Exhibit 10.1

 

Confidential Treatment Requested.

Confidential portions of this document have been redacted and have been separately filed with the Commission.

 

EXECUTION VERSION

 

 

MASTER MODIFICATION AGREEMENT

 

DATED AS OF AUGUST 31, 2012

 

by and among

 

BEHRINGER HARVARD REIT I, INC.,

 

BEHRINGER HARVARD REIT I SERVICES HOLDINGS, LLC,

 

BEHRINGER ADVISORS, LLC,

 

and

 

HPT MANAGEMENT SERVICES, LLC

 

 

 

TABLE OF CONTENTS

 

		Page
ARTICLE I DEFINITIONS		2
ARTICLE II PURCHASE AND SALE OF ASSETS AND STOCK; CLOSING		11
SECTION 2.1	Purchase and Sale of Assets	11
SECTION 2.2	Waiver of Non-Solicit/Non-Hire Provisions with respect to the Specified Employees	12
SECTION 2.3	Purchase and Sale of Series A Preferred Stock; Preferred Stock Closing; Cancellation of Existing Convertible Shares	13
SECTION 2.4	Closing Payments; Waived Fees	14
SECTION 2.5	Closing; Closing Deliverables	15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF REIT I		15
SECTION 3.1	Organization and Qualification	15
SECTION 3.2	Capitalization	15
SECTION 3.3	Issuance of Securities	16
SECTION 3.4	Authority; Approvals	16
SECTION 3.5	Litigation	17
SECTION 3.6	Brokers and Finders	17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SERVICE PROVIDERS		18
SECTION 4.1	Organization	18
SECTION 4.2	Authority; Approvals	18
SECTION 4.3	Existing Convertible Shares	18
SECTION 4.4	Litigation	18
SECTION 4.5	No Infringement or Misappropriation	19
SECTION 4.6	Title to Purchased Assets	19
SECTION 4.7	Brokers and Finders	19
SECTION 4.8	Noncontravention	19
ARTICLE V SPECIFIED EMPLOYEE MATTERS		20
SECTION 5.1	Employees and Offers of Employment	20
SECTION 5.2	Paid Time Off; Other Leave	20
SECTION 5.3	Severance Obligations	21
SECTION 5.4	Employee Benefit Plans	21
SECTION 5.5	No Third Party Beneficiaries	23
ARTICLE VI ADDITIONAL AGREEMENTS		23
SECTION 6.1	Reservation of REIT I Common Stock	23
SECTION 6.2	Public Statements; SEC Filings	23
SECTION 6.3	Confidentiality	24
SECTION 6.4	Behringer Nominees	25

 

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SECTION 6.5	Status of the Existing Advisory Agreement	26
SECTION 6.6	Determination of Estimated Per Share Value	28
SECTION 6.7	Distributions under the LTIP Program	28
SECTION 6.8	Support Services Agreements	29
SECTION 6.9	Tax Matters	29
SECTION 6.10	Requests for Information	30
ARTICLE VII CLOSING DELIVERIES		30
SECTION 7.1	Closing Deliveries of REIT I	30
SECTION 7.2	Closing Deliveries of Services Holdings and the Service Providers	31
ARTICLE VIII SURVIVAL AND REMEDY; INDEMNIFICATION		32
SECTION 8.1	Survival	32
SECTION 8.2	Indemnification	32
SECTION 8.3	Limitations	36
SECTION 8.4	Contribution	37
SECTION 8.5	Exclusivity	38
SECTION 8.6	Insurance Coverage	38
ARTICLE IX GENERAL PROVISIONS		39
SECTION 9.1	Notices	39
SECTION 9.2	Interpretation	40
SECTION 9.3	Choice of Law; Venue	41
SECTION 9.4	Disputes	41
SECTION 9.5	Entire Agreement	41
SECTION 9.6	Amendment	42
SECTION 9.7	Waiver	42
SECTION 9.8	Remedies	42
SECTION 9.9	Severability	43
SECTION 9.10	Relationship of REIT I and the Behringer Group	43
SECTION 9.11	Further Assurances	43
SECTION 9.12	LIMITATIONS ON REPRESENTATIONS AND WARRANTIES	43
SECTION 9.13	Parties in Interest; No Third-Party Beneficiaries	45
SECTION 9.14	Successors and Assigns	45
SECTION 9.15	No Presumption Against Drafter	45
SECTION 9.16	Disclaimer	45
SECTION 9.17	Series A Preferred Stock Sample Conversion Calculations	45
SECTION 9.18	Counterparts	46
SECTION 9.19	Facsimile Signatures	46

 

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EXHIBITS
Exhibit A	Existing Advisory Agreement (conformed copy)
Exhibit B	Form of Administrative Services Agreement
Exhibit C	Form of Sixth Amended and Restated Property Management Agreement
Exhibit D	Form of Articles Supplementary (Series A Preferred Stock)
Exhibit E	Form of Registration Rights Agreement
Exhibit F	Form of Consulting Agreement
Exhibit G	Form of License Agreement
Exhibit H	Existing Property Management Agreement (conformed copy)
Exhibit I	Sample Series A Preferred Stock Calculations
ANNEXES
Annex I	Specified Advisor Employees
Annex II	Purchased Assets
Annex III	Advisory Fees and Expenses Annex

 

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SCHEDULES

 

Schedule 1.1(a)	Knowledge Persons of Services Holdings and the Service Providers
Schedule 1.1(b)	REIT I Knowledge Persons
Schedule 3.2(b)	Capitalization
Schedule 5.3	Severance Obligations
Schedule 6.4(a)	Acceptable Behringer Nominees

 

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MASTER MODIFICATION AGREEMENT

 

THIS MASTER MODIFICATION AGREEMENT, dated as of August 31, 2012 (this “ Agreement ”), is entered into by and among Behringer Harvard REIT I, Inc. (“ REIT I ”), Behringer Harvard REIT I Services Holdings, LLC (“ Services Holdings ”), Behringer Advisors, LLC (“ Advisor ”), and HPT Management Services, LLC (“ Property Manager ” and together with Advisor, the “ Service Providers ”). Terms used herein are defined in Article I .

 

RECITALS

 

WHEREAS, the Board of Directors of REIT I (based upon the recommendation of the REIT I Special Committee) and each of Services Holdings, Advisor and Property Manager have approved and declared advisable, upon the terms and subject to the conditions of this Agreement, the modification of the business relationship between REIT I and the Service Providers;

 

WHEREAS, upon the terms and subject to the conditions of this Agreement, Advisor desires to sell and REIT I desires to purchase all of the right, title and interest of Advisor in, to and under those assets set forth on Annex II hereto (the “ Purchased Assets ”);

 

WHEREAS, upon the terms and subject to the conditions of this Agreement, in consideration for the Transactions (as defined below) the Board of Directors of REIT I (based upon the recommendation of the REIT I Special Committee) desires to authorize and issue to Services Holdings and Services Holdings desires to acquire from REIT I 10,000 shares of Series A participating, voting, convertible preferred stock, par value $0.0001 per share, of REIT I as described in the Articles Supplementary (Series A Preferred Stock) in the form attached hereto as Exhibit D ;

 

WHEREAS, upon the terms and subject to the conditions of this Agreement, REIT I and each of Services Holdings, Advisor and Property Manager desire to enter into each Ancillary Agreement to which such Person is a party, concurrent with the execution and Closing of this Agreement (this Agreement and the Ancillary Agreements and the transactions contemplated hereby and thereby, including issuance of the Series A Preferred Stock and the exercise of the rights contemplated by the Articles Supplementary, collectively, the “ Transactions ”); and

 

WHEREAS, the Board of Directors of REIT I (based upon the recommendation of the REIT I Special Committee), including a majority of members of the Board of Directors of REIT I not otherwise interested in the Transactions directly or through an Affiliate (as defined in the REIT I Charter), has determined that the Transactions are in furtherance of and consistent with its business strategy, that the Transactions are fair and reasonable to REIT I and in the best interests of its stockholders and that either (x) the price of the Purchased Assets is no greater than the cost of the Purchased Assets to Advisor and its Affiliates or (y) that substantial justification exists for the excess of the price of the Purchased Assets over the cost of the Purchased Assets and such excess is reasonable.

 

 

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto (the “ Parties ”), intending to be legally bound hereby, agree as follows:

 

ARTICLE I
DEFINITIONS

 

For all purposes of this Agreement, the following terms shall have the following respective meanings:

 

“ Administrative Services Agreement ” has the meaning set forth in Section 7.1(b) .

 

“ Advisor ” has the meaning set forth in the Preamble.

 

“ Advisory Fees and Expenses ” shall mean all fees, expenses, reimbursements and other amounts payable by REIT I to Advisor pursuant to the Existing Advisory Agreement.

 

“ Advisory Fees and Expenses Annex ” has the meaning set forth in Section 2.4(b) .

 

“ Affiliate ” shall mean, except as otherwise provided herein, with respect to any Person, any other Person which, at the time of determination, directly or indirectly controls, is controlled by or is under common control with, such Person. For the purposes of this definition, “ control ” (including, with correlative meaning, the terms “ controlling ,” “ controlled by ” and “ under common control with ”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of such Person through the ownership of voting securities, by contract or otherwise. For the avoidance of doubt, REIT I, BH OP, and their respective Subsidiaries shall not be considered Affiliates of any member of the Behringer Group, Services Holdings, Advisor, or Property Manager, and vice versa.

 

“ Agreement ” has the meaning set forth in the Preamble.

 

“ Amended and Restated Property Management Agreement ” has the meaning set forth in Section 7.1(c) .

 

“ Ancillary Agreements ” shall mean the Administrative Services Agreement, Amended and Restated Property Management Agreement, Registration Rights Agreement, Consulting Agreement, License Agreement and any other agreement, instrument or document executed and delivered under this Agreement upon the Closing.

 

“ Articles Supplementary ” has the meaning set forth in Section 2.3(a) .

 

“ Behringer 401(k) Plan ” has the meaning set forth in Section 5.4(f) .

 

“ Behringer Deductible ” has the meaning set forth in Section 8.3(a) .

 

“ Behringer FSA Plans ” shall mean the flexible spending account plans of the Behringer Group.

 

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“ Behringer Group ” shall mean, collectively, (i) Services Holdings, (ii) the Service Providers, (iii) Behringer Harvard REIT I LTIP, LLC, (iv) Behringer Harvard Holdings, LLC, and (v) all of their respective Affiliates. For the avoidance of doubt, REIT I, BH OP, and their respective Subsidiaries shall not be considered members of the Behringer Group.

 

“ Behringer Indemnified Parties ” has the meaning set forth in Section 8.2(a) .

 

“ Behringer Nominees ” has the meaning set forth in Section 6.4(a) .

 

“ Behringer Plans ” shall mean, collectively, each plan, program, policy or Contract providing for compensation, bonuses, pension, retirement, profit sharing, health, dental, vision, life, disability, severance, termination pay, performance awards, equity or “profits interests” awards, fringe benefits or other employee benefits of any kind, if any, including any “employee benefit plan” within the meaning of Section 3(3) of ERISA, which is sponsored, maintained, or contributed to by any member of the Behringer Group in which any Specified Employee participates.

 

“ BH OP ” shall mean Behringer Harvard Operating Partnership I LP, a Texas limited partnership.

 

“ Bill of Sale ” has the meaning set forth in Section 7.1(a).

 

“ Business Day ” shall mean any day other than a Saturday or a Sunday or a day on which banks located in Dallas, Texas generally are authorized or required by Law or regulation to close.

 

“ Change of Control ” shall mean, with respect to REIT I, any event or series of related events (including, without limitation, issue, transfer or other disposition of shares of Equity Interests of REIT I, merger, share exchange or consolidation) after which (a) any Person is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of Equity Interests representing greater than 50% of the combined voting power of the then outstanding Equity Interests of REIT I and (b) the beneficial owners, directly or indirectly, of Equity Interests of REIT I immediately prior to such event or series of related events have less than 50% of the combined voting power of the surviving entity after such event or series of events. In addition, any event that causes, directly or indirectly, any Person other than REIT I to become the beneficial owner of greater than 50% of the Equity Interests of BH OP shall be deemed a Change of Control of REIT I.

 

“ Claim ” shall mean any threatened, pending or completed claim, action, suit, litigation, arbitration, alternative dispute resolution mechanism, investigation, hearing or any other proceeding, whether civil (including intentional and unintentional tort claims), criminal, administrative, regulatory, investigative or other, or any inquiry or investigation that might lead to the institution of any such claim, action, suit, litigation or other proceeding, whether civil (including intentional and unintentional tort claims), criminal, administrative, regulatory, investigative or other.

 

“ Closing ” has the meaning set forth in Section 2.5(a) .

 

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“ Closing Date ” has the meaning set forth in Section 2.5(a) .

 

“ COBRA ” shall mean Consolidated Omnibus Budget Reconciliation Act of 1985.

 

“ COBRA Liabilities ” has the meaning set forth in Section 5.4(d) .

 

“ Confidential Material ” shall mean information relating to the pricing related terms under the Administrative Services Agreement (including retention amounts, per employee costs, and hourly rates (the “ Pricing Information ”) and any other mutually agreed information, whether oral, written or otherwise, furnished by a party hereto (the “ Providing Party ”) or any directors, officers, partners, Affiliates, employees, agents, attorneys, advisors, accountants, consultants or representatives (collectively, “ Representatives ”) of the Providing Party to another party hereto (the “ Receiving Party ”) or any of the Receiving Party’s Representatives, and all reports, analyses, compilations, studies and other material prepared by the Receiving Party or any of its Representatives (in whatever form maintained, whether documentary, computer storage or otherwise) containing, reflecting or based upon, in whole or in part, any such information. The term “ Confidential Material ” shall not include any (i) information that becomes generally available to the public other than as a result of a disclosure by the Receiving Party, (ii) Pricing Information that becomes generally available to the public as a result of disclosure by the Behringer Group after the date hereof, (iii) information (other than Pricing Information) that becomes available to the Receiving Party on a non-confidential basis from a source other than the Providing Party, provided that such source is not known by the Receiving Party to be bound by a confidentiality agreement with or other obligation of secrecy to the Providing Party, or (iv) information (other than Pricing Information) that is independently developed by the Receiving Party without use of or reference to information from the Providing Party.

 

“ Consulting Agreement ” has the meaning set forth in Section 7.1(e) .

 

“ Contract ” shall mean any loan agreement, mortgage, indenture, deed of trust, lease, sublease, contract, covenant, plan, or other agreement, instrument, arrangement, obligation, understanding or commitment, permit, concession, franchise or license, whether oral or written, expressed or implied.

