Exhibit 10.5 

 

 

MANAGEMENT AGREEMENT

 

FOR PROPERTY KNOWN AS: VILLAGE GREEN OF ANN ARBOR     LOCATED AT: 459 Village
Green Blvd., Ann Arbor, MI 48105     BEGINNING: September 12, 2012     OWNER:
VILLAGE GREEN OF ANN ARBOR ASSOCIATES, LLC     MANAGING AGENT: VILLAGE GREEN
MANAGEMENT COMPANY LLC

 

 

List of Provisions

 

Section 1   Appointment of Managing Agent   2 1.1   Appointment and Acceptance  
2 1.2   Description of Premises   2 1.3   Term   2 1.4   Management Office   2 1
5   Apartment for On-Site Staff   2 Section 2   Bank   3 2.1   Operating Account
  3 2.1.1   Initial Deposit and Contingency Reserve   3 2.2   Security Deposit
Account   3 2.3   Fidelity Bond   4 Section 3   Collection of Rents and Other
Receipts   4 3.1   Agent’s Authority   4 3.2   Security Deposits   4 Section 4  
Disbursement from Operating Account   4 4.1   Operating Expenses   4 4.2  
Property Taxes   4 4.3   Debt Service   5 4.4   Net Proceeds   5 Section 5  
Agent Not Required to Advance Funds   5 Section 6   Financial and Other Reports
  5 6.1   Owner’s Right to Audit   5 6.2   Site Computer System   5 Section 7  
Advertising   6 Section 8   Leasing and Renting   6 8.1   Agent’s Authority to
Lease Premises   6 8.2   No Other Rental Agent   6 8.3   Rental Rates   6 8.4  
Enforcement of Leases   7 Section 9   Employees   7 9.1   Employees   7 9.2  
Owner Pays Employees Expenses   7 9.3   Agent’s Authority to File Returns   8
9.4   Worker’s Compensation Insurance   8 9.5   Hold Harmless, Labor Laws   8
Section 10   Maintenance and Repair   8 10.1   Approval for Exceptional
Maintenance Expense   9 Section 11   Contracts, Utilities and Services   9
Section 12   Relationship of Agent to Owner   9 Section 13   Save Harmless   10
Section 14   Liability Insurance   10 Section 15   Agent Assumes No Liability  
12 Section 16   Owner Responsible for all Expenses of Litigation   12 16.1  
Fees for Legal Advice   12 Section 17   Agent’s Compensation and Expenses   13
17.1   For Management Service   13 (a)   Management Fee   13 17.2   For
Modernization (Rehabilitation/Construction)   14 17.3   For Fire Restoration  
14 17.4   Incentive Fee; Reduction to Base Fee   14 17.5   Interest on Unpaid
Sums   15 17.6   For Property Tax Appeal Service   15 17.7   For VG
Select/LeasEquity Services   15 17.8   For VG Communications Services   15
Section 18   Representations   16 Section 19   Structural Changes   17 Section
20   Building Compliance   17 Section 21   Termination   17 21.1   Termination
for Cause   17 (a)   Breach of Agreement   18 (b)   Failure to Act, etc   18 (c)
  Excessive Damage   18 21.2   Termination without Cause   18 21.3   Owner
Responsible for Payments   19 21.4   Sale of Premises   19 21.5   Use of Name  
19 Section 22   Indemnification Survives Termination   20 Section 23   Headings
  20 Section 24   Force Majeure   20 Section 25   Complete Agreement   20
Section 26   Rights Cumulative;  No Waiver   21 Section 27   Applicable Law and
Partial Invalidity   21 Section 28   Notices   21 Section 29   Agreement Binding
Upon Successors and Assigns   22 Section 30   Additional Provisions   22 30.1  
Contractors and Vendors Insurance   22 30.2   Non - Reimbursable Costs   22 30.3
  Training Expenses/Regional Service Director Expenses   23 30.4   Cooperation  
24 30.5   No Assignment   24 30.6   Consents and Approvals   24 30.7   Approved
Budgets   24 Section 31   Dispute Resolution   25 Section 32   Counterparts   25
Signatures       26

 

 

 

 

Section 1                        APPOINTMENT OF MANAGING AGENT

 

1.1                      Appointment and Acceptance

 

This Management Agreement (“Agreement”) is made as of this 12th day of
September, 2012 by and between VILLAGE GREEN MANAGEMENT COMPANY LLC, a Delaware
Limited Liability Company (“Agent”) and VILLAGE GREEN OF ANN ARBOR ASSOCIATES,
LLC, a Michigan limited liability company (“Owner”), otherwise known as the
Parties (“Parties”).

 

Owner hereby appoints Agent as sole and exclusive Agent of Owner to lease and
manage the property described in paragraph 1.2 upon the terms and conditions
provided herein. Agent accepts the appointment and agrees to furnish the service
of its organization for the leasing and management of the “Premises” as defined
in paragraph 1.2; and Owner agrees to pay all expenses in connection with those
services.

 

1.2                      Description of Premises

 

The property to be managed by Agent under this Agreement (the "Premises") is
known as Village Green of Ann Arbor located in Ann Arbor, Michigan, consisting
of the land, buildings, and other improvements described as a 520 unit garden
style apartment community.

 

1.3                      Term

 

The term of this Agreement shall be for an initial period of One (1) year(s)
(the "Initial Term") from September 12, 2012, (“the Effective Date”) to and
including September 11, 2013, and thereafter shall be automatically renewed
annually (“Renewal Term”) unless terminated as provided in paragraphs 21.1, 21.2
or 21.4 herein.

 

1.4                      Management Office

 

Owner shall provide adequate space on the Premises for a management office.
Owner shall pay all expenses related to such office, including, but not limited
to, furnishings, equipment, computer, postage and office supplies, electricity
and other utilities, and telephone.

 

1.5                      Apartment For On-Site Staff

 

Owner shall provide a suitable apartment(s) on the Premises for the use of an
on-site manager and/or a resident maintenance technician and their families,
rent-free, except that such resident staff shall pay for heat, utilities and
cable in the same manner as other residents. The specific apartment(s) shall be
at Owner's discretion.

 

Village Green Ann Arbor2

 

 

Owner shall make available to Village Green employees who are employed on the
Premises, other than the on-site manager and/or a resident maintenance
technician, rental apartments at a 20% rent discount to the market rent
available at the time of rental (“Village Green Associate Discount”). All
Village Green employee rentals will be written on a month-to-month lease and the
Village Green employee discount will terminate immediately with the termination
of Associate’s employment with Village Green or with Village Green’s Management
of the Premises. Agent will not permit the occupancy of the Village Green
employee discount to exceed 3% of the Premise’s total units.

 

Section 2                        BANK ACCOUNTS

 

The various bank accounts established under this Agreement shall be established
in Owner's name with Agent acting in a fiduciary capacity for the Owner. In no
event should any funds related to the Premises be commingled with any other
funds of Agent.

