Document:

exhibit1031.htm

 

Exhibit 10.31

 

 

St. Andrews Apartments

MULTIFAMILY NOTE

	
US $17,969,000.00

	
As of September 1, 2010

FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if more than one)  promises to pay to the order of CWCAPITAL LLC, a Massachusetts limited liability company, the principal sum of Seventeen Million Nine Hundred Sixty-Nine Thousand and 00/100 Dollars (US $17,969,000.00), with interest accruing at the Interest Rate on the unpaid principal balance from the Disbursement Date until fully paid.

1.         Defined Terms.  In addition to defined terms found elsewhere in this Note, as used in this Note, the following definitions shall apply:

 

Amortization Period:  360 months.

 

Business Day:  Any day other than a Saturday, Sunday or any other day on which Lender is not open for business.

Debt Service Amounts:  Amounts payable under this Note, the Security Instrument or any other Loan Document.

Disbursement Date:  The date of disbursement of Loan proceeds hereunder.

Default Rate:  A rate equal to the lesser of 4 percentage points above the Interest Rate or the maximum interest rate which may be collected from Borrower under applicable law.

First Interest Only Payment Date:  The first day of October, 2010.

First Principal and Interest Payment Date:  The first day of October, 2012.

Indebtedness: The principal of, interest on, or any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument.

 

Interest Only Term:  24 months.

 

Interest Rate:  The annual rate of four and two hundred forty-five thousandths percent (4.245%).

 

Last Interest Only Payment Date:  The first day of September, 2012.

 

Lender: The holder of this Note.

Loan: The loan evidenced by this Note.

 

 

  

1

  

Loan Term:  84 months.

Maturity Date:  The first day of September, 2017, or any earlier date on which the unpaid principal balance of this Note becomes due and payable by acceleration or otherwise.

Property Jurisdiction:  The jurisdiction in which the Land is located.

Security Instrument:  A multifamily mortgage, deed to secure debt or deed of trust dated as of the date of this Note.

 

Yield Maintenance Period Term:  78 months.

 

Yield Maintenance Period End Date:  The last day of February, 2017.

Event of Default, Key Principal and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument.

2.           Address for Payment.  All payments due under this Note shall be payable at One Charles River Place, 63 Kendrick Street, Needham, Massachusetts 02494, or such other place as may be designated by written notice to Borrower from or on behalf of Lender.

3.           Payment of Principal and Interest.  Principal and interest shall be paid as follows:

(a)           Short Month Interest.  If disbursement of principal is made by Lender to Borrower on any day other than the first day of the month, interest for the period beginning on the Disbursement Date and ending on and including the last day of the month in which such disbursement is made shall be payable simultaneously with the execution of this Note.

 

(b)              Interest Computation.  Interest under this Note shall be computed on the basis of (check one only):

 

 

 

	
  

	   [  ] 	
30/360.  A 360-day year consisting of twelve 30-day months.

 

	
  

	   [X]	
Actual/360.  A 360-day year.  The amount of each monthly payment made by Borrower pursuant to Paragraph 3(c) below that is allocated to interest will be based on the actual number of calendar days during such month and shall be calculated by multiplying the unpaid principal balance of this Note by the per annum Interest Rate, dividing the product by 360 and multiplying the quotient by the actual number of days elapsed during the month.  Borrower understands that the amount allocated to interest for each month will vary depending on the actual number of calendar days during such month.

 

 

(c)             Monthly Installments:

 

(1)           Interest Only Period.  Commencing on the First Interest Only Payment Date and on the first day of every month until and including the Last Interest Only 

  

2

  

Payment Date, consecutive monthly installments of interest only shall be payable and in an amount equal to one of the following (check one only):

 

 

	
  

	   [  ]	

30/360.  If interest accrues based on a 30/360 interest computation, then consecutive monthly installments of interest only, each in the amount of ___________________________________________________________________________ Dollars (US $__________________________).

 

	
  

	   [X]	
Actual/360.  If interest accrues based on an Actual/360 interest computation, the amount of Sixty-Three Thousand Five Hundred Sixty-Five and 34/100 Dollars (US $63,565.34) shall be payable on the First Interest Only Payment Date and thereafter consecutive monthly installments of interest only, shall be payable as follows:

	
  

	
(1)

	
Fifty-Nine Thousand Three Hundred Twenty-Seven and 65/100 Dollars (US $59,327.65), shall be payable on the first day of each month during the term hereof which follows a 28-day month;

	
  

	
(2)

	
Sixty-One Thousand Four Hundred Forty-Six and 49/100 Dollars (US $61,446.49), shall be payable on the first day of each month during the term hereof which follows a 29-day month,

	
  

	
(3)

	
Sixty-Three Thousand Five Hundred Sixty-Five and 34/100 Dollars (US $63,565.34), shall be payable on the first day of each month during the term hereof which follows a 30-day month, or

	
  

	
(4)

	
Sixty-Five Thousand Six Hundred Eighty-Four and 18/100 Dollars (US $65,684.18), shall be payable on the first day of each month during the term hereof which follows a 31-day month,

	 	
(2)    Amortizing Period.  Commencing on the First Principal and Interest Payment Date and on the first day of every month thereafter, consecutive monthly installments of principal and interest, each in the amount of Eighty-Eight Thousand Three Hundred Forty-Four and 09/100 Dollars (US $88,344.09), until the entire unpaid principal balance evidenced by this Note is fully paid.

Any remaining principal and interest shall be due and payable on the Maturity Date.  The unpaid principal balance shall continue to bear interest after the Maturity Date at the Default Rate set forth in this Note until and including the date on which it is paid in full.

(d)           Payments Before Due Date.  Any regularly scheduled monthly installment of interest only (during the interest-only period set forth in paragraph 3(c) above) or principal and interest (during the period in which principal and interest is due also as set forth in paragraph 3(c) above) that is received by Lender before the date it is due shall be deemed to have been received on the due date solely for the purpose of calculating interest due.

(e)           Accrued Interest.  Any accrued interest remaining past due for 30 days or more shall be added to and become part of the unpaid principal balance and shall bear interest at the rate or rates specified in this Note.  Any reference herein to "accrued interest" shall refer to 

 

  

3

  

 

accrued interest which has not become part of the unpaid principal balance.  Any amount added to principal pursuant to the Loan Documents shall bear interest at the applicable rate or rates specified in this Note and shall be payable with such interest upon demand by Lender and absent such demand, as provided in this Note for the payment of principal and interest.

4.           Application of Payments.  If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion.  Borrower agrees that neither Lender's acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender's application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction.

5.           Security.  The Indebtedness is secured, among other things, by the Security Instrument, and reference is made to the Security Instrument for other rights of Lender concerning the collateral for the Indebtedness.

6.           Acceleration.  If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower.  Lender may exercise this option to accelerate regardless of any prior forbearance.

7.           Late Charge.  If any monthly installment due hereunder is not received by Lender on or before the 10th day of each month or if any other amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within 10 days after the date such amount is due, counting from and including the date such amount is due, Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to 5 percent of such monthly installment or other amount due.  Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan and that it is extremely difficult and impractical to determine those additional expenses.  Borrower agrees that the late charge payable pursuant to this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment.  The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8.

8.           Default Rate.  So long as any monthly installment or any other payment due under this Note remains past due for 30 days or more, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or other payment due, as applicable, at the Default Rate.  If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate.  Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any monthly installment or payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender's ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs 

 

  

4

  

 

and expenses.  Borrower also acknowledges that, during the time that any monthly installment or other payment due under this Note is delinquent for more than 30 days, Lender's risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk.  Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of the Borrower's delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan.

9.           Limits on Personal Liability.

(a)           Except as otherwise provided in this Paragraph 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents, and Lender's only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender's exercise of its rights and remedies with respect to the Mortgaged Property (as such term is defined in the Security Instrument) and any other collateral held by Lender as security for the Indebtedness. This limitation on Borrower's liability shall not limit or impair Lender's enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any obligations of Borrower.

(b)           Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of:

(1)           failure of Borrower to pay to Lender upon demand after an Event of Default, all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence;

(2)           failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument;

(3)           failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports;

(4)           fraud or written material misrepresentation by Borrower, Key Principal or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender;

(5)           failure to apply Rents, first, to the payment of reasonable operating expenses (other than Property management fees that are not currently payable pursuant to the terms of an Assignment of Management Agreement or any other agreement with Lender executed in connection with the Loan) and then to Debt Service Amounts, except that Borrower will not be personally liable (i) to the extent that Borrower lacks the legal right to direct the disbursement of such sums because of a bankruptcy, receivership or similar judicial proceeding, or (ii) with respect to Rents that are distributed in any 

 

 

5

 

calendar year if Borrower has paid all operating expenses and Debt Service Amounts for that calendar year; or

(6)           failure by Borrower to comply with the provisions of Section 17(a) of the Security Instrument.

(c)           Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default:

(1)            Borrower’s acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument;

(2)            a Transfer that is an Event of Default under Section 21 of the Security Instrument; or

(3)           the occurrence of a Bankruptcy Event (but only if the Bankruptcy Event occurs with the consent, encouragement or active participation of Borrower, Key Principal or any Borrower Affiliate).

(d)           To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term "Mortgaged Property" shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default, or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding.

10.           Voluntary and Involuntary Prepayments.

(a)           A prepayment premium shall be payable in connection with any prepayment made under this Note as provided below:

	 	

      (1)        Borrower may voluntarily prepay all (but not less than all) of the unpaid principal balance of this Note only on the last calendar day of a calendar month (the "Last Day of the Month") and only if Borrower has complied with all of the following:

	
(i)  

	
Borrower must give Lender at least 30 days (if given via U.S. Postal Service) or 20 days (if given via facsimile, email or overnight courier), but not more than 60 days, prior written notice of Borrower's intention to make a prepayment (the "Prepayment Notice").  The Prepayment Notice shall be given in writing (via facsimile, email, U.S. Postal Service or overnight courier) and addressed to Lender.  The Prepayment Notice shall include, at a minimum, the Business Day upon which Borrower intends to make the prepayment (the "Intended Prepayment Date").

