Document:

exv10w8

 

Exhibit 10.8

Management Agreement

Harding Place Retirement Community

Between

The Covenant Group, Inc.

Senior Living Specialists

and

Harding Place, Inc.

	 	 	 	 	 
	The Covenant Group, Inc.

	 	 
	 	Harding Place, Inc.
	5601 Bridge Street, Suite 250

	 	 	 	Box 2256, 900 E Center
	Fort Worth, Texas 76112

	 	 	 	Searcy, AR 72149-0001
	###-##-####

	 	 	 	501-279-4274

 

 

Management Agreement

     This Management Agreement made and entered into by and between
Harding Place, Inc. and/or Assigns (hereinafter referred to as “Owner”),
and The Covenant Group, Inc., a Texas corporation, and/or assigns
currently related to The Covenant Group, Inc., Fort Worth, Texas,
(hereinafter referred to as “Manager”).

     Whereas, Owner is building a certain Retirement Facility,
hereinafter referred to as “Facility,” at Searcy, White County, Arkansas,
and

     Whereas, Owner desires to engage Manager, by this Agreement, to
provide management services to operate the Facility, and

     Whereas, Manager is engaged in the business of managing, retirement
housing communities and in providing the related management services for
retirement housing communities.

     Now, Therefore, in consideration of their mutual covenants herein
contained, Owner hereby engages Manager to perform the duties and to
provide the services hereinafter described and Manager does hereby accept
such engagement on the terms and conditions hereinafter set forth.

Section One

Control and Management

     1.1 Control. Owner shall be the Owner and holder of all leases,
licenses, permits, occupancy agreements, and contracts in connection with
the Facility. Owner shall at all time exercise control over the assets
and the affairs of the Facility, and Manager shall perform the duties
herein required to be performed by it as Independent Contractor of Owner
and with the policies and directives from time to time adopted by Owner.
Owner shall, at all time, be responsible for the direction of the
Facility and for general supervision over activities of Manager.

     1.2 Financial Requirements. Manager will present to Owner for its
approval annual fiscal year Operating Budgets, Capital Budgets and Cash
Flow Budgets necessary for the operation of the Facility. Upon receiving
prior written approval of the proposed budgets by Owner, Manager will
carry out the operating, capital and cash flow programs as reflected by
the operating, capital and cash flow budgets of the Facility as proposed
and approved, to the extent that funds are made available by Owner.
Manager will not enter into contracts in excess of $1,000.00 without
prior written consent of Owner.

     1.3 Reports. Manager shall furnish Owner with a monthly report
detailing the performance of the Facility during the preceding month. The
report shall contain, among other things, statistics regarding occupancy,
expenses incurred, revenues, a profit and loss statement and similar
matters along with supporting documentation. Additionally, narrative
explanation will be provided as an addendum to said report as Manager
deems reasonably necessary or as requested by Owner to make the report
informative. Monthly

Harding Place Management Agreement – Page 1

 

reports shall be furnished to Owner no later than the close of
business on the 15th day of the calendar month next following the month
for which the report is being made. Owner shall at all time be entitled
to audit all books and records pertaining to the facility.

     1.4 Ownership of Books and Records. All books and records relating
to the Facility shall be owned by the Owner. Upon termination of this
Agreement, all records, books, computer software, files, and other
similar items shall remain or be delivered to the Facility for the
benefit of Owner.

     1.5 General Management. Subject to the foregoing, Manager is hereby
given general authority to supervise and manage the day-to-day operation
of the Facility and to perform the specific duties hereinafter set out.

Section Two

Management Services

     Management Services to be provided shall include the following
specific activities which shall be performed by Manager within the
guidelines established by Owner.

     2.1 Inventory. Preparation of specifications of quality and
quantity of supplies necessary for the continuity of operation.

     2.2 Operating Qualification. Assistance in obtaining and/or
maintaining appropriate Licenses and Permits for the operation of the
Facility.

     2.3 Maintenance or Qualification. Assistance in qualifying the
Facility to receive maximum benefits from Federal, State, and Local
agencies, when and if available.

     2.4 Personnel. Manager shall interview, hire, train, pay,
supervise, and discharge the personnel necessary to be employed in order
to properly maintain and operate the Facility, including, without
limitation, any Administrator or Supervisory Personnel who shall reside
at the Facility, subject to approval by Owner. Such personnel shall in
every instance be deemed employees of Manager and not of Owner, and Owner
shall have no right to supervise or direct such employees. All reasonable
salaries, wages, and other compensation of personnel employed by Manager
hereunder, including so called fringe benefits, medical and health
insurance, pension plans, social security, taxes, workmen’s compensation,
insurance, and the like, shall be deemed to be reimbursable expenses of
Manager. In this connection, Manager shall provide Owner with schedules
listing all employees utilized at Facility including their number,
titles, salary, fringe benefits, and evidence of bonding or coverage
under Manager’s crime insurance policy.

     Nothing contained in this Agreement shall be deemed or construed to
create a partnership or joint venture between Owner and Manager or to
cause Manager to be responsible in any way for the debts or obligations
of Owner or any other party (but nothing contained herein shall affect
Manager’s responsibility to transmit payments for the account of Owner as
provided herein), it being intention of the parties that the only

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relationship hereunder is that of Manager and Owner, and Manager
will not represent to anyone that its relationship to Owner is other than
that set forth herein.

     2.5 Accounting Reports. Institute adequate procedures and forms for
furnishing to Owner monthly operating statements.

     2.6 Standard of Services. Monitor the quality of services provided
by the Facility on a continuing basis and make every effort to maintain
the highest level of service possible within budget limitations.

     2.7 Prices. Recommend participating in or contracting for goods or
services which can reduce expenses of the operation.

     2.8 Vendors. Make available to the Facility such supply and
equipment Purchasing Contracts that are or may become available which
could reduce expenses of operation. Manager shall, subject to limitations
in Paragraph 1.2 hereof, enter into such contracts on behalf of and in
Owner’s name.

     2.9 Business Systems. Develop, implement, and supervise business
office systems, including accounting, bookkeeping, payroll and the timely
payment of appropriate taxes on behalf of Owner.

     2.10 Staffing and Operation Systems. Monitor and supervise staffing
levels, materials handling, equipment utilization, scheduling systems,
and inventory controls throughout the Facility and on a quarterly basis
report on the effectiveness of such activities.

     2.11 Insurance. Manager shall review the Facility’s insurance needs
and make recommendations with respect thereto to Owner. With prior
written approval of Owner, Manager shall enter into Insurance Contracts
of behalf of Owner.

     2.12 Government Regulation. Manager shall, within financial limits,
use its best efforts to cause all things to be done in and about the
Facility necessary to comply with the requirements of all applicable
statutes, ordinances, laws, rules, regulations, or order of any
governmental or regulatory body having jurisdiction in the premises,
respecting the use of the Facility, maintenance, or operation thereof,
including State, Federal, or Local Regulation.

     2.13 Deposit and Disbursement of Funds. All income or other monies
received from the operation of the Facility together with all accounts
and all other assets or property generated, created or which shall accrue
from the operation of the Facility shall belong to Owner and shall be its
property absolutely. Payment of all operating costs, wages, salaries,
expenses, and fees incurred or sustained in the operation of the Facility
is solely the obligation of Owner. Owner shall designate the depository
to be used by Manager in connection with the operation of the Facility.
All monies received from the property shall be deposited in a control
account accessible only by Owners. A separate account also belonging to
Owner but accessible by Manager shall be used to pay

Harding Place Management Agreement - Page 3

 

operating expenses. In all events, appropriate accounting
safeguards to ensure the integrity of the accounts will be instituted by
Owner and complied with by Manager.