 

2.1                      Operating Account

 

Agent shall establish on behalf of Owner a separate account(s) known as the
Village Green of Ann Arbor Operating Account, separate and apart from Agent's
corporate accounts, for the deposit of receipts collected as described herein,
in a bank or other institution whose deposits are insured by the federal
government. Such depository shall be selected by the Agent and approved by
Owner. Agent shall not be held liable in the event of bankruptcy or failure of a
depository. Funds in the Operating Account remain the property of Owner subject
to disbursement of expenses by Agent as described in this Agreement.

 

2.1.1                      Initial Deposit And Contingency Reserve

 

Immediately upon the Effective Date, Owner shall remit to Agent the sum of
$10,000 to be deposited in the Operating Account as the “Initial Deposit”. Owner
shall maintain the Initial Deposit balance in the Operating Account at all times
during this Agreement. Agent shall refund the Initial Deposit to Owner within 60
days after termination of the Agreement as provided in Sections 21 or 27 herein
upon satisfying any obligation of Owner not previously satisfied via available
funds in the Operating Account.

 

2.2                      Security Deposit Account

 

Agent shall, on behalf of Owner if required by law, establish and maintain a
separate interest-bearing account for tenant security deposits and advance
rentals. Such account shall be maintained and funded by the Owner in accordance
with applicable state or local laws.

 

Village Green Ann Arbor3

 

 

2.3                      Fidelity Bond

 

Agent shall cause all personnel who handle or are responsible for the keepsake
of any monies of Owner to be covered by a fidelity bond in an amount not less
than $1,000,000 with a company determined by Agent.

 

Section 3                        COLLECTION OF RENTS AND OTHER RECEIPTS

 

3.1                      Agent's Authority

 

Agent shall collect (and give receipts for, if necessary) all rents, charges and
other amounts receivable on Owner's behalf in connection with the management and
operation of the Premises. Such receipts shall be deposited in the Operating
Account maintained by Agent on behalf of Owner for the Premises.

 

3.2                      Security Deposits

 

Agent shall collect, deposit, and disburse tenants' security deposits on behalf
of Owner in accordance with the terms of each tenant's lease. Agent shall pay
tenants interest upon such security deposits as required by law.

 

Section 4                        DISBURSEMENTS FROM OPERATING ACCOUNT

 

4.1                      Operating Expenses

 

From the Operating Account, Agent is hereby authorized to pay on behalf of Owner
or reimburse Agent for all Owner approved expenses and costs as per the Annual
Operating Budget for the Premises and for all sums due Agent under this
Agreement.

 

4.2                      Debt Service

 

Owner shall give Agent advance written notice of at least thirty (30) business
days if Owner desires Agent to make any additional monthly or recurring payments
out of the proceeds from the Operating Account. If Owner notifies Agent to make
such payments after the beginning of the term of this Agreement, Agent shall
have the authority to name a new Initial Deposit amount pursuant to paragraph
2.1.1 of this Agreement, and Owner shall maintain this new Initial Deposit
amount at all times in the Operating Account.

 

Village Green Ann Arbor4

 

 

4.3                      Net Proceeds

 

To the extent that funds are available, and after maintaining the Initial
Deposit balance amount as specified in paragraph 2.1.1, Agent shall transmit
cash balances to Owner periodically as directed by Owner.

 

Section 5                        AGENT NOT REQUIRED TO ADVANCE FUNDS

 

In the event that the balance in the Operating Account is at any time
insufficient to pay disbursements due and payable under this Agreement, Owner
shall, immediately upon notice, remit to Agent sufficient funds to cover the
deficiency and replenish the Initial Deposit balance. In no event shall Agent be
required to use its own funds to pay any disbursements on behalf of Owner. Nor
shall Agent be required to advance any monies to Owner, to the Security Deposit
Account, or to the Operating Account.

 

Section 6                        FINANCIAL AND OTHER REPORTS

 

Agent shall furnish Owner with the statements and reports listed on Exhibit A
attached hereto.

 

6.1                      Owner's Right to Audit

 

Owner shall have the right to request periodic audits of all applicable accounts
managed by Agent, and the cost of such audit(s) shall be paid by Owner;
provided, however, if as a result of any such periodic audit, a material error
is identified, then the cost of such periodic audit shall be paid by Agent. For
purposes of this section, a “material error” shall be defined as an error which
amounts to 5% or more of the total budget.

 

6.2                      Site Computer System (When Applicable)

 

Agent is authorized to purchase and maintain as necessary, on behalf of Owner,
hardware necessary to operate Agent supplied operating software. This hardware
will be the property of the Owner. All operating software for the Premises shall
be supplied by the Agent at Owner’s cost as approved in the Annual Operating
Budget. Any other software purchased by the Owner shall be the property of the
Premises. Any software requested by Owner other than Agent’s standard software,
shall be at Owner’s expense including licensing costs, cost to purchase and
maintain system, training and support. Additionally, Owner shall incur any
expenses realized by Agent for the modification of its computer and
telecommunications systems to support the data transmission requirements of the
Owner if not on Agent’s standard software and format.

 

Village Green Ann Arbor5

 

 

Section 7                        ADVERTISING

 

Agent is authorized to advertise the Premises or portions thereof for rent,
using periodicals, signs, plans, collateral, or displays, or such other means as
Agent may recommend. Agent is authorized to place signs on the Premises
advertising the Premises for rent, provided such signs comply with applicable
laws. The cost of such advertising shall be paid out of the Operating Account as
approved in the Annual Operating Budget. The cost of advertisements that share
space with other communities managed by the Agent shall be prorated based upon
the number of units sharing the ad.

 

Section 8                        LEASING AND RENTING

 

8.1                      Agent's Authority to Lease Premises

 

Agent shall use all reasonable efforts to keep the Premises rented by procuring
tenants for the Premises. Agent is authorized to negotiate, prepare, and execute
all leases, including all renewals and extensions of leases (and expansions of
commercial/retail space in the Premises, if applicable) and to cancel and modify
existing leases. Agent shall execute all leases as agent for Owner. All lease
terms shall be in accordance with Village Green’s standard lease agreement, and
be consistent with budget goals.

 

8.2                      No Other Rental Agent

 

During the term of this Agreement, Owner shall not authorize any other person,
firm or corporation to negotiate or act as leasing or rental agent with respect
to any leases for space in the Premises. Owner agrees to promptly forward all
inquiries about leases to Agent.

 

8.3                      Rental Rates

 

Agent is authorized to establish and change or revise all rents, fees, or
deposits, and any other charges chargeable with respect to the Premises, subject
to the approval by Owner of, and general compliance by Agent with, the lease
term policies applicable to the Premises. Agent shall not reduce rents charged
to tenants in excess of 5% from the rents contemplated by the Annual Operating
Budget without written approval from Owner.

