Exhibit 10.4

 

MANAGEMENT AGREEMENT

 

This Management Agreement (this "Agreement") is dated March 15, 2016, by and
between BR Henderson Beach, LLC, a Delaware limited liability company ("Owner"),
and GREP Southeast, LLC, a Delaware limited liability company ("Manager").

 

WHEREAS, Owner is the owner of a 340-unit multifamily residential project known
as The Preserve at Henderson Beach (fka Alexan Henderson Beach) (the "Project"
or the “Property”), located in Destin, Florida; and

 

WHEREAS, Owner desires to appoint and engage Manager in the management and
operation of the Project, and Manager is willing to accept such appointment and
engagement on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, for and in consideration of the premises and the mutual promises
and covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Owner and Manager
agree as follows:

 

Article 1
DEFINITIONS

 

In addition to terms defined in other provisions of this Agreement, the
following terms shall have the following meanings when used in this Agreement:

 

1.1           Budget. A composite of (a) an “Operations Budget” which shall be
an estimate of receipts and expenditures for the operation of the Project during
a Fiscal Year, including a schedule of expected apartment rentals (excluding
security deposits) for the Fiscal Year, and (b) a “Capital Budget” which shall
be an estimate of capital replacements, substitutions and additions for the
Project (other than routine repairs and maintenance) for the Fiscal Year.

 

1.2           Commencement Date. The Commencement Date shall be the date hereof.

 

1.3           Depository Account. Account opened and maintained by Manager in
Owner’s name with an FDIC-insured bank designated by Manager and approved by
Owner into which deposits and from which disbursements are to be made pursuant
to this Agreement.

 

1.4           Effective Date. The Effective Date of this Agreement shall be the
date hereof.

 

1.5           Final Accounting. The Final Accounting shall include the
following: (a) final financial statements, (b) written summary of all
outstanding accounts payable and copies of all outstanding invoices, (c) final
bank statements following the close of the Depository Account(s), and (d) 1099
information upon request.

 

1.6           Fiscal Year. The period beginning January 1 and ending December
31, which is the fiscal year established by Owner for the Project.

 

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1.7           Gross Rental Revenue.  The entire amount of all revenue, as
determined utilizing the method of accounting specified in Section 5.1 of this
Agreement (i.e., cash versus accrual basis), from (a) tenant rentals and other
sums pursuant to tenant leases (excluding security deposits, except as provided
below) and other amounts for rental of the Project, including garage income,
parking fees and similar amounts, (b) income from the operation of the Project,
including but not limited to utility reimbursements, cable television,
telephone, internet access, security monitoring, laundry and vending machines,
(c) proceeds from business interruption insurance, (d) any sums and charges in
connection with termination of the tenant leases or settlement of rent claims,
net of litigation or collection costs, and (e) application fees, cleaning fees,
pet fees, administrative fees,  and other similar miscellaneous income.  Gross
Rental Revenue does not include the proceeds of (i) any sale, exchange,
refinancing, condemnation, or other disposition of all or any part of the
Project, (ii) any loans to Owner, whether or not secured by all or any part of
the Project, (iii) any capital contributions to Owner, (iv) any insurance (other
than business interruption insurance) maintained with regard to the Project, (v)
security deposits (until applied to obligations that constitute Gross Rental
Revenue), (vi) interest income, (vii) any awards from suits not related to the
collection of Rent, (viii) rents paid more than thirty (30) days in advance of
the due date until the month in which such payments are to apply as rental
income and the proceeds from any buy-out of all or a portion of the remaining
term of a lease, or from any damage claims against a tenant for lost rent, shall
be amortized over the remaining term of the lease and including in gross revenue
in equal monthly installments until the earlier of (A) occupancy of the subject
tenant’s space under a new lease; or (B) expiration of the term of the subject
lease, (ix) monies collected for capital items which are paid for by tenants,
(x) sales tax on rents, (xi) refunds, (xii) lump sum upfront payments paid by
ancillary income providers (e.g. laundry, cable, antenna), or (xiii) revenue
generated from contracts negotiated by Owner and managed by Owner or a third
party.

 

1.8           Loan Documents. The documents evidencing and security any loan for
which the Project is pledged as security, including the documents evidencing and
security that certain loan secured by a deed of trust on the Project in effect
on the Commencement Date, or as may be modified from time to time.

 

1.9           Project Employees. Those persons employed by Manager on-site as a
management staff (e.g., senior manager, manager, assistant managers, leasing
consultants and maintenance employees), including any employees who work at the
Project on a part-time or temporary basis and any employees from other sites who
may work at the Project to cover time-off or other special needs at the Project,
to the extent of the time they spend at the Project.

 

1.10         Property Close Date. The twentieth (20th) day of the month for each
reporting month during the Fiscal Year.

 

1.11         Required Property Services Addendum. The schedule attached hereto
as Exhibit “A” which details the services and fees for all required services
provided by Manager in accordance with the terms of this Agreement.

 

1.12         Security Deposit Account. Account opened and maintained by Manager
in Owner’s name with an FDIC-insured bank designated by Manager and approved by
Owner in which tenant security deposits are to be held pursuant to this
Agreement.

 

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1.13         Start Up Costs. Those costs which Manager incurs after the
Effective Date of this Agreement in connection with beginning operations at the
Project, which costs are approved in writing by Owner and may include (but are
not limited to) hiring and training Project Employees, purchasing software and
hardware, and other office equipment costs and expenses specific to the Project.

 

1.14         Term. The term of this Agreement shall begin on the Effective Date
and shall, subject to the other provisions in this Agreement, expire one year
after the Effective Date. The Term shall automatically be extended for
successive one-year periods unless either party terminates this Agreement in
accordance with the terms and conditions of this Agreement.

 

1.15         Termination Fee. An amount equal to one (1) month’s Base Management
Fee based on the average Base Management Fee over the three (3) months preceding
the month in which the Term is terminated. When applicable, the Termination Fee
shall be paid to Manager in addition to all other fees and amounts due to
Manager pursuant to this Agreement. The parties agree that the Termination Fee
is designed to reasonably compensate Manager for its costs incurred in taking on
the management of the Project for a short term and Manager’s investment in time,
resources and employees in that endeavor, all of which costs would be extremely
difficult, if not impossible, to specifically calculate with any degree of
accuracy.

 

1.16         Minimum Funding Requirement. A cash reserve in the amount of $150
per unit at the Project, such amount to be readily available to Manager during
the Term in connection with the operation of the Project (including the payment
of payroll) in accordance with the terms of this Agreement.

 

Article 2
DUTIES AND RIGHTS OF MANAGER

 

2.1           Appointment of Manager. Owner hereby appoints Manager as the
designated property manager of the Project, and Manager agrees, for and in
consideration of the compensation provided in this Agreement, that during the
Term of this Agreement Manager will supervise and direct the management and
operation of the Project. Manager shall have no liability whatsoever with
respect to acts or omissions of Owner, previous owners of the Project, any
previous property manager or any other agent of Owner. Manager’s services are
provided to Owner on a non-exclusive basis with respect to other multifamily
residential projects and Manager shall serve Owner in the management, operation,
maintenance and repair of the Project, conforming to the professional standards
of multi-family apartment complexes of similar size, age and construction in the
surrounding area. Everything performed by Manager under this Agreement shall be
done as Owner’s agent, and Manager shall have the right to execute and deliver
documents on behalf of Owner and to otherwise bind Owner as provided in this
Agreement. Manager shall act in a fiduciary capacity with respect to the proper
protection and accounting for Owner’s assets associated with the Property, and
shall use commercially reasonable efforts to operate the Property in a manner
consistent with the requirements imposed by Owner’s lender of which Manager has
received actual notice. Manager may install one or more signs on or about the
Project stating that the Project is under management of Manager, and Manager may
use in a commercially reasonable manner, subject to Owner’s approval, Manager's
name and logo in any display advertising that may be done on behalf of the
Project. Owner shall provide adequate office space at the Project, at no cost to
Manager, for Manager’s exclusive use in carrying out its duties pursuant to the
terms of this Agreement.

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2.2          Rental Activities. Manager shall render the following services and
perform the following duties for Owner:

 

(a)          Use commercially reasonable efforts to collect all monthly rentals
due from tenants and rental payments due from users or lessees of other
non-dwelling facilities in the Project, if any, in Owner’s name and at Owner's
expense institute legal action to evict tenants delinquent in payment of monthly
rental or other charges as more particularly described in Section 2.9 below;
provided, however, that in no event shall Manager be liable to Owner for any
uncollected rents;

 

(b)          Use commercially reasonable efforts to advertise at Owner's expense
the availability of Project units for rental and, subject to limitations imposed
by local laws or restrictive covenants applicable to the Project, display "for
rent" or other similar signs upon the Project; and

 

(c)          Use commercially reasonable efforts to do the following:

 

(i)          Lease apartment units in accordance with certain leasing guidelines
which may be outlined in the Budget or otherwise determined by Owner and
communicated to Manager in writing. Said guidelines shall include the following
parameters: Without the prior written consent of Owner, Manager shall not lease
space in the Project for (a) a term of less than 6 months or longer than 2
years; (b) for any non-residential purpose; or (c) for any activity that would
violate any requirement imposed by Owner or Owner’s lender, as long as the
Owner’s lender’s requirements have been communicated to Manager.