 

“ Covered Claim ” shall mean any Claim that arises from or relates to any Transaction, including (a) any Claim by or on behalf of REIT I, (b) any Claim by a stockholder of REIT I and (c) any Claim that the indemnification obligations contained in Section 8.2(a)(v)  are not valid or are not fully enforceable or that such indemnification obligations are subject to any limitation or exclusion not expressly set forth in such Section; provided , however, that Covered Claims shall not include (i) any Claim by REIT I or another REIT I Indemnified Party for indemnification under this Agreement or any Ancillary Agreement for a breach or violation of this Agreement or any Ancillary Agreement, (ii) any Claim by a Behringer Indemnified Party or any holder of Equity Interests of a member of the Behringer Group against another Behringer Indemnified Party, or (iii) any Claim that arises out of, relates to or results from a matter addressed by Section 4.8 without regard to any materiality, adverse effect or other qualifier contained therein or any survival limitation with respect thereto contained in Section 8.1 , and, for the avoidance of doubt, assuming that the representations and warranties contained in Section 4.8 are not made as of a specific date, but are made on a continuous basis starting as of the date hereof; provided ,

 

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however, that the representations and warranties contained in clause (b) of Section 4.8 with respect to Judgments applies only to Judgments in existence on the date hereof.

 

“ Cross-Receipt ” has the meaning set forth in Section 2.3(c)(i) .

 

“ Damages ” shall mean any and all costs, losses, damages, Liabilities, obligations, lawsuits, deficiencies, Claims, demands, penalties, assessments, fines, return of any consideration, Judgments, arbitration awards, indemnification payments, reasonable costs and Expenses, of any nature whatsoever, reasonable costs and reasonable expenditures required or incurred to comply with any Judgment, and all reasonable amounts paid in investigation, defense or settlement of any of the foregoing. All Damages shall be calculated on a pre-Tax basis, without reduction or other adjustment for any Tax consequences arising out of the payment of such Damages.

 

“ Employee Release ” has the meaning set forth in Section 5.3(a) .

 

“ Equity Interests ” shall mean (i) with respect to a corporation, as determined under the Laws of the jurisdiction of organization of such entity, shares of capital stock (whether common, preferred or treasury), (ii) with respect to a partnership, limited liability company, limited liability partnership or similar Person, as determined under the Laws of the jurisdiction of organization of such entity, units, interests, or other partnership or limited liability company interests, or (ii) any other equity ownership.

 

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations issued thereunder.

 

“ Estimated Per Share Value ” has the meaning set forth in Section 6.6(a) .

 

“ Estimated Valuation Policy ” shall mean the Second Amended and Restated Policy for Estimation of Common Stock that was utilized by the REIT I Board in calculating the December 16, 2011 estimated per share value of REIT I Common Stock, as the same may be amended or replaced from time to time in the discretion of the REIT I Board as contemplated by Section 6.6(b) .

 

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“ Excluded Assets ” has the meaning set forth in Section 2.1(c) .

 

“ Excluded Employee Claims ” has the meaning set forth in Section 5.4(g) .

 

“ Excluded Employee Liabilities ” has the meaning set forth in Section 5.1(a) .

 

“ Excluded Liabilities ” has the meaning set forth in Section 2.1(d) .

 

“ Existing Advisory Agreement ” shall mean that certain Fifth Amended and Restated Advisory Agreement, dated December 29, 2006, by and between Advisor and REIT I, as amended through February 20, 2012 and in effect immediately prior to its amendment and

 

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restatement into the Administrative Services Agreement as contemplated by this Agreement; a conformed version thereof is attached hereto as Exhibit A .

 

“ Existing Convertible Shares ” has the meaning set forth in Section 2.3(e) .

 

“ Existing Property Management Agreement ” shall mean that certain Fifth Amended and Restated Property Management and Leasing Agreement, dated May 15, 2008, by and among REIT I, BH OP and Property Manager, as amended through February 2012 and in effect immediately prior to its amendment and restatement into the Amended and Restated Property Management Agreement, as contemplated by this Agreement; a conformed version thereof is attached hereto as Exhibit H .

 

“ Expenses ” shall mean reasonable attorney fees and expenses, retainers, court costs, transcript costs, fees of experts, witness fees, travel charges, postage, delivery service fees and all other reasonable costs, disbursements, expenses and obligations of the types customarily paid or incurred in connection with prosecuting, investigating, defending, being a witness in or participating in (including on appeal), or preparing to prosecute, defend, be a witness in or participate in any Claim.

 

“ Federal Funds Rate ” shall mean, for a particular day, the offered rate as reported in The Wall Street Journal published for such day in the “Money Rates” section for reserves traded among commercial banks for overnight use in amounts of one million dollars or more or, if no such rate is published for a day, such rate as most-recently published in The Wall Street Journal, calculated on a daily basis based on a 365-day year.

 

“ Final Advisory Fees and Expenses Payment ” has the meaning set forth in Section 2.4(b) .

 

“ FINRA ” shall mean the Financial Industry Regulatory Authority, Inc. or any successor thereto.

 

“ Fundamental Representations ” has the meaning set forth in Section 8.1(c) .

 

“ GAAP ” shall mean United States generally accepted accounting principles in effect on the date hereof, consistently applied.

 

“ Governmental Authority ” shall mean any United States or other international, national, state or local government, any political subdivision thereof or any other governmental, judicial, public or statutory instrumentality, authority, body, agency, department, bureau, commission or entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, or any arbitrator with authority to bind a party at law.

 

“ Indebtedness ” of any Person shall mean any liabilities in respect of or representing (i) borrowed money or evidenced by bonds, monies, debentures, or similar instruments, (ii) the balance deferred and unpaid of the purchase price of any property but excluding current trade payables, if and to the extent any of the foregoing indebtedness would appear as a liability upon a balance sheet prepared in accordance with GAAP, (iii) all amounts owed by and all obligations of such Person as lessee under leases that have been recorded as capital leases, in accordance with GAAP, (iv) guaranties, direct or indirect, in any manner, of all or any part of any

 

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Indebtedness of any Person, (v) any obligation secured by a lien on a Person’s assets, and (vi) accrued interest, premiums, fees, and prepayment penalties for any of the foregoing.

 

“ Indemnified Party ” has the meaning set forth in Section 8.2(d)(i) .

 

“ Indemnifying Party ” has the meaning set forth in Section 8.2(d)(i) .

 

“ Indemnity Claim ” has the meaning set forth in Section 8.1(d) .

 

“ Intellectual Property Rights ” shall mean any or all of the following and all rights arising out of or associated therewith, in each case, in any jurisdiction in the world: (i) patents and patent applications (including reissues, reexaminations, divisions, renewals, extensions, provisionals, continuations and continuations-in-part), inventions (whether or not patentable and whether or not reduced to practice), invention or patent disclosures and inventor’s certificates; (ii) trade secrets, proprietary information and know-how, including methods, processes, designs, drawings, technical data and customer lists; (iii) original works of authorship (whether copyrightable or not), copyrights, copyright registrations and copyright applications; (iv) industrial designs and all registrations and applications thereof; (v) trademarks, service marks, certification marks, trade names, corporate names, domain names, uniform resource identifiers or locators (commonly known as URLs), logos, trade dress or other indicia of source or origin, including unregistered and common law rights in the foregoing, and all registrations of and applications to register the foregoing, in each case in any jurisdiction throughout the world; (vi) Software; (vii) moral and economic rights of authors and inventors, however denominated; and (viii) all other intellectual property or industrial property rights.

 

“ IRS ” shall mean the United States Internal Revenue Service.

 

“ Judgments ” shall mean any judgments, injunctions, orders, decrees, writs, rulings, stipulations, consents, settlements, or awards of any court or other judicial authority or any other Governmental Authority.

 

“ Knowledge ” shall mean (i) with respect to Services Holdings, Advisor and Property Manager, as the case may be, the actual knowledge of the individuals listed in Schedule 1.1(a)  without any duty to investigate and (ii) with respect to REIT I, shall mean the actual knowledge of the individuals listed in Schedule 1.1(b)  and the members of the REIT I Special Committee without any duty to investigate.

 

“ Laws ” shall mean all laws, statutes, by-laws, ordinances, rules, regulations, common law or Judgments of any Governmental Authority.

 

“ Liabilities ” shall mean any liability, Indebtedness, guaranty, assurance, commitment, claim, loss, damage, deficiency, assessment, obligation or responsibility, whether fixed or unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued or unaccrued, absolute, known or unknown, contingent or unmatured, liquidated or unliquidated, asserted or unasserted, due or to become due, whenever or however arising (including whether arising out of any Contract or tort based on negligence or strict liability) and whether or not the same would be required by GAAP to be stated in financial statements or disclosed in the notes thereto.

 

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“ License Agreement ” has the meaning set forth in Section 7.1(f) .

 

“ Licensing Claim ” shall mean any Claim that a Service Provider or any other Behringer Indemnified Party does not possess a real estate brokerage or similar license required by any Law in connection with services provided by such Person to REIT I or any of its Affiliates, or any Claim that arises from or relates to the foregoing.

 

“ Listing Event ” shall mean the listing of any Equity Interest of REIT I on a national securities exchange.

 

“ LTIP ” shall mean Behringer Harvard REIT I LTIP, LLC.

 

“ LTIP Program ” shall mean the program pursuant to which Equity Interests in LTIP were issued to certain employees providing services to REIT I on behalf of the Service Providers, as such program is in effect as of the Closing.

 

“ Non-Hired Specified Employee ” has the meaning set forth in Section 5.1(a) .

 

“ Notice ” has the meaning set forth in Section 9.1 .

 

“ Parties ” has the meaning set forth in the Recitals.

 

“ Person ” shall mean any individual, corporation, limited liability company, partnership, joint venture, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

“ Preferred Stock Closing ” has the meaning set forth in Section 2.3(b) .

 

“ Preferred Stock Purchase Price ” has the meaning set forth in Section 2.3(b) .

 

“ Pricing Information ” has the meaning set forth in the definition of Confidential Material.

 

“ Property Manager ” has the meaning set forth in the Preamble.

 

“ Providing Party ” has the meaning set forth in the definition of Confidential Material.

 

“ PTO Benefits ” has the meaning set forth in Section 5.2 .

 

“ PTO Liabilities ” has the meaning set forth in Section 5.2 .

 

“ Purchased Assets ” has the meaning set forth in the Recitals.

 

“ Purchased Assets Annex ” has the meaning set forth in Section 2.1(a) .

 

“ Receiving Party ” has the meaning set forth in the definition of Confidential Material.

 

“ Registration Rights Agreement ” has the meaning set forth in Section 7.1(d) .

 

“ REIT I ” has the meaning set forth in the Preamble.

 

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“ REIT I 401(k) Plan ” has the meaning set forth in Section 5.4(f) .

 

“ REIT I Board ” shall mean the Board of Directors of REIT I.

 

“ REIT I Bylaws ” shall mean the Amended and Restated Bylaws of REIT I, as amended and in effect immediately prior to Closing.

 

“ REIT I Charter ” shall mean the Ninth Articles of Amendment and Restatement of REIT I, as amended and in effect immediately prior to Closing.

 

“ REIT I Common Stock ” has the meaning set forth in Section 3.2(a) .

 

“ REIT I Deductible ” has the meaning set forth in Section 8.3(c) .

 

“ REIT I Disclosure Schedule ” has the meaning set forth in Section 9.2(c) .

 

“ REIT I FSA Plans ” shall mean flexible spending account plans of REIT I that are comparable to the Behringer FSA Plans.

 

“ REIT I Fundamental Representations ” has the meaning set forth in Section 8.1(b) .

 

“ REIT I Indemnified Parties ” has the meaning set forth in Section 8.2(b) .

 

“ REIT I Material Adverse Effect ” shall mean a material adverse effect on the business, properties, assets, financial condition, or results of operations of REIT I and its Subsidiaries, taken as a whole.

 

“ REIT I Organizational Documents ” shall mean the REIT I Charter and REIT I Bylaws, collectively.

 

“ REIT I Plans ” has the meaning set forth in Section 5.4(a) .

 

“ REIT I Preferred Stock ” has the meaning set forth in Section 3.2(a) .

 

“ REIT I SEC Filings ” shall mean each report, registration statement or document filed or furnished by REIT I with or to the SEC under the Exchange Act or the Securities Act.

 

“ REIT I Special Committee ” shall mean the Special Committee of the REIT I Board formed in connection with the contemplation of the Transactions, the members of which currently are Charles G. Dannis, Steven W. Partridge, and G. Ronald Witten.

 

“ Representatives ” has the meaning set forth in the definition of Confidential Material.

 

“ SDAT ” has the meaning set forth in Section 2.3(a) .

 

“ SEC ” shall mean the United States Securities and Exchange Commission.

 

“ Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

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“ Series A Preferred Stock ” has the meaning set forth in Section 2.3(b) .

 

“ Service Provider Disclosure Schedule ” has the meaning set forth in Section 9.2(d) .

 

“ Service Providers Fundamental Representations ” has the meaning set forth in Section 8.1(c) .

 

“ Service Providers ” has the meaning set forth in the Preamble.

 

“ Service Providers Material Adverse Effect ” shall mean a material adverse effect on the business, properties, assets, financial condition, or results of operations of Service Providers and their Subsidiaries, taken as a whole.

 

“ Services Holdings ” has the meaning set forth in the Preamble.

 

“ Services Holdings Material Adverse Effect ” shall mean a material adverse effect on the business, properties, assets, financial condition, or results of operations of Services Holdings and its Subsidiaries, taken as a whole.

 

“ Software ” shall mean all software of any type (including programs, applications, middleware, interfaces, utilities, tools, drivers, firmware, microcode, scripts, batch files, JCL files, instruction sets and macros) and in any form (including source code, object code and executable code), databases, associated data and related documentation, and all rights therein.

 

“ Specified Employees ” has the meaning set forth in Section 2.2(a) .

 

“ Specified Employee Annex ” has the meaning set forth in Section 2.2(a) .

 

“ Stock Power ” has the meaning set forth in Section 7.2(d) .

 

“ Stockholder Claim ” shall mean any Covered Claim made by a stockholder of REIT I, on behalf of REIT I by a stockholder of REIT I, or made by REIT I upon or following a demand by a stockholder of REIT I with respect to such Covered Claim.

 

“ Subsidiary ” or “ Subsidiaries ” of any Person shall mean any corporation, partnership, limited liability company, association, trust, joint venture or other entity or organization of which such Person, either alone or through or together with any other Subsidiary, owns, directly or indirectly, more than 50% of the stock or other Equity Interests, the holder of which is generally entitled to vote for the election of the board of directors, managers or other governing body of the entity or organization which such Person so owns. For the avoidance of doubt, REIT I, BH OP, and their respective Subsidiaries shall not be considered Subsidiaries of any member of the Behringer Group.

 

“ Support Services Agreement ” has the meaning set forth in Section 6.8 .

 

“ Tax Returns ” shall mean any report, return (including information return), election, document, estimated tax filing, declaration or other filing required to be supplied to any taxing or other Governmental Authority with respect to Taxes, including any amendments thereto.