 

Village Green Ann Arbor6

 

 

8.4                      Enforcement of Leases

 

Agent is authorized to institute, in Owner's name, all legal actions or
proceedings for the enforcement of any lease term, for the collection of rent or
other income from the Premises, or for the evicting or dispossessing of tenants
or other persons from the Premises. Agent is authorized to sign and serve such
notices as Agent deems necessary for lease enforcement, including the collection
of rent or other income. Agent is authorized, when expedient, to settle,
compromise, and release such legal actions or suits or reinstate such tenancies.
Any monies for such settlements paid out by Agent on behalf of Owner shall not
exceed three months rent without prior approval by Owner. Attorneys' fees,
filing fees, court costs, and other necessary expenses incurred in connection
with such actions and not recovered from tenants shall be paid out of the
Operating Account or reimbursed directly to Agent by Owner. Agent may select the
attorney of its choice as approved by Owner to handle such litigation.

 

Section 9                        EMPLOYEES

 

9.1                      Employees

 

Agent is authorized to hire, supervise, discharge, and pay all employees,
necessary for the management, maintenance, and operation of the Premises. All
employees shall be deemed employees of the Agent, and Owner shall not be liable
to Agent or others for any act or omission on the part of such employees unless
Owner expressly directed such employees to commit a negligent or unlawful act.
The number of site employees and their compensation shall be detailed in the
approved Annual Operating Budget.

 

9.2                      Owner Pays Employee Expenses

 

All wages and fringe benefits payable to such employees hired per paragraph 9.1
above, and all local, state, and federal taxes and assessments (including but
not limited to Social Security taxes, unemployment insurance and workers'
compensation insurance) incident to the employment of such personnel, shall be
paid by Agent on behalf of Owner out of the Owner’s Operating Account and shall
be treated as operating expenses. Agent shall not be liable to such employees
for their wages or compensation. Agent charges 20% (subject to annual increase
at no more than 3%) of monthly gross payroll (“payroll fee” or other “fee”
applicable in the State of Michigan) as reimbursement for those fringe benefit
expenses as noted above including a pro-rata share of risk management
administration, payroll processing expenses and in-house collection expenses.

 

Health and 401k “match” benefits for those associates hired pursuant to
paragraph 9.1 will be paid by Owner out of the Operating Account and shall be
treated as Operating Expenses. Health and 401k “match” benefits will not be paid
directly by Agent from the Payroll Fee.

 

Village Green Ann Arbor7

 

 

All OSHA and any government related agency mandated employee training, as
approved in the Annual Operating Budget, shall be paid by Agent on behalf of
Owner.

 

9.3                      Agent's Authority to File Returns

 

Agent shall do and perform all acts required of an employer with respect to the
Premises and shall execute and file all tax and other returns required under the
applicable federal, state, and local laws, regulations, and/or ordinances
governing employment, and all other statements and reports pertaining to labor
employed in connection with the Premises and under any similar federal or state
law now or hereafter in force. In connection with such filings, Owner shall upon
request promptly execute and deliver to Agent all necessary powers of attorney,
notices of appointment, and the like.

 

9.4                      Workers' Compensation Insurance

 

Agent shall, at Owner's expense, maintain workers' compensation insurance
covering all liability of the employer under established workers' compensation
laws. Such expenses shall be paid out of the payroll fee identified in paragraph
9.2.

 

9.5                      Hold Harmless, Labor Laws

 

Agent shall be responsible for compliance with all applicable state or federal
labor laws. Owner shall indemnify, defend, and save Agent harmless from all
claims, investigations, and suits, or from Owner's actions or failures to act,
with respect to any alleged or actual violation of state or federal labor laws.
Owner's obligation with respect to such violation(s) shall include payment of
all settlements, judgments, damages, liquidated damages, penalties, forfeitures,
back pay awards, court costs, litigation expenses, and attorneys' fees. If Agent
has willfully violated any laws, Agent shall be responsible for all costs in
connection herewith and Agent shall indemnify Owner with respect to violations
of labor laws by Agent.

 

Section 10                       MAINTENANCE AND REPAIR

 

Agent is authorized as approved in the Annual Operating Budget to make or cause
to be made, through contracted services or otherwise, all ordinary repairs and
replacements reasonably necessary to preserve the Premises in its present
condition and for the operating efficiency of the Premises, and all alterations
required to comply with lease requirements, governmental regulations, or
insurance requirements. Agent is also authorized as approved in the Annual
Operating Budget to decorate the Premises and to purchase or rent, on Owner's
behalf, all equipment, tools, appliances, materials, supplies, uniforms, and
other items necessary for the management, maintenance, or operation of the
Premises. Such maintenance and decorating expenses shall be paid out of the
Operating Account. This section applies except where decorating and/or
maintenance are at tenants' expense as stipulated in a lease.

 

Village Green Ann Arbor8

 

 

10.1                    Approval for Exceptional Maintenance Expense

 

Agent agrees to secure Owner’s prior approval on all expenditures subject to
paragraph 30.7, except for any expenditure resulting from emergency repairs
deemed necessary by Agent. For the purpose of this Agreement, an “emergency”
shall be defined as any situation in which failure on the part of Agent to act
promptly would reasonably be expected to cause injury to persons or appreciable
property damage or to comply with federal, state or local law. Any such
“emergency” expenditures will be submitted in writing to Owner immediately.

 

Section 11                      CONTRACTS, UTILITIES AND SERVICES

 

Agent is authorized to negotiate contracts for nonrecurring items of expense,
not to exceed $5,000 unless approved by Owner in writing, and to enter into
agreements on behalf of Owner for all necessary repairs, maintenance, minor
alterations, and utility services. Agent shall, on behalf of Owner and at
Owner's expense, make contracts for electricity, gas, telephone, fuel, or water,
and such other services as Agent shall deem necessary or prudent for the
operation of the Premises. All utility deposits shall be the Owner's
responsibility, except that Agent may pay same from the Operating Account at
Owner's request. All contracts shall contain a 30 day Notice of Cancellation to
the benefit of the Owner, without penalty.

 

NOTE: Any expenditure, non-recurring or otherwise beyond $5,000 will require
three (3) bids prior to executing a contract or for Owner’s review, if
requested.

 

Section 12                      RELATIONSHIP OF AGENT TO OWNER

 

The relationship of the parties to this Agreement shall be that of Owner and
Agent, and all duties to be performed by Agent under this Agreement shall be for
and on behalf of Owner, in Owner's name, and for Owner's account. In taking any
action under this Agreement, Agent shall be acting only as Agent for Owner, and
nothing in this Agreement shall be construed as creating a partnership, joint
venture, or any other relationship between the parties to this Agreement except
that of Principal and Agent, or as requiring Agent to bear any portion of losses
arising out of or connected with the ownership or operation of the Premises. Nor
shall Agent at any time during the period of this Agreement be considered a
direct employee of Owner. Neither party shall have the power to bind or obligate
the other except as expressly set forth in this Agreement. Owner also
acknowledges that all forms, systems, and manuals are the sole property of the
Agent, and are not transferable or are they to be reproduced in any manner
without the express written consent of the Agent.

