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.  A non-accountable
acquisition expense reimbursement in the amount of: (i) 0.25% of the funds
paid for purchasing an Asset, including any debt attributable to the Asset,
plus 0.25% of the funds budgeted for development, construction or improvement
in the case of Assets that we acquire and intend to develop, construct or
improve or (ii) 0.25% of the funds advanced in respect of a loan or other
investment.   Acquisition Expenses also
include any investment-related expenses due to third parties in the case of a
completed investment, including, but not limited to legal fees and expenses,
travel and communications expenses, costs of appraisals, accounting fees and
expenses, third-party brokerage or finder’s fees, title insurance, premium
expenses and other closing costs.

 

Acquisition 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 

 

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which
the Common Shares are listed or quoted for trading after the date of
Listing.  For purposes hereof, 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.

 

4

 

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

 

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 

 

5

 

repurchase
such Common Shares) multiplied by the price paid for each such redeemed Common
Share when initially purchased from the Company.

 

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 

 

6

 

economically
equivalent to proceeds of a Sale, valued in the reasonable determination of the
Company. 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.

 

7

 

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 

 

8

 

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
Distributions received prior to the Termination Date equals or exceeds the sum
of the aggregate

 

14

 

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 Organization and
Offering Expenses (other than Selling Commissions and the dealer

 

15

 

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;

 

(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;

 

(xiii)                          personnel 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

 

16

 

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.

 

(c)                                  Notwithstanding anything to the contrary in
this Section 3.02, the Advisor will be responsible for paying all of the
investment-related expenses that the Company or the Advisor incurs that are due
to third parties with respect to investments the Company does not make.

 

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

 

18

 

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

 

(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.  Before
becoming a stockholder, Behringer Harvard Holdings, an affiliate of the
Advisor, the Advisor, the Company’s directors and officers and their affiliates
must agree not to vote their shares regarding (1) the removal of any of
these affiliates and (2) any transaction between them and the Company.

 

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 Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD MULTIFAMILY

  OP I LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President – Corporate

  Development & Legal and Assistant 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 Assistant 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 and BEHRINGER HARVARD
MULTIFAMILY MANAGEMENT SERVICES, LLC, a Texas limited liability company (“Manager”).

 

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

 

ARTICLE I

 

Definitions

 

Except as otherwise
specified or as the context may otherwise require, the following terms have the
respective meanings set forth below for all purposes of this Agreement, and the
definitions of such terms are equally applicable both to the singular and
plural forms thereof:

 

1.1                               “Annual
Business Plan” has the meaning set forth in Section 3.12(a) hereof.

 

1.2                               “Approved
Leasing Parameters” means parameters established by or otherwise
approved in writing by Owner specifying the manner of the Manager’s performance
of promotional, leasing and management activities required to lease apartment
units in a Project.

 

1.3                               “Capital
Budget” has the meaning set forth in Section 3.12(a) hereof.

 

1.4                               “Controlling
Agreements” means 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.

 

1.5                               “Economic
Interest Percentage” means  the
percentage of capital contributed directly or indirectly to the Joint Venture
as compared with the total capital contributed to the Joint Venture by all of
the owners of the Joint Venture as such percentage shall be calculated in good
faith by the Owner.  For purposes of
defining Economic Interest Percentage, any in-kind contribution shall be
considered in the calculation and valued at the fair market value of the
contribution on the date of contribution as determined by the Owner.

 

1.6                               “Governmental
Requirements” means applicable ordinances, regulations, rules,
statutes, or laws of governmental entities having jurisdiction over a Project
or the requirements of the board of fire underwriters or other similar bodies.

 

 

1.7                               “Gross
Revenues” means 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.

 

1.8                               “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.

 

1.9                               “Joint
Venture” means an investment in 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 properties.

 

1.10                         “Losses”
means 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.

 

1.11                         “Management
Fee” has the meaning set forth in Section 4.1 hereof.

 

1.12                         “Manager
Indemnified Parties” has the meaning set forth in Section 2.5(a) hereof.

 

1.13                         “Operating
Budget” has the meaning set forth in Section 3.12(a) hereof.

 

1.14                         “Oversight
Fee” has the meaning set forth in Section 4.1 hereof.

 

1.15                         “Owner”
means the Company, the OP and any Joint Venture, limited liability company or
other affiliate of the Company or the OP that owns, in whole or in part, on
behalf of the Company, any Projects.

 

1.16                         “Project”
means, collectively, the apartment communities in which Owner now owns a direct
or indirect equity interest or hereafter acquires a direct or indirect equity
interest.

 

1.17                         “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.

 

1.18                         “Submanager”
has the meaning set forth in Section 6.1 hereof.

 

2

 

1.19                         “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

 

Engagement of Manager and Rental Responsibility

 

2.1                               Engagements.  Subject to the restrictions of
this Section 2.1, Owner hereby engages Manager to manage 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 pursuant to Section 4.1 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.

 

2.2                               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.

 

2.3                               Leasing of Premises. 
Manager shall perform promotional, leasing and management activities
required to lease apartment units in the Project in accordance with 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).  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.

 

3

 

2.4                               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.

 

2.5                               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
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.

