Document:

Exhibit 10.1

 

BEHRINGER
HARVARD MULTIFAMILY REIT I, INC.

 

SECOND
AMENDED AND RESTATED ADVISORY MANAGEMENT AGREEMENT

 

This SECOND AMENDED AND RESTATED ADVISORY
MANAGEMENT AGREEMENT (this “Agreement”),
effective as of the 1st day of April, 2009, is made and entered 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 and the Advisor previously entered into that certain
Amended and Restated Advisory Management Agreement dated September 2, 2008
(the “Agreement”);

 

WHEREAS, the Company
and the Advisor desire to amend the Agreement to remove the cap on the
reimbursement of organization and offering expenses by the Company during an
Offering (as defined below) and to amend certain other terms regarding the
reimbursement of organization and offering expenses;

 

WHEREAS, the Company
is issuing shares of its common stock, par value $0.0001, to the public, which
shares are 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
currently qualifies as a real estate investment trust and invests 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.

 

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

 

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

 

Board.  The Board
of Directors of the Company.

 

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 

 

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Value shall be the net worth established thereby and (ii) if the
Company Value is being determined in connection with a Listing, then the
Company Value shall be equal to the number of outstanding Common Shares
multiplied by the Closing Price of a single Share averaged over a period of 30
trading days during which the Common Shares are listed or quoted for trading
after the date of Listing.  For
purposes hereof, 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 

 

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income tax purposes but excluding distributions that constitute the
redemption of any Common Shares and excluding distributions on any Common
Shares before their redemption.

 

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

 

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

 

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 

 

6

 

allocated to the Company or the Operating Partnership in connection
with such transaction or series of transactions.  Net Sales Proceeds shall also include any
consideration (including non-cash consideration such as stock, notes, or other property
or securities) that the Company determines, in its discretion, to be
economically equivalent to proceeds of a Sale, valued in the reasonable
determination of the Company. 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.

 

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

 

Sale or Sales.  (i) Any
transaction or series of transactions whereby: (A) the Company or the
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 

 

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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 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.

 

9

 

ARTICLE II

 

THE ADVISOR

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

service contracts for Assets with duly
qualified and licensed Persons and, to the extent necessary, perform all other
operational functions for the maintenance and administration of the Assets,
including the servicing of Mortgages;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(p)           provide
office space, equipment and 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.

 

11

 

2.03         Authority
of Advisor.

 

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

 

12

 

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

 

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

 

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

 

2.09         Payment of Certain Organization and Offering Expenses.  The Company shall pay directly all
Organization and Offering Expenses considered underwriting compensation by 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.

 

13

 

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.  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 

 

14

 

equal to the lesser of (i) six percent
(6%) of the sales 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 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 

 

15

 

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, together with 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 (“Prior  Offering Additional
Reimbursement”); provided, however, that, within 60 days after the
end of the month in which an Offering terminates, the Advisor shall reimburse
the Company to the extent that Organization and Offering Expenses (other than
Selling Commissions and the dealer manager fee) together with the Prior
Offering Additional Reimbursement incurred by the Company exceed 1.5% of the
Gross Proceeds raised in the completed Offering, unless the terms of this
Agreement are amended upon renewal to provide otherwise in connection with
subsequent Offerings.

 

(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 

 

16

 

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 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.

 

17

 

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

 

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

 

4.03         Payments to and Duties of Advisor upon
Termination.

 

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

 

(b)           The Advisor shall promptly upon termination:

 

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

 

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

 

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

 

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

 

(c)           (i)            In the event that this Agreement
is terminated or allowed to expire without renewal due to a material breach by
the Advisor of this Agreement, which termination or expiration occurs prior to
the Advisor’s reimbursement to the Company for an Offering pursuant to the
provisions of Section 3.02(a)(i), the Advisor, within 15 days after the
end of the month in which the Offering terminates, or as soon thereafter as
reasonably practicable if the Termination Date occurs after such date, shall
reimburse the Company to the extent that Organization and Offering Expenses
(other than Selling Commissions and the dealer manager fee) and the Prior
Offering Additional Reimbursement incurred by the Company through the
Termination Date exceed 1.5% of the Gross Proceeds raised 

 

18

 

in such completed Offering.

