Exhibit 10.7

 

 

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

BR CWS 2017 Portfolio JV, LLC

 

A DELAWARE LIMITED LIABILITY COMPANY

 

DATED AS OF MARCH 22, 2017

 

 

 

 

 

 

LIMITED LIABILITY COMPANY AGREEMENT
OF
BR CWS 2017 PORTFOLIO JV, LLC

 

THIS LIMITED LIABILITY COMPANY AGREEMENT of BR CWS 2017 PORTFOLIO JV, LLC (“JV”
or “Company”) is made and entered into and is effective as of March 9, 2017, by
and between BR CWS Portfolio Member, LLC, a Delaware limited liability company
(“Bluerock”), CWS 2017 Portfolio, LLC, a Delaware limited liability company
(“CWS”) and CWS 2017 Portfolio PM, LLC, a Delaware limited liability company
(“Promote Member”) (this “Agreement”). Capitalized terms used herein shall have
the meanings ascribed to such terms in this Agreement.

 

Effective as of March 9, 2017, the Members, by execution of this Agreement,
hereby form the Company as a limited liability company pursuant to and in
accordance with the Delaware Limited Liability Company Act (6 Del. C. §18-101 et
seq.), as amended from time to time (the “Act”), and this Agreement; and the
Members hereby agree as follows:

 

Section 1.             Definitions. As used in this Agreement:

 

“Act” shall have the meaning provided in the second paragraph of this Agreement.

 

“Additional Capital Contributions” shall mean the additional Capital
Contributions made by a Member pursuant to the terms of Section 5.2(a).

 

“Affiliate” shall mean with respect to any Person (i) more than ten percent
(10%) of the issued and outstanding stock of which, or more than ten percent
(10%) of the ownership interests of which, is owned, directly or indirectly, by
a Person, including a Member, (ii) that now or hereafter owns, directly or
indirectly, more than a ten percent (10%) ownership interest in a Person,
including the Company or in any Member, (iii) any agent, trustee, officer,
director, employee, partner, member, manager or shareholder or member of the
family of such Person (or any member of the family of any such agent, trustee,
officer, director, employee, partner, member, manager or shareholder) or
(iv) any corporation, partnership, limited liability company, trust or other
entity that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person. The
term “control” (including the terms “controlled by” and “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. The term “family”
shall be deemed to include spouses, children, parents, brothers and sisters, and
the spouse, children, parents, brothers and sisters of such spouse’s children,
parents, brothers and sisters.

 

“Agreed Upon Value” shall mean the fair market value (net of any liability
secured by any such property that the Company assumes or takes subject to)
agreed upon pursuant to a written agreement between the Members of property
contributed by a Member to the capital of the Company, which shall for all
purposes hereunder be deemed to be the amount of the Capital Contribution
applicable to such property contributed.

 

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“Agreement” shall mean this Limited Liability Company Agreement, as amended from
time to time.

 

“Alternate Structure” shall have the meaning set forth in Section 15.1(h).

 

“Applicable Adjustment Percentage” shall have the meaning set forth in
Section 5.2(b)(3).

 

“Bankruptcy Code” shall mean Title 11 of the United States Code, as amended or
any other applicable bankruptcy or insolvency statute or similar law.

 

“Bankruptcy/Dissolution Event” shall mean, with respect to the affected party,
(i) the entry of an Order for Relief under the Bankruptcy Code, (ii) the
admission by such party of its inability to pay its debts as they mature,
(iii) the making by it of an assignment for the benefit of creditors generally,
(iv) the filing by it of a petition in bankruptcy or a petition for relief under
the Bankruptcy Code or any other applicable federal or state bankruptcy or
insolvency statute or any similar law, (v) the expiration of sixty (60) days
after the filing of an involuntary petition under the Bankruptcy Code without
such petition being vacated, set aside or stayed during such period, (vi) an
application by such party for the appointment of a receiver for the assets of
such party, (vii) an involuntary petition seeking liquidation, reorganization,
arrangement or readjustment of its debts under any other federal or state
insolvency law, provided that the same shall not have been vacated, set aside or
stayed within sixty (60) days after filing, (viii) the imposition of a judicial
or statutory lien on all or a substantial part of its assets unless such lien is
discharged or vacated or the enforcement thereof stayed within sixty (60) days
after its effective date, (ix) an inability to meet its financial obligations as
they accrue, or (x) a dissolution or liquidation.

 

“Base Management Fee” shall have the meaning provided in Section 9.7.

 

“Beneficial Owner” shall have the meaning provided in Section 5.7.

 

“Bluerock” shall have the meaning provided in the first paragraph of this
Agreement.

 

“Bluerock Transferee” shall have the meaning set forth in Section 12.2(b)(2).

 

“BR Credit Support Claim” shall mean any claim by a Lender under any Credit
Support arising solely from the acts or omissions of Bluerock and/or its
Affiliates.

 

“BR Major Decisions” shall mean the following decisions, which Bluerock shall
have the unilateral right to cause the Company to take, or refrain from taking,
subject to the limitations set forth in Section 5.7, Section 9.7, Section 9.10,
of this Agreement:

 

(i)any merger, conversion or consolidation involving the Company or any Owner or
the sale, lease, transfer, exchange or other disposition of any Property and/or
all or substantially all of the Company’s assets, in one or a series of related
transactions, and any selling, conveying or effecting any other direct or
indirect transfer (excluding any direct or indirect Transfer of Interests) of
any Property, Owner or other material asset of the Company or any portion
thereof or the entering into of any agreement, commitment or assumption with
respect to any of the foregoing (in each case, a “BR Sale”);

 

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(ii)giving, granting or undertaking any options, rights of first refusal, deeds
of trust, mortgages, pledges, ground leases, security or other interests in or
encumbering any Property, any portion thereof or any other material assets, and
amending, modifying, recasting, refinancing or replacing any financing to which
the Company (except for a Default Loan) or any Owner is a party or which
encumbers any Property or any portion thereof (in each case, a “BR Financing”);

 

(iii)the sale, transfer or exchange of all or any portion of the Property as
part of a 1031 exchange as contemplated in Section 9.2(i);

 

(iv)terminating the Management Agreement for Cause or issuing a notice of
default pursuant to the Management Agreement; provided, however, that any such
termination shall be subject to the terms of the documents relating to the Loan
and the Management Agreement; and

 

(v)approving and/or adopting any Budget, including, without limitation, any
Budget for an Owner.

 

(vi)Entering into any corporate housing agreement with an Affiliate of CWS (the
“Corporate Housing Agreement”).

 

For the avoidance of doubt, Due Care shall not apply to Bluerock with regard to
Bluerock making any BR Major Decision, which Bluerock shall have the right to
make in its sole discretion, in accordance with its own self-interest and
without any duty owed to the other Members in connection therewith; provided,
however, Due Care will apply to the implementation of any BR Major Decision
which Bluerock has decided to undertake.

 

“BR REIT” shall mean Bluerock Residential Growth REIT, Inc., a Maryland
corporation.

 

“BR Growth” shall mean Bluerock Growth Fund, LLC, a Delaware limited liability
company.

 

“BR Growth II” shall mean Bluerock Growth Fund II, LLC, a Delaware limited
liability company.

 

“BR SOIF II” shall mean Bluerock Special Opportunity + Income Fund II, LLC, a
Delaware limited liability company.

 

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“BR SOIF III” shall mean Bluerock Special Opportunity + Income Fund III, LLC, a
Delaware limited liability company.

 

“Budget” shall mean an estimate of receipts and expenditures for the operation
of any Property during a Fiscal Year, including a schedule of expected apartment
rentals and concessions (excluding security deposits, other refundable deposits,
SureDeposits and other similar bonds) for the Fiscal Year, and an estimate of
capital expenditures (as defined by generally accepted accounting principles,
consistently applied), which consist of capital replacements, substitutions,
repairs and additions for any Property (other than routine repairs and
maintenance) for the Fiscal Year, as shall be prepared by the Property Manager
and approved by any Owner as further described in Section 9.3.

 

“Capital Account” shall have the meaning provided in Section 5.6.

 

“Capital Contribution” shall mean, with respect to any Member, the aggregate
amount of (i) cash, and (ii) the Agreed Upon Value of other property contributed
by such Member to the capital of the Company net of any liability secured by
such property that the Company assumes or takes subject to.

 

“Capital Proceeds” means funds of the Company arising from a Capital
Transaction, less any cash which is applied to (i) the payment of costs and
expenses relating to such Capital Transaction, (ii) the repayment of debt of the
Company, (iii) the repair, restoration or other improvement of assets of the
Company which is required under any contractual obligation of the Company in
connection with such Capital Transaction, and (iv) the establishment of reserves
as determined by the Management Committee. “Capital Proceeds” shall also mean
any of the foregoing which are received by a Subsidiary or other Person in which
the Company is a member, partner or investor or in which the Company otherwise
has an interest, to the extent received by the Company as dividends or
distributions.

 

“Capital Transaction” means the sale, financing, refinancing or similar
transaction of or involving (i) any direct or indirect interest owned by the
Company in any Owner, and (ii) the Property, and the payment of any condemnation
awards, title insurance proceeds or casualty loss insurance proceeds (other than
business interruption or rental loss insurance proceeds) received by the Company
or an Owner to the extent not applied to mortgage indebtedness of the Company or
an Owner, not used for reconstruction of all or any portion of the Property or
not used in alleviation of a title defect.

 

“Cash Flow” shall mean, for any period for which Cash Flow is being calculated,
gross cash receipts of the Company and any Owner (without duplication) from the
ownership and operation of the Property (but excluding Capital Contributions,
Capital Proceeds and loans by Members to the Company), less the following
payments and expenditures: (i) all payments of operating expenses of the Company
or any Owner, (ii) all payments of principal of, interest on and any other
amounts due with respect to indebtedness, leases or other commitments or
obligations of the Company or any Owner (including on loans by Members to the
Company), (iii) all sums expended by the Company or any Owner for capital
expenditures, (iv) all prepaid expenses of the Company or any Owner, and (v) all
sums expended by the Company or any Owner which are otherwise capitalized.

 

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“Cause” shall mean any of the reasons that an Owner can terminate the Property
Manager pursuant to Section 7.2 of the Management Agreement.

 

“Certificate of Formation” shall mean the Certificate of Formation of the
Company, as amended from time to time.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time, including the corresponding provisions of any successor law.

 

“Collateral Agreement” shall mean any agreement, instrument, document or
covenant concurrently or hereafter made or entered into under, pursuant to, or
in connection with this Agreement and any certifications made in connection
therewith or amendment or amendments made at any time or times heretofore or
hereafter to any of the same (including, without limitation, the Management
Agreement.

 

“Company” shall mean BR CWS 2017 Portfolio JV, LLC, a Delaware limited liability
company organized under the Act.

 

“Company Minimum Gain” shall have the meaning given to the term “partnership
minimum gain” in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

 

“Confidential Information” shall have the meaning provided in Section 10.01.

 

“Controllable Expenses” shall mean all expenses, other than Uncontrollable
Expenses, incurred by the Company or any Owner with respect to the Property.

 

“Corporate Housing Agreement” shall have the meaning set forth in the definition
of BR Major Decision.

 

“Credit Support” means (i) an environmental indemnity, (ii) a guaranty for
non-recourse carve-outs, (iii) a completion guaranty, (iv) a payment guaranty,
and (v) any other guaranty, indemnity, or credit enhancement or personal
liability undertaking required by a Lender.

 

“Credit Support Claim” shall mean collectively, any BR Credit Support Claim, CWS
Credit Support Claim and Neutral Credit Support Claim. For purposes of
clarification, a Credit Support Claim shall not include any claims arising
solely from the gross negligence or willful misconduct of Guarantor or as a
result of the breach of any net worth covenants or reporting requirements of the
Guarantor contained in the Credit Support.

 

“CWS” shall have the meaning provided in the first paragraph of this Agreement.

 

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“CWS Change Event” shall mean (i) (A) gross negligence by CWS or any of its
Affiliates, (B) willful misconduct by CWS or any of its Affiliates, (C) fraud by
CWS or any of its Affiliates, or (D) intentional and material bad faith (to the
extent intentional and material are held to be constituent elements of bad
faith, but otherwise bad faith without such qualifications) by CWS or any of its
Affiliates, in each case in connection with or relating to the Company, any
Owner or the Property, (ii) any CWS Change Event Breach; (iii) a
Bankruptcy/Dissolution Event shall have occurred with respect to CWS, or CWS
Apartment Homes LLC, a Delaware limited liability company for so long as it is
the Property Manager; or (iv) at any time, for failure to satisfy the CWS
Ownership/Control Requirement. For purposes of the preceding sentence, so long
as CWS Apartment Homes LLC, a Delaware limited liability company is the Property
Manager of a Property, the Property Manager shall be deemed to be an Affiliate
of CWS with respect to such Property. For purposes of clarification, a CWS
Change Event shall not include any circumstances which result in a termination
of the Management Agreement pursuant to the terms of Section 7.10 thereof.

 

“CWS Change Event Breach” shall mean any material and intentional brach by CWS,
Promote Member and/or its Affiliate, with respect to this Agreement and/or the
Management Agreement, and only in such circumstances where such breach is
susceptible of cure, CWS, Promote Member and/or its Affiliate fails to cure, to
the reasonable satisfaction of Bluerock, such breach within thirty (30) days
following written notice from Bluerock to CWS, Promote Member and/or its
Affiliate of such breach; provided, however, to the extent such breach is
susceptible of being cured, but not within said thirty (30) days, if CWS,
Promote Member and/or its Affiliate commences to cure said breach within said
thirty (30) days and thereafter continuously and diligently pursues the cure to
completion, CWS, Promote Member and/or its Affiliate shall have an additional
period of time, not to exceed ninety (90) days from the date of Bluerock’s
initial notice of the breach, to cure such breach in the aforesaid manner.
Notwithstanding the foregoing, any breach of this Agreement and/or Management
Agreement which is susceptible of being cured with the payment of money shall
not be afforded the cure times set forth above, but rather shall be afforded a
period of time commencing on the date CWS, Promote Member and/or its Affiliate
receives notice of such breach and expiring ten (10) days thereafter to cure the
same, failing which, such breach shall be deemed a CWS Change Event Breach. For
purposes of clarification, a CWS Change Event Breach shall not include any
circumstances which result in a termination of the Management Agreement pursuant
to terms of Section 7.10 thereof.

 

“CWS Credit Support Obligation” shall mean the obligation of CWS and Promote
Member to cause an Affiliate thereof to execute and deliver Credit Support in
connection with the initial assumption of the Loan in form and content usually
and customarily provided by CWS’s Affiliates to Fannie Mae lenders, which form
has been provided by CWS to Bluerock and to Lender in connection with making an
application for the assumption of the Loans.

 

“CWS Credit Support Claim” shall mean any claim by a Lender under any Credit
Support arising solely from the acts or omissions of CWS and/or its Affiliates
(excluding the Guarantor).

 

“CWS Ownership/Control Requirement” as of any particular date means that each of
the following conditions is satisfied: (i) at least one of the Key Individuals
is not then dead, insane as determined by a qualified physician, incapacitated
as determined by a qualified physician, or the subject of a
Bankruptcy/Dissolution Event; and (ii) at least one of the Key Individuals is
actively involved in the operation and management of (a) CWS or CWS Parent,
(b) CWS Apartment Homes LLC, a Delaware limited liability company for so long as
it is the Property Manager, and (c) if applicable, any CWS Transferee.

 

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“CWS Parent” shall mean CWS Capital Partners LLC, a Delaware limited liability
company.

 

“CWS Transferee” shall have the meaning set forth in Section 12.2(b)(1).

 

“Deadlock” shall mean the failure of the Members who are then entitled to vote
to agree upon any Major Decision within thirty (30) days of the date when the
Member initiating any such Major Decision notifies the other Member of the fact
that a Major Decision is being presented to the Members for consideration.

 

“Default Amount” shall have the meaning provided in Section 5.2(b).

 

“Default Loan” shall have the meaning provided in Section 5.2(b)(1).

 

“Default Loan Rate” shall have the meaning provided in Section 5.2(b)(1).

 

“Defaulting Member” shall have the meaning provided in Section 5.2(b).

 

“Delaware UCC” shall mean the Uniform Commercial Code as in effect in the State
of Delaware from time to time.

 

“Dissolution Event” shall have the meaning provided in Section 13.2.

 

“Distributable Funds” with respect to any month or other period, as applicable,
shall mean an amount equal to the Cash Flow and Capital Proceeds of the Company
for such month or other period, as applicable, as reduced by reserves for
anticipated capital expenditures, future working capital needs and operating
expenses, contingent obligations and other purposes of the Company or any Owner,
the amounts of which shall be reasonably determined from time to time by the
Management Committee.

 

“Distributions” shall mean the distributions payable (or deemed payable) to a
Member (including, without limitation, its allocable portion of Distributable
Funds).

 

“Due Care” shall mean the usual and customary standard of care, prudence and
diligence exercised by a reasonably prudent multi-family residential real estate
manager, asset manager or developer for projects substantially similar in size,
nature and location to the Property under the circumstances then generally
prevailing with respect to the Property in accordance with the reasonable
exercise of sound and prudent business practices in connection with the
administration and management of the Company and its assets in accordance with
the this Agreement. For the avoidance of doubt, Due Care shall not apply to
Bluerock with regard to Bluerock making any BR Major Decision, which Bluerock
shall have the right to make in its sole discretion, in accordance with its own
self-interest and without any duty owed to the other Members in connection
therewith.

 

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“Emergency” shall mean an event requiring immediate action to be taken (a) in
order to comply with applicable laws, any insurance requirements, or to avoid
material damage to the Property (or any part thereof), (b) for the safety of the
Property, any tenants, occupants, customers or invitees thereof, (c) to avoid
the suspension of any services necessary to the tenants, occupants, licensees or
invitees thereof to the extent such suspension of services does not arise from
the gross negligence or willful misconduct of the Property Manager (so long as
the Management Agreement is in full force and effect with respect to the
Property), (d) to avoid the breach of Owner’s obligations under any tenant
leases, to the extent such breach does not arise from the gross negligence or
willful misconduct of the Property Manager (so long as the Management Agreement
is in full force and effect with respect to the Property), and, (e) to avoid
civil or criminal liability for Owner and/or Manager.

 

“Emergency Expenditure” shall mean any expenditure for an Emergency, which
expenditures may be made by the Property Manager, at the Owner’s expense, on the
terms and conditions set forth in Section 2.6(a) of the Management Agreement.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

 

“Extension Earnest Money” shall have the meaning provided in the Purchase
Agreement.

 

“Fiscal Year” shall mean each calendar year ending December 31.

 

“Foreign Corrupt Practices Act” shall mean the Foreign Corrupt Practices Act of
the United States, 15 U.S.C. Sections 78a, 78m, 78dd-1, 78dd-2, 78dd-3, and
78ff, as amended, if applicable, or any similar law of the jurisdiction where
the Property is located or where the Company or any of its Subsidiaries
transacts business or any other jurisdiction, if applicable.

 

“Guarantor” means any Member or any Affiliate of any Member that provides Credit
Support in connection with a Loan.

 

“Imputed Closing Costs” means an amount (not to exceed one and one quarter
percent (1.25%) of the purchase price) that would normally be incurred by the
Company or any Owner if the Property were sold for an amount specified in
Section 15.1 for title insurance premiums, survey costs, brokerage commissions,
legal fees, and other commercially reasonable closing costs.

 

“Income” shall mean the gross income of the Company for any month, Fiscal Year
or other period, as applicable, including gains realized on the sale, exchange
or other disposition of the Company’s assets.

 

“Indemnified Party” shall have the meaning provided in Section 14.4(a).

 

“Indemnifying Party” shall have the meaning provided in Section 14.4(a).

 

“Inducement Agreements” shall have the meaning provided in Section 14.4(a).

 

“Initial Capital Contribution” shall mean the initial Capital Contributions made
by a Member pursuant to the terms of Section 5.1.

 

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“Interest” of any Member shall mean the entire limited liability company
interest of such Member in the Company, which includes, without limitation, any
and all rights, powers and benefits accorded a Member under this Agreement and
the duties and obligations of such Member hereunder.

 

“Key Individual” shall mean each of Steven Sherwood, Gary Carmell, Michael
Engels, Michael Brittingham and Justin Leahy.

 

“Lender” shall mean the lender providing a Loan or any refinancing thereof.

 

“License Agreement” shall have the meaning set forth in the Management
Agreement.

 

“Loan” shall mean collectively: (i) that certain loan, in the initial principal
amount of $30,091,000 made to BRE MF Crown Ridge LLC, a Delaware limited
liability company (“Crown Ridge Seller”), as borrower, as the same has or will
be assumed by BR CWS Crown Ridge Owner, LLC (the “Crown Ridge Loan”), (ii) that
certain loan, in the initial principal amount of $43,125,000 made to BRE MF
Canyon Springs LLC, a Delaware limited liability company (“Canyon Springs
Seller”), as borrower, as the same has or will be assumed by BR CWS Canyon
Springs Owner, LLC (the “Canyon Springs Loan)”, (iii) that certain loan, in the
initial principal amount of $33,207,000 made to BRE MF Cascades I LLC, a
Delaware limited liability company (“Cascades I Seller”), as borrower, as the
same has or will be assumed by BR CWS Cascades I Owner, LLC (the “Cascades I
Loan”), (iv) that certain loan in the initial principal amount of $23,175,000
made to BRE MF Cascades II LLC, a Delaware limited liability company (“Cascades
II Seller”), as borrower, as the same has or will be assumed by BR CWS Cascades
II Owner, LLC (the “Cascades II Loan”), or (v) that certain loan, in the initial
principal amount of $18,078,000 made to BRE MF TPC LLC, a Delaware limited
liability company (“Cibolo Canyon Seller”), as borrower, as the same has or will
be assumed by BR CWS Cibolo Canyon Owner, LLC (the “Cibolo Canyon Loan”), as
applicable.

 

“Loan Documents” shall mean the loan documents evidencing the Loan.

 

“Loss” shall mean the aggregate of losses, deductions and expenses of the
Company for any month, Fiscal Year or other period, as applicable, including
losses realized on the sale, exchange or other disposition of the Company’s
assets.

 

“Major Decision” means any decision for the Company to take, or refrain from
taking, any action or incurring any obligation with respect to the following
matters (or the effectuation of any such action or obligation):

 

(i)except as expressly provided in Section 12 with respect to Transfers by
Bluerock or a Bluerock Transferee to a Bluerock Transferee and with respect to
Transfers by CWS as permitted thereunder, the admission or removal of any Member
or the Company’s issuance to any third party of any equity interest in the
Company (including interests convertible into, or exchangeable for, equity
interests in the Company);

 

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(ii)except upon the occurrence of any Dissolution Event or following any sale of
any Owner’s assets, any dissolution or termination of the Company or any Owner;

 

(iii)acquiring, directly or through any Subsidiaries, by purchase, ground lease
or otherwise, any real property or other material asset or the entry into of any
agreement, commitment or assumption with respect to any of the foregoing, or the
making or posting of any deposit (refundable or non-refundable), provided,
however, the foregoing shall not preclude the Management Committee from making a
determination to acquire a replacement property following any sale of any
Property as part of a 1031 exchange, which the Management Committee shall have
the right to do and which action shall not be deemed a Major Decision to the
extent the Management Committee adheres to the procedures contemplated in
Section 9.2(i) of this Agreement;

 

(iv)the sale, transfer or exchange of all or any portion of the Property as part
of a 1031 exchange which does not comply with the terms of Section 9.2(i);

 

(v)institute or settle any Company or Owner legal claims in excess of $50,000;

 

(vi)make any loan to any Member, except as expressly provided for in this
Agreement;

 

(vii)cause or permit the Company or Owner to file for or fail to contest a
bankruptcy proceeding, or seek or permit a receivership or make an assignment
for the benefit of its creditors; or

 

(viii)make distributions to the Members, except in accordance with Section 6
hereof;

 

(ix)employ, enter into any contract with (or materially modify any contract
with), or otherwise compensate, directly or indirectly, the Manager or any
Affiliate of the Manager or any Member, except for and as provided under the
Management Agreement, the License Agreement, and, if applicable, the Corporate
Housing Agreement;

 

(x)cause or permit any of the organizational documents of the Company or any
Subsidiary to be amended in any manner, other than any amendment (A) required
(1) by a Lender to the Company or Subsidiary or (2) in order for a REIT Member
to qualify as a “real estate investment trust” under the Code, in each case, to
the extent such amendment referenced in clauses (1) and (2) of this subparagraph
does not result in the dilution of any Member, does not adversely affect any
Member’s right to Distributions pursuant to Section 6 and does not otherwise
have a materially adverse effect on the rights or obligations of any Member, or
(B) that is solely ministerial in nature to reflect or implement this Agreement
under its express terms (such as, for example, to periodically update the
Members’ respective Capital Contribution amounts, Percentage Interests or
Management Committee representatives on Exhibit A hereto);

 

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(xi)subject to Section 5.8(a), make any decision with respect to the Purchase
Agreement, including, without limitation, any decision to terminate the Purchase
Agreement pursuant to any right of the purchaser thereunder for the failure of a
condition precedent, a Seller default or any other express right to terminate
the Purchase Agreement; provided, however, any Member acting on its own may
cause the Company to extend the Closing Date (as defined in the Purchase
Agreement) pursuant to the terms of Section 2.3(e) of the Purchase Agreement. In
the event of any such extension of the Closing Date, each Member will be
required to contribute its respective share of the Extension Earnest Money as
provided in Section 5.8 of this Agreement; provided, however, no Member shall be
deemed to have waived its rights under Section 5.8 of this Agreement, including,
without limitation, the rights of a Terminating Member, as a result of any such
extension;

 

(xii)except as contemplated in Section 15 below, any sale, transfer, or exchange
of all or any part of the Property or any of the Subsidiaries (i) to any
Affiliate of Bluerock, or (ii) for consideration other than cash (provided,
however, the foregoing shall not be construed as a limitation on Bluerock from
making a BR Decision with regard to any 1031 exchange pursuant to Section 9.2(i)
of this Agreement);

 

(xiii)except as expressly set forth herein, any financing to the Company or any
of its Subsidiaries by any Affiliate of Bluerock, any services agreement between
the Company or any of the Subsidiaries and any Affiliate of Bluerock, or the
payment of any fee to Bluerock or any Affiliate of Bluerock by the Company or
any of its Subsidiaries;

 

(xiv)any business activity of the Company or any of its Subsidiaries that is not
within the purposes of the Company set forth in Section 3 or Section 9.2(i) of
this Agreement;

 

(xv)any action, omission or decision by the Company or any of its Subsidiaries
that is reasonably likely to result in a BR Credit Support Claim or a Neutral
Credit Support Claim against the Guarantor or materially increase the exposure
of the Guarantor under any BR Credit Support Claim or Neutral Support Claim as a
result of any increase in the principal amount of the Loan or other changes in
the economic terms of the Loan, unless in connection with any such action, any
such liability or exposure is released by the Lender, or if despite the use of
Bluerock’s commercial reasonable efforts, Guarantor is not released by the
Lender, in each case, Bluerock causes a creditworthy indemnitor reasonably
satisfactory to CWS, Promote Member and Guarantor to provide an indemnity in
form and substance reasonably satisfactory to CWS, Promote Member and Guarantor,
indemnifying Guarantor with regard to such matter, in which case, such matter
will not be a Major Decision and the consent of the CWS and the Promote Member
shall not be required;

 

 11 

 

 

(xvi)the terms of any Credit Support to be provided by the Guarantor and any
amendments or modifications thereto; provided, however, the Members agree to not
unreasonably withhold their approval to such term so long as such terms are
substantially consistent with terms that the lender and Guarantor have agreed to
at that time with regard to a customary loan program; provided, however, in no
event shall such terms be more onerous to the Guarantor than the terms of the
Credit Support provided by the Guarantor in connection with the initial Loan;

 

(xvii)any decision to terminate or not extend or renew the Management Agreement
for any reason other than for Cause;

 

(xviii)any change in use of a Property for purposes other than multifamily
residential apartments for lease; or

 

(xix)any approval under Section 9.7(d).

 

“Management Agreement” shall mean that certain property Management Agreement
dated as of even date herewith, by and between an Owner, as owner, and Property
Manager, as manager, pursuant to which Property Manager will provide certain
management services for the Property. The form of Management Agreement is
attached hereto as Exhibit I.

 

“Management Committee” shall have the meaning provided in Section 9.2(a).

 

“Manager” shall have the meaning provided in Section 9.1(a).

 

“Member” and “Members” shall mean Bluerock, CWS, Promote Member and any other
Person admitted to the Company pursuant to this Agreement. For purposes of the
Act, the Members shall constitute a single class or group of members.

 

“Member in Question” shall have the meaning provided in Section 16.12.

 

“Member Minimum Gain” shall mean an amount, determined in accordance with
Regulations Section 1.704-2(i)(3) with respect to each Member Nonrecourse Debt,
equal to the Company Minimum Gain that would result if such Member Nonrecourse
Debt were treated as a Nonrecourse Liability.

 

“Member Nonrecourse Debt” shall have the meaning given the term “partner
nonrecourse debt” in Regulations Section 1.704-2(b)(4).

 

“Member Nonrecourse Deductions” shall have the meaning given the term “partner
nonrecourse deductions” in Regulations Section 1.704-2(i).

 

 12 

 

 

“Membership Price” shall have the meaning set forth in Section 15.1(h).

 

“Net Income” shall mean the amount, if any, by which Income for any period
exceeds Loss for such period.

 

“Net Loss” shall mean the amount, if any, by which Loss for any period exceeds
Income for such period.

 

“Neutral Credit Support Claim” shall mean any Credit Support Claim that is
neither a BR Credit Support Claim nor a CWS Credit Support Claim. For purposes
of clarification, a Neutral Credit Support Claim shall not include any claims
arising solely from the gross negligence or willful misconduct of Guarantor or
as a result of the breach of any net worth covenants or reporting requirements
of the Guarantor contained in the Credit Support.

 

“New York UCC” shall have the meaning set forth in Section 16.17.

 

“Nonrecourse Deduction” shall have the meaning given such term in Regulations
Section 1.704-2(b)(1).

 

“Nonrecourse Liability” shall have the meaning given such term in Regulations
Section 1.704-2(b)(3).

 

“Offeror” shall have the meaning provided in Section 15.1(b).

 

“Offeree” shall have the meaning provided in Section 15.1(b).

 

“Owner” shall mean, collectively BR CWS Crown Ridge Owner, LLC, BR CWS Canyon
Springs Owner, LLC, BR CWS Cascades I Owner, LLC, BR CWS Cascades II Owner, LLC
and BR CWS Cibolo Canyon Owner, LLC, each a Delaware limited liability company.
Each Owner shall be deemed to be a Subsidiary of the Company.

 

“Percentage Interest” shall have the meaning provided in Section 5.3.

 

“Person” shall mean any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other legal entity.

 

“Preferred Return” shall mean, with regard to any and all Capital Contributions
made by a Member, a cumulative, rate of return equal to ten percent (10%)
annually, compounded monthly (although, in no circumstance shall such return
exceed 10% per annum on a cumulative basis); provided that a cumulative rate of
return equal to fifteen percent (15%) annually, compounded monthly (although, in
no circumstance shall such return exceed 15% per annum on a cumulative basis)
shall be applicable with regard to additional Capital Contributions made with
respect to the Default Amount of a Defaulting Member under Section 5.2(b)(3).
For purposes of calculating the Preferred Return, Capital Contributions and
distributions of Distributable Funds pursuant to Section 6.1(c) shall be deemed
to have occurred as of the end of the month in which such Capital Contributions
or distributions take place. An example of Preferred Return calculated in the
manner described in this definition of Preferred Return is attached hereto as
Exhibit H and incorporated herein by reference.

 

 13 

 

 

“Promote Member” shall have the meaning set forth in the first paragraph of this
Agreement.

 

“Property” shall have the meaning provided in Section 3.

 

“Property Manager” shall mean CWS Apartment Homes LLC, a Delaware limited
liability company, so long as the initial Management Agreement is in full force
and effect with respect to the Property, and, thereafter, the entity performing
similar services for any Owner with respect to the Property.

 

“Property Manager Reports” shall have the meaning set forth in Section 8.2(c).

 

“Protective Capital Call” shall mean a Capital Call necessary (a) to prevent an
imminent default with respect to any Loan obtained by the Company or any Owner
(e.g., payment of debt service following an operating shortfall, reserves
required by the Lender, a reduction in principal required by the Lender to meet
loan to value requirements); (b) for funds required to refinance the Property
when the current Loan has matured or will mature in the near future (i.e. less
than three (3) months) (e.g., commitment fees, loan application fees, equity
infusions to meet market loan to value requirements, etc.); or (c) to fund an
Emergency Expenditure.

 

“Purchase Agreement” shall mean that certain Agreement of Purchase and Sale
dated March15, 2017, as from time to time amended, by and between Seller and
CWS, pursuant to which CWS Apartment Homes LLC, a Delaware limited liability
company has contracted to acquire the Property.

 

“Pursuer” shall have the meaning provided in Section 10.3.

 

“Pursuit Cost Budget” shall mean the budget attached hereto as Exhibit F hereto.

 

“Qualified Broker” shall mean a reputable, independent national brokerage
company that has a presence in the area in which the relevant Property is
located and has at least ten (10) years’ experience in valuing and selling
multi-family properties in the area of such Property.

 

“Regulations” shall mean the Treasury Regulations promulgated pursuant to the
Code, as amended from time to time, including the corresponding provisions of
any successor regulations.