 

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“ Taxes ” shall mean (i) all taxes, charges, fees, levies or other assessments, including income, gross receipts, excise, property, sales, withholding, social security, occupation, use, service, service and use, license, payroll, franchise, transfer and recording taxes, fees and charges, imposed by the United States, or any state, local or foreign government or subdivision or agency thereof whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest, fines, penalties or additional amounts attributable to or imposed on or with respect to any such taxes, charges, fees, levies or other assessments and (ii) any Liability for the payment of amounts determined by reference to amounts described in clause (i) as a result of being a member of an affiliated, consolidated, combined or unitary group.

 

“ Transactions ” has the meaning set forth in the Recitals.

 

“ Transfer Taxes ” has the meaning set forth in Section 6.9(b)(ii) .

 

“ Transferred Account Balances ” has the meaning set forth in Section 5.4(e) .

 

“ Transferred Employees ” has the meaning set forth in Section 5.1(a) .

 

“ Two Briarlake ” shall mean that certain property currently owned by REIT I in Houston, Texas commonly known as Two Briarlake Plaza, located at 2050 West Sam Houston Parkway South, Houston, Texas and the improvement and development thereof.

 

“ Two Briarlake Approved Plan ” shall mean that plan described in the Board Investment Package, dated February 20, 2012, as amended by the plan described in the Board Investment Package, dated May 10, 2012, and approved by the REIT I Board pursuant to resolutions of the REIT I Board, dated February 20, 2012 and May 10, 2012, as such plan may be subsequently amended and approved by the REIT I Board from time to time.

 

“ Two Briarlake Development Fees ” has the meaning set forth in Section 6.5(f)(ii) .

 

“ Waived Fees ” has the meaning set forth in Section 2.4(b) .

 

ARTICLE II
PURCHASE AND SALE OF ASSETS AND STOCK; CLOSING

 

SECTION 2.1                                                   Purchase and Sale of Assets.

 

(a)        Purchased Assets . Upon the terms and subject to the conditions of this Agreement, REIT I shall purchase from Advisor and Advisor shall sell, convey, transfer, assign and deliver, or cause to be sold, conveyed, transferred, assigned and delivered, to REIT I (or its designee) at the Closing, all of Advisor’s right, title and interest in, to and under the Purchased Assets expressly set forth on Annex II hereto (the “ Purchased Assets Annex ”), which Purchased Assets Annex includes those tangible assets of Advisor located at the current corporate offices of REIT I that are used by the Specified Employees exclusively in the conduct of the business of REIT I and which are not currently owned by REIT I.

 

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(b)        Assumed Liabilities . At the Closing, REIT I or its permitted assigns shall assume and agree to pay, perform, fulfill and discharge, and shall pay, perform, fulfill and discharge, as they become due: (i) Liabilities of Transferred Employees arising on and after the Closing as set forth in Article V , (ii) the PTO Liabilities and (iii) the COBRA Liabilities.

 

(c)        Excluded Assets . The following assets and properties (the “ Excluded Assets ”) are not included in the Purchased Assets and that REIT I shall have no rights with respect to the following under this Agreement: (i) any and all assets of any Person other than Advisor; (ii) any and all Behringer Plans; (iii) any and all Contracts; and (iv) any and all assets of Advisor other than those expressly set forth on the Purchased Assets Annex. For the avoidance of doubt, except for the license of certain Intellectual Property Rights under the License Agreement as set forth therein, no Intellectual Property Rights (including Software and/or licenses for Software that may have been used by Service Providers in connection with the Purchased Assets or to provide services to REIT I prior to Closing ) are being conveyed or licensed to REIT I or its Affiliates pursuant to this Agreement, any Ancillary Agreement or any Transactions. For the avoidance of doubt, nothing in this Section 2.1(c)  is intended to, and nothing in this Section 2.1(c)  will be deemed to, modify any rights of any of the Parties with respect to insurance policies currently in effect, including the status or rights of REIT I as a named insured or other covered person under any group insurance policy maintained by a member of the Behringer Group.

 

(d)        Excluded Liabilities . Services Holdings and Service Providers are responsible for, and shall pay, perform, fulfill and discharge, as they become due: (i) any and all Liabilities relating to the Excluded Assets; (ii) the Excluded Employee Claims; and (iii) the Excluded Employee Liabilities (collectively, the “ Excluded Liabilities ”).

 

SECTION 2.2                 Waiver of Non-Solicit/Non-Hire Provisions with respect to the Specified Employees.

 

(a)       At Closing, Advisor shall waive the non-solicitation and non-hire provisions contained in Section 6.15 (Non-Solicitation) of the Existing Advisory Agreement as included in that certain First Amendment to the Existing Advisory Agreement with respect to each employee (each, a “ Specified Employee ”) set forth on Annex I hereto (the “ Specified Employees Annex ”). For the avoidance of doubt, neither Advisor nor any other member of the Behringer Group shall be required to or be deemed to waive any right (except as contemplated by the immediately preceding sentence) under any non-solicit or non-hire provision of the Existing Advisory Agreement, the Existing Property Management Agreement or any other Contract, nor shall the foregoing Persons waive any such provision with respect to any solicitation by such Specified Employees or any rights with respect to any other employee (or other covered service provider) who is not a Specified Employee and is covered by such a provision.

 

(b)       At Closing, each of Services Holdings and the Service Providers shall waive or cause to be waived any non-solicitation, non-hire, non-compete or other similar

 

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provisions contained in any Contract between any of them and any Specified Employee to the extent necessary to allow such Specified Employee to work for REIT I.

 

(c)       Services Holdings and the Service Providers acknowledge that to the extent that a Specified Employee has on behalf of REIT I prior to Closing and in connection with this Agreement and the Transactions, solicited other Specified Employees to work for REIT I, such activities prior to Closing do not constitute a breach or violation of any non-solicitation or other similar provisions contained in any Contract between any of them and such Specified Employee.

 

(d)       Except as contemplated by this Section 2.2 , no member of the Behringer Group waives any non-solicitation, non-hire, non-compete or other similar provisions contained in any Contract between any of them and any Specified Employee. It is understood that REIT I is not or may not be aware of the existence or terms of any such Contract with a Specified Employee.

 

SECTION 2.3                 Purchase and Sale of Series A Preferred Stock; Preferred Stock Closing; Cancellation of Existing Convertible Shares.

 

(a)       The REIT I Board shall adopt and file with the State Department of Assessments and Taxation of Maryland (the “ SDAT ”) as soon as practicable but in no case later than one (1) Business Day after the Closing Date the Articles Supplementary (Series A Preferred Stock) to the REIT I Charter in the form attached hereto as Exhibit D (the “ Articles Supplementary ”).

 

(b)       On the date of the filing of the Articles Supplementary with the SDAT, REIT I shall sell and issue to Services Holdings and Services Holdings shall purchase 10,000 shares of Series A participating, voting, convertible preferred stock, par value $0.0001 per share, of REIT I as described in the Articles Supplementary (the “ Series A Preferred Stock ”) in consideration of the agreements, covenants and obligations of Services Holdings, the Service Providers and the other members of the Behringer Group under this Agreement and the Ancillary Agreements, including the Transactions, and payment by Services Holdings of an amount in cash equal to the aggregate par value of such Series A Preferred Stock (the “ Preferred Stock Purchase Price ”). The Series A Preferred Stock shall be registered in the name of Services Holdings and recorded on the books of REIT I in uncertificated form. The Series A Preferred Stock shall not be subject to any restriction on transfer other than: (i) any restrictions as may be required or imposed pursuant to applicable state and federal securities Laws; (ii) the Registration Rights Agreement; (iii) the REIT I Charter; and (iv) as may be created by, or exist through or under, any of the holders thereof.

 

(c)       The closing of the purchase and sale of the Series A Preferred Stock pursuant to Section 2.3(b)  (the “ Preferred Stock Closing ”) shall occur on the date of the filing of the Articles Supplementary with SDAT.

 

(i)       At the Preferred Stock Closing, REIT I shall deliver or cause to be delivered to Services Holdings: (A) evidence in form and substance reasonably

 

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satisfactory to Services Holdings that the Articles Supplementary have been filed with and accepted by SDAT, (B) evidence, in form and substance reasonably satisfactory to Services Holdings, of the issuance of 10,000 shares of Series A Preferred Stock to Services Holdings, and (C) a duly executed counterpart of a cross-receipt (the “ Cross-Receipt ”).

 

(ii)       At the Preferred Stock Closing, Services Holdings shall deliver or cause to be delivered to REIT I a duly executed counterpart of the Cross-Receipt.

 

(d)       The Series A Preferred Stock issued pursuant to this Section 2.3 shall be subject to the restrictions and entitled to the registration and other rights set forth in the Registration Rights Agreement.

 

(e)       Upon the Preferred Stock Closing, all 1,000 convertible shares of non-participating, non-voting convertible stock, par value $0.0001 per share, of REIT I held by Advisor (the “ Existing Convertible Shares ”) shall be transferred by Advisor to REIT I pursuant to the Stock Power. All Existing Convertible Shares shall be retired and cancelled promptly after such transfer.

 

(f)       The Parties shall treat the Series A Preferred Stock as stock for all purposes.

 

SECTION 2.4                 Closing Payments; Waived Fees.

 

(a)        Acquired Rights Payment . At Closing, REIT I shall pay an amount equal to $1,500,000 for the Purchased Assets and in consideration of the license of the Intellectual Property Rights under the License Agreement and the other agreements, covenants and obligations of the Behringer Group in connection with the Transactions in cash by wire transfer of immediately available funds to the bank account as shall be designated in writing by Services Holdings at least two Business Days prior to the Closing.

 

(b)        Advisory Fees and Expenses . Attached hereto as Annex III is a schedule (the “ Advisory Fees and Expenses Annex ”) setting forth the aggregate amount of all Advisory Fees and Expenses for all services rendered through the Closing under the Existing Advisory Agreement or otherwise due to Advisor with respect to the period before the Closing under the Existing Advisory Agreement (“ Advisory Fees and Expenses Amount ”). Subject to Section 6.5 , Advisor, on behalf of itself and its Affiliates, and its and their respective successors and assigns, hereby waives the obligation of REIT I to pay $3,540,847 of fees earned under Section 3.01 of the Existing Advisory Agreement between the opening of business on July 1, 2012 and the date hereof (the “ Waived Fees ”). At the Closing, REIT I shall pay an amount equal to the Final Advisory Fees and Expenses Amount minus the Waived Fees to Advisor in cash by wire transfer of immediately available funds to the bank account as shall be designated in writing by Advisor (the “ Final Advisory Fees and Expenses Payment ”).

 

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(c)        Preferred Stock Purchase Price . At Closing, Services Holdings shall pay the Preferred Stock Purchase Price to REIT I in cash by wire transfer of immediately available funds to the bank account as shall be designated in writing by REIT I.

 

SECTION 2.5                 Closing; Closing Deliverables

 

(a)       The closing (the “ Closing ”) of the purchase and sale of the Purchased Assets, the assumption of Assumed Liabilities as contemplated by this Agreement, the execution of the Administrative Services Agreement, the execution of the Amended and Restated Property Management Agreement, the execution of the Registration Rights Agreement, the execution of the Consulting Agreement, the execution of the License Agreement, and the other transactions contemplated by this Agreement (other than the Preferred Stock Closing) shall take place simultaneously with the execution of this Agreement, on the date hereof (the “ Closing Date ”) at the offices of Behringer Harvard Holdings, 15601 Dallas Parkway, Addison, Texas, or at such other place as the Parties may mutually agree. The Closing shall be deemed effective for all purposes at 11:59 P.M. on the Closing Date.

 

(b)       At the Closing, the Parties shall deliver or cause to be delivered those agreements, assignments, instruments and other documents set forth in Article VII .

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF REIT I

 

REIT I hereby represents and warrants to Services Holdings and the Service Providers as of the date hereof, as follows:

 

SECTION 3.1                 Organization and Qualification.

 

(a)       REIT I is a corporation validly existing and in good standing under the laws of the State of Maryland. REIT I has the requisite corporate power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted except where the failure to have such power and authority would not reasonably be expected to have a REIT I Material Adverse Effect.

 

(b)       BH OP is a limited partnership validly existing and in good standing under the laws of the State of Texas. BH OP has the requisite partnership power and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted except where the failure to have such power and authority would not reasonably be expected to have a REIT I Material Adverse Effect.

 

SECTION 3.2                 Capitalization.

 

(a)       To the Knowledge of REIT I, The authorized capital stock of REIT I consists of (i) 382,499,000 shares of common stock, par value $0.0001 per share (“ REIT I Common Stock ”), (ii) 1,000 Existing Convertible Shares, and (iii) 17,500,000 shares of preferred stock, par value $0.0001 per share (“ REIT I Preferred Stock ”). As of August 31, 2012, 298,477,851.3007 of REIT I Common Shares were issued and

 

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outstanding. As of the date hereof immediately prior to Closing, 1,000 Existing Convertible Shares were issued and outstanding. As of the date hereof immediately prior to Closing, no shares of REIT I Preferred Stock were issued and outstanding.

 

(b)       To the Knowledge of REIT I, except as contemplated by this Agreement or as set forth in Schedule 3.2(b) , as of the date hereof, there are no outstanding subscriptions, options, calls, contracts, commitments, understandings, restrictions, agreements, arrangements, rights (including preemptive rights) or warrants, including any right of conversion or exchange under any outstanding security, instrument or other agreement or commitment of any character, obligating REIT I to issue, deliver or sell, or cause to be issued, delivered or sold, additional Equity Interests of REIT I or obligating REIT I to grant, extend or enter into any such agreement or commitment. Except as contemplated by this Agreement or as set forth in Schedule 3.2(b) , there are no registration rights granted by REIT I and held by any individual or entity with respect to any securities of REIT I (whether such securities are currently outstanding or issuable in the future).

 

SECTION 3.3                 Issuance of Securities. The Series A Preferred Stock to be issued by REIT I to Services Holdings in connection with this Agreement, when issued in accordance with the provisions of this Agreement, will (a) be duly authorized, validly issued, fully paid and nonassessable, and (b) will not be subject to any restriction on transfer other than: (i) any restrictions as may be required or imposed pursuant to applicable state and federal securities Laws; (ii) the Registration Rights Agreement; (iii) the REIT I Charter; and (iv) as may be created by, or exist through or under, any of the holders thereof.

 

SECTION 3.4                 Authority; Approvals.

 

(a)       REIT I has full corporate power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party and to consummate the Transactions. No provision of Law applicable to REIT I or the REIT I Organizational Documents requires approval by the stockholders of REIT I of any of this Agreement, the Ancillary Agreements, or the Transactions. The execution and delivery by REIT I of this Agreement and each Ancillary Agreement to which it is a party, and the consummation by REIT I of the Transactions, have been duly authorized by all necessary corporate action and no other proceedings on the part of REIT I are necessary to authorize the execution and delivery of this Agreement and such Ancillary Agreements and the consummation of the Transactions, except for filing the Articles Supplementary with SDAT. This Agreement has been, and each Ancillary Agreement to which REIT I is a party when executed and delivered will be, duly and validly executed and delivered by REIT I and, assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto or thereto, constitutes or will constitute, as applicable, a legal, valid and binding agreement of REIT I, enforceable against REIT I in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to enforcement of creditors’ rights generally, and (ii) general equitable principles.

