Document:

Document

Exhibit 10.2

AMENDED AND RESTATED ADVISORY AGREEMENT

between

PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

and

PACIFIC OAK CAPITAL ADVISORS, LLC

September 9, 2022

TABLE OF CONTENTS

Page
						
	ARTICLE 1 - DEFINITIONS
	1

	ARTICLE 2 - APPOINTMENT
	8

	ARTICLE 3 - DUTIES OF THE ADVISOR
	8

	3.01 Organizational and Offering Services
	8

	3.02 Acquisition Services
	9

	3.03 Asset Management Services
	9

	3.04 Stockholder Services
	11

	3.05  Other Services
	12

	ARTICLE 4 - AUTHORITY OF ADVISOR
	12

	4.01 General
	12

	4.02 Powers of the Advisor
	12

	4.03 Approval by the Board
	12

	4.04 Modification or Revocation of Authority of Advisor
	12

	ARTICLE 5 - BANK ACCOUNTS
	13

	ARTICLE 6 – RECORDS AND FINANCIAL STATEMENTS
	13

	ARTICLE 7 - LIMITATION ON ACTIVITIES
	13

	ARTICLE 8 - FEES
	13

	8.01 Acquisition Fees
	13

	8.02 Asset Management Fees
	14

	8.03 Disposition Fees
	15

	8.04 Subordinated Share of Cash Flows
	15

	8.05 Subordinated Incentive Fee
	16

	8.06 Changes to Fee Structure
	16

	ARTICLE 9 - EXPENSES
	16

	9.01 General
	16

	9.02 Timing of and Limitations on Reimbursements
	18

	ARTICLE 10 – VOTING AGREEMENT
	18

	ARTICLE 11 - RELATIONSHIP OF ADVISOR AND COMPANY; OTHER ACTIVITIES OF THE ADVISOR
	18

	11.01 Relationship
	18

	11.02 Time Commitment
	18

	11.03 Investment Opportunities and Allocation
	18

	ARTICLE 12 - THE PACIFIC OAK NAME
	19

	ARTICLE 13 - TERM AND TERMINATION OF THE AGREEMENT
	19

	13.01 Term
	19

	13.02 Termination by Either Party
	19

	13.03 Payments on Termination and Survival of Certain Rights and Obligations
	20

	ARTICLE 14 - ASSIGNMENT
	20

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	ARTICLE 15 - INDEMNIFICATION AND LIMITATION OF LIABILITY
	20

	15.01 Indemnification
	20

	15.02 Limitation on Indemnification
	21

	15.03 Limitation on Payment of Expenses
	21

	ARTICLE 16 - MISCELLANEOUS
	21

	16.01 Notices
	21

	16.02 Modification
	22

	16.03 Severability
	22

	16.04 Construction
	22

	16.05 Entire Agreement
	22

	16.06 Waiver
	22

	16.07 Gender
	22

	16.08 Titles Not to Affect Interpretation
	22

	16.09 Counterparts
	22

	ARTICLE 17 – PORT PROVISIONS
	23

	17.01 Management of PORT Operations and Assets
	23

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AMENDED AND RESTATED ADVISORY AGREEMENT
This Amended and Restated Advisory Agreement, entered into as of September 9, 2022, but effective as of September 1, 2022 (the “Agreement”), is between Pacific Oak Strategic Opportunity REIT, Inc., a Maryland corporation (the “Company”), and Pacific Oak Capital Advisors, LLC, a Delaware limited liability company (the “Advisor”), and amends and restates that certain Advisory Agreement between the Company and the Advisor effective as of November 1, 2021 (the “Prior Agreement”).
W I T N E S S E T H
WHEREAS, the Company desires to avail itself of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities hereinafter set forth, on behalf of, and subject to the supervision of, the board of directors of the Company (the “Board”), all as provided herein;
WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the Board, on the terms and conditions hereinafter set forth;
WHEREAS, the Company and the Advisor acknowledge and agree that Section 17.02 of the Prior Agreement contained a scrivener’s error; specifically, that it was not intended or agreed that the Advisor would rebate or offset fees described under Section 17.02 of the Prior Agreement to the extent of the Company’s indirect economic interest in fees paid by Pacific Oak Residential Trust II, Inc. (“PORT II”) to  Pacific Oak Residential Advisors, LLC (“PORA”), and that the Advisor did not in fact do so; that it was actually intended and agreed that PORA or its parent company Pacific Oak Residential, Inc. (“PORI”) would rebate or offset such certain fees referenced in Section 17.02 of the Prior Agreement to PORT II, and that PORA or PORI did in fact do so; and the parties further agree that Section 17.02 of the Prior Agreement is no longer necessary or appropriate in this Agreement; and
WHEREAS, the Company and the Advisor desire to amend the Prior Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree to amend and restate the Prior Agreement as follows:
ARTICLE 1
DEFINITIONS
The following defined terms used in this Agreement shall have the meanings specified below:
“Acquisition Expenses” means any and all expenses, excluding the fee payable to the Advisor pursuant to Section 8.01, incurred by the Company, the Advisor or any Affiliate of either in connection with the selection, acquisition or development of any property, loan or other potential investment, whether or not acquired or originated, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, nonrefundable option payments on properties or other investments not acquired, accounting fees and expenses, title insurance premiums and miscellaneous expenses related to the selection, acquisition or development of any property, loan or other potential investment. 
“Acquisition Fees” means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person 
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in connection with making or investing in any Property, Loan or other Permitted Investment or the purchase, development or construction of any Property by the Company. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, Development Fee, Construction Fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be Development Fees and Construction Fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property.
“Advisor” means (i) Pacific Oak Capital Advisors, LLC, a Delaware limited liability company, or (ii) any successor advisor to the Company.
“Affiliate” or “Affiliated”  An Affiliate of another Person includes any of the following: (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (ii) any Person directly or indirectly owning, controlling, or holding with the power to vote 10% or more of the outstanding voting securities of such other Person; (iii) any legal entity for which such Person acts as an executive officer, director, trustee, or general partner; (iv) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; and (v) any executive officer, director, trustee, or general partner of such other Person. An entity shall not be deemed to control or be under common control with an Advisor-sponsored program unless (i) the entity owns 10% or more of the voting equity interests of such program or (ii) a majority of the board of directors (or equivalent governing body) of such program is composed of Affiliates of the entity. 
“Appraised Value” means the value according to an appraisal made by an Independent Appraiser. 
“Asset Management Fee” shall have the meaning set forth in Section 8.02. 
“Average Invested Assets” means, for a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Properties, Loans and other Permitted Investments secured by real estate before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period.
“Board” means the board of directors of the Company, as of any particular time.
“Bylaws” means the bylaws of the Company, as amended from time to time.
“Cash from Financings” means the net cash proceeds realized by the Company from the financing of Properties, Loans or other Permitted Investments or from the refinancing of any Company indebtedness (after deduction of all expenses incurred in connection therewith). 