 

“Reimbursable Expenses” shall mean all costs and expenses incurred by the
Property Manager in connection with the maintenance or operation of a Property
and which constitute reimbursable expenses as provided in the Management
Agreement, which shall be reimbursable by any Owner to the Property Manager in
accordance with the terms of the Management Agreement.

 

 14 

 

 

“REIT” shall mean a real estate investment trust as defined in Code Section 856.

 

“REIT Member” shall mean any Member, if such Member is a REIT or a direct or
indirect subsidiary of a REIT.

 

“REIT Requirements” shall mean the requirements for qualifying as a REIT under
the Code and Regulations.

 

“Representatives” shall have the meaning provided in Section 9.2(a).

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Seller” shall mean BRE MF Crown Ridge LLC, BRE MF Canyon Springs LLC, BRE MF
Cascades I LLC, BRE MF Cascades II LLC and BRE MF TPC LLC.

 

“SOIFs” shall mean, collectively, BR SOIF II and BR SOIF III.

 

“Subsidiary” shall mean, with respect to any Person, any corporation,
partnership, limited liability company or other entity of which at least a
majority of the capital stock or other equity securities is owned by such
Person.

 

“Tax Matters Member” shall have the meaning provided in Section 8.3.

 

“Total Investment” shall mean the sum of the aggregate Capital Contributions
made by a Member.

 

“Transfer” means, as a noun, any transfer, sale, assignment, exchange, charge,
pledge, gift, hypothecation, conveyance, encumbrance or other disposition,
voluntary or involuntary, by operation of law or otherwise and, as a verb,
voluntarily or involuntarily, by operation of law or otherwise, to transfer,
sell, assign, exchange, charge, pledge, give, hypothecate, convey, encumber or
otherwise dispose of.

 

“Uncontrollable Expenses” shall mean the following expenses with respect to any
Owner or Property: taxes, assessments (including but not limited to ad valorem
and margin taxes) and insurance; licenses and permits; expenses incurred by the
Company or any Owner; audit fees, HOA assessments; assessments or other charges
pursuant to recorded maintenance, shared use, easement and other similar
agreements with third parties; utilities; Emergency Expenditures; regularly
scheduled debt service payments; lender reserves and impounds; and costs due to
a change in law or the interpretation thereof.

 

“Valuation Amount” shall have the meaning provided in Section 15.1(b).

 

Section 2.             Organization of the Company.

 

2.1          Name. The name of the Company shall be “BR CWS 2017 PORTFOLIO JV,
LLC.” The business and affairs of the Company shall be conducted under such name
or such other name as the Members deem necessary or appropriate to comply with
the requirements of law in any jurisdiction in which the Company may elect to do
business.

 

 15 

 

 

2.2          Place of Registered Office; Registered Agent. The address of the
registered office of the Company in the State of Delaware is 2711 Centerville
Road, Wilmington, Delaware 19808, Delaware 19904. The name and address of the
registered agent for service of process on the Company in the State of Delaware
is Corporation Service Company, 2711 Centerville Road, Wilmington, Delaware
19808. The Management Committee may at any time on five (5) days prior notice to
all Members change the location of the Company’s registered office or change the
registered agent.

 

2.3          Principal Office. The principal address of the Company shall be c/o
Bluerock Real Estate, L.L.C., 712 Fifth Avenue, 9th Floor, New York, New York
10019 and the principal office of Property Manager shall be c/ c/o CWS Capital
Partners LLC, 14 Corporate Plaza, Suite 210, Newport Beach, CA 92660, or, in
each case, at such other place or places as may be determined by the Management
Committee from time to time.

 

2.4          Filings. On or before execution of this Agreement, an authorized
person within the meaning of the Act shall have duly filed or caused to be filed
the Certificate of Formation of the Company with the office of the Secretary of
State of Delaware, as provided in Section 18-201 of the Act, and the Members
hereby ratify such filing. The Manager shall use its best efforts to take such
other actions as may be reasonably necessary to perfect and maintain the status
of the Company as a limited liability company under the laws of Delaware.
Notwithstanding anything contained herein to the contrary, the Company shall not
do business in any jurisdiction that would jeopardize the limitation on
liability afforded to the Members under the Act or this Agreement.

 

2.5          Term. The Company shall continue in existence from the date hereof
until December 31, 2066, unless extended by the Members, or until the Company is
dissolved as provided in Section 13, whichever shall occur earlier.

 

2.6          Expenses of the Company. Other than (i) the reimbursement or
payment of costs, expenses and fees as provided herein, (ii) to the extent
contemplated in Section 14 of this Agreement, and (iii) the fees described in
Section 9.7, no fees, costs or expenses shall be payable by the Company to any
Member (or its Affiliates).

 

Section 3.            Purpose.

 

The purpose of the Company, subject in each case to the terms hereof, shall be
to engage, directly or through the Owners, in the business of acquiring, owning,
operating, managing, leasing, selling, financing and refinancing the following
properties;

 

(a)          the real estate and any real estate related investments (or
portions thereof) consisting of certain real and personal property located in
Bexar County, Texas commonly known as the “The Mansions at Canyon Springs
Apartments,” as more particularly described in the Purchase Agreement (the
“Canyon Springs Property”), which will be owned by BR CWS Canyon Springs Owner,
LLC, a Delaware limited liability company, and all other activities reasonably
necessary to carry out such purpose;

 

 16 

 

 

(b)          the real estate and any real estate related investments (or
portions thereof) consisting of certain real and personal property located in
Bexar County, Texas commonly known as the “The Towers at TPC Apartments,” as
more particularly described in the Purchase Agreement (the “Cibolo Canyon
Property”), which will be owned by BR CWS Cibolo Canyon Owner, LLC, a Delaware
limited liability company, and all other activities reasonably necessary to
carry out such purpose;

 

(c)          the real estate and any real estate related investments (or
portions thereof) consisting of certain real and personal property located in
Smith County, Texas commonly known as the “The Mansions at Cascades I
Apartments,” as more particularly described in the Purchase Agreement (the
“Cacades I Property”), which will be owned by BR CWS Cascades I Owner, LLC, a
Delaware limited liability company, and all other activities reasonably
necessary to carry out such purpose;

 

(d)          the real estate and any real estate related investments (or
portions thereof) consisting of certain real and personal property located in
Smith County, Texas commonly known as the “The Mansions at Cascades II
Apartments,” as more particularly described in the Purchase Agreement (the
“Cascades II Property”), which will be owned by BR CWS Cascades II Owner, LLC, a
Delaware limited liability company, and all other activities reasonably
necessary to carry out such purpose; and

 

(e)          the real estate and any real estate related investments (or
portions thereof) consisting of certain real and personal property located in
Bexar County, Texas commonly known as the “The Estates at Crown Ridge
Apartments,” as more particularly described in the Purchase Agreement (the
“Crown Ridge Property”), which will be owned by BR CWS Crown Ridge Owner, LLC, a
Delaware limited liability company, and all other activities reasonably
necessary to carry out such purpose.

 

The Canyon Spring Property, Cibolo Canyon Property, Cascades I Property,
Cascades II Property, and Crown Ridge Property are hereinafter collectively
referred to herein as or if referred to generically as to any one or more
thereof, the “Property”.

 

Section 4.             Conditions.

 

4.1          Bluerock Conditions. The obligation of Bluerock to close under the
Purchase Agreement and to consummate the transactions contemplated herein,
including, without limitation, to make the initial Capital Contributions under
Section 5.1 (each, an “Initial Capital Contribution”) is subject to fulfillment
of all of the following conditions on or prior to the closing date under the
Purchase Agreement:

 

(a)          CWS and Promote Member shall deposit in the Company’s bank account
or the designated escrow account of First American Title Insurance Company,
located at 30 North LaSalle Street, Suite 2700, Chicago, Illinois 60602, Attn:
Deanna Wilkie (“Title Company”) the aggregate amount of each of its respective
Initial Capital Contribution set forth on Exhibit A hereto. CWS and Promote
Member shall receive a credit (without duplication) against the amount of its
respective Initial Capital Contribution for all amounts previously funded by CWS
or its Affiliates as provided in the Pursuit Cost Budget;

 

(b)          The Purchase Agreement shall have been assigned to the Company
and/or any applicable Owners;

 

 17 

 

 

(c)          Reserved;

 

(d)         The Management Agreement shall have been executed by each Owner and
the Property Manager;

 

(e)          All of the representations and warranties of CWS and Property
Manager contained in this Agreement and the Collateral Agreements shall continue
to be true and correct in all material respects as of the date thereof;

 

(f)          “Lender Consent”, as such term is defined in the Purchase
Agreement, has occurred, each Owner shall have assumed (or be concurrently
assuming) the Loan with respect to each Property and the CWS Credit Support
Obligation has been satisfied.

 

4.2          CWS Conditions. The obligation of CWS and CWS Promote Member to
close under the Purchase Agreement and to consummate the transactions
contemplated herein, including, without limitation, to make the Initial Capital
Contributions under Section 5.1 is subject to fulfillment of all of the
following conditions on or prior to the closing date under the Purchase
Agreement:

 

(a)          Bluerock shall deposit into the Company’s bank account or Title
Company’s designated escrow account the amount of its aggregate Initial Capital
Contribution set forth on Exhibit A hereto.

 

(b)          Reserved;

 

(c)          “Lender Consent”, as such term is defined in the Purchase
Agreement, has occurred, and each Owner shall have assumed (or be concurrently
assuming) the Loan (provided, however, the condition contained in this
Section 4.2(c) shall not be applicable to the extent Lender Consent does not
occur and/or any Owner fails to assume the Loan due solely to the
non-satisfaction of the CWS Credit Support obligation);

 

(d)          The Management Agreement shall have been executed between any Owner
and Property Manager; and

 

(e)          All of the representations and warranties of Bluerock contained in
this Agreement and the Collateral Agreements shall continue to be true and
correct in all material respects as of the date thereof; and

 

Section 5.             Capital Contributions, Loans, Percentage Interests and
Capital Accounts.

 

5.1          Initial Capital Contributions. Subject to satisfaction of the
conditions set forth in Section 4, concurrently with the closing under the
Purchase Agreement, Bluerock, CWS and Promote Member shall each make an Initial
Capital Contribution to the Company of cash in an amount equal to the respective
amounts set forth in Exhibit A attached hereto, which amounts shall be subject
to a credit for amounts funded by such Member or its Affiliates as provided in
Section 5.8. In addition, at the closing of the acquisition of the Property,
Promote Member or its designee shall earn an acquisition fee in the amount of
seventy-five one hundredths of one percent (0.75%) of the purchase price as set
forth in the Purchase Agreement, which shall be contributed proportionally by
the Members and shall be counted as part of their respective Initial Capital
Contributions. The Initial Capital Contribution of the Members to the Company
may include amounts for working capital. In the event any Member has previously
funded more than its respective share of Initial Capital Contributions as of the
date the funding conditions have been satisfied, the Member who has over-funded
its share shall be entitled to reimbursement of its excess funding at such time.

 

 18 

 

 

5.2          Additional Capital Contributions.

 

(a)          Additional Capital Contributions may be called for from the Members
(i) by any Member if the same is a Protective Capital Call, or (ii) as
determined in the sole good faith discretion of the Management Committee, by
written notice to the Members from time to time as and to the extent capital is
necessary to pay an expense or liability of the Property, the Company, or any
Owner. Such additional Capital Contributions shall be in an amount for each
Member equal to the product of the amount of the aggregate Capital Contribution
called multiplied by each Member’s then current Percentage Interest. Such
additional Capital Contributions shall be payable by the Members to the Company
upon the earlier of (i) twenty (20) days after written request from the Member
or Management Committee, as applicable, or (ii) the date when the Capital
Contribution is required (which shall be no sooner than 10 days after the
delivery of such written request), as set forth in a written request from the
Member or Management Committee, as applicable.

 

(b)          If a Member (a “Defaulting Member”) fails to make a Capital
Contribution that is required as provided in Section 5.1 or Section 5.2(a)
within the time frame required therein (the amount of the failed contribution
and related loan shall be the “Default Amount”), the other Member, provided that
it has made the Capital Contribution required to be made by it, shall have (in
addition to such rights as may be applicable pursuant to Section 5.8) one or
more of the following exclusive remedies:

 

(1)         to advance to the Company on behalf of, and as a loan to the
Defaulting Member, an amount equal to the Default Amount to be evidenced by a
promissory note in form reasonably satisfactory to the non-Defaulting Member
(each such loan, a “Default Loan”). The Capital Account of the Defaulting Member
shall be credited with the amount of such Default Amount attributable to a
Capital Contribution and the aggregate of such amounts shall constitute a debt
owed by the Defaulting Member to the non-Defaulting Member. Any Default Loan
shall bear interest at the rate of fifteen percent (15%) per annum, but in no
event in excess of the highest rate permitted by applicable laws (the “Default
Loan Rate”), and shall be payable by the Defaulting Member on demand from the
non-Defaulting Member and from any Distributions due to the Defaulting Member
hereunder. Interest on a Default Loan, to the extent unpaid, shall accrue and
compound on an annual basis. The Default Rate shall in no event exceed 15% per
annum on a cumulative basis. A Default Loan shall be prepayable, in whole or in
part, at any time or from time to time without penalty. Any such Default Loans
shall be with full recourse to the Defaulting Member and shall be secured by the
Defaulting Member’s Interest, including, without limitation, such Defaulting
Member’s right to Distributions. In furtherance thereof, upon the making of any
such Default Loan, the Defaulting Member hereby pledges, assigns and grants a
security interest in its Interest to the non-Defaulting Member and agrees to
promptly execute such documents and statements reasonably requested by the
non-Defaulting Member to further evidence and secure such security interest. Any
advance by the non-Defaulting Member on behalf of a Defaulting Member pursuant
to this Section 5.2(b)(1) shall be deemed to be a Capital Contribution made by
the Defaulting Member except as otherwise expressly provided herein. All
Distributions to the Defaulting Member hereunder shall be applied first to
payment of any interest due under any Default Loan and then to principal until
all amounts due thereunder are paid in full. While any Default Loan is
outstanding, the Company shall be obligated to pay directly to the
non-Defaulting Member, for application to and until all Default Loans have been
paid in full, the amount of (x) any Distributions payable to the Defaulting
Member, and (y) any proceeds of the sale of the Defaulting Member’s Interest;

 

 19 

 

 

(2)         subject to any applicable thin capitalization limitations on
indebtedness of the Company for U.S. federal income tax purposes, to treat the
non-Defaulting Member’s portion of such Capital Contribution as a loan to the
Company (rather than a Capital Contribution) and to advance to the Company as a
loan to the Company an amount equal to the Default Amount, which loan shall be
evidenced by a promissory note in form reasonably satisfactory to the
non-Defaulting Member and which loan shall bear interest at the Default Loan
Rate and be payable on a first priority basis by the Company from available Cash
Flow and prior to any Distributions made to any Member. If each Member has loans
outstanding to the Company under this provision, such loans shall be payable to
each Member in proportion to the outstanding balances of such loans to each
Member at the time of payment. Any advance to the Company pursuant to this
Section 5.2(b)(2) shall not be treated as a Capital Contribution made by any
Member;

 

(3)         to make an additional Capital Contribution to the Company equal to
the Default Amount whereupon the Percentage Interests of the Members shall be
recalculated to (i) increase the non-Defaulting Member’s Percentage Interest by
the percentage (“Applicable Adjustment Percentage”) determined by dividing one
hundred fifty percent (150%) of the Default Amount by the sum of the Members’
Total Investment (taking into account the actual amount of such additional
Capital Contribution) and by increasing its Total Investment solely for purposes
of determining the Member’s Percentage Interest, by one and one-half of the
amount of the Default Amount, and (ii) reduce the Defaulting Member’s Percentage
Interest by the Applicable Adjustment Percentage and by decreasing its Total
Investment solely for purposes of determining the Member’s Percentage Interest
by one-half of the amount of the Default Amount; or

 

(4)         in lieu of the remedies set forth in subparagraphs (1), (2) or (3),
revoke its portion of such additional Capital Contribution, whereupon the
portion of the Capital Contribution made by the non-Defaulting Member shall be
returned within ten (10) days.

 

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5.3          Percentage Ownership Interest. The Members shall have the initial
percentage ownership interests (as the same are adjusted as provided in this
Agreement, a “Percentage Interest”) in the Company set forth on Exhibit A
immediately following the Initial Capital Contributions provided for in
Section 5.1. The Percentage Interests of the Members in the Company shall be
adjusted monthly, and if appropriate to reflect any pending adjustments that
have been determined but not yet effected, prior to any request for Additional
Capital Contributions pursuant to Section 5.2 or any distributions to Members
pursuant to Section 6.1 or any determinations pursuant to Sections 13 and 15, so
that the respective Percentage Interests of the Members at any time shall be in
proportion to their respective cumulative Total Investment made (or deemed to be
made) pursuant to Sections 5.1 and 5.2, as the same may be further adjusted
pursuant to Section 5.2(b)(3); provided that, notwithstanding anything to the
contrary contained in this Agreement, with respect to the Promote Member, such
.01% Percentage Interest shall not be subject to adjustment so long as CWS has
an Interest in the Company but rather, any adjustment that would otherwise be
made to the Promote Member’s Percentage Interest shall instead be made to CWS’
Percentage Interest. Percentage Interests shall not be adjusted by Distributions
made (or deemed made) to a Member.

 

5.4          Return of Capital Contribution. No Member shall have any right to
withdraw or make a demand for withdrawal of the balance reflected in such
Member’s Capital Account (as determined under Section 5.6) until the full and
complete winding up and liquidation of the business of the Company.

 

5.5          No Interest on Capital. Interest earned on Company funds shall
inure solely to the benefit of the Company, and no interest shall be paid upon
any Capital Contributions (except as contemplated by the terms of
Section 5.2(b)(1)) nor upon any undistributed or reinvested income or profits of
the Company.

 

5.6          Capital Accounts. A separate capital account (the “Capital
Account”) shall be maintained for each Member in accordance with
Section 1.704-1(b)(2)(iv) of the Regulations. Without limiting the foregoing,
the Capital Account of each Member shall be increased by (i) the amount of any
Capital Contributions made by such Member, (ii) the amount of Income allocated
to such Member and (iii) the amount of income or profits, if any, allocated to
such Member not otherwise taken into account in this Section 5.6. The Capital
Account of each Member shall be reduced by (i) the amount of any cash and the
fair market value of any property distributed to the Member by the Company (net
of liabilities secured by such distributed property that the Member is
considered to assume or take subject to), (ii) the amount of Loss allocated to
the Member and (iii) the amount of expenses or losses, if any, allocated to such
Member not otherwise taken into account in this Section 5.6. The Capital
Accounts of the Members shall not be increased or decreased pursuant to
Regulations Section 1.704-1(b)(2)(iv)(f) to reflect a revaluation of the
Company’s assets on the Company’s books in connection with any contribution of
money or other property to the Company pursuant to Section 5.2 by existing
Members. If any property other than cash is distributed to a Member, the Capital
Accounts of the Members shall be adjusted as if such property had instead been
sold by the Company for a price equal to its fair market value, the gain or loss
allocated pursuant to Section 7, and the proceeds distributed in the manner set
forth in Section 6.1 or Section 13.3(d)(3). No Member shall be obligated to
restore any negative balance in its Capital Account. No Member shall be
compensated for any positive balance in its Capital Account except as otherwise
expressly provided herein. The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with the provisions of Regulations Section 1.704-1(b)(2) and shall be
interpreted and applied in a manner consistent with such Regulations.

 

 21 

 

 

5.7          New Members. Upon approval by the Members, the Company may issue
additional Interests and thereby admit a new Member or Members, as the case may
be, to the Company, only if such new Member (i) has delivered to the Company its
Capital Contribution, (ii) has agreed in writing to be bound by the terms of any
Collateral Agreements and this Agreement by becoming a party hereto, and
(iii) has delivered such additional documentation as the Company shall
reasonably require to so admit such new Member to the Company. Without the prior
written consent of each then-current Member, a new Member may not be admitted to
the Company if the Company would, or may, have in the aggregate more than one
hundred (100) members. For purposes of determining the number of members under
this Section 5.7, a Person (the “beneficial owner”) indirectly owning an
interest in the Company through a partnership, grantor trust or S corporation
(as such terms are used in the Code) (the “flow-through entity”) shall be
considered a member, but only if (i) substantially all of the value of the
beneficial owner’s interest in the flow-through entity is attributable to the
flow-through entity’s interest (direct or indirect) in the Company and (ii) in
the sole discretion of the Management Committee, a principal purpose of the use
of the flow-through entity is to permit the Company to satisfy the 100-member
limitation.

 

5.8          Pursuit Cost Sharing. Prior to the closing of the acquisition of
the Property pursuant to the Purchase Agreement and concurrently with the
assignment of the Purchase Agreement to the Company and/or applicable Owners,
the Members shall contribute amounts required to fund any earnest money
(including, without limitation, any Extension Earnest Money) under the Purchase
Agreement and any amounts payable to the loan servicer or Lender in connection
with any applications or requests related to the assumption of the Loans as
shown on the Pursuit Cost Budget, in the following ratio: (i) with regard to
funding earnest money, Bluerock shall contribute seventy-five percent (75%) of
such amounts and CWS shall contribute twenty-five percent (25%) of such amounts,
and (ii) with regard to any amounts payable to the loan servicer or Lender in
connection with any applications or requests related to the assumption of the
Loans, Bluerock shall contribute seventy-five percent (75%) of such amounts and
CWS shall contribute twenty-five percent (25%) of such amounts. Such amounts
shall be funded no later than 5 days following receipt by the Members of a
funding reimbursement request from Promote Member: The Members acknowledge and
agree that prior to the date of this Agreement, CWS or its Affiliates have
already funded all or a portion of the earnest money under the Purchase
Agreement and certain amounts payable to the loan servicer or Lender in
connection with any applications or requests related to the assumption of the
Loans as provided in the Pursuit Cost Budget. For purposes of determining the
amounts to be funded by the Members pursuant to this Section 5.8, CWS shall
receive a credit for any such amounts previously funded by CWS or its Affiliates
and the Members shall fund such amounts so that as and when such amounts of the
earnest money and/or Loan assumption costs are required to be funded by the
Members, each Member shall have funded their allotted amounts. In the event the
Owners fail to close on the acquisition of the Property, then unless the failure
to close is attributable to the gross negligence, fraud or willful refusal to
fund on behalf of a particular a Member, or, in the case of CWS and Promote
Member, the refusal to perform the CWS Credit Support Obligation (any such
action, “PSA Member Default Action”), in which event, the Member who caused the
PSA Member Default Action shall promptly reimburse the other Member for such
other Member’s share of all earnest money, Loan assumption costs and other
amounts funded in accordance with this Section 5.8 or as set forth in the
Pursuit Cost Budget by such other Member, the Members shall owe no further
funding obligation pursuant to this Section 5.8, and the Member who did not
commit a PSA Member Default Action shall have the right to cause the Company to
make any and all further decisions with respect to the Purchase Agreement,
notwithstanding subsection (xi) of the definition of “Major Decision”. For
avoidance of doubt, to the extent the Company, as a Major Decision, terminates
the Purchase Agreement pursuant to an express right thereunder, such termination
shall not be considered grossly negligent, fraudulent or willful refusal to
fund. In the event the Owners close on the acquisition of the Property, then the
amounts so funded shall be considered part of the Member’s Initial Capital
Contribution and the parties shall true-up such amounts so that at the closing
of the acquisition of the Property, Bluerock shall have contributed ninety
percent (90%), and CWS and Promote Member shall have contributed an aggregate of
ten percent (10%) of all amounts funded pursuant to this Section 5.8. If despite
the assignment of the Purchase Agreement to the Company as provided in the first
sentence of this Section 5.8, the Seller does not honor such assignment, then
Promote Member shall cause CWS Apartment Homes LLC, in its capacity as the
assignor under such assignment to use its commercially reasonable efforts to
take such actions as may be reasonably necessary to enforce such assignment on
behalf of the Company and to deliver any correspondence on behalf of the "Buyer"
under the Purchase Agreement as directed by the Company, including, without
limitation, in furtherance of exercising any termination of the Purchase
Agreement as set forth in this Section 5.8 of this Agreement.

 

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(a)          With regard to any decision to terminate the Purchase Agreement
pursuant to an express right of the buyer thereunder, including, without
limitation, under Section 2.3(d)(ii) of the Purchase Agreement, or for a failure
of a condition precedent, including, without limitation, any condition precedent
due to a casualty, condemnation or seller default, then if one Member desires to
terminate the Purchase Agreement pursuant to such right (including, without
limitation, any termination right under Section 2.3(d)(ii) of the Purchase
Agreement (“Terminating Member”), but the other Member desires to proceed
notwithstanding Terminating Member’s desire to exercise such termination right
(“Proceeding Member”), then the Proceeding Member shall have the right to cause
the Company to continue to pursue the acquisition under the Purchase Agreement
but only if it has fully reimbursed the Terminating Member for any amounts
funded pursuant to this Section 5.8 or as set forth in the Pursuit Cost Budget
within the earlier to occur of: (i) five (5) business days following written
receipt of the Terminating Member’s notice that it desires to terminate the
Purchase Agreement, or (ii) two (2) business days prior to the date that the
relevant termination right under the Purchase Agreement will expire. If the
Proceeding Member timely reimburses the Terminating Member, then the Terminating
Member’s interest in the Company shall be redeemed and the parties shall execute
such reasonable documentation to evidence such redemption or, at the option of
the Proceeding Member, the Purchase Agreement will be assigned to the Proceeding
Member or its designee. If the Proceeding Member fails to timely reimburse the
Terminating Member, then the Terminating Member shall have the unilateral right
to cause the Company to exercise the termination right under the Purchase
Agreement, whereupon any earnest money returned to the Company shall be
disbursed to the Members, subject to Section 5.8(b), pari passu and prorata in
accordance with the amounts actually funded by the Members pursuant to this
Section 5.8. Bluerock shall not have the right to be a Proceeding Member under
this Section 5.8(a) if the redemption of the Terminating Member’s interest in
the Company or assignment of the Purchase Agreement is not permitted by the
terms of the Purchase Agreement, unless otherwise consented to by the Seller
thereunder.

 

 23 

 

 

(b)          Notwithstanding the ratio which the Members contributed any earnest
money pursuant to this Section 5.8, the loss of any Earnest Money (as defined in
the Purchase Agreement) which becomes Non-Refundable Portion of the Earnest
Money (as defined in the Purchase Agreement) pursuant to the terms of the
Purchase Agreement shall be apportioned 50% to Bluerock and 50% in the aggregate
to CWS and Promote Member. For example, if the total Earnest Money contributed
by a date certain is $4,000,000.00 (i.e. the Initial Earnest Money and one
deposit of Extension Earnest Money), and Bluerock contributed $3,000,000.00 and
CWS contributed $1,000,000.00, if $1,000,000.00 of such Earnest Money becomes
the Non-Refundable Portion of the Earnest Money, then the refundable portion of
the Earnest Money (i.e. $3,000,000.00) shall be paid back as follows: Bluerock
shall receive $2,500,000.00 and CWS shall receive $500,000.00.

 

Section 6.             Distributions.

 

6.1          Distribution of Distributable Funds.

 

(a)          The Management Committee shall calculate and determine the amount
of Distributable Funds for each applicable period. Except as provided in
Sections 5.2(b), 6.1 or 13.3 or otherwise provided hereunder, Distributable
Funds, if any, shall be distributed to the Members, on a monthly basis based on
a calendar year, so long as the Loan is outstanding. Thereafter, such
distributions shall be made on the 15th day of each month or from time to time
as determined by the Management Committee.

 

(b)         Any Distributions otherwise payable to a Member under this Agreement
shall be applied first to satisfy amounts due and payable on account of the
indemnity and/or contribution obligations of such Member under this Agreement
and/or any other agreement delivered by such Member to the Company or any other
Member but shall be deemed distributed to such Member for purposes of this
Agreement.

 

(c)          Distributable Funds shall be distributed in the following order and
priority:

 

(1)         First, to such Members who shall have made additional Capital
Contributions with respect to the Default Amount of a Defaulting Member under
Section 5.2(b)(3) in proportion to the aggregate sum of the accrued but unpaid
Preferred Return with respect to such additional Capital Contributions until
each such Member shall realize through Distributions and actually received the
Preferred Return with respect to such additional Capital Contributions;

 

(2)         Second, to such Members who shall have made additional Capital
Contributions with respect to the Default Amount of a Defaulting Member under
Section 5.2(b)(3) in proportion to the aggregate sum of such additional Capital
Contributions until each such Member shall realize through Distributions and
actually received an amount equal to such additional Capital Contributions;

 

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(3)         Third, to the Members in proportion to the aggregate sum of the
accrued but unpaid Preferred Return with respect to the Additional Capital
Contributions of a Member under Section 5.2(a) until each such Member shall
realize through Distributions and actually received the Preferred Return with
respect to such Additional Capital Contributions;

 

(4)         Fourth, to the Members in proportion to the aggregate sum of the
Additional Capital Contributions of the Members under Section 5.2(a) until each
such Member shall realize through Distributions and actually receives an amount
equal to such Additional Capital Contributions;

 

(5)         Fifth, to the Members in proportion to their respective Percentage
Interests until each Member shall realize through Distributions and actually
receive the Preferred Return with respect to the Initial Capital Contributions
of a Member under Section 5.1;

 

(6)         Sixth, to the Members in proportion to their respective Percentage
Interests until each Member shall realize through Distributions and actually
receives an amount equal to such Initial Capital Contributions under
Section 5.1; and

 

(7)         Seventh, the balance, if any, of such Distributable Funds remaining
after the Distributions pursuant to (1), (2), (3), (4), (5) and (6) above shall
be distributed as follows:

 

a.           if a CWS Change Event has occurred, such Distributable Funds shall
be distributed to the Members in proportion to their Percentage Interests; and

 

b.           if no CWS Change Event has occurred, such Distributable Funds shall
be distributed as follows: (i) an amount equal to twenty-two and one-half
percent (22.5%) of such Distributable Funds shall be distributed to Promote
Member, (ii) an amount equal to seven and seventy-five hundredths percent
(7.75%) of such Distributable Funds shall be distributed to CWS and Promote
Member in accordance with their respective Percentage Interests, and (iii) an
amount equal to sixty-nine and seventy-five one hundredths percent (69.75%) of
such Distributable Funds shall be distributed to Bluerock.

 

6.2          Distributions in Kind. In the discretion of the Management
Committee, Distributable Funds may be distributed to the Members in cash or in
kind; provided, however, any distribution of any asset in kind must be made to
all Members in an amount equal to the percentage in which such Member shares in
Distributions from the Company. In the case of all assets to be distributed in
kind, the amount of the Distribution shall equal the fair market value of the
asset distributed as determined by the Management Committee. In the case of a
Distribution of publicly traded property, the fair market value of such property
shall be deemed to be the average closing price for such property for the thirty
(30) day period immediately prior to the Distribution, or if such property has
not yet been publicly traded for thirty (30) days, the average closing price of
such property for the period prior to the Distribution in which the property has
been publicly traded.

 

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Section 7.             Allocations.

 

7.1          Allocation of Net Income and Net Losses Other than in Liquidation.
Except as otherwise provided in this Agreement, Net Income and Net Losses of the
Company for each Fiscal Year shall be allocated among the Members in a manner
such that, as of the end of such Fiscal Year and taking into account all prior
allocations of Net Income and Net Losses of the Company and all Distributions
made by the Company through such date, the Capital Account of each Member is, as
nearly as possible, equal to the Distributions that would be made to such Member
pursuant to Section 6.1 if the Company were dissolved, its affairs wound up and
assets sold for cash equal to their tax basis (or book value in the case of
assets that have been revalued in accordance with Section 704(b) of the Code),
all Company liabilities were satisfied, and the net assets of the Company were
distributed in accordance with Section 6.1 immediately after such allocation.

 

7.2          Allocation of Net Income and Net Losses in Liquidation. Net Income
and Net Losses realized by the Company in connection with the liquidation of the
Company pursuant to Section 13 shall be allocated among the Members in a manner
such that, taking into account all prior allocations of Net Income and Net
Losses of the Company and all Distributions made by the Company through such
date, the Capital Account of each Member is, as nearly as possible, equal to the
amount which such Member is entitled to receive pursuant to Section 13.3(d)(3).

 

7.3          U.S. Tax Allocations.

 

(a)          Subject to Section 704(c) of the Code, for U.S. federal and state
income tax purposes, all items of Company income, gain, loss, deduction and
credit shall be allocated among the Members in the same manner as the
corresponding item of income, gain, loss, deduction or credit was allocated
pursuant to the preceding paragraphs of this Section 7.

 

(b)          In accordance with Code Section 704(c) and the Treasury regulations
promulgated thereunder, income and loss with respect to any property contributed
to the capital of the Company (including, if the property so contributed
constitutes a partnership interest, the applicable distributive share of each
item of income, gain, loss, expense and other items attributable to such
partnership interest whether expressly so allocated or reflected in partnership
allocations) shall, solely for U.S. federal income tax purposes, be allocated
among the Members so as to take account of any variation between the adjusted
basis of such property to the Company for U.S. federal income tax purposes and
its Agreed Upon Value at the time of contribution. Such allocation shall be made
in accordance with the “traditional method” set forth in Regulations
Section 1.704-3(b) unless the Members unanimously agree to another permissible
method under such Regulations.

 

(c)          Any elections or other decisions relating to such allocations shall
be made by the Members in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 7.3 are solely
for purposes of U.S. federal, state and local income taxes and shall not affect,
or in any way be taken into account in computing, any Member’s share of Net
Income, Net Loss, other items or distributions pursuant to any provisions of
this Agreement.

