Document:

Document

Exhibit 10.5

    

AMENDED AND RESTATED
ADVISORY AGREEMENT
between
PACIFIC OAK RESIDENTIAL TRUST II, INC.
and
PACIFIC OAK RESIDENTIAL ADVISORS, LLC

October 9, 2020

Table of Contents

Page

						
	ARTICLE 1 DEFINITIONS
	1

	ARTICLE 2 APPOINTMENT
	8

	ARTICLE 3 DUTIES OF THE ADVISOR
	8

	3.01    Organizational and Offering Services
	9

	3.02    Acquisition Services
	9

	3.03    Asset Management Services
	9

	ARTICLE 4 AUTHORITY OF ADVISOR
	12

	4.01    General
	12

	4.02    Powers of the Advisor
	12

	4.03    Approval by the Board
	13

	4.04    Modification or Revocation of Authority of Advisor
	13

	ARTICLE 5 BANK ACCOUNTS
	13

	ARTICLE 6 RECORDS AND FINANCIAL STATEMENTS
	13

	ARTICLE 7 LIMITATION ON ACTIVITIES
	14

	ARTICLE 8 FEES
	14

	8.01    Acquisition Fees
	14

	8.02    Asset Management Fees
	14

	8.03    Incentive Fees
	14

	8.04    Calculation of Incentive Fees
	15

	ARTICLE 9 EXPENSES
	15

	9.01    General
	15

	9.02    Timing of and Additional Limitations on Reimbursements
	16

	ARTICLE 10 VOTING AGREEMENT
	17

	ARTICLE 11 RELATIONSHIP OF ADVISOR AND COMPANY;
	17

	OTHER ACTIVITIES OF THE ADVISOR
	17

	11.01    Relationship
	17

	11.02    Time Commitment
	17

	ARTICLE 12 THE PACIFIC OAK NAME
	17

	ARTICLE 13 CHANGE OF CONTROL
	18

	13.01    Change of Control
	18

	ARTICLE 14 TERM AND TERMINATION OF THE AGREEMENT
	18

	14.01    Term
	18

	14.02    Termination by Either Party
	18

	14.03    Payments on Termination and Survival of Certain Rights and Obligations
	19

	ARTICLE 15 ASSIGNMENT
	19

	ARTICLE 16 INDEMNIFICATION AND LIMITATION OF LIABILITY
	19

	16.01    Indemnification
	19

	16.02    Limitation on Payment of Expenses
	20

	ARTICLE 17 MISCELLANEOUS
	20
	17.01    Notices
	20

	17.02    Modification
	21

Table of Contents
(continued)
Page

						
	17.03    Severability
	21

	17.04    Construction
	21

	17.05    Entire Agreement
	21

	17.06    Waiver
	21

	17.07    Gender
	21

	17.08    Titles Not to Affect Interpretation
	21

	17.09    Counterparts
	22

									
			