“Cash from Sales and Settlements” means the net cash proceeds realized by the Company (i) from the sale, exchange or other disposition of any of its assets or any portion thereof after deduction of all expenses incurred in connection therewith and (ii) from the prepayment, maturity, workout or other settlement of any Loan or Permitted Investment or portion thereof after deduction of all expenses incurred in connection therewith.  In the case of a transaction described in clause (i) (C) of the definition of “Sale” and (i)(B) of the definition of “Settlement,” Cash from Sales and Settlements means the proceeds of any such transaction actually distributed to the Company from the Joint Venture or partnership.  Cash from Sales and Settlements shall not include Cash from Financings.
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“Cash from Sales, Settlements and Financings” means the total sum of Cash from Sales and Settlements and Cash from Financings.
“Charter” means the articles of incorporation of the Company, as amended from time to time.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.
“Company” means Pacific Oak Strategic Opportunity REIT, Inc., a corporation organized under the laws of the State of Maryland.
“Competitive Real Estate Commission” means a real estate or brokerage commission for the purchase or sale of property that is reasonable, customary, and competitive in light of the size, type, and location of the property.
“Conflicts Committee” shall have the meaning set forth in the Company’s Charter.
“Construction Fee” means a fee or other remuneration for acting as general contractor and/or construction manager to construct improvements, supervise and coordinate projects or to provide major repairs or rehabilitation on a Property. 
“Contract Sales Price” means the total consideration received by the Company for the sale of a Property, Loan or other Permitted Investment.
“Cost of Loans and other Permitted Investments” means the sum of the cost of all Loans and Permitted Investments held, directly or indirectly, by the Company, calculated each month on an ongoing basis, and calculated as follows for each investment:  the lesser of (i) the amount actually paid or allocated to acquire or fund the Loan or Permitted Investment (inclusive of fees and expenses related thereto and the amount of any debt associated with or used to acquire or fund such investment) and (ii) the outstanding principal amount of such Loan or Permitted Investment (plus the fees and expenses related to the acquisition or funding of such investment), as of the time of calculation.  With respect to any Loan or Permitted Investment held by the Company through a Joint Venture or partnership of which it is, directly or indirectly, a partner, such amount shall be the Company’s proportionate share thereof.  
“Cost of Real Estate Investments” means the sum of (i) with respect to Properties wholly owned, directly or indirectly, by the Company, the amount actually paid or allocated to the purchase, development, construction or improvement of Properties, inclusive of fees and expenses related thereto, plus the amount of any outstanding debt attributable to such Properties and (ii) in the case of Properties owned by any Joint Venture or partnership in which the Company or the Partnership is, directly or indirectly, a partner, the portion of the amount actually paid or allocated to the purchase, development, construction or improvement of Properties, inclusive of fees and expenses related thereto, plus the amount of any outstanding debt associated with such Properties that is attributable to the Company’s investment in the Joint Venture or partnership. 
“Dealer Manager” means (i) Pacific Oak Capital Markets Group, LLC, a Delaware limited liability company, or (ii) any successor dealer manager to the Company.
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“Development Fee” means a fee for the packaging of a Property, including negotiating and approving plans, and undertaking to assist in obtaining zoning and necessary variances and necessary financing for the Property, either initially or at a later date.
“Director” means a member of the board of directors of the Company.
“Disposition Fee” shall have the meaning set forth in Section 8.03. 
“Distributions” means any distributions of money or other property by the Company to owners of Shares, including distributions that may constitute a return of capital for federal income tax purposes.
“GAAP” means accounting principles generally accepted in the United States.
“Gross Proceeds” means the aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Organization and Offering Expenses. 
“KBS Advisory Agreement” means the advisory agreement between the Company and its prior advisor, KBS Capital Advisors LLC, dated October 7, 2019, which agreement terminated on October 31, 2019.
“Independent Appraiser” means a person or entity with no material current or prior business or personal relationship with the Advisor or the Directors, who is engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Company, and who is a qualified appraiser of real estate as determined by the Board. Membership in a nationally recognized appraisal society such as the American Institute of Real Estate Appraisers (M.A.I.) or the Society of Real Estate Appraisers (S.R.E.A.) shall be conclusive evidence of such qualification. 
“Invested Capital” means the amount calculated by multiplying the total number of Shares purchased by Stockholders since Company inception by the issue price, reduced by any amounts paid by the Company to repurchase Shares since Company inception.  For purposes of this definition, all Shares issued to stockholders of Pacific Oak Strategic Opportunity REIT II, Inc. (“SOR II”), in connection with the merger (the “Merger”) of SOR II with Pacific Oak SOR II, LLC (“Merger Sub”) pursuant to that certain Agreement and Plan of Merger among the Company, Merger Sub and SOR II, dated as of February 19, 2020, shall be deemed to have been purchased by Stockholders at the effective time of the Merger and at a price of $10.63 per Share.
“Joint Venture” means any joint venture, limited liability company or other Affiliate of the Company that owns, in whole or in part, on behalf of the Company any Properties, Loans or other Permitted Investments.
“Listed” or “Listing” shall have the meaning set forth in the Company’s Charter.  
“Loans” means mortgage loans and other types of debt financing investments made by the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, including, without limitation, mezzanine loans, B-notes, bridge loans, convertible mortgages, wraparound mortgage loans, construction mortgage loans, loans on leasehold interests, and participations in such loans.
“Market Value” shall have the meaning set forth in Section 8.05.
“Merger” shall have the meaning set forth in the definition of “Invested Capital.”
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“NASAA Guidelines” means the NASAA Statement of Policy Regarding Real Estate Investment Trusts as in effect on the date hereof. 
“Net Income” means, for any period, the total revenues applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves; provided, however, Net Income for purposes of calculating total allowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets. 