 

 

  

6

  

 

	
(ii)  

	
Borrower acknowledges that the Lender is not required to accept any voluntary prepayment of this Note on any day other than the Last Day of the Month even if Borrower has given a Prepayment Notice with an Intended Prepayment Date other than the Last Day of the Month or if the Last Day of the Month is not a Business Day.  Therefore, even if Lender accepts a voluntary prepayment on any day other than the Last Day of the Month, for all purposes (including the accrual of interest and the calculation of the prepayment premium), any prepayment received by Lender on any day other than the Last Day of the Month shall be deemed to have been received by Lender on the Last Day of the Month and any prepayment calculation will include interest to and including the Last Day of the Month in which such prepayment occurs.  If the Last Day of the Month is not a Business Day, then the Borrower must make the payment on the Business Day immediately preceding the Last Day of the Month.

	
(iii)  

	
Any prepayment shall be made by paying (A) the amount of principal being prepaid, (B) all accrued interest (calculated to the Last Day of the Month), (C) all other sums due Lender at the time of such prepayment, and (D) the prepayment premium calculated pursuant to Schedule A.

	
(iv)  

	
If, for any reason, Borrower fails to prepay this Note (A) within five (5) Business Days after the Intended Prepayment Date or (B) if the prepayment occurs in a month other than the month stated in the original Prepayment Notice, then Lender shall have the right, but not the obligation, to recalculate the prepayment premium based upon the date that Borrower actually prepays this Note and to make such calculation as described in Schedule A attached hereto.  For purposes of such recalculation, such new prepayment date shall be deemed the "Intended Prepayment Date."

(2)           Upon Lender's exercise of any right of acceleration under this Note, Borrower shall pay to Lender, in addition to the entire unpaid principal balance of this Note outstanding at the time of the acceleration, (i) all accrued interest and all other sums due Lender under this Note and the other Loan Documents, and (ii) the prepayment premium calculated pursuant to Schedule A.

(3)           Any application by Lender of any collateral or other security to the repayment of any portion of the unpaid principal balance of this Note prior to the Maturity Date and in the absence of acceleration shall be deemed to be a partial prepayment by Borrower, requiring the payment to Lender by Borrower of a prepayment premium.

(b)           Notwithstanding the provisions of Paragraph 10(a), no prepayment premium shall be payable (1) with respect to any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument, or (2) as provided in subparagraph (c) of Schedule A.

 

 

  

7

  

(c)           Schedule A is hereby incorporated by reference into this Note.

(d)           Any required prepayment of less than the entire unpaid principal balance of this Note shall not extend or postpone the due date of any subsequent monthly installments or change the amount of such installments, unless Lender agrees otherwise in writing.

(e)           Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender's incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender's ability to meet its commitments to third parties.  Borrower agrees to pay to Lender upon demand damages for the detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages.  Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth on Schedule A represents a reasonable estimate of the damages Lender will incur because of a prepayment.

(f)           Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the loan evidenced by this Note, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower's voluntary agreement to the prepayment premium provisions.

11.           Costs and Expenses.  Borrower shall pay on demand all expenses and costs, including fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding.

12.           Forbearance.  Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy.  The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender's right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment.  Enforcement by Lender of any security for Borrower's obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender.

13.           Waivers.  Presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower, Key Principal, and all endorsers and guarantors of this Note and all other third party obligors.

14.           Loan Charges.  Borrower agrees to pay an effective rate of interest equal to the sum of the Interest Rate provided for in this Note and any additional rate of interest resulting from any other charges of interest or in the nature of interest paid or to be paid in connection with 

 

  

8

  

 

the loan evidenced by this Note and any other fees or amounts to be paid by Borrower pursuant to any of the other Loan Documents.  Neither this Note nor any of the other Loan Documents shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate greater than the maximum interest rate permitted to be charged under applicable law.  If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan  is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation.  The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note.  For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note.  Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

15.           Commercial Purpose.  Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family or household purposes.

16.           Counting of Days.  Except where otherwise specifically provided, any reference in this Note to a period of "days" means calendar days, not Business Days.

17.           Governing Law.  This Note shall be governed by the law of the jurisdiction in which the Land is located.

18.           Captions.  The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note.

19.           Notices.  All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 31 of the Security Instrument.

20.           Consent to Jurisdiction and Venue.   Borrower and Key Principal each agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the Property Jurisdiction.  The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note.  Borrower and Key Principal each irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

21.           WAIVER OF TRIAL BY JURY.  BORROWER, KEY PRINCIPAL AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES, AS LENDER, KEY PRINCIPAL AND BORROWER, THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY 

 

  

9

  

 

JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

ATTACHED SCHEDULES.  The following Schedules are attached to this Note:

 

	
  

	   [X]	
  Schedule A

	

Prepayment Premium (required)

 

	
  

	   [X]	
  Schedule B

	
Modifications to Multifamily Note

 

 

  

10

  

 

IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative.  Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

 

  

11

  

BORROWER:

	
  

	
BSF/BR AUGUSTA, LLC, a Florida limited liability company

	
  

	
By:  BSF/BR Augusta JV, LLC, a Delaware limited liability company, its Sole Member

	
  

	
By:  BSF-TSC GP, LLC, a Delaware limited liability company, its Manager

 

By:    _______________________(SEAL)

Michael Baumann

Manager

	
  

	
By:  BR Augusta JV Member, LLC, a Delaware limited liability company, its Manager

By:    _______________________(SEAL)

Name:

Authorized Signatory

 

 

  

12

  

PAY TO THE ORDER OF _____________________________, WITHOUT RECOURSE

	
  

	
CWCAPITAL LLC, a Massachusetts limited liability company

By:______________________________(SEAL)

Name:

Title:

Fannie Mae Commitment No. 862507

 

 

  

13

  

ACKNOWLEDGMENT AND AGREEMENT OF KEY PRINCIPAL TO

PERSONAL LIABILITY FOR EXCEPTIONS TO NON-RECOURSE LIABILITY

Key Principal, who has an economic interest in Borrower or who will otherwise obtain a material financial benefit from the Loan, hereby absolutely, unconditionally and irrevocably agrees to pay to Lender, or its assigns, on demand, all amounts for which Borrower is personally liable under Paragraph 9 of the Multifamily Note to which this Acknowledgment is attached (the "Note").  The obligations of Key Principal shall survive any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the Security Instrument.  Lender may pursue its remedies against Key Principal without first exhausting its remedies against the Borrower or the Mortgaged Property. All capitalized terms used but not defined in this Acknowledgment shall have the meanings given to such terms in the Security Instrument.  As used in this Acknowledgment, the term "Key Principal" (each if more than one) shall mean only those individuals or entities that execute this Acknowledgment.

The obligations of Key Principal shall be performed without demand by Lender and shall be unconditional irrespective of the genuineness, validity, or enforceability of the Note, or any other Loan Document, and without regard to any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or a guarantor.  Key Principal hereby waives the benefit of all principles or provisions of law, which are or might be in conflict with the terms of this Acknowledgment, and agrees that Key Principal's obligations shall not be affected by any circumstances which might otherwise constitute a legal or equitable discharge of a surety or a guarantor.  Key Principal hereby waives the benefits of any right of discharge and all other rights under any and all statutes or other laws relating to guarantors or sureties, to the fullest extent permitted by law, diligence in collecting the Indebtedness, presentment, demand for payment, protest, all notices with respect to the Note including this Acknowledgment, which may be required by statute, rule of law or otherwise to preserve Lender's rights against Key Principal under this Acknowledgment, including notice of acceptance, notice of any amendment of the Loan Documents, notice of the occurrence of any default or Event of Default, notice of intent to accelerate, notice of acceleration, notice of dishonor, notice of foreclosure, notice of protest, notice of the incurring by Borrower of any obligation or indebtedness and all rights to require Lender to (a) proceed against Borrower, (b) proceed against any general partner of Borrower, (c) proceed against or exhaust any collateral held by Lender to secure the repayment of the Indebtedness, or (d) if Borrower is a partnership, pursue any other remedy it may have against Borrower, or any general partner of Borrower.  In addition, Key Principal waives the benefit of O.C.G.A. Section 10-7-24.

At any time without notice to Key Principal, and without affecting the liability of Key Principal hereunder, (a) the time for payment of the principal of or interest on the Indebtedness may be extended or the Indebtedness may be renewed in whole or in part; (b) the time for Borrower's performance of or compliance with any covenant or agreement contained in the Note, or any other Loan Document, whether presently existing or hereinafter entered into, may be extended or such performance or compliance may be waived; (c) the maturity of the Indebtedness may be accelerated as provided in the Note or any other Loan Document; (d) the Note or any other Loan Document may be modified or amended by Lender and Borrower in any respect, including an increase in the principal amount; and (e) any security for the Indebtedness may be modified, exchanged, surrendered or otherwise dealt with or additional security may be pledged or mortgaged for the Indebtedness.

 

 

  

14

  

 

Key Principal acknowledges that Key Principal has received a copy of the Note and all other Loan Documents.  Neither this Acknowledgment nor any of its provisions may be waived, modified, amended, discharged, or terminated except by an agreement in writing signed by the party against which the enforcement of the waiver, modification, amendment, discharge, or termination is sought, and then only to the extent set forth in that agreement.  Key Principal agrees to notify Lender (in the manner for giving notices provided in Section 31 of the Security Instrument) of any change of Key Principal's address within 10 Business Days after such change of address occurs.  Any notices to Key Principal shall be given in the manner provided in Section 31 of the Security Instrument.  Key Principal agrees to be bound by Paragraphs 20 and 21 of the Note.

THIS ACKNOWLEDGMENT IS AN INSTRUMENT SEPARATE FROM, AND NOT A PART OF, THE NOTE.  BY SIGNING THIS ACKNOWLEDGMENT, KEY PRINCIPAL DOES NOT INTEND TO BECOME AN ACCOMMODATION PARTY TO, OR AN ENDORSER OF, THE NOTE.

IN WITNESS WHEREOF, Key Principal has signed and delivered this Acknowledgment under seal or has caused this Acknowledgment to be signed and delivered under seal by its duly authorized representative.  Key Principal intends that this Acknowledgment shall be deemed to be signed and delivered as a sealed instrument.

