This ADVISORY
AGREEMENT (this “ Agreement ”) is entered into
on this the
day of
, 2008; by and between UNITED DEVELOPMENT FUNDING IV, a Maryland
real estate investment trust (the “ Trust ”),
and UMTH GENERAL SERVICES, L.P., a Delaware limited partnership
(the “ Advisor ”).
WHEREAS ,
the Trust intends to issue common shares of beneficial interest,
par value $.01, to the public, upon registration of such shares
with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended and may subsequently issue
additional securities;
WHEREAS,
the Trust has been formed to originate, acquire, hold, manage,
administer and operate a portfolio of loans secured by real estate
and interests in entities that own real estate, as well as direct
investments in real estate and other real estate-related
assets;
WHEREAS ,
the Trust intends to qualify as a real estate investment trust and
to invest its funds in investments permitted by the terms of the
Trust’s Declaration of Trust and Sections 856 through
860 of the Internal Revenue Code;
WHEREAS ,
the Trust desires to avail itself of the experience, sources of
information, advice, assistance and certain facilities available to
the Advisor and to have the Advisor undertake the duties and
responsibilities hereinafter set forth, on behalf of, and subject
to the supervision of, the Board of Trustees (the
“Board”) of the Trust, all as provided herein;
and
WHEREAS ,
the Advisor is willing to undertake to render 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 are
hereby acknowledged, the parties hereto agree as
follows:
The following
defined terms used in this Agreement shall have the meanings
specified below:
Acquisition Expenses . Any and all expenses incurred by the Trust,
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, title insurance premiums and other closing
costs.
Acquisition and Origination Fees
. Any and all fees and commissions,
exclusive of Acquisition Expenses, paid by any Person to any other
duly qualified and licensed Person (including any fees or
commissions paid by or to any duly qualified and licensed Affiliate
of the Trust or the Advisor) in connection with origination, making
or investing in Secured Loans or the purchase, development or
construction of an Asset, including, without limitation, real
estate commissions, selection fees, non-recurring management fees,
loan fees, points or any other fees of a similar nature.
Advisor . UMTH General Services, L.P., a Delaware
limited partnership, any successor advisor to the Trust, or any
Person to which UMTH General Services, L.P. or any successor
advisor subcontracts all or substantially all of its
functions.
Advisory
Fees . The fees
payable to the Advisor for day-to-day professional management
services in connection with the Trust and its investment in Assets
as set forth in Section 3.01(b) of this Agreement.
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 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 Person;
(iv) any executive officer, director, trustee or general
partner of such Person; and (v) any legal entity for which such
Person acts as an executive officer, director, trustee or general
partner.
Appraised
Value . Value
according to an appraisal made by an Independent
Appraiser.
Assets . Properties, Secured Loans and other direct or
indirect investments in securities or equity interests in Real
Property (other than investments in bank accounts, money market
funds or other current assets, whether of the proceeds from an
Offering or the sale of an Asset or otherwise) owned by the Trust,
directly or indirectly through one or more of its Affiliates or
Joint Ventures or through other investment interests.
Average
Invested Assets . For
a specified period, the average of the aggregate book value of the
Assets, before deducting depreciation, bad debts or other similar
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 Board is determining on a regular
basis the current value of the Trust’s net assets for
purposes of enabling fiduciaries of employee benefit plan
shareholders 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 most recent Assets’ aggregate
valuation established by the Board without reduction for
depreciation, bad debts or other non-cash reserves and without
reduction for any debt secured by or relating to the
Assets.
Board . The Board of Trustees of the Trust.
Bylaws . The bylaws of the Trust, as the same are in
effect as amended from time to time.
Change of
Control . Any
(i) event (including, without limitation, issue, transfer or
other disposition of Shares of beneficial interest of the Trust 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-j of the Securities
Exchange Act of 1934, as amended), directly or indirectly, of
securities of the Trust or the Partnership representing greater
than 50% of the combined voting power of the Trust’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 or
(ii) direct or indirect sale, transfer, conveyance or other
disposition (other than pursuant to clause (i)) in one or a series
of related transactions, of all or substantially all of the assets
of the Company or the Partnership, taken as a whole, to any
“person” (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as
amended).
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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.
Contract
Purchase Price . The
amount (i) actually paid and/or budgeted in respect of the
purchase, development, construction or improvement of a Property,
(ii) of funds advanced with respect to a Secured Loan or
(iii) actually paid and/or budgeted in respect to the purchase
of other Assets, in each case exclusive of Acquisition and
Origination Fees and Acquisition Expenses but including any debt
attributable to such acquired Assets.
Contract
Sales Price . The
total consideration provided for in the sales contract for the Sale
of a Property.
Debt
Financing Fee . The
fees payable to the Advisor pursuant to Section 3.01(c) of
this Agreement.