 

 26 

 

 

Section 8.             Books, Records, Tax Matters and Bank Accounts.

 

8.1          Books and Records. The books and records of account of the Company
shall be maintained in accordance with industry standards and shall be based on
the Property Manager Reports. The books and records shall be maintained at the
Company’s principal office or at a location designated by the Management
Committee, and all such books and records (and the dealings and other affairs of
the Company and its Subsidiaries) shall be available to any Member at such
location for review, investigation, audit and copying, at such Member’s sole
cost and expense, during normal business hours on at least twenty-four (24)
hours prior notice. In connection with such review, investigation or audit, such
Member (and its representatives and agents) shall have the unfettered right to
meet and consult with any and all employees of Property Manager (or any of their
respective Affiliates) and to attend meetings and independently meet and consult
with any and all third parties having dealings or any other relationship with
the Company or any of its Subsidiaries or with Property Manager in respect of
the Company or any of its Subsidiaries. In addition, at any time during which
CWS Apartment Homes LLC is not the Property Manager of a particular Property,
then unless Bluerock has conducted an independent annual audit (the “BR Audit”)
of the books, accounts and records of the Company pursuant to a scope reasonably
acceptable to CWS and Promote Member and promptly provides CWS and Promote
Member with a copy of such audit certified to CWS and Promote Member, CWS and
Promote Member shall have the right to require an annual audit (the “CWS Audit”)
of the books, accounts and records of the Company and the Subsidiary relating to
such Property conducted by an independent auditor selected by CWS and Promote
Member. The BR Audit shall be conducted at the expense of the Company. Bluerock
and CWS shall each bear fifty percent (50%) of the costs associated with the CWS
Audit. The Company, the Subsidiaries and such Subsidiary and the other Members
shall reasonably cooperate in connection with any audit.

 

8.2          Reports and Financial Statements.

 

(a)          Within five (5) business days of the end of each Fiscal Year, the
Manager shall cause each Member to be furnished with two sets of the following
additional annual reports computed as of the last day of the Fiscal Year:

 

(1)         An unaudited balance sheet of the Company;

 

(2)         An unaudited statement of the Company’s profit and loss; and

 

(3)         A statement of the Members’ Capital Accounts and changes therein for
such Fiscal Year.

 

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(b)          Within the time periods set forth in the Management Agreement, the
Property Manager is required to furnish to Owner such information as requested
by Bluerock as is necessary for any reporting requirements of the SOIFs, BR
Growth, or BR Growth II (to the extent any of such affiliates of Bluerock are
hereafter a Member or direct or indirect owner of a Member of the Company) and
any reporting requirements of any REIT Member (whether a direct or indirect
owner) to determine its qualification as a REIT and its compliance with REIT
Requirements as shall be reasonably requested by Bluerock. Further, as provided
in the Management Agreement, the Property Manager is required to cooperate in a
reasonable manner at the request of any Member to work in good faith with any
designated accountants or auditors of such Member or its Affiliates so that such
Member 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 the Member or any of its
Affiliates in connection therewith, including for purposes of testing internal
controls and procedures of such Member or its Affiliates.

 

(c)          The Members acknowledge that the Property Manager is obligated to
perform Property-related accounting and furnish Property-related accounting
statements under the terms of the Management Agreement (the “Property Manager
Reports”). Manager shall be entitled to rely on the Property Manager Reports
with respect to its obligations under this Section 8, and the Members
acknowledge that the reports to be furnished shall be based on the Property
Manager Reports, without any duty on the part of the Manager to further
investigate the completeness, accuracy or adequacy of the Property Manager
Reports.

 

8.3          Tax Representative.

 

(a)          Bluerock is hereby designated as the “tax matters partner” of the
Company and the Subsidiaries, as defined in Code Section 6231(a)(7) (the “Tax
Matters Member”) and shall prepare or cause to be prepared all income and other
tax returns of the Company and its Subsidiaries pursuant to the terms and
conditions of Section 8.5. Except as otherwise provided in this Agreement, all
elections required or permitted to be made by the Company and its Subsidiaries
under the Code or state tax law shall be timely determined and made by Bluerock
in its reasonable good faith discretion after consultation with CWS. The Members
intend that the Company be treated as a partnership for U.S. federal, state and
local tax purposes, and the Members will not elect or authorize any person to
elect to change the status of the Company from that of a partnership for U.S.
federal, state and local income tax purposes. Bluerock agrees to consult with
CWS with respect to any written notice of any material tax elections and any
material inquiries, claims, assessments, audits, controversies or similar events
received from any taxing authority. In addition, upon the request of any Member,
the Company and each of its Subsidiaries shall make an election pursuant to Code
Section 754 to adjust the basis of the Company’s property in the manner provided
in Code Sections 734(b) and 743(b). The Company hereby indemnifies and holds
harmless Bluerock from and against any claim, loss, expense, liability, action
or damage resulting from its acting or its failure to take any action as the
“tax matters partner” of the Company and its Subsidiaries, provided that any
such action or failure to act does not constitute gross negligence or willful
misconduct by Bluerock. As the Tax Matters Member, Bluerock shall take such
action as may be necessary to cause to the extent possible each other Member to
become a “notice partner” within the meaning of Code Section 6231(a)(8).
Bluerock shall use reasonable efforts to inform each other Member of all
material matters that may come to its attention in its capacity as the Tax
Matters Member by giving notice thereof within ten (10) business days after
becoming aware thereof and, within such time, shall forward to each other Member
copies of all material written communications it may receive in such capacity.
If any Member intends to file a notice of inconsistent treatment under Code
Section 6222(b), such Member shall give reasonable notice under the
circumstances to the other Members of such intent and the manner in which the
Member’s intended treatment of an item is (or may be) inconsistent with the
treatment of that item by the other Members. Without the consent of each Member,
the Tax Matters Member shall not extend the statute of limitations, file a
request for administrative adjustment, file suit concerning any tax refund or
deficiency relating to any Company administrative adjustment or enter into any
settlement agreement relating to any Company item of income, gain, loss,
deduction or credit for any Fiscal Year of the Company. This provision is not
intended to authorize the Tax Matters Member to take any action left to the
determination of an individual Member under Sections 6222 through 6231 of the
Code.

 

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(b)          If, and to the extent that, provisions of the Bipartisan Budget Act
of 2015 (the “2015 Act”) apply to any audit of any tax return of the Company
(“Affected Tax Return”), then the following provisions shall apply:

 

(i)          Bluerock shall be designated and shall act as the “Partnership
Representative” pursuant to the Code with all of the rights, duties and powers
provided for in Code Sections 6221 through 6241 (as modified by the 2015 Act),
subject to any limitations in this Section 8.3. Following such designation, any
reference to the Tax Matters Member in this Agreement shall be deemed to refer
to the Partnership Representative, and the Partnership Representative shall
succeed to all of the duties and rights of the Tax Matters Member that existed
prior to the application of the provisions of the 2015 Act. Subject to the terms
of this Agreement, the Partnership Representative shall have full discretion to
represent and bind the Company in each audit conducted by any taxing authority,
including without limitation the power and authority (i) to make an election
under Section 6223 (if available) or Section 6226 of the Code (as amended by the
2015 Act), and any Treasury Regulations promulgated in accordance therewith, and
(ii) to take, and to cause the Company to take, all actions necessary or
convenient to give effect to such an election. The Company may engage
accountants and legal counsel to assist the Partnership Representative in
discharging its duties hereunder at the expense of the Company.

 

(ii)         The Partnership Representative shall keep the other Members
reasonably advised of any material dispute the Company or any Subsidiary may
have with any federal, state or local taxing authority. The costs and expenses
incurred by a Member in connection with the preceding sentence shall not be
treated as expenses of the Company. All expenses incurred by the Partnership
Representative with respect to any tax matter that does or may affect the
Company, or any Member by reason thereof, shall be paid for out of Company
assets and shall be treated as Company expenses (other than, for the avoidance
of doubt, such costs and expenses of the Partnership Representative in its
capacity as a Member which shall not be treated as expenses of the Company).

 

(iii)        Unless directed to the contrary by the unanimous written consent of
the Members, upon any final adjustment occurring under the procedures of the
2015 Act, the Partnership Representative shall cause the Company to timely elect
to utilize the alternative procedure described in Section 6226 of the Code (as
modified by the 2015 Act) to have the Members of the Company for the year which
is under examination pay the applicable tax liability, and the Partnership
Representative shall provide the Internal Revenue Service and each affected
Member with such information as required by such Section 6226 and any Treasury
Regulations promulgated thereunder. Each Member agrees to reasonably cooperate
with the Company in utilizing the procedures under Section 6226 of the Code,
whether or not such person is a Member at the time of a final adjustment.

 

 29 

 

 

(iv)        Each applicable Member shall indemnify and reimburse the Company to
the extent that the Company is required to make any payment for a tax, interest,
addition to tax or penalty on behalf of a Member or with respect to a Member’s
share of any adjustment to income, gain, loss, deduction, or credit as
determined in the reasonable good faith discretion of the Partnership
Representative based on the amount each such Member should have borne (computed
at the tax rate used to compute the Company’s liability). To the fullest extent
permitted by law, a Member’s obligations under this Section 8.3(b)(iv) shall
survive the dissolution, liquidation, termination and winding-up of the Company
and shall survive, as to each Member, such Member’s withdrawal from the Company
or termination of the Member’s status as a Member. The Company may pursue all
rights and remedies it may have against each Member (or former Member). Any
amounts payable to the Company under this Section 8.3(iv) (an “Imputed
Underpayment Amount”) shall be payable by the applicable Member within ten (10)
business days of receipt of notice that such payment is due. The Company shall
have a right of set-off against distributions to a Member or former Member in
the amount of such Imputed Underpayment Amount, and any amount withheld pursuant
to this Section 8.3(b)(iv) shall be treated as an amount distributed to such
Member for all purposes under this Agreement. The Members agree to reasonably
cooperate with the Company as necessary to carry out the intent of this
Section 8.3, and in furtherance thereof, each Member agrees to take all actions
that the Partnership Representative informs it are reasonably necessary to
effect a valid decision of the Partnership Representative in its capacity as
such, including without limitation providing any information reasonably
requested in connection with any tax audit or related proceeding (which
information may be freely disclosed to the Internal Revenue Service or other
relevant taxing authorities) and paying the portion of a liability determined to
be attributable to such Member in accordance with this Section 8.3.

 

(v)         Bluerock shall have the authority, its reasonable good faith
discretion, to amend this Agreement where appropriate to provide for provisions
intended to address the application of the applicable rules of the Code,
Treasury Regulations and the Internal Revenue Service that apply to audits
conducted pursuant to the 2015 Act, as they may be amended or interpreted from
time-to-time, to the audit of any Affected Tax Return.

 

8.4          Bank Accounts. All funds of the Company are to be deposited in the
Company’s name in such bank account or accounts as may be designated by the
Management Committee or established by the Property Manager pursuant to the
Management Agreement and shall be withdrawn on the signature of such Person or
Persons as the Management Committee may authorize.

 

8.5          Tax Returns. Bluerock shall cause to be prepared all income and
other tax returns of the Company and its Subsidiaries required by applicable law
and shall submit such returns to the Management Committee for its review,
comment and approval at least twenty (20) days prior to the due date or extended
due date thereof and shall thereafter cause the same to be filed in a timely
manner (including extensions). No later than the due date or extended due date,
Manager shall deliver or cause to be delivered to each Member a copy of the tax
returns for the Company and such Subsidiaries with respect to such Fiscal Year,
together with such information with respect to the Company and such Subsidiaries
as shall be necessary for the preparation by such Member of its U.S. federal and
state income or other tax and information returns; provided, however, Manager
shall commit to deliver drafts of K-1s to each of the Members no later than
February 28 of the year following the end of each Fiscal Year, and shall deliver
final K-1’s to the Members promptly thereafter.

 

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8.6          Expenses. Notwithstanding any contrary provision of this Agreement,
the Members acknowledge and agree that the reasonable expenses and charges
incurred directly or indirectly by or on behalf of the Manager, Bluerock, CWS or
Promote Member in connection with its obligations under this Section 8 will be
reimbursed by the Company to the applicable party to the extent provided in the
applicable Budget. Further, it is expressly understood and agreed that all
reasonable expenses of Bluerock, CWS, Promote Member and their respective
principals and Affiliates associated with the Company or the Property, along
with all accounting and administrative expenses for CWS, shall be reimbursed by
the Company, including without limitation, filing fees, tax returns, closing
costs, due diligence and travel to the extent provided in the applicable Budget.

 

Section 9.             Management and Operations.

 

9.1          Management.

 

(a)          The Company shall be managed by Bluerock (“Manager”), who shall
have the authority to exercise all of the powers and privileges granted by the
Act, any other law or this Agreement, together with any powers incidental
thereto, and to take any other action not prohibited under the Act or other
applicable law, so far as such powers or actions are necessary or convenient or
related to the conduct, promotion or attainment of the business, purposes or
activities of the Company. Bluerock shall perform its duties as the Manager in
accordance with Due Care. Bluerock, on behalf of the Company, shall implement
all Major Decisions approved by the Members, enforce agreements entered into by
the Company and its Subsidiaries, and conduct the business and affairs of the
Company and its Subsidiaries in accordance with the terms of this Agreement.
Manager shall manage the operations and affairs of the Company, subject to the
oversight of the Management Committee. To the extent that Bluerock or a Bluerock
Transferee Transfers all or a portion of its Interest in accordance with
Section 12 to a Bluerock Transferee, such Bluerock Transferee may be appointed
as the Manager under this Section 9.1(a) by Bluerock or a Bluerock Transferee
then holding all or a portion of an Interest without any further action or
authorization by any Member.

 

(b)          The Management Committee may appoint individuals to act on behalf
of the Company with such titles and authority as determined from time to time by
the Management Committee.

 

(c)          Except as specifically provided otherwise in this Agreement:
(i) all Major Decisions shall require the consent of all Members, (ii) all BR
Major Decisions shall require only the consent of Bluerock, and (iii) if a CWS
Change Event has occurred, then neither CWS or Promote Member shall be entitled
to vote on any Major Decision except for those Major Decisions set forth in the
following subsections of the definition of Major Decision: (iii), (iv), (xii)
and (xiv), but only to the extent such Major Decisions relate to Bluerock
undertaking such Major Decision in furtherance of a 1031 exchange which does not
comply with Section 9.2(i) or to any business activity that is not within the
purposes of the Company, and not otherwise; (vii) with regard to bankruptcy,
receivership or an assignment; (viii) with regard to making distributions;
(x) with regard to amending organizational documents; (xii) with regard to
Affiliate sales, transfers or exchanges and/or for consideration other than
cash; (xiii) with regard to Affiliate financing, service contracts or fees;
(xv) with regard to BR Credit Support Claims and Neutral Credit Support Claims;
and (xvi) with regard to the terms of any Credit Support, or any amendments or
modifications thereto.

 

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9.2          Management Committee.

 

(a)          Bluerock and CWS hereby establish a management committee (the
“Management Committee”). The Management Committee shall consist of four (4)
individuals appointed to act as “representatives” of the Member that appointed
him or her (the “Representatives”) as follows: (i) Bluerock shall be entitled to
designate two (2) Representatives to represent Bluerock; and (ii) CWS shall be
entitled to designate two (2) Representatives to represent CWS. The initial
members of the Management Committee are set forth on Exhibit A. Bluerock and CWS
each represents, warrants and covenants that the Representatives designated by
them on Exhibit A have, and shall at all times have, the full power and
authority to make decisions and vote as a member of the Management Committee,
and that such Representatives’ votes as members of the Management Committee will
be binding on each of them and any transferee of all or a portion of their
Interest; unless and until such time as Bluerock or CWS or their transferee
notifies the other Member of a change in a Representative, after which time this
sentence shall apply only with respect to the replacement Representative.

 

(b)          Each member of the Management Committee shall hold office until
death, resignation or removal at the pleasure of the Member that appointed him
or her. If a vacancy occurs on the Management Committee, the Person with the
right to appoint and remove such vacating Representative shall appoint his or
her successor. A Member shall lose its right to have Representatives on the
Management Committee, and its Representatives on the Management Committee shall
be deemed to be automatically removed, as of the date on which such Member
ceases to be a Member or as otherwise provided in this Agreement. If Bluerock or
a Bluerock Transferee Transfers all or a portion of its Interest to a Bluerock
Transferee pursuant to Section 12.2, such Bluerock Transferee shall
automatically, and without any further action or authorization by any Member,
succeed to the rights and powers of Bluerock under this Section 9 as may be
agreed to between Bluerock or the Bluerock Transferee which is transferring the
Interest, on the one hand, and the Bluerock Transferee to which the Interest is
being transferred, on the other hand, including the shared or unilateral right
to appoint the Representatives that Bluerock was theretofore entitled to appoint
pursuant to Section 9.2(a).

 

(c)          The Management Committee shall meet once every quarter (unless
waived by mutual agreement of the Members) and at such other times as may be
necessary for the conduct of the Company’s business on at least five (5) days
prior written notice of the time and place of such meeting given by any
Representative. Notice of regular meetings of the Management Committee is not
required. Representatives may waive in writing the requirements for notice
before, at or after a special meeting, and attendance at such a meeting without
objection by a Representative shall be deemed a waiver of such notice
requirement.

 

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(d)          The Management Committee shall have the right, but not the
obligation, to elect one of the Representatives or another person to serve as
Secretary of the Management Committee. Such person shall hold office until his
or her death, resignation or removal by a vote of the Management Committee. The
Secretary or a person designated by him or her shall take written minutes of the
proceedings of the meetings of the Management Committee, and such minutes shall
be filed with the records of the Company.

 

(e)          The only Representatives required to constitute a quorum for a
meeting of the Management Committee shall be one (1) Representative appointed by
Bluerock and one (1) Representative appointed by CWS; provided, however, that if
CWS has not appointed at least one (1) Representative to the Management
Committee at the time of such meeting (for example, if each CWS Representative
has been removed and not replaced), then a quorum for a meeting of the
Management Committee shall be one (1) Representative appointed by Bluerock. Each
of the two (2) Representatives appointed by Bluerock shall be entitled to cast
two (2) votes on any matter that comes before the Management Committee and each
of the Representatives appointed by CWS shall be entitled to cast one (1) vote
on any matter that comes before the Management Committee. Approval by the
Management Committee of any matter shall require the affirmative vote (including
votes cast by proxy) of at least a majority of the votes of the Representatives
then in office voting at a duly held meeting of the Management Committee.

 

(f)          Any meeting of the Management Committee may be held by conference
telephone call, video conference or through similar communications equipment by
means of which all persons participating in the meeting can communicate with
each other. Participation in a telephonic and/or video conference meeting held
pursuant to this Section 9 shall constitute presence in person at such meeting.

 

(g)          Any action required or permitted to be taken at a meeting of the
Management Committee may be taken without a meeting, without prior notice and
without a vote if a consent or consents in writing, setting forth the action so
taken, shall be signed by the Representatives having not less than the minimum
of votes that would be necessary to authorize or take such action at a meeting
at which all Representatives entitled to vote thereon were present and voted.
All consents shall be filed with the minutes of the proceedings of the
Management Committee.

 

(h)          Except as otherwise expressly provided in this Agreement, none of
the Members or their Representatives (in their capacities as members of the
Management Committee) only, shall have any duties or liabilities to the Company
or any other Member (including any fiduciary duties), whether or not such duties
or liabilities otherwise arise or exist in law or in equity, and, to the extent
permitted by applicable law, each Member hereby expressly waives any such duties
or liabilities; provided, however, that this Section 9.2(h) shall not eliminate
or limit the liability of such Representatives or the Members (A) for acts or
omissions that involve fraud, intentional misconduct or a knowing and culpable
violation of law, or (B) for any transaction not permitted or authorized under
or pursuant to this Agreement from which such Representative or Member derived a
personal benefit unless the Management Committee has approved in writing such
transaction in accordance with this Agreement; provided, further, however, that
each of such Representative and/or Member acts in accordance with Due Care.
Except as provided in this Agreement, whenever in this Agreement a
Representative of a Member and/or a Member is permitted or required to make a
decision affecting or involving the Company, any Member or any other Person,
such Representative and/or such Member shall be entitled to consider only such
interests and factors as he, she or it desires, including a particular Member’s
interests, and shall, to the fullest extent permitted by applicable law, have no
duty or obligation to give any consideration to any interest of or factors
affecting the Company or any Member.

 

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(i)          Subject to obtaining any necessary Lender approvals, Bluerock, in
its sole discretion, may at any time elect to cause the Company to transfer one
or more of the Properties (each, a “Divided Property”) to a new limited
liability company (an “LLC”) formed for the purpose of owning such Divided
Property, which LLC shall be owned by the Members in the same percentages as
such Members own their Interests in the Company. The operating agreement for the
LLC shall be substantially similar in form to this Agreement except (i) as
mutually agreed by the Members and (ii) that revisions shall be made to this
Agreement and the operating agreements for the LLCs to reflect that the
distributions under Section 6.1(c) shall be made on an aggregate basis with
respect to the Company and the Divided Property LLCs with the effect that the
distribution economics as set forth under Section 6.1(c) hereof shall be
respected among the Company and the Divided Property LLCs on an aggregated basis
(for purposes of clarity, no amounts shall be distributable under
Section 6.1(c)(7) of any Divided Property LLC or this Agreement (as revised)
unless and until the aggregate Preferred Return and Capital Contributions have
first been distributed with respect to the Company and all Divided Property
LLCs). The transfer of a Divided Property to an LLC shall be structured to
qualify as a partnership division pursuant to Treas. Reg. § 1.708-1(d), and
shall be accomplished by transferring 100% of the membership interest in the
Owner that owns the Divided Property to the LLC and as otherwise described in
Treas. Reg. § 1.708-1(d)(3)(i)(A). The LLC shall take the Divided Property
subject to the Company’s obligations under the Loan documentation and the
related security agreements, and the Manager is authorized to execute, and shall
execute, all necessary documents and take all other actions on behalf of the
Company to effectuate such transfer. All costs and expenses of effecting a
Divided Property incurred by the Company shall be borne by Bluerock. If Bluerock
desires to exchange a Property, including, without limitation, a Divided
Property, pursuant to a Code Section 1031 exchange and CWS and Promote Member do
not, then Bluerock may, after or concurrently with the sale of such Property,
cause the exchange property to be acquired by the LLC, provided that
concurrently with the sale of such Property, Bluerock shall cause CWS’ and
Promote Members’ interest in the Company with respect to the sold Property to be
redeemed for an amount equal to what CWS and the Promote Member would have
received had such Property been sold and proceeds were distributed pursuant to
Section 6 of this Agreement rather than used to consummate a Code Section 1031
exchange.

 

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9.3          Budget.

 

(a)          Attached hereto as Exhibit D is the form of Budget applicable to
the balance of the 2017 Fiscal Year, which Budget is deemed approved by each
Owner and the Property Manager. The Property Manager shall submit a proposed
Budget for a Fiscal Year to each Owner for such Owner’s review no later than
September 15th of the year prior to the beginning of such Fiscal Year. In the
event any Owner does not approve any Budget proposed by the Property Manager, in
whole or in part, any Owner and the Property Manager shall in good faith
cooperate to resolve any differences with respect to the proposed Budget for
such Fiscal Year as soon as may be reasonably practicable, but in no event later
than December 31 of the year prior to the beginning of such Fiscal Year. If for
any reason the Property Manager and an Owner are unable to agree on a form of
Budget for a Fiscal Year prior to such deadline, such Owner shall, at its
election, be entitled to unilaterally establish the Budget for such Fiscal Year
and such Owner-prepared Budgets shall be implemented by the Property Manager as
provided in the Management Agreement. Until a complete new Budget is approved,
as provided in the Management Agreement, and so long as an Owner has not
unilaterally established a Budget as provided in the immediately preceding
sentence, Property Manager is required to operate the Property on the basis of
the Budget for the prior Fiscal Year adjusted, as necessary, for (i) any actual
changes in Uncontrollable Expenses, (ii) increases in Controllable Expenses
based on changes in the Consumer Price Index All Urban Consumers for the area in
which the Property is located, and (iii) any Emergency Expenditure. In the
instance that the Property is operating on the basis of the Budget for the prior
Fiscal Year, all capital expenditures (except capital expenditures which are
Emergency Expenditures) must be prior approved by an Owner in writing. It is
hereby expressly acknowledged by the parties that the Budgets are intended as
projections only, and the Property Manager shall have no responsibility (other
than the reporting set forth in Section 9.3(c)) for any shortfall or other loss
because the Property operations do not achieve the results projected in any
Budget. Each Fiscal Year Budget shall include the information set forth in
Exhibit B attached hereto.

 

(b)          The Budget shall constitute a major control under which the
Property Manager shall be required to operate the Property, and there shall be
no substantial variances therefrom except as permitted by the Property
Management Agreement or approved by an Owner (and, to the extent required under
this Agreement, by the Management Committee established hereunder) in writing.
Consequently, except as permitted by other provisions of the Management
Agreement, no expenses may be incurred or commitments made by the Property
Manager in connection with the maintenance and operation of the Property which
exceed the amounts allocated to the corresponding line item amounts in the
Budget for the period in question by more than ten percent (10%) or $5,000 per
line item, whichever is less, without the prior consent of an Owner; provided
that the foregoing limitation shall not apply to the “Base Management Fee”
(which will be determined as provided in the Management Agreement), or to
expenses for Uncontrollable Expenses; and provided that the Property Manager
will be permitted to pay expenses in excess of Budget allowances if the expenses
represent reallocation among periods of amounts otherwise allowed by this
provision or which represent cost savings in any line item or the application of
a contingency line item, if any, (for avoidance of doubt, any such reallocation
shall only occur within a Budget for a given Owner and Property, and not among
Budgets for multiple Owners and/or Properties). Any 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 the Management 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 line item amount
contained in the Budget) in excess of ten percent (10%) or $5,000 per line item,
whichever is less, the Property Manager shall furnish to the Owner, within the
time period set forth in the Management Agreement, a written explanation as to
why the variance occurred. If substantial variances have occurred or are
anticipated by the Property Manager during the remainder of any Fiscal Year, the
Property Manager shall, as provided in the Management Agreement, prepare and
submit to the Owner, for review and approval by such Owner, a revised forecast
covering the remainder of the Fiscal Year with an explanation for the revision.

 

 35 

 

 

(d)          Notwithstanding the terms of Section 9.3(a) through Section 9.3(c)
above, any Budget may, at any time, be amended by Bluerock in its commercially
reasonable discretion.

 

(e)          For all purposes of this Section 9.3, subject to the rights of CWS
and Promote Member to approve Major Decisions as set forth in Section 9.1(c),
the limitations on Bluerock undertaking BR Major Decisions set forth in
Section 5.7, Section 9.7, Section 9.10, of this Agreement, and the limitations
on Bluerock implementing BR Major Decisions as contemplated in the definition of
BR Major Decisions, decisions on behalf of any Owner shall be made by the
Management Committee.

 

9.4          Implementation of Plan by Property Manager. The Property Manager
shall, subject to the limitations contained in the Management Agreement, the
availability of operating revenues and other cash flow and any other matters
outside of the reasonable control of the Property Manager, be required to
implement and shall not vary or modify the then applicable Budget unless
otherwise expressly permitted to vary or modify the applicable Budget pursuant
to the Management Agreement.

 

9.5          Affiliate Transactions. Except for the Management Agreement, the
License Agreement and, if applicable, the Corporate Housing Agreement, no
agreement shall be entered into by the Company or any Owner with a Member or any
Affiliate of a Member and no decision shall be made in respect of any such
agreement (including, without limitation, the enforcement or termination
thereof) unless such agreement or related decision shall have been approved in
writing by all Members. Without limiting the foregoing, except for the
Management Agreement, the License Agreement, and, if applicable, the Corporate
Housing Agreement, any such agreement shall be on arm’s length terms and
conditions, be terminable on thirty (30) days’ notice without penalty and the
terms and conditions of such agreement shall be disclosed to all Representatives
prior to the execution and delivery thereof. Further, the written approval of
Bluerock shall be required prior to the use of the name “Bluerock” in connection
with any matter or transaction and the written approval of CWS and Promote
Member shall be required prior to the use of the name “CWS” in connection with
any matter or transaction.

 

9.6          Other Activities.

 

(a)          Right to Participation in Other Member Ventures. Neither the
Company nor any Member (or any Affiliate of any Member) shall have any right by
virtue of this Agreement either to participate in or to share in any other now
existing or future ventures, activities or opportunities of any of the other
Members or their Affiliates, or in the income or proceeds derived from such
ventures, activities or opportunities.

 

(b)          Limitation on Actions of Members; Binding Authority. No Member
shall, without the prior written consent of the other Members, take any action
on behalf of, or in the name of, the Company, or enter into any contract,
agreement, commitment or obligation binding upon the Company, or, in its
capacity as a Member or Manager of the Company, perform any act in any way
relating to the Company or the Company’s assets, except in a manner and to the
extent consistent with the provisions of this Agreement.

 

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9.7          Management Agreement.

 

(a)          Independent Contractor. CWS Apartment Homes LLC, a Delaware limited
liability company, as Property Manager, has agreed to provide management
services to each Owner with respect to the Property on the terms set forth in
the respective Management Agreement; and it is agreed that the Property Manager
shall provide such management services to such Owner as an independent
contractor.

 

(b)          Management and Oversight Fees. Each Owner has entered into a
Management Agreement with the Property Manager (as such Management Agreement may
be updated and supplemented from time to time) pursuant to which the Property
Manager will be required to provide the management services described therein to
such Owner. Pursuant to the Management Agreement and subject to the terms of the
Loan Documents, the Property Manager will be entitled to receive a property
management fee equal to three percent (3.0%) of Gross Rental Revenue (as defined
in the Management Agreement) but in no event less than $7,500.00 per month
during “lease-up” (as more particularly described in Section 3.1 of the
Management Agreement (the “Base Management Fee”). CWS Apartment Homes LLC, as
the Property Manager, or its designee, shall also be entitled to a construction
management fee of three percent (3.0%) as provided in the Management Agreement.

 

(c)          Termination of Management Agreement.

 

(1)         The Management Agreement shall be terminable as provided under its
terms and conditions by any Owner or Bluerock or, as long as the Property
Manager is CWS Apartment Homes LLC, by Property Manager.

 

(2)         Notwithstanding anything to the contrary in this Section 9.7(c), no
termination of a Management Agreement or buyout of the other party’s Interest in
the Company shall be permitted unless permitted or approved under any applicable
Collateral Agreement or under the Loan Documents.

 

(d)          Delegation. Any delegation of the responsibilities of Property
Manager or the subcontracting for such services will be subject to the prior
written consent of the Management Committee. Separate agreements may also be
entered into with CWS, Bluerock, their respective Affiliates, or with third
parties for certain services to be provided to the Company or any Owner,
including leasing, construction management, property management, asset
management, technology services, etc., on an arms-length basis and on terms and
conditions which are competitive for services and supplies rendered by persons
or entities of similar skill, competence and experience other than the Members
or their respective Affiliates. Such arrangements shall be at market rates, and
shall, subject to the final sentence of this Section 9.7(d), be entered into
only with the prior written approval of the Members, consistent with an approved
budget and business plan for each asset. Unless otherwise agreed, all such
contracts will be payable on a monthly basis and will be terminable upon thirty
(30) days’ notice for any reason or no reason. Notwithstanding the foregoing,
the Members hereby approve the Management Agreement and the License Agreement.
Further notwithstanding anything contained herein to the contrary, this
Section 9.7 shall not be construed to prevent the Management Committee from
unilaterally selecting a replacement Property Manager which is not an Affiliate
of Bluerock following any termination of the Management Agreement.

 

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9.8          Operation in Accordance with REOC/REIT Requirements.

 

(a)          The Members acknowledge that Bluerock or one or more of its
Affiliates (a “BR Affiliate”) intends or may intend to qualify as a “real estate
operating company” or “venture capital operating company” within the meaning of
U.S. Department of Labor Regulation 29 C.F.R. §2510.3-101 (a “REOC”), and agree
that the Company and its Subsidiaries shall in such case be operated in a manner
that will enable Bluerock and such BR Affiliate to so qualify. Notwithstanding
anything herein to the contrary, the Company and its Subsidiaries shall not
take, or refrain from taking, any action that Bluerock notifies the Company
would result in Bluerock or a BR Affiliate from failing to qualify as a REOC.
The Members acknowledge and agree that Bluerock may assign any or all of its
rights or powers under this Agreement as Manager, to designate committee
representatives, to provide consents and approvals, or any other rights or
powers to one or more of its BR Affiliates as it deems appropriate, and the
exercise of any such rights or powers by a BR Affiliate shall have full force
and effect under this Agreement without the need for any further consent or
approval. Except as disclosed to Bluerock, CWS (a) shall not fund any Capital
Contribution “with the ‘plan assets’ of any ‘employee benefit plan’ within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended or any ‘plan’ as defined by Section 4975 of the Internal Revenue Code
of 1986, as amended”, and (b) shall comply with any reasonable requirements
specified by Bluerock in order to ensure compliance with this Section 9.8.

 

(b)          Except for the Property, neither the Company nor its Subsidiaries
shall hold any investment, incur any indebtedness or otherwise take any action
that would cause any Member of the Company (or any Person holding an indirect
interest in the Company through an entity or series of entities treated as
partnerships for U.S. federal income tax purposes) to realize any “unrelated
business taxable income” as such term is defined in Code Sections 511 through
514, unless specifically agreed to by the Manager in writing. No Manager, Member
or any Affiliate thereof shall be liable for any income or other taxes, damages,
costs or expenses incurred by the Company or any Member by reason of the
recognition by the Company of UBTI.

