Document:

Exhibit 10.11

 

Prepared 12-1-05

 

NEW SOUTHERN BANK

Salary Continuation Agreement

 

© 2005
Clark Consulting, Inc.

 

This document is provided to assist your legal counsel in documenting
your specific arrangement.  The laws of
the various states may differ considerably, and this specimen is for general
information only.  It is not a form to be
signed, nor is it to be construed as legal advice.  Failure to accurately document your arrangement
could result in significant losses, whether from claims of those participating
in the arrangement, from the heirs and beneficiaries of participants, or from
regulatory agencies such as the Internal Revenue Service, the Department of
Labor, or bank examiners.  License is
hereby granted to your legal counsel to use these materials in documenting
solely your arrangement.

 

In general, if your bank is subject to SEC regulation, implementation
of this or any other executive or director compensation program may
trigger rules requiring certain disclosures on Form 8-K within four days of
implementing the program.  Consult with
your SEC attorney, if applicable, to determine your responsibilities under the
disclosure rules.

 

 

 

IMPORTANT NOTICE ON CODE SECTION 409A COMPLIANCE

 

Consult with your legal and tax advisors to determine the impact of the
new Internal Revenue Code Section 409A to your particular situation.  The Treasury Department on September 29th,
2005 issued proposed regulations implementing the requirements of Section 409A
which apply to nonqualified deferred compensation arrangements.  The effective date for the proposed
regulations is January 1, 2007; however, they can be fully relied upon by plan
sponsors until the regulations become final.

 

 

NEW
SOUTHERN BANK

SALARY CONTINUATION AGREEMENT

 

THIS SALARY CONTINUATION AGREEMENT (the “Agreement”) is adopted this                  
day of                       ,
200     , by and between NEW SOUTHERN BANK, a
state-chartered commercial bank located in Macon, Georgia (the “Company”), and
BRANDON L. MERCER (the “Executive”).

 

The purpose of this Agreement is to provide specified benefits to the
Executive, a member of a select group of management or highly compensated
employees who contribute materially to the continued growth, development and
future business success of the Company. 
This Agreement shall be unfunded for tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”), as
amended from time to time.  The Company
will pay the benefits from its general assets.

 

The Company and the Executive agree as provided herein.

 

Article 1

Definitions

 

Whenever used in this Agreement, the following words and phrases shall
have the meanings specified:

 

1.1           “Accrual Balance” means the liability
that should be accrued by the Company, under Generally Accepted Accounting
Principles (“GAAP”), for the Company’s obligation to the Executive under this
Agreement, by applying Accounting Principles Board Opinion Number 12 (“APB 12”)
as amended by Statement of Financial Accounting Standards Number 106 (“FAS 106”)
and the Discount Rate.  Any one of a
variety of amortization methods may be used to determine the Accrual
Balance.  However, once chosen, the
method must be consistently applied.  The
Accrual Balance shall be reported by the Company to the Executive on Schedule
A.

 

1.2           “Beneficiary” means each designated
person, or the estate of the deceased Executive, entitled to benefits, if any,
upon the death of the Executive determined pursuant to Article 4.

 

1.3           “Beneficiary Designation Form” means
the form established from time to time by the Plan Administrator that the
Executive completes, signs and returns to the Plan Administrator to designate
one or more Beneficiaries.

 

1.4           “Board” means the boards of directors
of the Company.

 

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

 

1.6           “Disability”
means the Executive’s suffering a sickness, accident or injury which has

 

1

 

been determined by the insurance carrier of any individual or group
disability insurance policy covering the Executive, or by the Social Security
Administration, to be a disability rendering the Executive totally and
permanently disabled.  The Executive must
submit proof to the Plan Administrator of the insurance carrier’s or Social Security
Administration’s determination upon the request of the Plan Administrator.

 

1.7           “Discount Rate” means the rate used
by the Plan Administrator for determining the Accrual Balance.  The initial Discount Rate is seven percent
(7%).  However, the Plan Administrator,
in its sole discretion, may adjust the Discount Rate to maintain the rate
within reasonable standards according to GAAP.

 

1.8           “Early Involuntary Termination” means Separation from Service before Normal
Retirement Age for reasons other than death, Disability, Termination for Cause
or Early Voluntary Termination.

 

1.9           “Early Involuntary
Termination Date” means the month, day and year in which Early
Involuntary Termination occurs.

 

1.10         “Early Voluntary Termination” means Separation from Service before Normal
Retirement Age for reasons other than death, Disability, Termination for Cause
or Early Involuntary Termination.

 

1.11         “Early Voluntary
Termination Date” means the month, day and year in which Early
Voluntary Termination occurs.

 

1.12         “Effective
Date” means November 1, 2005.

 

1.13         “Final Pay” means the current base
annual salary of the Executive at Separation from Service.

 

1.14         “Normal
Retirement Age” means the Executive’s fiftieth (50th)
birthday.

 

1.15         “Normal
Retirement Date” means the later of the Normal Retirement Age or
Separation from Service.

 

1.16         “Plan Administrator” means the plan
administrator described in Article 8.

 

1.17         “Plan
Year” means a twelve-month period commencing on November 1 and
ending on October 31 of each year.  The
initial Plan Year shall commence on the Effective Date of this Agreement.

 

1.18         “Projected Benefit” means thirty
percent (30%) of Projected Final Pay.

 

1.19         “Projected Final Pay” means Final Pay
increased four percent (4%) annually, until Normal Retirement Age.

 

2

 

1.20         “Separation from Service” means
the termination of the Executive’s
employment with the Company for reasons other than death
or Disability.  Whether a
Separation form Service takes place is determined based on the facts and
circumstances surrounding the termination of the Executive’s employment and
whether the Company and the Executive intended for the Executive to provide
significant services for the Company following such termination.  A termination of employment will not be
considered a Separation from Service if:

 

(a)           the Executive
continues to provide services as an employee of the Company at an annual rate
that is twenty percent (20%) or more of the services rendered, on average,
during the immediately preceding three full calendar years of employment (or,
if employed less than three years, such lesser period) and the annual
remuneration for such services is twenty percent (20%) or more of the average
annual remuneration earned during the final three full calendar years of
employment (or, if less, such lesser period), or

 

(b)           the Executive
continues to provide services to the Company in a capacity other than as an
employee of the Company at an annual rate that is fifty percent (50%) or more
of the services rendered, on average, during the immediately preceding three
full calendar years of employment (or if employed less than three years, such
lesser period) and the annual remuneration for such services is fifty percent
(50%) or more of the average annual remuneration earned during the final three
full calendar years of employment (or if less, such lesser period).

 

1.21         “Specified Employee” means a key
employee (as defined in Section 416(i) of the Code without regard to paragraph
5 thereof) of the Company if any stock of the Company is publicly traded on an
established securities market or otherwise.

 

1.22         “Termination
for Cause” has that meaning
set forth in Article 5.

 

 

Article 2

Benefits During Lifetime

 

2.1           Normal Retirement
Benefit.  Upon Separation from Service on or after the
Normal Retirement Age for reasons
other than death, the Company shall pay to the Executive the benefit described
in this Section 2.1 in lieu of any other benefit under this Article.

 

2.1.1        Amount of Benefit.  The
annual benefit under this Section 2.1 is thirty percent (30%) of Final Pay.

 

2.1.2        Payment of Benefit.  The
Company shall pay the annual benefit to the Executive in twelve (12) equal
monthly installments commencing on the first day of the month following the
Executive’s Normal Retirement Date.  The
annual benefit shall be paid to the Executive for fifteen (15) years.

 

3

 

2.2           Early Involuntary
Termination Benefit.  Upon Early Involuntary Termination, the
Company shall pay to the Executive the benefit described in this Section 2.2 in
lieu of any other benefit under this Article.