 

(ii)         Secure tenants for the Project based on tenant selection criteria
recommended by Manager and approved by Owner, and negotiate leases with such
tenants in accordance with the leasing guidelines. Manager shall prepare all
prospective leases on a standard form of lease approved by Owner. Owner
specifically authorizes Manager to execute leases in Owner's name and on Owner's
behalf, consistent with the standards established by Owner, and any lease so
executed will be binding on Owner to the same extent as if executed by Owner.
Manager recommends Owner use the then current National Apartment Association
lease form; however, in no event shall Manager be responsible for ensuring that
the terms of the form lease agreement(s) approved by Owner for the Project or
the application or enforcement of those lease agreements in accordance with
their terms (including but not limited to actions taken by Manager under Section
2.9 below consistent with the terms of the lease agreements) complies with all
applicable laws. Absent a finding of gross negligence or willful misconduct by
Manager or the Project Employees, Owner shall be responsible for any and all
liabilities, claims, causes of action, losses, demands, judgments, settlements
and costs and expenses (including reasonable attorneys' fees and court costs)
relating to the lease agreements or other housing statutes, whether such actions
are brought against Owner or Manager.

 

(iii)        Supervise all dealings with tenants of the Project on behalf of
Owner and receive and consider service requests; receive and attempt to resolve
any complaints, disputes or disagreements among tenants; monitor the activities
of tenants to ensure their compliance with terms and conditions of their
respective leases and notify the respective tenants and Owner of any
non-compliance with such leases; and supervise the moving in and out of all
tenants of the Project.

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2.3         Budget.

 

(a)          Manager shall submit a proposed Budget for a Fiscal Year to Owner
for Owner's review no later than September 15th prior to the beginning of such
Fiscal Year; provided that the proposed Budget for the first Fiscal Year shall
cover the portion of such Fiscal Year beginning on the Commencement Date and
shall be delivered not later than the first day of such period. In the event
Owner disapproves a proposed Budget, in whole or in part, Owner and Manager
shall jointly prepare the Budget as soon as may be reasonably practicable. Until
a complete new Budget is approved, Manager shall operate on the Budget for the
prior Fiscal Year adjusted to reflect changes in the Consumer Price Index - All
Urban Consumers for the area in which the Project is located. It is hereby
expressly acknowledged by the parties that the Budgets are intended as
projections only, and Manager shall have no responsibility for any shortfall or
other loss because the Project operations do not achieve the results projected
in any Budget.

 

(b)          The Budget shall constitute a major control under which Manager
shall operate the Project, and there shall be no substantial variances therefrom
except as permitted by other provisions of this Agreement or approved by Owner
in writing. Consequently, except as permitted by other provisions of this
Agreement, no expenses may be incurred or commitments made by Manager in
connection with the maintenance and operation of the Project which exceed the
amounts allocated to the corresponding summary accounts in the Budget for the
period in question by more than ten percent (10%) or $2,000, whichever is less,
without the prior consent of Owner; provided that the foregoing limitation shall
not apply to the Base Management Fee (which will be determined as provided in
this Agreement), or to expenses for taxes, insurance, utilities or other
non-controllable expenses, or to expenditures required due to emergencies that
threaten life, injury or property or could result in civil or criminal liability
for Owner and/or Manager; and provided that Manager may pay expenses in excess
of Budget allowances if the expenses represent reallocation among periods of
amounts otherwise allowed by this provision. Owner’s agreement to pay any fee or
cost as evidenced by the inclusion of any item in an approved Budget shall have
the same binding effect as if such agreement to pay was expressly set forth in
this Agreement.

 

(c)          In the event there shall be a variance in any summary accounts
between the results of operations for any month and the estimated results of
operations for such month (as set forth in the corresponding summary account
contained in the Budget) in excess of ten percent (10%) or $2,000, whichever is
less, Manager shall furnish to Owner, within twenty (20) days after the last day
of such month, a written explanation as to why the variance occurred. If
substantial variances have occurred or are anticipated by Manager during the
remainder of any Fiscal Year, Manager shall prepare and submit to Owner, for
review and approval by Owner, a revised forecast covering the remainder of the
Fiscal Year with an explanation for the revision.

 

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2.4          Manager and Other Employees.

 

(a)          Manager shall hire, train, instruct, pay, promote, supervise and
discharge the work of the Project Employees in accordance with Manager’s
policies and procedures. Prior to hiring any individual, Manager shall conduct,
at Owner’s expense, a background check on such individual, including credit,
criminal history and drug screening. The Project Employees shall be employees of
Manager or an affiliate of Manager and not of Owner. Manager shall be solely
responsible for legal compliance concerning the foregoing activities, and except
in circumstances where Manager acts or fails to act at Owner’s express
direction, Manager shall indemnify and hold harmless Owner (and defend Owner
with counsel reasonably satisfactory to Owner), against any and all liabilities,
claims, causes of action, losses, demands, judgments, settlements and costs and
expenses (including reasonable attorneys' fees and court costs) arising out of
or in connection with violations of employment-related laws by Manager with
respect to any Project Employee. Certain obligations of Owner with respect to
Project Employees are more fully described in Exhibit “A”.

 

(b)          Since a Project Employee may need to reside at the Project and be
available full-time in order to properly perform the duties of his/her
employment, it is further understood and agreed that each Project Employee
(including his/her spouse and dependents), in addition to his/her salary and
fringe benefits, may receive the normal maintenance customarily provided
employees of an apartment project, including apartment rental at an agreed upon
discount and use of all Project facilities. Project Employees may occupy
apartment units on a month-to-month basis with an executed tenant lease,
regardless of whether they are allowed a rental discount, provided that any such
discount shall be included in the Budget or otherwise approved by Owner.

 

(c)          Manager shall prepare (or cause to be prepared) and submit all
forms, reports and returns required by all federal, state or local laws in
connection with unemployment insurance, workers’ compensation insurance,
disability benefits, social security and other similar taxes now in effect or
hereafter imposed with respect to Project Employees.

 

(d)          Owner shall reimburse Manager, in advance of each regularly
scheduled pay date, the total actual aggregate compensation, including salary
and fringe benefits, payable with respect to Project Employees for such two week
payroll period. The term "fringe benefits", as used herein, shall include, but
not be limited to, the employer's contribution of F.I.C.A. and 401(k)
contributions, unemployment compensation and other employment taxes, workers’
compensation, group life, accident and health/vision/dental insurance premiums,
allowance for vacation and sick time, disability and other similar benefits,
applicable severance payments, any vacation pay-out which may be due at the end
of employment, costs for training Manager's on-site employees as described on
Exhibit “A”, and reasonable costs incurred by Manager to provide suitable
corporate apparel for its on-site employees. Any performance bonuses paid to any
Project Employee in excess of budgeted amounts must be prior approved by Owner.
The payroll expenses charged to Owner will include accrued vacation hours earned
by each Project Employee during each payroll period; however, Owner shall not be
financially responsible for vacation accrued prior to a Project Employee’s
employment at the Project. Owner shall not directly compensate any Project
Employee without the prior consent of Manager. Owner shall also pay to Manager a
payroll processing fee as described in Exhibit “A”.

 

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2.5           Contracts and Supplies. Manager shall, in the name of and on
behalf of Owner and at Owner's expense, consummate arrangements with third party
concessionaires, licensees and suppliers for services and supplies for the
Project, including telephone, cleaning, furnace and air-conditioning
maintenance, pest control, landscaping and other similar items that are
customarily provided in accordance with standards comparable to those prevailing
in other comparable apartment projects in the geographic area in which the
Project is located. Manager shall have the right to establish and verify certain
compliance criteria for any third party concessionaires, licensees and
suppliers, including but not limited to licensing, credit, insurance, criminal
history, and inclusion on any government watch-lists. Owner shall indemnify and
hold Manager harmless from any and all damages that arise from the use of any
vendor or supplier at the Project (except to the extent caused by Manager’s
gross negligence or willful misconduct). Manager shall, where necessary, execute
contracts for such services and supplies, which contracts shall be in Owner's
name, and Owner hereby authorizes Manager to enter into such contracts in the
name of and on behalf of Owner, and to bind Owner to such contracts. Unless
provided for in the Budget and agreed to by Owner, Manager shall not execute any
such contract on behalf of Owner without Owner's approval unless the contract
may be terminated without cause and without penalty on notice of thirty (30)
days or less. Owner recognizes that the Project may be operated in conjunction
with other projects in an effort to provide for more efficient and less
expensive methods of operation, and Owner agrees that costs for such shared
activities may be allocated or shared between the Project and such other
projects on a per unit basis. Manager shall provide email accounts for the
Project at Owner’s expense as described in Exhibit “A”.