 

Village Green Ann Arbor9

 

 

Section 13                      INDEMNIFICATION

 

Agent shall protect, defend, indemnify and hold harmless Owner against all loss,
damage, liability, costs and expenses, including, without limitation, reasonable
attorneys’ fees, incurred by Owner and arising out of (i) any failure of Agent
to perform any of its obligations under this Agreement, (ii) any acts of Agent
beyond the scope of the Agent’s authority hereunder, or (iii) the gross
negligence or willful misconduct of Agent, its agents or employees. Owner shall
protect, defend, indemnify and hold harmless Agent against all loss, damage,
liability, costs and expenses, including, without limitation, environmental
claims and reasonable attorneys’ fees, incurred by Agent in the performance of
its services under this Agreement, other than acts, omissions or other events
which Agent is obligated to indemnify Owner pursuant to the immediate preceding
sentence.

 

Owner shall also protect, defend, indemnify and hold harmless Agent and its
affiliates, agents, employees, directors, officers and principals on a primary
and non-contributory basis from any action arising out of the Premises against
all loss, damage, liability, costs and expenses, including, without limitation,
reasonable attorneys’ fees, incurred by Agent in connection with any Fair
Housing Accessibility Guidelines violation(s) or allegations.

 

The foregoing indemnities shall survive the termination of this Agreement.

 

Section 14                      LIABILITY INSURANCE

 

Agent shall, at Owner’s direction and expense, arrange for adequate insurance
against physical damage (e.g., fire with extended coverage endorsement, boiler
and machinery, etc.) and liability for loss, damage, or injury to property or
persons, which might arise out of the occupancy, management, operation or
maintenance of the Premises. The amounts and types of insurance shall be
acceptable to both Owner and Agent, and any deductible required under such
insurance policies shall be Owner’s expense. Liability insurance shall protect
the interests of both Owner and Agent, and shall name both Owner and Agent as
Additional Insureds. The cost of any Premises-related loss, damage to property
or persons or defense costs/legal expenses, which is part of a deductible,
self-insured retention or excluded and/or otherwise not covered by insurance,
shall be Owner’s expense.

 

Village Green Ann Arbor10

 

 

14.1        Agent’s Insurance. Agent shall obtain the following insurance as it
relates to Agent’s operations hereunder, at Agent’s sole cost and expense:

 

a.     Commercial General Liability Form covering Agent’s business operations,
written on an occurrence basis in an amount not less than One Million Dollars
($1,000,000) per occurrence with an annual aggregate limit of not less than Two
Million Dollars ($2,000,000), for bodily injury including death, and property
damage liability. Commercial General Liability insurance covering the Premises
and its operations shall be provided by the Owner at the Owner’s expense in
accordance with Section 14.2.

 

b.     Umbrella/Excess Liability insurance excess of primary Commercial General
Liability in an amount not less than Five Million Dollars ($5,000,000) per
occurrence and in the aggregate.

 

c.     All insurance policies provided pursuant to Section 14.1 a. and b. shall
be excess over any other valid, existing and applicable insurance carried by
Owner.

 

d.     Fidelity Bond or Insurance. Agent shall maintain, pay for and keep in
full force fidelity bond or insurance coverage on all of its employees, agents,
officers and directors who are involved in, or employed in connection with, the
performance of Agent’s obligations under this Agreement, in an amount equal to
One Million ($1,000,000) per occurrence and in the aggregate. Evidence of such
fidelity coverage will be provided to Owner at Owner’s request. The cost of such
bond shall be the expense of the Agent.

 

14.2        Owner’s Insurance. Owner shall provide and maintain, at Owner’s cost
and expense, insurance as it relates to operations of the Premises. Such
insurance shall include:

 

a.     Commercial General Liability insurance, including bodily injury, personal
injury and property damage liability in connection with the use or occupancy of
the Premises written on an occurrence basis in an amount not less than One
Million Dollars ($1,000,000) per occurrence with an annual aggregate limit of
not less than Two Million Dollars ($2,000,000). Agent shall be specified as
additional insured under this policy on a primary and non-contributory basis.

 

b.     Umbrella/excess liability insurance excess of primary Commercial General
Liability insurance in the minimum amount of Five Million Dollars ($5,000,000)
per occurrence, Five Million Dollars ($5,000,000) in the aggregate, and
following form on primary coverage.

 

Village Green Ann Arbor11

 

 

c.     All of Owner’s insurance shall be in the name of the Owner, except that
Agent shall be named as additional insured and Owner’s insurance shall be
primary insurance and not excess over or contributory with any other valid,
existing, and applicable insurance carried by the Agent.

 

Section 15                      AGENT ASSUMES NO LIABILITY

 

Agent assumes no liability whatsoever for any acts or omissions of Owner, or any
previous owners of the Premises, or any previous management or other agent of
either. Agent assumes no liability for any failure of or default by any tenant
in the payment of any rent or other charges due Owner or in the performance of
any obligations owned by any tenant to Owner pursuant to any lease or otherwise.
Nor does Agent assume any liability for previously unknown violations of
environmental or other regulations which may become known during the period this
Agreement is in effect. Any such regulatory violations or hazards discovered by
Agent shall be brought to the attention of Owner in writing, and Owner shall
promptly cure them.

 

Section 16                      OWNER RESPONSIBLE FOR ALL EXPENSES OF LITIGATION

 

Owner shall pay all expenses incurred by Agent, including, but not limited to,
reasonable attorneys' fees and any liability, fines, penalties or the like, in
connection with any claim, proceeding, or suit involving an alleged violation of
any law by Agent or Owner, or both, provided, however, that Owner shall not be
responsible to Agent for any such expenses in the event Agent is finally
adjudged to have personally, and not in a representative capacity, violated any
such law. Nothing contained in this Agreement shall obligate Agent to employ
legal counsel to represent Owner in any such proceeding or suit.

 

16.1                    Fees for Legal Advice

 

Owner shall pay reasonable expenses incurred by Agent in obtaining legal advice
regarding compliance with any law affecting the Premises or activities related
to them. If such expenditure also benefits others for whom Agent acts in a
similar capacity, Owner agrees to pay an apportioned amount of such expense.