     2.14 Collection of Accounts. Manager shall supervise and direct the
collection of all accounts due owner and shall take all reasonable steps
necessary to minimize the amount of bad debts.

     2.15 Legal Actions. Manager shall, with prior written approval of
Owner, institute in the name and at the expense of Owner, any and all
legal actions or proceedings necessary to collect charges, rent or other
sums due the Facility or to evict or dispossess Tenants or other persons
unlawfully in possession under any Lease, Rental Agreement, License, or
Concessionaire.

     2.16 Rates. Manager and Owner recognize the importance of
maintaining rates which enable the Facility to pay its obligations while
minimizing cost to Tenants. From time to time, Manager will recommend to
Owner, for approval, rate structures which take into account the
financial obligations of the Facility and the level or rates at other
comparable Facilities nearby.

     2.17 Shortfall or Excess Revenue. Any shortfall in the operations
of the Facility shall be funded to Manager by Owner on or before the 15th
of each month following the month such shortfall occurs.

     2.18 Indemnification. Manager shall indemnify and hold harmless
Owner for any loss, damage, liability, costs, or expenses (including
reasonable attorney’s fees) arising from the performance or
non-performance of contractual an customary responsibilities undertaken
as Manager of Facility. If Manager is expressly directed by Owner to
perform or not perform some duty or action that Manager would have
otherwise taken, Manager may request that Owner provide certain
indemnities or other assurances that Manager will be relieved of any
liability in said performance or non-performance of such duty or action.

Section Three

Management Fee

     Management Fee. Owner shall pay Manager a fee hereunder an amount
equal to $3,000 per month for ongoing management, beginning November 1,
1996. On January 1, 1997 the fee will increase to $4,000 per month. On
April 1, 1997, the anticipated beginning of resident occupancy, the fee
will increase to $5,000 per month. Thereafter, upon achieving eighty
percent (80%) occupancy of the Retirement Housing Community for two
consecutive months, the fee will increase to $6,000 or 4.5% o of Gross
Revenue per month, whichever is greater. Notwithstanding anything to the
contrary, the management fee shall not exceed $6,000 per month. Such fee
shall be paid each month, payable on or before the tenth day of each
month for the preceding month. In addition to the management fee, Owner
shall reimburse Manager for travel and related expenses.

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Section Four

Term

     Term. The primary term of this Agreement shall be for a period of
three (3) years commencing on the date the contract is executed and shall
automatically be extended for successive additional terms of three (3)
years unless terminated as is hereinafter provided. This Agreement may be
terminated with or without cause upon thirty (30) days prior written
notice by either party.

Section Five

Miscellaneous

     5.1 Notices. Any notice or other communications by either party to
the other shall be in writing and shall be given and deemed to have been
given, if either delivered personally or mailed postage prepaid,
registered or certified mail addressed as follows:

	 	 	 
	To Owner:

	 	David Burks, President
	

	 	Harding Place, Inc.
	

	 	Box 2256, 900 E. Center
	

	 	Searcy, AR 72149-0001
	 
	 	 
	To Manager:

	 	Gary D. Staats, President
	

	 	The Covenant Group, Inc.
	

	 	5601 Bridge Street, Suite 250
	

	 	Fort Worth, TX 76112

     5.2 Inadvertent Non-Performance. Manager shall not be deemed to be
in violation of this Agreement if it is prevented from performing any of
its obligations hereunder for any reason beyond its control, including
without limitation, acts of God, fire, the elements, flood, strikes,
limitations of Facility’s financial resources, or statutory regulations
or rules of the Federal, State, or Local Government or any Agency
thereof.

     5.3 Modification and Changes. This Agreement can not be changed
modified except by other Agreement in writing and duly executed by both
parties.

     5.4 Manager as Independent Contractor. It is expressly agreed by
both parties hereto that Manager is at all time hereunder acting and
performing as Independent Contractor and that no act, commission or
omission of either party hereto shall be construed to make or render the
other party, its agent, joint venturer, or associate, except to the
extent specified herein.

     5.5 Authority of Manager. Manager represents to Owner that Manager
is fully qualified to manage and perform all obligations under this
Agreement.

     5.6 Construction. In the event one or more of the provisions
contained in the Agreement shall be invalid, illegal, or unenforceable in
any respect under applicable law, the validity, legality, and
enforceability of the remaining provisions hereof shall not in any way be
impaired thereby.

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     5.7 Heading. The headings contained herein are for reference only
and are not intended to define, limit, or describe the scope or intent of
any provision of the Agreement.

     5.8 Governing Law. This Agreement shall be deemed to have been made
and shall be construed and interpreted in accordance with the laws of the
State of Arkansas, and performance in White County, Arkansas.

     5.9 No Assignment by Manager. This Agreement may not be assigned by
Manager without the expressed written consent of Owner.

     5.10 Binding. This Agreement shall be binding upon and shall inure
to the benefit of the respective successors and assigns (where permitted)
of the parties hereto.

     5.11 Effective Date. This Agreement shall be effective the date the
last of the parties sign as indicated below.

     5.12 Signing. The parties hereto signed this Agreement on the dates
specified below.

Harding Place Management Agreement - Page 6

 

	 	 	 	 	 
	

	 	Owner
	 	 
	 
	 	 	 	 
	

	 	Harding Place, Inc.	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	By:

	 	/s/ David B. Burks	 	 
	

	 	
 	 	 
	

	 	David B. Burks	 	 
	

	 	Its President	 	 
	 
	 	 	 	 
	

	 	8-9-96	 	 
	

	 	
 	 	 
	

	 	Date	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	

	 	Manager	 	 
	 
	 	 	 	 
	

	 	The Covenant Group, Inc.	 	 
	By:

	 	/s/ Gary D. Staats	 	 
	

	 	
 	 	 
	

	 	Gary D. Staats	 	 
	

	 	Its President	 	 
	 
	 	 	 	 
	

	 	8-16-96	 	 
	

	 	
 	 	 
	

	 	Date	 	 

Harding Place Management Agreement - Page 7exv10w9

 

Exhibit 10.9

MANAGEMENT AGREEMENT

     This Management Agreement (“Agreement”) is made as of December 1, 2003,
between the Grand Prairie Housing Finance Corporation, a public non-profit
housing finance corporation (the “Issuer”) and CGI Management, Inc., a Delaware
corporation (the “Manager”).

	1.	 	Appointment and Acceptance. The Issuer appoints the Manager as exclusive
agent for the management of the Project described in Section 2 of this
Agreement, and the Manager accepts the appointment, subject to the terms
and conditions set forth in this Agreement. The Manager acknowledges that
it will manage the Project on behalf of and under the control of the
Issuer and Majority Holder, if any, (as such term is defined in the
Indenture) in a manner consistent with the requirements and limitations
set forth in this Agreement, in accordance with the Facility Standard, all
applicable laws and regulations and in manner reasonably calculated to a)
protect and preserve the assets that comprise the Project, b) maximize
financial return to the Issuer, and c) control operating expenses.
	 