 

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(b)       BH OP has full partnership power and authority to enter into the Ancillary Agreements to which it is a party and to consummate the Transactions. No provision of Law applicable to BH OP or the partnership agreement of BH OP requires approval by the limited partners of BH OP of the Ancillary Agreements to which it is a party or the Transactions. The execution and delivery by BH OP of each Ancillary Agreement to which it is a party, and the consummation by BH OP of the Transactions, to the extent applicable to BH OP, have been duly authorized by all necessary partnership action and no other proceedings on the part of BH OP are necessary to authorize the execution and delivery of such Ancillary Agreements and the consummation of the applicable Transactions. Each Ancillary Agreement to which BH OP is a party when executed and delivered will be duly and validly executed and delivered by BH OP and, assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto or thereto, constitutes or will constitute, as applicable, a legal, valid and binding agreement of BH OP, enforceable against BH OP in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to enforcement of creditors’ rights generally, and (ii) general equitable principles.

 

(c)       To the Knowledge of REIT I, except for the filing by REIT I of the Articles Supplementary, no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any Governmental Authority is required to be made, obtained or given by or on behalf of REIT I or BH OP the absence of which would prevent the consummation by REIT I or BH OP of the Transactions, or the performance by REIT I of its obligations under this Agreement and the Ancillary Agreements to which it is party or the performance by BH OP of its obligations under each Ancillary Agreement to which it is a party.

 

SECTION 3.5                 Litigation.

 

To the Knowledge of REIT I, there are no Claims pending or threatened in writing against or investigations with respect to REIT I or its Affiliates, that, if determined in a manner adverse to REIT I or its Affiliates would, individually or in the aggregate, reasonably be expected to result in a REIT I Material Adverse Effect or otherwise reasonably be expected to prohibit or restrict the consummation of the Transactions. To the Knowledge of REIT I, neither of REIT I nor any its Affiliates is subject to any Judgment or Contract which would, individually or in the aggregate, reasonably be expected to result in a REIT I Material Adverse Effect or otherwise reasonably be expected to prohibit or restrict the consummation of the Transactions.

 

SECTION 3.6                 Brokers and Finders.

 

REIT I has not employed, paid or become obligated to pay any fee to any broker, finder or other intermediary for or on account of the Transactions, except for fees and expenses of Morgan Stanley for which REIT I will be exclusively liable.

 

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SERVICE PROVIDERS

 

Each of Services Holdings and the Service Providers hereby represents and warrants to REIT I, as of the date hereof, as follows:

 

SECTION 4.1                 Organization.

 

It is a limited liability company validly existing and in good standing under the laws of its jurisdiction of organization.

 

SECTION 4.2                 Authority; Approvals.

 

(a)       It has the full limited liability company power and authority to enter into this Agreement and the Ancillary Agreements to which it is a party, and to consummate the Transactions. No provision of Law applicable to it or its organizational documents requires approval by its members of any of this Agreement, the Ancillary Agreements or the Transactions, except as duly obtained prior to or concurrent with the execution and delivery of this Agreement. The execution and delivery by it of this Agreement and each Ancillary Agreement to which it is a party, and the consummation by it of the Transactions, have been duly authorized by all necessary limited liability company action, and no other proceedings on the part of it are necessary to authorize the execution and delivery of this Agreement and such Ancillary Agreements or to consummate the Transactions. This Agreement has been, and each Ancillary Agreement to which it is a party when executed and delivered will be, duly and validly executed and delivered by it, as applicable, and, assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto or thereto, constitutes or will constitute, as applicable, a valid and binding agreement of it, as applicable, enforceable against it in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting or relating to enforcement of creditors’ rights generally and (ii) general equitable principles.

 

(b)       To its Knowledge, no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any Governmental Authority is necessary for the execution and delivery by it of this Agreement and the Ancillary Agreements to which it is party or the consummation by it of the Transactions.

 

SECTION 4.3                 Existing Convertible Shares.

 

Advisor is the record and beneficial owner of the Existing Convertible Preferred Shares and has the authority to transfer such Existing Convertible Shares to REIT I pursuant to this Agreement.

 

SECTION 4.4                 Litigation.

 

To its Knowledge, there are no Claims pending or threatened in writing against or investigations with respect to Services Holdings, Service Providers, and their Affiliates that, if determined in a manner adverse to Services Holdings, Service Providers, and their Affiliates

 

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would, individually or in the aggregate, reasonably be expected to result in a Services Holdings Material Adverse Effect or Service Providers Material Adverse Effect or otherwise reasonably be expected to prohibit or restrict the consummation of the Transactions. To its Knowledge, neither of Services Holdings, Service Providers nor or any of their Affiliates is subject to any Judgment or Contract which would, individually or in the aggregate, reasonably be expected to result in a Services Holdings Material Adverse Effect or Service Providers Material Adverse Effect or otherwise reasonably be expected to prohibit or restrict the consummation of the Transactions.

 

SECTION 4.5                 No Infringement or Misappropriation.

 

To its Knowledge, no Member of the Behringer Group has received any Claim alleging that it or REIT I or any of their respective Affiliates has infringed or misappropriated any Intellectual Property Rights of any third party (including any Claim that it must license or refrain from using any Intellectual Property Rights of any third party) through its use of the “Behringer Harvard” service mark.

 

SECTION 4.6                 Title to Purchased Assets.

 

Advisor is the sole owner of and has good and valid title to each of the Purchased Assets, free and clear of all Liabilities (except for immaterial Liabilities).  At the Closing, Advisor will deliver to REIT I good and valid title in and to the Purchased Assets, free and clear of all Liabilities (except for immaterial Liabilities).

 

SECTION 4.7                 Brokers and Finders.

 

It has not employed any broker, finder or other intermediary on behalf of itself or REIT I in connection with the Transactions, except for fees and expenses of Robert A. Stanger & Co., Inc. for which the Behringer Group will be exclusively liable.

 

SECTION 4.8                 Noncontravention.

 

The execution, delivery and performance of the Transactions by each of Services Holdings, the Service Providers and the other members of the Behringer Group do not and will not (a) violate, conflict with or result in the breach of any provision of its organizational documents, or (b) except for matters addressed under Section 8.2(b)(v) , conflict with or violate, in any material respect, any Judgment in existence on the date hereof applicable to it, or any of its assets, properties or businesses, or (c) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, or give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any lien or other encumbrance on any of the shares of Series A Preferred Stock to be issued by REIT I to Services Holdings in connection with this Agreement, pursuant to, any note, bond, mortgage or indenture, agreement, lease, sublease, license, permit, franchise or other Contract, instrument or arrangement to which it is a party or by which any of such shares, assets or properties is bound or affected, except, in the case of clause (c), to the extent that such conflicts, breaches, defaults or other matters would not adversely affect its ability to carry out its obligations under this Agreement, and to consummate the Transactions.

 

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ARTICLE V
SPECIFIED EMPLOYEE MATTERS

 

SECTION 5.1                 Employees and Offers of Employment.

 

(a)       Effective as of the Closing, REIT I shall offer employment to the Specified Employees on the terms and subject to the conditions determined by the Compensation Committee of the REIT I Board in accordance with the provisions of this Article V . The Specified Employees who accept and commence employment after the Closing with REIT I are hereinafter collectively referred to as the “ Transferred Employees .” For the period commencing on September 1, 2012 and ending on December 31, 2013, such Transferred Employees shall receive substantially similar (or more beneficial) base salaries and cash bonus opportunities as received immediately prior to the Closing. Further, REIT I hereby assumes, as of the Closing, all Liabilities of Transferred Employees (including the employment and termination thereof) arising after the Closing in connection with their employment by REIT I, including the employment and termination thereof. Except for REIT I’s indemnification for PTO Liabilities pursuant to Section 5.2 and assumption of severance benefits for Non-Hired Specified Employees pursuant to Section 5.3 , REIT I does not assume, and shall not be liable or responsible for, any Liabilities with respect to any Specified Employee who does not become a Transferred Employee (each, a “ Non-Hired Specified Employee ”) or any other employee of the Service Providers (such Liabilities, the “ Excluded Employee Liabilities ”).

 

(b)       Subject to applicable Law and the terms of any Contract between a Transferred Employee and REIT I, each Transferred Employee shall be, upon acceptance and commencement of employment with REIT I, an “at will” employee of REIT I, and nothing in this Article V shall create a contract of employment between (x) REIT I or any of its Affiliates and (y) a Transferred Employee, nor limit the right of REIT I and its Affiliates to terminate the employment of any Transferred Employee at any time, for any reason, with or without cause, and without notice.

 

SECTION 5.2                 Paid Time Off; Other Leave.

 

For the period commencing on September 1, 2012 and ending on December 31, 2013, REIT I shall provide to each Transferred Employee paid time off, vacation, and other accrued leaves of absence benefits (“ PTO Benefits ”) substantially comparable in the aggregate as those provided by the Behringer Group immediately prior to Closing, and REIT I shall give each Transferred Employee credit for the remaining PTO Benefits accrued by such Transferred Employee during his or her employment with the Behringer Group prior to Closing (that has not been forfeited or lost as of Closing), but REIT I may subject such accrued PTO Benefits to any accrual caps and use limitations (such as a “use it or lose it” policy) that are comparable to the accrual caps and use limitations under the comparable Behringer Group policies for PTO Benefits, as REIT I may reasonably determine. To the extent that any member of the Behringer Group incurs any Damages with respect to any Liabilities for PTO Benefits with respect to any Specified Employee (collectively, the “ PTO Liabilities ”), REIT I shall indemnify such member of the Behringer Group with respect to such Damages.

 

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SECTION 5.3                 Severance Obligations.

 

(a)       From September 1, 2012 through December 31, 2013, REIT I shall provide severance benefits substantially comparable to those which would be provided using the formula set forth in Schedule 5.3 to any Transferred Employee who is involuntarily terminated by REIT I under circumstances that would entitle the Transferred Employee to severance benefits had his or her employment been terminated by a member of the Behringer Group immediately prior to Closing (for example, REIT I shall be under no obligation to provide severance benefits to any Transferred Employee who has been terminated for cause). If REIT I or any of its Affiliates seeks a release from any Transferred Employee with respect to Claims of such Transferred Employee against REIT I or its Affiliates (an “ Employee Release ”), REIT I shall use commercially reasonable efforts to obtain a release releasing (among other Persons) the Behringer Indemnified Parties of all employment-related Claims of such Transferred Employee arising during his or her term of service (as an employee or otherwise) with the Behringer Group prior to Closing on substantially similar terms as such Employee Release.

 

(b)       REIT I shall reimburse the applicable member of the Behringer Group for any severance benefits paid up to the amount determined using the formula set forth in Schedule 5.3 to any Non-Hired Specified Employee who has his or her employment terminated by the applicable member of the Behringer Group within ninety (90) days of the Closing Date.

 

SECTION 5.4                 Employee Benefit Plans.

 

(a)       Effective as of 11:59 P.M. on the Closing Date, Transferred Employees shall cease participation in any and all Behringer Plans and shall be eligible to participate in employee benefit and fringe benefit plans maintained by REIT I or one of its Affiliates (the “ REIT I Plans ”). Effective as of 12:00 A.M. September 1, 2012 and continuing for a period ending on December 31, 2013, REIT I shall provide to the Transferred Employees through REIT I Plans, employee benefits and fringe benefits which are, in the aggregate, substantially comparable to the employee benefits and fringe benefits provided to such Transferred Employees under the Behringer Plans immediately prior to the Closing Date.

 

(b)       Following the Closing Date, each Transferred Employee shall receive credit for all purposes (including credit for eligibility, benefit accrual and for vesting) under the REIT I Plans for years of service with the Behringer Group; provided , however, that with respect to any credit for benefit accruals under any REIT I Plan, there shall be no duplication of benefits or accruals under the employee benefit plans or programs of REIT I and those of the Behringer Group (for example, with respect to employer contributions under a REIT 401(k) Plan).

 

(c)       It is the intention of the Parties that the Transferred Employees and their eligible dependents be placed in no worse a position but no better a position than if they had remained participants in the group health plan of the Behringer Group for the remainder of the applicable plan year. Following the Closing Date, REIT I shall cause any and all pre-existing condition limitations, eligibility waiting periods and evidence of

 

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insurability requirements under any REIT I Plans that are group health plans in which such Transferred Employees and their eligible dependents shall participate to be waived (but only to the extent that such Transferred Employees and their eligible dependents would be covered under the applicable group health plan of the Behringer Group).

 

(d)       As of the Closing, (i) REIT I hereby assumes all obligations and Liabilities under COBRA (“ COBRA Liabilities ”) for each Transferred Employee (and his/her dependents and beneficiaries) for a qualifying event occurring after the Closing Date, and (ii) no member of the Behringer Group shall have any COBRA Liabilities with respect to such Transferred Employees (and their dependents and beneficiaries).

 

(e)       As of 12:00 A.M. September 1, 2012, (i) the election levels and the coverage levels of the Transferred Employees shall apply under the REIT I FSA Plans in the same manner as under the Behringer FSA Plans, and (ii) the Transferred Employees shall be reimbursed from the REIT I FSA Plans for claims incurred from and after 12:00 A.M. September 1, 2012 on the same basis and the same terms and conditions as under the Behringer FSA Plans. Subject to a reasonable blackout period for claims arising prior to the Closing Date, the account balances of the Transferred Employees with respect to the plan year in which the Closing Date occurs (whether positive or negative) (the “ Transferred Account Balances ”) under the Behringer FSA Plans shall be transferred to one or more REIT I FSA Plans. As soon as practicable after the Closing Date, and in any event within thirty (30) Business Days after the amount of the Transferred Account Balances is determined, Services Holdings shall pay or cause to be paid to REIT I, in cash, the net aggregate amount of the Transferred Account Balances of such Transferred Employees, if such amount is positive, and REIT I shall pay Services Holdings (or its designee), in cash, the net aggregate amount of the Transferred Account Balances of such Transferred Employees, if such amount is negative. All adjustments shall be based upon the assumption that the flexible spending account plans for both the Behringer Group and REIT I and its Affiliates are calendar year plans. For purposes of illustration, if a Transferred Employee who made a $5,000 annual election with respect to the Behringer FSA Plan spent all $5,000 prior to June 30 and was transferred on June 30, such employee would have a negative account balance of $2,500.