 

Village Green Ann Arbor12

 

 

Section 17                      AGENT'S COMPENSATION AND EXPENSES

 

As compensation for the services provided by Agent under this Agreement (and
exclusive of reimbursement of expenses to which Agent is entitled hereunder),
Owner shall pay Agent as follows:

 

17.1For Management Services

 

(a)A base fee (“Base Fee”) of Three and 3/4 percent (3.75%) of the total monthly
Gross Monthly Collected Income, payable by the 10th day of each month for the
duration of this Agreement. Payments due Agent for periods of less than a
calendar month shall be prorated over the number of days for which compensation
is due. The Base Fee shall be calculated based upon the total Gross Monthly
Collected Income during that accounting month including, but not limited to:
rental income, parking income, laundry income, forfeited security deposits (so
long as not for damages) all income associated with leasing of the Premises
(excluding recovery of operating expenses from tenants including, utilities, and
trash), cancellation fee income and all other miscellaneous income including,
but not limited to, income realized by Village Green Select. Gross Monthly
Collected Income shall NOT be deemed to include income arising out of the sale
of real property or the settlement of fire or other casualty losses,
condemnation proceeds or items of a similar nature.

 

For all purposes hereof, “Gross Monthly Collected Income” shall mean the total
gross monthly collections received from the Premises, including, without
limitation, rents (and any interest or penalties accrued thereon), and
miscellaneous gross income items of Owner, as applicable; provided, however,
“Gross Monthly Collected Income” shall specifically exclude:

 

i.Interest paid on any depository accounts, including the Operating Account and
any Security Deposit Account;

 

ii.Security deposits unless and until such deposits are applied as rental income
upon termination of a Lease;

 

iii.Proceeds from a sale, refinancing, condemnation, hazard or liability
insurance, title insurance, tax abatement awards of all or any portion of the
Property.

 

iv.Recovery of operating expenses, e.g. utilities, trash removal, etc.

 

Village Green Ann Arbor13

 

 

17.2For Modernization (Rehabilitation/Construction):

 

A Supervision Fee of Five Percent (5%) shall be charged against the cost of
major capital improvements (in excess of $25,000 per occurrence) including, but
not limited to, building restoration, structural enhancements, major roof
replacement, etc. but shall specifically preclude replacement of carpeting and
appliances and routine deferred maintenance and capital improvements as
routinely found in the Annual Operating Budget. The Supervision Fee shall be
payable to Agent in the month the major capital improvements are incurred and
governed by separate written approval of Owner.

 

17.3For Fire Restoration, Insurance Claims or Storm Damage:

 

At the direction of Owner, a Supervision Fee of 10% of the total cost up to
$500,000; between $500,000 and $1,000,000 a fee of 8%; over $1,000,000 a fee of
6%. Such fee shall be paid to Agent by the Owner in the month the billings are
completed to the Insurance Company.

 

17.4Incentive Fee; Reduction to Base Fee:

 

For each calendar year of the Initial Term or any Renewal Term(s), the Base Fee
shall be subject to the following adjustments:

(i)In the event actual Net Operating Income (defined as Gross Monthly Collected
Income, less variable and fixed expenses, but not reduced for debt service nor
capital improvement costs) meets or exceeds the Net Operating Income as approved
in the Annual Operating Budget, the Base Fee will be increased by .25%.

(ii)In the event actual Net Operating Income (defined as Gross Monthly Collected
Income, less variable and fixed expenses, but not reduced for debt service nor
capital improvement costs) is less than the Net Operating Income as approved in
the Annual Operating Budget, the Base Fee will be decreased by .25%.

(iii)The above calculation shall be performed following the end of each calendar
year, and the recalculated Base Fee amount will be added to or deducted from, as
applicable, the next monthly payment of management fee. The adjustment to the
Base Fee shall be prorated for periods less than a calendar year.

 

Village Green Ann Arbor14

 

 

17.5Interest on Unpaid Sums

 

Any sums due Agent under any provision of this Agreement, and not paid within
thirty (30) days after such sums have become due, shall bear interest at the
rate of two (2) points over the prime rate per annum.

 

17.6For Property Tax Appeal Service (This applies to Michigan/Ohio Only)

 

A yearly property Tax Maintenance Fee of $275 (subject to an annual increase of
3%) and expenses incurred in connection with appeal, which include, but are not
limited to, appraisal fees, expert witness fees and filing fees shall be paid to
Agent. The Tax Maintenance Fee is a yearly budgeted expense and billed once per
year. The expenses in connection with an appeal will be approved by Owner prior
to proceeding with such appeal and will be sent in writing to Owner with Agent’s
recommendations. Owners wishing to utilize their own Tax Consulting Service, do
so at their own cost.

 

17.7For Village Green Select/LeasEquity Services

 

Owner will pay to Village Green Select, 25% of the receipts the Premises
realizes from its LeasEquity Home Purchase Assistance Program as reimbursement
for its broker services and expertise.

 

A 25% Administration Fee shall be paid to Village Green Select with respect to
any special project initiated or developed by Village Green Select that produces
revenue realized by the Premises for ancillary services. The 25% Administration
Fee will be netted from the revenue distributed to the Premises from the gross
revenue received. Village Green Select will be responsible for all expenses
necessary to procure, promote and affect such programs. NOTE: The foregoing
applies only to the extent Owner elects to utilize the LeasEquity Home Purchase
Assistance Program.

 

17.8For Village Green Communications Services

 

A 15% Ad Placement Fee and 20% Collateral Design/print Fee with respect to
projects completed by Village Green Communications for the Premises will be
charged and will be the cost of the Premises subject to Owner’s approval in the
Annual Operating Budget. In addition, the discounts obtained by Village Green
Communications for group advertising and/or group ordering will be passed on to
the Premises. NOTE: The foregoing applies only to the extent Owner elects to
utilize Village Green Communications for such services.

 

Village Green Ann Arbor15

 

 

17.9Subordination to First Mortgage

 

Notwithstanding anything contained herein to the contrary, all compensation due
to the Agent under this Section 17 for the services provided by Agent under this
Agreement shall automatically (and without further action by either party) be
subordinate to Owner’s obligation to pay the debt service payments due on any
first priority mortgage loan that may affect the Premises from time to time.

 

Section 18                       REPRESENTATIONS

 

(a)          Owner represents and warrants: That Owner has full power and
authority to enter into this Agreement and carry out the transactions
contemplated hereby, and the persons and entities executing this Agreement on
behalf of Owner are duly authorized to execute this Agreement and any other
documents reasonably necessary to carry out the transactions contemplated
herein; this Agreement has been duly executed and delivered by Owner and
constitutes a valid and binding obligation of Owner enforceable in accordance
with its terms; that there are no written or oral agreements affecting the
Premises other than tenant leases, copies of which have been furnished to Agent;
that there are no recorded easements, restrictions, reservations, or rights of
way which adversely affect the use of the Premises for the purposes intended
under this Agreement; that to the best of Owner's knowledge, the Premises is
zoned for the intended use; that all leasing and other permits for the operation
of the Premises have been secured and are current; that the buildings and their
construction and operation do not violate any applicable statutes, laws,
ordinances, rules, regulations, orders, or the like (including, but not limited
to, those pertaining to hazardous or toxic substances and Fair Housing
Accessibility Guidelines). Any hazardous or toxic substances shall be disclosed
by providing a copy of the Phase I Environmental Report(s) and the current O&M
Plan for the Premises. Not providing these reports does not void the warranty
affected herein.