 

 

  

15

  

 

KEY PRINCIPAL:

BSF-TSC, LP, a Delaware limited partnership

By:________________________________(SEAL)

Name:

Title:

Address:     c/o Trade Street Capital

19950 West Country Club Drive

Suite 801, Aventura, Florida 33180

	
  

	
BLUEROCK REAL ESTATE, L.L.C., a Delaware limited liability company

By:________________________________(SEAL)

Name:

Title:

Address:     c/o Trade Street Capital

19950 West Country Club Drive

Suite 801, Aventura, Florida 33180

 

 

  

16

  

SCHEDULE A

PREPAYMENT PREMIUM

Any prepayment premium payable under Paragraph 10 of this Note shall be computed as follows:

	
  

	
(a)

	
If the prepayment is made at any time after the date of this Note and before the Yield Maintenance Period End Date, the prepayment premium shall be the greater of:

	
  

	
(i)

	
1% of the amount of principal being prepaid; or

	
  

	
(ii)

	
The product obtained by multiplying:

 

	
  

	
(A)

	

the amount of principal being prepaid,

 

	
  

	
by

	
  

	
(B)

	
the difference obtained by subtracting from the Interest Rate on this Note the Yield Rate (as defined below), on the twenty-fifth Business Day preceding (x) the Intended Prepayment Date, or (y) the date Lender accelerates the Loan or otherwise accepts a prepayment pursuant to Paragraph 10(a)(3) of this Note,

	
  

	
by

	
  

	
(C)

	
the present value factor calculated using the following formula:

1 - (1 + r)-n/12

r

[r =           Yield Rate.

	
  

	
 n =

	
the number of months remaining between (1) either of the following: (x) in the case of a voluntary prepayment, the Last Day of the Month during which the prepayment is made, or (y) in any other case, the date on which Lender accelerates the unpaid principal balance of this Note and (2) the Yield Maintenance Period End Date.

 

 

  

A-1

  

 

For purposes of this clause (ii), the “Yield Rate” means the yield calculated by interpolating the yields for the immediately shorter and longer term U.S. “Treasury constant maturities” (as reported in the Federal Reserve Statistical Release H.15 Selected Interest Rates (the "Fed Release") under the heading "U.S. government securities") closest to the remaining term of the Yield Maintenance Period Term, as follows (rounded to three decimal places):

	
  

	
a =the yield for the longer U.S. Treasury constant maturity

	
  

	
b =

	
the yield for the shorter U.S. Treasury constant maturity

	
  

	
x =

	
the term of the longer U.S. Treasury constant maturity

	
  

	
y =

	
the term of the shorter U.S. Treasury constant maturity

	
  

	
z =

	
“n” (as defined in the present value factor calculation above) divided by 12.

Notwithstanding any provision to the contrary, if “z” equals a term reported under the U.S. “Treasury constant maturities” subheading in the Fed Release, the yield for such term shall be used, and interpolation shall not be necessary.  If publication of the Fed Release is discontinued by the Federal Reserve Board, Lender shall determine the Yield Rate from another source selected by Lender.  Any determination of the Yield Rate by Lender will be binding absent manifest error.]

	
  

	
(b)

	
If the prepayment is made on or after the Yield Maintenance Period End Date but before the last calendar day of the 4th month prior to the month in which the Maturity Date occurs, the prepayment premium shall be 1% of the amount of principal being prepaid.

	
  

	
(c)

	
Notwithstanding the provisions of Paragraph 10(a) of this Note, no prepayment premium shall be payable with respect to any prepayment made on or after the last calendar day of the 4th month prior to the month in which the Maturity Date occurs.

 

  

A-2

  

 

 

_________________

Borrower’s Initials

 

  

A-3

  

 

SCHEDULE B

MODIFICATIONS TO MULTIFAMILY NOTE

(Waste)

The following modification is made to the text of the Multifamily Note that precedes this Schedule:

	
1.

	
Paragraph 9(b) of the Note is hereby modified by deleting clause (6) in its entirety and inserting the following in lieu thereof:

	
  

	
“(6)

	
waste or abandonment of the Mortgaged Property by Borrower.”

All capitalized terms used but not defined in the Note (including this Schedule B) shall have the meanings given to such terms in the Security Instrument (as that term is defined in this Note).

  

B-1

  

______________________

Borrower’s Initials

 

 

B-2exhibit1032.htm

Exhibit 10.32

Property Management Agreement for ST. ANDREWS APARTMENT HOMES, Augusta, Georgia

 

 

PROPERTY MANAGEMENT AGREEMENT

 

This Property Management Agreement is made and entered into as of this September 7, 2010, by and between BSF-St. Andrews, LLC , having an office at _19950 W. Country Club Drive, Suite 801, Aventura, Florida 222180__, a ___________________________________,  (the “Owner”) and HAWTHORNE RESIDENTIAL PARTNERS, LLC, a North Carolina limited liability company, having an office at 1848 Banking Street, Greensboro, North Carolina 27408 (the “Manager”).

 

R E C I T A L S:

 

	
A.  

	
Owner is the owner of the Property, which is commonly known as

	
  

	
_St. Andrews Apartment Homes_ having _240_ units and located at

	
  

	
50 St. Andrews Drive

	
  

	
Augusta, GA 30909.

 

      B.   Owner desires to engage Manager as an independent contractor to rent, lease, operate and manage the Property on the terms and conditions set forth below and Manager desires to accept such engagement.

 

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

 

 

 

The balance of this page has been intentionally left blank.

 

 

 

  

1

  

 Part I:  BASIC DATA

 

The following defined terms shall have the meaning set forth below:

 

	
 “Property Name”

	
St. Andrews Apartment Homes

	
“Number of Units”

	
 240

	
 

“Commencement Date”

	
 September 7, 2010

	
“Initial Term”

	
12 months

	
 

“Budget Due Date”

	
 November 1st

	
“Management Fee Percentage”

	
3.0%

	
 

 

“Incentive Management Fee”

	
 

 

TBD

	
 

“New Construction Fee”

	
 TBD

	
 

“Capital Event Fee”

	
 TBD

	
 

“Administrative Set  Up Fee”

	
$1,500 (one time)

	
 

“Payroll Handling Fee”

	
 

15% per employee/per payroll period

	
“Renovation/Capital Projects/Insurance Restoration Fee”

	
To be negotiated per project

	
“Managers Notice Address”

	  
	  	
 

Hawthorne Residential Partners

	  	
1848 Banking Street

	  	
Greensboro, NC 27410

	
“Owner’s Notice Address”

	  
	  	
 

	  	
 

	  	
 

 

 

  

2

  

 

	
  

	
Part II  - STANDARD TERMS

 

	
  

	
1. Appointment and General Provisions

 

 

	
1.1  

	
Management Duties and Authority

 

Subject to the provisions of this Agreement and at the direction of Owner, Manager shall manage, administer the operations of, and lease the Property on behalf of Owner in a manner consistent with the standard of maintenance generally applied from time to time during the Term to other similarly-situated residential apartment properties of similar age, class, and appearance, in good order and repair, and in a manner consistent with the Budget and in a manner intended to maximize the Cash Flow from the Property, subject to and within the Budgets approved by Owner as provided herein.  Subject to the provisions hereof, and subject to the approved Budgets, Manager shall provide all services reasonably necessary, proper, desirable or appropriate for the successful management and operation of the Property, including the duties and services specified in this Agreement.

 

 

	
1.2  

	
Independent Contractor

 

Except as otherwise herein provided (including, by way of illustration, Manager’s execution of Contracts pursuant to Section 2.4(C)), Manager’s relationship to Owner hereunder is that of an independent contractor, and neither Manager nor Owner shall represent to any other Person that Manager’s relationship to Owner hereunder is other than that of an independent contractor.  All persons employed by Manager or any Affiliates of Manager in connection with the operation and maintenance of the Property shall be employees solely of Manager or its Affiliates and not of Owner and all arrangements with such employees are solely the concern of Manager.

 

 

	
1.3  

	
Indemnification.

 

	
(A)  

	
Manager shall indemnify, defend and hold harmless Owner, and its stockholders, members, partners, directors, officers, managers, employees, agents and Affiliates (each, an “Owner Indemnified Party”) from and against any and all claims, actions, suits, proceedings, losses, damages, liabilities, costs and expenses, including reasonable attorneys’ fees and disbursements (“Damages”) (including Damages relating to violations of environmental Legal Requirements), arising out or resulting from the acts or omissions of Manager and its directors, officers, employees, contractors, subcontractors and agents, which constitute gross negligence, fraud, malfeasance, breach of fiduciary duty, willful, reckless or criminal misconduct, a breach of this Agreement or any actions of Manager beyond the scope of the authority conferred upon Manager hereunder.  Manager shall have the right to defend, and shall defend, at its expense and by counsel of its own choosing (subject to Owner’s approval of such counsel, not to be unreasonably withheld, conditioned or delayed), against any claim or liability to which the indemnity agreement set forth in this Section 1.3(A) would apply.  Notwithstanding the foregoing, if (i)

 

 

  

3

  

 

	
 

	
Manager has failed or refused to defend, indemnify and hold harmless Owner and any Owner Indemnified Party after written notice to Manager, (ii) an Event of Default exists on the part of Manager, (iii) Owner or any Owner Indemnified Party to be defended hereunder reasonably determines that a conflict of interest exists, or (iv) Owner reasonably determines that Manager is insufficiently liquid or creditworthy to adequately defend or pay the amount of any Damages when due, Owner, or such Owner Indemnified Party may, in its sole and absolute discretion, engage its own attorney and other professionals to defend or assist it with respect to such matters, and, at the option of Owner or such Owner Indemnified Party, its attorney shall control the resolution of such matters.  Manager shall not have the authority to settle any claim or liability that is the subject of the indemnification agreement provided for in this Section 1.3(A) without first obtaining Owner’s prior written consent, such consent not to be unreasonably withheld.  Manager or Owner, as applicable, shall regularly apprise the other of the status of all proceedings.

 

	
(B)  

	
Owner shall indemnify, defend (through attorneys selected by Owner) and hold harmless Manager and its partners, members, stockholders, managers, directors, officers, employees and agents (each a “Manager Indemnified Party”) from and against any and all Damages arising out of or resulting from  the acts or omissions of Owner and its directors, officers, employees, contractors, subcontractors and agents, which constitute negligence, fraud, malfeasance, breach of fiduciary duty, willful, reckless or criminal misconduct, or a breach of this Agreement.  Owner shall have the right to defend, and shall defend, at its expense and by counsel of its own choosing against any claim or liability to which the indemnity agreement set forth in this Section 1.3(B) would apply.  Any settlement of any such claim or liability by Owner shall be subject to the reasonable approval of Manager.  Notwithstanding the foregoing, if (i) Owner has failed or refused to defend, indemnify and hold harmless Manager and any Manager Indemnified Party after written notice to Owner, (ii) an Event of Default exists on the part of Owner, (iii) Manager or any Manager Indemnified Party to be defended hereunder reasonably determines that a conflict of interest exists, or (iv) Manager reasonably determines that Owner is insufficiently liquid or creditworthy to adequately defend or pay the amount of any Damages when due, Manager, or such Manager Indemnified Party may, with the prior, written consent of Owner with such consent not to be unreasonably withheld, engage its own attorney and other professionals to defend or assist it with respect to such matters  Owner or Manager, as applicable, shall regularly apprise the other of the status of all such legal proceedings.