 

2.6                               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 4.1 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 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.

 

4

 

ARTICLE III

 

Services to be Performed by Manager

 

3.1                               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 III.  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
relating to such employees, costs of technology related to the Projects,
including computers, telephone systems and property management and accounting
software and any upgrades or conversions thereof, 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 5.2 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 5.2,
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 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.

 

3.2                               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 3.12
hereof.

 

3.3                               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

 

5

 

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.

 

3.4                               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 3.4.

 

3.5                               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 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.

 

3.6                               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).

 

6

 

3.7                               Controlling Agreements. 
Manager has received copies of (and will be provided with copies of
future) 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.

 

3.8                               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.

 

(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 3.14 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 Losses that may be imposed on or incurred
by reason of the willful misconduct, gross negligence and/or unlawful acts (such

 

7

 

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.

 

3.9                               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 5.2
herein.

 

3.10                         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.

 

8

 

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 5.2 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 5.4.  Owner will deposit the additional funds
requested by the Manager within five (5) days following the receipt of
such request.

 

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

 

3.12                         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” 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

 

9

 

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 3.14(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.

 

3.13                         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.

 

3.14                         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.

 

10

 

(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.

 

3.15                         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, 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 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 IV 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 3.5 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.

 

11

 

3.16         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.

 

3.17         Branding.  Manager shall maintain and administer for Owner the standards
of branding established by Behringer Harvard Holdings, LLC with respect to all
billboards, signage and uniforms.

 

3.18         Risk Management.  Manager shall provide to Owner risk
management services, including, but not limited to, the following: assisting
and providing ways to mitigate, minimize, control, and transfer risk through
the prudent use of risk management, insurance programs and recommendations of
safety and loss control techniques; selecting and managing insurance brokers
and service products; preparing underwriting data for use in marketing
insurance programs; negotiating and placing insurance and related services;
serving as liaison for insurance brokers and monitoring insurance premium
invoices for accuracy; managing and settling loss control and insurance claims;
consulting and coordinating  insurance requirements for financing
properties; reviewing and monitoring sub-contractor certificates of insurance;
and consulting regarding insurance verbiage requirements for leases and
contracts.

 

3.19         Real Estate Tax Management.  Manager shall provide to Owner tax
management services with respect to the Properties, including, but not limited
to, the following: coordinating payment of real estate taxes; contesting real
estate taxes, as Manager deems appropriate; accounting for all bills to be
processed at any given installment, and following up on missing bills; data
entry of tax amounts and equalized values when available; providing copies of
documents as requested (including following up on cancelled checks, monitoring
payment by third parties, communicating with interested parties and forwarding
tax bills to purchasers and other parties as necessary).

 

3.20         Technology Use and Support.  Manager shall utilize the software
and technology platforms that it believes are appropriate in connection with
fulfilling its duties under this Agreement.  In addition, Manager shall
provide technical support and maintenance with respect to any technology used
in the maintenance, operation, management and leasing of properties.

 

ARTICLE IV

 

Manager’s Compensation, Term

 

4.1           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 Revenues for each
Project for such month payable monthly in arrears.  Certain of these Projects may be owned by
Joint Ventures.  When the Manager is not
paid by the Joint Venture directly in respect of its services, the applicable
Management Fee or Oversight Fee to be paid by the Owner will be calculated by
multiplying the Management Fee by the Economic Interest Percentage  owned directly or indirectly by the
Owner in such Project. In the event that Owner contracts directly
with a third-party property manager not affiliated with the 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-half of
one percent (0.50%) 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 incurred by the
Manager of engaging another person or entity to perform Manager’s
responsibilities hereunder; provided, however, that Manager shall be
responsible for

 

12

 

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.

 

4.2           Term  This Agreement commenced as of November 22,
2006, and shall thereafter continue for a period of two 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 two-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 4.1  for the unexpired portion of the term.

 

4.3           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.

 

(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 

 

13

 

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 3.14(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 3.14(b), the statement of
operations for the fiscal year or portion thereof ending on the date of
termination.

 

4.4           Owner’s Obligations Upon Termination.  Upon
any termination of this Agreement by Owner other than under clause (i) of
the introductory paragraph to Section 4.2, 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 V

 

Procedures for Handling Receipts and Operating Capital

 

5.1           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.

 

5.2           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

 

14

 

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

 

5.3           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.

 

5.4           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.

 

5.5           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 V, 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 VI

Miscellaneous

 

6.1           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 6.1 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.

 

6.2           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

 

15

 

person 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.

 

6.3           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.

 

6.4           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.

 

6.5           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.

 

6.6           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.

 

6.7           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).

 

6.8           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.

 

6.9           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.

 

6.10         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.

 

16

 

6.11         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.

 

6.12         Ownership of Proprietary Property.  The
Manager retains ownership of and reserves all Intellectual Property Rights in
the Proprietary Property.  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.

 

6.13         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.

 

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

 

6.15         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]

 

17

 

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

  	
   

  	
   

  	
  Executive Vice President – Corporate

  
	
   

  	
  Development and Legal

  	
   

  	
   

  	
  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

  	
   

  	
   

  
							

 

18

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