 

2.6         Alterations, Repairs and Maintenance.

 

(a)          Manager shall use commercially reasonable efforts, at Owner's
expense, to maintain the Project in good repair and condition. Manager shall, in
Owner's name and at Owner's expense, hire and discharge independent contractors
for the repair and maintenance of the Project to the extent involvement of
outside parties is necessary for completion of such work. Expenditures for
maintenance and repair are subject to the Budget-related limitations of this
Agreement, except in the case of emergency repairs necessary to prevent injury
to residents or others on or about the Project or damage to the Project or
property of others located on or about the Project, in which case expenditures
may be made by Manager, at Owner’s expense, without prior approval up to amounts
not to exceed $10,000.00 in the aggregate, but thereafter, only with Owner's
prior written consent, but Owner shall in any case be notified as soon as
practicable.

 

(b)          Manager shall implement capital replacements, substitutions and
additions for the Project that are provided for in the Capital Budget. Owner
shall be responsible for all costs of such capital replacements, substitutions
and additions for the Project and Owner shall pay all such costs directly and
reimburse Manager for any such costs incurred by Manager; provided, however,
Manager shall not exceed the amount allowed by the Capital Budget for such
capital replacement, substitution and addition without obtaining Owner's prior
written consent. Subject to the terms of the immediately preceding sentence, if
Owner fails to reimburse Manager for all costs incurred by Manager in connection
with such capital replacements, substitutions and additions for the Project,
then Manager will be excused from performance of its responsibilities under this
Section 2.6(b); provided, however, that to the extent such costs are payable
through the submission of a draw request, Manager shall perform on behalf of
Owner, as provided in Section 5.2(e). Owner may elect to utilize the services
offered by Greystar’s regional maintenance for an additional fee agreed to by
Owner and Manager.

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2.7           Licenses and Permits. Manager shall, in a timely manner, apply
for, obtain and maintain all licenses and permits (including deposits and bonds)
required for Manager in connection with the management and operation of the
Project. Owner agrees to execute and deliver any and all applications and other
documents and to otherwise cooperate to the fullest extent with Manager in
applying for, obtaining and maintaining such licenses and permits. Owner will be
responsible for all licenses and permits required for the Project. Manager
agrees (a) to cooperate with Owner in gathering data for processing applications
for permits and licenses that Owner pursues for the Project and (b) to advise
Owner of all operating licenses and permits required to be maintained by Owner
and of all renewal requirements with respect to any such licenses and permits
provided that Manager is aware of the need for such licenses or permits.

 

2.8           Compliance with Laws. Manager shall comply with all laws
applicable to it in the performance of its duties hereunder, including laws
prohibiting discrimination in housing, employment laws (including those related
to unfair labor practices), laws regarding depositing tenant security deposits
and laws regarding the storage, release and disposal of hazardous materials and
toxic substances by Project Employees, including without limitation, asbestos,
petroleum and petroleum products. Manager shall not be responsible for
compliance with laws relating to the condition of the Property, including
building, zoning, subdivision, fire and other codes or laws, and laws regulating
hazardous materials or toxic substances (except for materials knowingly released
by Project Employees), but Manager shall notify Owner of any violation of any
such laws of which Manager becomes actually aware. Owner shall comply with all
applicable laws with respect to the condition of the Property and the operation
of the Project. Manager and Owner each shall notify the other of any notice of
violation of law with respect to the Project that it receives from any
governmental authority or any notice of violation or required corrective action
that it receives from any board of fire underwriters or similar agency.

 

2.9           Legal Proceedings. Manager shall institute, in the name and at the
expense of Owner, legal actions which Manager deems appropriate to collect
charges, rent or other income from the Project, or to dispossess tenants or
other persons in possession who default, or to cancel or terminate any lease,
license or concession agreement for the breach thereof. Manager is authorized to
institute and defend on behalf of Owner and/or Manager all legal actions related
to Manager’s authority and performance under this Agreement. Reasonable
attorneys' fees and costs for such legal actions shall be at Owner’s expense. It
is expressly acknowledged by Owner that Manager shall not be responsible for
providing legal advice, tax advice or other counsel to Owner or Project
Employees with respect to any Project related matters, and any recommendations
or advice given by Manager shall not be relied upon as legal advice.
Notwithstanding anything to the contrary in this Agreement, in no event shall
Manager be liable for any action (or inaction) by Manager taken in reliance on
advice from legal counsel to the Owner and/or the Project. Further
notwithstanding anything contained in this Agreement to the contrary, in no
event shall Manager institute or defend any legal proceedings where the amount
in dispute exceeds $5,000.00 without Owner’s prior written consent.

 

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2.10         Security Services. Owner acknowledges that Manager has not
undertaken to provide, and is not responsible for providing, security services
to the Project. Should Owner choose to do so, Owner (or Manager, as Owner’s
agent on Owner’s behalf) may separately contract with a company providing alarm
monitoring, patrol or similar services. Manager’s sole responsibility with
respect to any security services shall be reasonable cooperation with the
company providing such services and to use commercially reasonable efforts to
enforce the terms of any separate security contract. Owner hereby agrees to
indemnify, defend and hold Manager harmless with respect to any loss, claim or
cause of action (including reasonable attorneys’ fees and court costs) asserted
against Manager due to acts or omissions of any such security company or as to
any claimed inadequacy of any security services provided.

 

2.11         Project Defects. Notwithstanding anything to the contrary in this
Agreement, Manager is not responsible for parts of the Project during its
construction or rehabilitation, and Manager's responsibility for a residential
unit will not begin until Manager, Owner and Owner's contractor agree that such
unit is complete (subject to minor punch list items) and ready for occupancy. In
no event shall Manager be responsible for uncovering violations of building,
zoning, subdivision, fire or other codes or other laws and regulations
(including laws relating to accessibility) or for defects or other shortcomings
in the Project or its construction. Manager hereby expressly disclaims any
expertise with respect to compliance with accessibility laws, environmental and
other similar laws and regulations which may govern the Project and the
Property. Manager's responsibility as to such matters will be limited to
advising Owner of problems that come to the attention of Manager and
implementing, at Owner's cost, remedial steps directed by Owner on terms
consistent with this Agreement.

 

2.12         Debts of Owner. In the performance of its duties as Manager,
Manager shall act on behalf of Owner solely in Manager’s capacity as Owner’s
agent as specifically set forth in this Agreement. All debts and liabilities to
third parties incurred by Manager pursuant to this Agreement and in the course
of its operation and management of the Project shall be the debts and
liabilities of Owner, and Manager shall not be liable for (and is hereby
indemnified with respect to) any such debts or liabilities except to the extent
caused by the gross negligence or willful misconduct of Manager or the Project
Employees. Manager shall have no responsibility to make payments with Manager’s
funds on any indebtedness incurred by Owner whether or not secured by the
Project or any portion thereof.

 

2.13         Scope of Owner Liability. In no event shall Owner have any
liability for expenses willfully incurred by Manager to the extent incurred
beyond an express authorization in this Agreement, where the consent of the
Owner was required pursuant to the terms and conditions of this Agreement, and
the Manager failed to obtain said consent.

 

Article 3
MANAGEMENT FEES; PAYMENTS TO MANAGER

 

3.1           Management Fee. Owner shall pay to Manager, as compensation for
its services, the Base Management Fee based upon the Gross Rental Revenue
realized for the Project. The Base Management Fee is defined as a sum equal to
2.5% (two and one half percent) of the Gross Rental Revenue of the Project per
month. The Base Management Fee for any partial month will be prorated based on
the number of days during the month that are within the Term. Owner shall pay
Manager the Base Management Fee for each month no later than the 10th day of the
following month; provided that Manager has completed a reconciliation of the
actual Gross Rental Revenue for the applicable month. Upon notice, Owner shall
be responsible for the timely remittance of any tax (other than any income tax
charged to Manager) which may be due and owing by Owner with respect to (a) fees
or sums paid to Manager in accordance with the terms of this Agreement, and (b)
the operation of the Project in the applicable jurisdiction.

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3.2           Place of Payment. All sums payable by Owner to Manager hereunder
shall be payable by automated clearing house (ACH) to Manager at 1201 Elm
Street, Suite 1600, Dallas, Texas 75270, unless Manager shall, from time to
time, specify a different address or method in writing.

