Unassociated Document


     

    AMENDED
AND RESTATED MANAGEMENT AGREEMENT

    


    among

    


    Preferred
Apartment Communities, Inc.,

    


    Preferred
Apartment Communities Operating Partnership, L.P.

    


    and

    


    Preferred
Apartment Advisors, LLC

     

      
        

      

    

    


    Dated as
of January 25, 2011

    
       

      
        

      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    TABLE OF
CONTENTS

     

    
      
        	 
      	 
      	
                Page

              
	 
      	 
      	 
      
	
                Section
      1.

              	
                Definitions

              	
                1

              
	
                Section
      2.

              	
                Appointment
      and Duties of the Manager

              	
                6

              
	
                Section
      3.

              	
                Conduct
      Policies

              	
                12

              
	
                Section
      4.

              	
                Additional
      Activities of the Manager; Non-Solicitation; Restrictions

              	
                12

              
	
                Section
      5.

              	
                Bank
      Accounts

              	
                13

              
	
                Section
      6.

              	
                Records;
      Confidentiality

              	
                14

              
	
                Section
      7.

              	
                Compensation

              	
                15

              
	
                Section
      8.

              	
                Expenses
      of the Company

              	
                17

              
	
                Section
      9.

              	
                Limits
      of the Manager’s Responsibility; Indemnification

              	
                19

              
	
                Section
      10.

              	
                No
      Joint Venture

              	
                21

              
	
                Section
      11.

              	
                Term;
      Renewal; Termination Without Cause

              	
                21

              
	
                Section
      12.

              	
                Assignments

              	
                22

              
	
                Section
      13.

              	
                Termination
      for Cause

              	
                23

              
	
                Section
      14.

              	
                Action
      Upon Termination

              	
                24

              
	
                Section
      15.

              	
                Release
      of Money or Other Property Upon Written Request

              	
                24

              
	
                Section
      16.

              	
                Miscellaneous

              	
                25

              


      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    AMENDED
AND RESTATED MANAGEMENT AGREEMENT dated as of January 25, 2011, among Preferred
Apartment Communities, Inc., a Maryland corporation (“PAC”), Preferred Apartment
Communities Operating Partnership, L.P., a Delaware limited partnership (the
“Operating
Partnership”), and Preferred Apartment Advisors, LLC, a Delaware limited
liability company (the “Manager”).

     

    WITNESSETH:

     

    WHEREAS,
the parties entered into the Management Agreement on November 19, 2010 (the
“Original Agreement”);
and

     

    WHEREAS,
the parties have agreed to make certain amendments and desire to amend and
restate the Original Agreement in its entirety;

     

    NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and
agreements contained herein, the parties hereto, intending to be legally bound,
hereby agree that the Original Agreement hereby is amended and restated in its
entirety to read as follows:

     

    
      	
            	
              Section
      1.

            	
              Definitions.

            


    

     

    (a)           The
following terms shall have the respective meanings set forth below in this Section 1(a):

     

    “Above-Market Rates” has the
meaning set forth in Section 11(b).

     

    “Acquisition Expenses” means
any and all expenses, exclusive of Acquisition Fees, incurred by the Company,
the Manager or any of their respective Affiliates in connection with the
selection, evaluation, acquisition, origination, making or development of any
Investment, whether or not acquired, including legal fees and expenses, travel
and communications expenses, property inspection expenses, third party brokerage
or finder’s fees, costs of appraisals, nonrefundable option payments on property
not acquired, accounting fees and expenses, title insurance premiums and
expenses, survey expenses, closing costs and the costs of performing due
diligence.

     

    “Acquisition Fee” means the
fee payable to the Manager or its assignees pursuant to Section 7(a).

     

    “Affiliate” means, with respect to
a specified Person, (i) any Person directly or indirectly controlling,
controlled by, or under common control with such specified Person, (ii) any
general partner of such specified Person, and (iii) any Person for which such
specified Person acts as a general partner.  For purposes of this
definition, the terms “controlled”, “controlled by”, or “under common control
with” shall mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of an entity, whether through
the ownership of voting securities, by contract or credit arrangement, as
trustee or executor, or otherwise.

     

    “Agreement” means this Amended and
Restated Management Agreement, as amended or supplemented from time to
time.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    “AMEX” means NYSE
Amex.

     

    “Asset Management Fee” means
the fee payable to the Manager pursuant to Section 7(b).

     

    “Automatic Renewal Term” has the meaning set
forth in Section 11(a).

     

    “Bankruptcy Event” means, with respect to
any Person, (i) the filing by such Person of a voluntary petition seeking
liquidation, reorganization, arrangement or readjustment, in any form, of its
debts under Title 11 of the United States Code or any other U.S. federal or
state or foreign insolvency law, or such Person’s filing an answer consenting to
or acquiescing in any such petition, (ii) the making by such Person of any
assignment for the benefit of its creditors, (iii) the expiration of 60 days
after the filing of an involuntary petition under Title 11 of the Unites States
Code, an application for the appointment of a receiver for a material portion of
the assets of such Person, or an involuntary petition seeking liquidation,
reorganization, arrangement or readjustment of its debts under any other U.S.
federal or state or foreign insolvency law, provided that the same shall not
have been vacated, set aside or stayed within such 60-day period, or (iv) the
entry against such Person of a final and non-appealable order for relief under
any bankruptcy, insolvency or similar law now or hereinafter in
effect.

     

    “Board” means the board of
directors of PAC.  In every instance herein requiring approval of the Board
or referring to policies or directions of the Board, for purposes of this
Agreement, the Board shall be deemed to include any duly appointed and
constituted committee of the Board with respect to each and every act that under
the Governing Instruments or applicable law may be taken with the approval of a
duly appointed and constituted committee of the Board, and references herein to
the Board shall be deemed to include references to each such
committee.

     

    “Business Day” means any day except a
Saturday, a Sunday or a day on which banking institutions in New York, New York
or in Atlanta, Georgia are not required to be open.

     

    “Cause Termination Notice” has
the meaning set forth in Section
13(a).

     

    “Change of Control” of an entity means a
change in the direct or indirect (i) beneficial ownership of more than 50% of
the combined voting power of such entity’s then outstanding equity interests, or
(ii) power to direct or cause the direction of the management and policies of
such entity, whether through the ownership of voting securities, by contract or
credit arrangement, as trustee or otherwise.

     

    “Claim” has the meaning set
forth in Section 9(c).

     

    “Class A Common Stock” means the Class A
Common Stock, par value $0.01 per share, of PAC.

     

    “Closing Date” means the date of
closing of the Initial Public Offering.

     

    “Code” means the Internal
Revenue Code of 1986, as amended from time to time, or any successor statute
thereto.  Reference to any provision of the Code shall mean such provision
as in effect from time to time, as the same may be amended, and any successor
provision thereto, as interpreted by any applicable regulations as in effect
from time to time.


    
      
         


      

      
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    “Company” means, collectively,
PAC and the Operating Partnership.

     

    “Company Entities” means,
collectively, PAC, the Operating Partnership and each of their respective
subsidiaries.

     

    “Company Indemnified
Party” has
meaning set forth in Section 9(b).

     

    “Competitive Real Estate
Commission” means a real estate or brokerage commission for the purchase
or sale of an asset which is reasonable, customary and competitive in light of
the size, type and location of the asset.

     

    “Conduct Policies” has the meaning set
forth in Section 3.

     

    “Confidential
Information” has the meaning set
forth in Section 6.

     

    “Construction Fee, Development Fee
and Landscaping Fee” means the fee payable to the Manager or its
assignees pursuant to Section 7(e).

     

    “Contract Sales Price” means
the total consideration received by any of the Company Entities for the sale of
an Investment, which total consideration shall include the amount of cash
received, the fair market value of any property received and the amount of debt
assumed by the purchaser to which a Company Entity is relieved of responsibility
upon such disposition.

     

    “Director” means a member of
the Board.

     

    “Disposition Fee on Sale of
Assets” means the fee payable to the Manager or its assignees pursuant to
Section 7(d).

     

    “Effective Termination
Date” has
the meaning set forth in Section 11(b).

     

    “Exchange Act” means the Securities
Exchange Act of 1934, as amended.

     

    “Fees Accrued Upon
Termination” means the amounts
payable to the Manager or its assignees equal to the aggregate of any earned but
unpaid compensation and expense reimbursements accrued as of the date of
termination if this Agreement is terminated (i) pursuant to a Change of Control
of PAC, (ii) pursuant to a Termination Without Cause, (iii) by the Manager
pursuant to Section 13(b),
or (iv) based on a liquidation by the Company of all its assets.

     

    “Financing Transaction” means
any transaction with respect to any Investment involving any of the Company
Entities incurring any mortgage or other indebtedness, including the entering
into any line of credit, transaction involving the creation of any commercial
mortgage-backed security and mezzanine financing.


    
      
         


      

      
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    “GAAP” means United States
generally accepted accounting principles, consistently applied.

     

    “General and Administrative Expenses
Fee” means the fee payable to the Manager or its assignees pursuant to
Section 8(b)(ii)
in connection with the administration of the day-to-day operations and the
performance and supervision of the performance of such other administrative
functions necessary to the management of the Company.

     

    “Governing Instruments” means, with regard to
any entity, the articles of incorporation or certificate of incorporation and
by-laws in the case of a corporation, the partnership agreement in the case of a
general or limited partnership, the certificate of formation and operating or
limited liability company agreement in the case of a limited liability company,
the declaration of trust or other comparable trust instrument in the case of a
trust, or similar governing documents in the case of another type of entity, in
each case, as the same may be amended from time to time.