AMENDED AND RESTATED ADVISORY AGREEMENT
This Amended and Restated Advisory Agreement, dated as of October 9, 2020 (this “Agreement”), is between Pacific Oak Residential Trust II, Inc., a Maryland corporation (the “Company”), and Pacific Oak Residential Advisors, LLC, a Delaware limited liability company (the “Advisor”).
W I T N E S S E T H
WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities set forth herein; and 
WHEREAS, the Advisor is willing to undertake to render these services on the terms and conditions hereinafter set forth.
WHEREAS, the parties entered into the Advisory Agreement on August 31, 2020 (the “Original Agreement”).
WHEREAS, the parties desire to amend and restate the Original Agreement in its entirety with this Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree:
ARTICLE 1.
DEFINITIONS
The following defined terms used in this Agreement shall have the meanings specified below:
“Acquisition Expenses” means any and all expenses, excluding the fees payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Partnership, the Advisor or any of their Affiliates in connection with the selection, acquisition or development of any Property, or other Residential Asset, whether or not acquired, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, due diligence, nonrefundable option payments on assets not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to the selection, acquisition or development of any Property or other potential investment.
“Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with investing in Residential Assets.  Included in the computation of such fees or commissions shall be any real estate commission, selection fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be development fees and construction fees paid to Persons not Affiliated with the Advisor in 
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connection with the actual development and construction of a Property.  The Advisor shall not be entitled to more than one Acquisition Fee for each Property.
“Advisor” means (i) Pacific Oak Residential Advisors, LLC, a Delaware limited liability company; or (ii) any successor advisor to the Company.
“Affiliate” or “Affiliated” shall have the meaning set forth in the Company’s Charter.
“Appraised Value” means the value according to an appraisal made by an Independent Appraiser.
“Board of Directors” or “Board” means persons holding such office, as of any particular time, under the Charter, whether they be the Directors named therein or additional or successor Directors.
“Bylaws” means the bylaws of the Company, as amended from time to time.
“Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties or other Permitted Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith).
“Cash from Sales and Settlements” means the net cash proceeds realized by the Company (i) from the sale, exchange or other disposition of any of its assets or any portion thereof after deduction of all expenses incurred in connection therewith and (ii) from the prepayment, maturity, workout, restructuring or other settlement of any Permitted Investment or portion thereof after deduction of all expenses incurred in connection therewith. In the case of a transaction described in clause (C) of the definition of “Sale” and (B) of the definition of “Settlement,” Cash from Sales and Settlements means the proceeds of any such transaction actually distributed to the Company from the Joint Venture. Cash from Sales and Settlements shall not include Cash from Financings.
“Cause” means (a) if the Company or the Advisor materially breaches any provision of this Agreement and the breach continues for a period of thirty days after written notice thereof  by the non-breaching party specifying the breach and requesting that the breach be remedied in the thirty-day period or (b) a Change of Control.
“Change of Control” means the occurrence of any of the following: (i) any “person” (within the meaning of Section 13(d) of the Exchange Act, as enacted and in force on the date hereof) is or becomes the “beneficial owner” (as that term is defined in Rule 13d-3, as enacted and in force on the date hereof, under the Exchange Act) of securities of the Company representing more than 50% of the combined voting power of the Company’s securities then outstanding; (ii) there occurs a merger, consolidation or other reorganization of the Company which is not approved by the Board of Directors; (iii) there occurs a sale, exchange, transfer or other disposition of substantially all the assets of the Company to another Person, which disposition is not approved by the Board of Directors; or (iv) there occurs a contested proxy 
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solicitation of the Stockholders that results in the contesting party electing candidates to a majority of the Board of Directors’ positions next up for election.
“Change of Control Termination Notice” shall have the meaning set forth in Section 13 of this Agreement.
“Charter” means the articles of incorporation of the Company under Title 2 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended from time to time.
“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.
“Common Shares” means the shares of common stock of the Company, par value $.01 per share.
“Company” means Pacific Oak Residential Trust II, Inc., a corporation organized under the laws of the State of Maryland.
“Cost of Residential Assets” means the sum of (i) with respect to Residential Assets wholly owned, directly or indirectly, by the Company, the amount actually paid for the purchase of each Residential Asset, including fees and expenses related thereto (but excluding any Acquisition Fees paid or payable to the Advisor or its affiliates under this Agreement), plus amounts funded or budgeted at the time of acquisition for capital expenditures for the development, construction or improvement of Residential Assets and (ii) in the case of Residential Assets owned by any Joint Venture in which the Company or the Partnership is, directly or indirectly, a co-venturer for capital expenditures the amount that is attributable to the Company’s investment in the Joint Venture. The Cost of Residential Assets is computed without regard to whether any portion of the cost is funded using debt financing secured by, or attributable to, the Residential Asset.
“Dealer Manager” means (i) Arete Wealth Management, or (ii) any successor dealer manager to the Company.
“Director” means a member of the Board of Directors of the Company.
“Distributions” means any distributions (which shall not include stock dividends) of money or other property by the Company to owners of Common Shares, including distributions that may constitute a return of capital for federal income tax purposes.
“GAAP” means accounting principles generally accepted in the United States.
“Gross Investment Amount” means the amount equal to the product of the total number of Common Shares purchased by Stockholders by the issue price, reduced by: (1) distributions designated by our board as being funded from the proceeds of sales, financing or refinancing of 
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our assets; and (2) distributions of operating cash flow to the extent such distributions of operating cash flow provide a cumulative, non-compounded annual return in excess of the Stockholders’ 7% Return; and (3) the total number of shares repurchased by the Company (excluding the number of shares issued as stock dividends and subsequently repurchased by the Company) multiplied by the repurchase price.
“Group” shall mean a group of Persons within the meaning of Section 13(d)(3) of the Exchange Act of 1934, as amended.
“Independent Appraiser” means an appraiser chosen by a registered appraisal management company meeting the requirements of that term as defined within the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended, and otherwise acceptable to the Board.
“Joint Venture” means any arrangement between the Company or any Affiliate including the Partnership on the one hand and a third party on the other hand pursuant to which the Company and the third party invest in Residential Assets or other Permitted Investments.
“Listed” or “Listing” shall have the meaning set forth in the Company’s Charter.
“Market Value” means: (i) in the case of a listing, the value of the outstanding Common Shares of the Company measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 30 days during which the Common Shares are traded, with such period beginning 180 days after listing.
“Merger” means any business combination, merger, reorganization or share exchange involving the Company or its subsidiaries into or with another corporation or other legal person (the “Acquiror”) and as a result of such transaction, less than a majority of the outstanding voting securities or other capital interests of the surviving, resulting or acquiring corporation or other legal person are owned in the aggregate by those who were Stockholders immediately prior to such transaction (other than the Acquiror or its Affiliates if they owned Common Shares immediately prior to such transaction).
“Merger Consideration Amount” means: (i) in the case of a Merger in which the consideration consists solely of cash, the total consideration to be received by holders of Common Shares outstanding immediately prior to the closing of the Merger; (ii) in the case of a Merger in which the consideration consists of securities traded on a national securities exchange, the product of (x) the number of shares of such securities received by the Stockholders at the closing of the Merger and (y) the market value of such securities, measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 20 consecutive days during which such securities are traded, with such 20-trading day period ending on the trading day prior to the closing date of the Merger; (iii) in the case of a Merger in which the consideration consist of securities that are not traded on a national securities exchange, the value ascribed to such securities in the merger agreement; and (iv) in the case of a Merger in which the consideration is some combination of that described above, the sum of clauses (i) through (iii), as applicable.
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“MGCL” means Titles 1 through 3 of the Maryland General Corporation Law, as amended from time to time.
“Net Cash Flow” means for the applicable measuring period, the aggregate of the Company’s Operating Cash Flow plus any Cash Flow from Financings and Cash from Sales and Settlements, all without duplication.
“Net Income” means, for any period, the total revenues applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves, all calculated in accordance with GAAP; provided, however, Net Income for purposes of calculating total allowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets.
“Operating Cash Flow” means Operating Revenue minus the sum of: (i) Operating Expenses; (ii) all principal and interest payments on indebtedness and other sums paid to lenders; (iii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Common Shares;(iv) taxes; and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of Property, and other expenses connected with the acquisition, disposition, and ownership of Residential Assets or other Permitted Investments (other than commissions on the sale of assets other than Property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of Property.
“Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding: (i) all principal and interest payments on indebtedness and other sums paid to lenders; (ii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Common Shares; (iii) taxes; (iv) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of Property, and other expenses connected with the acquisition, disposition, and ownership of Residential Assets or other Permitted Investments (other than commissions on the sale of assets other than Property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of Property; and (v) non-cash expenditures such as depreciation, amortization and bad loan reserves.
“Operating Revenue” means the Company’s cash receipts from ownership or operation of: (i) Properties; (ii) SFH Interests; (iii) other Permitted Investments; and (iv) the Company’s direct or indirect proportionate share of any cash from any Joint Venture in which the Company or the Partnership is, directly or indirectly, a co-venturer; provided that Operating Revenue shall not include Cash from Sales and Settlements.
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“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with any offering of its Common Shares, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting or placement agent fees, brokerage discounts and commissions (including fees of counsel to the underwriter or placement agent); any expense allowance granted by the Company to the underwriter or placement agent or any reimbursement of expenses of the underwriter, placement agent, Sponsor or Advisor by the Company; legal fees; due diligence expenses; marketing expenses;  expenses for printing, engraving and mailing; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under federal and state laws, including taxes and fees and the fees and expenses of accountants and attorneys.
“Other Organization and Offering Expenses” means all Organization and Offering Expenses excluding total underwriting or placement agent fees, brokerage discounts and commissions.
“Partnership” means PORT II OP LP, a Delaware limited partnership formed to own and operate investments in Residential Assets and other Permitted Investments on behalf of the Company.
“Permitted Investments” means all investments in which the Company may acquire an interest, either directly or indirectly, including Properties, SFH Interests and short-term investments acquired for purposes of cash management, and including ownership interests in a Joint Venture.
“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
“Private Offering” or “Offering” means an offering of Common Shares or other equity securities pursuant to a Private Placement Memorandum, other than a private offering of shares under a distribution reinvestment plan.
“Private Placement Memorandum” means a confidential private placement memorandum, as amended or supplemented, pursuant to which the Company offers its Common Shares or other equity securities.
“Property” or “Properties” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, or any real property acquired, transferred or conveyed to a Joint Venture in which the Company is, directly or indirectly, a co-venturer.
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“Property Manager” means an entity that has been retained to perform and carry out property-management services at one or more of the Properties.
“REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.
“Residential Assets” means Single Family Homes, and SFH Interests.
“Sale” means any transaction or series of related transactions whereby: (A) the Company, directly or indirectly, including through the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, and including any event with respect to any Property or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction; (B) the Company, directly or indirectly, including through the Partnership, sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest in any Joint Venture in which it is, directly or indirectly, a co-venturer; or (C) any Joint Venture  in which the Company, directly or indirectly, through the Partnership is, a co-venturer, sells, grants, transfers, conveys, or relinquishes its ownership of any Property or other Permitted Investment or portion thereof, including any event with respect to any Property or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by the Joint Venture or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction.
“SEC” means the United States Securities and Exchange Commission.
“Single Family Homes” means a residential building consisting of one to four units.
“SFH Interest” means securities or other interests that generate cash flow derived from Single Family Homes such as mortgages secured by Single Family Homes, subordinated, mezzanine or bridge loans made to owners or investors in Single Family Homes and other related structured investments.
“Sponsor” means Pacific Oak Capital Advisors, LLC, a Delaware limited liability company.
“Stockholders” means the record holders of the Common Shares or any other series of class of stock of the Company.
“Stockholders’ 7% Return” means, as of any date, an aggregate amount equal to a 7% cumulative, non-compounded, annual return on Gross Investment Amount (calculated on a daily basis, decompounded assuming a three hundred sixty-five day year, and applied assuming a three hundred sixty-five day year.  For purposes of calculating the Stockholders’ 7% Return, Gross Investment Amount shall be determined for each day during the period for which the Stockholders’ 7% Return is being calculated, including a daily adjustment to reflect shares 
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repurchased or redeemed by the Company (excluding shares issued as stock dividends and subsequently repurchased by the Company).
“Subordinated Incentive in Net Cash Flows” means a fee payable to our Advisor equal to 20% of the excess Net Cash Flow for the applicable period, whether from continuing operations, net sales proceeds, net financing proceeds, or otherwise over an amount sufficient to pay stockholders: (1) a return of their Gross Investment Amount; and (2) the Stockholders’ 7% Return regardless of the source used to pay the stockholders 7% Return including distributions that may constitute a return of capital for federal income tax purposes. 
“Subordinated Incentive Fee” means a fee payable to our Advisor upon a merger or listing of the Common Shares on a national securities exchange equal to 20% of the amount by which, in the case of  a Listing, the Market Value of our outstanding Common Shares or in the case of a Merger, the Merger Consideration, without any adjustment for the incentive fee, plus the total of all distributions paid by us on the Common Shares from inception until the date Market Value or Merger Consideration is determined (regardless of the source used to fund the distributions and including distributions that may constitute a return of capital for federal income tax purposes) exceeds: (1) the Gross Investment Amount; plus (2) the amount of distributions necessary to pay the Stockholders’ 7% return through the date the Market Value or Merger Consideration is determined.