 

3.3           Reimbursement of Expenses. Owner shall be liable for the costs and
expenses of maintaining and operating the Project, and except as otherwise
specifically provided in this Agreement, Owner shall pay, or shall reimburse
Manager for, all costs and expenses incurred by Manager in connection with the
maintenance or operation of the Project in accordance with the Budgets or the
performance by Manager of its duties under this Agreement. Within twenty (20)
days of the Effective Date, Owner shall pay to Manager the full amount of any
Start Up Costs for which Manager may be out of pocket and which have Owner’s
prior written approval. Owner shall be liable for any fees incurred on behalf of
the Project pursuant to Exhibit “A”. Purchases of, or contracts for, materials
or services may be made in bulk by Manager in connection with its operation of
apartment projects generally, and Owner agrees that the pro rata portion of the
net costs of such materials or service used in connection with, or for the
benefit of, the Project shall be allowed as a reimbursable cost hereunder,
subject to Owner’s prior approval of the allocation methodology of Manager.
Owner shall not be obligated to reimburse Manager for expenses for office
equipment or office supplies of Manager (unless incurred for the Project), for
any overhead expenses of Manager incurred with respect to its general offices,
for costs relating to accounting services performed hereunder, or for any
salaries of off-site supervisory employees of Manager (other than extraordinary
services requested by Owner). Manager shall provide, at Owner’s expense, and
utilize property management software for the Project as agreed by the parties.
Manager shall not be obligated to make any advance to or for the account of
Owner or to pay any sums except out of funds in the Depository Account, and
Owner shall be liable for all expenses of maintaining and operating the Project
to the extent that such expenses exceed receipts from the Project available in
the Depository Account. Manager will be excused from performance of its
responsibilities under this Agreement to the extent that funds are not available
in the Depository Account to pay related expenses (other than expenses for which
Manager is not entitled to reimbursement under the terms of this Agreement) and
Owner does not provide funds within five (5) business days after request of
Manager.

 

3.4           Payment Obligations Survive Termination. Upon any termination of
this Agreement, regardless of the cause, Owner shall continue to be obligated to
pay Manager all amounts due with respect to the period prior to such termination
(including all expenses that are reimbursable in accordance with the terms of
this Agreement, the Base Management Fee for the period ending on the date of
termination, and any applicable Termination Fee).

 

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Article 4
PROCEDURE FOR HANDLING RECEIPTS AND OPERATING CAPITAL

 

4.1           Bank Deposits. Owner hereby expressly authorizes Manager to open
and operate the Depository Account, and Owner shall promptly deliver to Manager
any documentation reasonably requested by the depository institution which is
necessary to establish the Depository Account. All monies received by Manager
for, or on behalf of, Owner shall be deposited by Manager in the Depository
Account. All monies of Owner held by Manager pursuant to the terms of this
Agreement shall be held by Manager in trust for the benefit of Owner to be
disbursed as provided in this Agreement and/or a Budget. Such funds shall not be
commingled with the funds of any other person, or entity, including Manager, its
employees or affiliates.

 

4.2           Security Deposit Account. Owner hereby expressly authorizes
Manager to open and operate the Security Deposit Account, and Owner shall
promptly deliver to Manager any documentation reasonably requested by the
depository institution which is necessary to establish the Security Deposit
Account. Manager shall comply with all applicable laws with respect to security
deposits received from tenants in respect of the Project. All security deposit
funds held by Manager shall at all times be the property of Owner, subject to
all applicable laws with respect thereto.

 

4.3           Disbursement of Funds. Manager shall disburse funds in the
Depository Account on behalf of Owner for payment of Project expenses incurred
by Manager in the performance of its duties hereunder and other Project expenses
identified to Manager by Owner. Owner specifically authorizes Manager to expend
funds in the Depository Account as contemplated by other provisions of this
Agreement, including Article 3. Manager is expressly authorized to pay or to
reimburse Manager for all fees (including the Base Management Fee) and expenses
and for all other sums due Manager under this Agreement from funds in the
Depository Account. Should funds in the Depository Account be insufficient to
satisfy the debts and obligations of the Project, such debts and obligations
shall be paid in the following order: Project payroll, including all payroll
related taxes and expenses; Base Management Fee and other management expenses
and reimbursements permitted hereunder; underlying mortgage obligations; and
other required payments; provided, however, that in the event the Loan Documents
conflict with the terms of this Section 4.3, then the terms of the Loan
Documents shall prevail so long as Manager has received actual notice of such
provisions.

 

4.4           Minimum Funding Requirement. Concurrently with its execution and
delivery hereof, Owner shall deposit the Minimum Funding Requirement into the
Depository Account. Owner also shall deposit in the Depository Account funds
sufficient to pay the expenses of the Project to the extent that such expenses
are reasonably expected to exceed funds derived from the operation of the
Project. Owner shall replenish any depletion in the Minimum Funding Requirement
within five (5) business days after receiving a request from Manager. In the
event Owner does not replenish any such depletion within five (5) business days,
Manager may replenish any such depletion in the Minimum Funding Requirement on
behalf of Owner with funds from the operation of the Project (in addition to any
other remedies Manager may have pursuant to this Agreement).

 

4.5           Disbursements to Owner. Any funds in the Depository Account in
excess of the Minimum Funding Requirement may be transferred to Owner from time
to time pursuant to delivery instructions and a payment schedule approved by
Owner.

 

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4.6         General Provisions.

 

(a)          Persons designated by Owner from time to time, including one of
whom shall be an employee of Manager, shall be authorized signatories on all
bank accounts established by Manager hereunder and shall have authority to make
disbursements from such accounts, and to the extent necessary, Owner shall make
arrangements with the related depository institution to authorize such action by
those persons. All persons designated by Manager as authorized signatories or
who otherwise handle funds for the Project shall be covered by commercial crime
insurance maintained by Manager with coverage in the minimum amount of
$1,000,000.00 employee dishonesty, $1,000,000 forgery or alteration, $1,000,000
computer fraud, $1,000,000 wire funds transfer fraud, $1,000,000 money and
securities on and off premises. Coverage shall include: (i) third party
coverage, (ii) no limitation or exclusion related to acts of collusion, (iii)
theft of Owner’s property by Manager’s owners, directors and officers, and (iv)
the definition of employee shall include leased employees if the Manager
utilizes the services of an employee leasing firm.

 

(b)          Any expense relating to the insurance identified in Section 4.6(a)
shall be borne by Manager.

 

(c)          Except in the event and to the extent of any theft, fraud, gross
negligence or willful misconduct by Manager or its employees, Manager shall have
no liability to Owner or any third party for loss of funds (including in
instances of theft or fraud by third parties), even if the amount of funds
maintained exceeds the available federal or other deposit insurance, and Owner
hereby assumes all risk of loss with respect to funds except as otherwise
specified herein. Owner shall participate, at Owner’s expense, in any fraud
detection and prevention program offered by the depository institution at which
the Depository Account and the Security Deposit Account are established.

 

(d)          Manager shall not be responsible for preparing or filing tax
returns or related filings for Owner or otherwise with respect to the Project;
provided, however, that Manager will cooperate with Owner in gathering data for
such filings in accordance with Manager’s duties set forth in this Agreement.

 

Article 5
ACCOUNTING

 

5.1           Books and Records. Manager shall keep, or shall supervise and
direct the keeping of, a comprehensive system of office records, books and
accounts pertaining to the Project. Such accounts shall be maintained using
accrual method of accounting in accordance with generally accepted accounting
principles (GAAP); provided that Owner may instruct Manager in writing to
utilize an accounting method other than GAAP. Such records shall be subject to
examination at the office where they are maintained by Owner or its authorized
agents, attorneys and accountants at reasonable hours on reasonable advance
notice. Manager shall preserve all invoices for a period of four years (or such
other period as may be required by applicable law) or until this Agreement
terminates and such items are delivered to Owner at Owner’s request and expense.
Manager shall comply with the Capitalization and Expense Policy of Bluerock
which has been provided.

 

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5.2          Periodic Statements.

 

(a)          On or before the sixth (6th) business day of the following month,
Manager shall electronically deliver, or cause to be electronically delivered,
to Owner the reports identified on Exhibit B.

 

(b)          On or before the sixth (6th) business day of the following month,
Manager shall cause to be furnished to Owner such information as reasonably
requested in writing by Owner as is necessary for any reporting requirements of
any direct or indirect members of Owner or for any reporting requirements of any
REIT member (whether a direct or indirect owner) to determine its qualification
as a real estate investment trust and its compliance with REIT requirements.
Further, Manager shall cooperate in a reasonable manner at the request of Owner
and any direct or indirect member of Owner to work in good faith with any
designated accountants or auditors of such party or its affiliates so that such
party or its affiliate is able to comply with its public reporting, attestation,
certification and other requirements under the Securities Exchange Act of 1934,
as amended, applicable to such entity, and to work in good faith with the
designated accountants or auditors of such party or any of its affiliates in
connection therewith, including for purposes of testing internal controls and
procedures of such party or its affiliates.