 

2.2.1        Amount of Benefit.  The
annual benefit under this Section 2.2 is the Early Involuntary Termination
Benefit set forth on Schedule A for the Plan Year during which the Early
Involuntary Termination Date occurs. 
This benefit is determined by vesting the Executive in zero percent (0%)
of the Normal Retirement Benefit described in Section 2.1 for Plan Years one
through five (1-5), ten percent (10%) of the said amount commencing in Plan
Year six (6), and an additional ten percent (10%) of said amount for each
succeeding Plan Year thereafter until the Executive becomes one hundred percent
(100%) vested.

 

2.2.2        Payment of Benefit.  The
Company shall pay the annual benefit to the Executive in twelve (12) equal
monthly installments commencing on the first day of the month following the
Executive’s Normal Retirement Age.  The
annual benefit shall be paid to the Executive for fifteen (15) years.

 

2.3           Early Voluntary
Termination Benefit.  Upon Early Voluntary Termination, the Company
shall pay to the Executive the benefit described in this Section 2.3 in lieu of
any other benefit under this Article.

 

2.3.1        Amount of Benefit.  The
benefit under this Section 2.3 is the Early Voluntary Termination Benefit set
forth on Schedule A for the Plan Year during which the Early Voluntary
Termination Date occurs.  This benefit is
determined by vesting the Executive in zero percent (0%) of the Accrual Balance
for the first five (5) Plan Years, ten percent (10%) of the Accrual Balance in
Plan Year six (6), and an additional ten percent (10%) of said amount for each
succeeding Plan Year thereafter until the Executive becomes one hundred percent
(100%) vested in the Accrual Balance.

 

2.3.2        Payment of Benefit.  The
Company shall pay the benefit to the Executive in twelve (12) equal monthly
installments commencing on the first day of the month following the Executive’s
Normal Retirement Age.  The benefit shall
be paid to the Executive for fifteen (15) years.

 

2.4           Disability Benefit.  Upon
Separation from Service due to Disability prior to Normal Retirement Age, the
Company shall pay to the Executive the benefit described in this Section 2.4 in
lieu of any other benefit under this Article.

 

2.4.1        Amount of Benefit.  The
benefit under this Section 2.4 is the Disability Benefit set forth on Schedule
A for the Plan Year during which the date Separation from Service occurs.  This benefit is determined by vesting the
Executive in one hundred percent (100%) of the Accrual Balance.

 

2.4.2        Payment of Benefit.  The
Company shall pay the benefit to the Executive in

 

4

 

twelve
(12) equal monthly installments commencing on the first day of the month
following the Executive’s Normal Retirement Age.  The benefit shall be paid to the Executive
for fifteen (15) years.

 

2.5           Restriction on Timing of Distribution.  Notwithstanding any provision of this
Agreement to the contrary, if the Executive is considered a Specified Employee
at Separation from Service under such procedures as established by the Company
in accordance with Section 409A of the Code, benefit distributions that are
made upon Separation from Service may not commence earlier than six (6) months
after the date of such Separation from Service.  Therefore, in the event this Section 2.5 is
applicable to the Executive, any payment or series of payments to be made due
to a Separation from Service shall commence no earlier that the first day of the
seventh month following the Separation from Service.

 

2.6           Distributions Upon Income Inclusion Under
Section 409A of the Code.  Upon the inclusion of any portion of the
Accrual Balance into the Executive income as a result of the failure of this
non-qualified deferred compensation plan to comply with the requirements of
Section 409A of the Code, to the extent such tax liability can be covered by
the participant’s vested Accrual Balance, a distribution shall be made as soon
as is administratively practicable following the discovery of the plan failure.

 

Article 3

Death Benefits

 

3.1           Death During
Active Service.  If the Executive dies while in the active
service of the Company, the Company shall pay to the Beneficiary the benefit
described in this Section 3.1.  This
benefit shall be paid in lieu of the benefits under Article 2.

 

3.1.1        Amount of Benefit.  The
annual benefit under this Section 3.1 is thirty percent (30%) of Final Pay.

 

3.1.2        Payment of Benefit.  The
Company shall pay the annual benefit to the Executive’s Beneficiary in twelve
(12) equal monthly installments commencing on the first day of the month
following the Executive’s death.  The
annual benefit shall be paid to the Executive’s Beneficiary for a period of
fifteen (15) years.

 

3.2           Death During
Payment of a Benefit.  If the Executive dies after any benefit
payments have commenced under Article 2 of this Agreement but before receiving
all such payments, the Company shall pay the remaining benefits to the
Beneficiary at the same time and in the same amounts they would have been paid
to the Executive had the Executive survived.

 

3.3           Death After Separation from Service But Before Payment of a Benefit Commences.  If the Executive is entitled to any benefit
payments under Article 2 of this Agreement, but dies prior to the commencement
of said benefit payments, the Company shall pay the same benefit payments to
the Beneficiary that the Executive was entitled to prior to death except that
the benefit payments shall commence on the first day of the month following

 

5

 

the
date of the Executive’s death.

 

Article 4

Beneficiaries

 

4.1           Beneficiary
Designation.  The Executive shall have the right, at any
time, to designate a Beneficiary(ies) to receive any benefits payable under
this Agreement upon the death of the Executive. 
The Beneficiary designated under this Agreement may be the same as or
different from the beneficiary designation under any other benefit plan of the
Company in which the Executive participates.

 

4.2           Beneficiary Designation: Change.  The
Executive shall designate a Beneficiary by completing and signing the
Beneficiary Designation Form, and delivering it to the Plan Administrator or
its designated agent.  The Executive’s
Beneficiary designation shall be deemed automatically revoked if the
Beneficiary predeceases the Executive or if the Executive names a spouse as
Beneficiary and the marriage is subsequently dissolved.  The Executive shall have the right to change
a Beneficiary by completing, signing and otherwise complying with the terms of
the Beneficiary Designation Form and the Plan Administrator’s rules and
procedures, as in effect from time to time. 
Upon the acceptance by the Plan Administrator of a new Beneficiary
Designation Form, all Beneficiary designations previously filed shall be
cancelled.  The Plan Administrator shall
be entitled to rely on the last Beneficiary Designation Form filed by the
Executive and accepted by the Plan Administrator prior to the Executive’s
death.

 

4.3           Acknowledgment.  No
designation or change in designation of a Beneficiary shall be effective until
received, accepted and acknowledged in writing by the Plan Administrator or its
designated agent.

 

4.4           No Beneficiary Designation.  If
the Executive dies without a valid beneficiary designation, or if all
designated Beneficiaries predecease the Executive, then the Executive’s spouse
shall be the designated Beneficiary.  If
the Executive has no surviving spouse, the benefits shall be made to the
personal representative of the Executive’s estate.

 

4.5           Facility of
Payment.  If the Plan Administrator determines in its
discretion that a benefit is to be paid to a minor, to a person declared
incompetent, or to a person incapable of handling the disposition of that
person’s property, the Plan Administrator may direct payment of such benefit to
the guardian, legal representative or person having the care or custody of such
minor, incompetent person or incapable person. 
The Plan Administrator may require proof of incompetence, minority or
guardianship as it may deem appropriate prior to distribution of the
benefit.  Any payment of a benefit shall
be a payment for the account of the Executive and the Executive’s Beneficiary,
as the case may be, and shall be a complete discharge of any liability under
the Agreement for such payment amount.

 

6

 

Article
5

General Limitations

 

5.1           Termination for
Cause.  Notwithstanding any provision of this
Agreement to the contrary, the Company shall not pay any benefit under this
Agreement if the Company’s Board terminates the Executive’s employment for:

 

(a)           Gross negligence or gross neglect of duties
to the Company;

 

(b)           Commission of a felony or of a gross
misdemeanor involving moral turpitude;

 

(c)           Fraud, disloyalty, dishonesty, or willful
violation of any law or significant Company policy committed in connection with
the Executive’s employment and resulting in a material adverse effect on the
Company; or

 

(d)           Issuance of an order for removal of the
Executive by the Company’s banking regulators.