“Offering” means any offering of Shares that is registered with the SEC, excluding Shares offered under any employee benefit plan.
“Operating Cash Flow” means Operating Revenue Cash Flows minus the sum of (i) Operating Expenses, (ii) all principal and interest payments on indebtedness and other sums paid to lenders, (iii) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (iv) taxes, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property.
“Operating Expenses” means all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or to Company business, including fees paid to the Advisor, but excluding (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and tax incurred in connection with the issuance, distribution, transfer, registration and Listing of the Shares, (ii) interest payments, (iii) taxes, (iv) non-cash expenditures such as depreciation, amortization and bad loan reserves, (v) incentive fees paid in compliance with Section IV.F. of the NASAA Guidelines and (vi) Acquisition Fees, Acquisition Expenses, real estate commissions on the resale of real property, and other expenses connected with the acquisition, disposition, and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), such as the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of property. 
“Operating Revenue Cash Flows” means the Company’s cash flow from ownership and/or operation of (i) Properties, (ii) Loans, (iii) Permitted Investments, (iv) short-term investments, and (v) interests in Properties, Loans and Permitted Investments owned by any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner.
“Organization and Offering Expenses” means all expenses incurred by or on behalf of the Company in connection with or preparing the Company for registration of and subsequently offering and distributing its Shares to the public, whether incurred before or after the date of this Agreement, which may include but are not limited to, total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys); any expense allowance granted by the Company to the underwriter or any reimbursement of expenses of the underwriter by the Company; expenses for printing, engraving and mailing; compensation of employees while engaged in sales activity; charges of transfer agents, registrars, trustees, escrow holders, depositaries and experts; and expenses of qualification of the sale of the securities under Federal and State laws, including taxes and fees, accountants’ and attorneys’ fees. 
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“PORT” means Pacific Oak Residential Trust, Inc., a Maryland corporation.
“Partnership” means Pacific Oak Strategic Opportunity Limited Partnership, a Delaware limited partnership formed to own and operate Properties, Loans and other Permitted Investments on behalf of the Company.  
“Permitted Investments” means all investments (other than Properties and Loans)  in which the Company may acquire an interest, either directly or indirectly, including through ownership interests in a Joint Venture or partnership, pursuant to its Charter, Bylaws and the investment objectives and policies adopted by the Board from time to time, other than short-term investments acquired for purposes of cash management.
“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
“Prior Advisor Performance Fee Value” means the value of the Subordinated Share of Cash Flows (as defined in the KBS Advisory Agreement) based on a hypothetical liquidation of the Company’s assets and liabilities at their then-current estimated values used in the 2018 NAV (as defined in the KBS Advisory Agreement) calculation, less any potential amounts to be paid as closing costs and fees related to the disposition of real property, all as determined and used in calculating the number of RSUs (as defined in the KBS Advisory Agreement) to be issued to KBS Capital Advisors LLC in connection with the termination of the KBS Advisory Agreement. 
“Property” means any real property or properties transferred or conveyed to the Company or the Partnership, either directly or indirectly, including through ownership interests in a Joint Venture or partnership.  
“Property Manager” means an entity that has been retained to perform and carry out at one or more of the Properties property-management services, excluding persons, entities or independent contractors retained or hired to perform facility management or other services or tasks at a particular Property, the costs for which are passed through to and ultimately paid by the tenant at such Property.
“REIT” means a “real estate investment trust” under Sections 856 through 860 of the Code.
“Sale” means any transaction or series of transactions whereby: (A) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, including any event with respect to any Property, Loan or other Permitted Investment that gives rise to a significant amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction; (B) the Company or the Partnership sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the Company or the Partnership in any Joint Venture or any partnership in which it is a partner; or (C) any Joint Venture or any partnership in which the Company or the Partnership is a partner, sells, grants, transfers, conveys, or relinquishes its ownership of any Property, Loan or other Permitted Investment or portion thereof, including any event with respect to any Property, Loan or other Permitted Investment that gives rise to insurance claims or condemnation awards, and including the issuance by such Joint Venture or 
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any partnership or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction. 
“SEC” means the United States Securities and Exchange Commission.
“Settlement” means the prepayment, maturity, workout or other settlement of any Loan or other Permitted Investment or portion thereof owned, directly or indirectly, by (A) the Company or the Partnership or (B) any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner.
“Shares” means shares of common stock of the Company, par value $.01 per share. 
“Stockholders” means the registered holders of the Shares. 
“Stockholders’ 7% Return” means, as of any date, an aggregate amount equal to a 7% cumulative, non-compounded, annual return on Invested Capital (calculated like simple interest on a daily basis based on a three hundred sixty-five day year) since Company inception.  For purposes of calculating the Stockholders’ 7% Return, Invested Capital shall be determined for each day during the period for which the Stockholders’ 7% Return is being calculated (i.e. although the calculation is performed since Company inception, it will take into account the specific dates that Shares were purchased by Stockholders or repurchased by the Company) and shall be calculated net of (1) Distributions of Operating Cash Flow since Company inception to the extent such Distributions of Operating Cash Flow provide a cumulative, non-compounded, annual return in excess of 7% since Company inception, as such amounts are computed on a daily basis based on a three hundred sixty-five day year and (2) Distributions of Cash from Sales, Settlements and Financings since Company inception, except to the extent such Distributions would be required to supplement Distributions of Operating Cash Flow in order to achieve a cumulative, non-compounded, annual return of 7% since Company inception, as such amounts are computed on a daily basis based on a three hundred sixty-five day year.