 

(c)          Within thirty (30) days after the final Property Close Date of each
Fiscal Year, Manager shall deliver, or cause to be delivered, to Owner an income
and expense statement showing results of operation of the Project for the Fiscal
Year. If requested by Owner, Manager will cooperate with Owner in an audit of
such Fiscal Year financial statement by an independent certified public
accountant selected and paid for by Owner.

 

(d)          Owner may request, and Manager shall provide within a commercially
reasonable period (not to exceed three (3) business days with respect to readily
available reports and ten (10) days with respect to extraordinary (i.e. not
readily available) reports) after such request, such additional leasing and
management reports that relate to the operations of the Project as are customary
for other similar properties. Owner shall be liable for all reasonable and
pre-approved costs incurred by Manager in the preparation of any such additional
reports and in collecting and analyzing related data.

 

(e)          Owner may request, and Manager shall provide within a commercially
reasonable period after such request, assistance with draw requests, ad hoc
reports and special accounting projects at a reasonable cost to be pre-approved
by Owner. Manager shall also prepare and provide to Owner such reports and
information as reasonably required by Owner to prepare the reports and tax
returns required under (i) its limited liability company operating agreement and
(ii) the Loan Documents. Such reports and information shall not exceed in scope
or frequency the reports and information as Manager routinely provides other
owners for which Manager is providing property management services.

 

(f)          In the event that Owner or Owner’s mortgagee(s) requires an audit,
Manager shall cooperate with the auditors in a timely manner to complete the
audit engagement. Manager shall cooperate in a reasonable manner at the request
of any indirect owner of Owner and shall work in good faith with its designated
representatives, accountants or auditors to enable compliance with its public
reporting, attestation, certification and other requirements under applicable
securities laws and regulations, including for testing internal controls and
procedures.

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5.3           Expenses. All costs and expenses incurred in connection with the
preparation of any statements, Budgets, schedules, computations and other
reports required under this Agreement shall be the responsibility of Manager,
except as otherwise provided in Section 5.2(d) or this Agreement.

 

Article 6
GENERAL COVENANTS OF OWNER AND MANAGER

 

6.1           Owner’s Right of Inspection and Review. Owner and its accountants,
attorneys and agents shall have the right to enter upon any part of the Project
at any reasonable time during the Term of this Agreement for the purpose of
examining or inspecting the Project, but any inspection shall be done with as
little disruption to the business of the Project as possible and subject to the
terms of any tenant leases and the rights of tenants to limit or prohibit access
to space in their possession.

 

6.2         Indemnifications.

 

(a)          Owner shall indemnify and hold harmless Manager, each person who
holds a direct or indirect ownership interest in Manager, and the respective
officers, directors, shareholders, agents, employees, parents, subsidiaries and
affiliates of such party and such owners (collectively, “Manager Indemnitees”),
and defend the Manager Indemnitees with counsel reasonably satisfactory to
Manager, against any and all liabilities, claims, causes of action, losses,
demands, judgments, settlements and costs and expenses (including reasonable
attorneys’ fees and court costs) (“Claims”) arising out of or in connection with
(a) the ownership, maintenance or operation of the Property (including claims
made by vendors or suppliers to the Project), or the performance by Manager of
its responsibilities under and in accordance with this Agreement or acting under
the express or implied directions of Owner, or Manager’s status as the property
manager for the Project, (b) Owner’s violation of any applicable federal, state
or local law or regulation, (c) any errors, prior actions or inactions taken by
Owner and/or Owner’s agents prior to the Effective Date of this Agreement, and
(d) any debts, liabilities or payments for which Manager is exculpated pursuant
to Section 2.12 of this Agreement; except that this indemnity shall not apply to
any matters for which Manager is responsible under an indemnity specifically
undertaken by Manager in this Agreement. Owner’s responsibility shall
specifically extend to hazardous materials, toxic wastes and similar substances,
as well as insects, microorganisms and other substances that could cause
property damage or pose a threat to human health, and to costs incurred in
connection with any investigation of site conditions or remediation, removal or
restoration work because of the presence of any of the same, except to the
extent any of the same are knowingly released into the environment by, or Claims
otherwise caused, by Manager or Project Employees.

 

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(b)          Manager shall indemnify and hold harmless Owner, each person or
entity that holds a direct or indirect ownership interest in Owner, and the
respective officers, directors, shareholders, agents, employees, parents,
subsidiaries and affiliates of such party and such owners (collectively, “Owner
Indemnitees”), and defend Owner Indemnitees with counsel reasonably satisfactory
to Owner, against any and all Claims (i) to the extent arising out of third
party bodily injury, property damage or financial loss caused by (a) Manager’s
gross negligence (as opposed to mere negligence), willful misconduct,
intentional wrongdoing, or criminal actions; or (b) material breach of this
Agreement, including, without limitation, any failure to comply with the
provisions of any loan document to which Manager has received actual notice; or
(ii) that are the types of claims typically covered under Manager’s Employment
Practices Liability Insurance or Errors and Omissions Liability insurance, or
(iii) Hazardous Substances Claims caused by Manager or Project Employees. As a
matter of expansion and not limitation, any breach shall be deemed material to
the extent that Owner has provided Manager with written notice thereof, and
Manager has failed to cure the same within the time period prescribed in Section
7.1 of this Agreement.

 

(c)          Owner’s obligations under Section 6.2(a) and Manager’s obligations
under Section 6.2(b) are excused to the extent that indemnity and defense are
provided to Manager and Owner, respectively, by the other party’s insurance;
provided that this Section 6.2(c) shall not absolve a party from responsibility
for defense for Claims that are within the scope of its indemnity obligations if
an insurer (i) does not provide the defense in a manner reasonably satisfactory
to the indemnitee or (ii) does not actually pay the Claim.

 

(d)          A party seeking indemnification under this Section 6.2 shall give
the party from whom it seeks indemnification prompt written notice of a claim,
shall permit the other party to conduct the defense and settlement of the claim
as long as the indemnifying party confirms without reservation that the claim is
within the indemnifying party’s indemnification obligations, and shall provide,
at the indemnifying party’s sole expense, reasonable cooperation in the defense
of the claim; provided that the indemnified party shall have the right to
participate in the defense of the claim with counsel of its own choosing and at
its own expense. An indemnitor may not settle any Claim against the indemnitee
on terms that (i) provide for a criminal sanction or fine against the
indemnitee, (ii) admit to criminal liability on the part of the indemnitee, or
(iii) provide for injunctive relief against the indemnitee.

 

(e)          All Owner Indemnitee and Manager Indemnitee parties are third-party
beneficiaries of this Agreement to the extent of their indemnity, defense and
similar rights under the related provision and may enforce that provision
against Owner or Manager, as applicable.

 

(f)          The indemnity obligations of the parties in this Agreement shall
survive expiration or earlier termination of the Term of this Agreement.

 

6.3         Claims by Owner Against Manager Parties. Owner shall release and
save Manager and Manager Indemnitees harmless as to all acts and omissions of
said parties relating to the management of the Project or the performance of
Manager’s duties hereunder whether caused in whole or in part by the negligence
of Manager or Manager Indemnitees but not in the event of said parties’ gross
negligence, willful misconduct, intentional wrongdoing, or criminal actions, or
as otherwise specifically excluded herein.

 

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Article 7
DEFAULT; TERMINATION RIGHTS; END OF TERM

 

7.1           Default by Manager. Manager shall be deemed to be in default under
this Agreement if Manager commits a material breach of any term or condition of
this Agreement and fails to cure such default within fifteen (15) days after
written notice thereof by Owner to Manager or, if such default cannot be cured
within fifteen (15) days, then within such additional period as shall be
reasonably necessary to effect a cure so long as Manager commences efforts to
cure within the original fifteen (15) day period, thereafter diligently pursues
the cure, and completes that cure within thirty (30) days.

 

7.2           Remedies of Owner. Upon the occurrence of an event of default by
Manager as specified in Section 7.1 of this Agreement, Owner shall have the
right to terminate the Term of this Agreement after any applicable notice and
cure period. Notwithstanding the foregoing, Owner may terminate this Agreement
immediately upon written notice to Manager if (a) Manager commences a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency,
reorganization or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of its or any substantial part of its property, or consents to any such
relief or to the appointment of or taking possession by any such official in the
benefit of creditors, or fails generally to pay its debts as they become due, or
takes any corporate action to authorize any of the foregoing; (b) Manager
assigns this Agreement or delegate its duties under this Agreement without the
consent of Owner; or (c) Manager dissolves or otherwise terminates by merger,
consolidation or otherwise without the consent of Owner. Early termination shall
not affect Owner’s right to recover from Manager damages that Owner has suffered
due to Manager’s default.