 

(b)          Agent represents and warrants: That Agent has full power and
authority to enter into this Agreement and carry out the transactions
contemplated hereby, and the persons and entities executing this Agreement on
behalf of Agent are duly authorized to execute this Agreement and any other
documents reasonably necessary to carry out the transactions contemplated
herein; this Agreement has been duly executed and delivered by Owner and
constitutes a valid and binding obligation of Owner enforceable in accordance
with its terms; and that Agent has in full force and effect all applicable
licenses required in connection with the management of the Premises in
accordance with this Agreement.

 

Village Green Ann Arbor16

 

 

Section 19                      STRUCTURAL CHANGES

 

Owner expressly withholds from Agent any power or authority to make any
structural changes in any building, or to make any other major alterations or
additions in or to any such building or to any equipment in any such building,
or to incur any expense chargeable to Owner other than expenses related to
exercising the express powers vested in Agent through this Agreement, without
the prior written consent of the following Asset Manager/Owner Representative.

 

Robert Platt

 

However, such emergency repairs as may be required because of danger to life or
property, or which are immediately necessary for the preservation and safety of
the Premises or the safety of the tenants and occupants thereof, or required to
avoid the suspension of any necessary service to the Premises, or to comply with
any applicable federal, state, or local laws, regulations, or ordinances, shall
be authorized pursuant to paragraph 10.1 of this Agreement, and Agent shall
notify Owner immediately thereof.

 

Section 20                      BUILDING COMPLIANCE

 

Agent does not assume and is given no responsibility for compliance of the
Premises or any building thereon or any equipment therein with the requirements
of any building codes or with any statute, ordinance, law, or regulation of any
governmental body or of any public authority or official thereof having
jurisdiction, except to notify Owner promptly or forward to Owner promptly any
complaints, warnings, notices, or summonses received by Agent relating to such
matters. Agent agrees to take no action which would result in violation of such
codes or ordinances. Owner represents that to the best of Owner's knowledge the
Premises and all such equipment comply with all such requirements, and Owner
authorizes Agent to disclose the ownership of the Premises to any such officials
and agrees to indemnify and hold Agent, harmless per Section 13.

 

Section 21                      TERMINATION

 

21.1                    Termination for Cause

 

Notwithstanding the foregoing, this Agreement shall terminate in any event, and
all obligations of the parties hereunder shall cease (except as to liabilities
or obligations which have accrued or arisen prior to such termination, or which
accrue pursuant to paragraphs 13 and 21.3 as a result of such termination, and
obligations to insure and indemnify), upon the occurrence of any of the
following events:

 

Village Green Ann Arbor17

 

 

(a)BREACH OF AGREEMENT - thirty (30) days after the receipt of notice by either
party to the other specifying in detail a material breach of this Agreement, if
such breach has not been cured within said thirty (30) day period; or if such
breach is of a nature that it cannot be cured within said thirty (30) day period
but can be cured within a reasonable time thereafter, if efforts to cure such
breach have not commenced or/and such efforts are not proceeding and being
continued diligently both during and after such thirty (30) days period prior to
the breach being cured. HOWEVER, the breach of any obligation of either party
hereunder to pay any monies to the other party under the terms of this Agreement
shall be deemed to be curable within thirty (30) days.

 

(b)FAILURE TO ACT, ETC. - In the event that any insurance required of Owner or
Agent is not maintained without any lapse, or it is alleged or charged that the
Premises, or any portion thereof, or any act or failure to act by Owner, its
agent and employees with respect to the Premises, fails to comply with any law
or regulation, or any order or ruling of any public authority, and Agent, in its
sole discretion, considers that the action or position of Owner or its
representatives with respect thereto may result in damage or liability to Agent,
or disciplinary proceeding with respect to Agent's license, Agent shall have the
right to terminate this Agreement at any time by written notice to Owner of its
election to do so, which termination shall be effective upon the service of such
notice. Such termination shall not release the indemnities of Owner set forth
herein.

 

(c)EXCESSIVE DAMAGE - Upon the destruction of or substantial damage to 50% or
more of the Premises by any cause, or the taking of all or a substantial portion
of 50% or more of the Premises by eminent domain, in either case making it
impossible or impracticable to continue operation of the Premises.

 

21.2                    Termination without Cause

 

Notwithstanding the foregoing, either party may terminate this Agreement at any
time without cause after the Initial Term upon sixty (60) days written notice to
the other party. Notwithstanding anything contained in this Agreement to the
contrary, the Owner shall have the further right to immediately terminate this
Agreement if the Agent becomes insolvent, and to terminate this Agreement at any
time without cause upon providing thirty (30) days written notice to Agent. 

 

Village Green Ann Arbor18

 

 

21.3                   Owner Responsible for Payments

 

Upon termination of or withdrawal from this Agreement, Owner shall assume the
obligations of any contract or outstanding bill executed by Agent in accordance
with this Agreement for and on behalf of Owner and responsibility for payment of
all unpaid bills. In addition, Owner shall furnish Agent security, in an amount
satisfactory to Agent, against any obligations or liabilities that Agent may
have properly incurred on Owner's behalf under this Agreement.

 

Agent may withhold necessary funds for up to sixty (60) days after the end of
the month in which this Agreement is terminated, in order to pay bills
previously incurred but not yet invoiced and to close accounts. Agent shall
deliver to Owner, (a) within sixty (60) days after the end of the month in which
this Agreement is terminated, any balance of monies due Owner and (b)
immediately after termination any tenant security deposits which were held by
Agent with respect to the Premises, and any excess funds not needed to be
retained by Agent to pay such outstanding bills. As promptly as possible, but in
no event later than sixty (60) days after termination, Agent shall provide Owner
with a final accounting reflecting the balance of income and expenses with
respect to the Premises as of the date of termination or withdrawal, and all
records, contracts, leases, receipts for deposits, and other papers or documents
which pertain to the Premises.

 

21.4                      Sale of Premises

 

In the event that the Premises is sold by Owner upon transfer of ownership, this
Agreement shall terminate. In the event that any such termination occurs within
the Initial Term, Owner shall pay Agent a fee equal to one (1) month(s) of
management fees based on the average monthly fee paid in the prior three (3)
month(s).