 

(c)          The Company (and any direct or indirect Subsidiary of the Company)
may not engage in any activities or hold any assets that would constitute or
result in the occurrence of a REIT Prohibited Transaction as defined herein.
Notwithstanding anything to the contrary contained in this Agreement, during the
time a REIT Member is a Member of the Company, neither the Company, any direct
or indirect Subsidiary of the Company, nor any Member of the Company shall
knowingly take or refrain from taking any action which, or the effect of which,
would constitute or result in the occurrence of a REIT Prohibited Transaction by
the Company or any direct or indirect Subsidiary thereof, including without
limiting the generality of the foregoing, but in amplification thereof:

 

 38 

 

 

(i)          Entering into any lease, license, concession or other agreement or
permitting any sublease, license, concession or other agreement that provides
for rent or other payment based in whole or in part on the income or profits of
any person, excluding for this purpose a lease that provides for rent based in
whole or in part on a fixed percentage or percentages of gross receipts or gross
sales of any person without reduction for any costs of the lessee (and in the
case of a sublease, without reduction for any sublessor costs). Bluerock
confirms, without approving the same, that it has nonetheless had the
opportunity to both review and approve all of the documents described in the
immediately preceding sentence which are in existence as of the date of this
Agreement;

 

(ii)         Leasing personal property, excluding for this purpose a lease of
personal property that is entered into in connection with a lease of real
property where the rent attributable to the personal property is less than 15%
of the total rent provided for under the lease. Bluerock confirms without
approving the same, that it has nonetheless had the opportunity to both review
and approve all of the documents described in the immediately preceding sentence
which are in existence as of the date of this Agreement;

 

(iii)        Acquiring or holding any debt investments, excluding for these
purposes “debt” solely between wholly-owned Subsidiaries of the Company, unless
(I) the amount of interest income received or accrued by the Company under such
loan does not, directly or indirectly, depend in whole or in part on the income
or profits of any person, and (II) the debt is fully secured by mortgages on
real property or on interests in real property. Notwithstanding anything to the
contrary herein, in the case of debt issued to the Company by a Subsidiary which
is treated as a “taxable REIT subsidiary” of the REIT Member, such debt shall be
secured by a mortgage or similar security interest, or by a pledge of the equity
ownership of a subsidiary of such taxable REIT subsidiary. Bluerock hereby
confirms, without approving the same, that it has nonetheless had the
opportunity to both review and approve all debt investments in effect as of the
date of this Agreement;

 

(iv)        Acquiring or holding, directly or indirectly, more than 10% of the
outstanding securities of any one issuer (by vote or value) other than an entity
which either (i) is taxable as a partnership or a disregarded entity for United
States federal income tax purposes, (ii) has properly elected to be a taxable
REIT subsidiary of the REIT Member by jointly filing with REIT, IRS Form 8875,
or (iii) has properly elected to be a real estate investment trust for U.S.
federal income tax purposes;

 

(v)         Entering into any agreement where the Company receives amounts,
directly or indirectly, for rendering services to the tenants of any property
that is owned, directly or indirectly, by the Company other than (i) amounts
received for services that are customarily furnished or rendered in connection
with the rental of real property of a similar class in the geographic areas in
which the Property is located where such services are either provided by (A) an
Independent Contractor (as defined in Section 856(d)(3) of the Code) who is
adequately compensated for such services and from which the Company or REIT
Member do not, directly or indirectly, derive revenue or (B) a taxable REIT
subsidiary of REIT Member who is adequately compensated for such services or
(ii) amounts received for services that are customarily furnished or rendered in
connection with the rental of space for occupancy only (as opposed to being
rendered primarily for the convenience of the Property’s tenants);

 

 39 

 

 

(vi)        Entering into any agreement where a material amount of income
received or accrued by the Company under such agreement, directly or indirectly,
does not qualify as either (i) “rents from real property” or (ii) “interest on
obligations secured by mortgages on real property or on interests in real
property,” in each case as such terms are defined in Section 856(c) of the Code;

 

(vii)       Holding cash of the Company available for operations or distribution
in any manner other than a traditional bank checking or savings account;

 

(viii)      Selling or disposing of any property, subsidiary or other asset of
the Company prior to (i) the completion of a two (2) year holding period with
such period to begin on the date the Company acquires a direct or indirect
interest in such property and begins to hold such property, subsidiary or asset
for the production of rental income, and (ii) the satisfaction of any other
requirements under Section 857 of the Code necessary for the avoidance of a
prohibited transaction tax on the REIT; or

 

(ix)         Failing to make current cash distributions to REIT Member each year
in an amount which does not at least equal the taxable income allocable to REIT
Member for such year; provided, however, any such cash distributions shall be
made in accordance with the priorities set forth in Section 6.1(c).

 

Notwithstanding the foregoing provisions of this Section 9.8(c), the Company may
enter into a REIT Prohibited Transaction if it receives the prior written
approval of the REIT Member specifically acknowledging that the REIT Member is
approving a REIT Prohibited Transaction pursuant to this Section 9.8(c). For
purposes of this Section 9.8(c), “REIT Prohibited Transactions” shall mean any
of the actions specifically set forth in Sections 9.8(c)(i) through (c)(ix) as
well as any action of which the Company receives notice from Bluerock or a REIT
Member that such action would result in a REIT Member losing its REIT status
under IRC Section 856 or would cause such REIT Member to be subject to any
punitive taxation pursuant to IRC Section 857(b)(6). The Loan or any loan
contemplated by Section 5.2(b) shall not be considered a REIT Prohibited
Transaction.

 

9.9          FCPA.

 

(a)          In compliance with the Foreign Corrupt Practices Act, each Member
will not, and will ensure that its officers, directors, employees, shareholders,
members, agents and Affiliates, acting on its behalf or on the behalf of the
Company or any of its Subsidiaries or Affiliates do not, for a corrupt purpose,
offer, directly or indirectly, promise to pay, pay, promise to give, give or
authorize the paying or giving of anything of value to any official
representative or employee of any government agency or instrumentality, any
political party or officer thereof or any candidate for office in any
jurisdiction, except for any facilitating or expediting payments to government
officials, political parties or political party officials the purpose of which
is to expedite or secure the performance of a routine governmental action by
such government officials or political parties or party officials. The term
“routine governmental action” for purposes of this provision shall mean an
action which is ordinarily and commonly performed by the applicable government
official in (i) obtaining permits, licenses, or other such official documents
which such Person is otherwise legally entitled to; (ii) processing governmental
papers; (iii) providing police protection, mail pick-up and delivery or
scheduling inspections associated with contract performance or inspections
related to transit of goods across country; (iv) providing phone service, power
and water supply, loading and unloading of cargo, or protecting perishable
products or commodities from deterioration; or (v) actions of a similar nature.

 

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(b)          The term routine governmental action does not include any decision
by a government official whether, or on what terms, to award new business to or
to continue business with a particular party, or any action taken by an official
involved in the decision making process to encourage a decision to award new
business to or continue business with a particular party.

 

(c)          Each Member agrees to notify immediately the other Member of any
request that such Member or any of its officers, directors, employees,
shareholders, members, agents or Affiliates, acting on its behalf, receives to
take any action that may constitute a violation of the Foreign Corrupt Practices
Act.

 

9.10        BR Major Decisions. BR Major Decisions shall be subject to the
following terms and conditions.

 

(a)          BR Sale. Prior to undertaking any BR Sale, Bluerock shall notify
CWS and Promote Member thereof in writing and request CWS and Promote Member to
provide the names of up to three (3) Qualified Brokers which they would
recommend to undertake and consummate the BR Sale. CWS and Promote Member shall
promptly respond to such request and shall provide a list of said Qualified
Brokers in order of preference and complete with relevant supporting
information, including broker opinions of value. Bluerock will in good faith
consider the Qualified Brokers recommended by CWS and Promote Member and will,
in its reasonable good faith discretion, select a Qualified Broker to undertake
and consummate the BR Sale (for avoidance of doubt, Bluerock shall have no
obligation to select any of the Qualified Brokers recommended by CWS and Promote
Member, and may select another Qualified Broker who was not recommended by CWS
and Promote Member). A BR Sale must be undertaken by Bluerock on a bonafide
arms-length basis with an independent third party Person not affiliated with
Bluerock. Bluerock shall keep the other Members reasonably apprised of the
status of a BR Sale and will promptly notify the other Members in writing of the
proposed offering price and other terms and conditions of the proposed BR Sale,
and shall provide the other Members with copies of all proposed and final term
sheets and agreements, and shall keep the other Members informed regarding the
progress of the BR Sale. It shall be a condition to any BR Sale that the
Guarantor be released from all Credit Support (subject to the Guarantor not
being released for environmental liability arising prior to the date of loan
assumption under an environmental indemnity, and such other matters customarily
not released in connection with Fannie Mae loan assumptions) in connection with
the applicable Loan if the Property which is the subject of the BR Sale is to be
sold without a full repayment of the Loan at the closing. Each BR Sale shall be
on a full cash basis. The Members shall cooperate with each other in a
reasonable manner to implement a BR Sale under this Section 9.10, as requested
by any Member and as necessary to effect the sale of any interests in the Owner
that owns the Property which is the subject of the BR Sale, including, without
limitation, a redemption of ownership interests or the sale of a fee interest in
the Property which is the subject of the BR Sale, without, however, requiring
any change in the economics of such acquisition, or any additional liability of
any Member, and with all expenses related to any such revised structure being
borne and paid by the requesting Member.

 

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(b)          BR Financing. Bluerock may undertake a BR Financing on behalf of
the Company or Subsidiary on a bona-fide arms-length basis with an independent
third party lender who is not an Affiliate of Bluerock. Bluerock shall promptly
notify the other Members in writing of the initiation of any BR Financing and
the proposed terms of any BR Financing, shall promptly provide the other Members
with copies of all proposed applications, term sheets, commitments and loan
documents, and shall keep the other Members informed regarding the progress of
the BR Financing. The BR Financing shall (i) be on a non-recourse basis (except
for customary non-recourse carve-outs), (ii) unless CWS Apartment Homes LLC will
be the Property Manager of the applicable Property, not in any manner require
CWS, Promote Member or any Affiliate thereof to provide any Credit Support
(except, in all circumstances where CWS Apartment Homes LLC will be the Property
Manager of the applicable Property, for Credit Support substantially consistent
with terms that the lender and Guarantor have agreed to at such time with
respect to a customary loan program; provided, however, in no event shall such
Credit Support be on terms more onerous to the Guarantor than the terms of the
Credit Support provided by Guarantor in connection with the initial Loan),
(iii) permit the consummation of the Transfers permitted under Section 12.2 of
this Agreement in substantially the same manner as permitted under the initial
Loan and without the payment of fees or charges for Transfers other than
customary review fees and fees which are not substantially greater than those
set forth under the initial Loan, (iv) if applicable, provide for the release of
the Guarantor under the Credit Support (subject to the Guarantor not being
released for environmental liability arising prior to such date under an
environmental indemnity, and such other matters customarily not released in
connection with Fannie Mae loan assumptions) upon consummation of the
transactions contemplated by the terms of Section 15 (other than the
consummation of a Sale Election) or upon the termination of the Management
Agreement (unless, in each case, after exercising commercially reasonable
efforts to effect such release, Bluerock causes a creditworthy entity,
reasonably acceptable to CWS, Promote Member and Guarantor, to provide an
indemnity in form and substance reasonably satisfactory to CWS, Promote Member
and Guarantor, indemnifying Guarantor for matters arising from and after the
date of or such consummation or termination, and (v) permit substantially the
same permitted transfers included in the loan documents relating to the initial
Loan which is in place at the time the Owner initially acquired the relevant
Property.

 

(c)          When implementing any BR Major Decision, Bluerock agrees that it
shall not take or fail to take any action or decision on behalf of the Company,
any Subsidiary or with respect to any Property that is reasonably likely to
result in a BR Credit Support Claim or Neutral Support Claim against the
Guarantor or materially increase the exposure of the Guarantor under any Credit
Support as a result of any increase in the principal amount of the Loan or other
changes in the economic terms of the Loan or would in whole or in part
constitute a Major Decision.

 

9.11        Licensed Property. Neither the Company nor any Owner may use any of
the Licensed Property (as defined in the License Agreement) in connection with
any Property where CWS Apartment Homes LLC, a Delaware limited liability company
is not the Property Manager, except as otherwise specifically set forth in the
License Agreement.

 

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Section 10.          Confidentiality.

 

10.1        Any information relating to a Member’s business, operation or
finances which are proprietary to, or considered proprietary by, a Member are
hereinafter referred to as “Confidential Information”. All Confidential
Information in tangible form (plans, writings, drawings, computer software and
programs, etc.) or provided to or conveyed orally or visually to a receiving
Member, shall be presumed to be Confidential Information at the time of delivery
to the receiving Member. All such Confidential Information shall be protected by
the receiving Member from disclosure with the same degree of care with which the
receiving Member protects its own Confidential Information from disclosure. Each
Member agrees: (i) not to disclose such Confidential Information to any Person
except to those of its employees or representatives who need to know such
Confidential Information in connection with the conduct of the business of the
Company and who have agreed to maintain the confidentiality of such Confidential
Information and (ii) neither it nor any of its employees or representatives will
use the Confidential Information for any purpose other than in connection with
the conduct of the business of the Company; provided that such restrictions
shall not apply if such Confidential Information is or hereafter becomes public,
other than by breach of this Agreement; was already in the receiving Member’s
possession prior to any disclosure of the Confidential Information to the
receiving Member by the divulging Member; or has been or is hereafter obtained
by the receiving Member from a third party not bound by any confidentiality
obligation with respect to the Confidential Information; provided, further, that
nothing herein shall prevent any Member from disclosing any portion of such
Confidential Information (1) to the Company and allowing the Company to use such
Confidential Information in connection with the Company’s business, (2) pursuant
to judicial order or in response to a governmental inquiry, by subpoena or other
legal process, but only to the extent required by such order, inquiry, subpoena
or process, and only after reasonable notice to the original divulging Member,
(3) as necessary or appropriate in connection with or to prevent the audit by a
governmental agency of the accounts of CWS or Bluerock, (4) in order to
initiate, defend or otherwise pursue legal proceedings between the parties
regarding this Agreement, (5) necessary in connection with a Transfer of an
Interest permitted hereunder or (6) to a Member’s respective attorneys or
accountants or other representatives.

 

10.2        The Members and their Affiliates shall each act to safeguard the
secrecy and confidentiality of, and any proprietary rights to, any non-public
information relating to the Company and its business, except to the extent such
information is required to be disclosed by law or reasonably necessary to be
disclosed in order to carry out the business of the Company. Each Member may,
from time to time, provide the other Members written notice of its non-public
information which is subject to this Section 10.2.

 

10.3        Without limiting any of the other terms and provisions of this
Agreement (including, without limitation, Section 9.6), to the extent a Member
(the “Pursuer”) provides the other Member with information relating to a
possible investment opportunity then being actively pursued by the Pursuer on
behalf of the Company, the other Member receiving such information shall not use
such information to pursue such investment opportunity for its own account to
the exclusion of the Pursuer so long as the Pursuer is actively pursuing such
opportunity on behalf of the Company and shall not disclose any Confidential
Information to any Person (except as expressly permitted hereunder) or take any
other action in connection therewith that is reasonably likely to cause damage
to the Pursuer.

 

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10.4        Notwithstanding anything contained in this Section 10 to the
contrary, Bluerock shall have the right to make disclosures in connection with
the Company and the Property in order to comply with Securities and Exchange
Commission requirements imposed on or otherwise governing Bluerock and any
Affiliate thereof who has an indirect interest in the Company.

 

Section 11.          Representations and Warranties.

 

11.1        In General. As of the date hereof, each of the Members hereby makes
each of the representations and warranties applicable to such Member as set
forth in Section 11.2. Such representations and warranties shall survive the
execution of this Agreement.

 

11.2        Representations and Warranties. Each Member hereby represents and
warrants that:

 

(a)          Due Incorporation or Formation; Authorization of Agreement. Such
Member is a corporation duly organized or a partnership or limited liability
company duly formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation and has the corporate,
partnership or company power and authority to own its property and carry on its
business as owned and carried on at the date hereof and as contemplated hereby.
Such Member is duly licensed or qualified to do business and in good standing in
each of the jurisdictions in which the failure to be so licensed or qualified
would have a material adverse effect on its financial condition or its ability
to perform its obligations hereunder. Such Member has the corporate, partnership
or company power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and the execution, delivery and performance
of this Agreement has been duly authorized by all necessary corporate,
partnership or company action. This Agreement constitutes the legal, valid and
binding obligation of such Member.

 

(b)          No Conflict with Restrictions; No Default. Neither the execution,
delivery or performance of this Agreement nor the consummation by such Member
(or any of its Affiliates) of the transactions contemplated hereby (i) does or
will conflict with, violate or result in a breach of (or has conflicted with,
violated or resulted in a breach of) any of the terms, conditions or provisions
of any law, regulation, order, writ, injunction, decree, determination or award
of any court, any governmental department, board, agency or instrumentality,
domestic or foreign, or any arbitrator, applicable to such Member or any of its
Affiliates, (ii) does or will conflict with, violate, result in a breach of or
constitute a default under (or has conflicted with, violated, resulted in a
breach of or constituted a default under) any of the terms, conditions or
provisions of the articles of incorporation, bylaws, partnership agreement or
operating agreement of such Member or any of its Affiliates or of any material
agreement or instrument to which such Member or any of its Affiliates is a party
or by which such Member or any of its Affiliates is or may be bound or to which
any of its properties or assets is subject, (iii) does or will conflict with,
violate, result in (or has conflicted with, violated or resulted in) a breach
of, constitute (or has constituted) a default under (whether with notice or
lapse of time or both), accelerate or permit the acceleration of (or has
accelerated) the performance required by, give (or has given) to others any
material interests or rights or require any consent, authorization or approval
under any indenture, mortgage, lease, agreement or instrument to which such
Member or any of its Affiliates is a party or by which such Member or any of its
Affiliates or any of their properties or assets is or may be bound or (iv) does
or will result (or has resulted) in the creation or imposition of any lien upon
any of the properties or assets of such Member or any of its Affiliates.

 

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(c)          Governmental Authorizations. Any registration, declaration or
filing with, or consent, approval, license, permit or other authorization or
order by, or exemption or other action of, any governmental, administrative or
regulatory authority, domestic or foreign, that was or is required in connection
with the valid execution, delivery, acceptance and performance by such Member
under this Agreement or consummation by such Member (or any of its Affiliates)
of any transaction contemplated hereby has been completed, made or obtained on
or before the date hereof.

 

(d)          Litigation. There are no actions, suits, proceedings or
investigations pending, or, to the knowledge of such Member or any of its
Affiliates, threatened against or affecting such Member or any of its Affiliates
or any of their properties, assets or businesses in any court or before or by
any governmental department, board, agency or instrumentality, domestic or
foreign, or any arbitrator which could, if adversely determined (or, in the case
of an investigation could lead to any action, suit or proceeding which if
adversely determined could) reasonably be expected to materially impair such
Member’s ability to perform its obligations under this Agreement or to have a
material adverse effect on the consolidated financial condition of such Member;
such Member or any of its Affiliates has not received any currently effective
notice of any default, and such Member or any of its Affiliates is not in
default, under any applicable order, writ, injunction, decree, permit,
determination or award of any court, any governmental department, board, agency
or instrumentality, domestic or foreign, or any arbitrator which could
reasonably be expected to materially impair such Member’s (or any of its
Affiliate’s) ability to perform its obligations under this Agreement or to have
a material adverse effect on the consolidated financial condition of such
Member.

 

(e)          Investigation. Such Member is acquiring its Interest based upon its
own investigation, and the exercise by such Member of its rights and the
performance of its obligations under this Agreement will be based upon its own
investigation, analysis and expertise. Such Member is a sophisticated investor
possessing an expertise in analyzing the benefits and risks associated with
acquiring investments that are similar to the acquisition of its Interest.

 

(f)          Broker. Except for ARA, a Newmark Company, no broker, agent or
other person acting as such on behalf of such Member was instrumental in
consummating this transaction and that no conversations or prior negotiations
were had by such party with any broker, agent or other such person concerning
the transaction that is the subject of this Agreement. The Members acknowledge
and agree that the Company shall be responsible for the fee payable to ARA, a
Newmark Company.

 

(g)          Investment Company Act. Neither such Member nor any of its
Affiliates is, nor will the Company as a result of such Member holding an
interest therein be, an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940, as amended.

 

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(h)         Securities Matters.

 

(1)         None of the Interests are registered under the Securities Act or any
state securities laws. Such Member understands that the offering, issuance and
sale of the Interests are intended to be exempt from registration under the
Securities Act, based, in part, upon the representations, warranties and
agreements contained in this Agreement. Such Member is an “accredited investor”
as such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act.

 

(2)         Neither the Securities and Exchange Commission nor any state
securities commission has approved the Interests or passed upon or endorsed the
merits of the offer or sale of the Interests. Such Member is acquiring the
Interests solely for such Member’s own account for investment and not with a
view to resale or distribution thereof in violation of the Securities Act.

 

(3)         Such Member is unaware of, and in no way relying on, any form of
general solicitation or general advertising in connection with the offer and
sale of the Interests, and, except as provided in Section 12.2(f), no Member has
taken any action which could give rise to any claim by any person for brokerage
commissions, finders’ fees (without regard to any finders’ fees payable by the
Company directly) or the like relating to the transactions contemplated hereby.

 

(4)         Such Member is not relying on the Company or any of its officers,
directors, employees, advisors or representatives with regard to the tax and
other economic considerations of an investment in the Interests, and such Member
has relied on the advice of only such Member’s advisors.

 

(5)         Such Member understands that the Interests may not be sold,
hypothecated or otherwise disposed of unless subsequently registered under the
Securities Act and applicable state securities laws, or an exemption from
registration is available. Such Member agrees that it will not attempt to sell,
transfer, assign, pledge or otherwise dispose of all or any portion of the
Interests in violation of this Agreement.

 

(6)         Such Member has adequate means for providing for its current
financial needs and anticipated future needs and possible contingencies and
emergencies and has no need for liquidity in the investment in the Interests.

 

(7)         Such Member has significant prior investment experience, including
investment in non-listed and non-registered securities. Such Member is
knowledgeable about investment considerations and has a sufficient net worth to
sustain a loss of such Member’s entire investment in the Company in the event
such a loss should occur. Such Member’s overall commitment to investments which
are not readily marketable is not excessive in view of such Member’s net worth
and financial circumstances and the purchase of the Interests will not cause
such commitment to become excessive. The investment in the Interests is suitable
for such Member.

 

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(8)         Such Member represents to the Company that the information contained
in this subparagraph (h) and in all other writings, if any, furnished to the
Company with regard to such Member (to the extent such writings relate to its
exemption from registration under the Securities Act) is complete and accurate
and may be relied upon by the Company in determining the availability of an
exemption from registration under federal and state securities laws in
connection with the sale of the Interests.

 

Section 12.          Sale, Assignment, Transfer or other Disposition.

 

12.1        Prohibited Transfers. Except as otherwise provided in this
Section 12, Sections 5.2(b), and 15.1, no Member shall Transfer all or any part
of its Interest, whether legal or beneficial, in the Company, and any attempt to
so Transfer such Interest (and such Transfer) shall be null and void and of no
effect.

 

12.2        Affiliate Transfers.

 

(a)          Subject to the provisions of Section 12.2(b) hereof, and subject in
each case to the prior written approval of each Member (such approval not to be
unreasonably withheld), any Member may Transfer all or any portion of its
Interest in the Company at any time to an Affiliate of such Member, provided
that such Affiliate shall remain an Affiliate of such Member at all times that
such Affiliate holds such Interest. If such Affiliate shall thereafter cease
being an Affiliate of such Member while such Affiliate holds such Interest, such
cessation shall be a non-permitted Transfer and shall be deemed void ab initio,
whereupon the Member having made the Transfer shall, at its own and sole
expense, cause such putative transferee to indemnify the Company and the other
Member(s) against loss or damage under any Collateral Agreement.

 

(b)          Notwithstanding anything to the contrary contained in this
Agreement, (1) CWS, Promote Member or a CWS Transferee may Transfer without the
required approval set forth in Section 12.2(a) all or any portion of its
Interests to any Affiliate of CWS or Promote Member (collectively, a “CWS
Transferee”) if after giving effect to such Transfer, the CWS Ownership/Control
Requirement will be satisfied and one or more of the Key Individuals, will hold
either directly or indirectly, an aggregate of no less than one percent (1%) of
the aggregate Percentage Interests, and (2) Bluerock or a Bluerock Transferee
may Transfer without the required approval set forth in Section 12.2(a) of up to
one hundred percent (100%) of its Interest to any Affiliate of Bluerock,
including but not limited to (A) BR Growth or any Person that is directly or
indirectly owned by BR Growth; (B) BR SOIF II or any Person that is directly or
indirectly owned by BR SOIF II; (C) BR SOIF III or any Person that is directly
or indirectly owned by BR SOIF III; (D) BR REIT or any Person that is directly
or indirectly owned by BR REIT; or (E) BR Growth II, or any Person that is
directly or indirectly owned by BR Growth II (collectively, a “Bluerock
Transferee”); provided, however, no Transfer shall be permitted and shall be
void ab initio if it shall violate any “Transfer” provision of the Loan
Documents or any applicable Collateral Agreement with third party lenders.

 

(c)          Upon the execution by any such CWS Transferee or Bluerock
Transferee of such documents necessary to admit such party into the Company and
to cause the CWS Transferee or Bluerock Transferee (as applicable) to become
bound by this Agreement, the CWS Transferee or Bluerock Transferee (as
applicable) shall become a Member, without any further action or authorization
by any Member.

 

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(d)          The Transfer of any interest in Manager and any transferee of an
interest in Manager shall be recognized and permitted under this Agreement and
by the Members, without any further action or authorization by any Member.

 

12.3        Admission of Transferee; Partial Transfers. Notwithstanding anything
in this Section 12 to the contrary and except as provided in Section 5.2(b), no
Transfer of Interests in the Company shall be permitted unless the potential
transferee is admitted as a Member under this Section 12.3:

 

(a)          If a Member Transfers all or any portion of its Interest in the
Company, such transferee may become a Member if (i) such transferee executes and
agrees to be bound by this Agreement, (ii) the transferor and/or transferee pays
all reasonable legal and other fees and expenses incurred by the Company in
connection with such assignment and substitution and (iii) the transferor and
transferee execute such documents and deliver such certificates to the Company
and the remaining Members as may be required by applicable law or otherwise
advisable; and

 

(b)          Notwithstanding the foregoing, any Transfer or purported Transfer
of any Interest, whether to another Member or to a third party, shall be of no
effect and void ab initio, and such transferee shall not become a Member or an
owner of the purportedly transferred Interest, if the Management Committee
determines in its sole discretion that:

 

(1)         the Transfer would require registration of any Interest under, or
result in a violation of, any federal or state securities laws;

 

(2)         the Transfer would result in a termination of the Company under Code
Section 708(b); provided, however, that any such determination under this
Section 12.3(b)(2) shall require the reasonable determination and approval of at
least one (1) Representative appointed by CWS.

 

(3)         as a result of such Transfer the Company would be required to
register as an investment company under the Investment Company Act of 1940, as
amended, or any rules or regulations promulgated thereunder;

 

(4)         if as a result of such Transfer the aggregate value of Interests
held by “benefit plan investors” including at least one benefit plan investor
that is subject to ERISA, could be “significant” (as such terms are defined in
U.S. Department of Labor Regulation 29 C.F.R. 2510.3-101(f)(2)) with the result
that the assets of the Company could be deemed to be “plan assets” for purposes
of ERISA;

 

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(5)         as a result of such Transfer, the Company would or may have in the
aggregate more than one hundred (100) members and material adverse federal
income tax consequences would result to a Member. For purposes of determining
the number of members under this Section 12.3(b)(5), a Person (the “beneficial
owner”) indirectly owning an interest in the Company through a partnership,
grantor trust or S corporation (as such terms are used in the Code) (the
“flow-through entity”) shall be considered a member, but only if
(i) substantially all of the value of the beneficial owner’s interest in the
flow-through entity is attributable to the flow-through entity’s interest
(direct or indirect) in the Company and (ii) in the sole discretion of the
Management Committee, a principal purpose of the use of the flow-through entity
is to permit the Company to satisfy the 100-member limitation;

 

(6)         the transferor failed to comply with the provisions of
Sections 12.2(a) or (b); or

 

(7)         the transfer would result in a violation of any Credit Support
constituting part of the Loan Documents, unless otherwise approved in accordance
with the Loan Documents.

 

The Management Committee may require the provision of a certificate as to the
legal nature and composition of a proposed transferee of an Interest of a Member
and from any Member as to its legal nature and composition and shall be entitled
to rely on any such certificate in making such determinations under this
Section 12.3.

 

12.4        Withdrawals. Each of the Members does hereby covenant and agree that
it will not withdraw, resign, retire or disassociate from the Company, except as
a result of a Transfer of its entire Interest in the Company permitted under the
terms of this Agreement and that it will carry out its duties and
responsibilities hereunder until the Company is terminated, liquidated and
dissolved under Section 13. No Member shall be entitled to receive any
distribution or otherwise receive the fair market value of its Interest in
compensation for any purported resignation or withdrawal not in accordance with
the terms of this Agreement.

 

Section 13.          Dissolution.

 

13.1        Limitations. The Company may be dissolved, liquidated and terminated
only pursuant to the provisions of this Section 13, and, to the fullest extent
permitted by law but subject to the terms of this Agreement, the parties hereto
do hereby irrevocably waive any and all other rights they may have to cause a
dissolution of the Company or a sale or partition of any or all of the Company’s
assets.

 

13.2        Exclusive Events Requiring Dissolution. The Company shall be
dissolved only upon the earliest to occur of the following events (a
“Dissolution Event”):

 

(a)          the expiration of the specific term set forth in Section 2.5;

 

(b)          at any time at the election of all of the Members in writing;

 

(c)          at any time there are no Members (unless otherwise continued in
accordance with the Act);

 

(d)          the entry of a decree of judicial dissolution pursuant to
Section 18-802 of the Act; or

 

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(e)          the Purchase Agreement has not been closed by the “Closing Date”,
as such term is defined in, and as may be extended under, the Purchase
Agreement.

 

13.3        Liquidation. Upon the occurrence of a Dissolution Event, the
business of the Company shall be continued to the extent necessary to allow an
orderly winding up of its affairs, including the liquidation of the assets of
the Company pursuant to the provisions of this Section 13.3, as promptly as
practicable thereafter, and each of the following shall be accomplished:

 

(a)          The Management Committee shall cause to be prepared a statement
setting forth the assets and liabilities of the Company as of the date of
dissolution, a copy of which statement shall be furnished to all of the Members.

 

(b)          The property and assets of the Company shall be liquidated or
distributed in kind under the supervision of the Management Committee as
promptly as possible, but in an orderly, businesslike and commercially
reasonable manner.

 

(c)          Any gain or loss realized by the Company upon the sale of its
property shall be deemed recognized and allocated to the Members in the manner
set forth in Section 7.2. To the extent that an asset is to be distributed in
kind, such asset shall be deemed to have been sold at its fair market value on
the date of distribution, the gain or loss deemed realized upon such deemed sale
shall be allocated in accordance with Section 7.2 and the amount of the
distribution shall be considered to be such fair market value of the asset.

 

(d)          The proceeds of sale and all other assets of the Company shall be
applied and distributed as follows and in the following order of priority:

 

(1)         to the satisfaction of the debts and liabilities of the Company
(contingent or otherwise) and the expenses of liquidation or distribution
(whether by payment or reasonable provision for payment), other than liabilities
to Members or former Members for Distributions;

 

(2)         to the satisfaction of loans made pursuant to Section 5.2(b) in
proportion to the outstanding balances of such loans at the time of payment;

 

(3)         the balance, if any, to the Members in accordance with Section 6.1.

 

13.4        Continuation of the Company. Notwithstanding anything to the
contrary contained herein, the death, retirement, resignation, expulsion,
bankruptcy, dissolution or removal of a Member shall not in and of itself cause
the dissolution of the Company, and the Members are expressly authorized to
continue the business of the Company in such event, without any further action
on the part of the Members.

 

Section 14.          Indemnification.

 

14.1        Exculpation of Members. Except as otherwise provided in this
Section 14, no Member, Manager, Representative or officer of the Company shall
be liable to the Company or to the other Members for damages or otherwise with
respect to any actions or failures to act taken or not taken relating to the
Company, except to the extent any related loss results from fraud, gross
negligence or willful or wanton misconduct on the part of such Member, Manager,
Representative or officer or the willful breach of any obligation under this
Agreement.