     

    “Indemnified Party” has the meaning set
forth in Section 9(b).

     

    “Independent Director” means a member of the
Board who is “independent” in accordance with PAC’s Governing Instruments and
the rules of the AMEX or such other securities exchange on which the shares of
Class A Common Stock are listed.

     

    “Initial Public Offering” means PAC’s sale of
Class A Common Stock to the public through one or more underwriters pursuant to
the Registration Statement.

     

    “Initial Term” has the meaning set
forth in Section 11(a).

     

    “Investment” means any
investment by any Company Entity, directly or indirectly, in Real Estate Assets,
Real Estate Related Loans or any other asset.

     

    “Investment Committee” means the investment
committee formed by the Board.

     

    “Investment Company Act” means the Investment
Company Act of 1940, as amended.

     

    “Investment Guidelines” means the investment
guidelines approved by the Board, a copy of which is attached hereto as Exhibit A, as the
same may amended, restated, supplemented or waived pursuant to the approval of a
majority of the entire Board (which must include a majority of the Independent
Directors).

     

    “Investment Transaction” means
any purchase, acquisition, exchange, sale or disposition, merger or interest
exchange that results in the acquisition or disposition of, or other transaction
involving, an Investment.

     

    “Joint Ventures” means the
joint venture or partnership or other similar arrangements (other than between
or among any Company Entity) in which a Company Entity is a co-venturer, member,
partner or other equity holder, which are established to own
Investments.

     

    “Losses” has the meaning set
forth in Section 9(a).


    
      
         


      

      
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    “Manager” has the meaning set
forth at the head of this Agreement and shall include any successor in interest
thereto.

     

    “Manager Change of
Control” means a Change of
Control of the Manager; provided, however, that no
Manager Change of Control shall result from (i) any public offering of equity
interests of the Manager, or (ii) any assignment of this Agreement by the
Manager as permitted hereby and in accordance with the terms
hereof.

     

    “Manager Indemnified
Party” has
the meaning set forth in Section 9(a).

     

    “Manager Permitted Disclosure
Parties” has the meaning set
forth in Section 6(a).

     

    “Notice of Proposal to
Negotiate” has the meaning set
forth in Section 11(c).

     

    “Operating Partnership” has
the meaning at the head of this Agreement.

     

    “PAC” has the meaning at the
head of this Agreement.

     

    “Person” or “person” means any natural
person, corporation, partnership, association, limited liability company,
estate, trust or joint venture, any federal, state, county or municipal
government or any bureau, department or agency thereof, or any other legal
entity.

     

    “Property Management and Leasing
Fee” means the fee payable to the Manager or its assignees pursuant to
Section 7(c).

     

    “Real Estate Assets” means any
investments by any Company Entity in unimproved or improved Real Property
(including fee or leasehold interests, options and leases), directly, through
one or more subsidiaries or through a Joint Venture.

     

    “Real Estate Related Loans”
means any investments in mortgage loans and other types of real estate related
debt obligations, including mezzanine loans, bridge loans, convertible
mortgages, wraparound mortgage loans, construction mortgage loans, loans on
leasehold interests and participations in such loans, by any Company Entity,
directly, through one or more subsidiaries or through a Joint
Venture.

     

    “Real Property” means real
property owned from time to time by any Company Entity, directly, through one or
more subsidiaries or through a Joint Venture, which consists of (i) land
only, (ii) land, including the buildings located thereon,
(iii) buildings only, or (iv) such Investments the Board or the
Manager designates as Real Property to the extent such Investments could be
classified as Real Property.

     

    “Registration Statement” means
PAC’s Registration Statement on Form S-11 (Registration No. 333-168407), as
amended from time to time, pursuant to which it is conducting or has conducted
the Initial Public Offering.

     

    “Regulation FD” means Regulation FD as
promulgated by the SEC.

     

    “REIT” means a “real estate
investment trust” as defined under the Code.


    
      
         


      

      
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    “SEC” means the United States
Securities and Exchange Commission.

     

    “Securities Act” means the Securities
Act of 1933, as amended.

     

    “Target Assets” means the types of
assets described under “Business— Our Target Assets” in PAC’s prospectus
included in the Registration Statement, subject to, and including any changes
in, the Investment Guidelines.

     

    “Termination Notice” has the meaning set
forth in Section 11(b).

     

    “Termination Without
Cause” has
the meaning set forth in Section 11(b).

     

    (b)           As
used herein, accounting terms relating to any Company Entity not defined in
Section 1(a),
and accounting terms partly defined in Section 1(a), to
the extent not defined, shall have the respective meanings given to them under
GAAP.

     

    (c)           As
used herein, “calendar quarters” shall mean the periods from January 1 to March
31, April 1 to June 30, July 1 to September 30 and October 1 to December 31 of
the applicable year.

     

    (d)           The
words “hereof”, “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section references are to this
Agreement unless otherwise specified.

     

    (e)           The
meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.

     

    (f)           The
words “include”, “includes” and “including” shall be deemed to be followed by
the phrase “without limitation.”

     

    (g)           A
reference to any gender shall be deemed to be a reference to all
genders.

     

    
      	
            	
              Section
      2.

            	
              Appointment
      and Duties of the Manager.

            


    

     

    (a)           PAC
and the Operating Partnership hereby appoint the Manager to manage and
administer the Investments and day-to-day operations of the Company Entities,
subject at all times to the further terms and conditions set forth in this
Agreement and to the oversight of, and such further limitations or parameters
consistent with this Agreement as may be imposed from time to time by, the
Board.  The Manager will use commercially reasonable efforts to perform
each of its duties set forth herein, provided that funds are made
available by the Company for such purposes as set forth in Section 8. 
The Company shall not appoint any other Person except the Manager to perform the
duties and carry out the responsibilities of the Manager described herein,
except as may otherwise be permitted by this Agreement and except to the extent
that the Manager elects, in its sole and absolute discretion, subject to the
terms of this Agreement, to cause the duties of the Manager as set forth herein
to be provided by third parties.


    
      
         


      

      
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    (b)           The
Manager, in its capacity as manager of the Investments and the day-to-day
operations of the Company Entities, at all times will be subject to the
oversight and direction of the Board, will act in a manner that is compliant
with the provisions of the Governing Instruments of each Company Entity, will
use commercially reasonable efforts to present to the Company potential
investment opportunities and will perform its duties hereunder, including
managing the Company’s business affairs in conformity with the Investment
Guidelines and other policies that are determined and adopted by the
Board.  PAC, the Operating Partnership and the Manager hereby acknowledge
the adoption by the Board of the Investment Guidelines, including the Company’s
investment strategy with respect to Target Assets.  PAC, the Operating
Partnership and the Manager hereby acknowledge and agree that, during the term
of this Agreement, any proposed changes to the Company’s investment strategy
that would modify or expand the Target Assets shall require a change in, or
supplement to, the Investment Guidelines.  The Company shall notify the
Manager promptly of any amended, restated, supplemented or waived Investment
Guidelines, including any modification or revocation of the Manager’s authority
set forth in the Investment Guidelines; provided, however, that such
modification or revocation shall not be applicable to investment transactions to
which the Manager has committed any Company Entity prior to the date of receipt
by the Manager of such notification.

     

    (c)           The
Manager will be responsible for the day-to-day operations of the Company
Entities (which, for purposes of the Manager’s responsibilities in this
Agreement, includes their respective subsidiaries) and will perform (or cause to
be performed), subject to the Board’s oversight, such services and activities
relating to the Investments and the day-to-day operations of the Company
Entities as may be appropriate, which may include:

     

    (i)  (A)
proposing modifications to the Investment Guidelines to the Board, (B)
periodically reviewing the Company’s Investment portfolio for compliance with
the Investment Guidelines and reporting its findings to the Board, (C)
periodically reviewing and reporting to the Board regarding the diversification
of the Company’s Investment portfolio and the financing strategies, and (D)
conducting or overseeing the provision of the services and activities set forth
in this Section 2;

     

    (ii)  investigating,
analyzing, selecting, conducting due diligence with respect to, negotiating the
terms and conditions of (including negotiating the forms of definitive
agreements), arranging financing for and recommending to the Board in accordance
with procedures adopted by the Board possible Investment Transactions consistent
with the Investment Guidelines;

     

    (iii)  with
respect to prospective Investment Transactions and Financing Transactions,
conducting negotiations (including negotiation of definitive agreements) with
sellers, purchasers, prospective merger partners, lenders and other financing
sources and brokers and, if applicable, their respective agents and
representatives and closing Investment Transactions and Financing Transactions
on behalf of the Company;

     

    (iv)  effecting
any private placement of interests in the Operating Partnership,
tenancy-in-common or other interests in Investments as may be approved by the
Board;


    
      
         


      

      
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    (v)  delivering
to, or maintaining on behalf of, the Company copies of all appraisals obtained
in connection with the Investments in any Real Estate Assets as may be required
to be obtained by the Board;

     

    (vi)  negotiating
and causing the Company to enter into, within the discretionary limits and
authority granted by the Board, repurchase agreements, interest rate swap
agreements, agreements relating to borrowings under programs established by the
U.S. Government and other agreements and instruments required to conduct the
business of the Company;

     

    (vii)  engaging
and supervising, at the expense of the Company, independent contractors that
provide investment banking, securities brokerage, mortgage brokerage, real
estate brokerage services, other financial services, due diligence services,
underwriting review services, legal and accounting services, and all other
services (including transfer agent and registrar services) as may be required
relating to the Company’s operations, Investments, Investment Transactions or
Financing Transactions;