 

(f)       As of the Closing Date, Transferred Employee shall cease participation in the Behringer Harvard Employee Retirement Plan (the “ Behringer 401(k) Plan ”). Further, effective as of this date, Service Providers will take or cause to be taken any and all actions required to fully vest such Transferred Employees in their account balances in such Behringer 401(k) Plan. Lastly, as of the Closing Date or as soon as practicable thereafter, Service Providers shall cause the Behringer 401(k) Plan, in a trust to trust transfer, to transfer the account balances of the Transferred Employees in the Behringer 401(k) Plan to the Metis Property Investments, LLC 401(k) Profit Sharing Plan (the “ REIT I 401(k) Plan ”) and REIT I shall cause the REIT I 401(k) Plan to accept such asset transfer. The Service Providers and REIT I shall take any actions necessary and required by Law and the terms of each such plan to effectuate such transfer.

 

(g)       The Service Providers shall be responsible for and shall bear and discharge all Liabilities for any and all claims incurred or made by Transferred

 

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Employees (as well as any other employee of the Service Providers) and their dependents and beneficiaries on and before 11:59 P.M. August 31, 2012 under any Behringer Plan (“ Excluded Employee Claims ”). REIT I hereby shall be responsible for and discharge all Liabilities for any and all claims incurred on or after 12:00 A.M. September 1, 2012 by Transferred Employees (and their dependents and beneficiaries) under REIT I Plans. For purposes of this Section 5.4(g) , a claim shall be deemed incurred, in the case of health benefits (which includes hospital, surgical, medical, dental or vision benefits), when the services that are the subject of the claim are performed or provided and, in the case of other benefits (such as life insurance, sickness, accident, severance and disability benefits), when an event has occurred or when a condition has been diagnosed that entitles the individual to the benefit.

 

SECTION 5.5                                                   No Third Party Beneficiaries.

 

No provision of this Article V shall create any third party beneficiary or other rights in any employee or former or future employee (including any beneficiary or dependent thereof) of the Behringer Group or REIT I or any of its Affiliates (including any Transferred Employee) in respect of employment, continued employment (or resumed employment), compensation, benefits, or severance, and no provision of this Article V shall create any such rights in any such Persons in respect of any compensation, benefits, or severance that may be provided, directly or indirectly, under any Behringer Plan or any plan or arrangement which may be established by REIT I or any of its Affiliates. No provision of this Agreement is intended as, nor shall any provision of this Agreement constitute, the establishment, amendment, or modification of, or supplement to, any employee benefit plan subject to ERISA, any other Behringer Plan or REIT I Plan, or with respect to the LTIP Program. No provision of this Agreement shall constitute a limitation on the rights of the Behringer Group, REIT I or their respective Affiliates to establish, amend, modify, supplement, or terminate after the Closing Date any such plans or arrangements.

 

ARTICLE VI
ADDITIONAL AGREEMENTS

 

SECTION 6.1                                                   Reservation of REIT I Common Stock.

 

REIT I has available and REIT I shall reserve and keep available at all times, free of preemptive and other similar rights of stockholders, the requisite aggregate number of authorized but unissued shares of REIT I Common Stock to enable REIT I to timely effect the issuance and delivery in full to the holders of the Series A Preferred Stock the shares of REIT I Common Stock issuable upon the conversion of such Series A Preferred Stock, in any case prior to the issuance to the holders of Series A Preferred Stock of such shares of REIT I Common Stock.

 

SECTION 6.2                                                   Public Statements; SEC Filings.

 

(a)                                   Press Releases . The Parties shall consult with each other prior to issuing any press release or making any other public statement with respect to this Agreement, any Ancillary Agreement, the Transactions or the disclosure of an Estimated Per Share Value as contemplated by Section 6.6 , and shall not issue any such press release or public statement prior to review and approval by REIT I and Services Holdings as the case may

 

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be, except that prior review and approval shall not be required if, in the reasonable judgment of counsel to the party seeking to issue such press release or make such public statement, prior review and approval would prevent the timely dissemination of such release or statement in violation of applicable Law, except that in such case the issuing party shall use its reasonable best efforts to consult with the other party before issuing such release or making such public statement.

 

(b)                                  REIT I SEC Filings . REIT I shall not file with or furnish to the SEC any REIT I SEC Filing that includes disclosures related to Services Holdings, the Service Providers, the Behringer Group, this Agreement, any Ancillary Agreement, or the Transactions with respect to which Services Holdings shall not previously have been advised and given a reasonable opportunity to comment on the sections thereof that describe or otherwise relate to Services Holdings, the Service Providers, the Behringer Group, this Agreement, any Ancillary Agreement or the Transactions, in each case to the extent practicable under the circumstances.

 

(c)                                   Required approvals under this Section 6.2 shall not be unreasonably withheld or delayed.

 

SECTION 6.3                                                   Confidentiality.

 

(a)                                   Subject to Section 6.3(b)  below, the Confidential Material will be kept confidential and will not, without the prior written consent of the Providing Party, be disclosed by the Receiving Party or its Representatives, in whole or in part, and will not be used by the Receiving Party or its Representatives, directly or indirectly, for any purpose other than in connection with this Agreement, any Ancillary Agreement or the Transactions, or evaluating, negotiating or advising with respect to such matters. Moreover, the Receiving Party agrees to transmit Confidential Material to its Representatives only if and to the extent that the Representatives need to know the Confidential Material for purposes of the transactions contemplated hereby and are informed by the Receiving Party of the confidential nature of the Confidential Material and of the terms of this Section 6.3 . In any event, the Receiving Party will be responsible for any actions by its Representatives which are not in accordance with the provisions hereof.

 

(b)                                  Notwithstanding the foregoing, the Receiving Party may reveal Confidential Material to any Governmental Authority if and only if such information to be disclosed is (i) approved in writing by the Providing Party for disclosure, (ii) in response to an informal request for information from the SEC, provided that (A) the Receiving Party shall notify the Providing Party of the existence, terms and circumstances surrounding the request and (B) any Confidential Material so disclosed shall be disclosed on a confidential basis and shall continue to be deemed Confidential Material for purposes of this Agreement, or (iii) subject to Section 6.3(c) , required by Law to be disclosed by the Receiving Party.

 

(c)                                   In the event that the Receiving Party, any of its Representatives or anyone to whom the Receiving Party or its Representatives supply the Confidential Material is

 

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requested (by oral questions, interrogatories, requests for information or documents, subpoena, civil or criminal investigative demand, any informal or formal investigation by any Governmental Authority or otherwise in connection with any legal process) or required by applicable Law to disclose any Confidential Material, the Receiving Party agrees: (i) to promptly notify the Providing Party of the existence, terms and circumstances surrounding a request or requirement; (ii) to consult with the Providing Party on the advisability of taking available legal steps to resist or narrow the request or requirement; and (iii) if disclosure of the information nonetheless is required by Law to be disclosed by the Receiving Party, then the Receiving Party shall give prior written notice of such required disclosure to the Providing Party and the Receiving Party shall cooperate with the Providing Party to limit the extent of such disclosure, including by submission of a request for confidential treatment with the SEC for Confidential Materials contained in REIT I SEC Filings.

 

(d)                                  The provisions of Section 6.3 shall expire and cease to have any further force and effect on the third anniversary of the Closing Date.

 

SECTION 6.4                                                   Behringer Nominees.

 

(a)                                   So long as the members of the Behringer Group and their respective employees and any direct and indirect owners of Equity Interests in the LTIP (including employees participating in the LTIP Program) or Behringer Harvard Holdings, LLC hold, in the aggregate, at least 2,500 shares of Series A Preferred Stock, at any time at which REIT I’s stockholders shall have the right to, or shall, vote for or consent in writing to the election of directors of REIT I (whether at an annual meeting of REIT I’s stockholders, a special meeting of REIT I’s stockholders called for the purpose of electing directors of REIT I or at any adjournment or postponement thereof), then, and in each such event, Services Holdings shall have the right to designate two (2) nominees to serve as directors (the “ Behringer Nominees ”); provided , however, that if the Nominating Committee of the REIT I Board deems any such Behringer Nominee not reasonably acceptable, the REIT I Board may require that Services Holdings nominate an alternative director, it being acknowledged and agreed that the individuals set forth on Schedule 6.4(a) are deemed reasonably acceptable to the Nominating Committee of the REIT I Board; provided , however, that no such designation may be made if, following such election, there would be more than two (2) Behringer Nominees serving as directors on the REIT I Board.

 

(b)                                  At each annual meeting of REIT I’s stockholders, special meeting of REIT I’s stockholders called for the purpose of electing directors of REIT I, and at any adjournment or postponement thereof, the REIT I Board (or a duly authorized committee thereof) shall (i) nominate each Behringer Nominee for election as a member of the REIT I Board and (ii) include each Behringer Nominee in any proxy statement and related materials used by REIT I in respect of the election to which such nomination pertains. REIT I agrees to use its reasonable best efforts (to the extent within the control of REIT I) to cause the Behringer Nominees to be elected to the REIT I Board. Subject to the REIT I Organizational Documents, if a Behringer Nominee is not elected a member of the REIT I Board at such a stockholders meeting, (i) Services Holdings may designate a replacement Behringer Nominee to serve as director; provided , however, that such

 

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Behringer Nominee must be deemed reasonably acceptable by the Nominating Committee of the REIT I Board; provided further, that the individuals listed on Schedule 6.4(b)  are deemed reasonably acceptable by the Nominating Committee of the REIT I Board, and (ii) the REIT I Board shall appoint (as promptly as practicable) such replacement Behringer Nominee to the REIT I Board, including, if necessary, by adding additional directorships to the REIT I Board. Upon the death, resignation or removal of a Behringer Nominee that is a member of the REIT I Board (or has been nominated), Services Holdings may designate a replacement Behringer Nominee to fill such vacancy (or nomination), and REIT I shall appoint such replacement Behringer Nominee to the REIT I Board as promptly as practicable (or use the same reasonable best efforts to cause such Behringer Nominee to be elected to the REIT I Board as it was obligated to use with respect to the original Behringer Nominee). Notwithstanding the foregoing or anything else in this Agreement to the contrary, (A) there shall not be more than two (2) Behringer Nominees serving as directors on the REIT I Board at any time, and (B) REIT I need not take any action under this Section 6.4(b)  if such would be the case.

 

(c)                                   For so long as the Consulting Agreement remains in effect, Services Holdings hereby designates Robert S. Aisner as one of the Behringer Nominees.

 

(d)                                  Each Behringer Nominee who (i) serves on the REIT I Board, (ii) does not serve as an officer of REIT I, and (iii) does not provide consulting services to REIT I other than commensurate with such Behringer Nominee’s service as a director (including Mr. Aisner if he ceases to serve as Chief Executive Officer of REIT I and ceases to provide services to REIT I pursuant to the Consulting Agreement), shall be entitled to compensation equivalent to the compensation generally provided to a non-employee director of the REIT I Board who is not a Behringer Nominee from time to time.

 

SECTION 6.5                                                   Status of the Existing Advisory Agreement.

 

Notwithstanding the amendment and restatement of the Existing Advisory Agreement into the Administrative Services Agreement, certain provisions of the Existing Advisory Agreement shall continue in full force and effect as set forth in this Section 6.5 .

 

(a)                                   Article V (Indemnification) of the Existing Advisory Agreement, including indemnification of Advisor for contingent Liabilities that arise or become due after Closing, remains in full force and effect until the applicable statute of limitations.

 

(b)                                  Subject to Section 2.2(a)  of this Agreement, Section 6.15 (Non-Solicitation) of the Existing Advisory Agreement as included in that certain First Amendment to the Existing Advisory Agreement remains in full force and effect in accordance with its terms without limitation.

 

(c)                                   Subject to Section 6.5(f)  below, the provisions of the Existing Advisory Agreement that require REIT I to pay Advisory Fees and Expenses to Advisor shall immediately terminate and be of no further force and effect upon payment in full of the Final Advisory Fees and Expenses Payment in accordance with Section 2.4(b) , and the Final Advisory Fees and Expenses Payment shall be the final and binding payment with

 

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respect to any and all Advisory Fees and Expenses for services provided by Advisor prior to the Closing.

 

(d)                                  Subject to Section 6.5(f)  below, at Closing, Section 3.05 (Audit of Advisor Payments) of the Existing Advisory Agreement shall terminate upon payment of the Final Advisory Fees and Expenses Amount. For the avoidance of doubt, no Person shall have any audit rights pursuant to such Section 3.05, and REIT I shall not have any right to claim overpayment or seek reimbursement, with respect to Advisory Fees and Expenses (or other amounts) paid to Advisor with respect to services provided prior to the Closing.

 

(e)                                   Any reservation of rights by Advisor under the Existing Advisory Agreement shall continue in full force and effect. Advisor and REIT I acknowledge that the amount of $31,900,000 shall be included in amounts for which the Advisor will receive credit in respect of any overpayment to the Advisor under Section 3.05 of the Existing Advisory Agreement.

 

(f)                                     Notwithstanding the foregoing,

 

(i)                                      the Existing Advisory Agreement remains in full force in effect and shall continue in full force and effect with respect to Two Briarlake (including Section 3.05) and

 

(ii)                                   REIT I shall pay to Advisor the fees payable in connection with services rendered in the development of Two Briarlake under Section 3.01(b) and Section 3.01(f) (with respect to development and construction financing, but not any subsequent financing, whether permanent or not) of the Existing Advisory Agreement (the “ Two Briarlake Development Fees ”)

 

until the earlier to occur of (x) REIT I ceasing development of Two Briarlake in a manner that is reasonably consistent with the Two Briarlake Approved Plan and (y) Advisor having received the last payment from REIT I with respect to Two Briarlake pursuant to the Existing Advisory Agreement. Consequently, REIT I shall pay all such Advisory Fees and Expenses relating to the development and construction financing (but not any subsequent financing, whether permanent or not) of Two Briarlake that become payable under the Existing Advisory Agreement after the date hereof. For the avoidance of doubt, when expenses with respect to Two Briarlake are paid by or on behalf of REIT I or its Affiliates, the Two Briarlake Development Fees relating thereto payable under Section 3.01(b) of the Existing Advisory Agreement shall become due and payable in accordance with the terms of the Existing Advisory Agreement, and when any development and construction financing (but not any subsequent financing, whether permanent or not) with respect to Two Briarlake is originated, the Two Briarlake Development Fees relating thereto payable under this Section 3.01(f) of the Existing Advisory Agreement shall become due and payable in accordance with the terms of the Existing Advisory Agreement. No Two Briarlake Development Fee shall be payable in respect of any such subsequent financing (whether permanent or not). When expenses with respect to Two Briarlake are paid by REIT I, the Advisory Fees and Expenses relating thereto shall become due and payable in accordance with the terms of the

 

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Existing Advisory Agreement. For the avoidance of doubt, Advisory Fees and Expenses with respect to Two Briarlake that are payable as of the Closing Date shall be included in the Advisory Fees and Expenses Annex, and Advisory Fees and Expenses with respect to Two Briarlake that are not currently payable as of the Closing Date shall not be included in the Advisory Fees and Expenses Annex.