 

21.5                       Use of Name

 

(a)           Upon expiration or termination of this Agreement for any reason by
either party, Owner shall immediately cease using the names "Village Green" or
"Village Park" all of which are registered service marks owned by Agent. Agent
has the right to remove all signs, advertising materials, forms and other
documents bearing these names, 10 days prior to termination but no later than 10
days following termination.

 

(b)           Owner acknowledges that time is of the essence in carrying out the
change of name required in the preceding paragraph, and that Agent has
established substantial good will and secondary meaning associated with its name
and the Marks. Owner further acknowledges that Agent will have no adequate
remedy at law for the failure of Owner to abide by the provisions of the
preceding paragraph, and that Agent will suffer irreparable injury, the value of
which will be difficult, if not impossible, to determine with any certainty.
Accordingly, Owner agrees that in the event of any failure by Owner to comply
with such provisions, Agent will, in addition to all other remedies available to
it under this Agreement or otherwise, be entitled to equitable relief in the
form of an injunction against such breach, as well as such other relief as a
court with jurisdiction may deem just and proper.

 

Village Green Ann Arbor19

 

 

Section 22                        INDEMNIFICATION SURVIVES TERMINATION

 

All representations and warranties of the parties contained herein shall survive
the termination of this Agreement. All provisions of this Agreement that require
Owner to have insured, defend, reimburse, or indemnify Agent shall survive any
termination; and if Agent is or becomes involved in any proceeding or litigation
by reason of having been Owner's Agent, such provisions shall apply as if this
Agreement were still in effect.

 

Section 23                        HEADINGS

 

All headings and subheadings employed within this Agreement and in the
accompanying List of Provisions are inserted only for convenience and ease of
reference and are not to be considered in the construction or interpretation of
any provision of this Agreement.

 

Section 24                        FORCE MAJEURE

 

Any delays in the performance of any obligation of Agent under this Agreement
shall be excused to the extent that such delays are caused by wars, national
emergencies, natural disasters, strikes, labor disputes, utility failures,
governmental regulations, riots, adverse weather, and other similar causes not
within the control of Agent, and any time periods required for performance shall
be extended accordingly.

 

Section 25                        COMPLETE AGREEMENT

 

This Agreement, including any specified attachments, constitutes the entire
agreement between Owner and Agent with respect to the management and operation
of the Premises and supersedes and replaces any and all previous management
agreements entered into or/and negotiated between Owner and Agent relating to
the Premises covered by this Agreement. No change to this Agreement shall be
valid unless made by supplemental written agreement executed and approved by
Owner and Agent. Except as otherwise provided herein, any and all amendments,
additions, or deletions to this Agreement shall be null and void unless approved
by Owner and Agent in writing. Each party to this Agreement hereby acknowledges
and agrees that the other party has made no warranties, representations,
covenants, or agreements, express or implied, to such party, other than those
expressly set forth herein, and that each party, in entering into and executing
this Agreement, has relied upon no warranties, representations, covenants, or
agreements, express or implied, to such party, other than those expressly set
forth herein.

 

Village Green Ann Arbor20

 

 

Section 26                        RIGHTS CUMULATIVE; NO WAIVER

 

No right or remedy herein conferred upon or reserved to either of the parties to
this Agreement is intended to be exclusive of any other right or remedy, and
each and every right and remedy given under this Agreement or now or hereafter
legally existing upon the occurrence of an event of default under this
Agreement. The failure of either party to this Agreement to insist at any time
upon the strict observance or performance of any of the provisions of this
Agreement, or to exercise any right or remedy as provided in this Agreement,
shall not impair any such right or remedy or be construed as a waiver or
relinquishment of such right or remedy with respect to subsequent defaults.
Every right and remedy given by this Agreement to the parties to it may be
exercised from time to time and as often as may be deemed expedient by those
parties.

 

Section 27                        APPLICABLE LAW AND PARTIAL INVALIDITY

 

The execution, interpretation, and performance of this Agreement shall in all
respects be controlled and governed by the laws of the State of Michigan. If any
part of this Agreement shall be declared invalid or unenforceable, Agent shall
have the option to terminate this Agreement by notice to Owner subject to
provision 21.2 herein.

 

Section 28                        NOTICES

 

Any notices, demands, consents, and reports necessary or provided for under this
Agreement shall be in writing and shall be addressed as follows, or at such
other address as Owner and Agent individually may specify hereafter in writing:

 

  AGENT: Diane K. Batayeh, Chief Operating Officer     Village Green Management
Company LLC     30833 Northwestern Hwy., Suite 300     Farmington Hills,
Michigan  48334-2551

 

Village Green Ann Arbor21

 

 

  OWNER: Jonathan Holtzman     Village Green of Ann Arbor Associates LLC    
30833 Northwestern Hwy., Suite 300     Farmington Hills, MI  48334-2551

 

Such notice of other communication may be mailed by United States registered or
certified mail, return receipt requested, postage prepaid, and may be deposited
in a United States Post Office or a depository for the receipt of mail regularly
maintained by the post office. Such notices, demands, consents, and reports may
also be delivered by hand or by any other receipted method or means permitted by
law. For purposes of this Agreement, notices shall be deemed to have been
"given" or "delivered" upon personal delivery thereof or forty-eight (48) hours
after having been deposited in the United States mails as provided therein.

 

Section 29                        AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS

 

This Agreement shall be binding upon the parties hereto and their respective
personal representatives, heirs, administrators, executors, successors and
assigns.

 

Section 30                        ADDITIONAL PROVISIONS

 

30.1                      Contractors and Vendors Insurance

 

Agent shall require that all contractors and vendors brought onto the Premises
to perform services have adequate insurance coverage at contractors or vendors
expense, including workers compensation as required by law.

 

30.2                       Non-Reimbursable Costs

 

The following expenses or costs incurred by or on behalf of Agent in connection
with the management and leasing of the Premises shall be at the sole cost and
expense of Agent and shall not be reimbursed by Owner unless requested by Agent
in advance and approved by Owner in writing.

 

(a)          Cost of gross salary and wages, payroll taxes, insurance, workers
compensation, and other benefits of Agents' home office personnel not assigned
full-time or part-time to the Premises, excepting as noted in 30.3. Owner
acknowledges and agrees to the cost reimbursements as provided for in Section
9.2.

 

Village Green Ann Arbor22

 

 

(b)           General accounting and reporting services which are considered to
be within the reasonable scope of Agents' responsibility to Owner or as
reasonably requested by mortgage lenders.

 

(c)           Cost of forms, papers, ledgers, and other supplies and equipment
used in the Agents' home office or at any location off the Premises.

 

(d)           Cost of off-site electronic data processing equipment, or any
pro-rata charge thereon located off the Premises or any cost for data processing
provided by a computer service company.

 

(e)           Political or charitable contributions.

 

(f)           Cost of travel by Agent's overhead employees.