     

    (viii)  advising
the Company on, preparing, negotiating and entering into, on behalf of the
Company, applications and agreements relating to programs established by the
U.S. Government;

     

    (ix)  coordinating
and managing operations of any joint venture or co-investment interests held by
the Company and conducting all matters with the joint venture or co-investment
partners;

     

    (x)  providing
executive and administrative personnel, office space and office services
required in rendering services to the Company;

     

    (xi)  entering
into on behalf of the Company leases and service contracts in connection with
the Investments and administering the day-to-day operations and performing and
supervising the performance of such other administrative functions necessary to
the Company’s management under oversight by the Board, including the collection
of revenues and the payment of the Company’s debts and obligations and
maintenance of appropriate computer services to perform such administrative
functions;

     

    (xii)  communicating
on the Company’s behalf with the holders of any equity or debt securities of PAC
or the Operating Partnership as required to satisfy the reporting and other
requirements of any governmental body or agency or trading market and to
maintain effective relations with such holders;

     

    (xiii)  evaluating
and recommending to the Board hedging strategies and engaging on the Company’s
behalf in hedging activities within the discretionary limits and authority as
granted by the Board, consistent with the Company’s qualification as a REIT and
with the Investment Guidelines;

     

    (xiv)  counseling
the Board and the Company regarding the maintenance of PAC’s qualification as a
REIT and monitoring compliance with the various REIT qualification tests and
other rules set out in the Code and Treasury Regulations thereunder and using
commercially reasonable efforts to cause PAC to qualify for taxation as a
REIT;


    
      
         


      

      
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    (xv)  counseling
the Board and the Company regarding the maintenance of PAC’s exemption from the
status of an investment company required to register under the Investment
Company Act, monitoring compliance with the requirements for maintaining such
exemption and using commercially reasonable efforts to cause PAC to maintain
such exemption from such status;

     

    (xvi)  furnishing
reports and statistical and economic research to the Board regarding the
activities and services performed for the Company by the Manager, including
reports with respect to potential conflicts of interest involving the Manager or
any of its Affiliates;

     

    (xvii)  monitoring
the performance of the Investments and providing periodic reports with respect
thereto to the Board, including comparative information with respect to such
operating performance and budgeted or projected operating results;

     

    (xviii)  investing
and reinvesting any moneys and securities of the Company within the
discretionary limits and authority as granted by the Board (including investing
in short-term investments pending investment in other Investments, payment of
fees, costs and expenses) and advising the Company with respect to its equity
and debt capitalization and its financing strategies, and the payments of
dividends or distributions to PAC’s stockholders and the Operating Partnership’s
partners;

     

    (xix)  causing
the Company to retain qualified accountants and legal counsel, as applicable, to
assist in developing appropriate accounting procedures and systems, internal
controls and other compliance procedures and testing systems with respect to
financial reporting obligations and compliance with the provisions of the Code
applicable to REITs and, if applicable, taxable REIT subsidiaries, and to
conduct quarterly compliance reviews with respect thereto;

     

    (xx)  assisting
the Company in qualifying to do business in all applicable jurisdictions and to
obtain and maintain all appropriate licenses;

     

    (xxi)  assisting
the Company in complying with all laws and regulatory requirements applicable to
the Company’s business activities, including preparing or causing to be prepared
all financial statements required under applicable regulations and contractual
undertakings and all reports and documents, if any, required under the Exchange
Act, the Securities Act, state or foreign securities laws or by the
AMEX;

     

    (xxii)  assisting
the Company in taking all necessary action to enable the Company to make
required tax filings and reports, including soliciting information from
stockholders to the extent required by the provisions of the Code applicable to
REITs;

     

    (xxiii)  handling
and resolving all claims, disputes or controversies (including all litigation,
arbitration, settlement or other proceedings or negotiations) in which the
Company may be involved or to which the Company or the Company’s properties or
assets may be subject arising out of the Company’s day-to-day operations (other
than with the Manager or its Affiliates), subject to such limitations or
parameters as may be imposed from time to time by the Board;


    
      
         


      

      
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    (xxiv)  using
commercially reasonable efforts to cause expenses incurred on behalf of the
Company to be commercially reasonable or commercially customary and within any
budgeted parameters or expense guidelines proposed by the Manager and approved
by the Board from time to time;

     

    (xxv)  advising
the Board regarding the Company’s equity and debt financings, hedging activities
and joint venture arrangements including (A) advising the Board on the
appropriateness of the Company’s leverage ratio, levels of preferred and common
equity financing, pricing of equity offerings, derivative positions and
strategies and off-balance sheet arrangements, and (B) seeking to execute on the
Company’s behalf Financing Transactions, equity offerings, hedging transactions
and joint ventures and off-balance sheet transactions consistent with the
Board’s directions and the Company’s financing policies as approved by the
Board;

     

    (xxvi)  providing
portfolio management services to the Company;

     

    (xxvii)  arranging
marketing materials, advertising, industry group activities (such as conference
participations and industry organization memberships) and other promotional
efforts designed to promote the Company’s business; and

     

    (xxviii)  performing
such other services as may be required from time to time for management and
other activities relating to the Company’s assets and business as the Board
shall reasonably request or the Manager shall deem appropriate under the
particular circumstances.

     

    (d)           The
Manager may retain, for and on behalf, and at the sole cost and expense, of the
Company, such services of the Persons referred to in Section 8 as the
Manager deems necessary or advisable in connection with the management and
operations of the Company.  In performing its duties under this Section 2, the
Manager shall be entitled to rely reasonably on qualified experts and
professionals (including accountants, legal counsel and other professional
service providers) hired by the Manager at the Company’s sole cost and
expense.

     

    (e)           The
Manager shall refrain from any action that, in its sole judgment made in good
faith, (i) is not in compliance with the Investment Guidelines, (ii) would
adversely and materially affect the qualification of PAC as a REIT or the
Operating Partnership as a partnership under the Code or the Company’s status as
an entity excluded from investment company status under the Investment Company
Act, or (iii) would conflict with or violate (A) any law, rule or
regulation of any governmental body or agency having jurisdiction over any
Company Entity, (B) any rule of any exchange on which the securities of the
Company may be listed, or (C) any applicable Governing Instruments.  The
Manager may proceed with taking an action described above if further instructed
to do so by the Board.  If the Manager is ordered to take any action by the
Board, the Manager promptly shall notify the Board if it is the Manager’s
judgment that such action would adversely and materially affect such
qualification or status or conflict with or violate any such law, rule or
regulation or Governing Instruments.  Notwithstanding the foregoing,
neither the Manager nor any of its Affiliates shall be liable to any Company
Entity, the Board, any of the stockholders, partners, members or other holders
of equity interests of any Company Entity for any act or omission by the Manager
or any of its Affiliates, except as provided in Section 9.


    
      
         


      

      
        10

        
          

        

      

      
         


      

    


    (f)           The
Manager shall notify the Board of all proposed Investment Transactions before
they are completed.  The Manager shall seek and obtain Board approval of
any Investment Transaction that does not meet the Investment Guidelines. 
Subject to this Section 7(f),
the Manager may execute without Board approval (but, in all cases, with advance
notice to the Board) any Investment Transaction that fits within the Investment
Guidelines.  If any transaction requires approval by the Independent
Directors, the Manager will deliver to the Independent Directors all documents
and other information reasonably required by them to evaluate properly the
proposed transaction.  With respect to Investment Transactions for which
Board approval is not required but advance notice is required, the Manager shall
provide to the Board a summary of its investment analysis with respect to the
proposed Investment Transaction.  The Board may, at any time upon the
giving of notice to the Manager, modify or revoke the authority set forth in
this Section 2(f);
provided, however, that such
modification or revocation shall be effective upon receipt by the Manager and
shall not be applicable to Investment Transactions to which the Manager has
committed the Company prior to the date of receipt by the Manager of such
notification.

     

    (g)           The
Company will take all actions reasonably required to permit and enable the
Manager to carry out its duties and obligations under this Agreement, including
all steps reasonably necessary to allow the Manager to file any registration
statement or other filing required to be made under the Securities Act, Exchange
Act, the AMEX’s Company Guide, the Code or other applicable law, rule or
regulation on behalf of the Company in a timely manner.  The Company will
use commercially reasonable efforts to make available to the Manager all
resources, information and materials reasonably requested by the Manager to
enable the Manager to satisfy its obligations hereunder, including its
obligations to deliver financial statements and any other information or reports
with respect to the Company.

     

    (h)           As
frequently as the Manager may deem necessary or advisable, or at the direction
of the Board, the Manager shall prepare (or, at the sole cost and expense of the
Company, cause to be prepared) reports and other information relating to any
proposed or consummated Investment.

     

    (i)       
    The Manager shall prepare (or, at the sole cost and
expense of the Company, cause to be prepared) all reports, financial or
otherwise, reasonably required by the Board in order for the Company Entities to
comply with their respective Governing Instruments or as otherwise reasonably
requested by the Board, including an annual audit of PAC’s consolidated
financial statements by a nationally recognized independent accounting
firm.

     

    (j)    
       The Manager shall prepare (or, at the
sole cost and expense to the Company, cause to be prepared) regular reports for
the Board to enable the Board to review the Company’s acquisitions, Investment
portfolio composition and characteristics, credit quality, performance and
compliance with the Investment Guidelines and policies approved by the
Board.