“Subordinated Incentive Fee Due on Termination” means a fee payable to our Advisor if the advisory agreement is terminated (unless terminated for “cause” by the Company), equal to: 20% of the amount, if any, by which the sum of (a) the value of our Properties and all other assets at the termination date as reflected on an appraisal made by an independent appraiser, less amounts of all third-party indebtedness or any other liability secured by our Properties or other third-party indebtedness, plus total distributions paid through the termination date plus (b) the amount necessary to pay the Stockholders’ 7% return through the termination date exceeds the Gross Investment Amount. No fee shall be due and payable if the Company terminates for “cause.”
“Termination Date” means the date of termination of the Agreement determined in accordance with Article 14 hereof.
ARTICLE 2.
APPOINTMENT
The Company hereby appoints the Advisor to serve as its advisor on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.
ARTICLE 3.
DUTIES OF THE ADVISOR
The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets. The Advisor undertakes to use its reasonable best efforts to present the Company potential investment opportunities, to make 
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investment decisions on behalf of the Company subject to the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board. Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:
a.Organizational and Offering Services
. The Advisor shall perform all services related to the organization of the Company or any Offering, other than services that (i) are to be performed by the Dealer Manager, (ii) the Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.
b.Acquisition Services
. 
(i)Provide the Company with relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;
(ii)Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Residential Assets and other Permitted Investments will be made; (c) cause the Company to, directly or indirectly, acquire, Residential Assets and other Permitted Investments; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Residential Assets and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Residential Assets and other Permitted Investments, or to engage an approved Property Manager;
(iii)Perform due diligence on prospective investments;
(iv)Prepare reports regarding prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments;
(v)Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Company; and
(vi)Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s investments. 
c.Asset Management Services
. 
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(i)Real Estate and Related Services:
(1)Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;
(2)Negotiate any borrowings that the Company, directly or indirectly, makes and to cause the Company or the underlying borrower to pay any amounts due on the borrowings;
(3)Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company;
(4)Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s investments;
(5)Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Residential Assets and other Permitted Investments on an overall portfolio basis;
(6)Consult with the Company’s officers and the Board and assist the Board in formulating and implementing the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company;
(7)Oversee and evaluate the performance by the Property Manager(s) of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;
(8)Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties;
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(9)Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget;
(10)Coordinate and manage relationships between the Company and any co-venturers; and
(11)Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, sale and refinancing opportunities.
(ii)Accounting and Other Administrative Services:
(1)Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company;
(2)From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement;
(3)Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations;
(4)Provide financial and operational planning services;
(5)Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the Internal Revenue Service and any other regulatory agency;
(6)Maintain and preserve all appropriate books and records of the Company;
(7)Provide services necessary to ensure the Company’s compliance with the rules and regulations REIT, including any asset, income and shareholder testing, and addressing with the Board, if necessary, any actions required to maintain REIT compliance;
(8)Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related tax matters;
(9)Provide the Company with all necessary cash management services;
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(10)Manage and coordinate with the transfer agent payment of dividends and other distributions to Stockholders;
(11)Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining necessary insurance coverage based upon risk management determinations;
(12)Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters;
(13)Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto;
(14)Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law;
(15)Notify the Board of all proposed material transactions before they are completed; and
(16)Do all things necessary to assure its ability to render the services described in this Agreement.
ARTICLE 4.
AUTHORITY OF ADVISOR
a.General
. All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter.
b.Powers of the Advisor
. Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.
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c.Approval by the Board
. Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized committees thereof if the Charter or the MGCL require the prior approval of the Board. If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.
d.Modification or Revocation of Authority of Advisor
. The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.
ARTICLE 5.
BANK ACCOUNTS
The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or in the name of the Company and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor. The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.
ARTICLE 6.
RECORDS AND FINANCIAL STATEMENTS
The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company or persons with rights to inspect the books and records, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees paid or reimbursements made under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor delivers to the Company for distribution to Stockholders shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests.
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ARTICLE 7.
LIMITATION ON ACTIVITIES
Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Common Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, or (v) violate the Charter or Bylaws. 
ARTICLE 8.
FEES
a.Acquisition Fees
. As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Residential Assets and other Permitted Investments, the Company shall pay the Advisor an Acquisition Fee for each such investment equal to 1.0% of the Cost of Residential Assets for any given transaction. With respect to the acquisition of any Residential Asset or other Permitted Investment through any Joint Venture in which the Company is, directly or indirectly, a partner, member or stockholder the Acquisition Fee payable to the Advisor shall equal 1.0% of each investment in the Joint Venture.  The Advisor shall submit an invoice to the Company following the closing or closings of each investment.  Generally, the Acquisition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company.  The Advisor may, in its discretion, waive or defer any Acquisition Fee, in whole or in part, in its sole discretion. All or any portion of the Acquisition Fees deferred shall not bear interest and may be paid by the Company in the Joint Venture in such other fiscal year as the Advisor shall determine.
b.Asset Management Fees
. As compensation for the services described in Section 3.03 the Company shall pay the Advisor an asset management fee equal to 0.25% quarterly (1% annually) on the carrying value of the Company’s total assets. For these purposes, the carrying value of the Company’s total assets shall be equal to the value reported on the Company’s balance sheet for the quarter most recently ended. The Advisor shall submit an invoice to the Company, accompanied by a computation of the fees for the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month. 
c.Incentive Fees
. Upon an event triggering the applicable fee below, and subject to the terms of each incentive fee, the Company shall pay (without duplication) to the Advisor the following Incentive Fees:   
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(i)Subordinated Incentive in Net Cash Flows;
(ii)Subordinated incentive fee; and  
(iii)Subordinated Incentive Fee Due on Termination.
d.Calculation of Incentive Fees
. In all cases above the Stockholders’ 7% Return is calculated like simple interest on a daily basis in the manner described below. In making this calculation, Gross Investment Amount is determined for each day during the period for which the Stockholders’ 7% Return is being calculated, including a daily adjustment to reflect any shares repurchased by the Company. The Stockholders’ 7% Return is not based on the return provided to any individual stockholder but rather is based on total distributions paid on all outstanding shares relative to total Gross Investment Amount. Accordingly, it is not necessary for each stockholder to have received any minimum return in order for the Advisor to be paid any of the incentive fees described above in 8.03(i)-(iii). 
ARTICLE 9.
EXPENSES
a.General
. In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, the Company shall pay directly or reimburse the Advisor for Other Organization and Offering Expenses incurred by the Advisor or its Affiliates in connection with the Offering in an amount equal to up to 0.5% of the gross offering proceeds from the offering of $200 million of Common Shares which commenced on August 31, 2020 and for all of the third-party expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement; provided, however, neither the Advisor nor any of its Affiliates shall be entitled to any  reimbursement for any cost or expenses for salaries and benefits of persons employed by the Advisor or its Affiliates who perform services for the Company or in any way related to the overhead or operations of the Advisor or its Affiliates.  The third-party expenses for which payment or reimburse will be allowed include, but are not limited to:
(i)Acquisition Expenses incurred in connection with the selection and acquisition of Residential Assets and other Permitted Investments, including expenses incurred related to assets pursued or considered but not ultimately acquired by the Company;
(ii)The cost of goods and services used by the Company and obtained from third parties other than the Advisor or its Affiliates;
(iii)Interest and other costs for borrowed money, including discounts, points and other similar fees;
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(iv)Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;
(v)All expenses, except expenses incurred by any Property Manager affiliated with the Advisor, of managing, improving, developing, operating and selling Residential Assets and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to the Residential Assets and other Permitted Investments;
(vi)All expenses in connection with payments to the Board and meetings of the Board and Stockholders;
(vii)Expenses of providing services for and maintaining communications with Stockholders, including the cost of preparing, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;
(viii)Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and directors;
(ix)Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board or any committee of the Board;
(x)Expenses for the Company to comply with all applicable laws, regulations and ordinances;
(xi)Expenses connected with payments of Distributions and stock dividends made or caused to be made by the Company to the Stockholders;
(xii)Expenses of merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and 
(xiii)All other third-party out-of-pocket costs incurred by the Advisor in performing its duties hereunder.
b.Timing of and Additional Limitations on Reimbursements
.
(i)Expenses incurred by the Advisor on behalf of the Company and reimbursable to the Advisor pursuant to this Article 9 shall be reimbursed upon delivery by the Advisor to the Board of a statement documenting the reimbursable expenses for the prior quarter; provided that the statement shall be delivered within 45 days after the end of each quarter.
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ARTICLE 10.
VOTING AGREEMENT
The Advisor agrees that, with respect to any Common Shares now or hereinafter owned by it, the Advisor will not vote or consent on matters submitted to the Stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor, (ii) any transaction between the Company and the Advisor or any of its Affiliates, (iii) the election of directors of the Company or (iv) the approval or termination of any contract with the Advisor or any Affiliate of the Advisor. This voting restriction shall survive until such time that the Advisor is both no longer serving as such and is no longer an Affiliate of the Company.
ARTICLE 11.
RELATIONSHIP OF ADVISOR AND COMPANY;
OTHER ACTIVITIES OF THE ADVISOR
a.Relationship
. The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them partners or joint venturers.  This Agreement shall not limit or restrict the right of any manager, director, officer, employee or equity holder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person; provided that neither the Advisor nor its affiliates shall render services similar to those be rendered hereunder to any person or entity in the business of acquiring, owning and managing single family homes (which consist of one to four unit dwellings) and other single family residential assets including securities whose value is derived from or based on investments in single family homes. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Company acknowledges that the Advisor provides services, as sub-advisor, to Pacific Oak Residential Trust, Inc. The Advisor shall promptly disclose to the Board the existence of any additional condition or circumstance, existing or anticipated, of which it has knowledge that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.
b.Time Commitment
. The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.
ARTICLE 12.
THE PACIFIC OAK NAME
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The Advisor and its Affiliates have a proprietary interest in the name “Pacific Oak.” The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “Pacific Oak” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “Pacific Oak” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “Pacific Oak” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any of its Affiliates. At such time, the Company will also make any changes to any trademarks, service marks or other marks necessary to remove any references to the word “Pacific Oak.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “Pacific Oak” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.
ARTICLE 13.
CHANGE OF CONTROL
a.Change of Control
.  Notwithstanding any other provisions of this Agreement to the contrary, in the event of a Change of Control of the Company, either the Company or the Advisor shall have the right, subject to the Company’s and the Partnership’s right to assign this Agreement in accordance with Section 15, upon sixty (60) days prior written notice to the other (the “Change of Control Termination Notice”), to terminate this Agreement. If the Advisor or the Company so elects to terminate this Agreement pursuant to this Section 13, the Termination Date shall be the date specified in the Change of Control Termination Notice, but in any event no later than thirty (30) days after the Change of Control of the Company.
ARTICLE 14.
TERM AND TERMINATION OF THE AGREEMENT
a.Term
. The term of this Agreement began on August 31, 2020 (with respect to the Company and its predecessors in interests) and shall end on August 31, 2025 and may be renewed for two successive five-year terms upon mutual consent of the parties. The Company will evaluate the performance of the Advisor before renewing this Agreement, and each such renewal shall be for a term of no more than five years. Any such renewal must be approved by the Board of Directors.
b.Termination by Either Party
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. This Agreement may be terminated for Cause upon 60 days written notice by either the Company or the Advisor. The provisions of Articles 1, 10, 12, 14, 16 and 17 shall survive termination of this Agreement.  
c.Payments on Termination and Survival of Certain Rights and Obligations
. 
(i)After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination (a) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement and (b) any incentive fees due under Section 8.03 hereunder  Notwithstanding the foregoing, no incentive fee will be paid if this Agreement is terminated for Cause by the Company in accordance with Section 14.02 following an event described in clause (a) of the definition of Cause.
(ii)The Advisor shall promptly upon termination:
(1)pay over to the Company all monies, if any, after deducting any accrued fees and reimbursement for its expenses to which it is then entitled;
(2)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;
(3)deliver to the Board all documents including, but not limited to those related to the Company’s assets then in the custody of the Advisor; and
(4)cooperate with the Company to provide an orderly transition of advisory functions.
ARTICLE 15.
ASSIGNMENT
This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Board. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of the assignment in the same manner as the Company is bound by this Agreement.
ARTICLE 16.
INDEMNIFICATION AND LIMITATION OF LIABILITY
a.Indemnification
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. The Company shall, to the fullest extent to which the Company many indemnify its directors under the MGCL, indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, partners, agents and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, incurred by these persons or entities to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance. 
b.Limitation on Payment of Expenses
. The Company shall pay or reimburse the reasonable legal expenses and other costs incurred by the Advisor or its Affiliates in advance of the final disposition of a proceeding subject to the limitations and requirements set forth in the MGCL.
ARTICLE 17.
MISCELLANEOUS
a.Notices
. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:
To the Company or the Board:
			