 

(ii)           In the event that an Advisory Agreement Termination
(as such term is defined in the Articles of Incorporation) occurs after the
commencement of an Offering and prior to the Advisor’s reimbursement to the
Company for such Offering pursuant to the provisions of Section 3.02(a)(i) hereof,
the Advisor, within 15 days after the end of the month in which such Offering
terminates, or as soon thereafter as reasonably practicable if the Termination
Date occurs after such date, shall reimburse the Company to the extent that
Organization and Offering Expenses (including Selling Commissions and the
dealer manager fee) incurred by the Company in connection with such Offering
through the Termination Date exceed 15% of the Gross Proceeds raised in such
completed Offering.

 

ARTICLE V

 

INDEMNIFICATION

 

5.01         Indemnification
by the Company.

 

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

 

19

 

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.

 

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.

 

20

 

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

  
	
   

  	
   

  
	
  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 

 

21

 

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.

 

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.

 

22

 

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]

 

23

 

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:

  	
  /s/ Gerald J. Reihsen, III

  
	
   

  	
   

  	
  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:

  	
  /s/ Gerald J. Reihsen, III

  
	
   

  	
   

  	
  Gerald J.
  Reihsen, III

  
	
   

  	
   

  	
  Executive Vice President –
  Corporate Development & Legal and Assistant Secretary

  

 

24Exhibit 10.1

 

UTSTARCOM, INC.

AMENDED AND RESTATED

VICE PRESIDENT CHANGE IN CONTROL
AND

INVOLUNTARY TERMINATION SEVERANCE
PAY PLAN

 

1.                                       Introduction.  The purpose of this UTStarcom, Inc. Vice
President Change in Control and Involuntary Termination Severance Pay Plan, as
amended and restated (the “Plan”) is to provide assurances of specified
severance benefits to eligible employees of the Company whose employment is
subject to being involuntarily terminated (other than for Cause, death or
Disability).  The Plan is intended to (a) assure
that the Company will have continued dedication and objectivity of its
employees, and (b) provide the Company’s employees with an incentive to
continue their employment and to motivate its employees to maximize the value
of the Company for the benefit of its stockholders.  This Plan is an “employee welfare benefit
plan,” as defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended.  This
document constitutes both the written instrument under which the Plan is
maintained and the required summary plan description for the Plan.

 

2.                                       Important Terms.  To help you understand how this Plan works,
it is important to know the following terms:

 

2.1                               “Administrator”
means the Company, acting through its Senior Vice President of Human Resources
or any person to whom the Administrator has delegated any authority or
responsibility pursuant to Section 8, but only to the extent of such
delegation.

 

2.2                               “Base
Pay” means a Covered Employee’s regular straight-time salary as in effect
during the last regularly scheduled payroll period immediately preceding the
date on which the Severance Benefit becomes payable.  Base Pay does not include payments for
overtime, shift premium, incentive compensation, incentive payments, bonuses,
commissions or other compensation.

 

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

 

2.4                               “Cause” means (a) any act of personal dishonesty taken
by the Covered Employee in connection with his or her responsibilities as an
employee which is intended to result in substantial personal enrichment of the
Covered Employee, (b) a Covered Employee’s conviction of a felony which
the Board reasonably believes has had or will have a material detrimental
effect on the Company’s reputation or business, (c) a willful act by the
Covered Employee which constitutes misconduct and is injurious to the Company,
and (d) continued willful violations by the Covered Employee of the
Covered Employee’s obligations to the Company after there has been delivered to
the Covered Employee a written demand for performance from the Company which
describes the basis for the Company’s belief that the Covered Employee has not
substantially performed his or her duties.

 

2.5                               “Change in Control” shall mean the occurrence of any of the
following events:

 

(a)                                  Any
“person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company’s then outstanding voting securities; or

 

 

(b)                                 The
consummation of the sale or disposition by the Company of all or substantially
all of the Company’s assets; or

 

(c)                                  The
consummation of a merger or consolidation of the Company, with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company, or such surviving entity or its parent outstanding immediately
after such merger or consolidation; or

 

(d)                                 A
change in the composition of the Board, as a result of which fewer than a
majority of the Directors are Incumbent Directors. “Incumbent Directors” means
Directors who either (A) are Directors as of the effective date of the
Plan (pursuant to Section 22), or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of
those Directors whose election or nomination was not in connection with any
transaction described in subsections (i), (ii) or (iii) or in
connection with an actual or threatened proxy contest relating to the election
of Directors.