 

7.3           Default by Owner. Owner shall be deemed to be in default under
this Agreement if Owner commits a material breach of any term or condition of
this Agreement and fails to cure such default within fifteen (15) days after
written notice thereof by Manager to Owner or, if such default cannot be cured
within fifteen (15) days, then within such additional period as shall be
reasonably necessary to effect a cure so long as Owner commences efforts to cure
within the original fifteen (15) day period and thereafter diligently pursues
the cure. Owner also shall be deemed to be in default hereunder in the event (i)
Owner shall fail to pay any amount due Manager hereunder and Owner does not cure
such default within five (5) business days after notice thereof, or (ii) Owner
shall fail to provide funds for operation of the Project as required by Section
3.3 or Section 4.4 and Owner fails to cure such default within the time periods
set forth in those sections.

 

7.4           Remedies of Manager. Upon the occurrence of an event of default by
Owner as specified in Section 7.3 of this Agreement, Manager shall have the
right to terminate the Term of this Agreement after any applicable notice and
cure period. If Manager terminates the Term due to an event of default by Owner,
Owner shall, no later than ten (10) business days after receiving notice of such
termination, pay to Manager the Termination Fee. Early termination shall not
affect Manager’s right to recover from Owner damages that Manager has suffered
due to Owner’s default.

 

7.5           Sale of Property. If Owner sells or otherwise conveys fee simple
title to the Property, Owner or Manager may terminate this Agreement by giving
prior written notice to the other party. Owner shall use commercially reasonable
efforts to provide Manager at least thirty (30) days’ prior written notice of
any such sale or conveyance. If such sale or conveyance occurs before twelve
(12) months following the Effective Date and either party elects to terminate
this Agreement pursuant to this Section 7.5, Owner shall, no later than ten (10)
business days after receiving notice of such termination, pay to Manager the
Termination Fee.

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7.6           Termination for Convenience. Notwithstanding anything to the
contrary in this Agreement, Owner may terminate the Term of this Agreement for
any reason, including its convenience or in the event of casualty, by giving
Manager thirty (30) days prior written notice of termination and specifying the
date of termination in said written notice. Notwithstanding anything to the
contrary in this Agreement, Manager may terminate the Term of this Agreement for
any reason, including its convenience or in the event of casualty, by giving
Owner at least sixty (60) days prior written notice of termination and
specifying the date of termination in said written notice. If Owner elects to
terminate this Agreement in accordance with this Section 7.6 within twelve (12)
months following the Effective Date, Owner shall, no later than ten (10)
business days after making such election, pay to Manager the Termination Fee.

 

7.7           End of Term. After the expiration or earlier termination of the
Term of this Agreement, Manager shall deliver to Owner (a) within sixty (60)
days thereafter, the Final Accounting with respect to the operations of the
Property, (b) within sixty (60) days thereafter, all books and records of Owner
then in possession or control of Manager (at Owner’s expense), and (c) within
thirty (30) days thereafter, all funds (including tenant security deposits)
after deducting therefrom such sums as are then due and owing to Manager
hereunder, and (d) within sixty (60) days thereafter, any plans and
specifications pertaining to the Project then in the possession of Manager.
Manager will reasonably cooperate in the transition of financial and accounting
information to the Project’s new management company. Immediately upon the
effective termination of this Agreement, Manager shall turn over all keys or
combinations to any locks on the Property, then in possession of Manager. In the
event any action or inaction by Owner delays Manager’s delivery of said items,
Manager shall have one additional day to deliver said items for each day of
delay caused by Owner. Manager shall have the right to retain and remove from
the Project all of its operational manuals, business records (which are not
records of the Project) and any equipment owned by Manager.

 

7.8           Authority Ceases on Termination. Upon termination of this
Agreement for any reason, Manager’s authority under this Agreement shall
immediately cease and Manager shall have no further right to act for Owner or to
draw funds from the Depository Account except to the extent permitted in Section
7.7 above.

 

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Article 8

 

INSURANCE

 

8.1          Owner’s Insurance.

 

(a)          During the Term of this Agreement, Owner, at Owner’s expense, shall
carry and maintain commercial general liability insurance on an “occurrence”
basis, naming Manager as an additional insured, with limits of not less than
$3,000,000 per occurrence and in the aggregate, per location, covering bodily
injury, property damage and personal injury (the “Owner’s Liability Insurance”).
The carrier for the Owner’s Liability Insurance shall have an A.M. Best Rating
of A-/VII or higher. Owner’s Liability Insurance shall include coverage for
losses arising from the ownership, management and operation of the Property and
shall be written or endorsed to apply primary and non-contributory to insurance
maintained by Manager under Section 8.2(a) below. If Owner’s Liability Insurance
has a deductible, or similar clause, Owner shall be responsible for paying any
losses that are not covered by Owner’s Liability Insurance because of said
deductible or similar clause. Owner shall provide to Manager a written
certificate from the carrier reflecting that Owner’s Liability Insurance is
effective in accordance with this Section 8.1 and that Owner’s Liability
Insurance will not be canceled or modified without thirty (30) days prior
written notice to Manager. Owner shall have its insurance carrier accept these
coverage requirements by endorsement to its policy.

 

(b)          Owner shall cause to be placed and kept in force fire and extended
coverage insurance and such other property and casualty insurance as Owner may
elect, at Owner’s expense. The provisions of Section 8.3 shall specifically
extend to such coverage. Owner shall furnish to Manager the appropriate
endorsement and certificate of insurance with respect to any such insurance.

 

(c)          Manager shall promptly report to Owner, as soon as is reasonably
practicable after Manager becomes actually aware of the same, all accidents and
incidents occurring on or about the Property and any insured damage or
destruction to the Property. Manager shall not be responsible for processing or
settlement of claims, but Manager shall reasonably assist Owner with processing
said claims upon Owner’s request.

 

(d)          Manager recommends to Owner that resident liability insurance be
required of each tenant at the Project, at the tenant’s cost, unless such a
requirement is in violation of any applicable law or regulation. If, at the
direction of the Owner, Manager implements a renter’s insurance program at the
Project whether it is a limited liability, or limited liability and personal
contents coverage policy, any such policy held by the resident shall not remove,
replace, reduce, or in any way modify the parties’ indemnification obligations
herein or the requirements of Owner or Manager to provide insurance and
indemnification in accordance with this Agreement. Manager agrees to use
commercially reasonable efforts to insure compliance on the part of Project
residents with any such programs. Manager assumes no responsibility, liability
or reduction in payment of its Base Management Fee as a result of any expense
incurred by Owner, including but not limited to payment by Owner of any
insurance deductible amount, caused by the failure of a resident to have
renter’s insurance in place. This exclusion of liability on Manager’s part
applies whether the resident failed to procure renter’s insurance at the time of
initial lease signing, at the time the resident’s renter’s insurance policy came
up for renewal, or at any other time.

 

(e)          Owner acknowledges that Manager is not an expert or consultant
regarding insurance coverage and requirements; accordingly, Owner assumes all
risks with respect to the adequacy of insurance coverage.

 

8.2           Manager’s Insurance. Manager shall obtain and maintain the
following insurance (the specifications for which may be changed from time to
time by Owner) necessary to protect the interest of Owner as it relates to
Manager's operations hereunder, at Manager's sole cost and expense, from
authorized insurance companies approved by Owner rated by Best's Rating at A IX
or higher. Manager shall not begin performing services hereunder until original
certificates of insurance showing evidence of the coverages outlined below have
been furnished to and approved by Owner.

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(a)          During the Term of this Agreement, Manager, at Manager’s expense,
shall carry and maintain commercial general liability insurance for the benefit
of Manager (with blanket contractual liability coverage) on an “occurrence”
basis, naming Owner as an additional insured, with limits of not less than
$1,000,000 per occurrence and $2,000,000 in the aggregate, per location and an
umbrella or excess liability policy with limits of not less than $5,000,000
(collectively, the “Manager’s Liability Insurance”) and shall be written or
endorsed to include Owner as an additional insured and shall be excess and
contingent to Owner’s insurance required under Section 8.1(a) above, except to
the extent a Claim is subject to an indemnification obligation specifically
undertaken by Manager in this Agreement, in which case Manager’s Liability
Insurance shall be deemed primary. Manager shall continue to name Owner as an
additional insured for a period of three years following the termination of the
Agreement. The carrier for the Manager’s Liability Insurance shall have an A.M.
Best Rating of A IX or higher. Manager shall provide to Owner an original
certificate from the carrier reflecting that Manager’s Liability Insurance is
effective in accordance with this Section 8.2 and that Manager’s Liability
Insurance will not be canceled or modified without thirty (30) days prior
written notice to Owner. Manager shall provide Owner with an original
certificate of insurance at least ten days prior to the expiration thereof, but
in any event prior to each renewal date, including during the three-year period
referenced above. Manager’s policy shall not include a Limitation of Coverage
Real Estate Operations (CG 22 60 07 98) endorsement, Real Estate Property
Managed Endorsement (CG 22 70 11 85) or similar endorsements excluding coverage
for bodily injury, property damage or personal and advertising injury. If
Manager utilizes the services of an employee leasing company, then it’s general
liability policy must include ISO endorsement CG 04 24 10 93 Coverage for Injury
to Leased Workers. Must include separation of insureds clause.