	Pacific Oak Residential Trust II, Inc.
3200 Park Center Drive
Suite 600
Costa Mesa, CA  92626
Email: mbender@pac-oak.com 
Attention: Michael Bender

To the Advisor:
			
	Pacific Oak Residential Advisors, LLC
11246 Alumni Way
Jacksonville, FL 32246
Email: jhealey@pac-oak.com; Mgough@pac-oak.com
Attention: Jeremy Healey and Michael Gough

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Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 17.01.
b.Modification
. This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns.
c.Severability
. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
d.Construction
. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.
e.Entire Agreement
. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous 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 and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
f.Waiver
. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
g.Gender
. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.
h.Titles Not to Affect Interpretation
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. The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.
i.Counterparts
. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.
[The remainder of this page is intentionally left blank. Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.
															
		PACIFIC OAK RESIDENTIAL TRUST II, INC.
					
		By:	/s/ T. Jeremiah Healey
		Name:	T. Jeremiah Healey
		Title:	President and Chief Executive Officer
					
		PACIFIC OAK RESIDENTIAL ADVISORS, LLC
					
		By:	/s/ T. Jeremiah Healey
		Name:	T. Jeremiah Healey
		Title:	Authorized Signatory
					
					
					
					

[Signature Page to Amended and Restated Advisory Agreement]Document

Exhibit 10.6

MANAGEMENT AGREEMENT

This MANAGEMENT AGREEMENT (this “Agreement”), dated August 31, 2020, is made and entered into by and among Pacific Oak Residential Trust II, Inc., a Maryland corporation (“Owner”), and DMH Realty, LLC, a Florida limited liability company (“Manager”).

RECITALS
WHEREAS, upon the commencement of the equity offering contemplated by the Company, as well as the associated unit issuance contemplated by PORT II OP LP (“OP”), Owner will own or otherwise have the right to collect rents from, and contract for managerial services for, the single-family rental properties identified and described in Schedule A attached hereto, as adjusted by any properties acquired by Owner or subsidiaries of the OP in accordance with this Agreement, minus any properties sold by Owner or subsidiaries of the OP from time to time in accordance with this Agreement (collectively, the “Properties” and each, a “Property”); and

WHEREAS, the parties desire to enter into this Agreement, pursuant to which Manager will undertake certain management, acquisition, disposition and oversight functions with respect to the Properties as provided herein, subject to the limitations set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I 
APPOINTMENT OF MANAGER

SECTION 1.01 Appointment of Manager. Owner hereby appoints Manager the sole and exclusive manager for the Properties upon the terms and conditions set forth herein. Manager hereby accepts such appointment on the terms and conditions set forth herein and shall furnish the services of its organization for the management of the Properties.

SECTION 1.02 Independent Contractor Status. Manager is hereby engaged to manage the Properties as an independent contractor.

ARTICLE  II 
TERM OF AGREEMENT

SECTION 2.01 Term of Agreement. This Agreement shall commence upon the Owner’s acquisition or control of the Properties (the “Effective Date”) and shall continue until the last day of the calendar month following the three year anniversary of the Effective Date (the “Term”). Upon 

expiration of the Term, this Agreement will automatically renew for additional one-year periods until terminated as provided in Article VIII.

ARTICLE III
MANAGER’S DUTIES AND RESPONSIBILITIES

SECTION 3.01 General Scope. Manager shall devote such efforts as are consistent with the Standard of Care (as defined below) in managing, coordinating and supervising the ordinary and usual business and affairs pertaining to the identification, acquisition, operation, maintenance, leasing, licensing, rehabilitation, construction, disposition and management of the Properties and in compliance with the directives of Owner or the Asset Management Committee (as hereinafter defined), all pursuant to the terms, conditions and limitations of this Agreement. Manager shall have such responsibilities, and shall perform and take, or cause to be performed or taken, all such services and actions customarily taken by managing agents of property of similar nature, location, and character to that of the Properties consistent with the duties set forth in this Article III. Unless otherwise specifically provided in this Agreement, the written directives of Owner or the Asset Management Committee, the Approved Guidelines, or the Approved Operating Budget (collectively, the “Guiding Documents”), all services and actions that Manager is required or permitted to perform or take, or cause to be performed or taken in connection with the management of the Properties shall be performed or taken, as the case may be, on behalf of Owner and at Owner’s sole cost, expense, and risk. Manager’s authority is limited to performing the services set forth herein and the other Guiding Documents. Except as provided in the Guiding Documents, Manager shall have no authority (a) to execute any contract or agreement for or on behalf of Owner, (b) to provide additional services or modify existing services to tenants, or (c) to assume or create any obligation or liability or to make any representation, covenant, agreement or warranty for or on behalf of Owner.

SECTION 3.02 Standard of Care. Manager shall perform its duties and obligations hereunder in a commercially reasonable manner, consistent with the degree of care, skill, prudence, diligence and good faith that a property manager would use in managing other properties or performing similar services in the same geographic location (the “Standard of Care”). Without limiting the generality of the foregoing, Manager shall employ such efforts as are consistent with the Standard of Care to comply with all applicable requirements of federal, state and local laws, ordinances, rules, regulations and orders governing the leasing, promotion, management, use, operation, repair and maintenance of the Properties and the terms of any leases, mortgages or other agreements to which Properties are subject (collectively, the “Requirements” or individually a “Requirement”). Manager shall have in its employ at all times a sufficient number of capable employees to properly, adequately, safely and economically perform the duties hereunder. Further, Manager shall carry out its duties set forth herein in a manner that is consistent with Owner’s written instructions concerning its election to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended.

SECTION 3.03 Proposed Management Plans. Manager shall prepare and submit to Owner a proposed “Management Plan” and “Operating Budget,” which include an annual business plan and budget of proposed Operating Expenditures and capital expenditures with respect to the leasing, management, identification, acquisition, promotion, operation, disposition, and repair and maintenance of the Properties for each calendar year (the “Fiscal Year”); provided, that if the effective date of this 
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Agreement occurs on a date other than the first day of a calendar year, or if the day on which the term of this Agreement expires or is terminated occurs on a day other than the last day of a calendar year, then the first and last Fiscal Years, as applicable, shall be prorated according to the number of days in the applicable Fiscal Year. The proposed Management Plans and Operating Budgets for Fiscal Year 2021 shall be submitted to Owner on or before November 15, 2020, and subsequent proposed Management Plans and Operating Budgets shall be submitted to Owner sixty (60) days prior to the beginning of the next Fiscal Year. Owner will review the proposed Management Plan and Operating Budget and will consult with Manager prior to the commencement of the forthcoming fiscal year in order to agree on an approved Management Plan and an approved Operating Budget (collectively, the “Approved Operating Budget”). Manager agrees to use such efforts as are consistent with the Standard of Care to ensure the actual costs of all Operating Expenditures and capital expenditures for the Properties shall not exceed the Approved Operating Budget, both in the aggregate and in respect of the specific budget category pertaining thereto (taking into account any variance allowances permitted in the Guiding Documents).

SECTION 3.04 Approved Operating Budget. The Approved Operating Budget shall constitute an authorization for Manager to establish rental rates and implement marketing strategies in accordance therewith. Manager shall supervise the preparation of all advertising layouts, brochures, and campaigns. Advertising and promotional materials shall be prepared in accordance with the Approved Operating Budget and full compliance with federal, state, and municipal fair housing laws, and Manager shall not use Owner’s name (or any Affiliate of Owner) without Owner’s express written approval.

SECTION 3.05 Acquisition and Disposition. Manager shall provide management, supervisory, administrative and logistical services and support to Owner and to Pacific Oak Residential Advisors LLC (the “Advisor”)  consistent with the Standard of Care and the Guiding Documents in connection with (i) the identification and evaluation of Properties that might be suitable for purchase or other acquisition, (ii) the purchase or other acquisition of Properties, (iii) the financing or refinancing of Properties, and (iv) the sale or other disposition of Properties (including, without limitation, the structuring and negotiation of such transactions and the management of Owner’s dealings with brokers, appraisers, bankers and other professionals engaged by Owner in connection with such transactions). For purposes of clarification, Properties acquired by Owner or any subsidiaries of the OP will be deemed Properties under this Agreement, and Properties sold by Owner or any subsidiaries of the OP shall no longer be deemed Properties under this Agreement, in either case regardless of whether this Agreement or any exhibit or schedule is formally amended to reflect the new or former Properties.

SECTION 3.06 Leasing. Manager shall exercise such efforts as are consistent with the Standard of Care to obtain and keep residents and will cooperate with any broker in any reasonable manner likely to aid in filling any vacancy. Manager is authorized, subject to the Approved Operating Budget and consistent with the Standard of Care and Guiding Documents, to negotiate, prepare, and execute all leases on Owner’s approved lease form, including all renewals and extensions of leases and to cancel and modify existing leases, provided such actions are taken in accordance with all Requirements.

SECTION 3.07   Security Deposits.  Manager is authorized to establish accounts on behalf of Owner for holding security deposits, if any, in accordance with the Approved Operating Budget 
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and all Requirements, and shall collect and refund security deposits in accordance with the terms of each resident’s lease and as may be required by applicable law. If required by statute, Manager will deposit security deposits into a separate interest-bearing account and pay residents the interest earned on such deposit; otherwise, Manager will deposit security deposits into the Operating Account (as defined below). When Manager reasonably deems appropriate, Manager may offset resident charges with forfeited security deposit amounts and disburse any surplus security deposits from the Operating Account.

SECTION 3.08 Collection of Rents and Enforcement of Leases. Manager shall exercise such efforts as are consistent with the Standard of Care to promptly collect all rents and other charges for services provided in connection with the use of the Properties. All monies collected shall be promptly deposited into the Operating Account unless otherwise directed by Owner. When necessary and permissible by applicable Requirements, Manager is authorized to institute the following actions: (a) terminate tenancies; (b) sign and serve such notices as are deemed reasonably necessary or expedient by Manager; (c) institute and prosecute actions and evict residents; (d) recover rents and other sums due by legal proceedings; and (e) settle, compromise, and release such actions or suits, or reinstitute such tenancies. Attorney’s fees, filing fees, court costs, and other reasonable and necessary expenses incurred in connection with such actions and not recovered from residents shall be paid out of the Operating Account.

SECTION 3.09  Operating Expenditures.

