerald
  J. Reihsen, III

  	
   

  	
   

  	
  Gerald
  J. Reihsen, III

  
	
   

  	
  Executive
  Vice President — Corporate Development and Legal 

  	
   

  	
   

  	
  Executive
  Vice President — Corporate Development and Legal

  
	
   

  	
   

  	
   

  
	
  BEHRINGER HARVARD MULTIFAMILY OP I LP

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:
  

  	
   

  	
  BHMF, Inc.,
  its General Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Gerald
  J. Reihsen, III

  	
   

  	
   

  
	
   

  	
   

  	
  Executive
  Vice President — Corporate Development and Legal 

  	
   

  	
   

  
									

 

 

16

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