 

5.2           Suicide or
Misstatement.  The Company shall not pay any benefit under
this Agreement if the Executive commits suicide within two years after the
Effective Date.  In addition, the Company
shall not pay any benefit under this Agreement if the Executive has made any
material misstatement of fact on any application for life insurance owned by
the Company on the Executive’s life.

 

Article 6

Claims and Review Procedures

 

6.1           Claims Procedure.  An
Executive or Beneficiary (“claimant”) who has not received benefits under the
Agreement that he or she believes should be paid shall make a claim for such
benefits as follows:

 

6.1.1        Initiation – Written Claim.  The
claimant initiates a claim by submitting to the Plan Administrator a written
claim for the benefits.  If such a claim
relates to the contents of a notice received by the claimant, the claim must be
made within sixty (60) days after such notice was received by the claimant.  All other claims must be made within one
hundred eighty (180) days of the date on which the event that caused the
claim to arise occurred.  The claim must
state with particularity the determination desired by the claimant.

 

6.1.2        Timing of Plan Administrator Response.  The
Plan Administrator shall respond to such claimant within 90 days after
receiving the claim.  If the Plan
Administrator determines that special circumstances require additional time for
processing the claim, the Plan Administrator can extend the response period by
an additional 90 days by notifying the claimant in writing, prior to the end of
the initial 90-day

 

7

 

period,
that an additional period is required. 
The notice of extension must set forth the special circumstances and the
date by which the Plan Administrator expects to render its decision.

 

6.1.3        Notice of Decision.  If
the Plan Administrator denies part or all of the claim, the Plan Administrator
shall notify the claimant in writing of such denial.  The Plan Administrator shall write the
notification in a manner calculated to be understood by the claimant.  The notification shall set forth:

 

(a)           The specific reasons for the denial;

(b)           A reference to the specific provisions of the Agreement on which the
denial is based;

(c)           A description of any additional information or material necessary for
the claimant to perfect the claim and an explanation of why it is needed;

(d)           An explanation of the Agreement’s review procedures and the time limits
applicable to such procedures; and

(e)           A statement of the claimant’s right to bring a civil action under ERISA
Section 502(a) following an adverse benefit determination on review.

 

6.2           Review Procedure.  If
the Plan Administrator denies part or all of the claim, the claimant shall have
the opportunity for a full and fair review by the Plan Administrator of the
denial, as follows:

 

6.2.1        Initiation – Written Request.  To
initiate the review, the claimant, within 60 days after receiving the Plan
Administrator’s notice of denial, must file with the Plan Administrator a
written request for review.

 

6.2.2        Additional Submissions – Information Access.  The
claimant shall then have the opportunity to submit written comments, documents,
records and other information relating to the claim.  The Plan Administrator shall also provide the
claimant, upon request and free of charge, reasonable access to, and copies of,
all documents, records and other information relevant (as defined in applicable
ERISA regulations) to the claimant’s claim for benefits.

 

6.2.3        Considerations on Review.  In
considering the review, the Plan Administrator shall take into account all
materials and information the claimant submits relating to the claim, without
regard to whether such information was submitted or considered in the initial
benefit determination.

 

6.2.4        Timing of Plan Administrator Response.  The
Plan Administrator shall respond in writing to such claimant within 60 days
after receiving the request for review. 
If the Plan Administrator determines that special circumstances require
additional time for processing the claim, the Plan Administrator can extend the
response period by an additional 60 days by notifying the claimant in writing,
prior to the end of the initial 60-day period, that an additional period is
required.  The notice of extension must
set forth the special circumstances and the date by which the

 

8

 

Plan
Administrator expects to render its decision.

 

6.2.5        Notice of Decision.  The
Plan Administrator shall notify the claimant in writing of its decision on
review.  The Plan Administrator shall
write the notification in a manner calculated to be understood by the
claimant.  The notification shall set
forth:

 

(a)           The specific reasons for the denial;

(b)           A reference to the specific provisions of the Agreement on which the
denial is based;

(c)           A statement that the claimant is entitled to receive, upon request and
free of charge, reasonable access to, and copies of, all documents, records and
other information relevant (as defined in applicable ERISA regulations) to the
claimant’s claim for benefits; and

(d)           A statement of the claimant’s right to bring a civil action under ERISA
Section 502(a).

 

Article 7

Amendments and Termination

 

7.1           Amendments.  This Agreement may be amended
only by a written agreement signed by the Company and the Executive.  However, the Company may unilaterally amend
this Agreement to conform with written directives to the Company from its
auditors or banking regulators or to comply with legislative or tax law,
including without limitation Section 409A of the Code and any and all
regulations and guidance promulgated thereunder.

 

7.2           Plan Termination Generally.  The
Company may unilaterally terminate this Agreement at any time.  The benefit shall be the Accrual Balance as
of the date the Agreement is terminated. 
Except as provided in Section 7.3, the termination of this Agreement
shall not cause a distribution of benefits under this Agreement.  Rather, upon such termination benefit distributions
will be made at the earliest distribution event permitted under Article 2 or
Article 3.

 

7.3           Plan Terminations Under Section 409A. 
Notwithstanding anything to the contrary in Section 7.2, if the Company
terminates this Agreement in the following circumstances:

 

(a)           Within thirty (30) days before, or twelve (12) months after a change in
control, as defined in Section 409A of the Code, provided that all
distributions are made no later than twelve (12) months following such
termination of the Agreement and provided that all the
Company’s arrangements which are substantially similar to the Agreement
are terminated so the Executive and all participants in the
similar arrangements are required to receive all amounts of compensation
deferred under the terminated arrangements within twelve (12) months of the
termination of the arrangements;

(b)           Upon the Company’s dissolution or with the approval of a bankruptcy
court

 

9

 

provided that the amounts deferred under the Agreement are included in
the Executive’s gross income in the latest of (i) the calendar year in which
the Agreement terminates; (ii) the calendar year in which the amount is no
longer subject to a substantial risk of forfeiture; or (iii) the first calendar
year in which the payment is administratively practical; or

(c)           Upon the Company’s termination of this and all other non-account
balance plans (as referenced in Section 409A of the Code or the regulations
thereunder), provided that all distributions are made no earlier than twelve
(12) months and no later than twenty-four (24) months following such
termination, and the Company does not adopt any new non-account balance plans
for a minimum of five (5) years following the date of such termination;

 

the Company may distribute the Accrual Balance, determined as of the
date of the termination of the Agreement, to the Executive in a lump sum
subject to the above terms.

 

Article 8

Administration of Agreement

 

8.1           Plan Administrator
Duties.  This Agreement shall
be administered by a Plan Administrator which shall consist of the Board, or
such committee or person(s) as the Board shall appoint.  The Executive may be a member of the Plan
Administrator.  The Plan Administrator
shall also have the discretion and authority to (i) make, amend, interpret and
enforce all appropriate rules and regulations for the administra­tion of this
Agreement and (ii) decide or resolve any and all ques­tions including
interpretations of this Agreement, as may arise in connection with the
Agreement.

 

8.2           Agents.  In the administration of this Agreement, the
Plan Administrator may employ agents and delegate to them such administrative
duties as it sees fit, (including acting through a duly appointed
representative), and may from time to time consult with counsel who may be
counsel to the Company.

 

8.3           Binding Effect of
Decisions.  The decision or
action of the Plan Administrator with respect to any question arising out of or
in connection with the administration, interpretation and application of the
Agreement and the rules and regulations promulgated hereunder shall be final
and conclusive and binding upon all persons having any interest in the
Agreement.  No Executive or Beneficiary
shall be deemed to have any right, vested or nonvested, regarding the continued
use of any previously adopted assumptions, including but not limited to the
Discount Rate.

 

8.4           Indemnity of Plan
Administrator.  The Company shall
indemnify and hold harmless the members of the Plan Administrator against any
and all claims, losses, damages, expenses or liabilities arising from any
action or failure to act with respect to this Agreement, except in the case of
willful misconduct by the Plan Administrator or any of its members.