Declaration of Trust . The Declaration of Trust of the Trust filed
with the Maryland State Department of Assessments and Taxation in
accordance with the Maryland REIT Law, as amended from time to
time.
Disposition Fees . The fees payable to the Advisor for services
provided in connection with the Sale of one or more Assets pursuant
to Section 3.01(f) of this Agreement.
Distributions . Any dividends or other distributions of money
or other property by the Trust 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
Trust through an Offering, without deduction for Selling
Commissions, wholesaling fees, marketing support fees, marketing
reallowances, due diligence expense reimbursement, volume
discounts, 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 a Soliciting Dealer
(where net proceeds to the Trust 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
Trustees and who is a qualified appraiser of Real Property of the
type held by the Trust 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 Trustee . A Trustee who is not, on the date of
determination and within the last two years from the date of
determination has not been, directly or indirectly associated with
the Sponsor, or the Advisor by virtue of (i) ownership of an
interest in the Sponsor, the Advisor or any of their Affiliates,
other than the Trust, (ii) employment by the Sponsor, 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 Trustee of the Trust or of any other
real estate investment trust organized by the Sponsor or advised by
the Advisor, (iv) performance of services, other than as a
Trustee, for the Trust, (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” per se if
the aggregate gross revenue derived by the Trustee from the
Sponsor, the Advisor and their Affiliates exceeds 5.0% of either
the Trustee’s annual gross revenue during either of the last
two years or the Trustee’s net worth on
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a fair market
value basis. An indirect association with the Sponsor or the
Advisor shall include circumstances in which a Trustee’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 Trust.
Invested
Capital . The amount
calculated by multiplying the total number of Shares purchased by
Shareholders by the issue price at the time of such purchase,
reduced by the portion of any Distribution that is attributable to
Net Sales Proceeds and by any amounts paid by the Trust to
repurchase Shares pursuant to the Trust’s plan for repurchase
of Shares.
Joint
Ventures . The joint
venture or partnership arrangements in which the Trust or the
Partnership is a co-venturer or general partner which are
established to acquire or hold Assets.
Listing or Listed . The approval of the
Trust’s application to list the Shares by a national
securities exchange and the commencement of trading in the Shares
on the respective national securities exchange.
Market
Value . Upon Listing,
the market value of the outstanding Shares, measured by taking the
average closing price for a single Share, over a period of 30
consecutive trading days, with such period beginning 180 days
after Listing, and multiplying that number by the number of Shares
outstanding on the date of measurement.
NASAA
Guidelines . The
Statement of Policy Regarding Real Estate Investment Trusts
published by the North American Securities Administrators
Association, Inc. on May 7, 2007, and in effect on the date
hereof.
Net
Income . For any
period, the Trust’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. If the Advisor is paid a Subordinated Incentive Fee or a
Subordinated Incentive Listing Fee, “Net Income,” for
purposes of calculating Total Operating Expenses shall exclude the
gain from the Sale of any 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 Trust, 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 Trust, 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 Trust or the
Operating Partnership from the Joint Venture less the amount of any
selling expenses, including legal fees and expenses incurred by or
on behalf of the Trust (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 Secured Loan on or in
satisfaction thereof other than regularly scheduled interest
payments) less the amount of selling expenses incurred by or on
behalf of the Trust, 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 Trust, 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
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real estate
commissions, closing costs, and legal fees and expenses and other
selling expenses incurred by or allocated to the Trust or the
Operating Partnership in connection with such transaction or series
of transactions. Net Sales Proceeds shall also include any amounts
that the Trust determines, in its discretion, to be economically
equivalent to proceeds of a Sale. Net Sales Proceeds shall not
include any reserves established by the Trust in its sole
discretion.
Offering . Any public offering and sale of Shares
pursuant to an effective registration statement filed under the
Securities Act, other than a public offering of shares under a
distribution reinvestment plan.
Organization and Offering
Expenses . Any and
all costs and expenses incurred by and to be paid from the assets
of the Trust in connection with the formation of the Trust and the
qualification and registration of an Offering, and the marketing
and distribution of Shares, including, without limitation, total
underwriting and brokerage discounts and commissions (including
fees of the underwriters’ attorneys); expenses for printing,
engraving and amending registration statements or supplementing
prospectuses; mailing and distribution costs; salaries of employees
while engaged in sales activity; telephone and other
telecommunications costs; all advertising and marketing expenses
(including the costs related to investor and broker-dealer sales
meetings); charges of transfer agents, registrars, trustees, escrow
holders, depositaries and experts; and fees, expenses and taxes
related to the filing, registration and qualification of the sale
of the Shares under federal and state laws; and accountants’
and attorneys’ fees.
Partnership . United Development Funding IV Operating
Partnership, L.P., a Delaware limited partnership, through which
the Trust may own Assets.