    
      
         


      

      
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    (k)           Officers,
employees and agents of the Manager and its Affiliates may serve as directors,
officers, agents, nominees or signatories for any Company Entity, to the extent
permitted by their respective Governing Instruments, by any resolutions duly
adopted by the Board, the Operating Partnership or such subsidiary.  When
executing documents or otherwise acting in such capacities for any Company
Entity, such Persons shall indicate in what capacity they are executing on
behalf of such Company Entity.  Without limiting the foregoing, while this
Agreement is in effect, the Manager will establish a management team, including
a chief executive officer and president or similar positions, along with
appropriate support personnel, to provide the management services to be provided
by the Manager to the Company Entities hereunder, who shall devote such of their
time to the management of the Investments and consideration of the Investment
Guidelines and policies as necessary and appropriate, commensurate with the
level of activity of the Company from time to time.

     

    (l)     
      The Manager, at its sole cost and expense,
shall maintain reasonable and customary “errors and omissions” insurance
coverage and other customary insurance coverage in respect to its obligations
and activities under, or pursuant to, this Agreement, naming PAC and the
Operating Partnership as additional insureds.

     

    (m)          The
Manager, at its sole cost and expense, shall provide such internal audit,
compliance and control services as may be required for the Company to comply
with applicable law (including the Securities Act and Exchange Act), regulation
(including SEC regulations) and the rules and requirements of the AMEX and as
otherwise reasonably requested by the Company or the Board from time to
time.

     

    (n)           The
Manager, at its sole cost and expense, shall maintain any required registration
of the Manager or any Affiliate with the Securities and Exchange Commission
under the Investment Advisers Act of 1940, as amended, or with any state
securities authority in any state in which the Manager or its Affiliate is
required to be registered as an investment advisor under applicable state
securities laws.

     

    
      	
            	
              Section
      3.

            	
              Conduct
      Policies.

            


    

     

    The
Manager acknowledges receipt of the Company’s Code of Business Conduct and
Ethics and the Company’s Policy on Insider Trading (collectively, the “Conduct Policies”) and will
use commercially reasonable efforts to require the Persons who provide services
to the Company to comply with the Conduct Policies in the performance of such
services hereunder or such comparable policies as shall in substance hold such
Persons to at least the standards of conduct set forth in the Conduct
Policies.

     

    
      	
            	
              Section
      4.

            	
              Additional
      Activities of the Manager; Non-Solicitation;
  Restrictions.

            


    

     

    (a)           Subject
to Section 4(c) and
except as may be provided in the Investment Guidelines, nothing in this
Agreement shall:  (i) prevent the Manager, any of its Affiliates
or any of their respective officers, directors or employees, from engaging in
other businesses or from rendering services of any kind to any other Person,
whether or not the investment objectives or policies of any such other Person
are similar to those of the Company; provided, however, that the
Manager devotes sufficient resources to the Company’s business to discharge its
obligations to the Company under this Agreement; or (ii) in any way bind or
restrict the Manager, any of its Affiliates or any of their respective officers,
directors or employees from buying, selling or trading any securities or
commodities for their own accounts or for the account of others for whom the
Manager, any of its Affiliates or any of their respective officers, directors or
employees may be acting.


    
      
         


      

      
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    (b)           While
information and recommendations supplied to the Company shall, in the Manager’s
good faith judgment, be appropriate under the circumstances and in light of the
investment objectives and policies of the Company, they may be different from
the information and recommendations supplied by the Manager or any Affiliate of
the Manager to others.  The Company shall be entitled to equitable
treatment under the circumstances in receiving information, recommendations and
any other services, but the Company recognizes that the Company is not entitled
to receive preferential treatment as compared with the treatment given by the
Manager or any Affiliate of the Manager to others.

     

    (c)           The
Manager shall report to the Board any condition or circumstance, existing or
anticipated, of which it has knowledge, which creates or could create a conflict
of interest between the Manager’s obligations to the Company and its obligations
to or its interest in any other Person.  If the Manager or any of its
Affiliates sponsored any other investment program with similar investment
objectives to the Company that has investment funds available at the same time
as the Company, the Manager shall inform the Board of the method to be applied
by the Manager in allocating investment opportunities among the Company and
competing investment entities and shall provide regular updates to the Board of
the investment opportunities provided by the Manager to competing programs in
order for the Board (including the Independent Directors) to evaluate that the
Manager is allocating such opportunities in accordance with such
method.

     

    (d)           In
the event of a Termination Without Cause of this Agreement by the Company
pursuant to Section 11(b),
for a period of two years from and after the date of such termination of this
Agreement, the Company shall not (and shall cause each of the Company Entities
to not), without the consent of the Manager, employ or otherwise retain
(directly or indirectly any Company Entity) any Person who was employed as an
executive by the Manager or any of its Affiliates on the date of such
termination or any Person who shall have been employed as an executive by the
Manager or any of its Affiliates at any time within the two-year period
immediately preceding the date on which such Person is scheduled to commence
employment with or otherwise be retained by the Company or any other Company
Entity.  The Company acknowledges and agrees that, in addition to any
damages, the Manager shall be entitled to equitable relief for any violation of
this Section 4(d) by
PAC or the Operating Partnership (directly or indirectly through any of their
respective subsidiaries), including injunctive relief.

     

    
      	
            	
              Section
      5.

            	
              Bank
      Accounts.

            


    

     

    At the
direction of the Board, the Manager may establish and maintain one or more bank
accounts in the name of any Company Entity, and may collect and deposit into any
such account or accounts, and disburse funds from any such account or accounts,
under such policies, terms and conditions as the Company may establish and the
Board may approve, provided that no funds shall be commingled with the funds of
the Manager or its Affiliates.  The Manager shall from time to time render
appropriate accountings of such collections and payments to the Board and, upon
request, shall provide information regarding such account to the Company’s
auditors.


    
      
         


      

      
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              Section
      6.

            	
              Records;
      Confidentiality.

            


    

     

    (a)           The
Manager shall maintain appropriate books of accounts and records relating to
services performed hereunder, and such books of account and records shall be
accessible for inspection by representatives of the Company Entities at any time
during normal business hours.  The Manager shall keep confidential any and
all non-public information, written or oral, obtained by it in connection with
the services rendered hereunder (“Confidential
Information”) and shall not use
Confidential Information except in furtherance of its duties under this
Agreement or disclose Confidential Information, in whole or in part, to any
Person other than (i) to its Affiliates and the officers, directors, employees,
agents, representatives or advisors of the Manager or any of its Affiliates who
need to know such Confidential Information for the purpose of rendering services
hereunder, (ii) to appraisers, financing sources and others in the ordinary
course of the Company’s business ((i) and (ii) collectively, “Manager Permitted Disclosure
Parties”), (iii) in connection with any governmental or regulatory
filings of the Company, or filings with the AMEX or other applicable securities
exchange or market, (iv) in presentations or other disclosures to the Company’s
investors (subject to compliance with Regulation FD), (iv) to governmental
officials having jurisdiction over the Company, (v) as requested by law or legal
process to which the Manager or any Person to whom disclosure is permitted
hereunder is a party, or (vi) with the consent of the Company.  The Manager
will inform each of its Manager Permitted Disclosure Parties of the non-public
nature of the Confidential Information and to obtain agreement from such Persons
to treat such Confidential Information in accordance with the terms
hereof.

     

    (b)           Nothing
herein shall prevent any Manager Permitted Disclosure Party from disclosing
Confidential Information (i) upon the order of any court or administrative
agency, (ii) upon the request or demand of, or pursuant to any law or regulation
to, any regulatory agency or authority, (iii) to the extent reasonably required
in connection with the exercise of any remedy hereunder, or (iv) to its legal
counsel or independent auditors; provided, however, that with
respect to clauses (i) and (ii), it is agreed that, so long as not legally
prohibited, the Manager will provide PAC with prompt written notice of such
order, request or demand so that PAC may seek, at its sole expense, an
appropriate protective order and/or waive any Manager Permitted Disclosure
Party’s compliance with the provisions of this Agreement.  If, failing the
entry of a protective order or the receipt of a waiver hereunder, the Manager is
required to disclose Confidential Information, the Manager Permitted Disclosure
Party may disclose only that portion of such information that is legally
required without liability hereunder; provided, however, that the
Manager Permitted Disclosure Party agrees to exercise commercially reasonable
efforts to obtain reliable assurance that confidential treatment will be
accorded such information.

     

    (c)           Notwithstanding
anything herein to the contrary, the following types of Confidential Information
shall be deemed to be excluded from provisions hereof:  (i) any
Confidential Information that is available to the public from a source other
than the Manager or its Affiliates, (ii) any Confidential Information that
is released in writing by any of the Company Entities to the public (except to
the extent exempt under, and in compliance with, Regulation FD) or to persons
who are not under similar obligation of confidentiality to any of the Company
Entities; and (iii) any Confidential Information that is obtained by the
Manager from a third party which, to the Manager’s knowledge, does not
constitute a breach by such third party of an obligation of confidence with
respect to the Confidential Information disclosed.


    
      
         


      

      
        14

        
          

        

      

      
         


      

    


    (d)           The
provisions of this Section 6 shall
survive the expiration or earlier termination of this Agreement for a period of
two years thereafter, provided that the parties will maintain trade secrets of
the other party identified in writing as trade secrets, and which in fact
constitute trade secrets, for a period of no longer than five years
thereafter.

     

    
      	
            	
              Section
      7.