 

SECTION 6.6                                                   Determination of Estimated Per Share Value.

 

(a)                                   The REIT I Board shall in good faith determine an estimated per share value of the REIT I Common Stock (an “ Estimated Per Share Value ”) in accordance with Section 6.6(b)  during the fourth quarter of 2012 and at least once during each subsequent year until the earliest to occur of (i) a Listing Event, (ii) a Change of Control or (iii) the conversion of all outstanding shares of Series A Preferred Stock into shares of REIT I Common Stock.

 

(b)                                  Each determination of Estimated Per Share Value pursuant to Section 6.6(a)  shall be made in good faith by the REIT I Board consistent with the practice, policies, and procedures (including the Estimated Valuation Policy) utilized by the REIT I Board in connection with determining the December 16, 2011 estimated per share value of the REIT I Common Stock; provided that, for each subsequent Estimated Per Share Value, the REIT I Board may in good faith revise its method for calculating the Estimated Per Share Value.

 

(c)                                   Promptly after the final determination by the REIT I Board of an Estimated Per Share Value in accordance with this Section 6.6 , REIT I shall publicly disclose such Estimated Per Share Value and shall also disclose such Estimated Per Share Value in its Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and each subsequent year in which such Estimated Per Share Value is calculated pursuant to this Section 6.6 .

 

SECTION 6.7                                                   Distributions under the LTIP Program.

 

(a)                                   Acknowledgment . Services Holdings acknowledges that it will distribute to LTIP and LTIP intends to distribute to its members (including Specified Employees participating in the LTIP Program) (i) the Series A Preferred Stock, (ii) any REIT I Common Stock or other securities issued upon conversion of the Series A Preferred Stock, and (iii) proceeds from the sales of such Series A Preferred Stock, REIT I Common Stock and/or other securities (as the case may be) consistent with the current terms of the LTIP Program. For the avoidance of doubt, neither Services Holdings nor LTIP intends to distribute the Series A Preferred Stock, REIT I Common Stock issued upon conversion of the Series A Preferred Stock or proceeds from the sales of such Series A Preferred Stock and/or REIT I Common Stock prior to the first anniversary of the Closing Date or while any Claim with respect to or arising out of the Transactions is pending.

 

(b)                                  No Third Party Beneficiaries or LTIP Program Modifications . No provision of this Section 6.7 shall create any third party beneficiary or other rights in any

 

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owner of Equity Interests of LTIP or any participant or former participant in any LTIP Program. No provision of this Agreement is intended as, nor shall any provision of this Agreement constitute, an amendment to the operating agreement of LTIP or the LTIP Program. No provision of this Agreement shall constitute a limitation on rights to amend, modify or terminate after the Closing Date to the operating agreement of LTIP or the LTIP Program.

 

SECTION 6.8                                                   Support Services Agreements.

 

In the event that REIT I desires services from any member of the Behringer Group in addition to the services provided under the Administrative Services Agreement and the Amended and Restated Property Management Agreement and such member of the Behringer Group desires to provide such services, such member of the Behringer Group and REIT I may enter into one or more support service agreements (the “ Support Services Agreements ”) whereby such member of the Behringer Group will provide such additional services. The term of any Support Services Agreement, the consideration payable for such additional services, and the other terms and conditions of such Support Services Agreements shall be as REIT I and such member of the Behringer Group mutually agree.

 

SECTION 6.9                                                   Tax Matters.

 

(a)                                   Tax Returns . REIT I and Services Holdings shall prepare, and timely file or cause to be filed their respective Tax Returns and any Tax Returns of their respective Subsidiaries that are required to be filed, including as a result of any extension of time to file, after the Closing Date.

 

(b)                                  Tax Matters Generally .

 

(i)                                      Cooperation . Each of REIT I, on the one hand, and Services Holdings and the Service Providers, on the other hand, will provide the other with such assistance and non-privileged information relating to their respective businesses as may reasonably be requested in connection with the preparation of any Tax Return or the performance of any audit, examination or any other proceeding by any Governmental Authority, whether conducted in a judicial or administrative forum.

 

(ii)                                   Transfer Taxes . All transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees (including any interest, penalty or addition thereto) incurred in connection with this Agreement, the Ancillary Agreements and the Transactions (the “ Transfer Taxes ”), shall be paid 50% by Advisor and 50% by REIT I when due, and the Party required by applicable Law will file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes and, if required by applicable Law, the other Party or Parties will join in the execution of any such Tax Returns and other documentation. For the avoidance of doubt, Transfer Taxes shall not include income or franchise Taxes or other Taxes based on the net or gross income of any Party, nor shall it include any standard corporate business license or fees required of any Party or its respective Affiliates incurred to carry out its normal business.

 

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SECTION 6.10                                             Requests for Information.

 

(a)                                   REIT I shall promptly respond to requests of Services Holdings or any other member of the Behringer Group, and to requests of broker-dealers, agents/representatives of broker-dealers, and other offering participants who have entered into a confidentiality agreement substantially similar (as to content) to the current confidentiality agreement used by the Behringer Group, for information and make employees reasonably available, consistent with past practice, until the earliest to occur of a Listing Event or a Change of Control.

 

(b)                                  Each of Services Holdings and Service Providers shall (and shall cause any other member of the Behringer Group to) respond promptly to reasonable requests of REIT I or BH OP, and to reasonable requests of agents/representatives of REIT I or BH OP, including their independent accountants, for information, in each case consistent with past practice, and shall provide reasonable access to REIT I, BH OP or their agents/representatives, as applicable, to books, records and information relating to REIT I or any of its Affiliates, including in connection with the assessment or audit of internal control of financial reporting and management’s assessment thereof.

 

ARTICLE VII
CLOSING DELIVERIES

 

SECTION 7.1                                                   Closing Deliveries of REIT I.

 

Simultaneous with the execution of this Agreement, REIT I has delivered or caused to be delivered to Services Holdings and/or the Service Providers:

 

(a)                                   a duly executed counterpart of a bill of sale with respect to the Purchased Assets, in form and substance reasonably satisfactory to Services Holdings and the Service Providers (the “ Bill of Sale ”), executed by REIT I;

 

(b)                                  a duly executed counterpart of the Administrative Services Agreement in substantially the form attached hereto as Exhibit B (the “ Administrative Services Agreement ”), executed by REIT I;

 

(c)                                   a duly executed counterpart of the Sixth Amended and Restated Property Management Agreement in substantially the form attached hereto as Exhibit C (the “ Amended and Restated Property Management Agreement ”), executed by both REIT I and BH OP;

 

(d)                                  a duly executed counterpart of the Registration Rights Agreement in substantially the form attached hereto as Exhibit E (the “ Registration Rights Agreement ”), executed by REIT I;

 

(e)                                   a duly executed counterpart of the Consulting Agreement with Robert S. Aisner in substantially the form attached hereto as Exhibit F (the “ Consulting Agreement ”), executed by REIT I;

 

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(f)                                     a duly executed counterpart of the Service Mark Licensing Agreement in substantially the form attached hereto as Exhibit G (the “ License Agreement ”), executed by REIT I;

 

(g)                                  instruments of authority from the Special Committee, the REIT I Board, or such other committee of the REIT I Board, in form and substance reasonably acceptable to Services Holdings, authorizing this Agreement, the Ancillary Agreements, and the Transactions; and

 

(h)                                  a certificate by Scott W. Fordham, in his capacity as Chief Operating and Financial Officer of REIT I, that the representations and warranties of REIT I made under Article III are accurate as of Closing, in form and substance reasonably satisfactory to Services Holdings.

 

SECTION 7.2                                                   Closing Deliveries of Services Holdings and the Service Providers.

 

Simultaneous with the execution of this Agreement, Services Holdings and/or the Service Providers have delivered or caused to be delivered to REIT I:

 

(a)                                   a duly executed counterpart of the Bill of Sale, in form and substance reasonably satisfactory to Services Holdings and the Service Providers, executed by Advisor;

 

(b)                                  a duly executed counterpart of the Administrative Services Agreement, executed by Advisor;

 

(c)                                   a duly executed counterpart Amended and Restated Property Management Agreement, executed by Property Manager;

 

(d)                                  a duly executed stock power with respect to conveyance of the Existing Convertible Shares to REIT I, executed by Advisor (the “ Stock Power ”);

 

(e)                                   a duly executed counterpart of the Registration Rights Agreement, executed by Services Holdings;

 

(f)                                     a duly executed counterpart of the Consulting Agreement, executed by Robert S. Aisner;

 

(g)                                  a duly executed counterpart of the License Agreement, executed by Behringer Harvard Holdings, LLC;

 

(h)                                  instruments of authority from Services Holdings and the Service Providers in form and substance reasonably satisfactory to REIT I authorizing this Agreement, the Ancillary Agreements, and the Transactions; and

 

(i)                                      a certificate by an executive officer of each of Services Holdings and the Service Providers, in his or her capacity as such, that the representations and warranties

 

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of Services Holdings and the Service Providers made under Article IV are accurate as of Closing, in form and substance reasonably satisfactory to REIT I.

 

ARTICLE VIII
SURVIVAL AND REMEDY; INDEMNIFICATION

 

SECTION 8.1                                                   Survival.

 

(a)                                   The covenants and agreements to be performed after the Closing (including, without limitation, this Article VIII ) shall not expire until all obligations have been fully discharged with respect thereto.

 

(b)                                  The representations and warranties of REIT I contained in Article III shall survive until the first anniversary of the Closing Date; provided , that the representations and warranties contained in Section 3.1 (Organization and Qualification), Section 3.2 (Capitalization), Section 3.3 (Issuance of Securities), Section 3.4(a) and (b)  (Authority), and Section 3.6 (Brokers and Finders) (collectively, the “ REIT I Fundamental Representations ”) shall survive until the expiration of the applicable statute of limitations with respect to the matters addressed in such sections.

 

(c)                                   The representations and warranties of the Service Providers contained in Article IV shall survive until the first anniversary of the Closing Date; provided , that the representations and warranties contained in Section 4.1 (Organization), Section 4.2(a)  (Authority), Section 4.6 (Title to Purchased Assets), Section 4.7 (Brokers and Finders), and Section 4.8 (Noncontravention) (collectively, the “ Service Providers Fundamental Representations ,” and together with the REIT I Fundamental Representations, the “ Fundamental Representations ”) each shall survive until the expiration of the applicable statute of limitations with respect to the matters addressed in such sections.

 

(d)                                  If written notice of a bona fide claim for indemnification under Section 8.2 (an “ Indemnity Claim ”) has been given in accordance with this Agreement prior to the expiration of the applicable representations, warranties, covenants or agreements, then the applicable representations, warranties, covenants or agreements shall survive as to such claim, until such claim has been finally resolved.

 

SECTION 8.2                                                   Indemnification.

 

(a)                                   By REIT I . From and after Closing, and subject to the limitations set forth in this Article VIII , Services Holdings, the Service Providers and each member of the Behringer Group and (without duplication) their Affiliates, successors and assigns and each of the respective officers, directors, managers, employees and agents of the foregoing (collectively, the “ Behringer Indemnified Parties ”) shall be indemnified by REIT I, to the maximum extent permitted by Texas Law, from and against any and all Damages which arise out of, result from or are incident to:

 

(i)                                      the breach or inaccuracy of any of the REIT I Fundamental Representations;

 

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(ii)                                   the breach or inaccuracy of any representation or warranty made by REIT I under Article III of this Agreement, other than the REIT I Fundamental Representations;

 

(iii)                                the breach of any covenant or agreement contained in this Agreement by REIT I;

 

(iv)                               PTO Liabilities; and

 

(v)                                  any Covered Claim.

 

(b)                                  By Services Holdings . From and after Closing, and subject to the limitations set forth in this Article VIII , each of Services Holdings and each Service Provider shall indemnify REIT I and its Affiliates, successors and assigns and each of the respective officers, directors, managers, employees and agents of the foregoing (collectively, the “ REIT I Indemnified Parties ”), to the maximum extent permitted by Texas Law, from and against any and all Damages, which Damages arise out of, result from or are incident to:

 

(i)                                      the breach or inaccuracy of any of the Service Providers Fundamental Representations by Services Holdings or such Service Provider;

 

(ii)                                   the breach or inaccuracy of any representation or warranty made by Services Holdings or the Service Providers under Article IV of this Agreement, other than the Service Providers Fundamental Representations, by Services Holdings or such Service Provider;

 

(iii)                                the breach of any covenant or agreement contained in this Agreement by Services Holdings or such Service Provider;

 

(iv)                               the Excluded Liabilities; and

 

(v)                                  any Licensing Claim; provided , however, that this Section 8.2(b)(v)  shall not apply in respect of any Licensing Claim brought by or on behalf of REIT I or an Affiliate of REIT I.

 

(c)                                   For purposes of determining the amount of any Damages related to a breach or inaccuracy of any representation or warranty made by REIT I under Article III or by Services Holdings or the Service Providers under Article IV (but not whether any breach or misrepresentation has occurred), the representations and warranties set forth in this Agreement shall be considered without regard to any “material”, “Material Adverse Effect” or similar qualifications set forth therein.

 

(d)                                  Procedures .

 

(i)                                      Any Person seeking any indemnification under this Section 8.2 (an “ Indemnified Party ”) shall give the party from whom indemnification is being sought (an “ Indemnifying Party ”) notice of any matter which such Indemnified Party has

 

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determined has given or could give rise to a right of indemnification under this Agreement as soon as reasonably practicable after the Person potentially entitled to indemnification becomes aware of any fact, condition or event which may give rise to Damages for which indemnification may be sought under this Section 8.2 . With respect to any Indemnity Claim by a Behringer Indemnified Party, Services Holdings shall have sole and exclusive authority to act for and in the name of the Indemnified Party. With respect to any Indemnity Claim by a REIT I Indemnified Party, REIT I shall have sole and exclusive authority to act for and in the name of the Indemnified Party. All notices given pursuant to this Article VIII shall describe with reasonable specificity the nature of the Indemnity Claim and the amount of Damages sought pursuant to such Indemnity Claim to the extent then known; provided , however , that the failure to give such notice shall not affect the rights of the Indemnified Party to indemnification under this Article VIII , except to the extent that Indemnifying Party shall have been actually prejudiced by reason of such failure.

 

(ii)                                   Upon a final determination (by agreement of the Indemnifying Party or a final, non-appealable Judgment) that a payment is due to the Indemnified Party under this Article VIII , and the failure of the Indemnifying Party to pay such obligation within thirty (30) days of receipt by the Indemnifying Party of the respective written demand for indemnification, interest shall accrue at the Federal Funds Rate plus eight percent (8%) per annum on the unpaid amount of the indemnification obligation from the date of such written demand for indemnification until the indemnification obligation is paid in full. All amounts owing under this Article VIII shall be paid by wire transfer of immediately available funds to the account designated in writing by the Indemnified Party entitled to such payment, promptly after receipt by the Indemnifying Party of written notice from the Indemnified Party.