 

2.6                               “Company”
means UTStarcom, Inc., a Delaware corporation, and any successor by
merger, acquisition, consolidation or otherwise that assumes the obligations of
the Company under the Plan.

 

2.7                               “Covered
Employee” means an employee of the Company who is identified on Exhibit A
to this Plan or who is designated by the Administrator in writing from time to
time as a Covered Employee.

 

2.8                               “Determination Period” means the time period beginning on
the date of the Change in Control and ending eighteen (18) months following the
Change in Control.

 

2.9                               “Director” means a member of the Company’s Board of
Directors.

 

2.10                         “Disability” means that the Covered
Employee has been unable to perform his or her Company duties as the result of
his or her incapacity due to physical or mental illness, and such inability, at
least twenty-six (26) weeks after its commencement or one hundred eighty (180)
days in any consecutive twelve (12) month period, is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Covered Employee or the Covered Employee’s legal representative (such
agreement as to acceptability not to be unreasonably withheld).  Termination resulting from Disability may
only be effected after at least thirty (30) days’ written notice by the Company
of its intention to terminate the Covered Employee’s employment.  In the event that the Covered Employee resumes
the performance of substantially all of his or her duties hereunder before the
termination of his or her employment becomes effective, the notice of intent to
terminate will automatically be deemed to have been revoked.

 

2.11                         “Effective Date” means June 20, 2006.

 

2

 

2.12                           “ERISA” means the Employee Retirement Income Security Act of
1974, as amended.

 

2.13                           “Good Reason” means, without the Covered Employee’s express
written consent, (a) a significant reduction of the Covered Employee’s
duties, position or responsibilities relative to the Covered Employee’s duties,
position or responsibilities in effect immediately prior to such reduction, or
the removal of the Covered Employee from such position, duties and
responsibilities, unless the Covered Employee is provided with comparable
duties, position and responsibilities; provided, however, that the sole
occurrence of the Company being acquired and made part of a larger entity shall
not constitute a “Good Reason”; (b) a reduction by the Company of the
Covered Employee’s base salary as in effect immediately prior to such
reduction; (c) a material reduction by the Company in the kind or level of
employee compensation or benefits to which the Covered Employee is entitled
immediately prior to such reduction, with the result that the Covered Employee’s
overall benefits package is significantly reduced; (d) the relocation of
the Covered Employee to a facility or location where such relocation increases
the distance the Covered Employee must travel to work by more than thirty (30)
miles from the Covered Employee’s commute prior to the relocation; or (e) the
failure of the Company to obtain the assumption of this Plan by any successor
to the Company (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company’s business and/or assets.

 

2.14                           “Involuntary Termination” means a termination of employment
of a Covered Employee under the circumstances described in Section 4.1 or Section 4.2.

 

2.15                           “Option” means a right granted pursuant to the Company’s
stock option plan(s) to purchase common stock of the Company pursuant to
the terms and conditions of such plan(s).

 

2.16                           “Plan” means the
UTStarcom, Inc. Vice President Change in Control and Involuntary
Termination Severance Pay Plan, as set forth in this document, and as hereafter
amended from time to time.

 

2.17                           “Severance Benefit”
means the compensation and other benefits the Covered Employee will be provided
pursuant to Section 4.

 

2.18                           “Severance Date” means the date on which a Covered Employee
experiences an Involuntary Termination.

 

2.19                           “Specified Employee” means any Covered Employee who would be
considered a “Specified Employee” as that term is defined in Section 409A(a)(2)(B)(i) of
the Internal Revenue Code of 1986, as amended (the “Code”).

 

3.                                     Eligibility for Severance Benefit.  An individual is eligible for the Severance
Benefit under the Plan, in the amount set forth in Section 4, only if he or she is a Covered Employee on the date he or
she experiences an Involuntary Termination and executes, and does not revoke, a
release in favor of the Company as required by Section 4.4.