            	
              Compensation.

            


    

     

    (a)           Acquisition
Fee.  The Company shall pay an Acquisition Fee to the Manager or its
assignees as compensation for services rendered in connection with the
investigation, selection and acquisition (by purchase, investment or exchange)
of Investments.  The total Acquisition Fee payable to the Manager or its
assignees shall equal 1.0% of the purchase price of Real Estate Assets and 1.0%
of the amount advanced for Real Estate Related Loans or other Investments (other
than Real Estate Assets), along with reimbursement of Acquisition Expenses
actually incurred by the Manager or any of its Affiliates; provided, however, that no
Acquisition Fee will be payable until the Closing Date, although it may accrue
before the Closing Date.  The purchase price of Real Estate Assets shall
equal the amount paid or allocated to the acquisition (by purchase, investment
or exchange) of the Real Estate Assets inclusive of expenses related thereto and
the amount of debt assumed in connection with such Investment or to which such
Investment may be subject following such acquisition, but exclusive of
Acquisition Fees.  The purchase price allocable for an Investment held
through a Joint Venture shall equal the product of (i) the purchase price of, or
the amount advanced for, the Investment, as applicable, determined as stated
above, and (ii) the direct or indirect ownership percentage in the Joint Venture
held directly or indirectly by any Company Entity.  For purposes of this
paragraph, “ownership
percentage” shall be the percentage of capital stock, membership
interests, partnership interests or other equity interests held by any Company
Entity, without regard to classification of such equity interests.  The
Company shall pay to the Manager or its assignees the Acquisition Fee promptly
upon the closing of the Investment, subject to the proviso set forth
above.

     

    (b)           Asset Management
Fee.  The Company shall pay a monthly Asset Management Fee to the
Manager or its assignees as compensation for services rendered in connection
with the management of the Investments.  The Asset Management Fee shall be
payable monthly in cash or shares of PAC’s Class A Common Stock, at the option
of the Manager, and shall be equal to one-twelfth of 0.50% of the total value of
the Company’s assets (including cash or cash equivalents) held as of the last
day of the immediately preceding month, based on the adjusted cost of the
Company’s assets before reduction for depreciation, amortization, impairment
charges and cumulative acquisition costs charged to expense in accordance with
GAAP (adjusted cost of Real Estate Assets and Real Estate Related Loans will
include the purchase price, Acquisition Expenses, capital expenditures and other
customarily capitalized costs) and as adjusted for appropriate closing dates for
individual asset acquisitions.  The Asset Management Fee will be
appropriately pro rated for any partial month.


    
      
         


      

      
        15

        
          

        

      

      
         


      

    


    (c)           Property Management and
Leasing Fee.  The Company shall pay a Property Management and
Leasing Fee to the Manager or its assignees as compensation for services
rendered in connection with the rental, leasing, operation and management of the
Company’s Real Estate Assets and the supervision of any non-Affiliates that are
engaged by the Manager to provide such services in an amount equal to 4.0% of
the gross revenues of properties managed per month.  The Manager may
subcontract the performance of its property management and leasing services
duties to third parties (including its Affiliates) and pay all or a portion of
the Property Management and Leasing Fee to such persons with whom it contracts
for these services. The Manager will be responsible for all fees payable to
third parties (including its Affiliates) in connection with subcontracted
property management and leasing duties. The Property Management and Leasing Fee
will be payable monthly in arrears, based on the actual gross revenues for the
prior month.

     

    (d)           Disposition Fee on Sale of
Assets.  In connection with a sale or other disposition of an
Investment (except for such Investments that are traded on a national securities
exchange) in which the Manager or any Affiliate of the Manager provides a
substantial amount of services, as determined by a majority of the Independent
Directors, the Company shall pay to the Manager or its assignees a Disposition
Fee on Sale of Assets up to the lesser of (i) one-half of a Competitive Real
Estate Commission and (ii) 1.0% of the Contract Sales Price of such Investment;
provided, however, that in no event may
the Disposition Fee on Sale of Assets paid to the Manager, its Affiliates and
non-Affiliates exceed the lesser of 6.0% of the Contract Sales Price and a
Competitive Real Estate Commission.  If the sale or disposition involves
the receipt of publicly traded securities or operating partnership units that
may be redeemed for or converted into publicly traded securities, then the
Disposition Fee on Sale of Assets shall be receivable upon the receipt of such
consideration, notwithstanding the fact that such consideration may at that time
be publicly traded or valued by reference to a publicly traded
security.

     

    (e)           Construction Fee,
Development Fee and Landscaping Fee.  The Company shall pay a
Construction Fee, Development Fee and/or Landscaping Fee to the Manager or its
assignees as compensation for services rendered in connection with the
construction, development or landscaping of the Real Estate Assets and the
supervision of any non-Affiliates that are engaged by then Manager to provide
such services in an amount equal to the customary and competitive market rates
in light of the size, type and location of the Real Estate Assets.

     

    (f)           Exclusion of Certain
Transactions.  If any Company Entity shall propose to enter into any
transaction in which the Manager, any Affiliate of the Manager or any of the
Manager’s directors or officers has a direct or indirect interest, then such
transaction shall be approved by a majority of the Board not otherwise
interested in such transaction, including a majority of the Independent
Directors.

     

    (g)           Limitation on Total Asset
Management Fees, Property Management and Leasing Fees and General and
Administrative Expenses Fee.  The total amount of the Asset
Management Fees, Property Management and Leasing Fees and General and
Administrative Expenses Fee payable in connection with the Company’s investments
paid or reimbursed to the Manager shall not exceed 1.50% of the total value of
the Company’s assets (including cash and cash equivalents) based on the adjusted
cost of the Company’s assets before reduction for depreciation, amortization,
impairment charges and cumulative acquisition costs charged to expense in
accordance with GAAP (adjusted cost will include the gross contract purchase
price, Acquisition Expenses, capital expenditures and other customarily
capitalized costs).


    
      
         


      

      
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    (h)           General and Administrative
Expenses Fee.  The Company shall pay a General and Administrative
Expenses Fee in an amount equal to 2.0% of the gross revenues of the Company per
month.

     

    
      	
            	
              Section
      8.

            	
              Expenses
      of the Company.

            


    

     

    (a)           The
Manager shall be responsible for the expenses related to any and all personnel
of the Manager and its Affiliates who provide services to the Company pursuant
to this Agreement (including each of the officers and directors of the Company
who are also directors, officers, employees or agents of the Manager or any of
its Affiliates), including salaries, bonus and other wages, payroll taxes, the
cost of employee benefit plans of such personnel, and costs of insurance with
respect to such personnel.  For the avoidance of doubt, any equity
incentive plan of PAC or the Operating Partnership in which any person referred
to above participates shall be excluded from the operation of this Section 8(a).

     

    (b)           The
Company shall pay (or cause to be paid) all the costs and expenses of each
Company Entity and shall reimburse the Manager or its Affiliates for expenses of
the Manager and its Affiliates incurred on behalf of any Company Entity,
excepting only those expenses that are specifically the responsibility of the
Manager pursuant to Section 8(a) and
subject to Section 7(g). 
Without limiting the generality of the foregoing, it is specifically agreed that
the following costs and expenses of the Company Entities shall be paid (or
caused to be paid) by the Company and shall not be paid by the Manager or
Affiliates of the Manager:

     

    (i)  Acquisition
Expenses incurred in connection with the selection and acquisition of
Investments;

     

    (ii)  General
and Administrative Expenses Fee;

     

    (iii)  expenses
in connection with the issuance of securities of the Company, any Financing
Transaction and other costs incident to the acquisition, disposition and
financing of the Investments;

     

    (iv)  costs
of legal, tax, accounting, consulting, auditing and other similar services
rendered to the Company by providers retained by the Manager, or, if provided by
the Manager’s personnel, in amounts which are no greater than those which would
be payable to outside professionals or consultants engaged to perform such
services pursuant to agreements negotiated on an arm’s-length
basis;

     

    (v)  the
compensation and expenses of the Directors and the cost of liability insurance
to indemnify the Company and its officers and the Directors;


    
      
         


      

      
        17

        
          

        

      

      
         


      

    


    (vi)  expenses
connected with communications to holders of the securities of any Company Entity
and other bookkeeping and clerical work necessary in maintaining relations with
holders of such securities and in complying with the continuous reporting and
other requirements of governmental bodies or agencies, including all costs of
preparing and filing required reports with the SEC, the costs payable by the
Company to any transfer agent and registrar in connection with the listing
and/or trading of the Company’s securities on any exchange, the fees payable by
the Company to any such exchange in connection with its listing, costs of
preparing, printing and mailing PAC’s annual report to its stockholders or the
Operating Partnership’s partners, as applicable, and proxy materials with
respect to any meeting of PAC’s stockholders or the Operating Partnership’s
partners, as applicable;

     

    (vii)  costs
associated with any computer software or hardware, electronic equipment or
purchased information technology services from third-party vendors that is used
for the Company Entities;

     

    (viii)  expenses
incurred by managers, officers, personnel and agents of the Manager for travel
on the Company’s behalf and other out-of-pocket expenses incurred by managers,
officers, personnel and agents of the Manager in connection with the purchase,
financing, refinancing, sale or other disposition of an Investment or in
connection with any Financing Transaction;

     

    (ix)  costs
and expenses incurred with respect to market information systems and
publications, research publications and materials, and settlement, clearing and
custodial fees and expenses;

     

    (x)  the
costs of maintaining compliance with all federal, state and local rules and
regulations or any other regulatory agency;