 

8.5           Company Information.  To
enable the Plan Administrator to perform its functions, the Company shall
supply full and timely information to the Plan Administrator on all

 

10

 

matters
relating to the date and circum­stances of the retirement, Disability, death,
or Separation from Service of the Executive, and such other pertinent
information as the Plan Administrator may reasonably require.

 

8.6           Annual Statement.  The
Plan Administrator shall provide to the Executive, within 120 days after the
end of each Plan Year, a statement setting forth the benefits payable under
this Agreement.

 

Article 9

Miscellaneous

 

9.1           Binding Effect.  This
Agreement shall bind the Executive and the Company, and their beneficiaries,
survivors, executors, successors, administrators and transferees.

 

9.2           No Guarantee of
Employment.  This Agreement is not an employment policy or
contract.  It does not give the Executive
the right to remain an employee of the Company, nor does it interfere with the
Company’s right to discharge the Executive. 
It also does not require the Executive to remain an employee nor
interfere with the Executive’s right to terminate employment at any time.

 

9.3           Non-Transferability. 
Benefits under this Agreement cannot be sold, transferred, assigned, pledged,
attached or encumbered in any manner.

 

9.4           Tax Withholding.  The
Company shall withhold any taxes that are required to be withheld, including
but not limited to taxes owed under Section 409A of the Code and regulations
thereunder, from the benefits provided under this Agreement.  Executive acknowledges that the Company’s
sole liability regarding taxes is to forward any amounts withheld to the
appropriate taxing authority(ies). 
Further, the Company shall satisfy all applicable reporting
requirements, including those under Section 409A of the Code and regulations
thereunder.

 

9.5           Applicable Law.  The
Agreement and all rights hereunder shall be governed by the laws of the State
of GEORGIA, except to the extent preempted by the laws of the United States of
America.

 

9.6           Unfunded
Arrangement.  The Executive and Beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement.  The benefits represent the
mere promise by the Company to pay such benefits.  The rights to benefits are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors.  Any insurance on the Executive’s life is a
general asset of the Company to which the Executive and Beneficiary have no
preferred or secured claim.

 

9.7           Reorganization.  The Company shall not merge or
consolidate into or with another company, or reorganize, or sell substantially
all of its assets to another company, firm, or person unless such succeeding or
continuing company, firm, or person agrees to assume

 

11

 

and
discharge the obligations of the Company under this Agreement.  Upon the occurrence of such event, the term
“Company” as used in this Agreement shall be deemed to refer to the successor
or survivor company.

 

9.8           Entire Agreement. 
This Agreement
constitutes the entire agreement between the Company and the Executive as to
the subject matter hereof.  No rights are
granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.

 

9.9           Interpretation.  Wherever
the fulfillment of the intent and purpose of this Agreement requires, and the
context will permit, the use of the masculine gender includes the feminine and
use of the singular includes the plural.

 

9.10         Alternative Action.  In
the event it shall become impossible for the Company or the Plan Administrator
to perform any act required by this Agreement, the Company or Plan
Administrator may in its discretion perform such alternative act as most nearly
carries out the intent and purpose of this Agreement and is in the best
interests of the Company.

 

9.11         Headings.  Article
and section headings are for convenient reference only and shall not control or
affect the meaning or construction of any of its provisions.

 

9.12         Validity.  In case any provision of this
Agreement shall be illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining parts hereof, but this Agreement
shall be construed and enforced as if such illegal and invalid provision has
never been inserted herein.

 

9.13         Notice.  Any
notice or filing required or permitted to be given to the Company or Plan
Administrator under this Agreement shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the address below: 

 

	
  4077
  Forsyth Road

  
	
  Macon,
  GA 31210

  
	
   

  

 

Such
notice shall be deemed given as of the date of delivery or, if delivery is made
by mail, as of the date shown on the postmark on the receipt for registration
or certification.

 

Any
notice or filing required or permitted to be given to the Executive under this
Agreement shall be sufficient if in writing and hand-delivered, or sent by
mail, to the last known address of the Executive.

 

9.14         Compliance with Section 409A.  This
Agreement shall at all times be administered and the provisions of this
Agreement shall be interpreted consistent with the requirements of Section 409A
of the Code and any and all regulations thereunder, including such regulations
as may be promulgated after the Effective Date of this Agreement.

 

12

 

9.15         Rescissions.  Any
modification to the terms of this Agreement that would inadvertently result in
an additional tax liability on the part of the Executive, shall have no effect
to the extent the change in the terms of the plan is rescinded by the earlier
of a date before the right is exercised (if the change grants a discretionary
right) and the last day of the calendar year during which such change occurred.

 

IN WITNESS WHEREOF, the Executive and a duly authorized representative
of the Company have signed this Agreement.

 

	
  EXECUTIVE:

  	
  COMPANY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  NEW
  SOUTHERN BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By 

  	
   

  	
   

  
	
  BRANDON L. MERCER

  	
   

  	
   

  
	
   

  	
  Title
  

  	
   

  	
   

  
							

 

13

 

o            New Designation

o            Change in Designation

 

I, BRANDON L. MERCER, designate the following as beneficiary of
benefits under the Agreement payable following my death:

 

	
  Primary:

  	
   

  	
  %

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  
	
  Contingent:

  	
   

  	
  %

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  %

  

 

Notes:

•      Please PRINT CLEARLY or TYPE the
names of the beneficiaries.

•      To name a trust as beneficiary,
please provide the name of the trustee(s) and the exact name and date of
the trust agreement.

•      To name your estate as
beneficiary, please write “Estate of _[your name]_”.

•      Be aware that none of the
contingent beneficiaries will receive anything unless ALL of the primary
beneficiaries predecease you.

 

I understand that I may change these beneficiary designations by
delivering a new written designation to the Plan Administrator, which shall be
effective only upon receipt and acknowledgment by the Plan Administrator prior
to my death.  I further understand that
the designations will be automatically revoked if the beneficiary predeceases
me, or, if I have named my spouse as beneficiary and our marriage is
subsequently dissolved.

 

	
  Name:

  	
  BRANDON L. MERCER

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Received by the
  Plan Administrator this          day
  of                                   ,
  20     

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:Exhibit 10.1

 

THIRD AMENDED AND RESTATED

ADVISORY AGREEMENT

 

This THIRD AMENDED AND RESTATED ADVISORY AGREEMENT (this “Agreement”) is entered into on this the 20th day
of March, 2006, by and between BEHRINGER HARVARD REIT I, INC., a Maryland
corporation (the “Company”), and
BEHRINGER ADVISORS LP, a Texas limited partnership (the “Advisor”).

 

W I T N E S S E T H

 

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

 

WHEREAS, the Company
and the Advisor previously entered into that certain Advisory Agreement, dated February 14,
2003 (as amended, supplemented or restated from time to time, the “Original
Advisory Agreement”), and it is intended that this Agreement amend and restate
the Original Advisory Agreement effective as of and for all periods after the
date hereof;

 

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

 

WHEREAS, the Company
desires to continue to avail itself of the experience, sources of information,
advice, assistance and certain facilities available to the Advisor and to have
the Advisor continue to 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 continue to provide such 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 I

DEFINITIONS

 

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

 

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

 

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
Person (including any fees or commissions paid by or to any Affiliate of the
Company or the Advisor) in connection with making or investing in Mortgages or
the purchase, development or construction of an Asset, including, without
limitation, real estate commissions, selection fees, 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
Advisors LP, a Texas limited partnership, any successor advisor to the Company,
or any Person to which Behringer Advisors 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.