“Subordinated Incentive Fee” means the fee payable to the Advisor under certain circumstances if the Shares are Listed, as calculated in Section 8.05.
“Subordinated Incentive Fee Threshold” has the meaning set forth in Section 8.05.
“Subordinated Performance Fee Due Upon Termination” means a fee payable in the form of an interest bearing promissory note (the “Performance Fee Note”) in a principal amount equal to the amount, if any, by which (I) (1) 15% of the amount, if any, by which (a) the Appraised Value of the Company’s Properties at the Termination Date, less amounts of all indebtedness secured by the Company’s Properties, plus the fair market value of all other Loans, Permitted Investments and other assets of the Company at the Termination Date, less amounts of indebtedness related to such Loans and Permitted Investments, less any other secured or unsecured indebtedness or known liabilities at the Termination Date, plus total Distributions (excluding any stock dividend) from Company inception through the Termination Date exceeds (b) the sum of Invested Capital plus total Distributions required to be made to the stockholders in order to pay the Stockholders’ 7% Return from Company inception through the Termination Date less (2) any prior payment to the Advisor of a Subordinated Share of Cash Flows (the amount calculated under (b) is the “Termination Fee Threshold”) exceeds (II) the Prior Advisor Performance Fee. Interest on the Performance Fee Note will accrue beginning on the Termination Date at a rate deemed fair and reasonable by the Conflicts Committee. The Company shall repay the Performance Fee Note at such time as the Company completes the first Sale or Settlement after the Termination Date using Cash from Sales and Settlements. If the Cash from Sales and Settlements from the first Sale or Settlement after the Termination Date is insufficient to pay the Performance Fee Note in full, including accrued interest, then the 
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Performance Fee Note shall be paid in part from the Cash from Sales and Settlements from the first Sale or Settlement, and in part from the Cash from Sales and Settlements from each successive Sale or Settlement until the Performance Fee Note is repaid in full, with interest. If the Performance Fee Note has not been paid in full within five years from the Termination Date, then the Advisor, its successors or assigns, may elect to convert the balance of the fee, including accrued but unpaid interest, into Shares at a price per Share equal to the average closing price of the Shares over the ten trading days immediately preceding the date of such election if the Shares are Listed at such time. If the Shares are not Listed at such time, the Advisor, its successors or assigns, may elect to convert the balance of the fee, including accrued but unpaid interest, into Shares at a price per Share equal to the fair market value for the Shares as determined by the Board based upon the Appraised Value of Company’s Properties on the date of election plus the fair market value of all other Loans and Permitted Investments of the Company on the date of election. 
“Subordinated Share of Cash Flows” has the meaning set forth in Section 8.04.
“Subordinated Share of Cash Flows Threshold” has the meaning set forth in Section 8.04.
“Termination Date” means the date of termination of the Agreement determined in accordance with Article 13 hereof.
“Termination Fee Threshold” has the meaning set forth in the definition of Subordinated Performance Fee Due Upon Termination.
“2%/25% Guidelines” means the requirement pursuant to the NASAA Guidelines that, in any period of four consecutive fiscal quarters, total Operating Expenses not exceed the greater of 2% of the Company’s Average Invested Assets during such 12-month period or 25% of the Company’s Net Income over the same 12-month period.
ARTICLE 2
APPOINTMENT
The Company hereby appoints the Advisor to serve as its advisor and asset manager on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.
ARTICLE 3
DUTIES OF THE ADVISOR
The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets.  The Advisor undertakes to use its best efforts to present to the Company potential investment opportunities, to make investment decisions on behalf of the Company subject to the limitations in the Company’s Charter, the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board.  Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:
3.01 Organizational and Offering Services.  The Advisor shall perform all services related to the organization of the Company or any Offering or private sale of the Company’s securities, other than services that (i) are to be performed by the Dealer Manager, (ii) the 
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Company elects to perform directly or (iii) would require the Advisor to register as a broker-dealer with the SEC or any state.
3.02 Acquisition Services.
(i)  Serve as the Company’s investment and financial advisor and provide relevant market research and economic and statistical data in connection with the Company’s assets and investment objectives and policies;
(ii)  Subject to Section 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which investments in Properties, Loans and other Permitted Investments will be made; (c) acquire, originate and dispose of Properties, Loans and other Permitted Investments on behalf of the Company; (d) arrange for financing and refinancing and make other changes in the asset or capital structure of investments in Properties, Loans and other Permitted Investments; and (e) enter into leases, service contracts and other agreements for Properties, Loans and other Permitted Investments;
(iii)  Perform due diligence on prospective investments and create due diligence reports summarizing the results of such work;
(iv)  With respect to prospective investments presented to the Board, prepare reports regarding such prospective investments that include recommendations and supporting documentation necessary for the Directors to evaluate the proposed investments;
(v)  Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of contemplated investments of the Company; 
(vi)  Deliver to or maintain on behalf of the Company copies of all appraisals obtained in connection with the Company’s investments; and
(vii)  Negotiate and execute approved investments and other transactions, including prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments.
3.03 Asset Management Services.
(i)  Real Estate and Related Services:
(a)  Investigate, select and, on behalf of the Company, engage and conduct business with (including enter contracts with) such Persons as the Advisor deems necessary to the proper performance of its obligations as set forth in this Agreement, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;
(b)  Negotiate and service the Company’s debt facilities and other financings;
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(c)  Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of investments of the Company;
(d)  Monitor and evaluate the performance of each asset of the Company and the Company’s overall portfolio of assets, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s investments;