	2.	 	Description of the Project. The property (herein, the “Project”) to be
managed by the Manager under this Agreement is, an independent senior
retirement living community to be developed by The Covenant Group of
Texas, Inc. (“Developer”) in accordance with the Facility Site consisting
of the land, buildings, and other improvements including a, library,
theatre, activity room, beauty/barber shop, dining, room and supporting
kitchen spaces and other amenities also described as follows:

124 Unit independent senior retirement living-
community to be developed by Developer on
approximately 7.527 acres located at the southwest
corner of Corn Valley and Freetown Roads, Grand
Prairie, Texas.

	3.	 	Definitions. As used in this Agreement

	 	a.	 	“Bonds” means those certain tax-exempt bonds that were issued
to finance the Project.
	 
	 	b.	 	“Certificate of Occupancy” means a final, irrevocable
certificate of occupancy issued by the relevant governmental
authority with jurisdiction over the Project which permits the full
and lawful occupancy and use of the entire Project for its intended
uses:
	 
	 	c.	 	“Effective Date” means the first calendar day following the
date the Project has received a Certificate of Occupancy and all
Permits required to operate.
	 
	 	d.	 	“Facility Standard” means the standards, policies and
programs prevailing and in effect from time to time and applicable
to the Crescent Point, a 112-unit independent senior living
community located in Cedar Hill, Texas, including, but not limited
to, all phases of operations and programs such as

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	 	 	 	purchasing programs, sales promotions programs, quality
improvement programs, activities, services, and the like.

	 	e.	 	“Indenture” means the Trust Indenture dated of even date
herewith by and between the Issuer and Wells Fargo, National
Association, as Trustee, entered into in connection with the
issuance of Bonds.
	 
	 	f.	 	“State” means State of Texas.

Unless the context in which they are used clearly indicates otherwise,
all other capitalized terms shall have meanings assigned in the
Indenture.

	4.	 	Identity of Interest. The Manager discloses to the Issuer and any Notice
Beneficial Owner as that term is defined in the Indenture) any and all
identities of interest that exist or will exist between the Manager and
the Issuer, suppliers of material and/or services, or vendors in any
combination of relationship. A certification by memorandum of such
disclosure is attached and made part of this Agreement. (See Exhibit A).
	 
	5.	 	Management Plan. Attached hereto as Exhibit B and hereby incorporated
herein, is a copy of the Management Plan (the “Management Plan”) for the
Project. The Management Plan provides a comprehensive and detailed
description of the policies and procedures to be followed in the
management of the Project. In many of its provisions, this Agreement
briefly defines the nature of the Manager’s obligations, with the
intention that reference be made to the Management Plan for more detailed
policies and procedures. Accordingly, the Issuer and the Manager will
comply with all applicable provisions of the Management Plan, regardless
of whether specific reference is made thereto in any particular provision
of this Agreement. In the event of any discrepancies between this
Agreement and the Management Plan, the terms of this Agreement will
prevail.
	 
	6.	 	Basic Information. As soon as possible after completion of construction
of the Project, the Manager will obtain from the Developer a complete set
of “as built” plans and specifications and copies of all guarantees and
warranties relevant to construction, fixtures, and equipment as well as
any assignments thereof from the Developer to the Issuer.
	 
	7.	 	Compliance with Governmental Orders. The Manager will take such action as
may be necessary to comply promptly with any and all governmental orders,
requirements, rules, regulations, or codes affecting or applicable to the
Project, whether imposed by federal, State, county, or municipal
authority. Nevertheless, the Manager shall take no action so long s the
Issuer is contesting, or has affirmed its intention to contest, any such
order or requirement. The Manager will notify the Issuer and any Notice
Beneficial Owner in writing of all notices of such orders or other
requirements, within seventy-two (72) hours from the time of their
receipt.
	 
	8.	 	Nondiscrimination. In performance of its obligations under this
Agreement, the Manager will comply with the provisions of any and all
federal, State, or local Fair Housing law prohibiting discrimination in
housing on the grounds of race, color,

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	 	 	religion, sex, familial status, national origin, or handicap. Other
nondiscrimination provisions include Title VI of the Civil Rights Act of
1964 (Public Law 88-352,78 Stat. 241), Section 504 of the Rehabilitation
Act of 1973, and the Age Discrimination Act of 1975 (collectively, “Fair
Housing Requirements”).
	 
	9.	 	Crime and Dishonesty Coverage. The Manager agrees to furnish, at its own
expense, crime and dishonesty coverage for the off-site employees of the
Manager who are entrusted with the receipt, custody, and disbursement of
any Project moneys, securities, or readily saleable property other than
money or securities. Coverage of $250,000 will be provided. The Manager
will obtain coverage from a company licensed to provide coverage in the
Project locality. Coverage will be in force to coincide with the
assumption of fiscal responsibility by the Manager until that
responsibility is relinquished. The other terms and conditions of the
coverage, and the surety thereon, will be subject to the requirements and
approval of the Issuer.
	 
	10.	 	Bids, Discounts, Rebates, etc. With prior approval of the Issuer, the
Manager will obtain contracts, materials, supplies, utilities, and
services on the most advantageous terms to the: Project, and is authorized
to solicit bids, either formal or informal, for those items which can be
obtained from more than one source. The Manager will secure and credit to
the Issuer all discounts, rebates, or commissions obtainable with respect
to purchases, service contracts, and all other transactions on the
Issuer’s behalf.
	 
	11.	 	Manager’s Authority.

The Issuer authorizes the Manager to:

	 	a.	 	Operate the Project according to the Management Plan.
	 
	 	b.	 	Operate and maintain the Project in accordance with the
expense category subtotals in the applicable Operating Budget
(defined in Section 21 hereof) and the Facility Standard.
	 
	 	c.	 	Purchase all material, equipment, tools, appliances,
supplies, and services necessary for proper maintenance and repair
of the Project as stipulated by the Issuer in the Management Plan,
Operating Budget, and/or other form of written documents.
	 
	 	e.	 	Notwithstanding any of the foregoing provisions or any
similar provisions that follow, the prior written approval of the
Issuer will be required for any one expenditure which exceeds One
Thousand Dollars ($1,000.00) in any one instance, for litigation
involving the Project, or labor, materials, or otherwise in
connection with the maintenance. and repair of the Project. This
limitation is not applicable to expenses within the limits of the
Operating Budget or emergency repairs involving manifest danger to
persons or property, or that are required to avoid suspension of any
necessary service to the Project. In the latter event, the Manager
will inform the Issuer and any Majority Holder of the facts as
promptly as possible.

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	 	f.	 	Represent the Issuer in specific matters related to
management of the Project.

	12.	 	Management Input. The Manager will advise and assist the Issuer with
respect to management planning and during construction of the Project and
subsequent review. The Manager’s specific tasks will be:

	 	a.	 	Participation in the on-site final inspection of the Project;
	 
	 	b.	 	Continuing review of the Management Plan, for the purpose of
keeping the Issuer advised of necessary or desirable changes;
	 
	 	c.	 	Coordinate management concerns with the design and
construction of the Project;
	 
	 	d.	 	Facilitate completion of any corrective work; and
	 
	 	e.	 	Facilitate the Manager’s responsibilities for arranging
utilities and services under this Agreement. The Manager will keep
the Issuer advised of all significant matters of this nature.

	13.	 	Marketing and Tenant Certification. The Manager will carry out the
marketing and tenant certifications activities prescribed in the
Management Plan, observing all applicable Fair Housing Requirements and
the requirements of the Indenture. Subject to the Issuer’s prior approval,
advertising expenses will be paid out of the Operating and Maintenance
Fund Bated pursuant to thee Indenture as Project expenses. At all times,
the Manager shall be responsible for the review and approval of all tenant
income and age certifications and associated documents for each tenant in
accordance with the requirements of the Indenture and preparation and
submittal of monthly and annual reports to the Issuer and any Notice
Beneficial Owner.