 

3

 

4.                                     Severance Benefit.

 

4.1                               Involuntary Termination Apart From a Change in
Control.  If at any time
before a Change in Control or after the Determination Period following a Change
in Control, the Company (or any parent or subsidiary of the Company) terminates
a Covered Employee’s employment for other than Cause, death or Disability, or
the Covered Employee terminates his or her employment with the Company for Good
Reason, then, subject to the Covered Employee’s compliance with Section 4.4,
the Covered Employee shall receive the following Severance Benefit from the
Company:

 

4.1.1                        Severance Benefit. 
Each Covered Employee shall be entitled to receive a lump sum cash
payment equal to two (2) weeks of Base Pay for each year of service with
the Company, with a minimum payment equal to six (6) months of Base Pay,
payable within thirty (30) days following the Involuntary Termination;
provided, however, that if the Covered Employee is a Specified Employee at the
time of such termination, payment shall be delayed as provided for in Section 11.3.

 

4.1.2                        Health Benefits.  The Company shall pay to the Covered
Employee an amount equal to six (6) months of the premiums for
continuation coverage under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended  (“COBRA”) for the  Covered Employee (and any
eligible dependents) under the Company’s medical, dental and vision plans at
the same level of coverage in effect on the Severance Date, payable in a lump
within thirty (30) days following the Involuntary Termination, provided,
however, that if the Covered Employee is a Specified Employee at the time of
such termination, payment shall be delayed as provided for in Section 11.3.

 

4.1.3   Accelerated Vesting of Equity
Awards.  Each Covered Employee
shall not receive any accelerated vesting on his or her outstanding and
unvested equity compensation awards.  The Covered Employee’s equity
awards  shall be exercisable until the earliest of (a) twelve (12)
months from the Employee’s date of termination, (b) the latest date the
equity award could have expired by its original terms under any circumstances, (c) the
tenth (10th) anniversary of the original date of grant of the equity award, or (d) the
date provided for under the equity plan under which the award was granted.

 

4.2                               Involuntary Termination Following a Change in Control. 
If at any time within the Determination Period following a Change in
Control, the Company (or any parent or subsidiary of the Company) terminates a
Covered Employee’s employment for other than Cause, death or Disability, or the
Covered Employee terminates his or her employment with the Company for Good
Reason, then, subject to the Covered Employee’s compliance with Section 4.4,
the Covered Employee shall receive the following Severance Benefit from the
Company:

 

4.2.1                        Severance Benefit. 
Each Covered Employee shall be entitled to receive a lump sum cash
payment equal to (a) one (1) year of Base Pay and (b) one
hundred percent (100%) of his or her target bonus for the year of the
Involuntary Termination, payable within thirty (30) days following the
Involuntary Termination; provided, however, that if the Covered Employee is a
Specified Employee at the time of such termination, payment shall be delayed as
provided for in Section 11.3.

 

4

 

4.2.2                        Health Benefits.  The Company shall pay to the Covered Employee
an amount equal to twelve (12) months of the premiums for continuation coverage
under COBRA of each Covered Employee (and any eligible dependents) under the
Company’s medical, dental and vision plans at the same level of coverage in
effect on the Severance Date, payable in a lump sum within thirty (30) days
following the Involuntary Termination; provided, however, that if the Covered
Employee is a Specified Employee at the time of such termination, payment shall
be delayed as provided for in Section 11.3.

 

4.2.3                        Accelerated Vesting of Equity Awards. 
Each Covered Employee
shall fully vest in and, if applicable, have the right to exercise, all of his
or her outstanding and unvested equity compensation awards.  The Covered
Employee’s equity awards (including awards that vest as a result of the Plan)
shall be exercisable until the earliest of: (a) twelve (12) months from the
Employee’s date of termination, (b) the latest date the equity award could
have expired by its original terms under any circumstances, (c) the tenth
(10th) anniversary of the original date of grant of the equity award, or (d) the
date provided for under the equity plan under which the award was granted.

 

4.3                                 Parachute
Payments.  In the event that the
severance and other benefits provided for in this Plan or otherwise payable or
provided to the Covered Employee (i) constitute “parachute payments”
within the meaning of Section 280G of the Code and (ii) but for this Section 4.3,
would be subject to the excise tax imposed by Section 4999 of the Code
(the “Excise Tax”), then the Employee’s severance benefits hereunder Section 4
shall be either

 

(a)                                  delivered
in full, or

 