 

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14.2        Indemnification by Company. The Company hereby indemnifies, holds
harmless and defends the Members, the Manager, the Representatives, the officers
and each of their respective agents, officers, directors, members, managers,
partners, shareholders and employees from and against any loss, expense, damage
or injury suffered or sustained by them (including but not limited to any
judgment, award, settlement, reasonable attorneys’ fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim) by reason of or arising out of (i) their activities
on behalf of the Company or in furtherance of the interests of the Company,
(ii) their status as Members, Managers, Representatives, employees or officers
of the Company, (iii) the Company’s assets, property, business or affairs
(including, without limitation, the actions of any officer, director, member,
manager or employee of the Company or any of its Subsidiaries), if the acts or
omissions were not performed or omitted fraudulently or as a result of gross
negligence or willful or wanton misconduct by the indemnified party or as a
result of the willful breach of any obligation under this Agreement by the
indemnified party, or (iv) to the extent of any Neutral Credit Support Claim.
For the purposes of this Section 14.2, officers, directors, members, managers,
employees and other representatives of Affiliates of a Member who are
functioning as representatives of such Member in connection with this Agreement
shall be considered representatives of such Member for the purposes of this
Section 14. Reasonable expenses incurred by the indemnified party in connection
with any such proceeding relating to the foregoing matters shall be paid or
reimbursed by the Company in advance of the final disposition of such proceeding
upon receipt by the Company of (x) written affirmation by the Person requesting
indemnification of its good faith belief that it has met the standard of conduct
necessary for indemnification by the Company and (y) a written undertaking by or
on behalf of such Person to repay such amount if it shall ultimately be
determined by a court of competent jurisdiction that such Person has not met
such standard of conduct, which undertaking shall be an unlimited general
obligation of the indemnified party but need not be secured.

 

14.3        Indemnification by Members for Misconduct.

 

(a)          CWS hereby indemnifies, defends and holds harmless the Company,
Bluerock, each Bluerock Transferee and each of their subsidiaries and their
agents, officers, directors, members, managers, partners, shareholders and
employees from and against all losses, costs, expenses, damages, claims and
liabilities (including reasonable attorneys’ fees) as a result of or arising out
of any fraud, gross negligence, willful or wanton misconduct or willful breach
of this Agreement on the part of, or by, CWS or any entity controlled directly
or indirectly by CWS (excluding the Property Manager), or any Representative
appointed by CWS. In addition, CWS hereby indemnifies, defends and holds
harmless the Guarantor, as a third party beneficiary to the covenant contained
in this sentence, to the extent of any losses, costs, expenses, damages, claims
and liabilities (including reasonable attorneys’ fees) arising from any CWS
Credit Support Claim.

 

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(b)          Bluerock hereby indemnifies, defends and holds harmless the
Company, CWS, each CWS Transferee and each of their subsidiaries and their
agents, officers, directors, members, managers, partners, shareholders and
employees from and against all losses, costs, expenses, damages, claims and
liabilities (including reasonable attorneys’ fees) as a result of or arising out
of any fraud, gross negligence, willful or wanton misconduct or willful breach
of this Agreement on the part of, or by, Bluerock or any entity controlled
directly or indirectly by Bluerock, or any Representative appointed by Bluerock.
In addition, Bluerock hereby indemnifies, defends and holds harmless the
Guarantor, as a third party beneficiary to the covenant contained in this
sentence, to the extent of any losses, costs, expenses, damages, claims and
liabilities (including reasonable attorneys’ fees) arising from any BR Credit
Support Claim.

 

14.4        General Indemnification by the Members.

 

(a)          Notwithstanding any other provision contained herein, each Member
(the “Indemnifying Party”) hereby indemnifies and holds harmless the other
Members, the Company and each of their subsidiaries and their agents, officers,
directors, members, managers, partners, shareholders and employees (each, an
“Indemnified Party”) from and against all losses, costs, expenses, damages,
claims and liabilities (including reasonable attorneys’ fees) as a result of or
arising out of (i) any breach of any material obligations of the Indemnifying
Party under this Agreement, or (ii) any material breach of any obligation by or
any material inaccuracy in or material breach of any representation or warranty
made by the Indemnifying Party or its Affiliates, whether in this Agreement or
in any other agreement with respect to the conveyance, assignment, contribution
or other transfer of the Property (or interests therein), assets, agreements,
rights or other interests conveyed, assigned, contributed or otherwise
transferred to the Company (collectively, the “Inducement Agreements”).

 

(b)          Except as otherwise provided herein or in any other agreement,
recourse for the indemnity obligation of the Members under this Section 14.4
shall be limited to such Indemnifying Party’s Interest in the Company; provided,
however, that recourse against either Member under its indemnity obligations
under this Agreement shall be further limited to an aggregate amount equal to
the value of such Member’s Interest as determined by and being limited to the
then current liquidation value of such Member’s Interest assuming the Company
were liquidated in an orderly fashion and all net proceeds thereof were
distributed in accordance with Section 6.

 

(c)          The indemnities, contributions and other obligations under this
Agreement shall be in addition to any rights that any Indemnified Party may have
at law, in equity or otherwise, subject to the aforementioned limitations. The
terms of this Section 14 shall survive termination of this Agreement.

 

Section 15.          Sale Rights.

 

15.1        Buy/Sell Rights.

 

(a)          Availability of Rights. At any time following the second
anniversary of the date that a Property is initially acquired by an Owner,
either Member may exercise its right to initiate the provisions of this
Section 15.1 with respect to such Property. Subject to the preceding sentence, a
Member may exercise its rights under this Section 15.1 with respect to any
single Property by providing an Offeror Election Notice (as defined below) for
such Property, and may provide a separate Offeror Election Notice with respect
to one or more additional Properties, provided, however, a separate Offeror
Election Notice must be provided with respect to each additional Property (i.e.,
each Offeror Election Notice may only relate to a single Property).
Notwithstanding anything to the contrary contained herein, a Member may not
exercise its rights under this Section 15.1 with respect to a particular
Property if Bluerock has exercised its right to sell such Property pursuant to
Section 9.10(a).

 

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(b)          Exercise. The Member wishing to exercise its rights pursuant to
this Section 15.1 (the “Offeror”) shall do so by giving written notice (the
“Offeror Election Notice”) to the other Member (the “Offeree”) setting forth a
statement of intent to invoke its rights under this Section 15.1 with respect to
a particular Property, stating therein the aggregate dollar amount (the
“Valuation Amount”) that the Offeror would be willing to pay to an Owner (or the
Company, as applicable) for the purchase of such Property or the interests in
the Owner that owns such Property (as applicable, the “Buy-Sell Property”) as of
the Closing Date (as defined below) free and clear of all liabilities and with
the payment of all Imputed Closing Costs, whether the Offeror intends to pay-off
the Loan relating to the Buy-Sell Property as of the Closing Date or whether
such Loan will remain in place and an estimate of the Offeror’s calculation of
the amount that would be distributable to the Offeree if the Offeree elects the
Sell Option (as defined below) and the amount that would be distributable to the
Offeror if the Offeree elects the Buy Option (as defined below), in each case
computed as if the closing were consummated for the Valuation Amount in
accordance with the terms set forth in this Section 15.1. To be valid, the
Offeror Election Notice must be substantially in the form attached hereto as
Exhibit G and must include a description of all oral, and copies of all written,
offers and inquiries received by the Offeror during the previous twelve-month
period relating to the financing, disposition or leasing of the Buy-Sell
Property (including proposals for the formation of one or more new entities for
the ownership and operation of the Buy-Sell Property).

 

(c)          Offeree Response. After receipt of the Offeror Election Notice, the
Offeree shall elect to either (i) cause the Company to sell the Buy-Sell
Property to the Offeror for an amount equal to the Valuation Amount on the
Closing Date free and clear of all liabilities and with the payment of all
Imputed Closing Costs (the “Sell Option”), or (ii) cause the Company to sell to
the Offeree the Buy-Sell Property for an amount equal to the Valuation Amount on
the Closing Date free and clear of all liabilities and with the payment of all
Imputed Closing Costs (the “Buy Option”). The Offeree shall have sixty (60) days
from the delivery of the Offeror Election Notice (the “Response Period”) in
which to exercise either the Sell Option or the Buy Option by giving written
notice to the Offeror of the Offeree’s election (the “Offeree Notice”). If the
Offeree does not elect the Buy Option within the Response Period, the Offeree
shall be deemed to have elected the Sell Option. If the Offeree elects the Buy
Option, then the Offeree shall be required to purchase the Buy-Sell Property on
the terms and conditions set forth in this Section 15.1. If the Offeree elects,
or is deemed to have elected, the Sell Option, then the Offeror shall be
required to purchase the Buy-Sell Property on the terms and conditions set forth
in this Section 15.1.

 

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(d)          Earnest Money. Within five (5) business days after the delivery of
the Offeree Notice or, if the Offeree does not timely provide the Offeree
Notice, within five (5) business days after the expiration of the Response
Period, as applicable, the acquiring Member shall deposit with a mutually
acceptable third-party escrow agent an earnest money deposit in the amount of
two percent (2%) of the Valuation Amount, which amount shall be applied to the
purchase price at closing. Such earnest money deposit will be non-refundable,
except as expressly provided in this Section 15.1. If the acquiring Member
should thereafter fail to consummate the transaction for any reason other than a
default by the applicable Owner or as a result of a damage or destruction as
provided in Section 15.1(e)(ii) below, or as a result of the failure of any
applicable condition to closing set forth in Section 15.1(f) below, then
(i) (A) the earnest money deposit shall be distributed from escrow to the
selling Member, free of all claims of the acquiring Member, as liquidated
damages and constituting the sole and exclusive remedy available to the selling
Member because of a default by the acquiring Member or (B) the selling Member
may, by delivering to the acquiring Member written notice thereof no later than
thirty (30) days after such failure, elect to purchase the Buy-Sell Property for
an amount equal to the amount the acquiring Member would have been entitled to
receive if the Company had sold the Buy-Sell Property for the Valuation Amount
and the Company had immediately paid all liabilities of the Company and the
Owner related to the Buy-Sell Property and Imputed Closing Costs and distributed
the Capital Proceeds of the sale to the Members pursuant to Section 6.1(c) of
this Agreement in satisfaction of their interests in the Buy-Sell Property, in
which case, the Closing Date therefor shall be the date specified in the selling
Member’s notice (which date shall not be more than ninety (90) days after the
date of such notice), and (ii) if the acquiring Member was the Offeror, the
non-refundable earnest money deposit for any future election by the acquiring
Member to buy any Buy-Sell Property shall be twenty percent (20%) of the amount
the selling Member is entitled to receive for any such Buy-Sell Property in
connection with any such future election.

 

(e)          Closing. The closing of the acquisition and sale pursuant to this
Section 15.1 shall be held on a mutually acceptable date (the “Closing Date”)
not later than sixty (60) days (or, if the Offeree is the acquiring Member, not
later than ninety (90) days) after the date of the Offeree Notice or, if the
Offeree does not timely provide the Offeree Notice, not later than sixty (60)
days after the expiration of the Response Period, as applicable. At such
closing, the following shall occur:

 

(i)          The Company shall cause the Buy-Sell Property to be conveyed or
assigned, as applicable, to the acquiring Member or its designee in accordance
with the reasonable instructions of the acquiring Member, and shall execute and
deliver to the acquiring Member all reasonable documents which may be required
to give effect to the disposition and acquisition of such interests, in each
case free and clear of all liens, claims, and encumbrances, with covenants of
special warranty.

 

 54 

 

 

(ii)         In addition to the other adjustments called for herein with respect
to the closing of the purchase and sale of such Buy-Sell Property under this
Section 15.1, unless expressly anticipated by the terms of the Offeror Election
Notice prior to the closing of the purchase and sale of the Buy-Sell Property
hereunder, the amounts payable for the Buy-Sell Property shall be adjusted by
increasing such amounts to take into account: (a) the amount of any Capital
Contribution or Default Loan (together with any accrued but unpaid interest
thereon) made by the selling Member with respect to the Buy-Sell Property
between the date of the Offeror Election Notice and the Closing Date, (b) the
selling Member’s interest in any amounts received by the Company or Owner with
respect to the Buy-Sell Property between the date of the Offeror Election Notice
and the Closing Date that remain undistributed, (c) the additional amount the
selling Member would receive under Section 6.1(c) if the purchase price were
recalculated under Section 15.1(b) by reason of any principal repayments on any
Loan relating to the Buy-Sell Property. In addition, if the acquiring Member
acquires the Buy-Sell Property without paying-off the related Loan at closing,
the acquiring Member shall be obligated to pay, directly to the party entitled
thereto, the amount of any applicable review fees and costs and all Loan
assumption fees. Notwithstanding anything to the contrary contained in this
Agreement, for purposes of computing the purchase price payable to the selling
Member, the Valuation Amount shall be increased to contemplate the pay-off of
the related Loan at closing, together with the payment of any related prepayment
premiums, yield maintenance, breakage fees, defeasance costs and other similar
costs and expenses, regardless of whether the Loan is paid-off or remains in
place at the closing. In the event the actual closing costs incurred by Seller
are less than the Imputed Closing Costs, as determined on the Closing Date, then
for purposes of computing the purchase price payable to the selling Member, the
Valuation Amount shall be decreased to the extent of such difference so as to
achieve parity between the closing costs that would otherwise be payable
pursuant to such transaction. The terms of the preceding sentence shall only
apply in the event of a sale of a fee interest in the Buy-Sell Property.

 

In the event that the Buy-Sell Property is damaged, destroyed or subject to any
condemnation or other taking, in whole or any material part, before the Closing
Date, then the acquiring Member shall have the right to, by providing written
notice to the selling Member prior to the Closing Date, be released from its
obligation to purchase the Buy-Sell Property in which event the earnest money
deposit will promptly be returned to the acquiring Member.

 

(iii)        The acquiring Member shall pay to the applicable Owner the
consideration therefor in cash.

 

(iv)        If the acquiring Member acquires the interests of the Owner that
owns a Property, the Company shall cause the Owner that owns the Buy-Sell
Property to deliver to the Company and the selling Member a separate indemnity
from such Owner, in form and substance reasonably satisfactory to the
non-selling Member, holding the Company and the selling Member and its members
and their respective Affiliates, officers, employees, directors, partners,
members, managers, and agents harmless from all damages, claims, liabilities and
expenses, including, without limitation, reasonable attorneys’ fees incurred by
or on behalf of such Owner and arising from events occurring or conditions
arising from and after the Closing Date.

 

(v)         The Members shall cooperate with each other in a reasonable manner
in any acquisition under this Section 15.1, as requested by any Member and as
necessary to effect the sale of the Buy-Sell Property including, without
limitation, a redemption of ownership interests or the sale of a fee interest in
the Property, without, however, requiring any change in the economics of such
acquisition, or any additional liability of any Member, and with all expenses
related to any such revised structure being borne and paid by the requesting
Member.

 

 55 

 

 

(f)          Loan. If the Loan related to the Buy-Sell Property is not to be
paid off at closing, then it shall be a closing condition in favor of the
acquiring Member that the Lender of such Loan have consented to such Loan
remaining in place as of the closing. If applicable, the acquiring Member shall
proceed with reasonable diligence and in good faith to obtain any such Lender
consent. If the acquiring Member is Bluerock, then it shall be a closing
condition in favor of CWS and Promote Member that at Closing, Bluerock shall
either: (i) cause the Loan for the Buy-Sell Property to be paid-off in full, or
(ii) cause the Guarantor to be released from all Credit Support (subject to the
Guarantor not being released for environmental liability arising prior to such
date under an environmental indemnity, and such other matters customarily not
released in connection with Fannie Mae loan assumptions) in connection with any
Loan encumbering the Buy-Sell Property which is not paid-off in full at the
closing, or if despite the use of its commercially reasonable efforts, Bluerock
is unable to secure Guarantor’s release, cause a creditworthy indemnitor
reasonably acceptable to CWS, Promote Member and Guarantor, to provide an
indemnity in form and substance reasonably satisfactory to CWS, Promote Member
and Guarantor, indemnifying Guarantor from and after the Closing Date for such
Loan related to such Buy-Sell Property.

 

(g)          CWS. For purposes of this Section 15.1, CWS and Promote Member
shall be considered one Member and Promote Member is hereby authorized to
receive notices and make elections on behalf of CWS and Promote Member under
this Section 15.1. Accordingly, if Bluerock desires to initiate the provisions
of this Section 15.1, then it must exercise such option as to all of the Members
comprising CWS and Promote Member.

 

(h)          Alternate Structure. At the request of the acquiring Member, the
selling Member agrees to reasonably cooperate with the acquiring Member to
structure the buy-sell transaction contemplated under this Section 15.1 as an
acquisition or redemption of membership interests in the applicable Owner rather
than a fee simple conveyance (“Alternate Structure”). In such instance, (i) the
consideration payable to the selling member shall be the amount the selling
Member would have been entitled to receive if the Company had sold the Buy-Sell
Property for the Valuation Amount on the Closing Date and the Company had
immediately paid all liabilities of the Company and the Owner related to the
Buy-Sell Property and Imputed Closing Costs and distributed the Capital Proceeds
of the sale to the Members pursuant to Section 6.1(c) of this Agreement in
satisfaction of their interests in the Buy-Sell Property (“Membership Price”),
and (ii) the Earnest Money payable pursuant to Section 15.1(d) shall equal two
percent (2%) of the Membership Price rather than the Valuation Amount. In
addition to the other adjustments called for herein with respect to the closing
of the purchase and sale of such Buy-Sell Property under this Section 15.1,
unless expressly anticipated by the terms of the Offeror Election Notice prior
to the closing of the purchase and sale of the Buy-Sell Property hereunder, the
purchase price payable to the selling Member shall be adjusted by increasing
such purchase price by: (a) the amount of any Capital Contribution or Default
Loan (together with any accrued but unpaid interest thereon) made by the selling
Member with respect to the Buy-Sell Property between the date of the Offeror
Election Notice and the Closing Date, (b) the selling Member’s interest in any
amounts received by the Company or Owner with respect to the Buy-Sell Property
between the date of the Offeror Election Notice and the Closing Date that remain
undistributed, (c) the additional amount the selling Member would receive under
Section 6.1(c) if the purchase price were recalculated under Section 15.1(b) by
reason of any principal repayments on any Loan relating to the Buy-Sell Property
between the date of the Offeror Election Notice and the Closing Date. In no
event shall the Members undertake the Alternate Structure if it would constitute
a violation of any terms under the Loan, or expose any Member to any additional
liability, expense, cost or recourse under the Loan, any agreement to which the
Company or any Owner is bound, or other applicable law, code, statute,
regulation or order.

 

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15.2        Intentionally Omitted.

 

Section 16.          Miscellaneous.

 

16.1        Notices.

 

(a)          All notices, requests, approvals, authorizations, consents and
other communications required or permitted under this Agreement shall be in
writing and shall be (as elected by the Person giving such notice) hand
delivered by messenger or overnight courier service, mailed (airmail, if
international) by registered or certified mail (postage prepaid), return receipt
requested, or sent via facsimile (provided such facsimile is immediately
followed by the delivery of an original copy of same via one of the other
foregoing delivery methods) addressed to:

 

If to Bluerock:

 

c/o Bluerock Real Estate, L.L.C.

712 Fifth Avenue, 9th Floor

New York, New York 10019

Attention: Jordan B. Ruddy

Facsimile No. (646) 278-4220

 

with copies to:

 

c/o Bluerock Real Estate, L.L.C.

712 Fifth Avenue, 9th Floor

New York, New York 10022

Attention: Michael Konig, Esq.

Facsimile No. (646) 278-4220

 

and

 

Nelson, Mullins, Riley & Scarborough LLP

201 17th Street, NW, Suite 1700

Atlanta, Georgia 30363

Attention: Eric R. Wilensky, Esq.

Facsimile No. (404) 322-6050

 

If to CWS or Promote Member:

 

CWS Apartment Homes LLC

9606 N. Mopac Expressway, Suite 500

Austin, Texas 78759

Attn: Michael Brittingham and Justin Leahy

Facsimile: (512) 837-5721

Email: mbrittingham@cwscapital.com

Email: jleahy@cwscapital.com

 

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With copies to:

 

c/o CWS Capital Partners LLC

14 Corporate Plaza, Suite 210

Newport Beach, CA 92660

Attn: Gary Carmell and Mary Ellen Barlow

Facsimile: (949) 640-4931

E-mail: gcarmell@cwscapital.com

E-mail: mbarlow@cwscapital.com

 

Bocarsly Emden Cowan Esmail & Arndt LLP

633 West Fifth Street, 64th Floor

Los Angeles, CA 90071

Attn: Aaftab Esmail, Esq.

Facsimile: (213) 559-0811

E-mail: aesmail@bocarsly.com

 

(b)          Each such notice shall be deemed delivered (i) on the date
delivered if by hand delivery or overnight courier service or facsimile, and
(ii) on the date upon which the return receipt is signed or delivery is refused
or the notice is designated by the postal authorities as not deliverable, as the
case may be, if mailed (provided, however, if such actual delivery occurs after
5:00 p.m. (local time where received), then such notice or demand shall be
deemed delivered on the immediately following business day after the actual day
of delivery).

 

(c)          By giving to the other parties at least fifteen (15) days written
notice thereof, the parties hereto and their respective successors and assigns
shall have the right from time to time and at any time during the term of this
Agreement to change their respective addresses.

 

16.2         Governing Law; Forum. This Agreement and the rights of the Members
hereunder shall be governed by, and interpreted in accordance with, the laws of
the State of Delaware, without regard to its conflicts of law provisions. Any
legal action or other legal proceeding relating to this Agreement or the
enforcement of any provision of this Agreement shall only be brought or
otherwise commenced in any state or federal court located in the State of New
York. Each of the parties hereto:

 

(a)          Expressly and irrevocably consents and submits to the exclusive
personal jurisdiction of and venue in each state and federal court located in
the State of New York (and each appellate court located in the State of New
York), in connection with any such legal proceeding;

 

(b)          Agrees that each state and federal court located in the State of
New York shall be deemed to be a convenient forum; and

 

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(c)          Agrees not to assert (by way of motion, as a defense or otherwise),
in any such legal proceeding commenced in any state or federal court located in
the State of New York, any claim that it is not subject personally to the
jurisdiction of such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue for such proceeding is improper or that this
Agreement or the subject matter of this Agreement may not be enforced in or by
such court.

 

Each of the parties hereto designates CT Corporation System, 1633 Broadway, New
York, New York 10019, as its agent for service of process in the State of New
York, which designation may only be changed on not less than ten (10) days’
prior notice to all of the other parties.

 

16.3        Successors. This Agreement shall be binding upon, and inure to the
benefit of, the parties and their successors and permitted assigns. Except as
otherwise provided herein, any Member who Transfers its Interest as permitted by
the terms of this Agreement shall have no further liability or obligation
hereunder, except with respect to claims arising prior to such Transfer.

 

16.4        Pronouns. Whenever from the context it appears appropriate, each
term stated in either the singular or the plural shall include the singular and
the plural, and pronouns stated in either the masculine, the feminine or the
neuter gender shall include the masculine, feminine and neuter.

 

16.5        Captions Not Part of Agreement. The captions contained in this
Agreement are inserted only as a matter of convenience and in no way define,
limit or extend the scope or intent of this Agreement or any provisions hereof.

 

16.6        Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable in any jurisdiction or in any respect, then
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and the Members shall use
their best efforts to amend or substitute such invalid, illegal or unenforceable
provision with enforceable and valid provisions which would produce as nearly as
possible the rights and obligations previously intended by the Members without
renegotiation of any material terms and conditions stipulated herein.

 

16.7        Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.

 

16.8        Entire Agreement and Amendment. This Agreement and the other written
agreements described herein between the parties hereto entered into as of the
date hereof, constitute the entire agreement between the Members relating to the
subject matter hereof. In the event of any conflict between this Agreement and
such other written agreements, the terms and provisions of this Agreement shall
govern and control. No amendment or waiver by a party shall be enforceable
against that party unless it is in writing and duly executed by such party.

 

16.9        Further Assurances. Each Member agrees to execute and deliver any
and all additional instruments and documents and do any and all acts and things
as may be necessary or expedient to effectuate more fully this Agreement or any
provisions hereof or to carry on the business contemplated hereunder.

 

 59 

 

 

16.10      No Third Party Rights. The provisions of this Agreement are for the
exclusive benefit of the Members and the Company, and no other party (including,
without limitation, any creditor of the Company) shall have any right or claim
against any Member by reason of those provisions or be entitled to enforce any
of those provisions against any Member.

 

16.11      Incorporation by Reference. Every Exhibit and Annex attached to this
Agreement is incorporated in this Agreement by reference.

 

16.12      Limitation on Liability. Except as set forth in Section 14 and with
respect to a Default Loan as set forth in Section 5.2(b), the Members shall not
be bound by, or be personally liable for, by reason of being a Member, a
judgment, decree or order of a court or in any other manner, for the expenses,
liabilities or obligations of the Company, and the liability of each Member
shall be limited solely to the amount of its Capital Contributions as provided
under Section 5. Except as set forth in Section 14.3 and with respect to a
Default Loan as set forth in Section 5.2(b), any claim against any Member (the
“Member in Question”) which may arise under this Agreement shall be made only
against, and shall be limited to, such Member in Question’s Interest, the
proceeds of the sale by the Member in Question of such Interest or the undivided
interest in the assets of the Company distributed to the Member in Question
pursuant to Section 13.3(d) hereof. Except as set forth in Section 14.3 and with
respect to a Default Loan as set forth in Section 5.2(b), any right to proceed
against (i) any other assets of the Member in Question or (ii) any agent,
officer, director, member, manager, partner, shareholder or employee of the
Member in Question or the assets of any such Person, as a result of such a claim
against the Member in Question arising under this Agreement or otherwise, is
hereby irrevocably and unconditionally waived.

 

16.13      Remedies Cumulative. Except as otherwise expressly provided in this
Agreement, the rights and remedies given in this Agreement and by law to a
Member shall be deemed cumulative, and the exercise of one of such remedies
shall not operate to bar the exercise of any other rights and remedies reserved
to a Member under the provisions of this Agreement or given to a Member by law.
In the event of any dispute between the parties hereto, the prevailing party
shall be entitled to recover from the other party reasonable attorney’s fees and
costs incurred in connection therewith.

 

16.14      No Waiver. One or more waivers of the breach of any provision of this
Agreement by any Member shall not be construed as a waiver of a subsequent
breach of the same or any other provision, nor shall any delay or omission by a
Member to seek a remedy for any breach of this Agreement or to exercise the
rights accruing to a Member by reason of such breach be deemed a waiver by a
Member of its remedies and rights with respect to such breach.

 

16.15      Limitation On Use of Names. Notwithstanding anything contained in
this Agreement or otherwise to the contrary, each of Bluerock and CWS as to
itself agree that neither it nor any of its Affiliates, agents, or
representatives is granted a license to use or shall use the name of the other
under any circumstances whatsoever, except such name may be used in furtherance
of the business of the Company but only as and to the extent unanimously
approved by the Members.

 

 60 

 

 

16.16      Publicly Traded Partnership Provision. Each Member hereby severally
covenants and agrees with the other Members for the benefit of such Members,
that (a) it is not currently making a market in Interests in the Company and
will not in the future make such a market and (b) it will not Transfer its
Interest on an established securities market, a secondary market or an
over-the-counter market or the substantial equivalent thereof within the meaning
of Code Section 7704 and the Regulations, rulings and other pronouncements of
the U.S. Internal Revenue Service or the Department of the Treasury thereunder.
Each Member further agrees that it will not assign any Interest in the Company
to any assignee unless such assignee agrees to be bound by this Section 16.16
and to assign such Interest only to such Persons who agree to be similarly
bound.

 

16.17      Uniform Commercial Code. The interest of each Member in the Company
shall be an “uncertificated security” governed by Article 8 of the Delaware UCC
and the UCC as enacted in the State of New York (the “New York UCC”), including,
without limitation, (i) for purposes of the definition of a “security”
thereunder, the interest of each Member in the Company shall be a security
governed by Article 8 of the Delaware UCC and the New York UCC and (ii) for
purposes of the definition of an “uncertificated security” thereunder.

 

16.18      Public Announcements. No Member nor any of its Affiliates shall,
without the prior approval of the other Members, issue any press releases or
otherwise make any public statements with respect to the Company or the
transactions contemplated by this Agreement, except as may be required by
applicable law or regulation or by obligations pursuant to any listing agreement
with any national securities exchange so long as such Member or such Affiliate
has used reasonable efforts to obtain the approval of the other Members prior to
issuing such press release or making such public disclosure.

 

16.19      No Construction Against Drafter. This Agreement has been negotiated
and prepared by Bluerock and CWS and their respective attorneys and, should any
provision of this Agreement require judicial interpretation, the court
interpreting or construing such provision shall not apply the rule of
construction that a document is to be construed more strictly against one party.

 

16.20      Separate Legal Counsel for Members.

 

(a)          The Partners acknowledge and agree that Bocarsly Emden Cowan Esmail
& Arndt LLP (“BECEA”) has represented CWS and Promote Member in connection with
this Agreement and all other agreements contemplated by this Agreement and the
Company. From time to time, BECEA shall be permitted to render legal advice and
to provide legal services to CWS, Promote Member and their respective Affiliates
with respect to the Company or otherwise. In no event shall an attorney/client
relationship exist between BECEA, on the one hand, and Bluerock or any of its
Affiliates, on the other hand.

 

 61 

 

 

(b)          The Partners acknowledge and agree that Nelson, Mullins, Riley &
Scarborough LLP (“NMRS”) has represented Bluerock in connection with this
Agreement and all other agreements contemplated by this Agreement and the
Company. From time to time, NMRS shall be permitted to render legal advice and
to provide legal services to Bluerock and its Affiliates with respect to the
Company or otherwise. In no event shall an attorney/client relationship exist
between NMRS, on the one hand, and CWS, Promote Member or any of their
respective Affiliates, on the other hand.

 

(c)          To the extent requested by any of the Members or their respective
Affiliates, BECEA and NMRS shall be permitted to render legal advice and to
provide legal services to the Company and its Subsidiaries, from time to time,
and each Member covenants and agrees that such representation of the Company
and/or its Subsidiaries by such firm, from time to time, shall not disqualify
such firms from providing legal advice and legal services as set forth in this
Section 16.20 hereof at any time in the future.

 

Section 17.          Insurance. During the Term, Property Manager, pursuant to
the terms of the Management Agreement, is required to procure and maintain
insurance as is determined to be appropriate by the Management Committee and in
accordance with the terms of the Loan, (in form and with endorsements, waivers
and deductibles and with insurance companies, designated or approved by
Bluerock) naming the Company, the Owners, Bluerock, CWS and Promote Member as
insureds or additional insured thereunder.

 

[SIGNATURES ON FOLLOWING PAGES]

 

 62 

 

 

IN WITNESS WHEREOF, this Agreement is executed by the Members, effective as of
the date first set forth above.

 

  BLUEROCK:       BR CWS Portfolio Member, LLC,   a Delaware limited liability
company,   its Manager         By: /s/ Jordan Ruddy     Name:  Jordan Ruddy    
Title: Authorized Signatory

 

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

 

[Signature page to Limited Liability Company Agreement

of BR CWS 2017 Portfolio JV, LLC]

 

S - 1

 

 

  CWS:       CWS 2017 Portfolio, LLC,   a Delaware limited liability company    
    By: /s/ Gary Carmell     Name:  Gary Carmell     Title:  Vice President    
    PROMOTE MEMBER:       CWS 2017 Portfolio PM, LLC,   a Delaware limited
liability company         By: /s/ Gary Carmell     Name:  Gary Carmell    
Title: Gary Carmell

 

[Signature page to Limited Liability Company Agreement

of BR CWS 2017 Portfolio JV, LLC]

 

S - 2

 

 

EXHIBIT A

 

Initial Capital Contributions and Percentage Interests

 

Member Name  Initial Capital Contributions   Percentage Interest  Bluerock 
$48,044,572.20*   90% CWS  $5,332,947.51*   9.99% Promote Member  $5,338.29* 
 .01%

 

Management Committee Representatives     Bluerock:       Ryan MacDonald      
Michael L. Konig       CWS:       Mike Brittingham       Justin Leahy

 

*to be updated prior to the closing of the acquisition of the Property.

 

A - 1

 

 

EXHIBIT B

 

Budget Information

 

1.a narrative description of any acquisitions or sales that are planned and any
other activities proposed to be undertaken;

 

2.a projected annual income statement (accrual basis) on a quarter-by-quarter
basis;

 

3.a projected balance sheet as of the end of the next Fiscal Year;

 

4.a schedule of projected operating cash flow (including itemized operating
revenues, project costs and project expenses) for such Fiscal Year on a
quarter-by-quarter basis, including a schedule of projected operating deficits,
if any;

 

5.a marketing plan indicating the portions of the Property that Property Manager
recommends be made available for sale or lease and the proposed terms and
conditions relating thereto;

 

6.a detailed budget reflecting on a line by line basis all projected operating
expenses and any proposed construction and capital expenditures for the
Property, including projected dates for commencement and completion of the
foregoing;

 

7.a description of the proposed investment of any funds of the Company which are
(or are expected to become) available for investment;

 

8.a description, including the identity of the recipient (if known) and the
amount and purpose, of all fees and other payments proposed, expected or
projected to be paid for professional services and, if a fee or payment exceeds
$25,000, for other services rendered to or on behalf of the Company by third
parties;

 

9.a projection of the amount of any anticipated additional Capital Contributions
which may be called for pursuant to Section 5.2(a) and the purposes for which
such additional Capital Contributions may be used; and

 

10.such other information requested from time to time by any Member.