(a)The term “Operating Expenditures” shall mean the aggregate of all actual, reasonable expenses incurred by Manager in accordance with this Agreement in connection with or arising from the identification, acquisition, financing, ownership, operation, management, repair, disposition, replacement, maintenance, and use or occupancy of the Properties including, without limitation, expenditures for: (i) license and permit fees, landowner association fees and assessments, and all other charges of any kind and nature by any governmental or public authority; (ii) management fees and any other reasonable expenses incurred by Manager consistent with the Guiding Documents; (iii) advertising and marketing expenses, and leasing fees and commissions; (iv) legal, accounting, engineering, and other professional and consulting fees and disbursements; (v) accounts payable to independent contractors providing labor, material, services and equipment to the Properties; (vi) premiums for insurance paid with respect to the Properties or the operations thereof; (vii) resident improvements and replacement and segregated reserves therefor; (viii) maintenance and repair of the Properties and all property and equipment used in connection with the operation thereof; (ix) renovation, improvement and development of the Properties and all property and equipment used in connection with the operation thereof; (x) refunds or security or other deposits to resident and contracting parties; (xi) funds reserved for contingent or contested liabilities, real estate taxes, insurance premiums, or other amounts not payable on a monthly basis; (xii) service contracts and public utility charges and assessments; (xiii) personnel administration charges and pre-employment screening and testing costs; (xiv) cost of third party revenue management programs; and (xv) costs of credit reports, bank charges, and like matters. Operating Expenditures may include (A) payroll, benefits and overhead expenses approved by Owner pursuant to the Approved Operating Budget, and (B) other costs and expenses of Manager’s or its Affiliates’ personnel engaged in any Additional Services; provided, however, that Manager shall be responsible for paying, and shall not be reimbursed for, its general administrative overhead costs and expenses, 
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including without limitation the costs and expenses of renting its offices, employing its general administrative staff, purchasing or renting its office equipment and supplies, and maintaining phone and internet connections.

(b)For purposes of clarification, Manager may perform (or cause its Affiliates to perform) certain services (including without limitation services related to leasing, onboarding, fit-up, inspecting, renovation, improvement, development, construction, maintenance, repair, cleaning, painting or decorating any of the Properties) that could be contracted or subcontracted out to third parties hereunder, and, for performing such services, Manager (or its Affiliates) shall be entitled to reimbursement for the costs and expenses incurred performing such services (in addition to the Leasing Fees, Property Management Fee, and Shared Fees contemplated under Article VI) at rates commensurate with rates that would be payable to unrelated third parties if Manager engaged such unrelated third parties to perform such services (collectively, the “Additional Services”).

(c)The Approved Operating Budget shall constitute an authorization for Manager to expend the amounts approved as long as the expenses are incurred in connection with the operation and management of the Properties. Manager shall employ such efforts as are consistent with the Standard of Care to insure that the actual costs of maintaining and operating the Properties shall not exceed the Approved Operating Budget and significant year-to-date budget variances will be explained to Owner each month. In cases of emergency, Manager may make expenditures which exceed the aforementioned spending limit without prior approval, if such expenditures are necessary in the reasonable judgment of Manager to effectively protect the Properties or to prevent personal injury and is not in excess of $5,000 with respect to any individual Property or $250,000 collectively among all Properties during any calendar year. Manager will promptly notify Owner of any such emergency.

SECTION 3.10 Capital Expenditures. Any capital expenditures set forth in the Approved Operating Budget shall constitute an authorization for Manager to expend the amounts approved; however, any capital expenditure (excluding expenditures related to acquisition activities and rehabilitation of newly acquired Properties) over $15,000 per Property shall be awarded on the basis of competitive bidding, solicited in the following manner: (a) a minimum of two (2) written bids shall be obtained for each purchase where possible and practical to obtain such bids; (b) each bid will be solicited in a form so that uniformity will exist in the bid quotes; (c) Manager shall provide the Asset Management Committee with all bid responses accompanied by Manager’s recommendations as to the most acceptable bid; and (d) the Asset Management Committee shall be free to accept or reject any and all bids, provided that if the Asset Management Committee fails to do so within three (3) Business Days, Manager shall provide written notice to the Asset Management Committee that a failure to respond within one (1) Business Day shall constitute a deemed approval, and the Asset Management Committee fails to do so within such one (1) Business Day, such failure shall be deemed acceptance. Owner shall be responsible for capital expenditures set forth in the Approved Operating Budget and may pay some from its own resources or may authorize payment by Manager out of available funds in the Operating Account.

SECTION 3.11 Public Utility and Service Contracts. To the extent applicable, Manager shall negotiate and execute, in its capacity as Owner’s agent, contracts for water, electricity, gas, vermin or pest extermination, and any other services which are necessary to properly maintain the 
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Properties. All required utility deposits will be the responsibility of Owner and each contract shall: (a) be in the name of, and expense of, Owner; and (b) include a provision for cancellation thereof by Owner or Manager.

SECTION 3.12 Reserved.

SECTION 3.13 Compliance with Regulations. Manager shall employ such efforts as are consistent with the Standard of Care to cause the Properties to be in compliance with all Requirements. Manager shall promptly give notice to the Asset Management Committee of Manager’s receipt of any oral or written notice of the existence of a material violation of any material Requirement or as otherwise required by the Standard of Care (a “Violation”), and Manager shall promptly cure at Owner’s expense any such Violation applicable to any Property, other than a Violation that is required to be cured by the respective tenants under the leases in effect at the Property. Expenses incurred in curing any Violation applicable to any Property may be paid from the Operating Account to the extent such expenses have been budgeted for in the Approved Operating Budget, and provided such expenses do not exceed $2,500 in any one instance. If (1) such expenses have not been so budgeted, (2) more than $2,500 is required to remedy a Violation, or (3) a Violation is one for which Owner may be subject to penalty, Manager shall immediately notify Owner of such Violation and advise Owner regarding a course of action for curing such Violation.

SECTION 3.14 Environmental Risk Management. Owner acknowledges and understands that Manager, except with respect to the obligations set forth in Section 3.05, is not responsible for (1) evaluating the presence or absence of hazardous or toxic substances, mold, waste, materials, electromagnetic field, radon, or radioactive materials upon, within, above, or beneath the Properties; (2) maintaining or evaluating compliance with environmental, hazardous or solid materials or waste laws, rules and regulations except for any operating and maintenance plan applicable to the Properties or in connection with Manager’s construction management duties; or (3) conducting or ensuring clean-up or remediation of existing or identified hazardous material spills or contamination unless the parties otherwise agree in writing or as expressly provided herein.

(a)Accordingly, Manager’s obligations to Owner with respect to the presence of Hazardous Materials and/or with the compliance and enforcement of Hazardous Materials Laws shall be subject to, conditioned upon, and limited by the  following:

(i)Owner may from time to time, at Owner’s sole discretion and expense, obtain from an independent environmental consultant retained by Owner, an environmental assessment report on the Properties (or any of them) and may have such assessment report periodically updated.

(ii)Except as provided by Section 3.14(a)(iii), Section 3.05, or as otherwise expressly agreed in writing by the parties, Manager shall not be obligated to make an independent determination as to the presence or absence of Hazardous Materials, or whether the Properties are in violation or compliance with any Hazardous Materials Laws. Manager may seek, on Owner’s behalf and at Owner’s expense, to enforce a resident’s compliance with any Hazardous Materials Laws in accordance with an environmental consultant’s recommendations contained in any environmental assessment report. Manager shall not have any obligation to determine whether or not Owner, any 
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residents, the Properties, or any portion thereof is in compliance with Hazardous Materials Laws; provided, Manager shall promptly notify Owner of any violations or potential violations of Hazardous Materials Laws observed on the Properties.

(iii)Manager shall be responsible for any Hazardous Materials which it uses or introduces to the Properties, including storage, containment, removal, or remediation as required by applicable law. To the extent Hazardous Materials (such as cleaning supplies or fuel) are required by Manager in the discharge of its duties under this Agreement, Manager shall only use and store quantities of such Hazardous Materials as are permitted under applicable law, and shall store, use and dispose of such Hazardous Materials in accordance with applicable laws. In connection with the foregoing, Manager hereby agrees to and shall indemnify, protect, defend, save, and hold harmless Owner, its principals and employees, and their respective successors and assigns from any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost, or expense (including attorney’s fees and expenses) arising out of or relating in any way to Manager’s violation of this Section 3.14(a)(iii).

(iv)Manager shall not be responsible for the abatement, clean-up or remediation of any spill of or contamination from any Hazardous Materials upon, beneath, or within all, or any portion, of the Properties (other than Hazardous Materials introduced, used or stored by Manager in violation of Section 3.14(a)(iii)), and the entire responsibility for such clean-up, abatement, or remediation shall lie with Owner and Owner’s environmental consultation. However, Manager shall cooperate with Owner in coordinating and supervising any abatement, clean-up, monitoring or remedial action on a Property site. Owner agrees that, with respect to any abatement, clean-up, or remedial action, Owner shall employ a qualified and licensed environmental clean-up company to undertake such clean-up and remediation, and Owner’s environmental consultant shall oversee the entire abatement, clean-up and remediation process and the obtaining of any required governmental approvals. If the clean-up or remediation is the responsibility of any resident of the Properties and/or Owner’s environmental consultant, Manager shall, on Owner’s behalf, require the resident to utilize qualified and licensed environmental clean-up companies and ensure that the clean-up and remediation is conducted to Owner’s satisfaction and in accordance with all Hazardous Materials Laws, governmental laws and approvals of which Manager is aware.

(v)In connection with the foregoing, Owner hereby agrees to and shall indemnify, protect, defend, save, and hold harmless Manager, its principals and employees, and their respective successors and assigns from any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost or expense (including attorney’s fees and expenses) arising out of or relating in any way to (1) the actions, or failure to act, by Manager in following Owner’s and Owner’s environmental consultant’s directions, (2) Owner’s failure or refusal to employ an environmental consultant with respect to the Properties, (3) the acts, omissions, or negligence of Owner, Owner’s environmental consultant, or the failure of such environmental consultant, to fulfill its obligations with respect to the Properties, (4) any violation of Hazardous Materials Laws applicable to the Properties, 
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(5) the designation of Manager as an “operator” or the Properties as a “regulated facility” under Hazardous Materials Laws, or otherwise liable as a party under any Hazardous Materials Laws, or as a party in any claim for contribution, cost recovery or indemnity against Manager, or its insurer arising out of the foregoing, and (6) any condition or circumstance arising initially prior to the date of this Agreement (regardless of whether such condition or circumstance continues). The foregoing indemnity shall not apply to any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost, or expense (including attorney’s fees and expenses) resulting from an indemnified party’s sole or gross negligence or willful misconduct.