(b)                                 delivered
as to such lesser extent which would result in no portion of such severance
benefits being subject to the Excise Tax, whichever of the foregoing amounts,
taking into account the applicable federal, state and local income taxes and the
Excise Tax, results in the receipt by the Covered Employee on an after-tax
basis of the greatest amount of severance benefits, notwithstanding that all or
some portion of such severance benefits may be taxable under Section 4999
of the Code.  Unless the Company and the
Covered Employee otherwise agree in writing, any determination required under this Section 4.3
shall be made in writing in good faith by the accounting firm serving as the
Company’s independent public accountants immediately prior to the Change of
Control (the “Accountants”).  In the
event of a reduction in benefits hereunder, the Covered Employee shall be given
the choice of which benefits to reduce. 
For purposes of making the calculations required by this Section 4.3,
the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code.  The Company and the Covered Employee shall
furnish to the Accountants such information and documents as the Accountants
may reasonably request in order to make a determination under this
Section.  The Company shall bear all
costs the Accountants may reasonably incur in connection with any calculations
contemplated by this Section 4.3. 
Any reduction in payments and/or benefits required by this Section 4.3
will occur in the following order: (i) reduction of cash payments; (ii) reduction
of vesting acceleration of equity awards; and (iii) reduction of other
benefits paid or provided to the Covered Employee.  In the event that acceleration of vesting of
equity awards is to be reduced, such acceleration of vesting will be cancelled
in the reverse order of the date of grant for the Covered Employee’s equity
awards.  If two or more equity awards are
granted on the same date, each award will be reduced on a pro-rata basis.

 

5

 

4.4                                 Release and Non-Disparagement Agreement.  As a condition to receiving Severance
Benefits under this Plan, each Covered Employee will be required to sign a
waiver and release of all claims arising out of his or her Involuntary
Termination and employment with the Company and its subsidiaries and affiliates
and an agreement not to disparage the Company, its directors, or its executive
officers, in a form reasonably satisfactory to the Company, provided that such
release is effective within sixty (60) days following the Covered Employee’s
termination of employment or such shorter period specified in the release (the “Release
Deadline”).  If the release of claims
does not become effective by the Release Deadline, the Covered Employee will
forfeit any rights to the Severance Benefits under this Plan.  No
Severance Benefits will be paid or provided until the waiver and release
agreement becomes effective or irrevocable.

 

4.5                                 Vacation
Days.  Any unused vacation pay
accrued as of a Covered Employee’s date of Involuntary Termination will be paid
at the time the Covered Employee receives his or her Severance Benefit.  No Covered Employee may use any accrued but
unused vacation pay to extend his or her Involuntary Termination date.

 

5.                                     Termination of Benefits. 
Benefits under this Plan shall terminate immediately for a Covered
Employee if such Covered Employee, at any time, violates any proprietary
information or confidentiality obligation to the Company or the terms of any
applicable non-competition agreement with the Company.

 

6.                                     Non-Duplication of Benefits. 
Notwithstanding any other provision in the Plan to the contrary, the
Severance Benefits provided hereunder shall be in lieu of any other severance
and/or retention plan benefits and the Severance Benefits provided hereunder
shall be reduced by any severance paid or provided to a Covered Employee under
any other plan or arrangement.

 

7.                                     Withholding.  The Company will withhold from any Severance
Benefit all federal, state, local and other taxes required to be withheld
therefrom and any other required payroll deductions.

 

8.                                     Administration.  The Company is the administrator of the Plan
(within the meaning of section 3(16)(A) of ERISA).  The Plan will be administered and interpreted
by the Administrator (in his or her sole discretion).  The Administrator is the “named fiduciary” of
the Plan for purposes of ERISA and will be subject to the fiduciary standards
of ERISA when acting in such capacity. 
Any decision made or other action taken by the Administrator with
respect to the Plan, and any interpretation by the Administrator of any term or
condition of the Plan, or any related document, will be conclusive and binding
on all persons and be given the maximum possible deference allowed by law.  The Administrator has the authority to act
for the Company (in a non-fiduciary capacity) as to any matter pertaining to
the Plan; provided, however, that this authority
does not apply with respect to (a) the Company’s power to amend or
terminate the Plan or (b) any action that could reasonably be expected to
increase significantly the cost of the Plan is subject to the prior approval of
the senior officer of the Company.  The
Administrator may delegate in writing to any other person all or any portion of
his or her authority or responsibility with respect to the Plan.