 

(b)          Manager shall carry and maintain the crime and dishonesty insurance
described in Section 4.6(a) of this Agreement. Additionally, Manager shall
maintain, at its sole cost and expense, professional liability or errors and
omissions liability insurance with limits of not less than $1,000,000 per
occurrence, $2,000,000 aggregate. If coverage is on a claims-made basis, the
retroactive date must be a date that is not later than the date on which Manager
began performing services on behalf of Owner. Coverage shall be maintained for a
period of three years after the termination of services. Manager shall provide
Owner with an original certificate of insurance on or before each renewal date
during this three-year time period. The policy shall include a separation of
insureds clause.

 

(c)          Manager shall cause to be placed and kept in force workers’
compensation and employers’ liability insurance in compliance with all
applicable federal, state and local laws and regulations covering all Project
Employees of Manager. Employers’ liability limits of $1,000,000. In the event
the principal has waived coverage for himself/herself, it is hereby agreed by
all parties that the principal may not perform any work under this contract.
Manager shall process all workers’ compensation claims and shall manage all such
claims in its sole discretion. Owner shall reimburse Manager for the expense of
such insurance on the basis of Manager’s current workers’ compensation rates and
the payroll of the Project. Owner’s reimbursement obligation shall extend to any
increase to expense derived from subsequent audits, and if any subsequent audit
results in an increase in Manager’s workers’ compensation costs, Owner shall
reimburse Manager for the increased amount.

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(d)          Owner acknowledges that Manager and its affiliates maintain certain
insurance programs on an enterprise basis, such as health insurance and workers’
compensation insurance, for the benefit of all of its employees, including
Project Employees. Manager will include the costs of such employee insurance
programs as line item expenses in the Budget, and upon approval of the Budget,
Owner will be deemed to have expressly approved such allocated insurance
expenses.

 

(e)          Manager, at its sole expense (which is not reimbursable) shall
carry and maintain business auto liability insurance covering owned, non-owned
and hired vehicles with a limit of not less than $1,000,000 per accident. If the
Manager utilizes the services of an employee leasing company then its Commercial
Auto Liability policy must include ISO endorsement CA 23 25 07 97 Coverage for
Injury to Leased Workers. Owner shall be named as additional insured.

 

(f)          Employment Practices Liability insurance with limits of $2,000,000
per occurrence/aggregate, including third party coverage for sexual harassment,
discrimination and other coverable employment-related torts.

 

8.3          Waiver of Subrogation; Insurance As First Source of Recovery.

 

(a)          Each property insurance policy maintained by Owner or Manager with
respect to the Property (including any property and casualty insurance
maintained by Owner) shall, where applicable, contain a waiver of subrogation
and similar rights, so that the insurer shall have no claim over or against
Owner or Manager or their Indemnitees, as the case may be, by way of subrogation
or otherwise, with respect to any claims that are insured under such policy.
Owner or Manager, as the case may be, shall notify the other party if any
insurance carrier does not agree to waive subrogation rights in any insurance
policy required by this Agreement.

 

(b)          Notwithstanding anything to the contrary set forth in this
Agreement, Manager waives any and all rights of recovery, claims, actions or
causes of action against Owner and Owner Indemnitees, and Owner hereby waives
any and all rights of recovery, claims, actions or causes of action against
Manager and Manager Indemnitees, for any and all liabilities, claims, causes of
action, losses, demands, judgments, settlements and costs and expenses
(including reasonable attorneys’ fees and court costs) for damage to or loss of
property to the extent the same are covered or would have been covered by the
insurance coverage required to be maintained by this Agreement. The releases in
this paragraph will apply even if the liability, claim, cause of action, loss,
demand, judgment, settlement, cost or expense is caused in whole or in part by
the negligence or strict liability of the released party, but will not apply to
the extent the damage or loss is caused by the gross negligence or willful
misconduct of the released party. For purposes of this Section 8.3(b), any
deductible amount under any insurance policy shall be deemed to be included as
part of collectible insurance proceeds.

 

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8.4           Environmental Indemnification. Owner agrees to defend, indemnify,
and hold harmless Manager and Manager's partners, directors, shareholders,
officers, and agents, against and from any and all actions, administrative
proceedings, causes of action, charges, claims, commissions, costs, damages,
decrees, demands, duties, expenses, fees, fines, judgments, liabilities, losses,
obligations, orders, penalties, recourses, remedies, responsibilities, rights,
suits, and undertakings of every nature and kind whatsoever, including, but not
limited to, attorneys' fees and litigation expenses, from the presence of
Hazardous Substances (as defined below) on, under or about the Project. Without
limiting the generality of the foregoing, the indemnification provided by this
paragraph shall specifically cover costs incurred in connection with any
investigation of site conditions or any remediation, removal or restoration work
required by any federal, state or local governmental agency because of the
presence of Hazardous Substances in, on, under or about the Property, except to
the extent that the Hazardous Substances are present as a result of gross
negligence, criminal activity, or any willful misconduct of Manager or its
employees. For purposes of this Agreement, "Hazardous Substances" shall mean all
substances defined as hazardous materials, hazardous wastes, hazardous
substances, or extremely hazardous waste under any federal, state or local law
or regulation. Nothing herein shall exonerate Manager from liability for any
Hazardous Substances Claims caused by Manager or Property Employees.

 

Article 9
MISCELLANEOUS PROVISIONS

 

9.1           Owner Representative. Owner shall designate one person as Owner’s
representative in all dealings with Manager, who shall, until further notice, be
the person executing this Agreement on behalf of Owner. The person so acting as
Owner’s representative from time to time shall have full authority to bind
Owner, and Manager may rely on any directive of such person without further
authorization or inquiry.

 

9.2           Owner Representations. Owner assumes all liability as to the
quality and construction of the Property. Owner further represents and warrants
that, to its actual knowledge, as of the Effective Date, the Property is in
compliance with all applicable federal, state and local laws, rules,
regulations, guidelines and ordinances, including but not limited to, the
Americans with Disabilities Act, the Federal Fair Housing Act, the Federal 1990
Clean Air Act, all other state and local accessibility requirements, and the
applicable building code affecting the Property.

 

9.3           Confidentiality; Non-Solicitation. Each party hereby agrees to
protect the financial and other confidential and/or proprietary information
provided by the other party from any use, distribution or disclosure except as
permitted herein. Each party shall use the same standard of care to protect said
information as is used to protect its own confidential and proprietary
information, but under no circumstance shall either party use less than a
reasonable standard of care. The parties shall consult with each other in
preparing any press release, public announcement, statement to the press, or
other form of release of information to the news media or the public that is
related to this Agreement or the relationship of the parties hereto (a “Press
Release”); provided, however, that the foregoing shall not (a) restrict Manager
from carrying out its duties in accordance with the terms of this Agreement, or
(b) apply to any general listing of Manager’s represented clients. During the
term of this Agreement, Owner shall not solicit any employee of Manager for
employment, and for an additional one (1) year period following the termination
or expiration of this Agreement, Owner shall not solicit or hire any Regional
Manager which was assigned to the Project during the Term of this Agreement.

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9.4           Notice. Any notice or communication hereunder must be in writing
and will be deemed to be delivered, whether or not received, (i) when delivered
by receipted delivery by an independent, reputable courier service, (ii) three
(3) business days after deposited with the United States Postal Service, postage
prepaid, certified or registered mail, with return receipt requested, addressed
to the parties as listed on the signature page to this Agreement (or at such
other address as the applicable party shall have specified by notice given in
accordance with this provision), or (iii) when delivered by confirmed facsimile
to the number listed on the signature page to this Agreement.

 

9.5           Severability. If any term, covenant or condition of this Agreement
or the application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement, or the application
of such term, covenant or condition to a person or circumstance other than those
as to which it is held invalid or unenforceable, shall not be affected thereby.
Each term, covenant or condition of this Agreement shall be enforced to the
fullest extent permitted by law.

 

9.6           No Joint Venture or Partnership. Notwithstanding anything to the
contrary in this Agreement, Owner and Manager hereby agree that nothing
contained herein shall be construed as making Manager and Owner joint venturers
or partners. Neither Manager nor Project Employees shall be deemed to be
employees of Owner.