 

	
(C)  

	
The provisions of this Section 1.3 shall survive the expiration or termination of this Agreement.

 

 

  

4

  

 

	
2.  

	
Management Duties and Authority

 

 

	
2.1  

	
Property Management Generally

 

	
(A)  

	
Manager shall, at the expense of Owner, manage, operate and care for the Property in a manner consistent with the standard of maintenance and repair of Comparable Properties, in accordance with the approved Budgets and the terms of any Financing, to the extent that Owner has communicated such terms in writing to Manager, and do all things necessary, desirable or appropriate therefore or customarily performed by managing agents of Comparable Properties.  Without limiting the generality of the foregoing, Manager shall:

 

	
(i)  

	
advertise the Property, displaying signs thereon, and rent the Property including the authority to negotiate, execute, extend, and renew leases in the Owner’s name;

 

	
(ii)  

	
implement approved Budgets;

 

	
(iii)  

	
make and renew all Contracts for water, sanitary and storm sewer, drainage, electricity, steam, gas, telephone, fuel, cleaning, garbage removal, pest control and other utilities and all other services necessary or appropriate for the management and operation of the Property in accordance with the Budgets unless otherwise provided herein;

 

	
(iv)  

	
purchase all supplies and equipment necessary or appropriate for the management and operation of the Property in accordance with the Budgets unless otherwise provided herein;

 

	
(v)  

	
contract a professional real estate property tax consultant of the Manager’s choice to monitor the real estate tax assessments of the Property and the reasonableness thereof in comparison with the assessments of similar properties; consult with, and make recommendations to, Owner concerning the real estate tax assessments of the Property and, at the expense of Owner, authorize the designated real estate tax consultant to take such action with respect thereto as Owner may direct;

 

	
(vi)  

	
make or cause to be made all ordinary and extraordinary repairs, decorations and alterations of the Property at Owner’s expense, subject to the limits of the Budget as set forth in Section 2.6(F).

 

 

	
2.2  

	
Management Employees

 

	
 

	
Manager shall employ capable personnel for the proper on-site maintenance and operation of the Property in accordance with the terms of this Agreement.  Such on-site personnel shall be employees of Manager and all matters pertaining to such

 

 

  

5

  

 

	
 

	
personnel, including their employment, supervision, compensation, promotion and discharge, shall be the responsibility of Manager.

 

	
(B)  

	
Manager shall be reimbursed for all of the gross salary or wages, including, without limitation, bonuses and vacation pay, payroll taxes, insurance, worker’s compensation, and Manager’s standard sick pay, and other reasonable benefits and payroll burdens of Manager’s employees required to properly, adequately, safely and economically manage, operate and maintain the Property but excluding any of Manager’s management, account and office personnel who supervise and direct Manager’s on-site employees.  The number of the on-site employees and amounts of their compensation may be adjusted annually and shall be reflected in the Budget to be approved by Owner.  Manager is hereby authorized to reimburse itself the payroll expense as defined in this Section 2.2(B) from the Operating Account three (3) business days prior to each actual payroll date.

 

	
(C)  

	
Manager shall fully comply with all Legal Requirements relating to worker’s compensation, social security, unemployment insurance, wages, hours, working conditions and other matters pertaining to Manager’s personnel.  Manager shall indemnify, defend and hold harmless Owner and any Owner Indemnified Party from and against any and all Damages relating to Manager’s failure to comply with this Section 2.2(C), and Manager’s obligations to indemnify, defend and hold harmless under this Section 2.2(C) shall survive the termination or expiration of this Agreement.

 

	
(D)  

	
Manager shall be solely responsible for its personnel in the event of the termination of this Agreement.

 

 

	
2.3  

	
Rent Collection and Services with Respect to Leases

 

	
(A)  

	
Perform any duties and exercise any rights conferred upon the Owner as Landlord under any leases entered into in connection with the Property.

 

	
(B)  

	
Manager shall use commercially reasonable efforts to collect all rentals and other charges and amounts due or to become due under all leases covering the Property.

 

	
(C)  

	
Manager shall institute judicial actions and proceedings as may be necessary to recover rents and other sums due the Owner from the tenants or to evict tenants and regain possession, including the authority, in the Agent’s discretion, to settle, compromise and release any and all such judicial actions and proceedings.

 

 

	
2.4  

	
Services with Respect to Contracts

 

	
(A)  

	
Manager shall, at the expense of the Owner, make contracts for terms no longer than (1) year for advertising, electric, gas, oil, water, telephone, rubbish hauling, vermin extermination, janitorial services, landscaping maintenance and other

 

 

  

6

  

 

	
 

	
maintenance services for the Property as Manager shall reasonably determine to be advisable, unless otherwise provided herein.

 

	
(B)  

	
Unless otherwise provided herein, Manager shall, at the expense of Owner, in accordance with the approved Budgets, duly and punctually pay and perform on behalf of Owner all of Owner’s obligations under the Contracts and use its good faith efforts to enforce, preserve and keep unimpaired the rights of Owner and the obligations of other parties under the Contracts.

 

	
(C)  

	
All Contracts and purchases made hereunder at the expense of Owner (whether or not specifically requiring the approval of Owner pursuant hereto) shall be made in the name of Property and executed by Manager executing same solely as Owner’s agent, and Property shall retain title to all property purchased hereunder at the expense of Owner.  Manager shall use commercially reasonable efforts to ensure that all Contracts made hereunder contain a provision satisfactory to Owner limiting the liability of Owner thereunder to the Property substantially similar to the following:

 

“Notwithstanding any provision to the contrary herein, [Contractor/Vendor] shall look solely to the estate and property of Owner in and to the Property in the event of any claim against Owner arising out of or in connection with this Agreement, the relationship of Owner and [Contractor/Vendor], and [Contractor/Vendor] agrees that the liability of Owner arising out of or in connection with this Agreement, the relationship of Owner and [Contractor/Vendor], shall be limited to such estate and property of Owner in and to the Property.  No properties or assets of Owner other than the estate and property of Owner in and to the Property and no property owned by any partner or member of Owner shall be subject to levy, execution or other enforcement procedures for the satisfaction of any judgment (or other judicial process) or for the satisfaction of any other remedy of [Contractor/Vendor] arising out of or in connection with this Agreement or the relationship of Owner and [Contractor/Vendor].”

 

	
(D)  

	
All Contracts made with any Affiliate of Manager must be approved by Owner in writing, such approval not to be unreasonably withheld, conditioned or delayed, provided that is shall be deemed reasonable for Owner to withhold its approval to any Contract if such Contract shall not be at competitive market terms and rates and the amount charged thereunder is more than would be charged by an independent third party.

 

	
(E)  

	
Subject to the provisions hereof, Manager may elect to have the routine maintenance, repair, cleaning, landscaping and other services with respect to the Property performed by employees of Manager and the reasonable costs of performing such services shall be at the expense of Owner; provided, however, in any event, such costs shall not exceed the costs that would have been incurred by Owner had such services been provided by unrelated third parties, shall be incurred in accordance with an approved Budget.

 

  

7

  

 

 

	
2.5  

	
Services with Respect to Legal Requirements and Insurance Requirements

 

	
(A)  

	
Each of Manager and Owner shall promptly notify the other upon receiving any notice with respect to any Legal Requirement or Insurance Requirement (and furnish a copy of the notice received by it with its notice to the other party) or upon learning of any default, event of default or condition which, with the giving of notice or the passage of time, or both, might constitute a default or event of default by Owner under any Legal Requirement or Insurance Requirement or otherwise impair the rights of Owner under any Permit.  In the event of any such notice, condition, default or event of default, Manager shall consult with Owner concerning the action to be taken with respect thereto and, at the expense of Owner, shall take such action with respect thereto as Owner shall reasonably direct.

 

	
(B)  

	
As long as the failure to promptly comply with any notice concerning any Legal Requirement or Permit shall not subject Manager to any liability, Owner may stay Manager’s remedial action with respect to such notice by instituting, or directing Manager to institute, appropriate legal or other proceedings to contest such notice, all at Owner’s sole expense.  In the event Owner directs Manager to institute such proceedings to contest such notice, Manager is hereby authorized to prepare, execute and file all applications and other documents required for such proceedings on Owner’s behalf and in Owner’s name.  Manager shall promptly furnish to Owner copies of all such applications and other documents prepared, executed or filed by Manager.

 

	
(C)  

	
Manager may appear in or commence legal or other proceedings on behalf of Owner in Owner’s name only upon the direction of Owner, it being understood that Owner will pay any costs and fees, including, without limitation, attorneys’ fees, in connection therewith.  However, Manager may appear in or commence legal or other proceedings relative to the performance by Manager of its duties and obligations hereunder, on its own behalf and at its own expense at any time without the direction of Owner, provided that the same shall result in no cost or liability to Owner.  Manager shall promptly notify Owner if it appears in any such proceedings on its own behalf and promptly furnish copies of any documents it files in connection with any such proceedings.

 

 

	
2.6  

	
Records and Reports

 

	
(A)  

	
Software and Chart of Accounts.  Manager will prepare rent rolls and monthly operating statements for the Property using Manager’s selected property management and accounting software using the Manager’s Chart of Accounts.

 

 

  

8

  

 

	
(B)  

	
Monthly Close Out.   Monthly financial statements for the Property shall be closed or “cut-off” on the 24th of each month.  In the event, the 24th falls on a weekend, the Property shall close on the Friday prior to the 24th.

 

	
(C)  

	
Distribution of Cash Flows.  Manager shall remit to Owner the net cash flow generated from operating and investing and financing activities for the previous month as specified in Exhibit B in accordance with wire transfer instructions provided by Owner.

 

	
(D)  

	
Budgets.  Not later than thirty (30) days from the date hereof and not later than sixty (60) days prior to the beginning of each Fiscal Year, Manager shall submit to Owner for its approval a proposed annual budget (the “Budget”) for the Property for the ensuing Fiscal Year setting forth on a monthly basis Manager’s good faith estimates of Gross Revenues, Operating Expenses, and Interest Expense for the Property for such year and the recommended Capital Expenditures and extraordinary expenses for such year described in reasonable detail.