 

6

 

9.                                     Eligibility
to Participate.  The Administrator
will not be excluded from participating in the Plan if otherwise eligible, but
he or she is not entitled to act or pass upon any matters pertaining
specifically to his or her own benefit or eligibility under the Plan.  The senior officer of UTStarcom, Inc.
will act upon any matters pertaining specifically to the benefit or eligibility
of the Administrator under the Plan.

 

10.                               Amendment
or Termination.  The Company reserves
the right to amend or modify the Plan at any time, without advance notice to
any Covered Employee; provided, however, that no amendment or modification of
the Plan shall reduce the Severance Benefit payable to any Covered Employee
(unless the affected Covered Employee consents to such amendment or termination).  The Company shall obtain consent from a
Covered Employee prior to terminating the Plan as to such Covered Employee’s
participation in the Plan.  Any action of
the Company in amending or terminating the Plan will be taken in a
non-fiduciary capacity.

 

11.                               Code Section 409A.

 

11.1                           Notwithstanding
anything to the contrary in this Plan, no Severance Benefits to be paid or
provided to a Covered Employee, if any, pursuant to this Plan, when considered
together with any other severance payments or separation benefits that are
considered deferred compensation under Code Section 409A, and the final
regulations and any guidance promulgated thereunder (“Section 409A”) (together, the “Deferred Compensation Separation Benefits”) will be paid or
otherwise provided until the Covered Employee has a “separation from service”
within the meaning of Section 409A.

 

11.2                           Any
Severance Benefits that would be considered Deferred Compensation Severance
Benefits will be paid on, or, in the case of installments, will not commence
until, the sixtieth (60th) day following the
Covered Employee’s separation from service, or, if later,
such time as required by Section 11.3. 
Any installment payments that would have been made to the Covered
Employee during the sixty (60) day period immediately following the Covered
Employee’s separation from service but for the preceding sentence will be paid
to the Covered Employee on the sixtieth (60th) day following the Covered
Employee’s separation from service and the remaining payments shall be made as
provided in this Plan.

 

11.3                           Notwithstanding
anything to the contrary in this Plan, if a Covered Employee is a “specified
employee” within the meaning of Section 409A at the time of the Covered
Employee’s termination (other than due to death), then the Deferred Compensation Separation Benefits
that are payable within the first six (6) months following the Covered
Employee’s separation from service will become payable on the first payroll
date that occurs on or after the date six (6) months and one (1) day
following the date of the Covered Employee’s separation from service.  All subsequent Deferred Compensation
Separation Benefits, if any, will be payable in accordance with the payment
schedule applicable to each payment or benefit. 
Notwithstanding anything herein to the contrary, if the Covered Employee
dies following the Covered Employee’s separation from
service, but prior to the six (6) month anniversary
of the separation from service, then any payments delayed in accordance with
this paragraph will be payable in a lump sum as soon as administratively
practicable after the date of the Covered Employee’s death and all other
Deferred Compensation Separation Benefits will be payable in accordance with
the payment schedule applicable to each payment or benefit.  Each payment and benefit payable under this
Plan is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of
the Treasury Regulations.

 

7

 

11.4                           Any
amount paid under this Plan that satisfies the requirements of the “short-term
deferral” rule set forth in Section 1.409A-1(b)(4) of the
Treasury Regulations will not constitute Deferred Compensation Separation
Benefits for purposes of Section 11.1 above.

 

11.5                           Any
amount paid under this Plan that qualifies as a payment made as a result of an
involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of
the Treasury Regulations that does not exceed the Section 409A Limit will
not constitute Deferred Compensation Separation Benefits for purposes of Section 11.1
above.  For purposes of this Plan, “Section 409A Limit” will mean the
lesser of two (2) times: (i) the Covered Employee’s annualized
compensation based upon the annual rate of pay paid to the Covered Employee
during the Company’s taxable year preceding the Company’s taxable year of the
Covered Employee’s termination of employment as determined under Treasury
Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service
guidance issued with respect thereto; or (ii) the maximum amount that
may be taken into account under a qualified plan pursuant to Section 401(a)(17)
of the Code for the year in which the Covered Employee’s employment is
terminated.