(b)The indemnities herein shall be immediately vested and shall survive the expiration or termination of this Agreement.

SECTION 3.15 Disclaimer of Certain Liabilities. Manager assumes no liability for any acts or omissions of Owner. Manager assumes no liability for any failure of, or default by, any tenant in the payment of any rent or other charges due Owner or in the performance of any obligations owed by any tenant to Owner pursuant to any lease or otherwise.

SECTION 3.16 No Requirement to Advance Funds. In no event shall Manager advance any monies on behalf of Owner, lend its credit to the Properties, or incur any liability in Manager’s own name.

SECTION 3.17 Representations. Manager represents and warrants to Owner as follows:

(a)Manager (i) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Florida, (ii) has qualified or will qualify to do business as a foreign corporation and will remain so qualified, and is and will remain in good standing, in each jurisdiction where the character of its property or the nature of its activities makes such qualification necessary and in which failure to so qualify would have a material adverse effect upon Manager or its ability to perform its obligations hereunder, (iii) has and will have full limited liability company power to own its property, carry on its business as presently conducted, and to enter into and perform it obligations under this Agreement and (iv) has and will have all licenses or other governmental approvals necessary to perform it obligations hereunder.

(b)The execution and delivery by Manager of this Agreement has been duly authorized by all necessary limited liability company action on the part of Manager. Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on Manager or its property or the certificate of formation of Manager, or any of the provisions of any indenture, mortgage, contract or other instrument to which Manager is a party or by which it is bound or result in the creation or imposition of any lien, charge or encumbrance upon any of its property pursuant to the terms of any such indenture, mortgage, contract or other instrument.

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(c)The execution and delivery by Manager of this Agreement does not require the consent or approval of, the giving of notice to, the registration or filing with, or the taking of any other action in respect of any state, federal or other governmental authority or agency.

(d)This Agreement has been duly executed and delivered by Manager and, assuming due authorization, execution and delivery by Owner, constitutes a valid and binding obligation of Manager enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and general principles of equity).

(e)There are no actions, suits, or proceedings pending, or, to the knowledge of Manager, threatened or likely to be asserted against or affecting Manager before or by any court, administrative agency, arbitrator, or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of Manager will be determined adversely to Manager or if determined adversely to Manager, will materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect Manager’s ability to perform its obligations under this Agreement. Manager is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by the above mentioned documents.

(f)No consents, approvals, waivers or notifications of members, creditors, lessors or other nongovernmental persons are required to be obtained by Manager in connection with the execution and delivery of this Agreement and the consummation of all the transactions herein contemplated.

(g)Manager is not (and no person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Manager shall be) subject to sanctions of the United States government or in violation of any federal, state, municipal or local laws, statutes, codes, ordinances, orders, decrees, rules or regulations (“Laws”) relating to terrorism or money laundering, including, without limitation, Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56, the “Patriot Act”).

(h)Neither Manager nor any person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Manager is a “Prohibited Person,” which term is defined as: (i) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person or entity with whom Manager is prohibited from dealing or otherwise engaging in any transaction by any terrorism or anti-money laundering Law, including the Executive Order and the Patriot Act; (iv) a person or entity who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (v) a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official 
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website, http://www.treas.gov/ofac/tllusdn.pdf or any replacement website or other replacement official publication of such list.

(i)As of the Effective Date, Manager has no actual knowledge of any illegal activities relating to controlled substances on any Property.

(j)As of the Effective Date, to Manager’s actual knowledge, (i) each Property is being used exclusively as a residential rental property and (ii) no illegal activity is taking place at any Property.

SECTION 3.18 Asset Management Committee.  Notwithstanding anything to the contrary herein, the duties and responsibilities of Manager set forth herein are subject in all respects to the authority of the asset management committee established by Owner (the “Asset Management Committee”) pursuant to the governing documents of Owner.

SECTION 3.19 Additional Covenants. Manager shall exercise such efforts as are consistent with the Standard of Care to comply with the terms and conditions of any additional requirements of Lender(s) to the Properties and agrees not to knowingly or intentionally take any action in material contravention thereof.

ARTICLE IV
BANKING AND FINANCIAL RECORDS

SECTION 4.01 Account Agency Agreement & Bank Accounts. Concurrent with the commencement of this Agreement, Owner and Manager shall enter into a joint account agreement at Owner’s platform bank or other bank acceptable to Owner (the “Operating Account”). Owner shall retain the ability to change the platform banks at its discretion with reasonable notice to Manager. It is understood that the bank account contemplated and authorized by the Account Agency Agreement shall be a non-interest bearing checking account.

SECTION 4.02 Financial Recordkeeping. Financial records include, but is not limited to, general ledgers for each account, journal entries, all supporting documentation and calculations used to create journal entries, trial balances, financial statements, bank statements, bank reconciliations, tax reports, accounts payable and receivable records, rent rolls, tenant information, portfolio analysis routinely created or created at the request of Owner, ad hoc reports requested by Owner from time to time and any other financial records and reports listed on Schedule B. At Owner’s cost, Manager shall maintain, at Manager’s premises and electronically in a centralized location designated and accessible by Owner, and maintain in a manner customary and consistent with generally accepted accounting principles, financial records based on Owner’s fiscal year-end. Manager shall not delete, destroy, relocate or otherwise make any historical record inaccessible to Owner without Owner’s prior written consent. Manager shall use the Company’s chart of accounts. Owner shall bear the expense of maintaining financial records electronically and the expense of storing historical financial records that are more than 36 months old.

SECTION 4.03 Internal Controls Environment. Manager shall continuously maintain an internal control environment that is customary and consistent with the size and complexity of Owner’s business. At Owner’s expense, Owner may hire consultants and other advisors to further 
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develop and refine Manager’s internal controls. Manager agrees, at Owner’s expense, to implement all reasonable suggestions Owner makes to modify internal controls and agrees to periodic testing and remediation of any identified deficiencies. Manager also agrees to assist in an audit of the internal controls if requested by Owner, to be completed at Owner’s expense and in accordance with Section 4.05 herein.

SECTION 4.04 Required Financial Reports. Manager shall furnish as listed on Schedule B monthly reports of collections, disbursements, and other accounting matters, on a schedule agreed to by Owner and any Lender(s). To support the monthly financial reports, Manager shall maintain at Manager’s premises copies of the following: (a) bank statements, bank deposit slips, and cancelled checks; comprehensive bank reconciliations; (c) detailed cash receipt records; (d) summaries of adjusting journal entries, and (e) supporting documentation for payroll, payroll taxes, and employee benefits.

SECTION 4.05  Owner’s Right to Audit and Test. Manager, in the conduct of its responsibilities and obligations to Owner hereunder, shall maintain complete, accurate, and separate books and records for the Properties, the entries to which shall be supported by sufficient documentation to ascertain that said entries are properly and accurately recorded with regard to each Property. Such books and records shall be maintained in accordance with Owner's financial information requirements and shall at all times be the property of Owner. Manager shall maintain such books and records for a period of not less than 12 months after the date of expiration or earlier termination of this Agreement, except that upon any termination of this Agreement by Owner, Manager shall immediately deliver to Owner all such books and records. Owner reserves the right to conduct an examination of the books and records maintained by Manager for Owner or that relate to the calculation of the fees, expenses, or other compensation paid or payable pursuant to this Agreement, and to perform any and all audit tests (whether conducted by the external auditors or Owner’s internal audit team) relating to Manager’s activities, either at the Properties, or at the office of Manager; provided such examination and tests are related to those activities performed by Manager for Owner or the calculation of the fees, expenses, or other compensation paid or payable pursuant to this Agreement. Owner may also conduct periodic testing of Manager’s internal controls. Owner shall give Manager not less than forty-eight (48) hours written notice of any such audit, examination or testing. Any and all such audits conducted either by Owner’s employees or appointees will be at the sole expense of Owner.

SECTION 4.06 Disbursement of Deposits. If requested by Owner, Manager shall remit to Owner with the monthly financial report all unexpended operating funds, except for a reserve of contingencies, as provided in Section 5.01 below, which shall remain in the Operating Account.

ARTICLE V
OWNER’S DUTIES AND RESPONSIBILITIES

SECTION 5.01 Initial Deposits and Contingency Reserves. Immediately upon the commencement of this Agreement, Owner shall deposit into the Operating Account the following amounts: (a) the sum of $100,000 to be deposited in the Operating Account as an initial deposit representing the estimated disbursements for Operating Expenditures to be made in the first month following the commencement of this Agreement. Furthermore, Owner authorizes Manager to maintain a contingency reserve of $250 per Property at all times in the Operating Account to enable 
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Manager to pay obligations of Owner under this Agreement as they become due in accordance with this Agreement and the Approved Operating Budget.

SECTION 5.02 Insufficient Operating Funds. If a cash flow deficit can be anticipated in the next budgeted month of operations, Owner agrees to, prior to the commencement of the next budgeted month, remit to Manager sufficient funds to cover the anticipated deficiency and fully fund the Operating Expenditures and approved contingency reserves. In the event that funds in the Operating Account become insufficient to cover all Operating Expenditures and approved contingency reserves, Owner agrees to, within three (3) days of notice, remit to Manager sufficient funds to cover the deficiency and replenish the contingency reserves. Notwithstanding any provision hereof to the contrary, Manager’s performance under this Agreement shall be excused and shall in no event be in default in the event there are insufficient funds in the Operating Account to perform its services described hereunder unless due to the gross negligence or willful misconduct of Manager.