 

	
(E)  

	
Budget Approval.  Owner shall approve, disapprove or comment on the proposed annual and revised Budgets within thirty (30) days after Owner’s receipt of such Budget.  Owner may approve, disapprove or modify any Budget in whole or in part.

 

	
(F)  

	
Operation Within Budget.  Manager shall use, manage and operate the Property strictly in accordance with the then current approved Budget, provided that, without Owner’s prior approval, Manager may (i) exceed any category or line item of the approved Budget for a Fiscal Year by up $10,000; (ii) incur expenses in excess of the approved Budget in the event of an emergency requiring immediate action to avoid imminent personal injury or imminent material property damage, provided that Manager notifies Owner as to such emergency, the actions taken to address it and the costs of such emergency promptly after the occurrence of the same; (iii) incur legally mandated expenses; and (iv) incur expenses necessary to satisfy tenant’s right of quiet enjoyment pursuant to a Lease.  If a Budget is disapproved by Owner in whole or in part, or not approved prior to the commencement of the ensuing Fiscal Year, Manager shall continue to manage and operate the Property pursuant to the prior Fiscal Year’s approved Budget or the previously approved Budget for the current Fiscal Year (except for non-recurring expenditures and Capital Expenses) until Manager and Owner can resolve their differences; provided, however, Manager shall be authorized to pay, as an expense of the Property, third party costs outside the control of Manager, such as, without limitation, taxes and utilities.  Manager has the authority to expend funds as provided in Section 2.8 in accordance with the provisions of the current approved Budget and in accordance with the provisions of this Section 2.6(F), provided that Manager shall not be required in any event to expend its own funds if there are insufficient funds available for Manager to perform its obligations hereunder.  Manager’s failure to manage the Property in the manner required herein shall be excused if Manager is prevented from doing so due to Owner’s failure or refusal to approve a Budget or to make available funds sufficient for Manager to perform its obligations hereunder.

 

 

  

9

  

 

	
(G)  

	
Books and Records.  Manager shall maintain, and keep at its main office accurate books, records and accounts of the management, operation and financial condition of the Property’s operations.  Such books, records and accounts shall be prepared and kept on a Cash Basis.

 

	
(i)  

	
Depreciation and amortization expense are not to be recorded.  Manager will make available to Owner or Owner’s auditors or tax preparers general ledger and invoice details necessary for the preparation of depreciation and amortization schedules.

 

	
(ii)  

	
Owner shall at all times retain title to the information constituting such books, records and accounts.  Manager shall, during the Term, retain such books, records and accounts.  Upon termination, Manager shall, at the expense of Owner, deliver such books and records to Owner.  Any and all computer programs, software and hardware not the property of Owner and utilized by Manager to maintain such books, records and accounts shall in all events remain the property of Manager.

 

	
(iii)  

	
Upon reasonable prior notice to Manager, Owner may, at its expense, inspect, audit and copy such books, records and accounts during regular business hours or during such other time as Manager may reasonably direct on a periodic or continuing basis by accountants retained by, or other representatives of Owner, and Manager shall cooperate in good faith with Owner in connection with the same.

 

	
(iv)  

	
Upon commencement of this Agreement, Owner shall coordinate with previous owner or manager the delivery to such reports and data as requested by Manager for the accurate set up of the Property’s books and records on the Manager’s property management and accounting system.

 

	
(v)  

	
In the event this Agreement is terminated, the Manager shall deliver such books, records and accounts of the Property to Owner at Owner’s expense.  Manager shall deliver a final accounting within thirty (30) days after the last day of the calendar month in which such termination occurs.

 

	
(H)  

	
Monthly Reports.  Manager shall furnish to Owner monthly reports for the Property, which reports shall be prepared showing monthly and year to date activity and which shall be furnished (without notice or demand by Owner) as specified in Exhibit A.

 

	
(I)  

	
Annual Reports.

 

	
(i)  

	
Manager shall cooperate in good faith with Owner’s Auditor in the preparation of a year-end statement of continuing operation of the Property, including a balance sheet and related statements of income and cash flows, which shall be furnished not later than forty-five (45) days after the end of each Fiscal Year.

 

 

  

10

  

 

	
(ii)  

	
All such annual reports shall be prepared on a Cash Basis, and, at Owner’s option and expense, may be audited by a national firm of independent certified public accountants selected by Owner (the “Auditor”).  Owner shall be responsible for arranging for such audit, and Manager shall cooperate in good faith with Owner’s Auditor in the preparation of Owner’s audited financial statements. A draft of the Auditor’s report for each Fiscal Year shall be submitted to Owner for approval by Owner before finalization of the same.

 

	
(J)  

	
Tax Matters Reporting.

 

	
(i)  

	
Manager shall cooperate in good faith and at Owner’s expense with Owner’s accountants and cooperate in the preparation of Owner’s tax return including, but not limited to, supplying necessary information for preparation of such tax return.  The cost of preparation and filing of the tax return will be borne by Owner.

 

	
(ii)  

	
As reasonably requested by Owner, Manager shall complete all tax-related surveys and questionnaires which Owner may reasonably require.

 

	
(iii)  

	
Manager shall prepare at Owner’s expense all state and local personal property and other tax returns, as required by law, which are not prepared by Owner’s accountant.

 

 

	
2.7  

	
Bank Accounts.

 

	
(A)  

	
Manager shall establish and maintain an operating account (the “Operating Account”) in the name of Owner for the Property for the collection of rents and an interest-bearing account for tenant security deposits (the “Security Deposit Account”).

 

	
(B)  

	
The Operating Account and the Security Deposit Account shall be maintained in the name of Owner at a financial institution selected by the Manager (the “Depository”). All funds deposited in such accounts or otherwise held by or in the name of Manager for the account of Owner shall be held by Manager in trust and shall not be commingled with Manager’s other funds.  Manager shall in no event have any liability in the event that the Depository should fail, go into receivership or conservatorship or if such funds are otherwise not available for reasons beyond Manager’s reasonable control.  Manager shall indemnify and hold harmless Owner from and against any and all Damages occurring by reason of any unauthorized application by Manager or its directors, officers, employees or representatives of any such funds held for the account of Owner, it being agreed that all expenditures made by Manager in a reasonable and good faith belief that same are authorized hereunder shall not be subject to said indemnity.

 

 

  

11

  

 

	
(C)  

	
Sweep accounts will be maintained in the name of the Owner in conjunction with the Operating Account in the event the average monthly balance of the Operating Account exceeds $250,000 for two (2) consecutive months.

 

	
(D)  

	
Manager shall ensure that security deposits are deposited promptly in the Security Deposit Account.  As needed, Manager shall withdraw such amounts from the Security Deposit Account as are necessary to (i) repay a security deposit (or portion thereof) to a Tenant as required pursuant to the terms of such Tenant’s Lease; and (ii) cause the transfer of a forfeited security deposit (or portion thereof) to the Operating Account.

 

	
(E)  

	
Upon commencement of this Agreement, Owner shall deliver to Manager a listing showing the current tenants of the Property who previously made Security Deposits under existing leases of the Property and will deliver the total amount of these Security Deposits via wire transfer to the Security Deposit Account established by the Manager for the Property.

 

 

	
2.8  

	
Payment of Expenses and Capital Expenditures

 

	
(A)  

	
Manager shall pay all expenses of operating the Property from the Operating Account in such amounts as are necessary to pay:

 

	
(i)  

	
Operating Expenses actually due and owing for such period;

 

	
(ii)  

	
Mortgage Interest Expense and principal payments; and

 

	
(iii)  

	
Actual Capital Expenditures for such period. At the discretion of Owner, Capital Expenditures may be required to be approved by Owner prior to payment or be funded separately by Owner.  If such an election is made, Capital Expenditures are to be requested based on actual expenditures and supported by actual invoices.  If and when a requisition is made, the Manager must provide the following:

 

	
(i)  

	
an itemization by category of all types of Capital Expenditures;

 

	
(ii)  

	
within each Capital Expenditure type, there shall be a one-line summary by type of improvement of the amount(s) previously spent, the amount of the current request and the estimated amount to complete the project;

 

	
(iii)  

	
a comparison to the original, approved Budget with an explanation for material variances; and

 

	
(iv)  

	
reasonable supporting documentation, such as invoices.

 

 

  

12

  

 

	
(B)  

	
If the funds on deposit in the Operating Account are insufficient or projected to be insufficient to cover the amounts necessary to pay the Operating Expenses, Debt Service or Capital Expenditures for such month,

 

	
(i)  

	
Manager shall promptly notify Owner, and Owner shall promptly make up such negative cash flow by depositing an amount equal to the deficit in the Operating Account. In such cases, Manager may, but shall not be obligated to, advance Manager’s own funds on behalf of Owner; and, if Manager makes any such advance from Manager’s own funds, Owner shall, within five (5) days of written demand by Manager, reimburse Manager for any such advance plus interest thereon at the rate per annum publicly announced by the Depository as its base or prime rate from the date of such advance to, but not including, the date of such reimbursement.

 

	
(ii)  

	
Until such time as Owner funding has been received, Manager shall prioritize payments from the Operating Account based on the following order of priority:  (1) third-party debt service payments, (2) reimbursement to Manager for cost salary, wages, payroll handling fee, taxes, insurance, workers compensation and other benefits for on-site employees as set forth in Section 2.2(B), (3) Manager’s management fees; (4) real estate taxes; (5) personal property taxes; (6) insurance premiums; (7) bills and charges for utilities; (8) other bills and charges of third parties related to the Property or the operation thereof with the oldest charges being paid first.

 

	
(C)  

	
Subject to the following sentence, Owner shall reimburse Manager for all actual, out of pocket expenses incurred and paid by Manager in connection with the management and operation of the Property pursuant to the Budget approved by Owner.

 

	
(i)  

	
Such expenses shall include but not be limited to salary and wages, payroll taxes, insurance, workers’ compensation, payroll handling fee and other benefits for Manager’s employees working on Property; advertising expenses; court costs; attorney’s fees; office supplies; long distance phone calls; postage; computer fees; overnight courier expense; and expenses related to training on-site personnel.

 

	
(ii)  

	
Such expenses shall not include (except as specifically provided herein or in the Schedules attached hereto)

 

	
(a)  

	
the cost of salary and wages, payroll taxes, insurance, workers compensation and other benefits of Manager’s management, accounting and office personnel unless  this personnel is filling a temporary vacancy of an approved, budgeted on-site position;

 

	
(b)  

	
travel expenses by Manager’s management, accounting and office personnel unless  this personnel is filling a temporary vacancy of an approved, budgeted;

 

 

  

13

  

 

	
(c)  

	
costs of providing the reports and documents to be provided pursuant to the provisions hereof, other than the costs and expenses incurred by Manager’s on site staff and the Auditor’s services hereunder.