 

Aggregate Assets Value.
The aggregate book value of the Assets at the time of measurement before
deducting depreciation, bad debts or other similar non-cash reserves and
without reduction for any debt secured by or relating to such assets; provided,
however, that during such periods in which the Company is obtaining regular
independent valuations of the current value of its net assets for purposes of
enabling fiduciaries of employee benefit plan stockholders to comply with
applicable Department of Labor reporting requirements, “Aggregate Assets Value”
will equal the greater of (i) the amount determined pursuant to the
foregoing or (ii) the Assets’ aggregate valuation established by the most
recent such valuation report without reduction for depreciation, bad debts or
other non-cash reserves and without reduction for any debt secured by or
relating to such assets.

 

Appraised Value.
Value according to an appraisal made by an Independent Appraiser.

 

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, supplemented or restated from time to time.

 

Assets. Properties,
Mortgages and other direct or indirect investments in equity interests in or
loans secured by or otherwise relating to Real Property (other than investments
in bank accounts, money market funds or other current assets, whether of the
proceeds from an Offering or the sale of an Asset or otherwise) owned by the
Company, directly or indirectly through one or more of its Affiliates or Joint
Ventures.

 

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 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 such values at the end of each month during
such period; provided, however, that
during such periods in which the Company is obtaining regular independent
valuations of the current value of its net assets for purposes of enabling
fiduciaries of employee benefit plan stockholders to comply with applicable
Department of Labor reporting requirements, “Average Invested Assets” will
equal the greater of (i) the amount determined pursuant to the foregoing
or (ii) the Assets’ aggregate valuation established by the 

 

2

 

most
recent such valuation report(s) without reduction for depreciation, bad debts
or other non-cash reserves.

 

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 event (including, without limitation, issue, transfer or other disposition
of Shares of capital stock of the Company or equity interests in the
Partnership, merger, share exchange or consolidation) after which any “person”
(as that term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 of the Securities Exchange Act of 1934,
as amended), directly or indirectly, of securities of the Company or the
Partnership representing greater than 50% of the combined voting power of the
Company’s or the Partnership’s then outstanding securities, respectively;
provided, that a Change of Control shall not be deemed to occur as a result of
any widely distributed public offering of the Shares.

 

Closing Price.
On any date, the last sale price for any class or series of the
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 Shares, in
either case as reported in the principal consolidated transaction reporting
system with respect to Shares listed or admitted to trading on the NYSE or, if
such Shares are not listed or admitted to trading on the NYSE, as reported on
the principal consolidated transaction reporting system with respect to Shares
listed or admitted to trading on a principal national securities exchange or,
if such Shares are not listed or admitted to trading on any national securities
exchange, the last quoted price on the Nasdaq National Market System, or, if
not so quoted, 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
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 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 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.

 

Company. Behringer
Harvard REIT I, Inc., a corporation organized under the laws of the State
of Maryland.

 

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 then current balance sheet; provided
that (i) if such Company Value is being determined in connection with a
Change of Control that establishes the Company’s net worth (e.g., a tender
offer for the Shares, sale of all of the Shares or a merger) then the Company
Value shall be the net worth established thereby, and (ii) if such Company
Value is being determined in connection with a Listing, then the Company Value
shall be equal to the number of outstanding Shares multiplied by the Closing
Price of a single Share averaged over a period of 30 trading days during which
the 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 Shares are then Listed on the NYSE and whether or
not there is an actual trade of such 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
(determined by a majority of the Independent Directors) shall name one
appraiser and the two named appraisers shall promptly agree in 

 

3

 

good faith to the appointment of one other appraiser whose
determination of the actual value of the Company as a going concern shall be
final and binding on the parties as to Company Value. The cost of any 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 such commission is paid,
the amount that customarily would be paid for the purchase or sale of a
Property that is reasonable, customary, and competitive in light of the size,
type and location of the Property.

 

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 actually paid or allocated in respect of the purchase, development,
construction or improvement of a Property, the amount of funds advanced with
respect to a Mortgage or the amount actually paid or allocated in respect to
the purchase of other Assets, in each case exclusive of Acquisition Fees and
Acquisition Expenses.

 

Contract Sales Price.
The total consideration provided for in the sales contract for the sale of a
Property.

 

Convertible Shares.
The 1,000 shares of the Company’s non-participating, non-voting, convertible
stock, par value $0.0001 per share.

 

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 a Property or Mortgage, including the negotiation
and approval of plans, and any assistance in obtaining zoning and necessary
variances and financing for a specific 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 owners of Shares, including distributions that may constitute a return
of capital for federal income tax purposes.

 

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

 

Independent Appraiser.
A Person with no material current or prior business or personal relationship
with the Advisor or the Directors and who is a qualified appraiser of Real
Property of the type held by the Company or of other Assets as determined by
the Board. Membership in a nationally recognized appraisal society such as the
American Institute of Real Estate Appraisers or the Society of Real Estate
Appraisers shall be conclusive evidence of such qualification as to Real
Property.

 

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, the 

 

4

 

Company, the Advisor or any of their Affiliates 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, 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. A business or professional
relationship is considered material if the aggregate gross revenue derived by
the Director from the Sponsor, the Advisor and their Affiliates exceeds 5% 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.

 

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

 

Invested Capital.
The amount calculated by multiplying the total number of Shares outstanding by
$10.00, reduced by the portion of any Distribution (other than any Stock
Dividends) that is attributable to Net Sales Proceeds and by any amounts paid
by the Company to repurchase Shares pursuant to the Company’s plan for
repurchase of Shares.

 

Joint Ventures.
The joint venture or partnership arrangements in which the Company or the
Partnership is a co-venturer or general partner, which are established to
acquire or hold Assets.

 

Listing or Listed.
The listing of the Shares of the Company on a national securities exchange or
the quotation of shares on the Nasdaq National Market System. Upon such
Listing, the Shares shall be deemed Listed.

 

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
evidences 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 evidences of indebtedness or obligations.

 

NASAA Guidelines.
The Statement of Policy Regarding Real Estate Investment Trusts of the North
American Securities Administrators Association, Inc.

 

Net Income.
For any period, the Company’s total revenues applicable to such period, less
the total expenses applicable to such 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, 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, including any legal fees and
expenses and other selling expenses incurred in connection with such
transaction. In 

 

5

 

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 from the Joint Venture less the amount of
any selling expenses, including legal fees and expenses incurred by or on
behalf of the Company (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 in
satisfaction thereof other than regularly scheduled interest payments to the
extent such interest accrues at a rate of less than ten percent (10%) per
annum) less the amount of selling expenses incurred by or on behalf of the
Company, 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, 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 180 days thereafter and less
the amount of any real estate commissions, closing costs, and legal fees and
expenses and other selling expenses incurred by or allocated to the Company 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 in its sole
discretion.

 

NYSE. The
New York Stock Exchange, Inc.

 

Offering.
Any public offering of Shares pursuant to an effective registration statement
filed under the Securities Act during periods from and after the date hereof.

 

Organization and Offering Expenses.
Any and all costs and expenses, other than Selling Commissions and the dealer
manager fee (as in effect from time to time), incurred by and to be paid by the
Company, the Advisor or any Affiliate in connection with the formation,
qualification and registration of the Company and the marketing and
distribution of its Shares, including, without limitation, the following:
legal, accounting and escrow fees; printing, amending, supplementing, mailing
and distributing costs; filing, registration and qualification fees and taxes;
telecopier and telephone costs; and all advertising and marketing expenses,
including the costs related to investor and broker-dealer sales meetings.

 

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

 

Performance Fee.
The fee payable to the Advisor upon termination of this Agreement under certain
circumstances if certain performance standards have been met pursuant to Section 4.03(b) or
(c).

 

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

 

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 venture
arrangements or other partnership or investment interests).

 

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 investment advice 

 

6

 

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(10) of the
Securities Act, including a preliminary prospectus, an offering circular as
described in Rule 256 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 to the public.

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

Soliciting Dealers.
Broker-dealers who are members of the National Association of Securities
Dealers, Inc., 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. Robert
M. Behringer.

 

Stock Dividend.
Any dividend or other distribution paid to stockholders of the Company in the form of
additional Shares.