 

(g)          Cost attributable to losses arising from gross negligence and
willful, unlawful violation or fraud on the part of Agent, Agent's associates or
affiliates or Agent's employees.

 

(h)           Any costs paid to anyone having an identity of interest with
Agent, Agent's associates and affiliates or employees of Agent and its
associates and affiliates excepting Leading Apartments/Apartments Express,
Village Green Communications and Village Green Select; affiliates of Village
Green Companies.

 

30.3                    Training Expenses

 

Agent shall provide, for the benefit of the Owner, new hire orientation,
recognition programs and continuing education in the areas of management,
marketing, leasing and maintenance of the Premises. Owner shall be responsible
for such costs as it relates to travel (lodging and food if necessary) and
instructional materials, but shall be exclusive of any expense associated with
Village Green corporate personnel who act in the capacity of instructor/trainer,
with amounts reimbursable to agent in accordance with the Annual Operating
Budget. Any specialized training, requested by Owner and outside of the scope of
the Agent’s normal and customary training programs shall be at the expense of
the Owner.

 

Village Green Ann Arbor23

 

 

                             Regional Service Director Expenses

 

Any expense incurred by Regional Service Director’s for travel to the Premises
(airfare, auto, lodging and food if necessary) shall be an expense of the Owner
and included in the Annual Operating Budget of the Premises.

 

30.4                    Cooperation

 

Should any claims, demands, suits, or other legal proceedings be made or
instituted against Owner of Premises which arise out of any matters relating to
this Agreement, Agent shall give Owner all pertinent information and reasonable
assistance in the defense or other disposition thereof.

 

30.5                    No Assignment

 

This Agreement and all rights hereunder shall not be assignable by either party
hereto.

 

30.6                    Consents and Approvals

 

Owner's consents and approvals must be in writing.

 

30.7                    Approved Budgets

 

Agent shall prepare and submit to Owner a proposed operating budget for the
promotion, operation, leasing, repair, maintenance, and preservation and
improvement of the Premises for each forthcoming calendar year. The operating
budget shall include schedules for capital improvements for such year. The
proposed budget for the remainder of the current calendar year shall be
delivered to Owner no later than sixty (60) days after the execution of this
Agreement. The proposed budget for each subsequent calendar year shall be
delivered to Owner no later than sixty (60) days before the end of each prior
calendar year. Owner shall approve or provide comments to any such proposed
budget within thirty (30) days following receipt of the proposed budget. Agent
shall address any such Owner comments in good faith until such time as the Owner
and Agent have agreed to a final form of operating budget (any such approved
budget, the “Annual Operating Budget”). If for any reason the Owner and Agent
are unable to agree on an Annual Operating Budget prior to the commencement of
the year for which the budget applies, the Agent shall continue to manage the
Premises based on the prior year’s Annual Operating Budget, subject to actual
increases for real estate taxes, utilities, payroll and insurance. Agent agrees
to use diligence and to employ all reasonable efforts to ensure that the actual
costs of leasing, maintaining and operating the Premises will conform to the
Annual Operating Budget as approved by the Owner.

 

Agent agrees to secure Owner’s prior approval on all expenditures that exceed
the Owner approved Annual Operating Budget by $5,000 per expense item or $10,000
cumulative.

 

Village Green Ann Arbor24

 

 

Section 31                        DISPUTE RESOLUTION

 

31.1        Claims disputes or other matters in question between the Parties to
this Agreement or breach thereof shall be subject to and decided by mediation
and arbitration in accordance with the Mediation and Arbitration rules of the
American Arbitration Association currently in effect.

 

31.2        In addition to and prior to arbitration, the parties shall endeavor
to settle disputes by mediation in accordance with the Mediation Rules of the
American Arbitration Association currently in effect. The parties shall share
the mediator’s fees and expenses equally, but otherwise each party shall bear
their own attorney fees and costs of the mediation.

 

31.3        Demand for arbitration shall be filed in writing with the other
party to this Agreement and with the American Arbitration Association.

 

31.4        Arbitration pursuant to this Agreement may be joined with an
arbitration involving common issues of law or fact between a party to this
Agreement and any person or entity with whom that party has a contractual
obligation to arbitrate disputes.

 

31.5        The agreement to arbitrate shall be specifically enforceable in
accordance with applicable law in any court having jurisdiction thereof.

 

31.6        The arbitrator shall award to the prevailing party in the
arbitration its reasonable costs, expenses and attorney fees incurred in the
arbitration.

 

31.7        The award rendered by the arbitrator shall be final and judgment may
be entered upon it in accordance with applicable law in any court having
jurisdiction thereof.

 

Section 32                        COUNTERPARTS

 

This Agreement may be executed in any number of counterparts and it shall be
sufficient that the signature of each party appear on one or more such
counterparts. All counterparts shall collectively constitute a single Agreement.

 

[Rest of this page intentionally left blank; signatures on next page.]

 

Village Green Ann Arbor25

 

 

SIGNATURES

 

IN WITNESS WHEREOF, the parties hereto have affixed or caused to be affixed
their respective signatures this ___ day of _____________, 2012.

 

WITNESS:         OWNER           VILLAGE GREEN OF ANN ARBOR ASSOCIATES, LLC, a
Michigan limited liability company           By:  JH Village Green LLC,     a
Delaware limited liability company     Its:  Co-Manager       /s/     /s/
Jonathan Holtzman       BY:  Jonathan Holtzman       ITS:  Sole Member          
AGENT           VILLAGE GREEN MANAGEMENT COMPANY LLC     a Delaware limited
liability company           BY: VILLAGE GREEN HOLDING LLC       a Delaware
limited liability company, its Manager         /s/     /s/ Jonathan Holtzman    
  BY:  Jonathan Holtzman       ITS:

 

Village Green Ann Arbor26

 

 

Exhibit A

Statements and Reports

 

(a)          Within twenty (20) days following the end of each month, a
statement of Operating Cash Flow for each month;

 

(b)          Within twenty (20) days following the end of each month, a monthly
cash basis balance sheet and cash basis profit and loss statement, with a
cumulative calendar year cash basis balance sheet and cash basis profit and loss
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 twenty (20) days following the end of each 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
large fluctuations compared to budget

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. 
Purchases will be accounted for using Bluerock’s capitalization policy.

6.          Security Deposit Activity

7.          Mortgage Statement

8.          Monthly Management Fee Calculation

9.          Monthly Distribution Calculation

10.         General Ledger, with description and balance detail

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

12.         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

 

Village Green Ann Arbor27

 

 

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

 

(d)          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. Agent 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; and

 

(e)          Within twenty (20) days of the end of each quarter of each Fiscal
Year, Agent 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, Agent 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 Investor pursuant to this Section subpart
(e).

 

[*]        Budget Comparison shall include (i) an unaudited income and expense
statement showing the results of operation of the Project 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.

 

Village Green Ann Arbor28