     

    (xi)  all
taxes and license fees;

     

    (xii)  all
insurance costs incurred in connection with the operation of the Company’s
business except for the costs attributable to the insurance that the Manager
elects to carry for itself and its personnel;

     

    (xiii)  costs
and expenses incurred in contracting with third parties;

     

    (xiv)  all
other costs and expenses relating to the Company’s business and investment
operations, including the costs and expenses of owning, protecting, maintaining,
developing and disposing of Investments, including appraisal, reporting, audit
and legal fees;

     

    (xv)  expenses
relating to any office(s) or office facilities, including disaster backup
recovery sites and facilities, maintained for the Company Entities or the
Investments of the Company separate from the office or offices of the
Manager;

     

    (xvi)  expenses
connected with the payments of interest, dividends or distributions in cash or
any other form authorized or caused to be made by the Board, the Operating
Partnership or other governing body to or on account of holders of the
securities of any Company Entity, including in connection with any dividend
reinvestment plan;


    
      
         


      

      
        18

        
          

        

      

      
         


      

    


    (xvii)  any
judgment or settlement of pending or threatened proceedings (whether civil,
criminal or otherwise) against any Company Entity, or against any trustee,
director, partner, member or officer of such Company Entity in his capacity as
such for which such Company Entity is required to indemnify such trustee,
director, partner, member or officer pursuant to the applicable Governing
Instruments or any agreement or other instrument or by any court or governmental
agency; and

     

    (xviii)  all
other expenses actually incurred by the Manager (except as otherwise specified
herein) which are reasonably necessary or advisable for the performance by the
Manager of its duties and functions under this Agreement.

     

    (c)           Costs
and expenses incurred by the Manager on behalf of the Company shall be
reimbursed monthly to the Manager.  The Manager shall prepare a written
statement in reasonable detail documenting the costs and expenses of the Company
and those incurred by the Manager on behalf of the Company during each month,
and shall deliver such written statement to the Company within 30 days after the
end of each month.  The Company shall pay all amounts payable to the
Manager pursuant to this Section 8(c)
within five Business Days after the receipt of the written statement without
demand, deduction, offset or delay.  Cost and expense reimbursement to the
Manager shall be subject to adjustment at the end of each calendar year in
connection with the annual audit of the Company.  The provisions of this
Section 8
shall survive the expiration or earlier termination of this Agreement to the
extent such expenses have previously been incurred or are incurred in connection
with such expiration or termination.

     

    
      	
            	
              Section
      9.

            	
              Limits
      of the Manager’s Responsibility;
  Indemnification.

            


    

     

    (a)           The
Manager, its Affiliates and their respective directors, officers, employees,
partners, members, stockholders, other equity holders agents and representatives
(each, a “Manager Indemnified
Party”), will not be liable to any Company Entity or any of the
stockholders, partners, members or other holders equity interests of any Company
Entity for any acts or omissions by any Manager Indemnified Party performed in
accordance with and pursuant to this Agreement, except by reason of any act or
omission constituting bad faith, willful misconduct or gross negligence on the
part of such Manager Indemnified Party.  The Company shall, to the fullest
lawful extent, reimburse, indemnify and hold harmless each Manager Indemnified
Party, of and from any and all expenses, losses, damages, liabilities, demands,
charges and claims of any nature whatsoever (including reasonable attorneys’
fees and costs of investigation) (collectively “Losses”) in respect of or
arising from any acts or omissions of such Manager Indemnified Party performed
in good faith under this Agreement and not constituting bad faith, willful
misconduct or gross negligence on the part of such Manager Indemnified
Party.  In addition, the Company shall advance funds to a Manager
Indemnified Party for legal fees and other costs and expenses incurred as a
result of any claim, suit, action or proceeding for which indemnification is
being sought, provided that such Manager Indemnified Party undertakes to repay
the advanced funds to the Company, together with the applicable legal rate of
interest thereon, in cases in which such Manager Indemnified Party is found
pursuant to a final and non-appealable order or judgment to not be entitled to
indemnification.


    
      
         


      

      
        19

        
          

        

      

      
         


      

    


    (b)           The
Manager shall, to the fullest lawful extent, reimburse, indemnify and hold
harmless the Company (each, a “Company Indemnified Party”)
of and from any and all Losses in respect of or arising from (i) any acts or
omissions of the Manager constituting bad faith, willful misconduct or gross
negligence on the part of the Manager, or (ii) any claims by the Manager’s
employees relating to the terms and conditions of their employment by the
Manager.  The Manager assumes no responsibility under this Agreement other
than to render in good faith the services specifically designated as to be
provided by the Manager hereunder and shall not be responsible for any action of
the Board in following or declining to follow any advice or recommendations of
the Manager, including as set forth in the Investment Guidelines.  A
Manager Indemnified Party and a Company Indemnified Party are each sometimes
hereinafter referred to as an “Indemnified
Party.”

     

    (c)           In
case any such claim, suit, action or proceeding (a “Claim”) is brought against
any Indemnified Party in respect of which indemnification may be sought by such
Indemnified Party pursuant hereto, the Indemnified Party shall give prompt
written notice thereof to the indemnifying party, which notice shall include all
documents and information in the possession of or under the control of such
Indemnified Party reasonably necessary for the evaluation and/or defense of such
Claim and shall specifically state that indemnification for such Claim is being
sought under this Section 9; provided, however, that the
failure of the Indemnified Party to so notify the indemnifying party shall not
limit or affect such Indemnified Party’s rights except to the extent that the
indemnifying party is actually prejudiced thereby.  Upon receipt of such
notice of Claim (together with such documents and information from such
Indemnified Party), the indemnifying party shall, at its sole cost and expense,
in good faith defend any such Claim with counsel reasonably satisfactory to such
Indemnified Party, which counsel may, without limiting the rights of such
Indemnified Party pursuant to the next succeeding sentence of this Section, also
represent the indemnifying party in such investigation, action or
proceeding.  In the alternative, such Indemnified Party may elect to
conduct the defense of the Claim, if (i) such Indemnified Party reasonably
determines that the conduct of its defense by the indemnifying party could be
materially prejudicial to its interests, (ii) the indemnifying party refuses to
assume such defense (or fails to give written notice to the Indemnified Party
within ten days of receipt of a notice of Claim that the indemnifying party
assumes such defense), or (iii) the indemnifying party shall have failed, in
such Indemnified Party’s reasonable judgment, to defend the Claim in good
faith.  The indemnifying party may settle any Claim against such
Indemnified Party without such Indemnified Party’s consent, provided (A) such
settlement is without any Losses whatsoever to such Indemnified Party, (B) the
settlement does not include or require any admission of liability or culpability
by such Indemnified Party, (C) the indemnifying party obtains an effective
written release of liability for such Indemnified Party from the party to the
Claim with whom such settlement is being made, which release must be reasonably
acceptable to such Indemnified Party, and a dismissal with prejudice with
respect to all claims made by the party against such Indemnified Party in
connection with such Claim, and (D) such settlement does not provide for any
equitable relief.  The applicable Indemnified Party shall reasonably
cooperate with the indemnifying party, at the indemnifying party’s sole cost and
expense, in connection with the defense or settlement of any Claim in accordance
with the terms hereof.  If such Indemnified Party is entitled pursuant to
this Section 9 to
elect to defend such Claim by counsel of its own choosing and so elects, then
the indemnifying party shall be responsible for any good faith settlement of
such Claim entered into by such Indemnified Party.  Except as provided in
the immediately preceding sentence, no Indemnified Party may pay or settle any
Claim and seek reimbursement therefor under this Section 9.


    
      
         


      

      
        20

        
          

        

      

      
         


      

    


    (d)           The
provisions of this Section 9 shall
survive the expiration or earlier termination of this Agreement.

     

    
      	
            	
              Section
      10.

            	
              No
      Joint Venture.

            


    

     

    The
parties to this Agreement are not partners or joint venturers with each other
and nothing herein shall be construed to make them partners or joint venturers
or impose any liability as such on either of them.

     

    
      	
            	
              Section
      11.

            	
              Term;
      Renewal; Termination Without Cause.

            


    

     

    (a)           This
Agreement shall become effective on the Closing Date and shall continue in
operation, unless terminated in accordance with the terms hereof, until the
fifth anniversary of the Closing Date (the “Initial Term”).  After
the Initial Term, this Agreement shall be deemed renewed automatically each year
for an additional one-year period (an “Automatic Renewal Term”),
unless the Company or the Manager elects not to renew this Agreement in
accordance with Section 11(b) or
Section 11(d),
respectively.

     

    (b)           Notwithstanding
any other provision of this Agreement to the contrary, upon written notice
provided to the Manager no later than 180 days prior to the expiration of the
Initial Term or any Automatic Renewal Term (the “Termination Notice”), the
Company may, without cause, in connection with the expiration of the Initial
Term or the then current Automatic Renewal Term, decline to renew this Agreement
(any such nonrenewal, a “Termination Without Cause”)
upon the affirmative vote of at least two-thirds of the Independent Directors
that includes a finding by such two-thirds majority either that (i) there has
been unsatisfactory performance by the Manager that is materially detrimental to
the Company Entities, taken as a whole, or (ii) the fees payable to the Manager
under Section 7 are
not, taken as a whole, in accordance with then-current market rates charged by
asset management companies rendering services similar to those rendered by the
Manager (“Above-Market
Rates”), subject to Section 11(c),
and only after reasonable investigation by the Independent Directors as to the
market rates charged by similarly situated managers.  In the event of a
Termination Without Cause, the Company shall pay the Manager the Fees Accrued
Upon Termination before or on the last day of the Initial Term or such Automatic
Renewal Term, as the case may be (the “Effective Termination
Date”).  The Company may terminate this Agreement for cause pursuant
to Section 13 even
after a Termination Notice and, in such case, no Fees Accrued Upon Termination
shall be payable.