 

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

 

Stockholders’ 9% Return.
As of any date, an aggregate amount equal to a 9% cumulative, noncompounded,
annual return on Invested Capital (calculated like simple interest); provided,
however, that for purposes of calculating the Stockholders’ 9% Return, any
Stock Dividend shall not be included as a Distribution; and provided further
that for purposes of determining the Stockholders’ 9% Return, the return for
each portion of the Invested Capital shall commence for purposes of the
calculation upon the issuance of the shares issued in connection with such
capital.

 

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).

 

Subordinated Incentive Listing Fee.
The fee payable to the Advisor under certain circumstances if the Shares are
Listed pursuant to Section 3.01(e).

 

Subordinated Share of Net Sales Proceeds.
The fee payable to the Advisor under certain circumstances following receipt of
Net Sales Proceeds pursuant to Section 3.01(d).

 

Termination Date.
The date of termination of this Agreement.

 

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 such
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) the Subordinated Share of Net Sales Proceeds, (vi) the
Performance Fee, (vii) the Subordinated Incentive Listing Fee, (viii) Acquisition
Fees and Acquisition Expenses, (ix) real estate commissions on the Sale of
Property, and (x) 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).

 

2%/25% Guidelines.
The requirement pursuant to the NASAA Guidelines that, in any 12 month period,
Total Operating Expenses not exceed the greater of 2% of Average Invested
Assets during such 12 month period or 25% of Net Income over the same 12 month
period.

 

8

 

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
undertakes to use its best efforts to present to the Company potential
investment opportunities and to provide a continuing and suitable investment
program consistent with the investment objectives and policies of the Company
as determined and adopted from time to time by the Board. In performance of
this undertaking, 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
an Affiliate of the Advisor or other Person:

 

(a)                                  serve
as the Company’s investment and financial advisor and provide research and
economic and statistical data in connection with the Assets and investment
policies;

 

(b)                                 provide
the daily management of the Company 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 uncertificated Shares, if any, and acting as transfer agent for the
Company’s Shares;

 

(d)                                 investigate,
select, and, on behalf of the Company, engage and conduct business with such
Persons as the Advisor deems necessary to the proper performance of its obligations
hereunder, including but not limited to 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 Affiliates of the Advisor, and
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 Partnership in compliance with the investment objectives and
policies of the Company; (iv) arrange for financing and refinancing and
make other changes in the asset or capital structure of, and dispose of,
reinvest the proceeds from the sale of, or otherwise deal with the investments
in, Assets; and (v) enter into leases of Property and service contracts
for Assets and, to the extent necessary, perform all other operational
functions for the maintenance and administration of such Assets, including the
servicing of Mortgages;

 

9

 

(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)                                     provide
the Company with 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 others to act, as
attorney-in-fact or agent of the Company in making, requiring and disposing of
Assets, disbursing, and collecting the funds, paying the debts and fulfilling
the obligations of the Company and 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 in connection with investor relations;

 

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

 

(q)                                 prepare
on behalf of the Company all reports and returns required by the Securities and
Exchange Commission, Internal Revenue Service and other state or federal
governmental agencies; and

 

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

 

2.03                           Authority of Advisor.

 

(a)                                  Pursuant
to the terms of this Agreement (including the restrictions included in this Section 2.03
and in Section 2.06), and subject to the continuing and exclusive
authority of the Board over the management of the Company, the Board hereby
delegates to the Advisor the authority to (i) locate, analyze and select
investment opportunities, (ii) structure the terms and 

 

10

 

conditions of transactions
pursuant to which investments will be made or acquired for the Company or the
Partnership, (iii) acquire Properties, make and acquire Mortgages and
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, including oversight of Affiliated companies that perform property
management or other services for the Company, (vi) oversee non-affiliated
and Affiliated property managers and other non-affiliated and Affiliated
Persons who perform services for the Company, and (vii) undertake
accounting and other record-keeping functions at the Asset level.

 

(b)                                 Notwithstanding
the foregoing, any investment in Assets by the Company or the Partnership (as
well as any financing acquired by the Company or the Partnership in connection
with such 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 such proposed
transactions involving investments in Assets as thereafter require prior
approval, provided however, that such 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 such 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
such account or accounts, and disburse from any such account or accounts, any
money on behalf of the Company, under such terms and conditions as the Board may approve,
provided that no funds shall be commingled with the funds of the Advisor; and
the Advisor shall from time to time render appropriate accountings of such
collections and payments to the Board, its Audit Committee and the auditors of
the Company.

 

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

 

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

 

11

 

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. 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.

 

ARTICLE III

COMPENSATION

 

3.01                           Fees.

 

(a)                                  Asset
Management Fee. The Company shall pay the Advisor a monthly Asset
Management Fee of (i) with respect to operating Assets, 0.6% of the
Aggregate Assets Value for such operating Assets (including any debt
attributable to the Assets), payable on the 15th day of each month in an amount
equal to 1/12th of 0.6% of the Aggregate Assets Value for such operating Assets
as of the last day of the immediately preceding month, and (ii) with
respect to development or redevelopment Assets, 0.6% of the Contract Purchase Price
(including any debt attributable to the Assets and any budgeted improvement
costs therefor) for such development or redevelopment Assets, payable on the
15th day of each month in an amount equal to 1/12th of 0.6% of the total
Contract Purchase Price for such development or redevelopment Assets as of the
date such amount is determinable. In any given month, in no event shall the
Advisor be paid Asset Management Fees pursuant to both clause (i) and clause
(ii) of this Section 3.01(a) with respect to the same Asset.

 

(b)                                 Acquisition
and Advisory Fees. The Company shall pay the Advisor an Acquisition and
Advisory Fee in an amount equal to (i) with respect to each Asset acquired
directly by the 

 

12

 

Company, 2.5% of the Contract
Purchase Price of such Asset and (ii) with respect to each Asset acquired
indirectly by the Company through one or more of its Affiliates or Joint
Ventures, 2.5% of the Contract Purchase Price of such Asset multiplied by
the Company’s percentage equity interest in such Affiliates or Joint Ventures,
in each case payable at the time and in respect of the funds expended for (A) the
acquisition of such Asset (including any debt attributable to the Asset), (B) to
the extent that such funds are capitalized, for the development, construction
or improvement of such Asset (including any debt attributable to the Asset) or (C) the
making of a Mortgage; provided, however, that in no event shall
the Company pay the Advisor Acquisition and Advisory Fees with respect to any
temporary investment in Assets. The total of all Acquisition Fees and any
Acquisition Expenses shall be limited in accordance with the Articles of
Incorporation.

 

(c)                                  Subordinated
Disposition Fee. If the Advisor or an Affiliate provides a substantial
amount of the 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, subject to the satisfaction of the condition
outlined below, a Subordinated Disposition Fee in an amount (the “Contingent Subordinated Disposition Fee”)
equal to (subject to the limitation in the following paragraph) (i) in the
case of the sale of Property, the lesser of (A) one-half of a Competitive
Real Estate Commission or (B) 3% of the sales price of such Property and (ii) in
the case of the sale of any Asset other than Property, 3% of the sales price of
such Asset or Assets. 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’ 9% Return. To the extent that, in any
instance, the Contingent Subordinated Disposition Fees is not earned and paid
due to the foregoing limitation, the Contingent Subordinated Disposition Fees
that would have been earned and paid had the foregoing limitation not been in
place at the time of a Sale shall be a contingent liability of the Company,
which shall be paid if and only if the conditions set forth in this
subparagraph 3.01(c) have been satisfied and, upon the satisfaction of
such condition, the Company shall pay all such Contingent Subordination
Disposition Fees as if such condition had been satisfied with respect to each
such prior Sale.