 

B - 1

 

 

EXHIBIT C

 

[Intentionally Omitted]

 

C - 1

 

 

EXHIBIT D

 

Budget

 

[pg69img01_ex10-7.jpg]

 

D - 1

 

 

[pg70img01_ex10-7.jpg]

 

D - 2

 

 

[pg71img01_ex10-7.jpg]

 

D - 3

 

 

[pg72img01_ex10-7.jpg]

 

D - 4

 

 

[pg73img01_ex10-7.jpg]

 

D - 5

 

 

[pg74img01_ex10-7.jpg]

 

D - 6

 

 

[pg75img01_ex10-7.jpg]

 

D - 7

 

 

[pg76img01_ex10-7.jpg]

 

D - 8

 

 

[pg77img01_ex10-7.jpg]

 

D - 9

 

 

[pg78img01_ex10-7.jpg]

 

D - 10

 

 

[pg79img01_ex10-7.jpg]

 

D - 11

 

 

[pg80img01_ex10-7.jpg]

 

D - 12

 

 

[pg81img01_ex10-7.jpg]

 

D - 13

 

 

[pg82img01_ex10-7.jpg]

 

D - 14

 

 

[pg83img01_ex10-7.jpg]

 

D - 15

 

 

[pg84img01_ex10-7.jpg]

 

D - 16

 

 

[pg85img01_ex10-7.jpg]

 

D - 17

 

 

[pg86img01_ex10-7.jpg]

 

D - 18

 

 

[pg87img01_ex10-7.jpg]

 

D - 19

 

 

[pg88img01_ex10-7.jpg]

 

D - 20

 

 

[pg89img01_ex10-7.jpg]

 

D - 21

 

 

EXHIBIT E

 

Intentionally Omitted

 

E - 1

 

 

EXHIBIT F

 

Pursuit Cost Budget

 

Cibolo Canyon
Pre-Acq at 3/20/17
03-11-000-1510.0201

Vendor  Invoice  Date  Amount   Description Diamond Technical Surveys  17-9054 
2/6/2017   2,125.00   Infrared inspection       2/7/2017   39.38   DD Brett M   
   2/17/2017   2,243.83   2/17 payroll       2/16/2017   107.00   DD Janna J   
   2/13/2017   101.65   DD Kaitlyn D       2/18/2017   165.70   DD Rich F Stone
Oak Land Design  8481  2/8/2017   690.09   Irrigation inspection AEI
Consultants  008-0218923  2/22/2017   2,300.00   Property condition assessment
      2/28/2017   1,384.60   DD Janna J       2/28/2017   3,006.91   DD Rich F
      2/28/2017   1,132.45   DD Brett M       2/28/2017   214.69   DD Kara M   
   2/28/2017   1,477.54   DD Stefanie M       2/28/2017   53.47   DD Jackie E   
   2/28/2017   40.99   DD Sarah C       2/28/2017   178.60   DD Sarah C      
2/28/2017   385.78   DD Sarah C The Planning and Zoning Co  I100515-1 
2/28/2017   1,050.00   Site expense Persohn/Hahn Associates  5728-01  3/1/2017 
 1,727.10   Elevator due diligence Don Illingworth & Associates  17060 
3/6/2017   1,200.00   Engineering services Bock & Clark Corporation  1121531 
2/24/2017   3,750.00   ALTA/NSPS land survey Targus Associates  7346  3/10/2017 
 3,500.00   PHASE I ESA Terracon  T884619  3/16/2017   5,400.00   ADA & FHAA
Assessment WJHW         2,800.00   Acoustic Testing FLSA         4,000.00   Fire
Life Safty Inspection Assumption Deposit         11,000.00             
 50,074.78    

 

 F - 1 

 

 

Crown Ridge
Pre-Acq at 3/20/17
03-11-000-1510.0199 Vendor  Invoice  Date  Amount   Description       2/17/2017 
 915.74   2/17 payroll Pest Management  293975  2/14/2017   487.13   Pest
control       2/18/2017   2,502.68   Due diligence Rich F       2/18/2017 
 20.00   Due diligence Rich F       2/21/2017   120.38   Due diligence Fred R   
   2/22/2017   1,838.06   Due diligence Sarah C Diamond Technical Surveys 
17-9055  2/13/2017   2,125.00   Infrared inspection AEI Consultants 
008-0218923  2/22/2017   2,650.00   Property condition assessment      
2/28/2017   90.00   Due diligence Janna J       2/28/2017   567.46   Due
diligence Rich F       2/28/2017   1,132.46   Due diligence Brett M      
2/28/2017   867.93   Due diligence Stefanie M       2/28/2017   53.46   Due
diligence Jackie E       2/28/2017   66.37   Due diligence Sarah C      
2/28/2017   40.99   Due diligence Sarah C       2/28/2017   178.60   Due
diligence Sarah C The Planning and Zoning Co  I100519-1  2/28/2017   1,050.00  
Site expense Persohn/Hahn Associates  5730-01  3/1/2017   6,255.13   Elevator
due diligence Bock & Clark Corporation  1121489  2/23/2017   7,900.00  
ALTA/NSPS Land survey Don Illingworth & Associates  17062  3/7/2017   1,500.00  
Consulting engineering Stone Oak Land Design  8537  3/5/2017   446.53  
Irrigation inspection Targus Associates  7344  3/10/2017   4,100.00   Phase I
ESA Terracon  T884615  3/16/2017   5,000.00   ADA & FHAA Assessment WJHW       
 2,800.00   Acoustic Testing FLSA         7,189.00   Fire Life Safety Inspection
Stone Oak Land Design         608.91   Irrigation Inspection Assumption Deposit 
       11,000.00               61,505.83    

 

 F - 2 

 

 

Canyon Springs
Pre-Acq at 3/20/17
03-11-000-1510.0200 Vendor  Invoice  Date  Amount   Description       2/17/2017 
 1,841.01   2/17 payroll       2/18/2017   28.22   DD Rich F       2/18/2017 
 19.16   DD Rich F       2/21/2017   98.44   DD Fred R Stone Oak Land Design 
8484  2/14/2017   357.23   Irrigation inspection Pest Management  293974 
2/8/2017   487.13   Pest service Diamond Technical Surveys  17-9056  2/13/2017 
 2,125.00   Infrared inspection AEI Consultants  008-0218923  2/22/2017 
 2,650.00   Property condition assessment       2/28/2017   227.04   DD Rich F
      2/28/2017   659.30   DD Christine D       2/28/2017   148.91   DD Cali R
      2/28/2017   1,132.46   DD Brett M       2/28/2017   25.46   DD Fred R   
   2/28/2017   53.47   DD Jackie E       2/28/2017   2,671.48   DD Sarah C      
2/28/2017   900.94   DD Sarah C       2/28/2017   40.99   DD Sarah C      
2/28/2017   178.60   DD Sarah C The Planning and Zoning Co  I100517-1 
2/28/2017   1,050.00   Site expense Persohn/Hahn Associates  5729-01  3/1/2017 
 5,122.45   Elevator due diligence Bock & Clark Corporation  1121530  2/24/2017 
 4,800.00   ALTA/NSPS Land Survey Don Illingworth & Associates  17061  3/7/2017 
 1,500.00   Consulting engineering Targus Associates  7345  3/10/2017 
 5,000.00   Phsae I ESA Stone Oak Land Design  8541  3/10/2017   730.69  
Irrigation inspection Terracon  T884616  3/16/2017   5,400.00   ADA & FHAA
Assessment WJHJ         2,800.00   Acoustic Testing FLSA         7,035.00   Fire
Life Safety Inspection Assumption Deposit         11,000.00             
 58,082.98    

 

 F - 3 

 

 

Orion at Cascades
Pre-Acq at 3/20/2017
03-11-000-1510.0197 Vendor  Invoice  Date  Amount   Description Pest Management 
296976  2/8/2017   757.75   Pest service       2/17/2017   4,522.54   2/17
payroll Don Illingworth  8341  2/16/2017   1,125.00   Site inspection      
2/16/2017   120.38   Due diligence Janna J       2/13/2017   133.75   Due
diligence Kaitlyn D       2/18/2017   3,140.84   Due diligence Rich F      
2/21/2017   125.19   Due diligence Fred R       2/14/2017   212.64   Due
diligence Colleen M Diamond Technical Surveys  17-9057  2/13/2017   2,225.00  
Infrared inspection AEI consultants  008-0218923  2/22/2017   2,600.00  
Property condition assessment       2/28/2017   1,259.49   Due diligence Janna J
      2/28/2017   2,827.95   Due diligence Fred R       2/28/2017   87.80   Due
diligence Kara M       2/28/2017   103.33   Due diligence Mike I      
2/28/2017   178.60   Due diligence Sarah C       2/28/2017   218.00   Due
diligence Sarah C       2/28/2017   4.31   Due diligence Kaitlyn D The Planning
and Zoning Co  I100497-1  3/6/2017   1,000.00   Site expense Targus Associates 
7342  3/10/2017   5,450.00   Phase I ESA Grayco Roofing Consulting  17031 
3/14/2017   8,484.23   Roof Consulting       3/17/2017   96.30   Due diligence
Deb Buck Terracon  T884610  3/16/2017   5,400.00   ADA and FHAA Assessment WJHW 
       2,500.00   Acoustic Testing Assumption Deposit         11,000.00       
       53,573.10    

 

 F - 4 

 

 

Orion at Cascades II
Pre-Acq at 3/20/17
03-11-000-1510.0198 Vendor  Invoice  Date  Amount   Description Pest Management 
293977  2/8/2017   633.26   Pest service       2/17/2017   4,135.76   2/17
payroll Don Illingworth  8341  2/16/2017   1,125.00   Site inspection      
2/16/2017   120.37   Due diligence Janna J       2/13/2017   133.75   Due
diligence Kaitlyn D John Cowan & Associates  022017  2/20/2017   5,000.00   1/2
survey fee       2/18/2017   2,663.11   Due diligence Rich F       2/21/2017 
 125.19   Due diligence Fred R Persohn/Hahn Associates  5725-01  2/16/2017 
 2,393.75   Elevator due diligence       2/14/2017   211.65   Due diligence
Colleen M Diamond Technical Surveys  17-9058  2/13/2017   2,225.00   Infrared
inspection AEI consultants  008-0218923  2/22/2017   2,400.00   Property
condition assessment       2/28/2017   1,259.50   Due diligence Janna J      
2/28/2017   2,827.86   Due diligence Rich F       2/28/2017   87.80   Due
diligence Kara M       2/28/2017   103.30   Due diligence Mike I      
2/28/2017   178.60   Due diligence Sarah C       2/28/2017   218.00   Due
diligence Sarah C       2/28/2017   4.31   Due diligence Kaitlyn D Fedex 
5-717-72389  2/23/2017   12.19   Fedex The Planning and Zoning Co  I100498-1 
3/2/2017   1,000.00   Site expense Targus Associates  7343  3/10/2017 
 2,300.00   Phase I ESA John Cowan & Associates  102643  3/3/2017   5,825.00  
Update ALTA/ACSM survey Grayco Roofing Consulting  17031  3/14/2017   8,484.23  
Roof Consulting       3/17/2017   96.30   Due diligence Deb Buck Terracon 
T884611  3/16/2017   5,000.00   FHAA Assessment WJHW         2,500.00   Acoustic
Testing Assumption Deposit         11,000.00               62,063.93        Loan
Balance            Assumption Fee 1%               Canyon Springs$ 43,125,000 
   $431,250     Crown Ridge$ 29,653,768     $296,538     Cascades I$ 33,207,000 
   $332,070     Cascades II$ 23,175,000     $231,750     Cibolo Canyon$
17,451,856     $174,519     Total$ 146,612,624     $1,466,126     Additional
Expenses               Bocarsly Emden Cowan Esmail & Arndt Legal Fees to Date 
$115,000     Earnest Money Deposit        $3,000,000     Extension Earnest Money
(2 at $1,000,000 each)  $2,000,000    

 

 F - 5 

 

 

EXHIBIT G

 

Form of Buy-Sell Notice

 

[Offeror / Initiating Member name and address]

 

________ __, 20__

 

BY FACSIMILE AND CERTIFIED MAIL

 

[Offeree / Non-Initiating Member Name and Address]

 

Re:[Offer Election][Sale] Notice pursuant to Limited Liability Company Agreement
of BR CWS 2017 Portfolio JV, LLC

 

Ladies/Gentlemen:

 

Reference is made to that certain Limited Liability Company Agreement of BR CWS
2017 Portfolio JV, LLC (the “Company”), dated March ___, 2017 (as amended, the
“Agreement”).Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Agreement.

 

This letter shall constitute a notice by [Promote Member] [Bluerock]

 

Buy-Sell:

 

invoking its rights to initiate the buy-sell option as Offeror under
Section 15.1 of the Agreement (the “Offer Notice”).

 

The aggregate dollar amount which we would be willing to pay [insert name of
applicable Owner or Company, as applicable] for [Buy-Sell Property/name Owner or
Property] as of the Closing Date free and clear of all liabilities is $________
(the “Valuation Amount”).

 

We estimate that if the closing were consummated for the Valuation Amount in
accordance with the terms set forth in Section 15.1 of the Agreement, the amount
that would be distributable to you if you accepted the offer (i.e., you elect
the Sell Option) would be $________, and the amount that would be distributable
to us if you did not accept the offer (i.e., you elect the Buy Option) would be
$________.The amounts set forth in the preceding sentence shall be subject to
the adjustments provided in Section 15.1 of the Agreement.

 

[Include a description of all oral, and copies of all written, offers and
inquiries received by the Offeror during the previous twelve-month period
relating to the financing, disposition or leasing of the Buy-Sell Property
(including proposals for the formation of one or more new entities for the
ownership and operation of the Buy-Sell Property).]

 

 G - 1 

 

 

It is the intention of the Offeror that the Loan relating to the Buy-Sell
Property will [be paid-off at closing/remain in place at closing.]

 

In accordance with Section 15.1 of the Agreement, you have 60 days from the
delivery of this Offer Election Notice to elect to either (i) cause the Company
to sell the interests in the Owner that owns the Buy-Sell Property to us or our
designee (i.e., the Sell Option), or (ii) cause the Company to sell the
interests in the Owner that owns the Buy-Sell Property to you or your designee
(i.e., the Buy Option).

 

[remainder of page intentionally left blank]

 

[signature page next page]

 

 G - 2 

 

 

  Sincerely,       [OFFEROR / INITIATING MEMBER]         By:  

    Name:  

    Title:  

 

 G - 3 

 

 

SCHEDULE 1

 

TO OFFER ELECTION NOTICE

 

Valuation Amount:  $          Plus:Cash Balances and Deposits*  $         
Less:Outstanding Debt*  $          Less:Other Liabilities*  $          Net
Amount to be Distributed to Members*  $          Bluerock’s Share*  $         
CWS’ Share*  $          Promote Member’s Share*             Earnest Money
Deposit  $  

 

*These amounts are estimates and are subject to adjustment on the actual Closing
Date in accordance with Section 15.1 of the Agreement.

 

 G - 4 

 

 

EXHIBIT H

 

Preferred Return Calculation

 

Compounded 10% Pref With Distributions 1.00797414 0.00797414    1   2   3   4  
5   6   7   8   9   10   11   12      45,000,000    45,358,836    45,720,534  
 45,385,116    45,747,023    46,111,816    45,779,519    46,144,571  
 46,512,534    46,183,432    46,551,705    46,922,915      358,836    361,698  
 364,582    361,907    364,793    367,702    365,052    367,963    370,897  
 368,273    371,210    374,170  distro   -    -    700,000    -    -  
 700,000    -    -    700,000    -    -    700,000      358,836    361,698  
 (335,418)   361,907    364,793    (332,298)   365,052    367,963    (329,103) 
 368,273    371,210    (325,830)     45,358,836    45,720,534    45,385,116  
 45,747,023    46,111,816    45,779,519    46,144,571    46,512,534  
 46,183,432    46,551,705    46,922,915    46,597,085                        
                                       Compounded 10% Pref Without Distributions
1.00797414                                                            
0.00797414                                                                1  
2   3   4   5   6   7   8   9   10   11   12      45,000,000    45,358,836  
 45,720,534    46,085,116    46,452,605    46,823,025    47,196,398  
 47,572,749    47,952,101    48,334,477    48,719,903    49,108,403    
 358,836    361,698    364,582    367,489    370,420    373,373    376,351  
 379,352    382,377    385,426    388,499    391,597  distro   -    -    -  
 -    -    -    -    -    -    -    -    -      358,836    361,698    364,582  
 367,489    370,420    373,373    376,351    379,352    382,377    385,426  
 388,499    391,597      45,358,836    45,720,534    46,085,116    46,452,605  
 46,823,025    47,196,398    47,572,749    47,952,101    48,334,477  
 48,719,903    49,108,403    49,500,000 

 

 H - 1 

 

  

EXHIBIT I

 

Form of Property Management Agreement

 

(SEE ATTACHED)

 

   

 

 

MANAGEMENT AGREEMENT

 

This Management Agreement (this “Agreement”) is
dated                           , 2017, by and between [Insert Owner], a
Delaware limited liability company (“Owner”), and CWS Apartment Homes LLC, a
Delaware limited liability company (“Manager”);

 

WHEREAS, Owner is the owner of a [XXX] unit multifamily residential property,
known as [Insert Property Name] located at [Insert Property Address]
(collectively, the “Property”); and

 

WHEREAS, Owner desires to appoint and engage Manager in the management and
operation of the Property, 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. An estimate of receipts and expenditures for the operation
of the Property during a Fiscal Year, including a schedule of expected apartment
rentals (excluding security deposits, other refundable deposits, SureDeposits
and other similar bonds and deposits) for the Fiscal Year, and an estimate of
capital expenditures (as defined by GAAP), which consist of capital
replacements, substitutions, material repairs and additions for the Property
(other than routine repairs and maintenance) for the Fiscal Year.

 

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

 

1.3          Confidential Information. The books, records, business practices,
methods of operations, computer software, financial models, financial
information, policies and procedures, and all other information relating to
Owner and the Property (including any such information relating to the Property
generated by Manager), which is not available to the public. Notwithstanding the
foregoing, Confidential Information shall not include any Proprietary Property.

 

1.4          Controllable Expenses. All expenses, other than Uncontrollable
Expenses, with respect to the Property.

 

1.5          Credit Support. All (i) environmental indemnities, (ii) guaranties
for non- recourse carve-outs, (iii) completion guaranties, (iv) payment
guaranty, and (v) any other guaranty, indemnity, or credit enhancement or
personal liability undertaking provided in connection with a Loan.

 

 1 

 

 

1.6          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. Owner hereby approves Wells Fargo, N.A. as the initial bank
where the Depository Account will be maintained.

 

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

 

1.8          Emergency. An event requiring action to be taken (a) in order to
comply with applicable laws, any insurance requirements, or to preserve the
Property (or any part thereof), (b) for the safety of the Property, any tenants,
occupants, customers or invitees thereof, (c) to avoid the suspension of any
services necessary to the tenants, occupants, licensees or invitees thereof, (d)
to avoid imminent danger to life or property, (e) to avoid the breach of Owner’s
obligations under any tenant leases, (f) to avoid civil or criminal liability
for Owner and/or Manager, or (g) as a result of acts of God, fire, damage or
casualty, mechanical or equipment failure, hazardous material spills or
contamination, riots or civil insurrection.

 

1.9          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), (d) 1099 information upon
request and (e) any additional information reasonably requested by Owner.

 

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

 

1.11        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., accrual versus cash basis), from (a) tenant rentals and other
sums pursuant to tenant leases (excluding security deposits, pet deposits, other
refundable deposits, SureDeposits and other similar bonds and deposits, in each
case, except as provided below) and other amounts for rental of the Property,
including garage income, parking fees, storage fees, amenity fees and other
similar amounts, late fees, late charges, NSF charges, and interest income, (b)
income from the operation of the Property, including, but not limited to,
utility reimbursements, cable television, telephone, internet access, security
monitoring, laundry, vending machines and other miscellaneous income, (c)
business and rental interruption insurance proceeds, (d) amounts paid by reason
of the breach of any lease, 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, other non-refundable fees and deposits, and other similar
miscellaneous income. Gross Rental Revenue does not include the proceeds of (i)
any sale, exchange, refinancing, condemnation (to the extent unrelated to the
collection of rents and other income or charges) or other disposition of all or
any part of the Property, (ii) any loans to Owner, whether or not secured by all
or any part of the Property, (iii) any capital contributions to Owner, (iv) any
insurance (other than business or rental interruption insurance) maintained with
regard to the Property, (v) security deposits, pet deposits, other refundable
deposits, SureDeposits and other similar bonds and deposits (until forfeited or
applied to obligations that constitute Gross Rental Revenue), (vi) sums
collected through litigation or paid to Owner pursuant to any indemnification
provision, (vii) rents paid more than thirty (30) days in advance of the due
date until the month in which such payments are to be applied as rental income,
(viii) 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, which amounts shall be
amortized over the remaining term of the lease and included in Gross Rental
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 collected on rents, (xi) refunds, including tax
abatements, (xii) non-recurring lump sum and/or non-recurring upfront payments
paid by ancillary income providers (e.g. laundry, cable, antennae, or (xiii)
tenant rentals and income from the operation of any non-residential retail
and/or commercial lease(s) (retail space revenue and management fee to be
negotiated in additional exhibit if applicable).

 

 2 

 

 

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

 

1.13        Loan. Any loan for which the Property is pledged as security,
including that certain loan secured by a deed of trust, mortgage or other
security instrument on the Property in effect on the Commencement Date, or as
may be modified from time to time.

 

1.14        Loan Documents. The documents evidencing and securing any Loan.

 

1.15        Property 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, but not limited to, any
employees who work at the Property on a part-time or temporary basis and any
employees from other sites who may work at the Property to cover time-off or
other special needs at the Property, to the extent of the time they spend at the
Property.

 

1.16        Property Close Date. The last day of each calendar month during the
Fiscal Year.

 

 3 

 

 

1.17        Proprietary Property. All modeling algorithms, tools, computer
programs, know-how, methodologies, processes, technologies, ideas, concepts,
skills, routines, subroutines, operating instructions, trade names, trademarks,
trade dress, logos, characterizations, service marks, domain names, websites,
social media accounts (and all user names and password account information
necessary for accessing and controlling said websites and social media
accounts), and other materials and aides used by Manager in performing its
duties set forth in this Agreement that relate to management advice, services
and techniques regarding the Property, and all modifications, enhancements and
derivative works of the foregoing.

 

1.18        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.

 

1.19        Start Up Costs. Those costs which Manager incurs after the Effective
Date of this Agreement in connection with beginning operations at the Property,
which costs are either included in a Budget or approved in advance and in
writing by Owner and may include (but are not limited to) purchasing software,
hardware, and other office equipment costs and expenses specific to the
Property.

 

1.20        Term. The term of this Agreement shall begin on the Effective Date
and shall, subject to the other provisions in this Agreement, expire three (3)
years 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 Article 7 of this Agreement.

 

1.21        Uncontrollable Expenses. The following expenses with respect to the
Owner or the Property: taxes, assessments (including, but not limited to, ad
valorem and margin taxes) and insurance; expenses incurred by the Owner; audit
fees; licenses and permits; HOA assessments; assessments or other charges
pursuant to recorded maintenance, shared use, easement and other similar
agreements with third parties; utilities; unanticipated material repairs that
are essential to preserve or protect the Property; costs of an Emergency;
regularly scheduled debt service payments; lender reserves and impounds; and
costs due to a change in law or the interpretation thereof.

 

 4 

 

 

ARTICLE 2

 

DUTIES AND RIGHTS OF MANAGER

 

2.1          Appointment of Manager. Owner hereby appoints Manager as the
exclusive designated property manager and leasing agent of the Property, and
Manager agrees, for and in consideration of the compensation and reimbursements
provided in this Agreement, that during the Term of this Agreement Manager will
supervise and direct the management and operation of the Property as provided in
this Agreement. Manager shall perform its duties and obligations in a
professional manner, and shall maintain the Property in accordance with the
applicable Budget and in accordance with the standards a reasonably prudent
multifamily property manager would employ with respect to properties of similar
age, size, and class as the Property in the market area in which the Property is
located. Manager shall have no liability whatsoever with respect to acts or
omissions of Owner, previous owners of the Property, 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 properties
and Manager shall serve Owner in the management, operation, maintenance and
repair of the Property, conforming to the standards a reasonable prudent
multi-family property manager would employ with respect to properties of similar
size, age and class as the Property in the market area in which the Property is
located. 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 (but only to the
extent provided) in this Agreement. Manager shall act with the same standard of
care with respect to the cash and cash accounts of Owner as Manager employs at
other properties in the market area of the Property which are managed by
Manager. Manager shall use commercially reasonable efforts to achieve the proper
protection and accounting for Owner’s other assets associated with the Property,
and shall use commercially reasonable efforts to operate the Property in a
manner consistent with the operational standards imposed by Owner’s lender under
the Loan Documents of which Manager has received actual notice and which Manager
is required to perform under this Agreement. Manager may install one or more
signs on or about the Property stating that Manager is the property manager and
leasing agent of the Property, and Manager may use in a commercially reasonable
manner, subject to Owner’s approval, which approval will not be unreasonably
withheld, conditioned or delayed, Manager’s name and logo in any display
advertising that may be done on behalf of the Property. Owner shall provide
adequate office space at the Property, at no cost to Manager, for Manager’s
exclusive use in carrying out its duties pursuant to the terms of this
Agreement.

 

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 Property, if any, and when, in Manager’s
reasonable judgment it is necessary and prudent, 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)          Subject to the limitations in the Budget, to advertise at Owner’s
expense the availability of apartment units at the Property for rental and,
subject to limitations imposed by local laws or restrictive covenants applicable
to the Property, display “for rent” or other similar signs upon the Property;
and

 

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

 

(i)          Lease leasable apartment units in substantial accordance with the
leasing guidelines attached hereto as Exhibit F or otherwise determined by Owner
and communicated to Manager in writing. Said leasing guidelines shall include
the following parameters: Without the prior written consent of Owner, Manager
shall not enter into a new lease or renew any existing lease for space in the
Property for (A) a term less than six (6) months, except that without regard to
month-to month leases, the Manager may enter into new leases or renewals so long
as no more than ten percent (10%) of the leases have an initial term less than
six (6) months; (B) any non-residential purpose [(with the exception of the
premises for the existing spa lease)]1; or (C) any activity that would violate
any requirement imposed by Owner’s lender under the Loan Documents.

 

 5 

 

 

(ii)         Secure tenants for the Property based on tenant selection criteria
recommended by Manager and approved by Owner, and negotiate leases with such
tenants in substantial accordance with the leasing guidelines attached hereto as
Exhibit F or otherwise determined by Owner and communicated to Manager in
writing; provided, however, Manager does not guarantee the creditworthiness of
any tenants or collectability of accounts receivables. 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.

 

(iii)        Supervise all dealings with tenants of the Property 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 in all material respects with the terms
and conditions of their respective leases and notify the respective tenants and
Owner of any material non-compliance with such leases; and supervise the moving
in and out of all tenants of the Property.

 

(d)          Attach and incorporate Owner’s Provision for Making Apartment
Modifications by Residents/Applicants With Disabilities or With Visitors Having
Disabilities (“Modifications Addendum”) substantially in the form attached
hereto as Exhibit E into the approved lease form. Manager shall, at Owner’s
expense, accommodate and administer the terms, procedures and accommodations set
forth in such Modifications Addendum to the extent consistent with applicable
law. Pursuant to the Modifications Addendum, a tenant may submit a “Request for
Reasonable Modification” or “Request for Reasonable Accommodation” (each, a
“Request”), as more particularly described in the Modifications Addendum.
Manager shall notify Owner in writing of any Request for Reasonable Modification
where the cost of such modification exceeds $2,500. Manager shall submit to
Owner all submitted Requests which Manager recommends be denied for Owner’s
consideration promptly following Manager’s receipt of the same. At no time shall
Manager deny any such Request without Owner’s express written consent. Owner
acknowledges Manager is not responsible, and shall have no liability, for
assessing accessibility compliance and that all such matters will be deferred to
Owner.

 

(e)          All inquiries for any leases or renewals or agreements for the
rental of the Property or portions thereof shall be referred to Manager, and all
negotiations connected therewith shall be conducted solely by or under the
direction of Manager in substantial accordance with the leasing guidelines
attached hereto as Exhibit F or as otherwise approved in writing by Owner.
Manager is authorized to utilize the services of apartment locator services and
pay compensation (which shall be at prevailing market rates in the vicinity of
the Property) of duly qualified and licensed leasing personnel responsible for
the leasing of the Property; the fees for such services shall be operating
expenses of the Property and, to the extent paid by Manager, reimbursable to
Manager by Owner to the extent set forth in the Budget.

 

 6 

 

 

2.3          Budget.

 

(a)          Attached hereto as Exhibit C is the form of Budget applicable to
the balance of the 2017 Fiscal Year, which Budget is deemed approved by Owner
and Manager. Manager shall submit an initial proposed Budget for a Fiscal Year
to Owner for Owner’s review no later than September 15 of the year prior to the
beginning of such Fiscal Year. In the event Owner does not approve any Budget
proposed by the Manager, in whole or in part, Owner and Manager shall in good
faith cooperate to resolve any differences with respect to the proposed Budget
for such Fiscal Year as soon as may be reasonably practicable, but in no event
later than December 31. If for any reason Manager and Owner are unable to agree
on a form of Budget for a Fiscal Year prior to such deadline, Owner shall, at
its election, be entitled to unilaterally establish the Budget (which Budget
shall comply with the requirements of clauses (i) and (ii) of the immediately
following sentence) for such Fiscal Year and for all subsequent Fiscal Years and
such Owner prepared Budgets shall be implemented by Manager in accordance with
the terms of this Agreement. Until a complete new Budget is approved and so long
as Owner has not unilaterally established a Budget as provided in the
immediately preceding sentence, Manager shall operate the Property on the basis
of the Budget for the prior Fiscal Year adjusted, as necessary, for (i) any
actual changes in Uncontrollable Expenses, and (ii) for increases in rental
revenue and Controllable Expenses, based on changes in the Consumer Price Index
All Urban Consumers for the area in which the Property is located. In the
instance that the Property is operating on the basis of the Budget for the prior
Fiscal Year, all capital expenditures (except for capital expenditures arising
as a result of an Emergency) must be prior approved by Owner in writing. It is
hereby expressly acknowledged by the parties that the Budgets are intended as
projections only, and Manager shall have no responsibility (other than the
reporting set forth in Section 2.3(c) for any shortfall or other loss because
the Property operations do not achieve the results projected in any Budget.
Without limiting the generality of the foregoing, Owner acknowledges and agrees
that Uncontrollable Expenses are not within the control of Manager, and Owner
shall be required to fund the actual costs thereof regardless of the amounts
budgeted therefor. Each Fiscal Year Budget shall include the information set
forth in Exhibit D attached hereto.

 

(b)          The Budget shall constitute a major control under which Manager
shall operate the Property, 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 Property which exceed the
amounts allocated to the corresponding line items in the Budget for the period
in question by more than ten percent (10%) or $5,000 per line item, 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 Uncontrollable Expenses; 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 or which represent cost savings in any line item or the application of
a contingency line item. 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 $5,000 per line item,
whichever is less, Manager shall furnish to Owner, within the time-frame
specified in Exhibit B, 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.

 

 7 

 

 

2.4          Manager and Other Employees.

 

(a)          Subject to payment or reimbursement as provided in the Budget or
this Agreement, Manager shall hire, train, instruct, pay, promote, supervise and
discharge the work of the Property Employees in accordance with Manager’s
policies and procedures. Prior to hiring any individual, to the extent permitted
by applicable law, Manager shall conduct, at Owner’s expense, a background check
on such individual, including criminal history and drug screening. The Property
Employees shall be employees of Manager or an affiliate of Manager and not of
Owner. Nothing herein is intended to provide Owner with any right to make any
hiring decisions on behalf of the Manager, it being understood that the decision
as to the hiring of Manager’s employees shall in all events remain fully and
solely vested in the Manager. Manager shall be solely responsible for legal
compliance concerning the foregoing activities with respect to the Property
Employees.

 

(b)          Manager shall provide to Owner the name and qualifications of its
on-site community director and any replacement for such on-site community
director. The identity of Manager’s on site manager and any replacement for such
on site manager shall be subject to Owner’s approval, which approval will not be
unreasonably withheld, conditioned or delayed. Manager shall provide to Owner
annually, along with the proposed Budget, a schedule of all proposed employees
to be employed in the direct management of the Property, including supervisory
employees to whom on-site personnel will report. Such schedule shall identify
(a) the extent each employee is an “on-site” employee, (b) a full or part time
employee (with details for the nature of any “part time” arrangement), (c) the
estimated extent of each employee’s commitment to the Property (by the
percentage of time such person is dedicated to Property) and (d) the title,
salary range, bonus range, living allowance, rent discounts, commissions and
other benefits of each employee. Manager will have the right to assign employees
to the Property to cover time-off or other special needs at the Property.

 

(c)          Since a Property Employee may need to reside at the Property and be
available full-time in order to properly perform the duties of his/her
employment, it is further understood and agreed that each Property 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 a multifamily property, including apartment rental at an agreed
upon discount and use of all Property facilities. Property 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. In the
event that a Property Employee resides at the Property, such Property Employee
shall execute a lease for the applicable unit. Such lease shall include a
standard employee addendum, which addendum will, in all events, address the
circumstances under which such Property Employee will be entitled to remain at
the Property as a tenant in the event that such Property Employee terminates its
employment with the Manager (or has its employment with the Manager terminated),
including the loss of any applicable discount and the obligation to reapply for
residency and meet all applicable tenant standards.

 

 8 

 

 

(d)          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 Property Employees.

 

(e)          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 Property 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, and reasonable costs incurred by Manager to provide suitable
corporate apparel for its on-site employees. Any performance bonuses paid to any
Property Employee in excess of amounts set forth in the Budget must be approved
by Owner prior to payment thereof. The payroll expenses charged to Owner will
include accrued vacation hours earned by each Property Employee during each
payroll period; however, Owner shall not be financially responsible for vacation
accrued prior to a Property Employee’s employment at the Property. Owner shall
not directly compensate any Property Employee without the prior consent of
Manager.