	14.	 	Rentals. Upon notice of pending vacancy, the Manager will promptly offer
for rent and will rent the dwelling units in the Project.

	 	a.	 	The Manager will make preparations for initial rent-up, as
described in the Management Plan.
	 
	 	b.	 	The Manager will follow all requirements for resident
selection required by the Indenture.
	 
	 	c.	 	The Manager will show the premises and available units to all
prospective residents without regard to race, color, national
origin, sex, religion, familial status or disability; and will
provide for reasonable accommodation to individuals with
disabilities.
	 
	 	d.	 	The Manager will take and process all applications received
for rentals. If an application is rejected, the Manager will inform
the applicant in writing of the reason for rejection. The rejected
application, with the reason for the rejection noted thereon, will
be kept on file until a compliance review has been conducted or for
at least three years. If the rejection is because of information

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	 	 	 	obtained from a Credit Bureau, the source of the report must be
revealed to the applicant according to the Fair Credit Reporting
Act. A current list of qualified applicants will be maintained.
	 
	 	e.	 	The Manager will prepare all dwelling leases and will execute
the same in its name, identified thereon as manager for the Issuer.
The terms of all leases will comply with the relevant provisions of
State and local law and the Indenture. Dwelling leases will be in a
form approved by the Issuer.
	 
	 	f.	 	The Issuer will furnish the Manager with rent schedules
showing approved rents for all units and income data relevant to
determination of resident eligibility. In no event will the rents be
exceeded, or to the extent agreed by Issuer, rent schedules may be
included with the submission of the annual Operating Budget.
	 
	 	g.	 	The Manager will counsel all prospective residents regarding
eligibility and will prepare and verify eligibility certifications
and recertifications in accordance with the requirements of the
Indenture.
	 
	 	h.	 	The Manager will collect, deposit, and disburse security
deposits, if required, in accordance with the terms of each tenant’s
lease (“Security Deposits”). The amount of each Security Deposit
will be as specified in the Management Plan. Security Deposits will
be deposited by the Manager on the day of receipt in a non-interest
bearing account, separate from all other accounts and funds, with a
bank or other financial institution whose deposits are insured by an
agency of the United States Government and designated of record as
“(Name of Project) Security Deposit Account.”

	15.	 	Collection of Rents and Other Receipts. The Manager will collect when due
all rents, charges, and other amounts receivable on the Issuer’s account
in connection with the management and operation of the Project. Such
receipts (except for Security Deposits, which will be handled as specified
above) will be deposited on the day of receipt in the Revenue Fund created
pursuant to the Indenture.

	16.	 	Enforcement of Leases. The Manager will secure full compliance by each
tenant with the terms of his lease. Voluntary compliance will be
emphasized, and the Manager, through the on-site management staff,
utilizing the services of available agencies will counsel tenant and make
referrals to community agencies in cases of financial hardship or under
other circumstances deemed appropriate by the Manager, to the end that
involuntary termination of tenancies may be avoided to the maximum extent
consistent with sound management of the Project. Nevertheless, the Manager
will lawfully terminate any tenancy when, in the Manager’s judgment,
sufficient cause (including but not limited to nonpayment of rent) for
such termination occurs under the terms of the tenant’s lease. For this
purpose, the Manager is authorized to consult with legal counsel to be
designated by the Issuer, to bring actions for eviction, and to execute
notices to vacate and judicial pleading incident to such actions;
provided, however, the Manager keeps the Issuer informed of such actions
and follows such instructions as the Issuer may prescribe for the conduct
of any such action. The Manager shall also attempt to obtain reimbursement
from such tenants for all legal

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	 	 	expenses, including attorney’s fees incurred on behalf of the Issuer in
connection with such legal action. Attorney’s fees and other necessary
costs incurred in connection with such actions will be paid out of the
Operating and Maintenance Fund as an expense of the Project.

	17.	 	Maintenance and Repair. The Manager will maintain and repair the Project
in accordance with the Management Plan, the Facility Standard and local
codes, and keep it in a condition acceptable to the Issuer, any Majority
Holder, and the Trustee, including but not limited to cleaning, painting,
decorating, plumbing, carpentry, grounds care, and such other maintenance
and repair work as may be necessary, subject to any limitations imposed by
the Issuer in addition to those contained herein.

Incident thereto, the following provisions will apply:

	 	a.	 	Special attention will be given to preventive maintenance
and, to the greatest extent feasible, the services of regular
maintenance employees will be used.
	 
	 	b.	 	Subject to the Issuer’s prior approval, the Manager will
contract with qualified independent contractors for the maintenance
and repair that is beyond the capability of on-site staff and for
extraordinary repairs. All contracts will be in the Issuer’s name,
except where otherwise prohibited by law, and will be executed only
by officers of the Issuer, or officers of the Manager, as directed
in writing by the Issuer. Provided, however, that contracts for
maintenance and repair within limits set forth in the applicable
Operating Budget or for emergency repairs (those to which Issuer’s
consent cannot reasonably be obtained expeditiously enough to
prudently remedy such occurrence) do not require Issuer’s execution
or approval.
	 
	 	c.	 	The Manager will systematically and promptly receive and
investigate all service requests from tenants, take such action
thereon as may be justified, and will keep records of the same.
Emergency requests will be received and serviced on a twenty-four
(24) hour basis. Complaints of a serious nature will be reported to
the Issuer promptly in writing after investigation.
	 
	 	d.	 	To the extent contained in an approved Operating Budget, the
Manager is authorized to purchase all materials, equipment, tools,
appliances, supplies, and services necessary to properly maintain
and repair the Project.
	 
	 	e.	 	Notwithstanding any of the foregoing provisions, the prior
approval of the Issuer will be required for any expenditure which
exceeds One Thousand Dollars ($1,000.00) in any one instance for
labor, equipment, tools, appliances, supplies, services, materials,
or otherwise in connection with the maintenance and repair of the
Project, except for recurring expenses within the limits of an
approved Operating Budget or emergency repairs involving manifest
danger to persons or property, or required to avoid suspension of
any necessary service to the Project. in the latter event, the
Manager will inform the Issuer and any Majority Holder of the facts
as promptly as possible.

D-6

 

	18.	 	Utilities and Services. In accordance with the Management Plan and the
approved Opening Budget, the Manager will make arrangements for water,
electricity, gas, sewage and trash disposal, pest control, lawn and pool
maintenance, security, laundry facilities theatre operation and
maintenance, beauty/barber shop operation and maintenance, and food and
beverage services for the dining room providing three meals per day
(breakfast, lunch and dinner) and similar services commensurate with the
Facility Standard. Subject to the Issuer’s prior approval, the Manager
will make such contracts as may be necessary to secure such utilities and
services. All contracts will be in the Issuer’s name, except where
otherwise prohibited by law, and will be executed only by officers of the
Issuer, or officers of the Manager, as directed in writing by the Issuer.
Provided, however, that any such contracts within limits set forth in the
applicable Operating Budget and the Tax Covenant in Section 38 below do
not require Issuer’s execution or approval.
	 