 

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

 

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’ 9% Return 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’ 9% Return 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’ 9% Return through the date of 

 

13

 

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)                                 Subordinated
Share of Net Sales Proceeds. Prior to Listing but after the Stockholders
have received total Distributions in an amount equal to the sum of their
aggregate Invested Capital and Stockholders’ 9% Return, upon the consummation
of any Sale, the Advisor shall receive a Subordinated Share of Net Sales
Proceeds in an amount equal to 15% of Net Sales Proceeds less the amount by
which the Company’s debt for borrowed money exceeds the aggregate book value of
the Company’s assets after the sale of the Asset(s) in respect of which the Net
Sales Proceeds is being determined.

 

Following Listing,
and as soon as practicable after determination of Market Value, if the
Stockholders have received or been deemed to have received total Distributions
in an amount equal to the sum of their aggregate Invested Capital and
Stockholders’ 9% Return through the date of Listing, the Advisor shall receive
a Subordinated Share of Net Sales Proceeds in an amount equal to 15% of Net
Sales Proceeds less the amount by which the Company’s debt for borrowed money
exceeds the aggregate book value of the Company’s assets after the sale of the Asset(s)
in respect of which the Net Sales Proceeds is being determined. For purposes of
this subparagraph (d), in determining whether the Subordinated Share of Net
Sales Proceeds is payable following Listing, in addition to actual
Distributions received, Stockholders will be deemed to have received
Distributions in the amount equal to the Market Value.

 

(e)                                  Subordinated
Incentive Listing Fee. Following Listing, and as soon as practicable after
determination of Market Value, the Advisor shall be entitled to receive a
Subordinated Incentive Listing Fee payable in the form of an interest
bearing promissory note (the “SILF Note”)
in a principal amount equal to 15% of the amount by which (i) the market
value of the outstanding Shares, measured by taking the Market Value, plus the
total of all Distributions paid to Stockholders from the Company’s inception
until the date of Listing, exceeds (ii) the sum of (A) 100% of
Invested Capital and (B) the total Distributions required to be paid to
the Stockholders in order to pay the Stockholders’ 9% Return from inception
through the date of Listing. Interest on
the SILF Note will accrue beginning on the date of Listing at a rate deemed
fair and reasonable by the Independent Directors on the date of Listing.
The Company shall repay the SILF Note using the entire Net Sales Proceeds of
each Sale after Listing until the SILF Note is paid in full, with interest. If
the SILF Note has not been paid in full within five years from the date of
Listing, then the Advisor, its successors or assigns, may elect to convert
the balance of the SILF Note, including accrued but unpaid interest, into
Shares at a price per Share equal to the average Closing Price of the Shares
over the ten trading days immediately preceding the date of such election. If
the Shares are no longer listed at such time as the SILF Note becomes
convertible into Shares as provided by this paragraph, then the price per
Share, for purposes of conversion, shall equal the fair market value for the
Shares as determined by the Board based upon the Appraised Value of the Assets
as of the date of election. The principal amount of the SILF Note shall be
referred to as “Subordinated Disposition Fees.”

 

(f)                                    Debt
Financing Fee. In the event of the origination of any debt financing obtained
by or for the Company (including any refinancing or assumption of debt), the
Company will pay to the Advisor a debt financing fee equal to one percent (1%)
of the amount available under such financing.

 

14

 

(g)                                 Limitations
on Payments. Notwithstanding the foregoing, no payments shall be made under
Sections 3.01(d), 3.01(e), 4.03(b) or 4.03(c) if, at or prior to the
time the payment is due, the Convertible Shares have been converted into Shares
in the case of Sections 3.01(d) and 3.01(e), or, in the case of Sections
4.03(b) and 4.03(c), the determination of the number of Shares issuable
upon conversion of the Convertible Shares has been made in accordance with Article First,
Section (iii)(c) of the Articles Supplementary, dated as of March 22,
2006, to the Articles of Incorporation, in each case, without any reduction in
the number of Convertible Shares converted or in the value or number of Shares
to be issued upon such conversion that may be triggered under the terms of
the Convertible Shares to avoid jeopardizing the Company’s REIT status. If,
however, the Convertible Shares have been converted into Shares in the case of
Sections 3.01(d) and 3.01(e), or, in the case of Sections 4.03(b) and
4.03(c), the determination of the number of Shares issuable upon conversion of
the Convertible Shares has been made in accordance with Article First, Section (iii)(c) of
the Articles Supplementary, dated as of March 22, 2006, to the Articles of
Incorporation, in each case, with a reduction in the number of Convertible
Shares converted or in the value or number of Shares issued upon such
conversion triggered under the terms of the Convertible Shares to avoid
jeopardizing the Company’s REIT status, (i) no payments otherwise due and
payable under Section 3.01(d) (“Offset Payments”) shall be paid until
the aggregate amount of such Offset Payments equals the aggregate value of the
Shares (as determined at the time of such conversion as being the Company Value
divided by the number of Shares outstanding at such time) issued or issuable
upon conversion of the Convertible Shares, and (ii) any payments otherwise
due and payable under Section 3.01(e), 4.03(b) or 4.03(c) shall
be reduced, dollar-for-dollar, by an amount equal to the aggregate value of the
Shares (as determined at the time of such conversion as being the Company Value
divided by the number of Shares outstanding at such time) issued or issuable
upon conversion of the Convertible Shares.

 

3.02                           Expenses.

 

(a)                                  In
addition to the compensation paid to the Advisor pursuant to Section 3.01
hereof, the Company shall pay directly or reimburse the Advisor for all of the
expenses paid or incurred by the Advisor in connection with the services it
provides to the Company pursuant to this Agreement, including, but not limited
to:

 

(i)                                     Organization
and Offering Expenses; provided, however, that within 60 days after the end of
the month in which an Offering terminates, the Advisor shall reimburse the
Company for any Organization and Offering Expenses reimbursement received by
the Advisor pursuant to this Section 3.02, to the extent that such
reimbursement exceeds 2% of the Gross Proceeds (2.5% for Offerings conducted
prior to the date hereof) exclusive of Gross Proceeds from shares sold under
the Company’s Distribution Reinvestment Plan. The Advisor shall be responsible
for the payment of all Organization and Offering Expenses in excess of 2% of
the Gross Proceeds (2.5% for Offerings conducted prior to the date hereof)
exclusive of Gross Proceeds from shares sold under the Company’s Distribution
Reinvestment Plan;

 

(ii)                                  Acquisition
Expenses incurred in connection with the selection and acquisition of Assets in
an amount equal to up to 0.5% of the Contract Purchase Price of each Asset;

 

(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;

 

15

 

(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 payable to an
Affiliate of the Company or a non-affiliated Person;

 

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

 

(ix)                                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, Listing and
registration fees, and other 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, revising, amending, converting, modifying, or terminating the
Company or the Articles of Incorporation;

 

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

 

(xiii)                          administrative
service expenses (including personnel costs; provided, however, that no
reimbursement shall be made for costs of personnel to the extent that such
personnel perform services in transactions 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 such statement
to the Company within 45 days after the end of each quarter.

 

3.03                           Other Services. Should the Board
request that the Advisor or any director, officer or employee thereof render
services for the Company other than set forth in Section 2.02, such
services shall be separately compensated at such rates and in such 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.

 

16

 

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 such year. 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 such excess was justified, based
on unusual and nonrecurring factors which they deem sufficient, the Excess
Amount may be reimbursed to the Advisor. Within 60 days after the end of
any fiscal quarter of the Company for which there is an Excess Amount which the
Independent Directors conclude was justified and reimbursable to the Advisor,
there shall be sent to the Stockholders a written disclosure of such fact, together
with an explanation of the factors the Independent Directors considered in
determining that such Excess Amount was justified. Such determination shall be
reflected in the minutes of the meetings of the Board. The Company will not
reimburse the Advisor or its Affiliates for services for which the Advisor or
its Affiliates are entitled to compensation in the form of a separate fee.
All figures used in any computation pursuant to this Section 3.04 shall be
determined in accordance with generally accepted accounting principles applied
on a consistent basis.