 

9.7           Integration Clause. This Agreement embodies the entire agreement
and understanding between Owner and Manager with respect to its subject matter
and supersedes all prior agreements and understandings, written and oral,
between Owner and Manager related to that subject matter.

 

9.8           Force Majeure. Any delay in the performance of Manager’s
obligations pursuant to the terms of this Agreement shall be excused to the
extent such delay is caused by war, national emergency, natural disaster,
strike, labor disputes, utility failures, governmental regulations, riots,
adverse weather, and other similar causes not within Manager’s reasonable
control, and any time periods required for Manager’s performance thereof shall
be extended accordingly.

 

9.9           Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Florida
without giving effect to the principles of conflict of laws to the extent such
principles would require or permit the application of the laws of another
jurisdiction. Manager represents that it has qualified to do business in the
State of Florida in connection with all actions based on or arising out of this
Agreement. Venue for any action brought to enforce this Agreement or collect any
sum due under this Agreement shall be in any court of applicable jurisdiction in
the county where the Project is located.

 

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9.10         LIMITATION OF DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, NEITHER OWNER NOR MANAGER SHALL BE LIABLE UNDER ANY
CIRCUMSTANCES FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES OF ANY KIND OR NATURE, INCLUDING LOST REVENUES AND PROFITS AND DAMAGES,
EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF THOSE DAMAGES. IN NO EVENT
SHALL MANAGER BE LIABLE FOR DAMAGES IN EXCESS OF THE BASE MANAGEMENT FEES PAID
BY OWNER DURING THE 24 MONTH PERIOD PRIOR TO THE DATE SAID DAMAGES ARE INCURRED,
plus (b) ALL AVAILABLE INSURANCE PROCEEDS. Manager acknowledges and agrees that
the members, officers, directors, employees, and trustees of Owner shall have no
personal liability for the payment or performance of any obligations under this
Agreement. Notwithstanding anything to the contrary contained herein, if Manager
shall recover any judgment against Owner in connection with this Agreement,
Manager shall look solely to Owner’s interest in the Project for the collection
or enforcement of any such judgment, and no other assets of Owner or such other
persons and entities shall be subject to levy, execution or other process for
the satisfaction or enforcement of such judgment, and neither Owner nor any
person or entity having an interest, directly or indirectly, in Owner shall be
liable for any deficiency.

 

9.11         Modification and Waiver. This Agreement and the obligations of the
parties under this Agreement may be amended, supplemented, waived and discharged
only by an instrument in writing executed by the party against which enforcement
of the amendment, addendum, waiver or discharge is sought.

 

9.12         Approvals and Consents. Neither Owner nor Manager shall
unreasonably withhold or delay any approval or consent contemplated by this
Agreement.

 

9.13         Prohibition on Assignment. Neither Owner nor Manager may assign
this Agreement to any person or entity without the prior written consent of the
other party. This Agreement shall be binding upon and shall inure to the benefit
of Manager and Owner and their respective successors and assigns.

 

9.14         Related Entities. Owner may elect to contract with entities in
which Manager has a financial interest or other affiliation, including Greystar
Management Services, LP. Any relationship Owner may enter into with a related
entity is that of an independent contractor and does not constitute an agency
relationship between Owner and the related entity. The Greystar-related business
entities are for-profit enterprises which may receive compensation, incentives,
commissions and coordination fees from third parties in connection with services
offered.

 

9.15         Time is of the Essence. Time is of the essence in this Agreement.

 

9.16         Attorney’s Fees. If either of the parties shall institute any
action or proceeding against the other party relating to this Agreement, the
non-prevailing party in such action or proceeding shall reimburse the prevailing
party for its disbursements incurred in connection therewith and for its
reasonable attorneys’ fees actually incurred.

 

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9.17         Subordination. This Agreement shall be subject and subordinate to
any financing or refinancing by debt, sale and leaseback or any other form of
financing, relating to the Project and any deed of trust, mortgage or other
instrument securing any financing now or hereafter constituting a lien upon the
Project or any part hereof, including without limitation, the Loan Documents.
The subordination provided in this Section shall by self-operative and shall not
require any further instrument or document. However, upon the request of Owner,
Manager shall promptly execute, acknowledge and deliver to the holder of such
financing or refinancing an instrument in form and substance satisfactory to
Owner and such holder confirming such subordination and containing such other
provisions as Owner or such holder shall reasonably request. Without limiting
the generality of the foregoing and notwithstanding anything herein to the
contrary, it is understood and agreed that, in the event of a sale pursuant to
or in lieu of foreclosure of, any deed of trust, mortgage or other instrument to
which this Agreement is subordinated pursuant to this Section, the purchaser or
other transferee of the Project shall have no obligation to pay or perform any
of Owner’s obligations hereunder and the Project shall not be subject to any
lien or other encumbrance for such obligation.

 

[Signature Page Follows]

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This Agreement is hereby executed by the parties hereto on the dates set forth
below.

 

ADDRESS: OWNER:  

Bluerock Real Estate

712 Fifth Avenue, 9th Floor BR HENDERSON BEACH, LLC, a Delaware limited
liability company New York, NY  10019   Attn: Michael Konig By: /s/ Jordan Ruddy
Fascimile: 646.278.4220 Name: Jordan Ruddy Title: Authorized Signatory      
Date: March 4, 2016       ADDRESS: MANAGER:     4030 Boy Scout Blvd.
Suite 800 GREP Southeast, LLC, a Delaware limited liability corporation Tampa,
FL 33607   Facsimile: 813.887.3343 By: /s/ Gary T. Crane Name: Gary T. Crane
With a copy of notices of default Title: President or termination to:          
Greystar Management Services, L.P.     Attn: Managing Director, Legal Services  
  600 E. Las Colinas Blvd., Suite 2100 Date:  March 4, 2016 Irving, Texas 75039
    Facsimile: 214.723.7535    

 

Signature Page

 

 

 

Exhibit A

Additional Compensation

 

1.The expense reimbursements referenced in this Agreement including the
following for the initial term:

 

Education, Support,
& Marketing   Property Management
Software   Technology   Other Costs Monthly   One-Time
Setup   Monthly   Monthly   Office Supplies,
Copies, Faxes,
Postage $390   $1000   $425   $160   $.33/unit/month

 

Greystar’s Technology Services Fee includes an array of products and services
that are essential to the operation of the community. Note that the package
requires the license of MS Office 2007 for all PCs.

 

1.Web-Based e-mail accounts for all property office staff members

2.Virus protection, Internet filtering, Firewall and Spyware protection for each
property PC

3.Centralized, managed data storage of property files

4.Access to reports stored on Owner Portal via the Internet

5.Phone support for technical issues

6.Use of RealBridge budget model

 

 

 

 

 

Exhibit B

Monthly Reports

 

1.Balance Sheet, including monthly comparison and comparison to quarter and year
end (if applicable).

2.Detailed Income Statement, including prior 12 months, compared to current year
budget for same period.

3.Trial Balance that includes mapping of the accounts to the financial
statements.

4.Account reconciliations for each balance sheet account within the trial
balance.

5.Detailed support for each account reconciliation including, but not limited
to, the following:

a.Detail Accounts Payable Aging Listing: 0-30 days, 31-60 days, 61-90 days and
over 90 days.

b.Detail Accounts Receivable/Delinquency Aging Report: 0-30 days, 31-60 days,
61-90 days, over 90 days and prepayments.

c.Fixed asset roll-forward and support (invoices and checks) for any new
acquisition/additions and/or support for any disposals to fixed assets.
Purchases will be accounted for using the capitalization policy of Bluerock Real
Estate, LLC.

6.Security Deposit Activity

7.Mortgage Statement

8.Monthly Management Fee Calculation

9.Monthly Distribution Calculation

10.General Ledger, with description and balance detail

11.Monthly Check Register including copies of all checks disbursed and copies of
cancelled checks.

12.Rent Roll

13.Monthly Reporting and evidence of withdrawal, if any, of the Minimum Funding
Requirement and Payroll Reserve, and any other operating reserve accounts and
capital expense reserve accounts, including, but not limited to, any
calculations evidencing shortfalls payable thereunder.

14.Variance Report, including the following:

a.Cap Ex Summary and Commentary

b.Monthly Income/Expense Variance with notes

c.Yearly Income/Expense Variance with notes

d.Occupancy Commentary

e.Market/Competition Commentary

f.Rent Movement/Concessions Commentary

g.Crime Commentary

h.Staffing Commentary

i.Operating Summary, with leasing and traffic reporting

j.Other reasonable reporting, as requested (e.g. Renovation/Rehab report)

15.Budget Comparison(1), including month-to-date and year-to-date variances with
narrative for any large fluctuations compared to Budget.

16.Market Survey, including property comparison, trends, and concessions.