Person . An individual, corporation, 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 Trust, either directly or indirectly (whether through joint
venture arrangements or other partnership or investment
interests).
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 253 of
the General Rules and Regulations under the Securities Act or, in
the case of an intrastate offering, any document by whatever name
known, utilized for the purpose of offering and selling securities
of the Trust to the public.
Real
Property . Land,
rights in land (including leasehold interests), land under
development, developed lots, 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 Trust
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 Trust 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 Trust
or the
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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
Trust 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 Trust or the Partnership directly or
indirectly (except as described in other subsections of this
definition) sells, grants, conveys or relinquishes its interest in
any Secured Loan or portion thereof (including with respect to any
Secured Loan, all repayments thereunder or in satisfaction thereof
other than regularly scheduled interest payments) and any event
with respect to a Secured Loan which gives rise to a significant
amount of insurance proceeds or similar awards; or (E) the
Trust 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. (ii) Notwithstanding the foregoing,
“Sale” or “Sales” shall not include 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.
Secured
Loans . In connection
with financing provided, invested in, participated in or purchased
by the Trust, 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 or pledges of equity
interests in entities owning Real Property.
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 or other broker-dealers in
connection with the sale of the Shares, including, without
limitation, commissions payable to the Soliciting
Dealers.
Shareholders . The record holders of the Shares as maintained
in the books and records of the Trust or its transfer
agent.
Shareholders’ 10.0% Return
. As of any date, an aggregate
amount equal to a 10.0% cumulative, non-compounded, annual return
on Invested Capital.
Shares . Any Shares of the Trust’s common shares
of beneficial interest, par value $.01 per share.
Soliciting Dealers . Broker-dealers who are members of the
Financial Industry Regulatory Authority, or that are exempt from
broker-dealer registration, and who, in either case, have executed
participating broker or other agreements with the Trust to sell
Shares.
Sponsor . UMT Holdings, L.P.
Subordinated Incentive Fee
. The fee payable to the Advisor
under certain circumstances if certain performance standards have
been met pursuant to Section 3.01(d) of this
Agreement.
Subordinated Incentive Listing
Fee . The fee payable
to the Advisor under certain circumstances if the Shares are Listed
pursuant to Section 3.01(g).
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Termination Date . The date of termination of this
Agreement.
Total
Operating Expenses .
All costs and expenses paid or incurred by the Trust, as determined
under generally accepted accounting principles, which are in any
way related to the operation of the Trust or to Trust business,
including Advisory Fees, but excluding (i) the expenses of
raising capital such as Organization and Offering Expenses, legal,
audit, accounting, underwriting, brokerage, listing, registration,
and other fees, printing and other such expenses and tax incurred
in connection with the issuance, distribution, transfer,
registration and Listing of the Shares, (ii) interest
payments, (iii) taxes, (iv) non-cash expenditures such as
depreciation, amortization and bad debt reserves, (v) the
Subordinated Incentive Fee, (vi) the Subordinated Incentive
Listing Fee, (vii) Acquisition and Origination Fees and
Acquisition Expenses, (viii) Debt Financing Fees,
(ix) real estate commissions on the Sale of Assets (including
Disposition Fees and Securitized Loan Pool Placement Fees), 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).
Trust . United Development Funding IV, a real estate
investment trust organized under the laws of the State of
Maryland.
Trustee . A member of the Board.
2.01
Appointment . The Trust 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.
The Advisor shall be deemed to be in a fiduciary relationship to
the Trust and its Shareholders.
2.02
Duties of the Advisor . Subject to Section 2.07,
the Advisor undertakes to use its commercially reasonable best
efforts to present to the Trust potential investment opportunities
consistent with the investment objectives and policies of the Trust
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 Trust’s most
recent Prospectus for Shares, Declaration of Trust and Bylaws, the
Advisor shall, either directly or by engaging a duly qualified and
licensed Affiliate of the Advisor or other duly qualified and
licensed Person:
(a) manage
the formation of the Trust and the Partnership, including the
preparation and filing of all necessary documentation and ancillary
agreements;
(b) structure,
qualify and register the initial Offering;
(c) coordinate
marketing and distribution of the Trust’s Shares in
connection with the initial Offering;
(d) structure,
qualify, register and oversee the distribution of Shares pursuant
to the Trust’s distribution reinvestment plan;
(e) structure,
qualify and administer the repurchase of Shares pursuant to the
Trust’s redemption program;
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(f) serve as
the Trust’s investment and financial advisor and provide
research and economic and statistical data in connection with the
Assets and the Trust’s investment policies;
(g) provide
the daily management of the Trust and perform and supervise the
various administrative functions reasonably necessary for the
management and operations of the Trust;
(h) maintain
and preserve the books and records of the Trust, including share
books and records reflecting a record of the Shareholders and their
ownership of the Trust’s Shares;
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