SECTION 5.03 Manager’s Compensation. Owner agrees to pay Manager, as compensation for services rendered in managing and leasing the Properties in accordance with the terms of this Agreement, the compensation as specified in Article VI below. Manager’s compensation may be paid to itself by Manager, on behalf of Owner when due hereunder from the Operating Account.

SECTION 5.04 Manager’s Costs to be Reimbursed. Owner agrees to reimburse Manager for all direct costs incurred in managing and leasing the Properties in accordance with the terms of this Agreement and the Approved Operating Budget. Manager’s reimbursement may be paid to itself by Manager, on behalf of Owner, from the Operating Account as incurred by Manager.

SECTION 5.05 Representations. As of the Effective Date, Owner represents and warrants to Manager as follows:

(a)Owner is a corporation duly formed, validly existing and in good standing under the laws of the State of Maryland, (ii) has qualified or will qualify to do business as a foreign corporation and will remain so qualified, and is and will remain in good standing, in each jurisdiction where the character of its Properties or the nature of its activities makes such qualification necessary and in which failure to so qualify would have a material adverse effect upon Owner or its ability to perform its obligations hereunder, (iii) has and will have full corporate power to own the Properties, carry on its business as presently conducted, and to enter into and perform it obligations under this Agreement and (iv) has and will have all licenses or other governmental approvals necessary to perform it obligations hereunder.

(b)The execution and delivery by Owner of this Agreement has been duly authorized by all necessary corporate action on the part of Owner. Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on Owner or its Properties or the certificate of formation of Owner, or any of the provisions of any indenture, mortgage, contract or other instrument to which Owner is a party or by which it is bound or result in the creation or imposition of any lien, charge or encumbrance upon any of the Properties pursuant to the terms of any such indenture, mortgage, contract or other instrument. The execution and delivery by Owner of this Agreement does not require the consent or approval 
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of, the giving of notice to, the registration or filing with, or the taking of any other action in respect of any state, federal or other governmental authority or agency.

(c)This Agreement has been duly executed and delivered by Owner and, assuming due authorization, execution and delivery by Manager, constitutes a valid and binding obligation of Owner enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and general principles of equity).

(d)There are no actions, suits, or proceedings pending, or, to the knowledge of Owner, threatened or likely to be asserted against or affecting Owner before or by any court, administrative agency, arbitrator, or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of Owner will be determined adversely to Owner or if determined adversely to Owner, will materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect Owner’s ability to perform its obligations under this Agreement. Owner is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by the above mentioned documents.

(e)No consents, approvals, waivers or notifications of members, creditors, lessors or other nongovernmental persons are required to be obtained by Owner in connection with the execution and delivery of this Agreement and the consummation of all the transactions herein contemplated.

(f)Owner is not (and no person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Owner shall be) subject to sanctions of the United States government or in violation of any Laws relating to terrorism or money laundering, including, without limitation, the Executive Order and the Patriot Act. Neither Owner nor any person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Owner is a Prohibited Person.

ARTICLE VI
COMPENSATION OF MANAGER

SECTION 6.01 Leasing Fees. Owner shall pay to Manager on a monthly basis in arrears, the following fees in connection with ongoing lease activity: (a) for all newly placed tenants, one-half of one month’s rent applicable to the initial rent period, and (b) for all renewal tenants, $100.

SECTION 6.02 Property Management Fee. Owner shall pay to Manager on a monthly basis in arrears, fees for services provided by Manager to manage each Property equal to 8% of the Collected Rental Revenues for all Properties up to $50,000,000, 7% of the Collected Rental Revenues for all Properties in excess of $50,000,000 up to $75,000,000, 6% of the Collected Rental Revenues for all Properties in excess of $75,000,000. (the “Property Management Fee”).

SECTION 6.03 Shared Fees. Owner shall pay to Manager on a monthly basis in arrears, the following portion of additional fees actually collected from any Properties: (a) from 
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application fees collected, 100% to Manager, (b) from insufficient funds fees collected, 50% to Manager; (c) from any late fees collected, 50% to Manager, and (d) from any other fees, 50% to Manager. For the avoidance of doubt, Owner shall retain 100% of the following fees: (x) any move-in fees, and (y) any pet fees.

SECTION 6.04 Definitions.  “Collected Rental Revenues” shall mean the amount of rental revenue actually collected for each Property per the terms of the lease pertaining to each Property (including lease breakage fees) or pursuant to any early termination buyouts, but excluding other income items, fees or revenue collected by Manager, including but not limited to: application fees, insufficient funds fees, late fees, move-in fees, pet fees, and security deposits (except to the extent applied to rent per the terms of the lease pertaining to any Property).

SECTION 6.05 Additional Services; No Other Compensation. The Leasing Fees, Property Management Fee, and Shared Fees are in addition to the reimbursements otherwise due to Manager under this Agreement, including for the Additional Services as described in Section 3.09. Manager expressly agrees that Manager shall not be entitled to receive any other compensation or other payments from Owner for services provided in respect of the Property (including, without limitation, for construction management, legal, tenant coordination, design, engineering, consulting or any other services performed by Manager or its Affiliates) unless expressly provided for in this Agreement or pursuant to a separate written agreement between Owner and Manager.

ARTICLE VII 
INSURANCE AND INDEMNIFICATION

SECTION 7.01 Property and Liability Insurance. Manager shall, at Owner’s sole cost and expense, promptly obtain and keep in force at all times adequate insurance against physical damage (e.g., fire with extended coverage endorsement) and against liability for loss, damage, or injury to property or persons which might arise out of the occupancy, management, operation, or maintenance of the Properties and in accordance with the policies of Owner and/or Lender(s).

SECTION 7.02 Workers’ Compensation Insurance. Manager shall maintain workers’ compensation insurance covering all employees of Manager employed in, on, or about the Properties so as to provide statutory benefits required by state and federal laws.

SECTION 7.03 Fidelity Bond. Manager will maintain, at Manager’s expense, a comprehensive fidelity bond covering all employees of Manager who handle or are responsible for the safekeeping of any monies of Owner.

SECTION 7.04 Indemnification. Owner shall indemnify, defend, and hold harmless Manager and its agents and employees from and against all claims, liabilities, losses, damages, and/or expenses arising out of (i) Manager’s performance under this Agreement, or (ii) facts, occurrences, or matters first arising prior to the date of this Agreement. Owner, at its own cost and expense, shall defend any action or proceeding against Manager arising therefrom. Notwithstanding the foregoing, Owner shall not be required to indemnify Manager against damages or expenses suffered as a result of the gross negligence, willful misconduct, or fraud on the part of Manager, its agents or employees. Manager shall indemnify, defend and hold harmless Owner and its agents from and against all claims, liabilities, losses, damages and/or expenses arising out of the gross negligence, willful misconduct, or 
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fraud on the part of Manager, its agents, or employees, and shall at its own cost and expense defend any action or proceeding against Owner arising therefrom.

ARTICLE VIII TERMINATION

SECTION 8.01 Termination. Notwithstanding the provisions of Article II above, this Agreement may also be terminated as follows:

(a)Automatically, in the event (i) Owner sells or otherwise disposes of all or substantially all of the Properties (which for purposes of clarification may include the sale of all or substantially all of the REIT’s or the OP’s direct or indirect ownership interests in Owner), or (ii) of an initial public offering of the REIT; or

(b)by Manager, in the event Owner defaults in the performance of any of its obligations under this Agreement and fails to cure such default within fifteen (15) days after its receipt from Manager of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, with respect to any non- monetary default that cannot be cured within fifteen (15) days, Owner shall have such additional period as shall be reasonable, provided that Owner has commenced to cure such default within such fifteen (15) day period, has proceeded to prosecute such cure with due diligence, and such cure is completed within sixty (60) days after Owner’s receipt of the notice of default; or

(c)by Owner, in the event Manager defaults in the performance of any of its obligations under this Agreement and fails to cure such default within fifteen (15) days after its receipt from Owner of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, that if such default cannot be cured within fifteen (15) days, then such additional period as shall be reasonable, provided that Manager has commenced to cure such default within such fifteen (15) day period, has proceeded to prosecute such cure with due diligence and such cure is completed within sixty (60) days after Manager’s receipt of the notice of default; or

(d)by either Owner or Manager, if a Bankruptcy Event occurs with respect to the other party, or if any involuntary bankruptcy petition shall be filed against the other party and is not dismissed within sixty (60) days of the date of such filing, or in the event the other party shall make an assignment for the benefit of creditors, or take advantage of any insolvency statute or similar law, in any such event, termination to become effective upon written notice to the other party; or

(e)by Owner, without cause upon not less than ninety (90) days prior written notice to Manager.

Any amounts accruing to Manager prior to such termination shall be due and payable upon termination of this Agreement; provided, however, that in the event this Agreement is terminated pursuant to Section 8.01(c), no further fees or expenses shall be payable to Manager thereafter, other than reimbursement of expenses properly documented and supported by invoices or receipts.

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SECTION 8.02 Termination Fee. If Owner terminates this Agreement pursuant to Section 8.01(a)(ii) or Section 8.01(e) before the end of the Term or any subsequent term year, then Owner shall be obligated to pay Manager an amount equal to three times the sum of the annual Property Management Fee for the trailing 12-month period. Any amounts accruing to Manager prior to such termination, shall be due and payable upon termination of this Agreement. To the extent funds are available, such sums shall be payable from the Operating Account. Any amount due in excess of the funds available from the Operating Account shall be paid by Owner to Manager upon demand. For the avoidance of doubt, Leaseing Fees, Shared Fees, and fees attributable to Additional Services are not considered in the calculation of the Termination Fee.

SECTION 8.03 Owner Responsible for Payments. Owner will be responsible for the direct handling and payment of invoices received after notice of termination. Upon notice of termination, Manager will submit to Owner written notice of all obligations payable with respect to the Properties through the termination date.