 

11.6                           The foregoing provisions are intended to comply
with the requirements of Section 409A so that none of the Severance
Benefits to be provided hereunder will be subject to the additional tax imposed
under Section 409A, and any ambiguities herein will be interpreted to so
comply.  Notwithstanding anything in this
Plan to the contrary, the Company reserves the authority to amend the
Plan as it deems necessary or desirable, and without the consent of any Covered
Employee or without providing any advance notice of any such amendment, in
order to ensure the Plan complies with Section 409A.

 

12.                               Claims
Procedure.  Any employee or other
person who believes he or she is entitled to any payment under the Plan may
submit a claim in writing to the Administrator. 
If the claim is denied (in full or in part), the claimant will be
provided a written notice explaining the specific reasons for the denial and
referring to the provisions of the Plan on which the denial is based.  The notice will also describe any additional
information needed to support the claim and the Plan’s procedures for appealing
the denial.  The denial notice will be
provided within 90 days after the claim is received.  If special circumstances require an extension
of time (up to 90 days), written notice of the extension will be given
within the initial 90-day period.  This
notice of extension will indicate the special circumstances requiring the
extension of time and the date by which the Administrator expects to render its
decision on the claim.

 

13.                               Appeal
Procedure.  If the claimant’s claim
is denied, the claimant (or his or her authorized representative) may apply in
writing to the Administrator for a review of the decision denying the
claim.  Review must be requested within
60 days following the date the claimant received the written notice of their
claim denial or else the claimant loses the right to review.  The claimant (or representative) then has the
right to review and obtain copies of all documents and other information
relevant to the claim, upon request and at no charge, and to submit issues and
comments in writing.  The Administrator
will provide written notice of his or her decision on review within
60 days after it receives a review request.  If additional time (up to 60 days) is
needed to review the request, the claimant (or representative) will be given
written notice of the reason for the delay. 
This notice of extension will indicate the special circumstances
requiring

 

8

 

the extension of time and the date by which the
Administrator expects to render its decision. 
If the claim is denied (in full or in part), the claimant will be
provided a written notice explaining the specific reasons for the denial and
referring to the provisions of the Plan on which the denial is based.  The notice shall also include a statement
that the claimant will be provided, upon request and free of charge, reasonable
access to, and copies of, all documents and other information relevant to the
claim and a statement regarding the claimant’s right to bring an action under Section 502(a) of
ERISA.

 

14.                                 Source
of Payments.  All Severance Benefits
will be paid in cash from the general funds of the Company; no separate fund
will be established under the Plan; and the Plan will have no assets.  No right of any person to receive any payment
under the Plan will be any greater than the right of any other general
unsecured creditor of the Company.

 

15.                                 Inalienability.  In no event may any current or former
employee of the Company or any of its subsidiaries or affiliates sell,
transfer, anticipate, assign or otherwise dispose of any right or interest
under the Plan.  At no time will any such
right or interest be subject to the claims of creditors nor liable to
attachment, execution or other legal process.

 

16.                                 No
Enlargement of Employment Rights. 
Neither the establishment or maintenance of the Plan, any amendment of
the Plan, nor the making of any benefit payment hereunder, will be construed to
confer upon any individual any right to be continued as an employee of the
Company.  The Company expressly reserves
the right to discharge any of its employees at any time, with or without cause.

 

17.                                 Applicable
Law.  The provisions of the Plan will
be construed, administered and enforced in accordance with ERISA and, to the
extent applicable, the laws of the State of California.

 

18.                                 Severability.  If any provision of the Plan is held invalid
or unenforceable, its invalidity or unenforceability will not affect any other
provision of the Plan, and the Plan will be construed and enforced as if such
provision had not been included.

 

19.                                 Headings.  Headings in this Plan document are for
purposes of reference only and will not limit or otherwise affect the meaning
hereof.

 

20.                                 Indemnification.  The Company hereby agrees to indemnify and
hold harmless the officers and employees of the Company, and the members of its
boards of directors, from all losses, claims, costs or other liabilities
arising from their acts or omissions in connection with the administration,
amendment or termination of the Plan, to the maximum extent permitted by
applicable law.  This indemnity will
cover all such liabilities, including judgments, settlements and costs of
defense.  The Company will provide this
indemnity from its own funds to the extent that insurance does not cover such
liabilities.  This indemnity is in
addition to and not in lieu of any other indemnity provided to such person by
the Company.