 

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
Property, 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 multifamily properties in the geographic area in which the
Property 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. 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 or otherwise agreed to by Owner,
Manager shall not execute any such contract on behalf of Owner without Owner’s
approval. Unless otherwise approved by Owner, in each instance, all contracts
must be terminable without cause on thirty (30) days or less notice, unless such
contract pertains to elevators, utilities, laundry, security monitoring, cable
television, telephone or internet or which constitute national service contracts
which are terminable upon a sale of the Property or upon any termination of this
Agreement. In addition, Owner agrees to specifically assume in writing all
obligations under all such contracts so entered into by Manager, on behalf of
Owner, upon the termination of this Agreement, and Owner shall indemnify, defend
and hold harmless Manager and the other Manager Indemnitees from and against any
and all Claims resulting from, arising out of or in any way related to such
contracts or orders and that relate to or concern matters occurring after
termination of this Agreement, but excluding matters arising out of the gross
negligence or willful misconduct of Manager. Owner recognizes that the Property
may be operated in conjunction with other properties 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 Property
and such other properties on an equitable basis as reasonably determined by
Manager and/or included in an approved Budget.

 

 9 

 

 

2.6          Alterations, Repairs and Maintenance.

 

(a)          Manager shall use commercially reasonable efforts, at Owner’s
expense, to maintain the Property 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 Property 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 an Emergency. Manager shall
give prompt written notice of any Emergency repairs to Owner and, circumstances
permitting, shall use commercially reasonable efforts to secure Owner’s prior
written approval thereof if the cost of such Emergency repairs exceed $10,000.
However, in the event of an Emergency which requires immediate repair or
alteration, and Owner is not readily available for consultation, Manager shall
be authorized to use its reasonable commercial judgment regarding the same;
provided, in such event Manager shall notify Owner of any such Emergency repairs
or alterations promptly thereafter and shall provide to Owner invoices
reflecting the expenses of such repairs as directed by Owner. It is understood
that any action taken by Manager under this Section 2.6(a) in connection with
any particular Emergency event shall not create precedent or a duty on the part
of Manager or Owner to take any action in connection with any future event.

 

(b)          Manager shall implement capital replacements, substitutions and
additions for the Property that are provided for in the Budget and, at Owner’s
expense, as may be required due to an Emergency. Owner shall be responsible for
all costs of such capital replacements, substitutions and additions for the
Property 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 Budget for such capital replacement, substitution and
addition without obtaining Owner’s prior written consent, except in the event of
an Emergency in which case the procedures set forth in Section 2.6(a) above
shall apply. 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 Property,
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). Renovation projects are defined as
projects in which the work centers around upgrading or otherwise renovating the
individual units or buildings, and is not work considered simple general
maintenance or repairs. For all renovation projects that are specifically
reviewed with, and approved by Owner, the Owner shall pay Manager a fee to
supervise such renovation projects equal to five percent (5%) of the total cost
of the completed work.

 

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(c)          The provisions of this Section 2.6(c) shall be subject to the
provisions of Section 2.11. Manager shall make periodic visual inspections of
the Property, at such intervals as prudent practice dictates and in any case at
least quarterly. Following the completion of each such inspection, Manager shall
give to Owner a written summary of any material physical shortcomings, including
violations of any applicable laws, defects in the Property, water infiltration
or mold that come to Manager’s attention. Manager also shall give Owner written
notice of any material physical shortcomings (including violations of any
applicable laws, defects in the Property, water infiltration or mold) that come
to Manager’s attention between scheduled periodic inspections. Manager shall
correct any physical shortcomings as soon as reasonably practicable under the
circumstances to the extent that correction is within the scope of routine
maintenance and repair activities for the Property and can be executed within
the limits of the then-existing approved Budget. If correction of any physical
shortcomings requires work outside the scope of routine maintenance and repair
activities for the Property or cannot be executed within the limits of the
then-existing approved Budget, Manager shall submit to Owner its recommendation
for corrective actions and, after consultation with Owner, shall, at Owner’s
expense, execute such corrective measures as Owner may direct. Manager may not
execute any corrective measures to address physical shortcomings that require
work outside the scope of routine maintenance and repair activities for the
Property or that cannot be executed within the limits of the then-existing
approved Budget, except to the extent otherwise approved by Owner or arising as
a result of any Emergency, in which event the provisions of Section 2.6(a) will
apply.

 

2.7          Licenses and Permits. Manager shall, at Owner’s expense, 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 Property. 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.

 

2.8          Compliance with Laws. The provisions of this Section 2.8 shall be
subject to the provisions of Section 2.11. Manager shall use its commercially
reasonable efforts to comply in all material respects 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 Property Employees, including without limitation, asbestos,
petroleum and petroleum products. Manager shall not be responsible for the
Property’s 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 Property 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 Property. Manager and Owner each shall notify the other
of any notice of violation of law with respect to the Property 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. When in Manager’s reasonable judgment it is
necessary and prudent, Manager shall institute, in the name and at the expense
of Owner, legal actions which Manager reasonably deems appropriate to collect
charges, rent or other income from the Property, 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 Property
Employees with respect to any Property 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 Property. 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 $10,000 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 Property. 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.

 

2.11        Property Defects. Notwithstanding anything to the contrary in this
Agreement, Manager is not responsible for parts of the Property 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.
Notwithstanding anything to the contrary in this Agreement, in no event shall
Manager be responsible for uncovering violations of building, zoning,
subdivision, fire, environmental or other codes or other laws and regulations
(including laws relating to accessibility) or for defects or other shortcomings
in the Property or its construction. Manager hereby expressly disclaims any
expertise with respect to compliance with such codes, laws or regulations which
may govern the Property or the operation thereof. Notwithstanding anything to
the contrary in this Agreement, 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 property
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 Property 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 Property
Employees; provided, however, Manager shall not be deemed to be in default under
this Agreement as a result of any such actions on the part of a Property
Employee, unless Manager fails to take appropriate actions to address any such
action by a Property Employee. Manager shall have no responsibility to make
payments with Manager’s funds on any indebtedness incurred by Owner whether or
not secured by the Property or any portion thereof. Manager shall not be
obligated to advance any of its own funds to or for the account of Owner, or to
incur any liability unless Owner shall have furnished Manager with funds
necessary for the discharge thereof. If Manager advances any additional funds in
payment of an expense in the maintenance or operation of the Property which was
included in the Budget, constitutes a reimbursable expense, was authorized by
Owner, or is an obligation of Owner under this Agreement, Manager shall have the
right to withdraw such amounts from the Depository Account or Owner shall
reimburse Manager within thirty (30) days after Owner’s receipt of itemized
invoices or bills therefor.

 

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2.13        Post-Closing Cooperation. Manager shall, at Owner’s written request,
cooperate with the seller of the Property to Owner for purposes of determining
any post-closing adjustment to the closing prorations or any allocation of
revenues received for the Property in accordance with the terms of the
applicable purchase contract; provided, however, Manager shall not remit any
funds to the seller of the Property pursuant to any such determination without
Owner’s prior review of such proposed distributions and Owner’s express
authorization to remit such funds.

 

2.14        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.

 

2.15        Manager’s Rights. Owner acknowledges and agrees that Manager and/or
its affiliates may now or hereafter own, operate, control, develop or manage
other real estate projects and that any acts related thereto shall not
constitute a breach of this Agreement by Manager and Owner shall have no
interest in such real estate projects. In all cases, Manager shall always give
equal priority to the renting of apartment units in the Property as to any other
real estate projects in the vicinity of the Property that is owned, operated,
controlled, developed or managed by Manager or any of its affiliates, and
neither Manager nor any of its affiliates shall induce or attempt to induce
tenants or prospective tenants of the Property to move to apartment units
located in any real estate projects in or near the Property which is owned,
operated, controlled, developed or managed by Manager or any of its affiliates.

 

2.16        Third-Party Insurance Requirements. Manager will require that all
persons performing work on or with respect to the Property (including
contractors, subcontractors and service vendors) maintain insurance coverage, at
no cost to Owner, in the following minimum amounts:

 

(a)          Worker’s compensation insurance with coverage at least equal to
statutory limits of the state where the Property is located or, if none,
$500,000 per accident.

 

(b)          Employers’ liability insurance with limits of $500,000 each
accident, $500,000 disease - policy limit and $500,000 disease - each employee,
or such higher limit imposed in accordance with any requirements of the laws of
the state where the Property is located.

 

(c)          Commercial general liability insurance (including contractual
liability coverage) with limits of not less than $1,000,000 per occurrence.
Manager and Owner to be named as additional insureds on a
primary/non-contributory basis for both ongoing and completed operations.

 

(d)          Business auto liability insurance, including hired and non-owned
auto coverage, with a combined single limit of at least $500,000 per occurrence.

 

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(e)          If appropriate based on the nature of the person’s work, errors and
omissions, liquor liability and/or garage keepers legal liability insurance.

 

(f)           Umbrella insurance with a limit of not less than $1,000,000.

 

Owner may require additional coverages and/or higher limits on a case-by-case
basis. Each insurer shall have an A.M. Best’s rating of at least B+/VIII.
Manager will obtain and keep on file a currently-effective certificate of
insurance which shows that required coverages are in place. Manager will require
the applicable policies to name as additional insureds Owner and such other
parties in interest (including Owner’s lenders and equity investors) as Owner
identifies to Manager. Manager also will confirm that the insurers waive all
rights of subrogation in respect of losses covered under the policies against
Owner and such other parties in interest (including Owner’s lenders and equity
investors) as Owner identifies. The insurance will be primary and
noncontributory with respect to insurance carried by Owner and its affiliates.
Manager must obtain Owner’s written permission to waive any of the above
requirements.

 

2.17        Property Licenses and Authorizations. Manager shall assist Owner in
obtaining and maintaining all licenses, permits and other governmental approvals
and authorizations required for the Property or the operation of the Property
(except any licenses, permits, approvals and authorizations required in
connection with the initial construction of the Property if the Property is to
be built). Manager shall obtain and complete applications for all licenses,
permits and other governmental approvals and authorizations and all required
renewals thereof and, once completed, shall submit the application and follow
through on processing and issuance of the related license, permit, approval or
authorization. Owner will be responsible for paying any fee for any license,
permit or other governmental approval or authorization required for the
Property. All licenses, permits and other governmental approvals and
authorizations for the Property shall be obtained in Owner’s name whenever
possible. All such licenses, permits, approvals and authorizations held in the
name of Manager shall be held by it on behalf of Owner and, upon the termination
or expiration of the Term of this Agreement, Manager shall transfer or assign
all such licenses, permits, approvals or authorizations to Owner or to such
person as Owner may direct.

 

2.18        Environmental Inspections. The provisions of this Section 2.18 shall
be subject to the provisions of Section 2.11. Manager shall periodically inspect
the Property, at such intervals as prudent practice dictates and in any case at
least quarterly, to identify and evaluate conditions which may present
environmental risks or noncompliance with environmental laws, except that
Manager shall not be responsible under this Agreement to identify any
environmental risks or toxic substances with respect to mold or other latent
environmental risks not readily apparent from a reasonable inspection. Manager
shall promptly notify Owner of any violations of environmental laws of which
Manager becomes aware or any other unusual or out of the ordinary circumstances
regarding hazardous materials that require responsive action or present a
potential danger to the Property or persons on or about the Property. Manager
shall reasonably cooperate with Owner, at Owner’s expense, in assessing,
remediating or otherwise resolving any hazardous material contamination
discovered at the Property, whether now existing or resulting from future
activities. Without Owner’s approval, Manager shall not undertake any
environmental remediation activity (except clean-up of minor spills in the
ordinary course of operations) or engage environmental professionals to conduct
any environmental assessment or remediation. Unless otherwise required by law,
Manager may not, without Owner’s approval, provide any party with any reports
relating to the environmental status of the Property.

 

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2.19        Special Maintenance Programs. Manager shall develop a preventative
maintenance program for the Property and shall submit such program (or an
updated program) to Owner for its review and approval as part of each annual
budgeting process. Owner may provide Manager with asbestos, lead paint, mold or
similar operation and maintenance programs when, in Owner’s judgment,
circumstances make any such program advisable. Manager shall use commercially
reasonable efforts to effectuate the preventative maintenance program for the
Property as approved by Owner and all such other maintenance programs, in each
case consistent with limits established by the approved Budget.

 

ARTICLE 3

 

MANAGEMENT FEES; PAYMENTS TO MANAGER

 

3.1          Management Fee.

 

(a)          Owner shall pay to Manager, as compensation for its services, the
Base Management Fee based upon the Gross Rental Revenue realized for the
Property. The Base Management Fee is defined as a sum equal to three percent
(3.00%) of the Gross Rental Revenue of the Property per month; provided that
during the Property’s lease-up, if applicable, the Base Management Fee shall be
not less than $7,500 per month. For the purposes of this Section 3.1, the
“lease-up” shall be the period beginning on the Commencement Date and ending
with the last day of the month in which the Property first achieves ninety-three
percent (93%) occupancy. 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 promptly
following Manager’s completion and delivery to Owner of the 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 Property in the applicable jurisdiction.

 

3.2          Place of Payment. All sums payable by Owner to Manager hereunder
shall be payable to Manager at CWS Apartment Homes LLC, 9606 N. Mopac
Expressway, Suite 500, Austin, Texas 78759, unless Manager shall, from time to
time, specify a different address or method in writing.

 

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3.3          Reimbursement of Expenses. Owner shall be liable for the costs and
expenses of maintaining and operating the Property, 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 Property in accordance with the Budgets or the
performance by Manager of its duties under this Agreement. Reimbursable expenses
shall also include, without limitation (a) costs of on-site telephone systems,
stationery and office supplies, on-site telephone expenses (both base charges
and long-distance charges), on-site photocopying costs, and postage charges, (b)
any expenses for which Owner is expressly obligated to reimburse Manager under
this Agreement, (c) any expenses which Manager incurs at the express direction
of Owner or pursuant to the express provisions of the Agreement, (d) any
expenses incurred by Manager in connection with an Emergency, (e) all expenses
incurred by Manager in the performance of its duties under this Agreement and
authorized by any Budget, including, without limitation, utility expenses,
supplies, materials, payroll for on-site employees and other employees
(provided, however, the costs and expenses of such other employees shall be
allocated to the Property on an equitable basis as outlined in the Budget or as
may otherwise be approved by Owner, which approval shall not be unreasonably
withheld, conditioned or delayed), reasonable and necessary legal fees and
disbursements and any reasonable work to put a unit in rentable condition, (f)
the cost of all insurance required to be maintained by Manager under this
Agreement as well as any associated deductibles, except as provided in Section
4.6(b) and Article 8 and (g) all expenses incurred by Manager for costs which
are the obligation of Owner under this Agreement. Owner shall pay Manager the
full amount of any Start Up Costs for which Manager may be out of pocket and
which have been approved in advance by Owner. Owner shall be liable for any fees
incurred on behalf of the Property 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 multifamily properties 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 Property shall be allowed as
a reimbursable cost hereunder, as outlined in the Budget or as may otherwise be
approved by Owner, which approval shall not be unreasonably withheld,
conditioned or delayed. Manager shall provide, at Owner’s expense, and utilize
property management software for the Property as described in Exhibit A. 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 Property to the extent
that such expenses exceed receipts from the Property 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 receipt of a written request
for the applicable funds from Manager.

 

3.4          Non-Reimbursable Expenses. Unless outlined in the Budget or
otherwise approved by Owner in writing on a case-by-case basis, the following
expenditures incurred by or on behalf of Manager shall be at the sole cost and
expense of Manager and shall not be reimbursed by Owner:

 

(a)          costs specified in this Agreement to be borne by Manager;

 

(b)          costs of travel, salary and wages, payroll taxes, insurance,
worker’s compensation and benefits of Manager’s off-site personnel, unless
otherwise provided in an approved Budget to be allocable to the Property (and
then only for a pro rata share of such costs based on time spent on matters
identified to the Property or on another basis as provided in the approved
Budget);

 

(c)          costs of accounting, record keeping and reporting which are within
the scope of Manager’s responsibility to Owner, unless otherwise provided in an
approved Budget to be allocable to the Property;

 

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(d)          costs of forms, papers, ledgers and other supplies and equipment
used in Manager’s office at any location off the Property;

 

(e)          costs of computers or other data processing equipment, or any pro
rata charge thereon, except the cost of computer hardware, software and
associated support and maintenance purchased for the on-site Property management
office to the extent provided for in the approved Budget;

 

(f)           costs of data processing, or any pro rata charge thereof,
including charges for services of any third-party data processing companies;
provided, however, reimbursable expenses shall include the Property’s pro-rata
share of administrative, accounting, training and other centralized services
provided for the benefit of the Property to the extent set forth in the approved
Budget.

 

(g)          political or charitable contributions;

 

(h)          advances made to employees (unless for otherwise reimbursable
costs) and costs of travel by Manager’s employees or agents to and from the
Property, unless otherwise provided in an approved Budget;

 

(i)           costs attributable to losses arising from the gross negligence,
fraud or willful misconduct on the part of Manager or Property Employees, except
as provided in Section 2.12;

 

(j)           costs of insurance required by Section 4.6(a) of this Agreement,
unless otherwise provided in an approved Budget, except that the cost of
fidelity bonds will not be a reimbursable expense;

 

(k)          employment fees, including recruitment and advertisements, unless
otherwise provided in an approved Budget or specifically approved by Owner in
writing on a case-by-case basis;

 

(l)           penalties, interest and late fees when the cause thereof is
related to Manager’s gross negligence, fraud or willful misconduct;

 

(m)         all overhead and general expenses for Manager’s regional, corporate
or other operations not specific to the Property, unless otherwise provided in
an approved Budget to be allocable to the Property; and

 

(n)          all employee parties, events, travel and recognition, except for
$25 per on site employee two times per year in order for said employees to
attend Manager’s awards banquet in January of each year, Manager’s summer awards
event, Manager’s national meeting, Manager’s “You Earned It” program and other
similar programs during the Term of this Agreement, and except as otherwise
provided in an approved Budget.

 

3.5          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 and the Base Management Fee for the period ending on the date of
termination).

 

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3.6          Affiliates. Without Owner’s prior approval, Manager shall not enter
into any contract for services or supplies for the management, maintenance and
operation of the Property with Manager or any affiliate of Manager or otherwise
procure services or supplies for the management, maintenance and operation of
the Property from Manager or any affiliate of Manager, to the extent that the
costs of such services or supplies exceed competitive costs for such services
rendered by persons or entities of similar skill, competence and experience,
other than Manager’s affiliates as demonstrated by two (2) bids obtained from
independent third parties. Notwithstanding the foregoing, Manager shall have the
right to enter into a corporate housing agreement with an affiliate of Manager
on terms and conditions approved by Owner.

 

3.7          Assistance with Sale or Financing by Owner. Manager shall, at no
material out-of-pocket cost or liability to Manager, reasonably cooperate with
and provide transaction support to Owner in connection with any sale or
financing of the Property. Without limiting the foregoing Manager shall, at the
request of Owner, conduct a unit-by-unit inspection of the Property and complete
a lease, key and work order audit prior to a contemplated sale or financing of
the Property. Manager shall also ensure that all on-site Property files are
organized and up to date and available for review by potential buyers or
lenders. If requested by Owner, Manager shall be the contact for collecting and
distributing due diligence materials related to the Property or its operation.
Manager also shall ensure that on-site representatives are available at the
Property to provide tours to sales agents, prospective buyers and lenders, or
other persons designated by Owner; to coordinate activities of inspectors who
are inspecting any aspect of the Property and to provide such inspectors with
access to the Property (subject to any limitations that Owner may set); and
coordinate production, review and copying of on-site records. Manager shall
prepare Property income and expense proration data in such format as Owner may
reasonably require and shall reasonably cooperate with Owner to verify any
post-closing adjustments to income and expenses prorations. Manager’s
participation in any sale or financing shall not give rise to a claim by Manager
for a commission or other compensation in addition to that otherwise provided
for in this Agreement. In connection with a sale or financing of the Property,
Manager shall, at no material out-of-pocket cost or liability to Manager, from
time to time upon request by Owner deliver to Owner or to the other parties
involved in the sale or refinancing written reports with respect to any and all
matters for which Manager is responsible under this Agreement, including rent
rolls, delinquency reports, operating statements, lists of service contracts,
warranties, inventories, lists of any alleged violations or non-compliance with
laws relating to the Property, lists of insurance claims, lists of any pending
or threatened litigation, and any other information that Manager is required to
maintain under this Agreement.

 

3.8          Web Site & Domain Name(s). Manager shall take all reasonable
actions, at Owner’s expense, to establish and continuously maintain a web site
and domain name(s) for the Property. As between Owner and Manager, rights to any
web site for the Property, as well as graphics and materials posted on such web
site (excluding all Intellectual Property Rights relating to the Property Marks
and the Proprietary Property), shall be the Property of Owner and, to the extent
that Manager hosts or contracts for such web site or its development, Manager
shall make arrangements for such rights to inure to Owner. If Manager hosts any
web site for the Property or includes the Property in any web site of the
Manager, then Manager shall, upon expiration or earlier termination of the Term
of this Agreement, make arrangements to transfer such web site and related
graphics and other materials (excluding all Intellectual Property Rights
relating to the Property Marks and the Proprietary Property) to Owner or another
person designated by Owner, with appropriate releases or transfers of rights
with respect to all of the same. Any third-party contract for hosting or
development of any Property web site shall be subject to Owner’s approval and,
unless otherwise agreed by Owner, shall be in the name of Owner.

 

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3.9          Intellectual Property. All names, service marks, trademarks, trade
dress, logos and similar characterizations identifying the Property or Owner or
any Owner affiliate (excluding all Intellectual Property Rights relating to the
Proprietary Property) are the property of Owner or its affiliates, and Owner or
its affiliates will own any variants or derivatives of such names, service
marks, trademarks, trade dress, logos or characterizations that may be developed
in the future, as well as any new names, service marks, trademarks, trade dress,
logos or characterizations developed in the future with respect to the Property.
Manager will have no rights to any of such names, service marks, trademarks,
trade dress, logos or characterizations or any variants or derivatives thereof
(excluding all Intellectual Property Rights relating to the Proprietary
Property), notwithstanding any use of the same by Manager in connection with its
activities with respect to the Property or any participation by Manager or its
personnel in the development of any of the same. Manager hereby assigns to Owner
any rights (excluding all Intellectual Property Rights relating to the
Proprietary Property) that otherwise inure to it as a result of participation by
Manager or its personnel in the development of any names, service marks,
trademarks, trade dress, logos or characterizations used with respect to the
Property (including variants or derivatives of existing names, service marks,
trademarks, trade dress, logos or characterizations), and Manager will execute,
and will cause its personnel to execute, specific assignments of rights
(excluding all Intellectual Property Rights relating to the Proprietary
Property) with respect to any such names, service marks, trademarks, trade
dress, logos or characterizations used with respect to the Property (including
variants or derivatives of existing names, service marks, trademarks, trade
dress, logos or characterizations) as requested by Owner.

 

3.10        Ownership of Proprietary Property. Manager retains ownership of and
reserves all Intellectual Property Rights relating to the Proprietary Property.
To the extent that Owner has or obtains any claim to any right, title or
interest in the Proprietary Property, including, without limitation, in any
suggestions, enhancements or contributions that Owner may provide regarding the
Proprietary Property, Owner hereby assigns and transfers exclusively to Manager
all right, title and interest, including, without limitation, all Intellectual
Property Rights, free and clear of any liens, encumbrances or licenses in favor
of Owner or any other party, in and to the Proprietary Property. In addition,
Owner will perform, at no material out-of-pocket cost to Owner, any acts that
may be deemed reasonably desirable by Manager to evidence more fully the
transfer of ownership of right, title and interest in the Proprietary Property
to Manager, including but not limited to the execution of any instruments or
documents now or hereafter requested by Manager to perfect, defend or confirm
the assignment described herein, in a form reasonably determined by Manager.
Without limiting the generality of the foregoing, Owner acknowledges and agrees
that the name “CWS”, “Marquis”, “Marq” and “M at ” and any logo, service mark,
trade name, trademark, trade dress, logo, characterization or name utilizing
“CWS”, “Marquis”, “Marq” and “M at ” and/or the stylized “M”, and all domain
names, websites, social media accounts and all user names and password account
information necessary for accessing and controlling said websites and social
medic accounts (collectively, the “Property Marks”) constitute Proprietary
Property. Notwithstanding the foregoing, subject to entering into a license
agreement with Manager (the “License Agreement”), Owner may use certain of the
Property Marks (excluding the name “CWS” and all related Intellectual Property
Rights) so long as Manager is the property manager of the Property and this
Agreement remains in full force and effect.

 

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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. Owner and Manager agree that Manager shall have no
liability for loss of funds of Owner contained in the Depository Account due to
insolvency of the bank or financial institution in which its accounts are kept,
whether or not the amounts in such accounts exceed the maximum amount of federal
or other deposit insurance applicable with respect to the financial institution
in question.

 

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 Property. All security deposit funds
held by Manager shall at all times be the property of Owner, subject to all
applicable laws with respect thereto. Owner and Manager agree that Manager shall
have no liability for loss of funds of Owner contained in the Security Deposit
Account due to insolvency of the bank or financial institution in which its
accounts are kept, whether or not the amounts in such accounts exceed the
maximum amount of federal or other deposit insurance applicable with respect to
the financial institution in question.

 

4.3          Intentionally Omitted.

 

4.4          Disbursement of Funds. Manager shall disburse funds in the
Depository Account on behalf of Owner for payment of Property expenses incurred
by Manager in the performance of its duties hereunder, and other Property
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 Property, such debts and obligations
shall be paid in the following order: Property 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 operating expenses and associated payments; provided, however,
that in the event the Loan Documents conflict with the terms of Section 4.5 or
this Section 4.4, then the terms of the Loan Documents shall prevail so long as
Manager has received actual notice of such provisions.

 

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4.5          Disbursements to Owner. Manager shall, at Owner’s written request,
on the twenty-first (21st) day of each month, pay Owner an amount equal to Gross
Rental Revenue for such month, less (i) reasonable reserves and (ii) amounts
paid in accordance with this Agreement, including, without limitation, the fees
owed to Manager pursuant to Article 3 of this Agreement.

 

4.6          General Provisions.

 

(a)          Persons designated by Owner from time to time – at least 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 Property shall be covered by commercial crime
insurance maintained by Manager with coverage in the minimum amount of
$1,000,000 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, unless otherwise provided in an approved Budget.

 

(c)          Except in the event and to the extent of any theft, fraud,
negligence or 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 Property,
all of which shall be the responsibility of Owner; provided, however, that
Manager will reasonably cooperate with Owner in gathering data for such filings
in accordance with Manager’s duties set forth in this Agreement.

 

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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 Property. 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 Manager 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 the Owner
which has been provided. In addition to the foregoing reporting and physical
inspections, Manager shall provide Owner with READ ONLY access to all applicable
software programs that Manager uses or maintains with respect to the Property.

 

5.2          Periodic Statements.

 

(a)          Within eight (8) business days following each monthly Property
Close Date (or within such other time-frame as may be provided in Exhibit B),
Manager shall electronically deliver, or cause to be electronically delivered,
to Owner the reports identified on Exhibit B.

 

(b)          Within eight (8) business days after each Property Close Date (or
within such other time-frame as may be provided in Exhibit B), 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 Owner or any
direct or indirect members of Owner or for any reporting requirements of any
REIT Member (as defined in Exhibit B) to determine its qualification as a real
estate investment trust and its compliance with any REIT Requirements (as
defined in Exhibit B) as shall be reasonably requested by Owner or such members.
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 eight (8) business days after the final Property Close Date
of each Fiscal Year (or within such other time-frame as may be provided in
Exhibit B), Manager shall deliver, or cause to be delivered, to Owner an income
and expense statement showing results of operation of the Property for the
Fiscal Year. If requested by Owner, Manager will reasonably cooperate with Owner
in an audit of such Fiscal Year financial statement by an independent certified
public accountant selected and paid for by Owner.

 

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(d)          Owner may request, and Manager shall provide within a commercially
reasonable period (not to exceed three (3) business days) after such request,
such additional leasing and management reports that relate to the operations of
the Property as are customary for other similar properties.

 

(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. 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 organizational documents and
(ii) the Loan Documents.

 

(f)           In the event that Owner or Owner’s mortgagee(s) requires an audit
of the Property financial information, Manager shall reasonably cooperate with
the auditors in a timely manner to complete the audit engagement. Manager shall
cooperate in a reasonable manner at the request of Owner or 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.

 

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 specified in this Agreement or on Exhibit A.

 

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 Property
at any reasonable time during the Term of this Agreement for the purpose of
examining or inspecting the Property, but any inspection shall be done with as
little disruption to the business of the Property 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 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 Property), or the performance by Manager of its
responsibilities under this Agreement or acting under the express or implied
directions of Owner, or Manager’s status as the property manager for the
Property, (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, (d) to the extent
that Owner hires a security provider in accordance with Section 2.10, matters
asserted against Manager due to acts or omissions of any such security company
or as to any claimed inadequacy of any security services provided, (e) any
debts, liabilities or payments for which Manager is exculpated pursuant to
Section 2.12 of this Agreement, and (f) breach by Owner of this Agreement. The
foregoing notwithstanding, this indemnity shall not apply to any matters for
which Manager is responsible under an indemnity specifically undertaken by
Manager in this Agreement.

 

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(b)          Owner further agrees to defend, indemnify, and hold harmless the
Manager Indemnitees 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 Property. 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 the gross
negligence, criminal activity, or willful misconduct of Manager or its
employees, including the Property Employees. For purposes of this section,
“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.

 

(c)          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 to the extent arising out of (i) Manager’s
gross negligence (as opposed to mere negligence), willful misconduct,
intentional wrongdoing, or criminal actions, (ii) breach by Manager of this
Agreement, including, without limitation, any failure to comply with the
provisions of any Loan Document which are the express responsibility of Manager
pursuant to the terms of this Agreement and to which Manager has received actual
notice, (iii) violations of employment-related laws by Manager with respect to
any Property Employee, (iv) the types of claims typically covered under
Manager’s Employment Practices Liability Insurance or Errors and Omissions
Liability insurance, or (v) Hazardous Substances caused by Manager or its
employees, including the Property Employees. As a matter of expansion and not
limitation, any breach of this Agreement 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.

 

 24 

 

 

(d)          Owner’s obligations under Sections 6.2(a) and 6.2(b) and Manager’s
obligations under Section 6.2(c) 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(d) 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.

 

(e)          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
indemnified party, (ii) admit to criminal liability on the part of the
indemnified party, or (iii) provide for injunctive relief against the
indemnified party.

 

(f)           All Owner Indemnitee and Manager Indemnitee parties are
third-party beneficiaries of this Agreement to the extent (but solely 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.

 

(g)          The indemnity obligations of the parties in this Agreement shall
survive expiration or earlier termination of the Term of this Agreement with
respect to matters occurring prior to the expiration or earlier termination of
the Term.

 

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 breach of any term or condition of this
Agreement and fails to cure such default within thirty (30) days after written
notice thereof by Owner to Manager or, if such default cannot be cured within
thirty (30) 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 thirty (30) day period, thereafter diligently pursues the cure.

 

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 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
organizational 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.

 

 25 

 

 

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 fifteen (15) days after notice thereof, or (ii) Owner shall fail
to provide funds for operation of the Property 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 (i) terminate this Agreement after any applicable notice and cure
period and (ii) recover from Owner compensatory damages that Manager has
suffered due to Owner’s default. Manager expressly agrees that termination and
compensatory monetary damages are Manager’s sole remedies with respect to a
default by Owner hereunder and Manager expressly waives and releases any right
to seek equitable relief, including specific performance or injunctive relief,
and to sue for any consequential or punitive damages.

 

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 prior written notice of any such sale or conveyance.

 

7.6          Casualty. Notwithstanding anything to the contrary in this
Agreement, Owner may terminate this Agreement in the event 50% or more of the
Property is destroyed by casualty, by giving Manager at least 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 this Agreement for any reason, including its convenience
or in the event of casualty, by giving Owner at least ninety (90) days prior
written notice of termination and specifying the date of termination in said
written notice.

 

7.7          End of Term. Within thirty (30) days after the expiration or
earlier termination of this Agreement, Manager shall deliver to Owner (a) the
Final Accounting with respect to the operations of the Property and (b) all
books and records of Owner then in possession or control of Manager (at Owner’s
expense), and (c) any plans and specifications pertaining to the Property then
in the possession of Manager. In the case of funds, all funds (including tenant
security deposits) after deducting therefrom such sums as are then due and owing
to Manager hereunder, (if any), shall be turned over to Owner within ten (10)
days after the expiration or earlier termination of this Agreement. Manager will
reasonably cooperate in the transition of financial and accounting information
to the Property’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 in the 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 Property
all of its operational manuals, business records (which are not records of the
Property) and any equipment owned by Manager.

 

 26 

 

 

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.

 

7.9          Credit Support. Notwithstanding anything to the contrary contained
in this Agreement, it shall be a condition to any termination of this Agreement
that Owner cause Manager and all of its affiliates (“Guarantor”) to be released
from any and all Credit Support provided by Guarantor in connection with a Loan
(subject to the Guarantor not being released for environmental liability arising
prior to such date under an environmental indemnity, and such other matters
customarily not released in connection with Fannie Mae loan assumptions), or, if
despite the use of Owner’s commercial reasonable efforts, Owner is unable to
secure Guarantor's release, cause a creditworthy entity reasonably acceptable to
Manager to provide an indemnity in form and substance reasonably satisfactory to
Manager indemnifying Guarantor for matters arising prospectively from and after
the termination date, consistent with the operating agreement of Owner’s sole
owner, BR CWS 2017 Portfolio JV, LLC. In addition, any such termination shall be
subject to the terms of the Loan Documents.