SECTION 8.04 Final Accounting. Within sixty (60) days after termination, Manager shall deliver to Owner: (a) a final accounting, reflecting the balance of income and expenses on the Properties as of the date of termination; (b) all records, contracts, leases, receipts, deposits, unpaid bills, and other papers or documents which pertain to the Properties; and (c) all remaining funds held by Manager with respect to the Properties. In consideration of performing the services contemplated under the preceding sentence during such post-termination period, provided this Agreement is not terminated pursuant to Section 8.01(c), Owner shall pay Manager an accounting fee equal to $75,000 per month.

SECTION 8.05 Manager’s Retention of Copies. Manager shall be entitled to retain copies of all documents referred to in Section 8.04.

SECTION 8.06  Survival of Obligations. All obligations of the parties hereunder, as to which performance is contemplated to occur after termination, shall survive termination of this Agreement. Without limiting the generality of the foregoing, all representations and warranties of the parties contained herein and all provisions of this Agreement that require Owner to have insured or to defend, reimburse, or indemnify Manager shall survive the termination of this Agreement; and if Manager is or becomes involved in any proceeding or litigation by reason of having been Owner’s agent, such provisions shall apply as if this Agreement were still in effect.

ARTICLE IX RESERVED

ARTICLE X
 MANAGER RESTRUCTURING

SECTION 10.01 Subcontracting. Manager is authorized to subcontract or delegate any of its responsibilities hereunder to any of its Affiliates provided that such Affiliate executes a joinder to this Agreement, in form and substance satisfactory to Owner.

ARTICLE XI MISCELLANEOUS
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SECTION 11.01 Notices. All notices or other communications required or permitted by this Agreement shall be in writing and shall be deemed to have been duly received (i) if given by electronic mail transmitted delivery receipt requested, upon receipt of a delivery receipt, (ii) if given by certified or registered mail, return receipt requested, postage prepaid, three (3) Business Days after being deposited in the U.S. mails and (iii) if given by courier or other means, when received or personally delivered, and, in any such case, addressed as follows:

If to Owner:

Pacific Oak Residential Trust II, Inc. 
11246 Alumni Way
Jacksonville, FL 32246
Attention:  Jeremy Healey and Michael Gough
Email: jhealey@pac-oak.com and mgough@pac-oak.com 

If to Manager:
DMH Realty LLC
11246 Alumni Way
Jacksonville, FL 32246
Attention:  Mark Peta and Dan Umstead
Email: mpeta@pac-oak.com and 
dumstead@pac-oak.com

or to such other addresses as may be specified by any such person to the other person pursuant to notice given by such person in accordance with the provisions of this Section 11.01.

SECTION 11.02 Governing Law; Waiver of Jury Trial. THE PROVISIONS OF THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA AS AT THE TIME IN EFFECT, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. THE PARTIES TO THIS AGREEMENT HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF FLORIDA, INCLUDING ANY APPELLATE COURTS THEREOF. THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH 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 THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

SECTION 11.03 Entire Agreement. This Agreement sets forth the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior 
17

commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof. 

SECTION 11.04 Amendment; Modification. This Agreement shall not be amended, supplemented, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by the parties hereto, or their respective successors or assignees; provided that Owner shall deliver an updated Schedule A to Manager each month in accordance with Section 11.01.

SECTION 11.05 Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

SECTION 11.06  Construction.  This Agreement shall be construed as if jointly drafted by Owner and Manager. Headings for sections, subsections, and other parts of this Agreement are for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.

SECTION 11.07  Counterparts.  This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile, scanned pages or electronic signature shall be effective as delivery of a manually executed counterpart to this Agreement

SECTION 11.08 Transferability; Successors and Assigns.  This Agreement is not transferable by Manager. The rights of Owner hereunder are transferable to any of its respective Affiliates upon no less than ten (10) days’ prior written notice to Manager. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

SECTION 11.09 Confidentiality. No party to this Agreement will disclose the terms of this Agreement to any third party without the consent of the other parties hereto, except as required by securities or other applicable laws. Notwithstanding the above provisions, each party may disclose the terms of this Agreement (i) in connection with the requirements of a public offering or securities filing, (ii) to accountants, banks, and financing sources (both debt and equity) and their advisors, (iii) in connection with the enforcement of this Agreement or rights under this Agreement, or (iv) in connection with a merger or acquisition (whether by an equity or asset transfer), or the like.

[Signature page follows]
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IN WITNESS WHEREOF, the parties have executed and delivered this MANAGEMENT AGREEMENT as of the date first written above.

															
		Pacific Oak Residential Trust II, Inc.
a Maryland corporation

					
		By:	/s/ T. Jeremiah Healey
		Name:	T. Jeremiah Healey
		Title:	President and Chief Executive Officer
					
		DMH REALTY, LLC
a Florida limited liability company

					
		By:	/s/ Michael S. Gough
		Name:	Michael S. Gough
		Title:	Manager
					
					
					
					

[Signature Page to Management Agreement]

Schedule A 
The Properties

[To come]

Schedule  B
Financial Record and Reports
(to be provided monthly unless otherwise noted)

1.Profit and Loss Statement (actual versus budgeted)

2.Rent Roll with Security Deposit

3.Leasing status report

4.Statement of Cash Flows

5.Monthly General Ledger detail

6.Capital Expenditure Report

7.Aged Receivable Report

8.Management Fee Calculation

9.Casualty reports (quarterly) detailing all damages and potential insurance claims

10.Liability reports (quarterly) detailing all current and potential legal claims from tenants, vendors, and third parties related to the Properties

11.Real estate tax analysis (quarterly)

Schedule C
Defined Terms

Capitalized terms used in this Agreement but not otherwise defined herein have the following definitions:

“Affiliate” of any Person means (i) any other individual or entity that is, directly or indirectly, (A) in Control of the applicable Person, (B) under the Control of the applicable Person or (C) under common Control with the applicable Person; (ii) any individual that is a director or officer of the applicable Person or (iii) any individual that is a director or officer of any entity described in clause
(i) of this definition.

“Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq., as amended from time to time.

“Bankruptcy Event” with respect to any Person, means the occurrence of any of the following:

a.Such Person voluntarily files for bankruptcy protection under the Bankruptcy Code.

b.Such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

c.Any Property becomes an asset in a voluntary bankruptcy or becomes subject to any voluntary reorganization, receivership, insolvency proceeding, or other similar voluntary proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

d.An order of relief is entered against such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party. If such Person, any general partner of such person if such Person is a general partnership, or any Related Party has solicited creditors to initiate or participate in such a proceeding, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding will be considered as having been initiated by a Related Party.

e.An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against such Person (by a party other than Owner) but only if such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person to contribute or cause the contribution of additional capital to such Person.

f.If such Person is a general partnership, any of the following occur:
i.Any general partner of such Person voluntarily files for bankruptcy protection under the Bankruptcy Code.

ii.Any general partner of such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.

iii.An order of relief is entered against any general partner of such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party.

(viii)    An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against any general partner of such Person (by a party other than Owner) but only if such Person or such general partner of such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person or such general partner of such Person to contribute or cause the contribution of additional capital to such Person.

“Business Day” means any day other than a Saturday, a Sunday, or any other day on which Owner or the national banking associations are not open for business.

“Control” means to possess, directly or indirectly through one or more intermediate entities, the power to direct or cause the direction of the management, operation, or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, including the power to elect a majority of the directors or trustees of a corporation or trust, as the case may be.

For example, a trustee of a trust is a Person that Controls that trust; a general partner in a limited partnership is a Person that Controls that limited partnership; a managing member or a non- member manager of a limited liability company is a Person that Controls that limited liability company; members of a limited liability company with a voting interest that permits them (individually or collectively) to direct or control the decisions of the limited liability company are Persons that Control that limited liability company; every general partner in a general partnership or member in a joint venture is a Person that Controls that entity; a shareholder of a corporation that holds 50% or more of the shares in the corporation (whether individually or in the aggregate with its Affiliates) is a Person that Controls that corporation.
“Governmental Authority” means any board, commission, department, agency or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, which has or acquires jurisdiction over any Property, or the use, operation or improvement of any Property, or over Manager.

“Hazardous Materials” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (PCBs) and compounds containing them; lead and lead- based paint; asbestos or asbestos containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on any Property is prohibited by any Governmental Authority; any substance that requires 

special handling and any other material or substance now or in the future that (i) is defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” by or within the meaning of any Hazardous Materials Law, or (ii) is regulated in any way by or within the meaning of any Hazardous Materials Law.

“Hazardous Materials Law” and “Hazardous Materials Laws” means any and all federal, state and local laws, ordinances, regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future, including all amendments, that relate to Hazardous Materials or the protection of human health or the environment and apply to Manager or to any Property. Hazardous Materials Laws include the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their state analogs.

“Lender” means any lender providing a loan to Owner which is secured by a mortgage or deed of trust on any Property.

“Person” means any natural person, sole proprietorship, corporation, general partnership, limited partnership, limited liability company, limited liability partnership, limited liability limited partnership, joint venture, association, joint stock company, bank, trust, estate, unincorporated organization, any federal, state, county or municipal government (or any agency or political subdivision thereof), endowment fund or any other form of entity.

“Related Party” means all the following:

(i)Manager.

(ii)Any general partner of Manager if Manager is a general partnership.

(iii)Any Person that holds, directly or indirectly, any ownership interest (including any shareholder, member or partner) in Manager, any general partner of Manager if Manager is a general partnership, or any Person that has a right to manage Manager or any general partner of Manager if Manager is a general partnership.

(iv)Any Person in which Manager or any general partner of Manager if Manager is a general partnership.

(v)Any Person in which any partner, shareholder, or member of Manager or any general partner of Manager if Manager is a general partnership.

(vi)Any Person in which any Person holding an interest in Manager or any general partner of Manager if Manager is a general partnership.

(vii)Any creditor of Manager that is related by blood, marriage or adoption to Manager.

(viii)Any creditor of Manager or any general partner of Manager if Manager is a general partnership that is related to any partner, shareholder or member of, or any other Person holding an interest in, Manager or any general partner of Manager, if Manager is a general partnership.

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