	19.	 	Employees. The Management Plan prescribes the number, qualifications, and
duties of the personnel to be regularly employed in the management of the
Project, including the on-site managers, and maintenance, bookkeeping,
clerical, and other managerial employees. All such on-site personnel will
be employees solely of the Manager, and not of the Issuer, and will be
hired, supervised, and discharged through the Manager, subject to the
flowing conditions:

	 	a.	 	The compensation (including fringe benefits) of-on-site
personnel will be within the Manager’s sole discretion, subject to
the approved Operating Budget and provided minimum wage standards
are met and the compensation is in accordance with local market
conditions.
	 
	 	b.	 	The Issuer will reimburse the Manager for compensation
(including fringe benefits) payable to the on-site management and
maintenance employees, as prescribed in the Management Plan, for
costs of recruiting, relocation, or travel incurred in connection
with the employment of staff for the Project, and for all local,
state, and federal taxes and assessments (including but not limited
to Social Security taxes, unemployment insurance, and Worker’s
Compensation insurance) incident to the employment of such
personnel. These reimbursement will be paid out of the Operating and
Maintenance Fund and will be treated as expenses of the Project.
	 
	 	c.	 	Compensation (including fringe benefits) payable to the
on-site staff (including all bookkeeping, clerical, and other
managerial personnel), plus all local, state, and federal taxes and
assessments incidents to the employment of such personnel will be
borne solely by the Project, and will not be paid out of the
Manager’s fee. The rental value of any dwelling unit furnished
rent-free to the on-site staff will be treated as a cost to the
Project.
	 
	 	d.	 	The Manager shall conduct any background or fitness tests the
Manager deems appropriate for potential new employees of the Project
including, but not limited to, drug testing and credit review,
provided that such testing and background checks are consistent with
applicable laws and the employment policies and procedures of the
Manager. The costs associated with such testing and background tests
shall be expenses of the Project.

D-7

 

	 	e.	 	Manager shall maintain for all of its employees workers
compensation insurance in accordance with statutory requirements,
social security coverage, and unemployment insurance and shall
withhold and promptly pay on the employees behalf such additional
taxes as may be required by federal, state, or local law.

20. Disbursements From Operating and Maintenance Fund

	 	a.	 	From the funds collected and deposited by the Manager in the
Revenue Fund, and transferred pursuant to the Indenture to the
Operating and Maintenance Fund, the Manager is entitled to make
disbursements from the Operating and Maintenance Fund to and Manager
may request Trustee to make disbursements in advance, on the first
day of each calendar month equal to one-twelfth (1/12th) of the
applicable Operating Budget to:

	 	(1)	 	Pay the Manager for compensation payable to the
employees specified in the Management Plan and in accordance
with the applicable Operating Budget, and for the taxes and
assessments payable to local, state, and federal governments
in connection with the employment of such personnel,
including reasonable and customary benefits.
	 
	 	(2)	 	Pay all sums otherwise due and payable by the
Issuer as expenses of the operation of the Project authorized
to be incurred by the Manager under the terms of this
Agreement and under the applicable Operating Budget,
including compensation payable to the Manager for its service
hereunder.

	 	b.	 	Except for the disbursements mentioned above, funds will be
disbursed or transferred from the Operating and Maintenance Fund
only as the Issuer (with the consent of any Majority Holder) may
from time to time direct in writing.
	 
	 	c.	 	In the event the balance in the Operating and Maintenance
Fund is at any time insufficient to pay disbursements due and
payable under this section, the Manager will inform the Issuer and
any Majority Holder of that fact and to the extent the Issuer has
funds available at the Issuer’s discretion, the Issuer will then
remit to the Manager sufficient funds to cover the deficiency. In no
event will the Manager be required to use its own funds to pay such
disbursements.
	 
	 	d.	 	Owner has anticipated that during the initial lease-up of the
Project that revenues collected from the residents will not be
sufficient to pay disbursements due and payable under this section
and as such, Owner has provided in the financing of the Project
certain funds to cover this deficiency to be deposited into the
Operating Deficit Reserve Fund (as defined in the Indenture). During
this initial prestabilization and lease-up period, in order to
ensure services for the Project are uninterrupted and Project
expenses are met when due and payable, Trustee is obligated to apply
money from the

D-8

 

	 	 	 	Operating Deficit Reserve Fund to fund operating expenses which
are in excess of gross revenues.

	21.	 	Budgets. Annual operating budgets (“Operating Budget”) for the Project
will he as approved by the Issuer and the Beneficial Owners (as such term
is defined in the Indenture) of a majority in principal amount of Bonds
outstanding. Annual disbursements for all costs of operating the Project
will not exceed the amount authorized by the approved Operating Budget. In
addition to preparation and submission of a recommended operating budget
for the initial fiscal year, the Manager will prepare a recommended
operating budget for each subsequent fiscal year beginning during the term
of this Agreement, and will submit the same to the Issuer and any Notice
Beneficial Owner thirty (30) days before the beginning of the fiscal year.
The Issuer will promptly inform the Manager of any changes incorporated in
the approved budget, and the Manager will notify the Issuer and any Notice
Beneficial Owner in writing of any anticipated deviation from the receipts
or disbursements stated in the approved budget. The Operating Budget for
the first year of operation is attached hereto as Exhibit C.
	 
	22.	 	Records and Report. In addition to any requirements specified in the
Management Plan or in other provisions of this Agreement, the Manager will
have the following responsibilities with respect to records and reports:

	 	a.	 	The Manager will establish and maintain a comprehensive
system of records, books, and accounts in a manner satisfactory to
the Issuer and any Majority Holder. All records, books, and accounts
will be subject to examination at reasonable hours by any authorized
representative of either of any Majority Holder or the Issuer. The
Manager will provide monthly reports showing occupancy, income,
expenses, and other customary matters to the Issuer, any Majority
Holder, and any other Notice Beneficial Owners of Bonds.
	 
	 	b.	 	With respect to each calendar year ending during the term of
this Agreement, the Manager will have an annual financial report
(audit) for the Project prepared by a Certified Public Accountant,
based upon the preparer’s examination of the books and records of
the Issuer and the Manager. The report will be prepared as required
by the Indenture, will be certified by the preparer and the Manager,
and will be submitted to the Issuer and any Notice Beneficial
Owners) within ninety (90) days after the end of the calendar year,
for the Issuer’s further certification and submission in accordance
with the requirements of the Indenture. Compensation for the
preparer’s services will be paid out of the Operating and
Maintenance Fund as an expense of the Project.
	 
	 	c.	 	The Manager will submit quarterly unaudited financial
statements to the Issuer and any Notice Beneficial Owners within 20
days after the end of each quarter.
	 
	 	d.	 	The Manager will prepare a monthly report for the Project
comparing actual and budgeted figures for receipts and
disbursements, and deliver delinquency reports, rent rolls, activity
reports for all reserve accounts (to the extent

D-9

 

	 	 	 	applicable), a balance sheet for the Project and also will prepare
monthly construction reports for major capital improvements or
repairs to the Project (other than for the initial construction of
the Project) and will submit each such report to the Issuer and
any Majority Holder (with a copy to the Notice Beneficial Owners
of Bonds) within ten (10) days after the end of the month covered.

	 	e.	 	The Manager will furnish such information (including
occupancy reports) as may be requested by the Issuer or any Majority
Holder from time to time (with a copy to the Notice Beneficial
Owners of Bonds) with respect to the financial, physical, or
operational condition of the Project.
	 
	 	f.	 	The Board of Directors of the Issuer may select an
accountant, which accountant shall review the financial records of
the operation of the Project every six months commencing six months
after the initial occupancy of the Project. In addition, said
accountant shall perform a year end audit annually. The Manager will
ensure that said accountant has access to any and all financial
records relating to the operation of the Project. The cost of such
audit shall be deemed an expense of the Project payable out of the
Operating and Maintenance Fund.
	 
	 	g.	 	The Manager will prepare and submit (with a copy to the
Notice Beneficial Owners of Bonds) all reports required to confine
compliance with Bond requirements of the Indenture, Bonds, and any
documents relating thereto.