 

7.10        Special Termination Right. In the event that an Operating
Performance Variance (as defined below) occurs, Owner shall have the right, as
its sole and exclusive remedy, to terminate this Agreement on the terms and
conditions hereinafter set forth. If an Operating Performance Variance has
occurred and Owner desires to terminate this Agreement, then Owner must, no
later than thirty (30) days after the occurrence of such Operating Performance
Variance, deliver written notice thereof to Manager (the “Owner Notice”).
Notwithstanding anything to the contrary contained herein, Owner shall not have
the right to provide an Owner Notice if the existence of such variance is due to
force majeure events such as weather or natural disasters, governmental action
or inaction, riots, acts of war or terrorism, “acts of God”, civil commotion,
insurrection, sabotage or casualty, in each case outside of the reasonable
control of Manager. If Owner provides an Owner Notice, then no later than ten
(10) business days after Owner’s delivery of the Owner Notice, Manager shall
deliver to Owner an “action plan” of measures that it proposes to undertake in
an effort to cause the Property’s operations to no longer have an Operating
Performance Variance. Owner shall have a period of five (5) business days after
receipt of the action plan to approve the action plan, which approval shall not
be unreasonably withheld, conditioned or delayed. If Owner timely approves or
fails to timely respond to such action plan, then such action plan shall be
deemed to have been adopted and shall be deemed to be a part of the Baseline
Budget. If for any reason Manager and Owner are unable to agree on such action
plan within such five (5) business day period, then Manager shall, at its
election, be entitled to unilaterally establish the action plan and such action
plan shall be deemed to be a part of the Baseline Budget. Once an action plan
has been approved or established as provided above, Manager shall use its
commercially reasonable efforts to implement such action plan within three (3)
months of Owner’s approval (or Manager’s establishment) of such action plan. If
Manager is unable to restore the Property’s performance to eliminate the
Operating Performance Variance by the end of such three (3) month period, then,
no later than thirty (30) days after the expiration of such three (3) month
period, Owner shall have the right, as its sole and exclusive remedy, to
terminate this Agreement by providing written notice of such termination to
Manager.

 

 27 

 

 

For purposes of this Section 7.10, the following definitions shall apply:

 

“Operating Performance Variance” shall mean that the actual Net Operating
Proceeds (as defined below) is (i) less than 92%, during the period commencing
as of the Effective Date and expiring on the second (2nd) anniversary of the
date that the Property is initially acquired by Owner, or (ii) thereafter, less
than 94% of the Net Operating Proceeds called for under the Baseline Budget, as
adjusted for variances approved by Owner in writing, for a period of six (6)
full consecutive calendar months, except that for purposes of determining
whether the Property’s operations no longer have an Operating Performance
Variance following the implementation of an action plan, the foregoing
measurement period shall instead be monthly during the three (3) month period
during which the action plan was implemented.

 

“Net Operating Proceeds” means the Gross Rental Revenues realized from the
Property, less the following expenses with respect to the Property:

 

(i)           payroll and benefits of on-site staff;

 

(ii)          marketing and advertising;

 

(iii)         turn over costs;

 

(iv)         repairs and maintenance;

 

(v)          professional and contract service expense;

 

(vi)         general and administrative; and

 

(vii)        Base Management Fee;

 

provided, however, for purposes of clarification, in no event shall the
foregoing expenses include any Uncontrollable Expenses or capital expenditures.

 

“Baseline Budget” shall mean (i) the current Budget if such Budget was mutually
approved by Owner and Manager, (ii) at Manager’s option, either the current
Budget unilaterally imposed by Owner or the most recent Budget that was mutually
approved by Owner and Manager, adjusted, as necessary, for (y) any actual
changes in Uncontrollable Expenses, and (z) for increases in rental revenue and
Controllable Expenses, based on changes in the Consumer Price Index All Urban
Consumers for the area in which the Property is located, if the current Budget
was unilaterally established by Owner, or (iii) to the extent that any six (6)
month measurement period hereunder occurs during a period where an updated
Budget is due, and a new Budget has not yet been approved or established in
accordance with Section 2.3(a) hereof, the existing Baseline Budget, adjusted,
as necessary, for the circumstances described in clauses (y) and (z) above.

 

 28 

 

 

ARTICLE 8

 

INSURANCE

 

8.1           Owner’s Insurance. Subject to Owner making the necessary funds
available and such insurance being available on commercially reasonable terms,
Manager shall use commercially reasonable efforts to 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 the
Property, at Owner’s sole cost and expense, from authorized insurance companies
with an AM Best rating of A VIII or higher.

 

(a)          Property Insurance. Manager will obtain and keep in force such
property insurance for the Property as Owner deems appropriate.

 

(b)          Owner’s Liability Insurance. Manager will obtain and keep in force
for the benefit of Owner commercial general liability insurance coverage with
limits of at least $2,000,000 per occurrence (the “Owner’s Liability Insurance”)
and umbrella/excess liability coverage with limits of at least $25,000,000 per
occurrence. Owner’s liability insurance shall include coverage for losses
arising from ownership, management and operation of the Property. Owner shall be
the insured on any such policy, with Manager named as an additional insured at
no expense to Manager. Owner’s coverage will be primary with respect to claims
not excluded and as otherwise set forth herein.

 

8.2           Manager’s Insurance. Manager shall use commercially reasonable
efforts to 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 Owner’s
sole cost and expense as and to the extent set forth in the Budget, from
authorized insurance companies approved by Owner rated by Best’s Rating at A IX
or higher. Manager will require the applicable policies to name as additional
insureds Owner and such other parties in interest (including Owner’s lenders and
equity investors) as Owner identifies to Manager. Manager shall not carry
insurance participating or concurrent in form of loss with any policies required
by this Agreement without Owner’s approval.

 

(a)          Workers’ compensation insurance with coverage at least equal to
statutory limits of the state where the Property is located or, if none,
$1,000,000 per accident.

 

(b)          Employers’ liability insurance with limits of $1,000,000 each
accident, $1,000,000 disease - policy limit and $1,000,000 disease - each
employee, or such higher limit imposed in accordance with any requirements of
the laws of the state where the Property is located.

 

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(c)          Commercial crime insurance covering dishonesty of employees, loss
of money and securities on the Property, being transported by messenger or
outside of the Property due to dishonesty, disappearance or destruction,
acceptance of counterfeit currency and depositor/check forgery, third party or
client coverage. The limits of such insurance should be at least $1,000,000 or
three months anticipated rental collections from the Property, whichever is
greater.

 

(d)          Commercial general liability insurance (including contractual
liability coverage) with limits of not less than $2,000,000 per occurrence (the
“Manager’s Liability Insurance”).

 

1.Coverage on an occurrence form.

 

2.Contractual liability coverage covering the indemnification section of this
agreement.

 

3.“Additional Insured – Owners, Lessees or Contractors – (FORM B), CG 20 10 11
85” or its equivalent providing coverage for both ongoing and completed
operations and naming Owner as an additional insured.

 

4.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 or limiting
coverage for bodily injury, property damage or personal and advertising injury.

 

5.Manager shall continue to name Owner as an additional insured for a period of
three years following the termination of the Agreement. Manager shall provide
Owner with an original certificate of insurance not less than fifteen days prior
to each renewal date during this three-year period.

 

6.If the Manager utilizes the services of an employee leasing company, then its
general liability policy must include ISO endorsement CG 04 24 10 93 Coverage
for Injury to Leased Workers.

 

7.The pollution exclusion must be modified to include coverage for pollution
claims related to a hostile fire as well as pollutants that are released from
the building’s heating equipment or equipment used to heat water.

 

8.A separation of insured clause.

 

(e)          Business auto liability insurance, including hired and non-owned
auto coverage, with a combined single limit of at least $1,000,000 per
occurrence.

 

(f)           Umbrella insurance with a limit of not less than $25,000,000.

 

 30 

 

 

(g)          Professional liability errors and omissions insurance with limits
of not less than $2,000,000.

 

(h)          Employment Practices Liability insurance with limits of $1,000,000
per occurrence/aggregate, including third party coverage for sexual harassment,
discrimination and other coverable employment-related torts.

 

8.3          Evidence of Coverage. Manager will provide Owner with certificates
of insurance which show that required coverages are in place and that the
parties identified in accordance with this Agreement are named as additional
insureds. Each certificate of insurance shall confirm an endorsement to the
related policy to the effect that the insureds will be given at least 30 days
(or 10 days in the event of a failure to pay premiums) prior written notice of
cancellation or any material change in the policy.

 

8.4          Renter’s Insurance. If at the direction of the Owner, Manager
implements a renter’s insurance program at the Property 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
Sections 6 and 8. Manager agrees to use commercially reasonable efforts to
insure compliance on the part of Property residents. Manager assumes no
responsibility, liability or reduction in payment of the 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.

 

8.5          Waiver of Subrogation. Each insurance policy maintained by Owner or
by Manager with respect to the Property shall contain a waiver of subrogation
clause, so that no insurers shall have any claim over or against Owner or
Manager, as the case may be, by way of subrogation or otherwise, with respect to
any claims that are insured under such policy. All insurance relating to the
Property shall be only for the benefit of the party securing said insurance and
all others named as insureds. Notwithstanding any contrary provision of this
Agreement, Owner and Manager hereby release each other from and waive all rights
of recovery and claims under or through subrogation or otherwise for any and all
losses and damages to property to the extent caused by a peril insured or
insurable under the policies of insurance maintained under this Agreement by the
waiving party and agree that no insurer shall have a right to recover any
amounts paid with respect to any claim against Owner or Manager by subrogation,
assignment or otherwise.

 

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8.6          Handling Claims. Manager shall report within a reasonable amount of
time to Owner all accidents and claims of which it is aware for damage and
injury relating to the ownership, operation, and maintenance of the Property and
any damage or destruction to the Property coming to the attention of Manager and
will assist Owner in Owner’s attempts to comply with all reporting and
cooperation provisions in all applicable policies. If preparation of such report
will require more than 24 hours, Manager shall give Owner notice of the accident
or claim within 24 hours, with confirmation of the expected date of delivery of
the related report. Manager is authorized to settle on Owner’s behalf any and
all claims against property insurers not in excess of $5,000, which includes
authority for the execution of proof of loss, the adjustment of losses, signing
of receipts, and the collection of money. If the claim is greater than $5,000,
Manager shall act only with the prior written approval of Owner. Manager shall
not knowingly take any action which may operate, or knowingly omit to take any
action which if not taken may operate, to bar Owner or any Indemnified Affiliate
of Owner (hereafter defined) from obtaining any protection or payment under any
policies of insurance held by either Owner or Manager or to prejudice defense by
Owner or any Indemnified Affiliate of Owner in any legal proceeding arising out
of any claim or otherwise prevent Owner or any Indemnified Affiliate of Owner
from protecting its interests against any such claim. Owner (or its insurers)
shall have the exclusive right, at Owner’s option, to conduct the defense of any
claim, demand, suit or other proceeding which may result in liability or loss to
Owner or any Indemnified Affiliate of Owner or for which Owner is responsible
under this Agreement or which is covered by Owner’s insurance. “Indemnified
Affiliate of Owner” means (a) each affiliate of Owner, (b) each person who holds
a direct or indirect ownership interest in Owner or any such affiliate and (c)
the respective officers, directors, managers, trustees, agents, employees and
affiliates of Owner or any such affiliate of any such owner.

 

ARTICLE 9

 

MISCELLANEOUS PROVISIONS

 

9.1          Owner Representative. Owner shall designate one or more persons 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(s)
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(s) 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, all other state
and local accessibility requirements, and the applicable building code affecting
the Property.

 

9.3          Confidentiality. In connection with the performance of its
obligations hereunder, Manager acknowledges that it will have access to
Confidential Information. Manager shall treat such Confidential Information as
proprietary to Owner and private, and shall preserve the confidentiality thereof
and not disclose, or permit its employees, agents or contractors to disclose,
such Confidential Information, except as may be necessary to discharge Manager’s
obligations under this Agreement. Notwithstanding the foregoing, Manager shall
have the right to disclose Confidential Information if and only to the extent it
has become public knowledge, but not due to the actions of Manager, or Manager
is required by court order to disclose any Confidential Information. If Manager
or anyone to whom Manager transmits Confidential Information pursuant to this
Agreement becomes legally compelled to disclose any of the Confidential
Information, Manager shall provide Owner with prompt notice thereof so that
Owner may seek a protective order or other appropriate remedy or waive
compliance with the provisions of this Agreement. In the event that such
protective order or other remedy is not obtained by Owner or Owner waives
compliance with the provisions of this Agreement, Manager shall furnish or cause
to be furnished only that portion of the Confidential Information which Manager
is required by applicable law to furnish, and will exercise commercially
reasonable efforts to obtain reliable assurances that confidential treatment is
accorded the Confidential Information so furnished. The Manager shall consult
with and obtain written approval from Owner 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”).

 

 32 

 

 

9.4          Non-Solicitation. During the term of this Agreement, Owner shall
not solicit any employee of Manager for employment.

 

9.5          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 being 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.

 

9.6          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.

 

9.7          Independent Contractor; No Joint Venture or Partnership. In the
performance of its duties hereunder, Manager shall be and act as an independent
contractor, with the sole duty to supervise, manage, operate, control, direct
and determine the methods of performance of the specified duties and obligations
hereunder. Nothing contained in this Agreement shall be deemed or construed to
create a partnership, joint venture, employment relationship, or otherwise to
create any liability for one party with respect to indebtedness, liabilities or
obligations of the other party except as otherwise may be expressly set forth
herein. Neither Manager nor any Property Employees shall be deemed to be
employees of Owner.

 

9.8          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.

 

9.9          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.

 

 33 

 

 

9.10        Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State in which the
Property is located 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 in which the Property is located 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 Property is
located.

 

9.11        LIMITATION OF DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, NEITHER MANAGER NOR OWNER 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. Manager
acknowledges and agrees that the members, managers, 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 Property and the proceeds therefrom 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.

 

9.12        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, supplement, waiver or discharge is sought.

 

9.13        Prohibition on Assignment. Manager shall not sell, directly or
indirectly, assign or otherwise transfer by operation of law or otherwise all or
any part of its rights or obligations under this Agreement, except, with Owner’s
consent, to an affiliate of Manager and any such unauthorized assignment shall
be void ab initio and of no effect.

 

9.14        Related Entities. Owner may elect to contract with entities in which
Manager has a financial interest or other affiliation. 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.

 

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.

 

 34 

 

 

9.17        Waiver of Jury Trial. MANAGER AND OWNER EACH WAIVES A JURY IN ANY
LITIGATION IN CONNECTION WITH THIS AGREEMENT (INCLUDING INTERPRETATION OR
CONSTRUCTION OF THIS AGREEMENT) OR PERFORMANCE UNDER THIS AGREEMENT. MANAGER AND
OWNER EACH ACKNOWLEDGES THAT THIS WAIVER HAS BEEN FREELY GIVEN AFTER
CONSULTATION BY IT WITH COMPETENT COUNSEL.

 

9.18        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 Property and any deed of trust, mortgage or other
instrument securing any financing now or hereafter constituting a lien upon the
Property or any part thereof, 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 Property shall have no obligation to pay or perform any
of Owner’s obligations hereunder and the Property shall not be subject to any
lien or other encumbrance for such obligation.

 

[Signature Page Follows]

 

 35 

 

 

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

 

ADDRESS: OWNER:    

c/o Bluerock Real Estate, LLC

712 Fifth Avenue, 9th Floor

New York, NY 10019

INSERT LEGAL ENTITY,

a Delaware limited liability company

Attn: Michael Konig

Facsimile: 646.278.4220

 

 

  By:  

  Name:  

  Title:  

 

  Date:  

 

ADDRESS: MANAGER:           CWS Apartment Homes LLC CWS APARTMENT HOMES LLC,
9606 N. Mopac Expressway, Suite 500 a Delaware limited liability company Austin,
Texas 78759         Attn: Michael Brittingham and Justin Leahy        
Facsimile:  (512) 837-5721         Email: mbrittingham@cwscapital.com        
Email: jleahy@cwscapital.com By:     Name:   With a copy to: Title:            
c/o CWS Capital Partners LLC         14 Corporate Plaza, Suite 210        
Newport Beach, CA 92660         Attn: Gary Carmell and Mary Ellen Barlow        
Facsimile:  (949) 640-4931         E-mail:  gcarmell@cwscapital.com        
E-mail:  mbarlow@cwscapital.com                   Bocarsly Emden Cowan Esmail &
Arndt LLP         633 West Fifth Street, 64th Floor         Los Angeles, CA
90071         Attn:  Aaftab Esmail, Esq.         Facsimile:  (213) 559-0811    
    E-mail:  aesmail@bocarsly.com                     Date:  

 

 36 

 

 

Exhibit A

 

Owner will reimburse Manager for the cost of software licenses used for the
property operations and any hardware or software maintenance necessary, at the
property location, for property operations. Manager shall use RealPage for
maintaining, storing, processing and transmitting information to Owner. Manager
will provide data in electronic format for direct upload into Owner’s Yardi (or
other) software.

 

 1 

 

 

Exhibit B

 

Statements and Reports

 

(a)Within eight (8) business days following the end of each month (except that
with respect to the months of March, June, September and December such
information will be provided within five (5) business days after the end of such
month), a statement of Gross Rental Revenue for each month;

 

(b)Within eight (8) business days following the end of each month (except that
with respect to the months of March, June, September and December such
information will be provided within five (5) business days after the end of such
month), a monthly GAAP balance sheet and GAAP income statement, with a
cumulative calendar year GAAP income statement to date, and a statement of
change in the Capital Account for each Member of Owner (“Member”) the preceding
month and year to date;

 

(c)Within eight (8) business days following the end of each month (except that
with respect to the months of March, June, September and December such
information will be provided within five (5) business days after the end of such
month), the monthly and year to date activity which shall be furnished (without
notice or demand) as follows:

 

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

 

2.Budget Comparison[*], including month-to-date and year-to-date variances-
Detailed Income Statement, including prior 12 months

 

3.Profit and loss statement compared to budget with narrative for any
fluctuations compared to budget in excess of 10% or $10,000 per line item,
whichever is lower

 

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

 

5.Account reconciliations for each balance sheet account within the trial
balance. – Detailed support for each account reconciliation including 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.

 

6.Security Deposit Activity

 

 1 

 

 

7.Mortgage Statement

 

8.Monthly Management Fee Calculation

 

9.Monthly Distribution Calculation

 

10.General Ledger, with description and balance detail

 

11.Monthly Check Register together with a detailed bank reconciliation,
including copies of all associated checks.

 

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

 

13.Rent Roll

 

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. calculation of Net Operating
Proceeds and/or Renovation/Rehab report)

 

All reports shall be prepared on an Accrual Basis in accordance with generally
accepted accounting principles, and shall be as of each calendar month end.
Manager shall furnish to Owner such other reports as may be reasonably requested
by Members in order for such Members to be able to comply with any reporting
requirements that are applicable to any such Member (or any Affiliate of any
such Member) under any applicable organizational or offering documents affecting
such Member or its Affiliates.

 

 2 

 

 

Within fifteen (15) days of the end of each quarter of each year, Manager shall
furnish to Owner such information as requested by Owner or its Members or
affiliates as is necessary for any REIT Member of Owner (whether a direct or
indirect owner) to determine its qualification as a real estate investment trust
(a “REIT”) and its compliance with any requirements for qualifying as a REIT
(the “REIT Requirements”) as shall be requested by Owner or its Members.
Further, Manager shall cooperate in a reasonable manner at the request of any
Member to work in good faith with any designated accountants or auditors of such
Member or its Affiliates so that such Member 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
the Member or any of its Affiliates in connection therewith, including for
purposes of testing internal controls and procedures of such Member or its
Affiliates. The requesting Member shall bear the cost of any information or
reports provided to such Member pursuant to this Exhibit.

 

[*] Budget Comparison shall include (i) an unaudited income and expense
statement showing the results of operation of the Property for the preceding
calendar month and the Fiscal Year to-date;

 

(ii) a comparison of monthly line item actual income and expenses with the
monthly line item income and expenses projected in the Budget. The balance sheet
will show the cash balances for reserves and operating accounts as of the
cut-off date for such month.

 

 3 

 

 

Exhibit C

 

2017 Annual Budget

 

 1 

 

 

Exhibit D

 

Annual Budget Information

 

1.a narrative description of any acquisitions or sales that are planned and any
other major activities proposed to be undertaken with respect to the Property;

 

2.a projected annual income statement (accrual basis) on a quarter-by-quarter
basis;

 

3.a schedule of projected operating cash flow (including itemized operating
revenues, property costs and property expenses) for such year on a quarter-by-
quarter basis, including a schedule of projected operating deficits, if any;

 

4.a marketing plan indicating the portions of the Property that Manager
recommends be made available for lease and the proposed terms and conditions
relating thereto;

 

5.a detailed budget reflecting on a line by line basis all projected operating
expenses and any proposed construction and capital expenditures for the
Property, including projected dates for commencement and completion of the
foregoing;

 

6.a description of the proposed investment of any funds of the Owner which are
(or are expected to become) available for investment;

 

7.a description, including the identity of the recipient (if known) and the
amount and purpose, of all fees and other payments proposed, expected or
projected to be paid for professional services and, if a fee or payment exceeds
$25,000, for other services rendered to or on behalf of the Owner by third
parties; and

 

8.such other information reasonably requested from time to time by Owner.

 

 1 

 

 

Exhibit E

 

ADDENDUM TO LEASE AGREEMENT:

 

PROVISION FOR REASONABLE ACCOMMODATIONS AND MODIFICATIONS FOR

RESIDENTS OR APPLICANTS WITH DISABILITIES

 

This addendum is attached to and made part of the Apartment Lease Agreement by
and between [Insert Owner] (the “Owner”), the Owner of the Premises*, acting
through its agent, [Insert Manager] (hereinafter referred to as “Manager”), and
[RESIDENT(S) FULL LEGAL NAME] (hereinafter referred to as “Resident”) of
Apartment number [XXX] located at. Any action taken under this Addendum by the
Owner may be done through its designee, including the Manager.

 

I.         OVERVIEW

 

[Insert Owner], a Delaware limited liability company, provides rental housing on
an equal opportunity basis. The Owner will not discriminate against any person
because of his or her disability and welcomes residents that have a disability,
become disabled, or who have recurring visits by people with a disability. In
addition, Owner allows certain Modifications to units or Accommodations to
policies and procedures be made to enable persons with disabilities to fully
enjoy and use their residences.

 

A Reasonable Accommodation is a change in rules, policies, practices, or
services so that a person with a disability will have an equal opportunity to
use and enjoy a dwelling unit or common space. A Reasonable Modification is a
structural modification that is made to allow persons with disabilities the full
enjoyment of the housing and related facilities. These reasonable Accommodations
and Modifications would include those from the various “safe harbors” of the
Fair Housing Act (FHA) and Americans with Disabilities Act (ADA) (as modified by
certain accepted tolerances) not already found in the dwelling unit or public
and common use areas.

 

II.        ACCOMMODATIONS AVAILABLE TO RESIDENT

 

A Resident that has a disability, becomes disabled, or who has recurring visits
by people with a disability may request that certain Accommodations be made to
rules, policies, practices, and/or services, to the extent that such
Accommodations are necessary to give persons with a disability an equal
opportunity to use and enjoy their apartment and the public and common use areas
of the property. Resident (or someone acting on their behalf) should complete a
REQUEST FOR REASONABLE ACCOMMODATION form, or a substantial equivalent thereof,
unless unable to do so due to the nature of their disability in which case,
assistance will be provided by Owner to Resident in completing the documentation
necessary for the request. Upon approval, Accommodations will be made by the
Owner or Owner’s designee.

 

To learn more about Accommodations, or for assistance with completing the
request form, please contact the on-site leasing office.

 

 

 1 

 

 

III.        MODIFICATIONS AVAILABLE TO RESIDENT

 

A Resident that has a disability, becomes disabled, or who has recurring visits
by people with a disability may request to make other reasonable Modifications
to their dwelling unit if the proposed Modifications are necessary for the full
enjoyment of the Premises*. A Modification generally requires physical changes
be made to Resident’s dwelling unit to facilitate accessibility through
doorways, accessibility to appliances and accessibility to fixtures in
bathrooms. Depending on the circumstances, the cost of Modification may be borne
by the Owner or Resident, and will be determined on a case by case basis. Owner
may offer to make Modifications using its own employees at a mutually agreed
upon cost to Resident. Resident (or someone acting on their behalf) should
complete a REQUEST FOR REASONABLE MODIFICATION form, or a substantial equivalent
thereof, unless unable to do so due to the nature of their disability. In which
case, assistance will be provided by Owner to Resident in completing the
documentation necessary for the request.

 

To learn more about Modifications, or for assistance with completing the request
form, please contact the on-site leasing office.

 

Permission to perform the necessary Modification is subject to the following:

 

For disabilities that are not apparent, Resident may be asked for information
that is necessary to evaluate the disability-related need for the Modification;
however, all information will be kept confidential. Depending on the
Modification requested, Owner may require Resident to provide reasonable
assurances that the Modification will be done in a workmanlike manner. Owner may
also require the Resident or Resident’s contractor obtain any required building
permits. Owner will require any contractor hired to perform work to show proof
of Builder’s Risk, General Liability, and Workers’ Compensation insurance.
Additionally, Owner has the right to inspect the work at any time by giving a
minimum 24 hour written notice to Resident of such inspection.

 

a.In some circumstances, at the end of lease term, Resident may be responsible
to restore the interior of the Premises to the condition that existed before the
Modification, reasonable wear and tear excepted.

 

b.If applicable, Resident and Resident’s contractors agree to strictly adhere to
all applicable local and state building codes and ordinances.

 

c.Owner will not increase Resident’s required security deposit as a result of
Modifications. However, if Resident fails to restore dwelling unit to an
original condition (for any Modification paid for by Resident), excluding normal
wear and tear, at the end of Resident’s lease Owner will deduct the cost of the
restoration from the security deposit. Resident will be billed for any remaining
balance to restore the dwelling unit to its original condition if security
deposit is insufficient.

 

 2 

 

 

d.Before work begins on any Modification, Resident, or a contractor assuming
responsibility on behalf of the Resident, must submit to the Owner (through the
Manager):

 

•plans and specification showing the nature of the Modification;

 

•materials to be used in the proposed Modification;

 

•floor plan (if applicable);

 

•approximate cost of proposed Modification;

 

•name, address and telephone number of company or person(s) who will perform or
make the Modifications;

 

•any additional sketches, drawings, clippings, pictures, etc. that may assist
the Owner through the Modification process.

 

e.Resident (or someone acting on their behalf) should complete a REQUEST FOR
REASONABLE MODIFICATION form, or a substantial equivalent thereof, unless unable
to do so due to the nature of their disability in which case, assistance will be
provided by Owner to Resident in completing the documentation necessary for the
request.

 

*”Premises” means interior or exterior parts, components or elements of a
building or a dwelling unit, including the public and common use of areas of a
building. 

 

 3 

 

 

[Insert Property Name]

 

REQUEST FOR REASONABLE MODIFICATION

 

Resident Name:    

 

Address of Leased Premises:    

 

Phone #:  (Home)     (Work):  

 

Nature of proposed Modification:    

 

Please attach any of the following if in your possession:

 

•plans and specifications showing the nature of the Modification;

 

•materials to be used in the proposed Modification;

 

•floor plan (if applicable);

 

•approximate cost of proposed Modification;

 

•name, address and telephone number of company or person(s) who will perform or
make the Modifications;

 

•any additional sketches, drawings, clippings, pictures, etc. that may assist
the Owner through the Modification process.

 

 

 

 

 

 

 

15.If available, attach copy of proposal or contract for proposed Modification.
Attachment Y / N

 

Resident acknowledges that:

 

a)If any construction or alteration is undertaken before approval of the
Application, the Resident may be required to return the Leased Premises to its
former condition at the Resident’s expense.

 

 4 

 

 

b)Any approval of this Application is contingent upon the Modification being
completed in a workmanlike manner.

 

c)The Owner is permitted to enter the Leased Premises to inspect the
Modification.

 

d)Approval for this Application will be deemed revoked if the Modification
requested has not commenced within 60 days of the date of approval of this
Application and completed by date specified by the Resident.

 

e)If Modifications are approved, Modification costs will be paid as noted in the
approval area of this document, found on page 2.

 

f)All necessary governmental approvals, including but not limited to permits
must be obtained prior to Modification work commencing.

 

g)All Modifications must meet all applicable governmental building, fire and
zoning codes. It is the Resident’s responsibility to ensure that all
Modifications comply with applicable law.

 

h)Any variation from this Application must be resubmitted for approval.

 

i)Owner and Manager shall not be liable for any injury, damage, or loss to
person or property caused by Resident’s installation or completion of the
proposed Modification.

 

j)Resident shall indemnify and save harmless the Owner, Manager, Manager’s
agents, employees, or associates against all liability, including liability
arising from death or injury to person or property caused by Resident’s
installation or completion of the proposed Modification.

 

k)Where necessary, in Owner or Manager’s reasonable judgment, Owner or Manager
may condition approval of this Application on construction/installation being
performed by a licensed contractor who provides Owner or Manager with copies of
all required insurance coverage. Such coverage shall provide a minimum
$1,000,000 of umbrella coverage and worker’s compensations coverage.

 

l)If Resident fails to restore dwelling unit to an original condition excluding
normal wear and tear, at the end of Resident’s lease Owner will deduct the cost
of the restoration from the security deposit. Resident will be billed for any
remaining balance to restore the dwelling unit to its original condition if
security deposit is insufficient.

 

 5 

 

 

Signature of Resident:     Date:  

  

 6 

 

 

All Applications must be sent to the below address via certified mail, overnight
courier, or facsimile. The applications may also be delivered in person to a
member of the Management team.

 

[Insert Property Name]

Leasing Office – Accommodation

Request PROPERTY ADDRESS

CITY, STATE, ZIP CODE

 

Facsimile: PROPERTY’S LEASING OFFICE FAX #

 

Residents are advised against purchasing materials, equipment and/or signing
contracts prior to receiving written approval of this Application from Owner.

 

 7 

 

 

APPROVAL OF PROPOSED MODIFICATION:

 

Cost of Modification will be paid for by RESIDENT / OWNER (circle one).

 

I,
                                                                               ,
acting as agent for [Insert Owner] hereby approve the Proposed Modification
described above.

 

ADDITIONAL CONDITIONS:  

 

 

 

 

 

Signature of person named above:   Signature of Resident:                  
Title:           Date:   Date:

 

[Insert Property Name]

 

REQUEST FOR REASONABLE ACCOMMODATION

 

[Insert Owner], a Delaware limited liability company, is committed to the letter
and spirit of the Fair Housing Act, which, among other things, prohibits
discrimination against persons with disabilities. In accordance with statutory
responsibilities and management policies, Owner will make reasonable
Accommodations to rules, policies, practices, or services, when such
Accommodations may be necessary to afford persons with disabilities an equal
opportunity to use and enjoy their housing community. If Resident is requesting
such an Accommodation, please fill out this form and return it to the Property
Manager.

 

 8 

 

 

Resident’s Name:       Address:       Date of Request:  

 

 9 

 

 

1.Please describe the Accommodation (exception to an existing rule or policy)
that you are requesting:

 

2.Do you consider yourself to have a disability?

 

The Fair Housing Act defines disability as a physical or mental impairment that
substantially limits one or more major life activities. The Supreme Court has
determined that to meet this definition a person must have an impairment that
prevents or severely restricts the person from doing activities that are of
central importance in most peoples’ daily lives.

 

¨      YES ¨     NO

 

3.Please describe how the requested Accommodation is necessary for your use and
enjoyment of your apartment community?

 

4.Please provide the contact information for a professional third party verifier
to whom we will send the attached verification form.

 

Name:           Position:           Address:    

 

Telephone:     Fax:  

  

 10 

 

 

Exhibit F

 

LEASING GUIDELINES

 

 1 

 

 

 

Property: (to be inserted)

 

Manager intends to use Yieldstar to price its units. Yieldstar is dynamic rent
pricing software that prices units based on various supply and demand parameters
as well as leasing velocity parameters. Due to the dynamic nature of this system
it is impossible to determine where each lease will be priced on a day- to-day
basis.

 

Manager intends to sign new leases in accordance with the budgeted annual
averages. Deposits - Negotiable based on market conditions and tenant credit

Lease Term - Term varies based on rents and market conditions. See Section
2.2(c)(i) of the Management Agreement.

 

Tenant Credit - Credit checks completed on all prospective tenants

 

*   Must make 3x the monthly rent

 

*   No negative apartment related comments

 

*   No felonies

 

*   No past due balances, collections within the last four (4) years, bankruptcy
or judgements within the last seven (7) years.

 

Concessions - None (Yieldstar) unless outlined in the Budget. Referral Fees -
Market driven

 

*  Locators = Typically between 50% to 100% of one month’s rent

 

*  Tenant Referrals - $250 to $500

 

Pet Fees - One time, non-refundable charge of $300 with an additional $200
deposit

 

Rental History - 6 months minimum satisfactory rental history

 

Employment - 1 year minimum employment history in same field of work

 

Criminal History - Arrest, conviction or deferred adjudication for any of the
following, application will be automatically denied: a felony of any kind, any
weapons charge, burglary, sex crime, assault or criminal trespassing.

 

Cosigner - Can be used in lieu of either of the following; lack of rental
history, income or credit. Cosigners must complete an application and meet all
rental criteria and will be held legally responsible for the lease and all
addendums. The cosigner must also make five (5) times the monthly rent.

 

 

 2