 

 

	
2.9  

	
Services with Respect to Financing.

 

	
(A)  

	
Manager shall, at the expense of Owner, in accordance with the approved Budgets unless otherwise provided herein, duly and punctually pay and perform on behalf of Owner all of those Owner’s obligations so requested by Owner for any Financing and use its commercially reasonable efforts to comply with all of the terms and provisions of any documents executed and delivered by Owner relating to a Financing (the “Financing Documents”).

 

	
(B)  

	
Each of Manager and Owner shall promptly notify the other upon learning of any default, or event of default or event which, with the giving of notice or the passage of time or both, might constitute a default or an event of default under any Financing Document.  Manager shall consult with Owner concerning the action to be taken with respect thereto and, at the expense of Owner, take such action as Owner shall direct.

 

	
(C)  

	
Without the consent of Owner, Manager (i) shall not modify, or in any way alter, the provisions of any Financing Documents and (ii) shall not take any action, or omit to take any action, or give any notice, the taking, omission or giving of which might result in the occurrence of a default by Owner under any Financing Documents to the extent such terms and provisions are provided by Owner to Manager in writing.

 

	
(D)  

	
Each of Manager and Owner shall promptly notify the other upon receiving any notice under any Financing Documents (and furnish a copy of the notice received by it with its notice to the other party) of any default, event of default or condition which, with the giving of notice or the passage of time or both, might result in a default or event of default by Owner under any Financing Documents. Manager shall consult with Owner concerning the action to be taken with respect thereto and, at the expense of Owner, shall take such reasonable action as Owner shall direct.

 

	
(E)  

	
Upon written request by Owner, Manager shall prepare all information, schedules and reports necessary to calculate and/or support the covenants in any Financing Documents encumbering the Property, including, but not limited to, preparing rent rolls,  delivering historic income and expense data for Financings, and providing debt covenant compliance information including, but not limited to, rent rolls, annual budgets, audited financial statements and debt service coverage ratio calculations.

 

 

	
2.10  

	
Notification of Sale or Financing Transaction.

 

Notwithstanding anything to the contrary set forth in this Agreement, it shall be a material covenant of Owner under this Agreement that Owner deliver a written notice to Manager 

  

14

  

 

promptly upon becoming aware that any Person is offering or otherwise marketing the Property for sale or offering the Property as collateral in connection with or arising from any Financing.  Owner’s failure to comply with the foregoing covenant shall constitute a material default under this Agreement, entitling Manager to terminate this Agreement upon notice to Owner.

 

	
3.  

	
Services with Respect to Property Sales and Post Sale-Closing

 

With respect to any potential sale of the Property, the Manager shall cooperate in good faith with Owner during the due diligence process and, as necessary, and perform the following duties and obligations  during and after the sale process:

 

	
(i)  

	
Prepare current rent rolls, historic income and expense data and such other materials necessary to offer the Property for sale.

 

	
(ii)  

	
Process information requests as reasonably requested by Owner, or due diligence requests of potential buyers, including providing access to Lease files, financial statements, service contracts, and supporting billing and disbursement documentation.

 

	
(iii)  

	
Prepare and provide schedules and support for closing adjustments, including revenue and expense prorations and, if necessary, reconciliations of estimated billed recoverable expenses versus actual expenses.

 

	
(iv)  

	
Prepare final accounting for the sale of the Property and, as necessary, participate in the fieldwork and preparation of the financial statements or audited financial statements to be prepared by the Auditor, including, but not limited to, providing access to the Property’s books and records and having qualified personnel available during normal business hours to answer any questions which may arise during the fieldwork.

 

	
(v)  

	
Prepare the final expense and recoverable expense reconciliations relating to the proration of revenues and expenses for the sale of the Property.

 

	
(vi)  

	
Process any invoices, if applicable and as approved by Owner, for payments made relating to property expenses for a period not to exceed sixty (60) days after the sale date.

 

	
(vii)  

	
Prepare, upon the request of Owner, a final schedule of distributions to be made.

 

	
(viii)  

	
After processing property disbursements and distributions, Manager shall close all bank accounts for which it has authorization.

 

These post-closing duties and obligations may span a period not to exceed sixty (60) days.  The monthly Management Fee covering the post-closing period shall be the greater of 50% of the 

 

  

15

  

 

previous 12 month average management fee or $1,500 paid monthly until final accounting is complete.

 

	
4.  

	
Insurance

 

 

	
4.1  

	
Owner’s Insurance

 

Owner shall maintain in full force and effect with respect to the Property and any personal property of Owner located at the Property and used in connection therewith, insurance policies satisfactory to Owner issued by insurance companies having an A.M. Best General Policyholder’s Service rating of not less than “A-,VIII” (or otherwise satisfactory to Owner), which are licensed, or approved to do business, in the state in which the Property is located and which are otherwise satisfactory to Owner.  At the request of Owner, Manager shall obtain same at Owner’s expense, subject to the review and acceptance of all coverage by Owner. All policies maintained by or for the benefit of Owner shall provide the following coverages:

 

	
(A)  

	
“All Risk” property damage insurance including, without limitation, fire, flood, sprinkler leakage, water damage and earthquake coverage, if applicable and available at commercially reasonable rates, in an amount and with an agreed amount endorsement equal to the lesser of (i) an amount sufficient to prevent Owner from becoming a co-insurer in any loss under the policy or (ii) equal to the replacement cost of the Property, and a deductible reasonably approved by Owner.  The policies of insurance carried in accordance with this Section 4.1(A) shall contain (y) a replacement cost endorsement without deduction for depreciation or obsolescence and (z) a waiver of subrogation clause, all in form reasonably satisfactory to Owner;

 

	
(B)  

	
Rental value insurance on the Property, if applicable, with a minimum twelve (12) month indemnity period;

 

	
(C)  

	
Business Interruption Insurance, if applicable, on an eighty percent (80%) Gross Earnings Form, with a minimum twelve (12) month indemnity period and including ordinary payroll coverages;

 

	
(D)  

	
Commercial General and Excess Liability Insurance, written on an occurrence basis, including blanket contractual liability, products and completed operations and personal injury coverage with a combined single limit for any one occurrence of $5,000,000 or such higher limit as Owner may from time to time reasonably request.  Such requirement may be satisfied by a layering of Commercial General Liability, Umbrella and Excess Liability policies, but in no event will the liability insurance be written for an amount less than $5,000,000 combined single limit for bodily injury and property damage liability.

 

	
(E)  

	
Boiler and Machinery Breakdown Direct Damage Insurance and third party liability coverage (if not covered under the Commercial General Liability Policy) with full comprehensive coverage on a repair and replacement basis for all HVAC equipment,

 

  

16

  

 

	
 

	
electrical equipment, boilers and machinery which form a part of the Property including Business Interruption Coverage for Loss of Rental Income in connection therewith in accordance with Section 4.1(C) hereof;

 

	
(F)  

	
During the course of any construction or repair of Improvements or during the course of Restoration on the Property (other than Tenant leasehold Improvements), Builder’s Risk Insurance on a completed value basis and on a non-reporting form against “all risks of physical loss,” including flood (if available at commercially reasonable rates), earthquake (if available at commercially reasonable rates), collapse and transit coverage (if available at commercially reasonable rates), during construction of such Improvements or Restoration, with deductibles reasonably satisfactory to Owner, covering the replacement cost value of work performed and the equipment, supplies and materials furnished (unless such equipment, supplies and materials are required to be insured by contractors or vendors) and rent loss insurance for a period not less than twelve (12) months in an amount reasonably satisfactory to Owner.  Such policy of insurance shall contain a “permission to occupy upon completion of work or occupancy” endorsement, a waiver of coinsurance or an agreed amount endorsement and an agreement by the insurer that following a loss, the insurer will pay to the insured (i) the full value of the loss (less the deductible), provided that Owner is required to or elects to rebuild or (ii) the actual cash value of the loss in the event Owner is not required to or does not elect to rebuild; and

 

	
(G)  

	
Such other insurance with respect to the Property, in such amounts as Owner (or any lender in connection with a Financing) from time to time may require against such other insurable hazards which at the time are commonly insured against for Comparable Properties.

 

Manager shall submit all insurance policies it obtains on behalf of Owner pursuant to this Section 4.1 for Owner’s review and approval.

 

 

	
4.2  

	
Manager’s Insurance

 

Manager shall, at the expense of Manager, maintain in full force and effect insurance policies with respect to the employees of Manager in form reasonably satisfactory to Owner and issued by insurance companies having an A.M. Best General Policyholder’s Service rating of not less than “A-,VIII” which are licensed in the state in which the Property is located and which are otherwise reasonably satisfactory to Owner.  Such policies shall provide the following coverage:

 

	
(A)  

	
Worker’s compensation and employer’s liability insurance subject to the statutory limits of the state in which the Property is located.   Manager shall provide Owner with a certificate evidencing such coverage.

 

	
(B)  

	
Comprehensive automobile liability insurance covering owned, non-owned, and hired vehicles in an amount not less than $1,000,000 combined single limit for bodily injury and property damage.  Such requirements may be satisfied by layering of comprehensive automobile liability, umbrella and excess liability policies.

 

 

  

17

  

 

	
(C)  

	
Fidelity bond and computer crime insurance with an annual limit of a minimum of $1,000,000 for each director, officer, employee or agent of Manager associated with the management of the Property including the handling of receipts and disbursements.

 

	
(D)  

	
Commercial general and umbrella liability insurance, written on an occurrence basis, in an amount not less than $1,000,000 and $10,000,000, respectively.  Such umbrella liability insurance shall apply in excess of the commercial general liability insurance and the insurance required in Sections 4.2(a) and 4.2(b).

 

	
(E)  

	
Professional liability insurance with an annual limit not less than $1,000,000 per occurrence and in the aggregate with an extended period of indemnity.  Such insurance policy shall survive the termination or expiration of this Agreement for a minimum period of two (2) years following the expiration or termination of this Agreement.