	23.	 	On-site Management Facilities. The Manager will continually maintain
management offices within the Project.
	 
	24.	 	Insurance. The Issuer will inform the Manager (a copy to be sent to any
Notice Beneficial Owner) of insurance to be carried with respect to the
Project and its operations, and the Manager will cause such insurance to
be placed and kept in effect at all times. In addition, manager
acknowledges that the Indenture requires Issuer to implement the
recommendations of the Insurance Consultant (as defined in the Indenture)
and therefore, agrees that upon receipt of the Insurance Consultant’s
recommendations, that Manager will take any steps necessary and/or
appropriate to implement such recommendations. All premiums for insurance
coverage will be treated as operating expenses. All insurance will be
placed with such companies, on such conditions, in such amounts, and with
such beneficial interests appearing thereon as shall be acceptable to the
Issuer and any Majority Holder, and shall be otherwise in conformity with
the Indenture (including, without limitation, those coverages set forth on
Exhibit D attached hereto and incorporated herein); provided that the same
will include public and professional liability coverage, with the Manager,
the Issuer, and the Trustee designated as insureds as their interests
appear, in amounts acceptable to the Manager as well as the Issuer and any
Majority Holder. The cost of such insurance will be reimbursed to Manger
in accordance with this Agreement. The Manager will investigate and
furnish the Issuer and any Majority Holder with full reports as to all
accidents, claims, and potential claims for damage relating to the
Project, and will cooperate with the Issuer’s insurers in connection
therewith.

D-10

 

	25.	 	Manager’s Compensation. The Manager will be compensated for its services
under this Agreement by monthly fees which comply with the operating
guidelines for management contracts set forth in Revenue Procedure 97-13,
1997-5 I.R.B. 18, including any revisions or amendments thereto pursuant
to section 141 of the Code (as defined below), to be paid out of the
Operating and Maintenance Fund as an expense of the Project. Such fees
will be payable on the fifth (5th) day of each month for the preceding
month with the first payment to be on the fifth (5th) day of the second
calendar month following the Effective Date. The Manager’s property
management fee will be in an amount equal to (a) $7,500.00 per month
(“Base Fee”), plus (b) the excess, if any, of 6% of the gross income
received from the Project each month, excluding Security Deposits, over
$7,500.00 (“Incentive Fee”) provided, however that the monthly Incentive
Fee shall not exceed the Base Fee for any month, and provided further that
the Incentive Fee shall be paid only after provision for payment of all
debt service associated with Bonds (including funding of any reserves
required (other than the Operating Deficit Reserve Fund) pursuant to the
Indenture or any of the agreements or instruments executed in connection
with the issuance of Bonds) then due; provided that to the extent money is
not available to pay the foregoing fees when due, such fees will accrue
and be paid as money is available.
	 
	26.	 	Term of Agreement.

	 	a.	 	This Agreement shall be in effect for a period of five (5)
years, beginning on the Effective Date and ending on that date that
is the day before five (5) years thereafter unless otherwise
terminated in accordance with this Agreement, subject to
subparagraph (b) below. In addition, the Issuer shall terminate this
Agreement if directed in writing by the Beneficial Owners of a
majority in principal amount of Bonds outstanding in accordance with
the requirements of the Indenture.
	 
	 	b.	 	Upon an Event of Default by a party as set forth in Section
27 below, this Agreement may be terminated prior to the expiration
of the term by the other party. In addition, the Issuer may
terminate this Agreement at any time after the third (3rd)
anniversary of the Effective Date upon sixty (60) days’ notice to
the Manager. The Issuer may also terminate this Agreement at any
time the debt service coverage generated by operation of the Project
on Bonds falls below 115% for any two consecutive quarters, after
January 1, 2007.
	 
	 	c.	 	Upon termination, the Manager will cooperate with the Issuer
and will (i) submit to the Issuer any financial statements required
by the Issuer or any Majority Holder and any and all books, records,
and documents pertaining to the Project in the Manager’s possession,
(ii) fulfill any and all obligations hereunder which have accrued
prior to the effective date of such termination, including, but not
limited to, all reporting and accounting functions (iii) deliver to
Issuer all materials, supplies, keys, security codes, inventories,
consumables, and the like pertaining to the Project or its
operation, (iv) assign, as directed by Issuer, any rights Manager
may have in any existing contracts pertaining to the operation
and/or maintenance of the Project; and (v) provide Issuer with
assistance in coordinating with any successor manager

D-11

 

	 	 	 	to ensure a smooth transition, including, but not limited to,
delivering of all Project files, notifying tenants and other
interested parties, and providing assistance with respect to
transfer of information to any new software from existing
software. After the Manager or the Issuer have accounted to each
other with respect to all matters outstanding as of the date of
termination, the Issuer will either promptly pay or discharge, or
furnish the Manager security, in form and principal amount
reasonably satisfactory to the Manager, against any obligations or
liabilities the Manager may properly have incurred on behalf of
the Issuer hereunder.

	27.	 	Default and Termination.

	 	a.	 	Each of the following shall constitute an Event of Default on
the part of the Manager:

	 	(1)	 	a failure to keep, observe, perform, meet, or
comply with any covenant, agreement, term, or provision
of this Agreement to be kept, observed, performed, met, or
complied with by the Manager hereunder, which failure
continues for a period of thirty (30) days after the Manager
has been provided written notice thereof;
	 
	 	(2)	 	the Manager shall (i) admit in writing its
inability to pay its debts; (ii) make a general assignment
for the benefit of creditors; (iii) suffer a decree or order
appointing a receiver or trustee for it or substantially all
of its property to be entered and, if entered without its
consent, not to be stayed or discharged within sixty (60)
days; (iv) suffer proceedings under any law relating to
bankruptcy, insolvency, or the reorganization or relief of
debtors to be instituted by or against it and, if contested
by it, not to be dismissed or stayed within sixty (60) days;
or (v) suffer any judgment, writ of attachment or execution,
or any similar process to be issued or levied against a
substantial part of its property which is not released,
stayed, bonded, or vacated within sixty (60) days after issue
or levy; or
	 
	 	(3)	 	the discovery by the Issuer that any statement,
representation, or warranty in this Agreement or furnished
pursuant to this Agreement is false, misleading, or erroneous
in any material respect.

	 	b.	 	Upon the occurrence of an Event of Default by the Manager,
the Issuer, with the consent of the Beneficial Owners of a majority
in principal amount of Bonds outstanding or at the direction of any
the Beneficial Owners of a majority in principal amount of Bonds
outstanding, shall have the right to pursue any remedy it may have
at law or equity, including but not limited to, (a) reducing its
claim to a judgment, (b) taking action to cure the Event of Default,
in which case the Issuer may offset against any payment due all
reasonable costs incurred by the Issuer in connection with its
efforts to cure such Event of Default, and (c) termination of this
Agreement and removal of the Manager from the Project and the
offsetting against any payments of any reasonable amounts expended
by the Issuer to cure the Event of Default. In