 

ARTICLE IV

TERM AND TERMINATION

 

4.01                           Term; Renewal. Subject to Section 4.02
hereof, this Agreement shall continue in force until the first anniversary of
the date hereof. Thereafter, this Agreement may be renewed for an
unlimited number of successive one-year terms upon mutual consent of the
parties. It is the duty of the Board to evaluate 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 (i) immediately upon a Change of
Control or (ii) upon 60 days written notice without cause or penalty (in
either case, if termination is by the Company, then such termination shall be
upon the approval of a majority of the Independent Directors). Notwithstanding
the foregoing, the provisions of this Agreement which provide for payment to the
Advisor of expenses, fees or other compensation following the date of
termination (i.e., Sections 3.01(e) and
4.03) shall continue in full force and effect until all amounts payable
thereunder to the Advisor are paid in full.

 

4.03                           Payments to and Duties of Advisor upon Termination.

 

(a)                                  After
the Termination Date, the Advisor shall not be entitled to compensation for
further services hereunder except it shall be entitled to and receive from the
Company within 30 days after the effective date of such 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, provided that the Subordinated
Incentive Listing Fee, if any, shall be paid in accordance with the provisions
of Section 3.01(e). Upon termination, the SILF Note shall become
immediately due and payable and shall be promptly paid by the Company. In the
event the Subordinated Incentive Listing Fee is paid to the Advisor following
Listing, no Performance Fee will be paid to the Advisor pursuant to Sections
4.03(b) or (c) below.

 

17

 

(b)                                 Upon
termination, unless such termination is by the Company because of a material
breach of this Agreement by the Advisor or occurs upon a Change of Control, the
Advisor shall be entitled to receive a Performance Fee payable in the form of
an interest bearing promissory note (the “Performance
Fee Note”) in a principal amount equal to the product of 0.15 times the amount, if any, by which (i) the
Company Value plus the total Distributions paid to holders of Shares
through the Termination Date, exceeds (ii) the sum of the aggregate
Invested Capital plus the Stockholders’ 9% Return through the Termination Date.
Interest on the Performance Fee Note
will accrue beginning on the Termination Date at a rate deemed fair and
reasonable by the Independent Directors. The Company shall repay the Performance Fee Note using the entire
Net Sales Proceeds of each Sale after the Termination Date until the Performance Fee Note is paid in full,
with interest. If the Performance Fee Note
has not been paid in full within five years from the Termination Date, then the
Advisor, its successors or assigns, may elect to convert the balance of
the Performance Fee Note,
including accrued but unpaid interest, into Shares at a price per Share equal
to the average Closing Price of the Shares over the ten trading days
immediately preceding the date of such election if the Shares are Listed at
such time. If the Shares are not Listed at such time, the Advisor, its
successors or assigns, may elect to convert the balance of the Performance Fee Note, including accrued
but unpaid interest, into Shares at a price per Share equal to the fair market
value for the Shares as determined by the Board based upon the Appraised Value
of the Assets on the date of election.

 

(c)                                  Notwithstanding
the foregoing, if termination occurs upon a Change of Control, the Advisor
shall be entitled to payment of a Performance Fee equal to the product of 0.15 times the amount, if any,
by which (i) the Company Value plus the total Distributions paid to
holders of Shares through the Termination Date, exceeds (ii) the sum of
the aggregate Invested Capital plus the Stockholders’ 9% Return. No deferral of
payment of the Performance Fee may be made under this Section 4.03(c).

 

(d)                                 In
the event that the Advisor disagrees with the valuation of Shares pursuant to Section 4.03(b) where
the Shares are not Listed, for purposes of determining the number of shares to
be issued to the Advisor following the Advisor’s election to convert the
balance of the Performance Fee Note owed to the Advisor, then the fair market
value of such shares shall be determined by an independent appraiser of equity
value selected by the Advisor and the Company. If the Advisor and the Company
are unable to agree upon an expert independent appraiser, then each of the
Company and the Advisor shall name one appraiser and the two named appraisers
shall promptly agree in good faith to the appointment of one such appraiser
whose determination shall be final and binding on the parties. The cost of such
appraisal shall be shared evenly between the Company and the Advisor.

 

(e)                                  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

 

18

 

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

 

ARTICLE V

INDEMNIFICATION

 

5.01                           Indemnification by the Company. The
Company shall indemnify and hold harmless the Advisor and its Affiliates,
including their respective officers, directors, partners and employees, from
all liability, claims, damages or losses arising in the performance of their
duties hereunder, and related expenses, including reasonable attorneys’ fees,
to the extent such liability, claims, damages or losses and related expenses
are not fully reimbursed by insurance, subject to any limitations imposed by
the laws of the State of Maryland, the Articles of Incorporation and the NASAA
Guidelines. The foregoing indemnity shall extend, without limitation, to any
claims to the extent relating to any of the events or outcomes set forth in the
Prospectus as possible results, outcomes or risks associated with the business
and investment objectives of the Company. Notwithstanding the foregoing, 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. Any
indemnification of the Advisor may be made only out of the net assets of
the Company and not from Stockholders.

 

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 such 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,
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 may be assigned by the Advisor to an Affiliate of the Advisor
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 such successor
organization shall be bound hereunder and by the terms of said assignment in
the same manner as the Company is bound by this Agreement. This Agreement shall
be binding on successors to the Company resulting from a Change of Control or
sale of all or substantially all the assets of the Company or the Partnership,
and shall likewise be binding upon any successor to the Advisor.

 

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

 

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

 

19

 

	
  To the Directors and to the Company:

  	
  Behringer Harvard REIT I, Inc.

  
	
   

  	
  15601 Dallas Parkway

  
	
   

  	
  Suite 600

  
	
   

  	
  Addison, Texas 75001

  
	
   

  	
   

  
	
  To the Advisor:

  	
  Behringer Advisors 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 6.03.

 

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

 

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

 

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

 

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

 

6.08                           Waiver. Neither the failure nor any
delay on the part of a party to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude
any other or further exercise of the same or of any other right, remedy, power
or privilege, nor shall any waiver of any right, remedy, power or privilege
with respect to any occurrence be construed as a waiver of such 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 such waiver.

 

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

 

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

 

6.11                           Execution in Counterparts. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed to be an original as against any party whose signature appears thereon,
and all of 

 

20

 

which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.

 

6.12                           Name. Behringer Advisors LP and/or
one or more of its Affiliates has a proprietary interest in the names “Harvard”
(for the businesses engaged in by the Company and its Affiliates) and “Behringer”
(for all purposes). Accordingly, and in recognition of this right, if at any
time the Company ceases to retain Behringer Advisors LP or an Affiliate thereof
to perform the services of Advisor, the Company will, promptly after
receipt of written request from Behringer Advisors LP, cease to conduct
business under or use the name “Harvard” or “Behringer” or any diminutive
thereof and the Company shall use its best efforts to change the name of the
Company to a name that does not contain the name “Harvard” or “Behringer” or
any other word or words that might, in the sole discretion of Behringer
Advisors LP, be susceptible of indication of some form of relationship
between the Company and Behringer Advisors LP or any Affiliate thereof.
Consistent with the foregoing, it is specifically recognized that Behringer
Advisors LP or one or more of its Affiliates has in the past and may in
the future organize, sponsor or otherwise permit to exist other investment
vehicles (including vehicles for investment in real estate) and financial and
service organizations having “Harvard” or “Behringer” as a part of their
name, all without the need for any consent (and without the right to object
thereto) by the Company or its Board.

 

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

 

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

 

[The remainder of this page intentionally
blank]

 

21

 

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

 

	
   

  	
  BEHRINGER
  HARVARD REIT I, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald
  J. Reihsen, III

  	
   

  
	
   

  	
   

  	
  Gerald J.
  Reihsen, III

  
	
   

  	
   

  	
  Executive
  Vice President—Corporate

  
	
   

  	
   

  	
  Development &
  Legal

  
	
   

  	
   

  	
   

  
	
   

  	
  BEHRINGER
  ADVISORS 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

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