(e)  Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Properties, Loans and other Permitted Investments on an overall portfolio basis;
(f)  Consult with the Company’s officers and the Board and assist the Board in the formulation and implementation of the Company’s financial policies, and, as necessary with respect to investment and borrowing opportunities presented to the Board, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company;
(g)  Oversee the performance by the Property Managers of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;
(h)  Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties and to evaluate the performance of the Property Managers;
(i)  Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget; 
(j)  Coordinate and manage relationships between the Company and any Joint Venture partners; and
(k) Consult with the Company’s officers and the Board and provide assistance with the evaluation and approval of potential asset disposition, sale and refinancing opportunities that are presented to the Board.
(ii)  Accounting and Other Administrative Services:
(a)  Provide the day-to-day management of the Company and perform and supervise the various administrative functions reasonably necessary for the management of the Company;
(b)  From time to time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement;
(c)  Make reports to the Conflicts Committee each quarter of the investments that have been made by other programs sponsored by the Advisor or 
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any of its Affiliates as well as any investments that have been made by the Advisor or any of its Affiliates directly;
(d)  Provide or arrange for any administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations;
(e)  Provide financial and operational planning services;
(f)  Maintain accounting and other record-keeping functions at the Company and investment levels, including information concerning the activities of the Company as shall be required to prepare and to file all periodic financial reports, tax returns and any other information required to be filed with the SEC, the Internal Revenue Service and any other regulatory agency;
(g)  Maintain and preserve all appropriate books and records of the Company;
(h)  Provide tax and compliance services and coordinate with appropriate third parties, including the Company’s independent auditors and other consultants, on related tax matters; 
(i)  Provide the Company with all necessary cash management services;
(j)  Manage and coordinate with the transfer agent the dividend process and payments to Stockholders;
(k)  Consult with the Company’s officers and the Board and assist the Board in evaluating and obtaining adequate insurance coverage based upon risk management determinations;
(l)  Provide the Company’s officers and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters, including but not limited to compliance with the Sarbanes-Oxley Act of 2002;
(m)  Consult with the Company’s officers and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto; 
(n)  Perform all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law, including federal and state securities laws and the Sarbanes-Oxley Act of 2002;
(o)  Notify the Board of all proposed material transactions before they are completed; and
(p)  Do all things necessary to assure its ability to render the services described in this Agreement.
3.04 Stockholder Services.
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(i)  Manage services for and communications with Stockholders, including answering phone calls, preparing and sending written and electronic reports and other communications; 
(ii)  Oversee the performance of the transfer agent and registrar; 
(iii)  Establish technology infrastructure to assist in providing Stockholder support and service; and
(iv)  Consistent with Section 3.01, the Advisor shall perform the various subscription processing services reasonably necessary for the admission of new Stockholders.
3.05 Other Services.  Except as provided in Article 7, the Advisor shall perform any other services reasonably requested by the Company (acting through the Conflicts Committee).
ARTICLE 4
AUTHORITY OF ADVISOR
4.01 General.  All rights and powers to manage and control the day-to-day business and affairs of the Company shall be vested in the Advisor. The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter.
4.02 Powers of the Advisor.  Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of investments, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.
4.03 Approval by the Board.  Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized committees thereof if the Charter or Maryland General Corporation Law require the prior approval of the Board.  If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.
4.04 Modification or Revocation of Authority of Advisor.  The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.
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ARTICLE 5
BANK ACCOUNTS
The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or in the name of the Company and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor.  The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.
ARTICLE 6
RECORDS AND FINANCIAL STATEMENTS
The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations in accordance with GAAP, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company, at any time or from time to time during normal business hours. Such books and records shall include all information necessary to calculate and audit the fees or reimbursements paid under this Agreement. The Advisor shall utilize procedures to attempt to ensure such control over accounting and financial transactions as is reasonably required to protect the Company’s assets from theft, error or fraudulent activity. All financial statements that the Advisor delivers to the Company shall be prepared on an accrual basis in accordance with GAAP, except for special financial reports that by their nature require a deviation from GAAP. The Advisor shall liaise with the Company’s officers and independent auditors and shall provide such officers and auditors with the reports and other information that the Company so requests.
ARTICLE 7
LIMITATION ON ACTIVITIES
Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code, (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended, (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Shares or its other securities, (iv) require the Advisor to register as a broker-dealer with the SEC or any state, or (v) violate the Charter or Bylaws. In the event an action that would violate (i) through (v) of the preceding sentence but such action has been ordered by the Board, the Advisor shall notify the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board. In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given. 
ARTICLE 8
FEES
8.01 Acquisition Fees.  As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Properties, Loans and other Permitted Investments, the Company shall pay an Acquisition Fee to the Advisor for each such investment (whether an acquisition or origination), excluding investments in PORT or made through PORT.  With respect to the acquisition or origination of a Property, Loan or other 