 

(iii)                                In connection with any Indemnity Claim that results from or arises out of a third-party Claim against an Indemnified Party, the following procedures in this clause (iii) shall apply. Subject to the further provisions of this Section 8.2(d)(iii) , the Indemnifying Party shall have the right to defend, compromise and settle any third-party Claim in the name of the Indemnified Party to the extent that the Indemnifying Party may be liable to the Indemnified Party in connection therewith; provided , however , that the Indemnifying Party shall not, without the prior written consent of the Indemnified Party, which shall not be unreasonably withheld or delayed, compromise or settle any Indemnity Claim (w) to the extent the Indemnified Party would be required to make any payment in connection with such settlement, (x) to the extent that the settlement includes an admission of guilt or wrongdoing by the Indemnified Party, (y) to the extent the settlement would provide relief consisting of anything other than money damages, or (z) to the extent that the settlement does not include a provision where the plaintiff or claimant in the matter fully releases the Indemnified Party from all liability; provided , however , that if there exists a material conflict of interest that would make it inappropriate for the Indemnifying Party to assume or control such defense, then the Indemnified Party shall be entitled to retain its own counsel and control the defense, at the expense of the Indemnifying Party, provided that the Indemnifying Party shall not be obligated to pay the Expenses of more than one separate counsel for all Indemnified Parties, taken together, except (A) to the extent that local counsel are necessary or

 

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advisable for the conduct of such action or proceeding, in which case the Indemnifying Party shall also pay the Expenses of any such local counsel, or (B) to the extent that a conflict of interest exists between or among the Indemnified Parties, in which case the Indemnifying Party shall pay the Expenses of such additional counsels for the Indemnified Parties as necessary to avoid such conflicts of interest; and provided further , that defense of the Claim and the counsel selected by the Indemnifying Party to undertake the defense of the Claim is approved without reservation/qualification by all carriers under potentially available insurance coverage secured by the Indemnified Party and such control of defense by the Indemnifying Party would not adversely affect (in the reasonable judgment of the Indemnified Party) the availability of any such insurance coverage. Subject to the provisions of this Section 8.2(c)(iii) , the Indemnifying Party shall be entitled to assume and control the defense of such third-party Claim if it notifies the Indemnified Party in writing within 30 days of delivery of the respective Indemnity Claim to the Indemnifying Party pursuant to this Section 8.2. If the Indemnifying Party undertakes or assumes the defense of a third-party Claim pursuant to this clause, the Indemnifying Party shall keep the Indemnified Party (including as requested by any carriers under potentially available liability insurance coverage secured by the Indemnified Party) fully advised on an ongoing basis of matters material to the defense or settlement of the Claim, including the drafting and filing of motions and responses, the retention of expert witnesses, the taking and defending of depositions, and matters of trial strategy. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such third-party Claim and satisfaction of the conditions thereto, the Indemnifying Party shall not be liable to the Indemnified Party under this Article VIII for any Expenses of other counsel or any other Expenses with respect to the defense of such third-party Claim, in each case incurred by the Indemnified Party in connection with the defense of such third-party Claim. If the Indemnifying Party controls the defense of a third-party Claim, the Indemnified Party shall have the right to participate in the defense of such third-party Claim and to employ its own counsel, and the Expenses of the Indemnified Party (including Expenses of counsel) with respect to such participation shall be at the sole expense of the Indemnified Party. If the Indemnifying Party shall undertake to defend any third-party Claim, the Indemnified Party shall cooperate reasonably with the Indemnifying Party and its counsel in the defense against such third-party Claim. If the Indemnifying Party receiving notice of such third-party Claim cannot defend or does not elect to defend such third-party Claim (as allowed hereunder) within the time period specified above, the Indemnified Party shall have the right, at the expense of the Indemnifying Party, to defend such third-party Claim; provided , however , that in no event shall the Indemnifying Party be responsible for the Expenses of more than one counsel for all Indemnified Parties, except (i) to the extent that local counsel are necessary or advisable for the conduct of such action or proceeding, in which case the Indemnifying Party shall also pay the Expenses of any local counsel, or (ii) to the extent that a conflict of interest exists between or among the Indemnified Parties, in which case the Indemnifying Party shall pay the Expenses of such additional counsels for the Indemnified Parties as necessary to avoid any such conflicts of interest. The party controlling such defense shall keep the other party advised of the status of such third-party Claim and the defense thereof and shall consider recommendations made by the other party with respect thereto. The Indemnified Party shall not agree to any settlement,

 

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compromise or discharge of, or admit any Liability with respect to, such third-party Claim (to the extent that such settlement, compromise or discharge obligates the Indemnifying Party to make any payment) without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld.

 

(iv)                               The Indemnified Party may at any time notify the Indemnifying Party of its intention to settle or compromise any Claim against the Indemnified Party solely at the Expense of the Indemnified Party without the consent of the Indemnifying Party; provided , however , that the Indemnifying Party shall have no further Liability in respect thereof under this Article VIII or otherwise.

 

(v)                                  The Indemnifying Party shall be subrogated to any claims or rights of the Indemnified Party as against any other Persons with respect to any amount paid by the Indemnifying Party under this Article VIII , other than (x) any current or former insurer of any Indemnified Party or (y) in the case of a Behringer Indemnified Party, another Behringer Indemnified Party. The Indemnified Party shall cooperate with the Indemnifying Party (as reasonably requested by the Indemnifying Party) in the assertion by the Indemnifying Party of any such claim (where subrogation has occurred) against such other Persons.

 

SECTION 8.3                                                   Limitations.

 

Notwithstanding anything in this Agreement (including Article VIII ) to the contrary:

 

(a)                                   No amount of Damages shall be payable pursuant to Section 8.2(a)(v)  to any Behringer Indemnified Party unless the aggregate amount of all Damages that are indemnifiable pursuant to Section 8.2(a)(v)  exceeds $1,500,000 (the “ Behringer Deductible ”), after which the aggregate amount in excess of the Behringer Deductible shall thereafter be recoverable in accordance with the terms hereof. For the avoidance of doubt, it is acknowledged and agreed that the Behringer Deductible shall be calculated in the aggregate with respect to all Indemnity Claims by the Behringer Indemnified Parties, respectively, pursuant to Section 8.2(a)(v)  and not separately.

 

(b)                                  In no event shall the aggregate amount of Damages for which the Behringer Indemnified Parties shall be entitled to indemnification pursuant to Section 8.2(a)(v)  (but excluding, however, Stockholder Claims) exceed $20,000,000. For the avoidance of doubt, it is acknowledged and agreed that such $20,000,000 amount shall be calculated in the aggregate with respect to all Indemnity Claims by the Behringer Indemnified Parties, respectively, pursuant to Section 8.2(a)(v)  and not separately.

 

(c)                                   No amount of Damages shall be payable pursuant to Section 8.2(b)(v)  to any REIT I Indemnified Party unless the aggregate amount of all Damages that are indemnifiable pursuant to Section 8.2(b)(v)  exceeds $150,000 (the “ REIT I Deductible ”), after which the aggregate amount in excess of the REIT I Deductible shall thereafter be recoverable in accordance with the terms hereof. For the avoidance of doubt, it is acknowledged and agreed that the REIT I Deductible shall be calculated in the aggregate

 

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with respect to all Indemnity Claims by the REIT I Indemnified Parties, respectively, pursuant to Section 8.2(b)(v)  and not separately.

 

(d)                                  In no event shall any Indemnifying Party be responsible and liable for any Damages or other amounts under this Article VIII that are consequential, in the nature of lost profits, diminution in value, damage to reputation or the like, special or punitive or otherwise not actual Damages..

 

(e)                                   No Behringer Indemnified Party shall have any right of contribution against REIT I or any of its Affiliates with respect to any breach by a member of the Behringer Group of any of its representations, warranties, covenants or agreements.

 

(f)                                     The amount of any Damages for which indemnification is provided under this Article VIII shall be reduced by any related recoveries actually recovered by the Indemnified Party under insurance policies of the Indemnifying Party or other related payments actually received from third parties other than, in the case of a Behringer Indemnified Party, another Behringer Indemnified Party, and in the case of a REIT I Indemnified Party, another REIT I Indemnified Party. However, and notwithstanding anything else in this Agreement, it is agreed that under no circumstances shall any Indemnified Party be required to prosecute any claim or seek payment or coverage under any insurance policy of the Indemnified Party. In addition, all Expenses and Damages incurred by the Behringer Indemnified Parties shall be counted toward satisfaction of the Behringer Deductible even if a Behringer Indemnified Party has received (or may receive) payment or reimbursement thereof under any insurance policy maintained by a Behringer Indemnified Party.

 

(g)                                  Each party agrees that to the extent any representation or warranty of any other party made in this Agreement is, to the Knowledge of such party on or prior to the Closing Date, untrue or incorrect, such party shall have no rights under this Article VIII by reason of such untruth or inaccuracy.

 

(h)                                  For the avoidance of doubt, nothing in this Agreement shall give any Person a right to indemnification under this Agreement with respect to any Damages or Claims to the extent such Damages or Claims arise out of the performance or non-performance of any party under any Ancillary Agreement.

 

SECTION 8.4                                                   Contribution.

 

If the indemnification provided for in this Article VIII for any reason is held by a court of competent jurisdiction or by an arbitrator to be unavailable to an Indemnified Party in respect of any Damages arising from or relating to a Claim, then the Indemnifying Party, in lieu of indemnifying an Indemnified Party hereunder, shall, to the extent permitted by applicable Law, contribute to the amount paid or payable by the Indemnified Party as a result of such Damages (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party (taking into account all of the transactions and agreements contemplated by this Agreement, which are intended to allow REIT I to become self-managed and to allow the Behringer Parties to continue to receive fees and other amounts pursuant to this Agreement and

 

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during the term of the Amended and Restated Property Management Agreement and Administrative Services Agreement) and the Indemnified Party from the transactions contemplated by this Agreement, or (ii) if the allocation provided by clause (i) above is not permitted by applicable Law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Party and the Indemnified Party in connection with the action or inaction which resulted in such Damages, as well as any other relevant equitable considerations. The Indemnifying Party and the Indemnified Party agree that it would not be just and equitable if contribution pursuant to this Section 8.4 were determined by pro rata or per capita allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding sentence.

 

SECTION 8.5                                                   Exclusivity.

 

Except with respect to claims based on actual fraud and subject to Section 8.3(h) , the rights of the Indemnified Parties under this Article VIII shall be the sole and exclusive remedies of the Indemnified Parties and their respective Affiliates with respect to any and all Damages or Claims relating to or arising out of or resulting from this Agreement; provided , however, that solely in the case of a Behringer Indemnified Party who is both an individual and a member of the Behringer Group, rights of indemnification under Section 8.2(a)(v)  and rights of indemnification under other sources (including rights under any insurance policy, REIT I Organizational Document, indemnification agreement, or Contract) are not mutually exclusive, and if and to the extent that such individual is entitled to indemnification with respect to Damages both under this Agreement and such other source, such individual may pursue such indemnification claims under this Agreement or such other source or both; provided further, however, that any recovery with respect to such indemnification claims shall be limited to the actual amount of such individual’s Damages, regardless of the number of sources on which such individual’s indemnification claims may be based. For the avoidance of doubt and notwithstanding the forgoing, (a) any Behringer Indemnified Party may be subrogated to the rights of any other Behringer Indemnified Party with respect to indemnification under this Agreement, including any rights of such subrogating Behringer Indemnified Party to seek indemnification with respect to Damages arising out of the advancement of expenses by such Behringer Indemnified Party to the subrogated Behringer Indemnified Party with respect to Claims for which the subrogated Behringer Indemnified Party is entitled to indemnification under this Agreement, and (b) any REIT I Indemnified Party may be subrogated to the rights of any other REIT I Indemnified Party with respect to indemnification under this Agreement, including any rights of such subrogating REIT I Indemnified Party to seek indemnification with respect to Damages arising out of the advancement of expenses by such REIT I Indemnified Party to the subrogated REIT I Indemnified Party with respect to Claims for which the subrogated REIT I Indemnified Party is entitled to indemnification under this Agreement.

 

SECTION 8.6                                                   Insurance Coverage.

 

REIT I shall purchase at or prior to the Closing a six-year prepaid “tail” policy having terms and conditions providing equivalent or more favorable benefits (from the perspective of insured persons other than REIT I) as the liability insurance policies maintained by REIT I as of

 

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the Closing for all Persons who are insured persons as of the Closing under such policies with respect to matters arising on or prior to the Closing Date.

 

ARTICLE IX
GENERAL PROVISIONS

 

SECTION 9.1                                                   Notices.

 

Any notice, report, approval, authorization, waiver, consent or other communication (each, a “ Notice ”) required or permitted to be given hereunder shall be in writing and shall be deemed given or delivered: (i) when delivered personally; (ii) one business day following deposit with a recognized overnight courier service that obtains a receipt, provided such receipt is obtained, and provided further that the deposit occurs prior to the deadline imposed by such service for overnight delivery; (iii) when transmitted, if sent by electronic mail, provided a read receipt is delivered to the sender, in each case provided such communication is addressed to the intended recipient thereof as set forth below:

 

If to REIT I, to:

 

Behringer Harvard REIT I, Inc.
c/o Special Committee of the Board of Directors
17300 Dallas Parkway

Suite 1010

Dallas, Texas 75248
Attention: Telisa Webb Schelin
Fax: (214) 365-7112

Email: tschelin@behringerharvard.com

 

with copies (which shall not constitute notice) to:

 

Proskauer Rose LLP

Eleven Times Square

New York, New York 10036

Attention:   Peter M. Fass
James P. Gerkis

Fax: (212) 969-2900

Email:     pfass@proskauer.com
jgerkis@proskauer.com

 

and:

 

Shefsky & Froelich, Ltd.
111 East Wacker

Suite 2800

Chicago, Illinois 60601
Attention: Michael J. Choate

Fax: (312) 275-7554

Email: mchoate@shefskylaw.com

 

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If to the Service Providers or Services Holdings:

 

Behringer Harvard REIT I Services Holdings
15601 Dallas Parkway

Suite 600

Addison, Texas 75001
Attention: Robert S. Aisner
Fax: (214) 655-1610

Email: baisner@behringerharvard.com

 

with copies (which shall not constitute notice) to:

 

Behringer Harvard Holdings
15601 Dallas Parkway

Suite 600

Addison, Texas 75001
Attention: Stanton P. Eigenbrodt
Fax: (214) 655-1610

Email: seigenbrodt@behringerharvard.com

 

and:

 

Jenner & Block LLP
353 N. Clark Street
Chicago, Illinois 60654

Attention:  Donald E. Batterson
Jeffrey R. Shuman

Fax: (312) 923-2707

Email:     dbatterson@jenner.com
jshuman@jenner.com

 

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 9.1 . The failure of any Party to give notice shall not relieve any other Party of its obligations under this Agreement except to the extent that such Party is actually prejudiced by such failure to give notice.