D-12

 

	 	 	 	the event of the Manager’s removal due to an Event of Default, the
Issuer shall have no further obligations to the Manager after such
removal and the Manager agrees to comply with paragraph 26(c)
hereof with respect to the transition of management of the
Project.
	 
	 	c.	 	Upon the occurrence of the Manager’s removal due to an Event
of Default, the Issuer or its designee shall have the exclusive
right to assume any and all contractual and/or leasehold rights of
the Manager, if any, relating to the occupation of the Project.
	 
	 	d.	 	Each of the following shall constitute an Event of Default on
the part of the Issuer:

	 	(1)	 	except as otherwise provided herein, failure by
the Issuer to pay within sixty (60) days after payment is due
any payment required to be paid to the Manager pursuant to
this Agreement; or
	 
	 	(2)	 	failure by the Issuer to observe and perform
any material covenant, condition, or agreement on its part to
be observed or performed, or its failure or refusal to
substantially fulfill any of its material obligations
hereunder, unless caused by the default of the Manager, and
unless cured by the Issuer within thirty (30) days after
receiving written notice thereof.

	 	e.	 	Upon an Event of Default by the Issuer, the Manager’s sole
remedy shall be to terminate this Agreement. Upon such termination,
the Manager shall be entitled to receive payment for all services,
furnished under this Agreement up to and including the date of such
termination, but solely from funds available therefor in the
Operating and Maintenance Fund, for services furnished under this
Agreement.
	 
	 	f.	 	To the extent that there is any Event of Default under the
Indenture or the Deed of Trust, the Manager may be removed by the
Issuer, with consent of any the Beneficial Owners of a majority in
principal amount of Bonds outstanding or at the direction of any the
Beneficial Owners of a majority in principal amount of Bonds
outstanding and the Issuer may appoint the replacement manager, with
the consent of any the Beneficial Owners of a majority in principal
amount of Bonds outstanding.

	28.	 	Bond Compliance Monitoring.

The Manager will be responsible for monitoring and verifying the
eligibility of tenants under the requirements of the Indenture:

	 	a.	 	To understand and maintain any rent restrictions and
eligibility requirements set forth in the Indenture and Section IV
of the Management Plan.
	 
	 	b.	 	To properly inform applicants and tenants regarding the
requirements of occupancy in the Project.

D-13

 

	 	c.	 	To verify income and any other appropriate characteristics
(using an annual income certification form) on all applicants for
occupancy in the Project and to confirm and document eligibility for
occupancy based on criteria set forth in the Management Plan.
	 
	 	d.	 	To assign new units and units coming vacant throughout the
life of the Project to qualified applicants in accordance with the
requirements of the Issuer and the Management Plan.
	 
	 	e.	 	To assist in preparing monthly, quarterly, or annual reports
required by state compliance monitoring agencies, if any,
accountants, or the Issuer.
	 
	 	f.	 	To stay informed regarding changes and clarifications in the
program. As such, to maintain an ongoing dialogue with the various
agencies and individuals responsible for compliance monitoring.

	29.	 	Manager’s Indemnification. Notwithstanding any provision of this
Agreement or any obligation of the Manager hereunder, it is understood and
agreed: (a) that, subject to the provisions of clause (c) below, the
Issuer has assumed and will maintain its responsibility and obligation
throughout the term of this Agreement for the finances and the financial
stability of the Project; (b) that the Manager shall have no obligation,
responsibility, or liability to fund authorized project costs, expenses,
debts, liabilities, or accounts other than those funds generated by the
Project itself or provided to the Project or to the Manager by Issuer, if
such obligations arose in connection with actions taken in good faith and
within the scope of this Agreement; and (c) any obligation for the payment
of money that Issuer may incur under this Agreement or in connection with
the Project shall not be deemed to constitute a general obligation of the
Issuer, the State, or the City of Grand Prairie, but shall be payable
solely from money on deposit in the Operating and Maintenance Fund created
under the Indenture to the extent there is money on deposit therein, and
shall not, under any circumstances be paid from any other property of the
Issuer. To the extent permitted by law, and subject to the provisions of
clause (c) above, the Issuer hereby indemnifies the Manager and agrees to
hold it harmless with respect to project costs, expenses, accounts, debts,
liabilities, and obligations and any legal fees and expenses incurred
without negligence or bad faith of the Manager in connection therewith
during the term of this Agreement. To the extent permitted by-law, the
Manager hereby indemnifies the Issuer and agrees to hold the Issuer
harmless from any loss, liability, or cost (including reasonable
attorneys’ fees) not covered by insurance proceeds that the Issuer may
sustain, incur, or assume as a result of any claims that may be alleged,
made, instituted, or maintained against the Manager or the Issuer, jointly
or severally, resulting from the negligence or willful misconduct of the
Manager, or its agents or employees, in connection with the performance of
the Manager’s duties under this Agreement.

	30.	 	Interpretative Provisions.

	 	a.	 	This Agreement constitutes the entire agreement between the
Issuer and the Manager with respect to the management and operation
of the Project. No

D-14

 

	 	 	 	change will be valid unless made by supplemental written agreement
approved, in writing, by the Issuer and Beneficial Owners of a
majority in principal amount of Bonds outstanding. Each party has
had the opportunity to have this Agreement reviewed by counsel of
its choice, and the parties hereby agree that the normal rule of
construction to the effect that any ambiguities are to be resolved
against the drafting party may not be employed in the
interpretation of this Agreement or any amendments or exhibits
hereto.
	 
	 	b.	 	This Agreement may be executed in several counterparts, each
of which shall constitute a complete original Agreement, which may
be introduced in evidence or used for any other purpose without
production of any of the other counterparts.
	 
	 	c.	 	At all times, this Agreement will be subject and subordinate
to all rights of the Issuer, and will work to the benefit of and
constitute a binding obligation upon the Manager and the Issuer and
their respective successors and assigns. To the extent that this
Agreement confers rights upon the Manager and the Issuer, it will be
deemed to work to their benefit, but without liability to either, in
the same manner and work with the same effect as though the Manager
and the Issuer were primary parties to the Agreement.
	 
	 	d.	 	The Manager shall not transfer or assign its rights,
obligations, or duties under this Agreement without the prior
written approval of the Issuer and the Beneficial Owners of a
majority in principal amount of Bonds outstanding.
	 
	 	e.	 	The Issuer has assigned its rights under this Agreement to
the Trustee, as security for Bonds.

	31.	 	Severability. The invalidity or unenforceability of any particular
provision hereof shall not affect the other provisions, and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provision had not been contained herein.
	 