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Permitted Investment to be wholly owned, directly or indirectly, by the Company, the Acquisition Fee payable to the Advisor shall equal 1.0% of the sum of the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property, Loan or other Permitted Investment and the amount of any debt associated with, or used to fund the investment in, such Property, Loan or other Permitted Investment.  With respect to the acquisition or origination of a Property, Loan or other Permitted Investment through any Joint Venture or any partnership in which the Company or the Partnership is, directly or indirectly, a partner, the Acquisition Fee payable to the Advisor shall equal 1.0% of the portion of the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other Permitted Investment, inclusive of the Acquisition Expenses associated with such Property, Loan or other Permitted Investment, plus the amount of any debt associated with, or used to fund the investment in, such Property, Loan or other Permitted Investment that is attributable to the Company’s investment in such Joint Venture or partnership.  Notwithstanding anything herein to the contrary, the payment of Acquisition Fees by the Company shall be subject to the limitations on Acquisition Fees contained in (and defined in) the Company’s Charter, and no Acquisition Fee shall be paid in connection with the Merger. The Advisor shall submit an invoice to the Company following the closing or closings of each acquisition or origination, accompanied by a computation of the Acquisition Fee. Generally, the Acquisition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company.  However, the Acquisition Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor.  All or any portion of the Acquisition Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.
8.02 Asset Management Fees.
(i) Except as provided in Section 8.02(ii) hereof, the Company shall pay the Advisor as compensation for the services described in Section 3.03 hereof a monthly fee (the “Asset Management Fee”) in an amount equal to one-twelfth of 0.75% of the sum of the Cost of Real Estate Investments and the Cost of Loans and other Permitted Investments, excluding investments in PORT or made through PORT.  The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the Asset Management Fee for the applicable period. Generally, the Asset Management Fee payable to the Advisor shall be paid on the last day of such month, or the first business day following the last day of such month.  However, the Asset Management Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor.  All or any portion of the Asset Management Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.
(ii) Notwithstanding anything contained in Section 8.02(i) to the contrary, a Property, Loan or other Permitted Investment that has suffered an impairment in value, reduction in cash flow or other negative circumstances may either be excluded from the calculation of the Cost of Real Estate Investments or the Cost of Loans and other Permitted Investments or included in such calculation at a reduced value that is recommended by the Advisor and the Company’s management and then approved by a majority of the Company’s independent directors, and the resulting change in the Asset Management Fee with respect to such an investment will be applicable upon the earlier to occur of the date on which (i) such investment is sold, (ii) such investment is surrendered to a Person other than the Company, its direct or indirect wholly owned subsidiary or a Joint Venture or partnership in which the Company has an interest, (iii) the Advisor determines that it will no longer pursue collection or other remedies related to such 
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investment, or (iv) the Advisor recommends a revised fee arrangement with respect to such investment.  
8.03 Disposition Fees.  If the Advisor or any of its Affiliates provide a substantial amount of services (as determined by the Conflicts Committee) in connection with a Sale, excluding investments in PORT or made through PORT, the Advisor or such Affiliate shall receive a fee at the closing (the “Disposition Fee”) equal to 1% of the Contract Sales Price; provided, however, that if in connection with such Sale commissions are paid to third parties other than the Advisor or its Affiliates, the fee paid to the Advisor or any of its Affiliates may not exceed the commissions paid to such unaffiliated third parties; and provided further that no Disposition Fee shall be payable to the Advisor for any Sale if such Sale involves the Company selling all or substantially all of its assets in one or more transactions designed to effectuate a business combination transaction (as opposed to a Company liquidation, in which case the Disposition Fee would be payable if the Advisor or an Affiliate provides a substantial amount of services as provided above).  The payment of any Disposition Fees by the Company shall be subject to the limitations contained in the Company’s Charter.  Any Disposition Fee payable under this Section 8.03 may be paid in addition to commissions paid to non-Affiliates, provided that the total commissions (including such Disposition Fee) paid to all Persons by the Company for each Sale shall not exceed an amount equal to the lesser of (i) 6% of the aggregate Contract Sales Price of each Property, Loan or other Permitted Investment or (ii) the Competitive Real Estate Commission for each Property, Loan or other Permitted Investment.  The Advisor shall submit an invoice to the Company following the closing or closings of each disposition, accompanied by a computation of the Disposition Fee. Generally, the Disposition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company.  However, the Disposition Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor.  All or any portion of the Disposition Fees not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.
8.04 Subordinated Share of Cash Flows.  The Subordinated Share of Cash Flows shall be payable to the Advisor in an amount equal to the amount, if any, by which (I) 15% of Operating Cash Flow and Cash from Sales, Settlements and Financings remaining after the Stockholders have received Distributions of Operating Cash Flow and of Cash from Sales, Settlements and Financings since Company inception such that the owners of all outstanding Shares have received Distributions since Company inception in an aggregate amount equal to the sum of the Stockholders’ 7% Return and Invested Capital, exceeds (II) the Prior Advisor Performance Fee Value.
When determining whether the above threshold (the “Subordinated Share of Cash Flows Threshold”) has been met:
(A)    Any stock dividend since Company inception shall not be included as a Distribution; and
(B)    Distributions since Company inception paid on Shares redeemed by the Company (and thus no longer included in the determination of Invested Capital), shall not be included as a Distribution.
Following Listing, no Subordinated Share of Cash Flows will be paid to the Advisor.  
If the Subordinated Share of Cash Flows is payable to the Advisor, the Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the total amount of the Subordinated Share of Cash Flows for the applicable period. Generally, the Subordinated Share of Cash Flows payable to the Advisor shall be paid on the last day of such month, or the first 