 

SECTION 9.2                                                   Interpretation.

 

(a)                                   For purposes of this Agreement, (i) the words “include,” “includes” and “including” and the words “such as” shall be deemed to be followed by the words “without limitation,” (ii) the word “or” is not exclusive and (iii) the words “herein”, “hereof”, “here by”, “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Exhibits and Schedules mean the Articles and Sections of, and the Exhibits and Schedules attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from

 

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time to time to the extent permitted by the provisions thereof and by this Agreement; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. Words used herein regardless of the gender specifically used, shall be deemed and construed to include any other gender, masculine, feminine or neuter, as the context requires.

 

(b)                                  The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. Titles to Articles and headings of Sections are inserted for convenience of reference only and shall not be deemed a part of or to affect the meaning or interpretation of this Agreement.

 

(c)                                   The REIT I disclosure schedule (the “ REIT I Disclosure Schedule ”) to this Agreement shall be arranged in sections and subsections corresponding to the numbered and lettered sections contained in Article III . The disclosures in any section or subsection of the REIT I Disclosure Schedule shall qualify other sections and subsections in Article III only to the extent it is clear from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

 

(d)                                  The disclosure schedule of the Service Providers (the “ Service Provider Disclosure Schedule ”) to this Agreement shall be arranged in sections and subsections corresponding to the numbered and lettered sections contained in Article IV . The disclosures in any section or subsection of the Service Provider Disclosure Schedule shall qualify other sections and subsections in Article IV only to the extent it is clear from a reading of the disclosure that such disclosure is applicable to such other sections and subsections.

 

SECTION 9.3                                                   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.

 

SECTION 9.4                                                   Disputes.

 

If there shall be a dispute between REIT I and/or BH OP, on the one hand, and any member of the Behringer Group, on the other, relating to this Agreement or the Transactions resulting in litigation or arbitration, the prevailing party in such litigation or arbitration shall be entitled to recover from the other party to such proceeding such amount as the court or arbitrator shall fix as reasonable attorneys’ fees.

 

SECTION 9.5                                                   Entire Agreement.

 

This Agreement and the Exhibits and Annexes referred to herein and the documents delivered pursuant hereto and the Disclosure Schedules, contain the entire understanding of the Parties with regard to the subject matter contained herein or therein, and supersede all prior agreements, understandings or letters of intent between or among the Parties, inducements and

 

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conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof.

 

SECTION 9.6                                                   Amendment.

 

This Agreement may not be amended except by an instrument in writing signed on behalf of REIT I (as authorized by the REIT I Board or an applicable committee thereof) and each of Services Holdings and the Service Providers and in compliance with applicable Law.

 

SECTION 9.7                                                   Waiver.

 

(a)                                   REIT I (as authorized by the REIT I Board or an applicable committee thereof) may (i) extend the time for the performance of any of the obligations or other acts of Services Holdings or the Service Providers hereunder, (ii) waive any inaccuracies in the representations and warranties of such Persons contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein to be complied with or satisfied by such Persons. Any agreement on the part of REIT I to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of REIT I.

 

(b)                                  Services Holdings may (i) extend the time for the performance of any of the obligations or other acts of REIT I hereunder, (ii) waive any inaccuracies in the representations and warranties of REIT I contained herein or in any document delivered pursuant hereto and (iii) waive compliance with any of the agreements or conditions contained herein to be complied with or satisfied by such Persons. Any agreement on the part of Services Holdings to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of Services Holdings.

 

(c)                                   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.

 

SECTION 9.8                                                   Remedies.

 

Neither any failure nor any delay by any Party in exercising any right under this Agreement will operate as a waiver of such right and no single or partial exercise of any such right will preclude any other or further exercise of such, or any other, right. Each Party acknowledges and agrees that the other Parties hereto will be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached. The Parties agree that money damages or other remedy at law would not be sufficient or adequate remedy for any breach or violation of, or default under, this Agreement by them and that in addition to all other remedies available to them at law or in equity, each of them shall be entitled to the fullest extent permitted by applicable Law to an

 

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injunction restraining such breach, violation or default and to other equitable relief, including, without limitation, specific performance, with a bond or other form of security not being required and specifically waived by the Parties.

 

SECTION 9.9                                                   Severability.

 

In case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision or provisions shall be ineffective only to the extent of such invalidity, illegality or unenforceability, without invalidating or affecting the remainder of such provision or provisions or the remaining provisions of this Agreement. If the final judgment of a court of competent jurisdiction or other authority declares that any term or provision hereof is invalid, illegal or unenforceable, the Parties agree that the court making such determination shall have the power to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, illegal or unenforceable term or provision with a term or provision that is valid, legal and enforceable and that comes closest to expressing the intention of the invalid, illegal or unenforceable term or provision.

 

SECTION 9.10                                             Relationship of REIT I and the Behringer Group.

 

Neither REIT I nor BH OP is a partner or joint venturer with any member of the Behringer Group, 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. The obligations of the members of the Behringer Group pursuant to the terms and provisions of this Agreement shall not be construed to preclude any such Person from engaging in other activities or business ventures, whether or not such other activities or ventures are in competition with REIT I or BH OP or the business of REIT I or BH OP.

 

SECTION 9.11                                             Further Assurances.

 

The Parties shall use their commercially reasonable efforts to do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments or documents as any other party may reasonably request in order to carry out the intent and purposes of this Agreement, the Ancillary Agreements and the consummation of the Transactions. Without the consent of Services Holdings, REIT I shall not and shall not allow any of its Affiliates to take any voluntary action or actions, or fail to take any action or actions, in each case, for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed under this Agreement or any Ancillary Agreement or with respect to the Transactions.

 

SECTION 9.12                                             LIMITATIONS ON REPRESENTATIONS AND WARRANTIES .

 

(a)                                   REIT I ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE IV , NONE OF SERVICES HOLDINGS, THE SERVICE PROVIDERS, OR ANY MEMBER OF THE BEHRINGER GROUP MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN CONNECTION WITH OR WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT OR IN

 

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CONNECTION WITH OR WITH RESPECT TO SERVICES HOLDINGS, THE SERVICE PROVIDERS, THE BEHRINGER GROUP, THEIR RESPECTIVE EMPLOYEES, THE PURCHASED ASSETS, THE EXISTING PROPERTY MANAGEMENT AGREEMENT, THE EXISTING ADVISORY AGREEMENT, ANY ANCILLARY AGREEMENT, OR ANY OTHER AGREEMENT BETWEEN ANY MEMBER OF THE BEHRINGER GROUP AND REIT I OR ITS AFFILIATES OR THE SERVICES PROVIDED THEREUNDER, OR WITH RESPECT TO ANY INFORMATION PROVIDED OR MADE AVAILABLE TO REIT I OR THE REIT I SPECIAL COMMITTEE, INCLUDING WITH RESPECT TO ANY REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR USE, TITLE, OR NON-INFRINGEMENT. ALL OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY DISCLAIMED BY SERVICES HOLDINGS AND THE SERVICE PROVIDERS. SERVICES HOLDINGS AND THE SERVICE PROVIDERS EACH ACKNOWLEDGE THAT EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE III , REIT I DOES NOT MAKE ANY REPRESENTATION OR WARRANTY OF ANY KIND, WHATSOEVER, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN CONNECTION WITH OR WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT. FOR THE AVOIDANCE OF DOUBT, THE FOREGOING SHALL NOT AFFECT OR OTHERWISE LIMIT ANY EXPRESS REPRESENTATIONS OR WARRANTIES CONTAINED IN ANY OF THE ANCILLARY AGREEMENTS.

 

(b)                                  EACH OF SERVICES HOLDINGS AND THE SERVICE PROVIDERS ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE III , NONE OF REIT I, OR ANY OF ITS AFFILIATES MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN CONNECTION WITH OR WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT OR IN CONNECTION WITH OR WITH RESPECT TO REIT I, ITS AFFILIATES, THEIR RESPECTIVE EMPLOYEES, THE PURCHASED ASSETS, THE EXISTING PROPERTY MANAGEMENT AGREEMENT, THE EXISTING ADVISORY AGREEMENT, ANY ANCILLARY AGREEMENT, OR ANY OTHER AGREEMENT BETWEEN REIT I OR ITS AFFILIATES AND ANY MEMBER OF THE BEHRINGER GROUP OR THE SERVICES PROVIDED THEREUNDER, OR WITH RESPECT TO ANY INFORMATION PROVIDED OR MADE AVAILABLE TO SERVICES HOLDINGS, THE SERVICE PROVIDERS, AND ANY OTHER MEMBER OF THE BEHRINGER GROUP, INCLUDING WITH RESPECT TO ANY REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE OR USE, TITLE, OR NON-INFRINGEMENT. ALL OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY DISCLAIMED BY REIT I. REIT I ACKNOWLEDGES THAT EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE IV, NONE OF SERVICES HOLDINGS AND THE SERVICE PROVIDERS MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND, WHATSOEVER, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN CONNECTION WITH OR WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT. FOR THE AVOIDANCE OF DOUBT, THE FOREGOING SHALL

 

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NOT AFFECT OR OTHERWISE LIMIT ANY EXPRESS REPRESENTATIONS OR WARRANTIES CONTAINED IN ANY OF THE ANCILLARY AGREEMENTS.

 

SECTION 9.13                                             Parties in Interest; No Third-Party Beneficiaries.

 

Except as set forth in Article V and Article VIII , this Agreement is not intended, and shall not be deemed, to (a) confer upon any Person other than the Parties and their respective successors and permitted assigns any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, (b) create any agreement of employment with any Person, or (c) otherwise create any third-party beneficiary hereto.

 

SECTION 9.14                                             Successors and Assigns.

 

This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties hereto and their successors and permitted assigns, but neither this Agreement nor any of the rights, interests and obligations hereunder shall be assigned by any party hereto without the prior written consent of the other Party.

 

SECTION 9.15                                             No Presumption Against Drafter.

 

Each of the Parties has jointly participated in the negotiation and drafting of this Agreement. In the event of an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by each of the Parties, and no presumptions or burdens of proof shall arise favoring any party by virtue of the authorship of any of the provisions of this Agreement.

 

SECTION 9.16                                             Disclaimer.

 

The representations and warranties in this Agreement are the product of negotiations among the Parties hereto and are for the sole benefit of such Parties (and, as applicable, the Behringer Indemnified Parties and the REIT I Indemnified Parties). Any inaccuracies in such representations and warranties are subject to waiver by the Parties hereto in accordance with Section 9.7 without notice or liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the Parties hereto of risks associated with particular matters regardless of the knowledge of any of such Parties. Consequently, Persons other than the Parties hereto (and, as applicable, the Behringer Indemnified Parties and the REIT I Indemnified Parties) may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

 

SECTION 9.17                                             Series A Preferred Stock Sample Conversion Calculations.

 

Attached hereto as Exhibit I are, for illustrative purposes only, sample calculations with respect to the conversion of the Series A Preferred Stock into REIT I Common Stock according to the terms of the Articles Supplementary based upon the assumptions set forth therein.

 

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SECTION 9.18                                             Counterparts.

 

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

 

SECTION 9.19                                             Facsimile Signatures.

 

A facsimile or other electronic signature on the signature pages hereto shall for all purposes be deemed an original and shall bind the signor as if such facsimile or other electronic signature were an original.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Parties have caused this Master Modification Agreement be signed by their respective officers or agents thereunto duly authorized as of the date first written above.

 

BEHRINGER HARVARD REIT I, INC.			BEHRINGER HARVARD REIT I SERVICES
			HOLDINGS, LLC
/s/ Charles G. Dannis			/s/ M. Jason Mattox
Name:	Charles G. Dannis		Name:	M. Jason Mattox
Title:	Chairman of the Special Committee		Title:	Executive Vice President
			BEHRINGER ADVISORS, LLC
			/s/ M. Jason Mattox
			Name:	M. Jason Mattox
			Title:	Executive Vice President
			HPT MANAGEMENT SERVICES, LLC
			/s/ M. Jason Mattox
			Name:	M. Jason Mattox
			Title:	Executive Vice President

 

[SIGNATURE PAGE TO MASTER MODIFICATION AGREEMENT]

 

 

EXHIBIT A

 

EXISTING ADVISORY AGREEMENT (CONFORMED COPY)

 

See attached.

 

 

FIFTH AMENDED AND RESTATED

ADVISORY MANAGEMENT AGREEMENT

(CONFORMED COPY)

 

This FIFTH AMENDED AND RESTATED ADVISORY MANAGEMENT AGREEMENT (this “ Agreement ”) is entered into on this 29 day of December, 2006, by and between BEHRINGER HARVARD REIT I, INC., a Maryland corporation (the “ Company ”), and BEHRINGER ADVISORS LP, a Texas limited partnership (the “ Advisor ”).

 

WITNESSETH

 

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 Expenses

 

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paid or incurred by the Advisor or any Affiliate are on behalf of the Company and will be reimbursed by the Company in accordance with the terms of Section 3.02(a)(ii).

 

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

 

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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 most recent such valuation report(s) without reduction for depreciation, bad debts or other noncash 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 any successor market or exchange), 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.

 

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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 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.

 

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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.

 

Distribution s .  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 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.

 

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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 coventurer 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 (or any successor market or exchange).  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 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

 

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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 .  Specified as 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.  Organization and Offering Expenses paid or incurred by the Advisor or any Affiliate are on behalf of the Company and will be reimbursed by the Company in accordance with the terms of Section 3.02(a)(i).

 

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).

 

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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 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.

 

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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.

 

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 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.

 

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

 

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

 

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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.

 

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

 

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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;

 

(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;

 

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(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 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).

 

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(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 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.

 

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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 AND REIMBURSEMENT OF SPECIFIED COSTS.

 

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.

 

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(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 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 Acquisition and Advisory Fees include reimbursements of allocable wages and compensation of employees of the Advisor and its Affiliates and third-party expenses.  The total of all Acquisition Fees and any Acquisition Expenses shall be limited in accordance with the Articles of Incorporation.

 

(c)            [Reserved]

 

(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%

 

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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.  The Debt Financing Fee includes the reimbursement of the specified cost incurred by the Advisor of engaging third parties to source debt financing, and nothing herein shall prevent the Advisor from entering fee-splitting arrangements with third parties with respect to the Debt Financing Fee.

 

(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

 

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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 the specified cost of all 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 1.5% of the Gross Proceeds (2.0% for Offerings conducted prior to the date hereof but after February 19, 2005, and 2.5% for Offerings conducted prior to February 19, 2005) 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 1.5% of the Gross Proceeds (2.0% for Offerings conducted prior to the date hereof but after February 19, 2005, and 2.5% for Offerings conducted prior to February 19, 2005) 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;

 

(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;

 

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(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.

 

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

 

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