	32.	 	Governing Law. This Agreement shall be governed by and subject to the
laws of the State of Texas.
	 
	33.	 	Representations, Warranties, and Covenants of the Manager.

The Manager hereby represents, warrants to, and covenants with the Issuer
and for the benefit of the owners of Bonds that:

	 	a.	 	The Manager has been, and will be during the term of this
Agreement, duly incorporated and is in good standing under the laws
of the State of Delaware and authorized to do business in the State.
	 
	 	b.	 	The Manager holds, and will hold during the term of this
Agreement, all material licenses, certificates, and permits from all
governmental authorities necessary for the conduct of its business
and has received no notice of proceedings relating to the revocation
of any such license, certificate, or permit which singly or in the
aggregate, if the subject of an unfavorable

D-15

 

	 	 	 	decision, ruling, or finding, would materially affect the conduct
of the business, results of operations, net worth, or condition
(financial or otherwise) of the Manager;
	 
	 	c.	 	The Manager has the full power and authority to execute,
deliver, and perform, and to enter into and consummate all
transactions contemplated by this Agreement, has duly authorized the
execution, delivery, and performance of this Agreement has duly
executed and delivered this Agreement and this Agreement constitutes
a legal, valid, and binding obligation of the Manager, enforceable
against it in accordance with its terms, except as such enforcement
may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the enforcement of
creditors’ rights in general and (ii) by general equity principles
(regardless of whether such enforcement is considered in a
proceeding in equity or at law);
	 
	 	d.	 	Neither the execution and delivery by the Manager of this
Agreement, the consummation by the Manager of the transactions
contemplated hereby, nor the fulfillment of or compliance by the
Manager with the terms and conditions of this Agreement will
conflict with or result in a breach of any of the terms, conditions,
or provisions of the Manager’s charter or bylaws or any legal
restriction or any material agreement or instrument to which the
Manager is now a party or by which it is bound, or constitute a
default or result in an acceleration under any of the foregoing, or
result in the violation of any law, rule, regulation, order,
judgment, or decree to which the Manager or its property is subject;
	 
	 	e.	 	At the date hereof, the Manager does not believe, nor does it
have any reason or cause to believe, that it cannot perform each and
every one of its covenants contained in this Agreement.
	 
	 	f.	 	There is no litigation pending or, to the Manager’s
knowledge, threatened, which, if determined adversely to the
Manager, would adversely affect the execution, delivery, or
enforceability of this Agreement, or the ability of the Manager to
manage the Project hereunder in accordance with the terms hereof or
which would have a material adverse effect on the financial
condition of the Manager;
	 
	 	g.	 	No consent, approval, authorization, or order of any court or
governmental agency or body is required for the execution, delivery,
and performance by the Manager of or compliance by the Manager with
this Agreement or the consummation by the Manager of the
transactions contemplated by this Agreement;
	 
	 	h.	 	The consummation by the Manager of the transactions
contemplated by this Agreement are in the ordinary course of
business of the Manager.
	 
	 	i.	 	The manager shall not knowingly engage in any activities,
fail to take any action, or take any action which would result in
Bonds becoming “Arbitrage

D-16

 

	 	 	 	Bonds” or “Private Activity Bonds” within the meaning of the
Internal Revenue Code of 1986, as amended.
	 
	 	j.	 	Manager will not engage in any activity that could create, or
be deemed to create, a conflict of interest with Issuer or Issuer’s
goals for the Project, which goals include, but are not limited to,
maximizing financial returns, protection and preservation of the
assets comprising the Project and control of operating expenses. In
furtherance this covenant, Manager agrees that it will not utilize
any prospective tenant lists or information, contact past or present
tenants of the Project or otherwise solicit any tenants or
prospective tenants of the Project for a tenancy in any other
projects owned or managed by Manager or in any other way use any
referrals (personal or otherwise), tenant lists, marketing studies
or the like obtained, created or generated in the course of
performing its obligations hereunder in connection with or for the
benefit of other senior living facilities owned, operated or managed
by Manager. Manager hereby acknowledges and agrees that it will keep
any information acquired or obtained by Manager in carrying out its
obligations hereunder confidential, except as otherwise required by
law, court order or as permitted by Issuer.

	34.	 	Manager Responsible for Operation of the Project. The operation of the
Project will be entirely under the control of the Manager and its
employees.
	 
	35.	 	Limitation on Liability. None of the officers, agents, or employees of
the Issuer shall have any personal liability for the obligations of the
Issuer hereunder. The Issuer’s obligations hereunder shall be satisfied
solely from the Trust Estate created under the Indenture or from other
funds (if any) derived from the ownership, operation, or disposition of
the Project and shall not constitute a general liability of the Issuer.
	 
	36.	 	Amendment. This Agreement may only be amended by a written instrument
executed by both of the parties hereto and upon consent of any Majority
Holder as set forth in Section 13.1 of the Indenture.
	 
	37.	 	Qualified Management Agreement. This Agreement is intended to, and shall
constitute a “qualified management agreement” in compliance with
applicable requirements of section 141 of the Internal Revenue Code, as
amended (“Code”) and Rev. Proc. 97-13, 1997-5 I.R.B. 18, and shall be
interpreted in accordance with such requirements.
	 
	38.	 	Tax Covenant. The Manager agrees to manage and operate the Project in a
manner which, to the extent of its rights and authority under this
Agreement and as otherwise authorized by the Issuer in writing, preserves
the exemption from federal income tax of interest on Bonds, and in
particular, comply with section 141(b) of the Code, Section 1.141-3 of the
Treasury Regulations, and Revenue Procedure 97-13 relating to conditions
under which tax-exempt bond-financed property will be considered used for
a nonpermissible private business use.
	 
	39.	 	Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if sent (i) by
facsimile transmission, with receipt

D-17

 

	 	 	confirmed, to the Issuer or to the Manager at the numbers indicated
below; (ii) by hand delivery or nationally recognized overnight courier
addressed as indicated below; (iii) by certified or registered mail,
return receipt requested, postage prepaid, addressed as follows:

	 	 	 
	To the Issuer:

	 	Grand Prairie Housing Finance Corporation
	

	 	P.O. Box 32758
	

	 	Grand Prairie, Texas 75053
	

	 	Facsimile: (972) 772-8142
	 
	 	 
	With a copy to:

	 	Andrews & Kurth, LLP
	

	 	1717 Main Street, Suite 3700
	

	 	Dallas, Texas 75201
	

	 	Attention: Kacy J. Whitehead
	

	 	Facsimile: (214) 659-4401
	 
	 	 
	To the Manager:

	 	CGI Management, Inc.
	

	 	5601 Bridge Street, Suite 504
	

	 	Fort Worth, Texas 76112
	

	 	Attention: Gary Staats
	

	 	Facsimile: (817) 446-0923
	 
	 	 
	To the Trustee:

	 	Wells Fargo Bank, National Association
	

	 	1445 Ross Avenue, 2nd Floor
	

	 	Dallas, Texas 75202
	

	 	Attention: Nancye C. Patterson
	

	 	Facsimile: (214) 777-4086

     or to such other address as shall be furnished in writing by either party
to the other party. All notices and other communications hereunder will be
deemed effective upon receipt however, notices given in the manner provided in
subpart (iii) hereof shall be deemed effective three (3) Business Days
following deposit with the United States Postal Service.

	40.	 	Non-Compete. During the term of this Agreement the Manager agrees, that
it nor any entity related to or an affiliate thereof, will develop,
construct or manage any new to-be built full-service independent living
retirement communities within a ten (10) mile radius of the Project,
without the prior written consent of the Issuer.

[Signature Pages Follow]

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     IN WITNESS WHEREOF, the Manager and the Issuer (by their duly authorized
officers) have executed this Agreement as of the date first above written.

	 	 	 	 	 
	 	GRAND PRAIRIE HOUSING FINANCE

CORPORATION

 	 
	 	By:  	/s/
 	 
	 	 	President 	 
	 	 	 	 
	 

D-19

 

	 	 	 	 	 
	 	CGI MANAGEMENT, INC.,

a Delaware corporation

 	 
	 	By:  	/s/ Robert Bullock
 	 
	 	 	Name:  	Robert Bullock 	 
	 	 	Title:  	Executive Vice-President 	 
	 

	 	 	 
	Attachments:

	 	EXHIBIT A — Identity of Interest Disclosure Certificate
	

	 	EXHIBIT B — Management Plan
	

	 	EXHIBIT C — Initial Operating Budget

D-20

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