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business day following the last day of such month.  However, the Subordinated Share of Cash Flows may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor.  All or any portion of the Subordinated Share of Cash Flows not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.
8.05 Subordinated Incentive Fee.  Upon Listing, the Advisor shall be entitled to the Subordinated Incentive Fee in an amount equal to the amount, if any, by which (I) 15% of the amount by which (i) the market value of the outstanding Shares of the Company, measured by taking the average closing price or the average of the bid and asked price, as the case may be, over a period of 30 days during which the Shares are traded, with such period beginning 180 days after Listing (the “Market Value”), plus the total of all Distributions paid to Stockholders (excluding any stock dividends) from Company inception until the date that Market Value is determined, exceeds (ii) the sum of (A) 100% of Invested Capital and (B) the total Distributions required to be paid to the Stockholders in order to pay the Stockholders’ 7% Return from Company inception through the date Market Value is determined (the sum of (A) and (B) is the “Subordinated Incentive Fee Threshold”) exceeds (II) the Prior Advisor Performance Fee Value. The Company shall have the option to pay such fee in the form of cash, Shares, a promissory note or any combination of the foregoing. The Subordinated Incentive Fee will be reduced by the amount of any prior payment to the Advisor of a Subordinated Share of Cash Flows. In the event the Subordinated Incentive Fee is paid to the Advisor following Listing, no other performance fee will be paid to the Advisor.  In addition, the Subordinated Incentive Fee may or may not be taken, in whole or in part, as to any year in the sole discretion of the Advisor.  All or any portion of the Subordinated Incentive Fee not taken as to any fiscal year shall be deferred without interest and may be paid in such other fiscal year as the Advisor shall determine.  
8.06 Changes to Fee Structure.  The Advisor and the Company shall not agree to reduce the Subordinated Share of Cash Flows Threshold, the Subordinated Incentive Fee Threshold or the Termination Fee Threshold without (a) the approval of the Conflicts Committee or (b) the approval of Stockholders holding a majority of the Shares.  In the event of Listing, the Company and the Advisor shall negotiate in good faith to establish a fee structure appropriate for a perpetual-life entity.  
ARTICLE 9
EXPENSES
9.01 General.  In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, the Company shall pay directly or reimburse the Advisor for all of the expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement, including, but not limited to:
(i)  All Organization and Offering Expenses; provided, however, that the Company shall not reimburse the Advisor to the extent such reimbursement would cause the total amount spent by the Company on Organization and Offering Expenses to exceed 15% of the Gross Proceeds raised as of the date of the reimbursement and provided further that within 60 days after the end of the month in which an Offering terminates, the Advisor shall reimburse the Company to the extent the Company incurred Organization and Offering Expenses exceeding 15% of the Gross Proceeds raised in the completed Offering; the Company shall not reimburse the Advisor for any Organization and Offering Expenses that are not fair and commercially reasonable to the Company, and the Advisor shall reimburse the Company for any Organization and Offering Expenses that are not fair and commercially reasonable to the Company;
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(ii)  Acquisition Fees and Acquisition Expenses incurred in connection with the selection and acquisition of Properties, Loans and other Permitted Investments, including such expenses incurred related to assets pursued or considered but not ultimately acquired by the Company, provided that, notwithstanding anything herein to the contrary, the payment of Acquisition Fees and Acquisition Expenses by the Company shall be subject to the limitations contained in the Company’s Charter;
(iii)  The actual out-of-pocket cost of goods and services used by the Company and obtained from entities not Affiliated with the Advisor;
(iv)  Interest and other costs for borrowed money, including discounts, points and other similar fees;
(v)  Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;
(vi)  Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and Directors;
(vii)  Expenses of managing, improving, developing, operating and selling Properties, Loans and other Permitted Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to such Properties, Loans and other Permitted Investments, including but not limited to prepayments, maturities, workouts and other settlements of Loans and other Permitted Investments;
(viii)  All out-of-pocket expenses in connection with payments to the Board and meetings of the Board and Stockholders;
(ix)  Personnel and related employment costs incurred by the Advisor or its Affiliates in performing the services described in Article 3 hereof, including but not limited to reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services, provided that, other than reimbursement of travel and communications expenses, no reimbursement shall be made for compensation of such employees of the Advisor or its Affiliates to the extent that such employees perform services for which the Advisor receives Acquisition Fees or Disposition Fees;
(x)  Out-of-pocket expenses of providing services for and  maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;
(xi)  Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board, the Conflicts Committee or any other committee of the Board;
(xii)  Out-of-pocket costs for the Company to comply with all applicable laws, regulations and ordinances; 
(xiii)  Expenses connected with payments of Distributions made or caused to be made by the Company to the Stockholders;
(xiv)  Expenses of organizing, redomesticating, merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and
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(xv)  All other out-of-pocket costs incurred by the Advisor in performing its duties hereunder.
9.02 Timing of and Additional Limitations on Reimbursements.
(i)  Expenses incurred by the Advisor on behalf of the Company and reimbursable pursuant to this Article 9 shall be reimbursed no less than monthly to the Advisor. The Advisor shall prepare a statement documenting the expenses of the Company during each quarter and shall deliver such statement to the Company within 45 days after the end of each quarter. 