 

 

	
4.3  

	
Blanket Insurance

 

Manager may effect any coverage required under this Article 4 under a blanket insurance policy reasonably satisfactory to Owner, provided that (i) any such policy of blanket insurance either shall specify therein, or the insurer under such policy shall certify to Owner, (a) the maximum amount of the total insurance afforded by the blanket policy allocated to the Property and (b) any sub limits in such blanket policy applicable to the Property, which amounts shall not be less than the amounts required pursuant to this Article 4; (ii) any such policy of blanket insurance shall comply in all respects with the other provisions of this Article 4; and (iii) the protection afforded under any policy of blanket insurance hereunder shall be no less than that which would have been afforded under a separate policy or policies relating only to the Property.

 

 

	
4.4  

	
Policies

 

	
(A)  

	
The insurance maintained under Section 4.1 shall name Owner as the Insured and Manager as additional insured as their interests may appear.  Such insurance may also be extended to name other persons as Owner may specify, from time to time, as additional insureds as their interests may appear.

 

	
(B)  

	
The insurance maintained under Section 4.2 shall name Manager as the insured thereunder.  The insurance maintained under Section 4.2(B) and (D) shall name Owner and such other persons as Owner may specify, from time to time, as additional insureds as their interests might appear.

 

	
(C)  

	
All insurance maintained under this Article 4 shall provide that (i) no cancellation or reduction thereof shall be effective until at least thirty (30) days after receipt by Owner and Manager of written notice thereof and (ii) all losses shall be payable notwithstanding any act or negligence of Manager or any Tenant or their partners, directors, officers, employees or agents which might, absent such agreement, result in a forfeiture of all or part of such insurance payment and notwithstanding (a) the

 

 

  

18

  

 

	
 

	
occupation or use of the Property for purposes more hazardous than permitted by the terms of such policy, or (b) any foreclosure or other action or proceeding taken pursuant to the provision of any mortgage with respect to the Property or (c) any change in title or ownership of the Property.  In the event of a Financing all insurance shall comply with the terms of the Financing Documents.

 

	
(D)  

	
Manager shall furnish to Owner, upon request, certificates of insurance or other evidence satisfactory to Owner of the renewal thereof, and evidence satisfactory to Owner of payment of the premiums therefore.  Upon Owner’s request, Manager shall deliver a copy of each policy certified to be a true copy by the insurer or insurance broker with respect to such policy.

 

 

	
4.5  

	
Payment of Premiums by Owner

 

If Manager fails to maintain the insurance required to be maintained under this Article 4 or fails to deliver evidence of insurance, Owner may, but shall not be obligated to, obtain such insurance and pay the premiums therefore and in the case of the insurance described in Section 4.2 or the duplication of any other insurance described in Article 4, Manager shall, on demand, reimburse Owner for all actual sums advanced and reasonable expenses incurred in connection therewith.

 

 

	
4.6  

	
Claims

 

In the event of a loss related to the Property under any of the insurance policies described in Sections 4.1 and 4.2(B), (C) and (D), Manager shall, if Manager has knowledge of the loss, promptly after learning of same, file a claim on behalf of Owner (and Manager if such party is also an insured) and use commercially reasonable efforts to diligently monitor such claim on behalf of such insured party and cooperate in good faith with any appointed representatives, consultants and adjusters retained by or on behalf of the insurance companies’ interests.

 

 

	
4.7  

	
Subrogation

 

Owner shall waive all rights of subrogation against Manager under its property insurance policies referred to in Section 4.1 and such waiver of subrogation will not affect the effectiveness of coverage of such policies and Owner will obtain an endorsement, if necessary to confirm that the waiver of subrogation herein granted will in no manner affect the coverage of such policies.

 

	
5.  

	
Manager’s Compensation

 

 

	
5.1  

	
Management Fees

 

	
(A)  

	
Owner shall pay Manager, and Manager shall accept, as compensation for Manager’s management services during the Term a fee (the “Management Fee”) on a monthly basis in an amount equal to 3.0% of Gross Receipts actually collected by Manager during that month.

 

 

  

19

  

 

	
(B)  

	
The Management Fee for any month shall be estimated and paid as an Operating Expense on the 1st day of the month to which it relates.  Reconciliation and true up of the Management Fee estimate will be calculated as part of the month end close out and will be paid as an Operating Expense on the 10th of the following monthly.  Subject to Section 2.8(C), Manager is hereby authorized to pay itself the Management Fee from the Operating Account.

 

	
(C)  

	
For the purposes of this Section 5.1, the term “Gross Receipts” shall mean all amounts actually collected as rents or other charges for use or occupancy of space or facilities in the Property, including furniture rental, forfeited security deposits, pet fees, application fees, decorating fees, late charges, collections from residents for water, sewer, electric, gas, oil and trash, royalties received for laundry equipment/services, cable/telephone/Internet services, insurance proceeds received as business loss compensation, and all other miscellaneous income with respect to the Property, but excluding other receipts, such interest or investment income, security deposits (unless and until forfeited), insurance proceeds received as replacement cost, tax refunds, Condemnation awards, dividends on insurance policies and proceeds of any other Capital Event or sale.

 

 

	
5.2  

	
New Construction Fees

 

	
  

	
To be negotiated.

 

 

	
5.3  

	
Renovation/Capital Projects/Insurance Rehabilitation Fees

 

TBD% of the cost of any capital project exceeding $10,000, not including regular recurring interior capital replacements such as carpet, floor vinyl and appliance replacements.  Additionally, if the services of a Capital Projects Manager is required, Manager will be charged to the Property $40.00 per hour for time worked plus travel time, travel expense and accommodations expense.

 

 

	
5.4  

	
For Capital Event (Refinance, Sale, etc.)

 

	
  

	
To be negotiated.

 

 

	
5.5  

	
Payroll Handling Fee

 

	
  

	
$15.00 per employee per payroll.

 

 

	
5.6  

	
Training

 

As needed, Manager will charge the property for the direct costs of travel and accommodations for the on-site personnel for attendance at required training and corporate conference events.

 

  

20

  

 

	
6.  

	
Term

 

 

	
6.1  

	
Term

 

The Term shall commence as of the date hereof and shall expire on the first (1st) anniversary of the date hereof (the “Initial Term”), unless extended or sooner terminated as hereinafter provided.

 

 

	
6.2  

	
Extension

 

After the expiration of the Initial Term, subject to termination under Section 6.3, the term of this Agreement shall be automatically extended on an annual basis unless terminated by Owner or Manager by written notice to the other not less than thirty (30) days’ prior to the end of the Initial Term or the then current Term, as applicable, given to the other party.

 

 

	
6.3  

	
Termination

 

	
(A)  

	
In the event of the sale of all or substantially all of Owner’s interest in the Property by Owner (including any sale by agreement, foreclosure or otherwise), this Agreement shall terminate upon the consummation of such sale.

 

	
(B)  

	
If any one or more of the following events (each an “Event of Default”) shall occur and be continuing:

 

	
(i)  

	
if Manager shall assign this Agreement or delegate its duties hereunder without the consent of Owner;

 

	
(ii)  

	
if any material license or qualification held by Manager and necessary for the performance of its duties or services hereunder shall be terminated or suspended, and such termination or suspension, as the case may be, is not reversed within fifteen (15) days following notice thereof by the applicable licensing authority or Owner;

 

	
(iii)  

	
if Manager or any of its directors, officers or employees shall misappropriate any funds of Owner or otherwise be guilty of gross negligence, willful misconduct, bad faith fraud, malfeasance, breach of fiduciary duty, or criminal misconduct in connection with Manager’s duties hereunder;

 

	
(iv)  

	
if Manager or Owner shall fail to pay any amount payable to the other party under this Agreement when due and such default shall continue for ten (10) days after notice thereof to the defaulting party;

 

	
(v)  

	
(a) if Manager or Owner shall fail to comply with any provision of this Agreement (other than those described in Section 6.3(B)(i) through (iv) and

 

 

  

21

  

 

	
 

	
(vi) through (viii)) and such Default shall continue for ten (10) days after notice of such Default is given by Owner to Manager; or (b) if such Default cannot reasonably be cured within such ten (10) day period, if Manager or Owner shall fail to commence the curing of such Default within such ten (10) day period (and to notify the other party within such ten (10) day period that Manager or Owner has commenced such cure and will prosecute such cure diligently and complete the same, which notice shall specify Manager’s or Owner’s estimate of the time period within which such cure will be completed) or, thereafter, shall fail to prosecute such cure diligently and complete the same within sixty (60) days; or (c) if, after the ten (10) day period described in clause (a) of this Section 6.3(B)(v), the other party is subject to any criminal liability or unbonded civil liability, the Property is subject to any unbonded Lien or the non-defaulting party or the Property is subject to any material risk of loss by reason of the defaulting party’s failure to comply with such provision of this Agreement;

 

	
(vi)  

	
if Manager shall fail to follow any lawful direction of Owner with respect to the Property which direction complies with this Agreement and such Default shall continue for three (3) Business Days after notice of such Default given by Owner to Manager;

 

	
(vii)  

	
(a) if Manager or Owner shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidation, custodian or other similar official of its or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (b) if an involuntary case or other proceeding shall be commenced against Manager or Owner seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidate, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty (60) days; or (c) if an order for relief shall be entered against Manager or Owner under any bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect; or

 

	
(viii)  

	
if there shall be a dissolution or termination of the corporate existence of Manager or Owner by merger, consolidation or otherwise;

 

then, while any such Event of Default shall be continuing, the non-defaulting party shall have the right to terminate this Agreement by notice to the defaulting party 

 

  

22

  

 

and to exercise any and all other rights and remedies available under this Agreement and at law or in equity.  Notwithstanding anything to the contrary contained herein while any such Event of Default shall be continuing beyond any applicable cure period, the non-defaulting party may, at its option, elect to terminate this Agreement.

 

	
(C)  

	
[Notwithstanding anything to the contrary contained herein, Owner shall have the right to terminate this Agreement upon thirty (30) days’ prior notice to the Manager, with or without cause.]

 

	
(D)  

	
[Notwithstanding anything to the contrary contained herein, Manger shall have the right to terminate this Agreement upon thirty (30) days’ prior notice to the Owner, with or without cause.]

 

	
(E)  

	
In the case of an Event of Default under Sections 6.3 (B) (vii) (a) or (c), the notice of termination shall be deemed to have been given upon the occurrence of such Event of Default.