 

9

 

21.                                 Additional
Information.

 

	
  Plan Name:

  	
   

  	
  UTStarcom, Inc. Vice President Change in
  Control and Involuntary Termination Severance Pay Plan

  
	
   

  	
   

  	
   

  
	
  Plan Sponsor:

  	
   

  	
  UTStarcom, Inc.

  1275 Harbor Bay Parkway

  
	
   

  	
   

  	
  Alameda, CA
  94502

  
	
   

  	
   

  	
   

  
	
  Identification
  Numbers:

  	
   

  	
  EIN:
  52-1782500

  
	
   

  	
   

  	
   

  
	
  Plan
  Year:

  	
   

  	
  Calendar year

  
	
   

  	
   

  	
   

  
	
  Plan
  Administrator:

  	
   

  	
  UTStarcom, Inc.

  
	
   

  	
   

  	
  Attention:
  Vice President, Human Resources

  
	
   

  	
   

  	
  1275 Harbor Bay
  Parkway

  
	
   

  	
   

  	
  Alameda, CA 94502

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (510) 864-8800

  
	
   

  	
   

  	
   

  
	
  Agent for Service of  Legal Process: 

  	
   

  	
  UTStarcom, Inc. 

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
  1275 Harbor Bay
  Parkway

  
	
   

  	
   

  	
  Alameda, CA 94502

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (510) 864-8800

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Service of process may also be made upon the Plan
  Administrator.

  
	
   

  	
   

  	
   

  
	
  Type of Plan

  	
   

  	
  Bonus Plan/Severance Plan/Employee Welfare Benefit
  Plan

  
	
   

  	
   

  	
   

  
	
  Plan Costs

  	
   

  	
  The cost of the Plan is paid by the Employer.

  

 

22.                               Statement of ERISA
Rights.

 

As a Covered Employee under the Plan, you have certain
rights and protections under ERISA:

 

(a)                                  You
may examine (without charge) all Plan documents, including any amendments and
copies of all documents filed with the U.S. Department of Labor, such as the
Plan’s annual report (IRS Form 5500). 
These documents are available for your review in the Company’s Human
Resources Department.

 

(b)                                 You
may obtain copies of all Plan documents and other Plan information upon written
request to the Plan Administrator.  A
reasonable charge may be made for such copies.

 

10

 

In addition to creating rights for Covered Employees,
ERISA imposes duties upon the people who are responsible for the operation of
the Plan.  The people who operate the
Plan (called “fiduciaries”) have a duty to do so prudently and in the interests
of you and the other Covered Employees. 
No one, including the Company or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
benefit under the Plan or exercising your rights under ERISA.  If your claim for a severance benefit is
denied, in whole or in part, you must receive a written explanation of the
reason for the denial.  You have the
right to have the denial of your claim reviewed.  (The claim review procedure is explained in
Sections 12 and 13 above.)

 

Under ERISA, there
are steps you can take to enforce the above rights.  For instance, if you request materials and do
not receive them within 30 days, you may file suit in a federal court. In
such a case, the court may require the Plan Administrator to provide the
materials and to pay you up to $110 a day until you receive the materials,
unless the materials were not sent because of reasons beyond the control of the
Plan Administrator.  If you have a claim
which is denied or ignored, in whole or in part, you may file suit in a state
or federal court.  If it should happen
that you are discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file suit in a federal
court.

 

In any case, the
court will decide who will pay court costs and legal fees.  If you are successful, the court may order
the person you have sued to pay these costs and fees.  If you lose, the court may order you to pay
these costs and fees, for example, if it finds that your claim is frivolous.

 

If you have any
questions regarding the Plan, please contact the Plan Administrator.  If you have any questions about this
statement or about your rights under ERISA, you may contact the nearest area
office of the Employee Benefits Security Administration (formerly the Pension
and Welfare Benefits Administration), U.S. Department of Labor, listed in your
telephone directory, or the Division of Technical Assistance and Inquiries,
Employee Benefits Security Administration, U.S. Department of Labor, 200
Constitution Avenue, N.W. Washington, D.C. 20210.  You may also obtain certain publications
about your rights and responsibilities under ERISA by calling the publications
hotline of the Employee Benefits Security Administration.

 

23.                                 Execution.

 

In Witness Whereof, the Company,
by its duly authorized officer, has executed this Plan on the date indicated
below.

 

 

	
   

  	
   

  	
  UTStarcom, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date

  	
   

  

 

11

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