    
      
         


      

      
        21

        
          

        

      

      
         


      

    


    (c)           Notwithstanding
the provisions of Section 11(b),
if the reason for nonrenewal specified in the Company’s Termination Notice is
that two-thirds of the Independent Directors have determined that the fees
payable to the Manager under Section 7 are,
taken as a whole, at Above-Market Rates, then the Company shall not have the
foregoing nonrenewal right if the Manager agrees that it will continue to
perform its duties hereunder during the Automatic Renewal Term that would
commence upon the expiration of the Initial Term or then current Automatic
Renewal Term at rates that at least two-thirds of the Independent Directors
determine to be at or below market rates, taken as a whole; provided, however, that if the
Independent Directors have made such a determination, the Manager shall have the
right to renegotiate the rate of fees payable to the Manager under Section 7 as so
determined by the Independent Directors, by delivering to the Company, not less
than 120 days prior to the pending Effective Termination Date, written notice (a
“Notice of Proposal to
Negotiate”) of its intention to renegotiate the fees payable to the
Manager under Section 7. 
Thereupon, the Company and the Manager shall endeavor to negotiate the fees
payable to the Manager under Section 7 in
good faith.  Provided that the Company and the Manager agree to a revised
fee structure under Section 7 within
60 days following the Company’s receipt of the Notice of Proposal to Negotiate,
the Termination Notice from the Company shall be deemed of no force and effect,
and this Agreement shall continue in full force and effect on the terms stated
herein, except that the compensation structure shall be the revised compensation
structure as then agreed upon by the Company and the Manager.  The Company
and the Manager agree to execute and deliver an amendment of this Agreement
setting forth such revised fee structure promptly upon reaching an agreement
regarding same.  If the Company and the Manager are unable to agree to a
revised compensation structure during such 60-day period, this Agreement shall
terminate on the Effective Termination Date and the Company shall be obligated
to pay the Manager the Fees Accrued Upon Termination upon the Effective
Termination Date.

     

    (d)           No
later than 180 days prior to the expiration of the Initial Term or the then
current Automatic Renewal Term, the Manager may deliver written notice to the
Company informing the Company of the Manager’s intention to discontinue
performance of services pursuant to this Agreement as of the upcoming expiration
date, whereupon this Agreement shall not be renewed and extended and this
Agreement shall terminate effective on the anniversary date of this Agreement
next following the delivery of such notice.  The Company shall not be
required to pay to the Manager the Fees Accrued Upon Termination if the Manager
terminates this Agreement pursuant to this Section 11(d).

     

    (e)           Except
as set forth in this Section 11, a
non-renewal of this Agreement pursuant to this Section 11 shall
be without any further liability or obligation of any party to the others,
except as provided in Sections 6, 8, 9 and 15.

     

    (f)           The
Manager shall cooperate with the Company in executing an orderly transition of
the management of PAC’s consolidated assets to a new manager.

     

    
      	
            	
              Section
      12.

            	
              Assignments.

            


    

     

    (a)           Assignments by the Manager. 
This Agreement shall terminate automatically without payment of the Fees
Accrued Upon Termination in the event of its assignment, in whole or in part, by
the Manager, unless such assignment has been consented to in writing by (i) the
Company with the consent of a majority of the Independent Directors, and (ii)
the Operating Partnership.  Any such permitted assignment shall bind the
assignee under this Agreement in the same manner as the Manager is bound, and
the Manager shall be liable to the Company for all acts or omissions of the
assignee under any such assignment to the same extent had such delegation not
occurred.  In addition, the assignee shall execute and deliver to the
Company a counterpart of this Agreement naming such assignee as the
Manager.  Notwithstanding the foregoing, the Manager may, without the
approval of the Company’s Independent Directors, (A) assign this Agreement to an
Affiliate of the Manager, and (B) delegate to one or more of its Affiliates the
performance of any of its responsibilities hereunder so long as it remains
liable for any such Affiliate’s performance to the same extent had such
delegation not occurred, in each case so long as assignment or delegation does
not require the Company’s approval under the Investment Company Act (but if such
approval is required, the Company shall not unreasonably withhold, condition or
delay its consent).  Nothing contained in this Agreement shall preclude any
pledge, hypothecation, assignment or other transfer of any amounts payable to
the Manager under this Agreement.


    
      
         


      

      
        22

        
          

        

      

      
         


      

    


    (b)           Assignments by the Company. 
This Agreement shall not be assigned by the Company without the prior
written consent of the Manager, except in the case of assignment by the Company
to another REIT or other organization which is a successor (by merger,
consolidation, purchase of assets, or other transaction) to the Company, in
which case such successor organization shall be bound under this Agreement and
by the terms of such assignment in the same manner as the Company is bound under
this Agreement.

     

    
      	
            	
              Section
      13.

            	
              Termination
      for Cause.

            


    

     

    (a)           The
Company may terminate this Agreement for cause effective upon 30 days’ prior
written notice of termination from the Company to the Manager (a “Cause Termination Notice”),
without payment of any Fees Accrued Upon Termination, upon the occurrence
of:

     

    (i)  a
breach by the Manager, its agents or its assignees of any material provision of
this Agreement and such breach shall continue for a period of 60 days after
written notice thereof specifying such breach and requesting that the same be
remedied in such 60-day period (or 90 days after written notice of such
breach if the Manager takes steps to cure such breach within 60 days of the
written notice);

     

    (ii)  a
Bankruptcy Event with respect to the Manager,

     

    (iii)  a
Manager Change of Control which a majority of the Independent Directors has
determined to be materially detrimental to the Company Entities, taken as a
whole;

     

    (iv)  the
dissolution of the Manager; or

     

    (v)  (A)
a final determination by a court that the Manager has committed fraud against
the Company, the Manager has embezzled funds of the Company or the Manager has
otherwise acted, or failed to act, in a manner constituting bad faith, willful
misconduct, gross negligence or reckless disregard in the performance of its
duties under this Agreement, (B) which act of fraud, embezzlement or other act
or failure to act described in clause (v)(A)
above has had a material adverse effect on the consolidated business, operations
and financial condition of the Company, and (C) where a majority of the
Independent Directors of PAC has voted affirmatively to terminate this Agreement
for cause as a result of such fraud, embezzlement or other act or failure to
act, which vote shall have occurred within 30 days following the final
determination referred to in clause (v)(A)
above; provided, however, if such
fraud, embezzlement or other act or failure to act was committed by a person
other than an executive officer of the Manager, then the Manager can cure the
same by terminating the employment of such person on or prior to the 30th day
following such final determination, in which event the Company shall cease to
have the right to terminate this Agreement for cause pursuant to this Section 13(a) and any
Cause Termination Notice previously given in reliance on this clause (v)
automatically shall be deemed to have been rescinded and
nugatory.


    
      
         


      

      
        23

        
          

        

      

      
         


      

    


    (b)           The
Manager may terminate this Agreement effective upon 60 days’ prior written
notice of termination to the Company if the Company shall default in the
performance or observance of any material term, condition or covenant contained
in this Agreement and such default shall continue for a period of 60 days after
written notice thereof specifying such default and requesting that the same be
remedied in such 60-day period.  The Company shall be required to pay to
the Manager the Fees Accrued Upon Termination if the termination of this
Agreement is made pursuant to this Section 13(b).

     

    (c)           The
Manager may terminate this Agreement if the Company becomes required to register
as an investment company under the Investment Company Act, with such termination
deemed to occur immediately before such event, in which case the Manager shall
not be entitled to payment of the Fees Accrued Upon Termination.

     

    
      	
            	
              Section
      14.

            	
              Action
      Upon Termination.

            


    

     

    From and
after the effective date of termination of this Agreement pursuant to Section 11,
12 or 13, the Manager shall
not be entitled to compensation for further services hereunder.  If the
Manager is terminated pursuant to Sections 11(b)
or 13(b), it
shall be paid all Fees Accrued Upon Termination.  Upon any such
termination, the Manager shall forthwith:

     

    (a)           after
deducting any accrued compensation and reimbursement for its expenses to which
it is then entitled, pay over to each Company Entity all money collected and
held for the account of such Company Entity pursuant to this
Agreement;

     

    (b)           deliver
to the Board a full accounting, including a statement showing all payments
collected by it and a statement of all money held by it, covering the period
following the date of the last accounting furnished to the Board with respect to
the Company Entities;

     

    (c)           deliver
to the Board all property and documents of the Company Entities then in the
custody of the Manager; and

     

    (d)           cooperate
with the Company Entities to provide an orderly management
transition.


    
      	
            	
              Section
      15.

            	
              Release
      of Money or Other Property Upon Written
Request.