 

	
(F)  

	
Following the expiration or termination of this Agreement, Manager shall cooperate in good faith with Owner and Owner’s agent and representatives to effectuate an orderly transition in connection with the management and/or operation of the Property.  Following the expiration or termination of this Agreement, Manager shall promptly deliver to Owner (i) all books, records, leases, agreements, and other documents and instruments in Manager’s possession or control relating to the Property, or the management or operation thereof, and (ii) the unused inventory of all supplies, materials, tools and equipment owned by Owner and used in connection with the management and/or operation of the Property, and (iii) all keys to any locks on the Property then in the possession of Manager, together with any plans and specifications pertaining to the Property then in the possession of Manager.  The provisions of this Section 6.3(E) shall survive the expiration or termination of this Agreement.

 

	
7.  

	
Miscellaneous

 

 

	
7.1  

	
Notices

 

All notices, requests, permissions, waivers and other communications (individually and collectively, a “Notice”) to either party hereunder shall be in writing and, unless otherwise specified herein, shall be delivered by hand, facsimile, United States registered or certified mail, return receipt requested, United States Express Mail, Federal Express, Airborne Express or any other national overnight express delivery service (in each case postage or delivery charges paid by the party giving such communication) addressed to the party to whom such communication is given at its address or facsimile number set forth in Part I.

 

Unless otherwise specified herein, each such Notice addressed and given as set forth above shall be effective (i) the date of receipt of such Notice, or attempted delivery of such Notice if receipt is 

 

  

23

  

refused; and (ii) if sent by mail as aforesaid, the date which is seventy-two (72) hours after such Notice is deposited in the mail, postage prepaid as aforesaid.  Any party listed above may change its address under this Section 7.1 by delivering Notice to the other parties listed above, provided that no such address shall be located outside of the United States of America.

 

 

	
7.2  

	
Representations and Warranties

 

	
(A)  

	
Manager represents and warrants to Owner that (i) Manager is a limited liability company duly organized and validly existing and in good standing under the laws of the State of North Carolina and has all requisite power and authority to carry on its business as now conducted and to execute, deliver and perform its obligations under this Agreement; (ii) the execution, delivery and performance by Manager of this Agreement are within its power, have been authorized by all necessary corporate action and do not contravene any provision of its operating agreement or certificate of formation; (iii) this Agreement has been duly executed and delivered by Manager; (iv) this Agreement is a valid and binding obligation of, Manager; (v) the execution, delivery and performance by Manager of this Agreement do not conflict with or result in a breach of any of the provisions of, or constitute a default under, any bond, note or other evidence of indebtedness, indenture, mortgage, deed of trust, loan agreement or similar instrument, any Lease or any other material agreement or contract by which Manager, or its activities or the Property, is bound or any applicable law or order, rule or regulation of any court or governmental authority having jurisdiction over Manager, its activities or the Property; and (vii) to Manager’s knowledge, no order, permission, consent, approval license (other than those already held by Manager), authorization, registration or filing by or with any governmental authority having jurisdiction over Manager, its activities or the Property is required for the execution, delivery or performance by Manager of this Agreement.

 

	
(B)  

	
Owner represents and warrants to Manager that (i) Owner is duly organized and validly existing and in good standing under the laws of the State as indicated herein and has all requisite power and authority to carry on its business as now conducted and to execute, deliver and perform its obligations under this Agreement; (ii) the execution, delivery and performance by Owner of this Agreement are within its power, have been authorized by all necessary corporate action and do not contravene any provision of its operating agreement or certificate of formation; (iii) this Agreement has been duly executed and delivered by Owner; (iv) this Agreement is a valid and binding obligation of, Owner; (v) the execution, delivery and performance by Owner of this Agreement do not conflict with or result in a breach of any of the provisions of, or constitute a default under, any bond, note or other evidence of indebtedness, indenture, mortgage, deed of trust, loan agreement or similar instrument, any Lease or any other material agreement or contract by which Owner, or its activities or the Property is bound or any applicable law or order, rule or regulation of any court or governmental authority having jurisdiction over Owner, its activities or the Property; and (vii) to Owner’s knowledge, no order, permission, consent, approval license (other than those already held by Owner), authorization,

 

 

  

24

  

 

	
 

	
registration or filing by or with any governmental authority having jurisdiction over Owner, its activities or the Property is required for the execution, delivery or performance by Owner of this Agreement.

 

	
7.3  

	
No Partnership, etc.

 

Nothing in this Agreement shall be construed as making Owner or Manager partners, joint ventures or members of a joint enterprise or as creating between Owner and Manager any employer employee relationship.

 

 

	
7.4  

	
Severability

 

If any provision of this Agreement or the application thereof to any Person or circumstances shall be held invalid or unenforceable, the other provisions of this Agreement or the application of such provision to other Persons or circumstances shall not be effected thereby but shall continue to be valid and enforceable to the fullest extent permitted under applicable law.

 

 

	
7.5  

	
Modification

 

Except as specified herein, no provision of this Agreement shall be modified, waived or terminated except by an instrument in writing signed by the party against whom such modification, waiver or termination is to be enforced.

 

 

	
7.6  

	
Successors and Assigns

 

	
(A)  

	
This Agreement shall be binding upon and inure to the benefit of Manager and Owner and their respective successors and assigns, and all references in this Agreement to “Manager” and “Owner” shall include the respective successors and assigns of such parties.

 

	
(B)  

	
Notwithstanding anything to the contrary contained herein, Manager shall not assign this Agreement or delegate its duties and obligations hereunder without the prior written consent of Owner, which consent may be granted or withheld in the sole and absolute discretion of Owner.

 

 

	
7.7  

	
Limitation of Liability

 

Notwithstanding anything to the contrary, if Manager shall recover any judgment against Owner in connection with this Agreement, Manager shall look solely to Owner’s interest in the Property for the collection or enforcement of any such judgment, and no other assets of Owner shall be subject to levy, execution or other process for the satisfaction or enforcement of such judgment, and neither Owner nor any Person having an interest in Owner shall be liable for any deficiency.  Manager’s employees, officers, directors, members and shareholders shall not be personally liable for any of Manager’s liabilities arising under this Agreement.

 

 

  

25

  

 

	
7.8  

	
Governing Law

 

This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, without regard to principles of conflicts of laws.  Manager and Owner, after consulting or having had the opportunity to consult with counsel, knowingly, voluntarily and intentionally waive any right they may have to a trial by jury in any action brought with respect to this Agreement or any of the transactions contemplated by this Agreement or any course of conduct, dealing, statements (whether oral or written) or actions of any party to this Agreement.  Manager and Owner shall not seek to consolidate, by counterclaim or otherwise, any such action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived.  These provisions shall not be deemed to have been modified in any respect or relinquished by either party except by a written instrument executed by such party.

 

 

	
7.9  

	
Counterparts

 

This Agreement may be signed in any number of counterparts, each of which shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were on the same instrument.

 

 

	
7.10  

	
Exclusive Benefit

 

Neither this Agreement nor any provision hereof nor any service, relationship or other matter alluded to herein shall inure to the benefit of any third party (except a successor or assign of Owner and its mortgagees, if any), to any trustee in bankruptcy, to any assignee for the benefit of creditors, to any receiver by reason of insolvency, to any other fiduciary or officer representing a bankrupt or insolvent estate of either party, or to the creditors or claimants in such an estate.  Without limiting the generality of the foregoing sentence, it is specifically understood and agreed that insolvency or bankruptcy of either party hereto shall, at the option of the other party, void all rights of such insolvent or bankrupt party hereunder (or as many of such rights as the other party shall elect to void) except to receive any moneys which are due to the insolvent or bankrupt party.

 

 

	
7.11  

	
Attorneys’ Fees

 

If either party hereto shall obtain a judgment against the other party in connection with a dispute arising under or in connection with this Agreement (whether in an action or through arbitration), such party shall be entitled to recover its court (or arbitration) costs, and reasonable attorneys’ fees and disbursements incurred in connection therewith and in any appeal or enforcement proceeding thereafter, in addition to all other recoverable costs.

 

 

	
7.12  

	
Nondiscrimination

 

Manager hereby agrees, warrants and assures that no person shall be excluded from participation in, be denied benefits of, or be otherwise subjected to discrimination in the performance on this Agreement or in the employment practices of Manager on the grounds of disability, age, race, color, religion, sex, national origin, or any other classification protected by Federal or state constitutional 

 

  

26

  

 

or statutory law.  Manager shall, upon request, show proof of such nondiscrimination and shall post in conspicuous places, available to all employees and applicants, notices of nondiscrimination.

 

IN WITNESS WHEREOF, Owner and Manager have executed and delivered this Agreement as of the date first above written.

 

Owner:

 

BSF-St. Andrews, LLC

 

By:       _________________________    

Name:  __________________         

Title:    ___________________       

Manager:

 

Hawthorne Residential Partners, LLC

 

By:       _________________________       

Name:  __________________         

Title:    ___________________        

 

  

27

  

 

Exhibit A

 

 

 

 Monthly Reporting Package Due Date:   15th of each month

 

 Delivery Method:  Electronic

 

 Monthly Reporting Package Table of Contents

 

 

	 	
(1)      

	
Balance Sheet

 

	 	
(2)      

	
Month-to-Date and Year-to-Date Budget Comparison Report;

 

	 	
(3)      

	
13 Month Rolling Profit and Loss Statement;

 

	 	
(4)      

	
Statement of Cash Flows;

 

	 	
(5)      

	
Comparative Balance Sheet showing current month and prior month balances;

 

	 	
(6)      

	
General Ledger for the current month;

 

	 	
(7)      

	
Variance Report with narrative explanations of all material variances (i.e., those exceeding the lesser of five percent (5%) or $1,000 of an individual Budget category of income or expense (actual compared to Budget) for the reporting period on a monthly and Fiscal Year to date basis;

 

	 	
(8)      

	
Rent Roll as of month end close out;

 

	 	
(9)      

	
Aged Accounts Receivable Summary (i.e. Tenant Delinquent Report);

 

	 	
(10)  

	
Accounts Receivable activity statement itemizing for the reporting period the opening rents receivable balance, the collected and billed rents, the closing rents receivable balance and any advanced rent and security deposit balances;

 

	 	
(11)  

	
 Monthly Management Fee Calculation and Fiscal Year to date reconciliation;

 

	 	
(12)  

	
Aged Payables schedule;

 

	 	
(13)  

	
Market Survey detailing leasing activity at the Property, the competitive environment vacancy rate for the relevant market in which the Property is locate for the current month.

 

 

Each of the above-described monthly reports shall be prepared, where applicable, on a Cash Basis of accounting or on such other basis set forth in Section 2.6(G).

 

  

28

  

 

Exhibit B

 

 Monthly Cash Flow Distribution Calculation

 

 

29

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00179-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00179-of-00352.parquet"}]]