            


    

     

    The
Manager agrees that any money or other property of the Company (which, for the
purposes of this Section 15,
shall be deemed to include any and all of their respective subsidiaries, if any)
held by the Manager shall be held by the Manager as custodian for the Company,
and the Manager’s records shall be appropriately and clearly marked to reflect
the ownership of such money or other property by the Company.  Upon the
receipt by the Manager of a written request signed by a duly authorized officer
of the Company requesting the Manager to release to the Company any money or
other property then held by the Manager for the account of the Company under
this Agreement, the Manager shall release such money or other property to the
Company or within a reasonable period of time, but in no event later than 60
days following such request.  Upon delivery of such money or other property
to the Company, the Manager shall not be liable to the Company, the Board, PAC’s
stockholders, the Operating Partnership’s partners or any of the directors or
equity holders of any subsidiary of the Company for any acts or omissions by the
Company in connection with the money or other property released to the Company
in accordance with this Section 15. 
The Company shall indemnify the Manager Indemnified Parties against any and all
Losses which arise in connection with the Manager’s proper release of such money
or other property to the Company in accordance with the terms of this Section 15. 
Indemnification pursuant to this provision shall be in addition to any right of
the Manager Indemnified Parties to indemnification under Section 9.

     

    
      
        
           


        

        
          24

          
            

          

        

        
           


        

      

    

     

    
      	
            	
              Section
      16.

            	
              Miscellaneous.

            


    

     

    (a)           Notices.  All notices,
requests, communications and demands (each a “Notice”) to, with or upon any
of the respective parties shall be in writing and sent by (i) personal delivery,
(ii) reputable overnight courier, (iii) facsimile transmission with
telephonic confirmation (provided that such Notice also is sent
contemporaneously by another method provided for in this Section 16(a)),
or (iv) registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below (or to such other address as may be hereafter
notified by the respective parties hereto in accordance with this Section 16(a)):

     

    
      
        	
                PAC:

              	
                Preferred
      Apartment Communities, Inc.

                3625
      Cumberland Boulevard, Suite 400

                Atlanta,
      Georgia 30339

                Attention:  Leonard
      A. Silverstein, Esq.

                Attention:  Jeffrey
      R. Sprain, Esq.

                Fax:  (770)
      818-4105

              
	 
      	 
      
	
                with
      a copy to:

              	
                Proskauer
      Rose LLP

                1585
      Broadway

                New
      York, New York 10036

                Attention:  Peter
      M. Fass, Esq.

                Attention:  James
      P. Gerkis, Esq.

                Fax:  (212)
      969-2900

              
	 
      	 
      
	
                The
      Operating Partnership:

              	
                Preferred
      Apartment Communities, Inc.

                3625
      Cumberland Boulevard, Suite 400

                Atlanta,
      Georgia 30339

                Attention:  Leonard
      A. Silverstein, Esq.

                Attention:  Jeffrey
      R. Sprain, Esq.

                Fax:  (770)
      818-4105

              
	 
      	 
      
	
                with
      a copy to:

              	
                Proskauer
      Rose LLP

                1585
      Broadway

                New
      York, New York 10036

                Attention:  Peter
      M. Fass, Esq.

                Attention:  James
      P. Gerkis, Esq.

                Fax:  (212)
      969-2900

              


      

    


    
      
         


      

      
        25

        
          

        

      

      
         


      

    

    


    
      
        	
                The
      Manager:

              	
                Preferred
      Apartment Advisors, LLC

                3625
      Cumberland Boulevard, Suite 400

                Atlanta,
      Georgia 30339

                Attention:  Leonard
      A. Silverstein, Esq.

                Attention:  Jeffrey
      R. Sprain, Esq.

                Fax:  (770)
      818-4105

              
	 
      	 
      
	
                with
      a copy to:

              	
                Bass,
      Berry & Sims PLC

                100
      Peabody Place, Suite 900

                Memphis,
      Tennessee 38103

                Attention:  John
      A. Good, Esq.

                Fax:  (901)
      543-5901

              


      

    

     

    Any
Notice sent as aforesaid shall be deemed given and effective upon actual receipt
(or refusal of receipt).

     

    (b)           Binding Nature of Agreement;
Successors and Assigns; No Third Party Beneficiaries.  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and permitted
assigns.  Except as provided in this Agreement with respect to
indemnification of Indemnified Parties hereunder, nothing in this Agreement
shall confer any rights upon any Person other than the parties hereto and their
respective heirs, legal representatives, successors and permitted
assigns.

     

    (c)           Integration.  This
Agreement contains the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements, understandings, inducements and conditions, express or implied, oral
or written, of any nature whatsoever with respect to the subject matter
hereof.  The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms
hereof.

     

    (d)           Amendments.  This
Agreement, nor any terms hereof, may not be amended or supplemented except in an
instrument in writing executed by the parties hereto.

     

    (e)           GOVERNING LAW.  THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.  EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF DELAWARE AND THE UNITED STATES
DISTRICT COURT FOR ANY DISTRICT WITHIN SUCH STATE FOR THE PURPOSE OF ANY ACTION
OR JUDGMENT RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND TO THE LAYING OF VENUE IN SUCH
COURT.


    
      
         


      

      
        26

        
          

        

      

      
         


      

    


    (f)           WAIVER OF JURY TRIAL. 
EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND,
THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

     

    (g)           No Waiver; Cumulative
Remedies.  No failure to exercise and no delay in exercising, on the
part of a party hereto, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.

     

    (h)           Costs and Expenses. 
Each party hereto shall bear its own costs and expenses (including the
fees and disbursements of counsel and accountants) incurred in connection with
the negotiations and preparation of this Agreement, and all matters incident
thereto.  If any party hereto initiates any legal action arising out of or
in connection with this Agreement, the prevailing party shall be entitled to
recover from the other party all reasonable attorneys’ fees, expert witness fees
and expenses incurred by the prevailing party in connection
therewith.

     

    (i)           Section Headings. 
The section and subsection headings in this Agreement are for convenience
in reference only and shall not be deemed to alter or affect the interpretation
of any provisions hereof.

     

    (j)           Counterparts.  This
Agreement may be executed (including by facsimile transmission) with counterpart
signature pages or in any number of separate counterparts, and all of which
taken together shall be deemed to constitute one and the same
instrument.

     

    (k)           Severability.  Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]


    
      
         


      

      
        27

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, each of the parties hereto has executed this Amended and
Restated Management Agreement as of the date first written above.

     

    
      
        
          
            
              
                	
                        PREFERRED
      APARTMENT COMMUNITIES, INC.

                      
	 
      	 
      	 
      
	
                        By:

                      	

                        /s/
      John A. Williams

                      
	 
      	
                        Name:

                      	 John
      A. Williams
	 
      	
                        Title:

                      	 President
      and Chief Executive Officer
	 
      	 
      	 
      
	
                        PREFERRED
      APARTMENT COMMUNITIES

                        OPERATING
      PARTNERSHIP, L.P.

                      
	 
      	 
      	 
      
	
                        By:

                      	
                        Preferred
      Apartment Communities, Inc.

                      
	 
      	
                        its
      General Partner

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	

                        /s/
      John A. Williams

                      
	 
      	 
      	
                        Name:
      John A. Williams

                      
	 
      	 
      	
                        Title:
      President and Chief Executive Officer

                      
	 
      	 
      	 
      
	
                        PREFERRED
      APARTMENT ADVISORS, LLC

                      
	 
      	 
      	 
      
	
                        By:

                      	
                        NELL
      Partners, Inc.

                      
	 
      	
                        its
      Managing Member

                      
	 
      	 
      	 
      
	 
      	
                        By:

                      	

                        /s/
      John A. Williams

                      
	 
      	 
      	
                        Name:
      John A. Williams

                      
	 
      	 
      	
                        Title:
      President and Chief Executive
Officer

                      


              

            

          

        

      

    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    


    Exhibit
A

     

    Investment
Guidelines

     

    
      	
              1.

            	
              No
      Investment shall be made by the Manager that would cause PAC to fail to
      qualify as a REIT under the Code.

            


    

     

    
      	
              2.

            	
              No
      Investment shall be made by the Manager that would cause either PAC or the
      Operating Partnership to be regulated as an investment company under the
      Investment Company Act.

            


    

     

    
      	
              3.

            	
              Until
      appropriate investments in Investments are identified, the Manager may
      invest the proceeds of the Initial Public Offering and any future
      offerings of PAC’s or the Operating Partnership’s securities for cash in
      interest-bearing, short-term, investment-grade investments, subject to the
      requirements for PAC’s qualification as a REIT under the
    Code.

            


    

     

    
      	
              4.

            	
              Investment
      Deployment Quantitative Limits:

            


    

     

    
      	
               
      

            	
              (a)

            	
              No
      more than 15% of the Company’s total assets may be invested by the Manager
      in any one single asset or
transaction.

            


    

     

    
      	
               
      

            	
              (b)

            	
              No
      more than 25% of the Company’s total assets may be invested by the Manager
      in any metropolitan statistical area (“MSA”).

            


    

     

    
      	
               
      

            	
              (c)

            	
              The
      Company’s aggregate borrowings (secured and unsecured) will not exceed 75%
      of the cost of its tangible assets at the time of any new
      borrowing.

            


    

     

    
      	
              5.

            	
              Investment
      Deployment Qualitative Guidelines:

            


    

     

    
      	
               
      

            	
              (a)

            	
              Multifamily
      related assets where the associated real property asset is located in an
      MSA with an aggregate population in excess of approximately
      1,000,000.

            


    

     

    
      	
               
      

            	
              (b)

            	
              Multifamily
      related assets where the associated real property asset has at least 100
      units.

            


    

     

    
      	
               
      

            	
              (c)

            	
              Multifamily
      related assets where the associated real property was built or
      substantially renovated after January 1, 1990 and, to the knowledge of the
      Manager, does not possess any design flaws and is not functionally
      obsolete.