(ii)  The Company shall not reimburse the Advisor at the end of any fiscal quarter for Operating Expenses that in the four consecutive fiscal quarters then ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of 2% of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for such year unless the Conflicts Committee determines that such excess was justified, based on unusual and nonrecurring factors that the Conflicts Committee deems sufficient. If the Conflicts Committee does not approve such excess as being so justified, any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. If the Conflicts Committee determines such excess was justified, then, within 60 days after the end of any fiscal quarter of the Company for which total reimbursed Operating Expenses for the Expense Year exceed the 2%/25% Guidelines, the Advisor, at the direction of the Conflicts Committee, shall cause such fact to be disclosed to the Stockholders in writing (or the Company shall disclose such fact to the Stockholders in the next quarterly report of the Company or by filing a Current Report on Form 8-K with the SEC within 60 days of such quarter end), together with an explanation of the factors the Conflicts Committee considered in determining that such excess expenses were justified. The Company will ensure that such determination will be reflected in the minutes of the meetings of the Board. All figures used in the foregoing computation shall be determined in accordance with GAAP applied on a consistent basis.
ARTICLE 10
VOTING AGREEMENT
The Advisor agrees that, with respect to any Shares now or hereinafter owned by it, the Advisor will not vote or consent on matters submitted to the stockholders of the Company regarding (i) the removal of the Advisor or any Affiliate of the Advisor, (ii) any transaction between the Company and the Advisor or any of its Affiliates, (iii) the election of directors of the Company or (iv) the approval or termination of any contract with the Advisor or any Affiliate of the Advisor.  This voting restriction shall survive until such time that the Advisor is both no longer serving as such and is no longer an Affiliate of the Company.  
ARTICLE 11
RELATIONSHIP OF ADVISOR AND COMPANY;
OTHER ACTIVITIES OF THE ADVISOR
11.01 Relationship.  The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers. Nothing herein contained shall prevent the Advisor from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates. Nor shall this Agreement limit or restrict the right of any manager, director, officer, employee or equityholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. The Advisor may, with respect to any 
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investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Advisor shall promptly disclose to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.
11.02 Time Commitment.  The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.
11.03 Investment Opportunities and Allocation.  The Advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the Company that is consistent with the investment policies and objectives of the Company, but neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present any particular investment opportunity to the Company even if the opportunity is of character that, if presented to the Company, could be taken by the Company. 
ARTICLE 12
THE PACIFIC OAK NAME
The Advisor and its Affiliates have a proprietary interest in the name “Pacific Oak.”  The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “Pacific Oak” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from the Advisor, cease to conduct business under or use the name “Pacific Oak” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “Pacific Oak” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any its Affiliates.  At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word “Pacific Oak.” Consistent with the foregoing, it is specifically recognized that the Advisor or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having “Pacific Oak” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.
ARTICLE 13
TERM AND TERMINATION OF THE AGREEMENT
13.01 Term.  This Agreement shall have an initial term of one year from November 1, 2021 and may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties. The Company (acting through the Conflicts Committee) will evaluate the performance of the Advisor annually before renewing this Agreement, and each such renewal shall be for a term of no more than one year.  Any such renewal must be approved by the Conflicts Committee.
13.02 Termination by Either Party.  This Agreement may be terminated upon 60 days written notice without cause or penalty by either the Company (acting in sole discretion and 
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authority of the Conflicts Committee) or the Advisor. The provisions of Articles 1, 10, 12, 13, 15 and 16 shall survive termination of this Agreement. 
13.03 Payments on Termination and Survival of Certain Rights and Obligations. Payments to the Advisor pursuant to this Section 13.03 shall be subject to the 2%/25% Guidelines to the extent applicable.
(i)  After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company within 30 days after the effective date of such termination (A) all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement and (B) the Subordinated Performance Fee Due Upon Termination, provided that (1) no Subordinated Performance Fee Due Upon Termination will be due or paid if the Company has paid or is obligated to pay the Subordinated Incentive Fee (2) no Subordinated Performance Fee Due Upon Termination will be due or paid if this Agreement is terminated by the Company for cause.
(ii)  The Advisor shall promptly upon termination:
(a)  pay over to the Company all money collected pursuant to this Agreement, if any, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;
(b)  deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;
(c)  deliver to the Board all assets and documents of the Company then in the custody of the Advisor; and
(d)  cooperate with the Company to provide an orderly transition of advisory functions.
ARTICLE 14
ASSIGNMENT
This Agreement may be assigned by the Advisor to an Affiliate with the consent of the Conflicts Committee. The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board. This Agreement shall not be assigned by the Company without the consent of the Advisor, except in the case of an assignment by the Company to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company is bound by this Agreement.
ARTICLE 15
INDEMNIFICATION AND LIMITATION OF LIABILITY
15.01 Indemnification.  Except as prohibited by the restrictions provided in this Section 15.01, Section 15.02 and Section 15.03, the Company shall indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, equity holders, partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by 
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insurance. Any indemnification of the Advisor may be made only out of the net assets of the Company and not from Stockholders.
Notwithstanding the foregoing, the Company shall not indemnify the Advisor or its Affiliates for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged material securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.
15.02 Limitation on Indemnification.  Notwithstanding the foregoing, the Company shall not provide for indemnification of the Advisor or its Affiliates for any liability or loss suffered by any of them, nor shall any of them be held harmless for any loss or liability suffered by the Company, unless all of the following conditions are met:
(i)    The Advisor or its Affiliates have determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company.
(ii)    The Advisor or its Affiliates were acting on behalf of or performing services for the Company. 
(iii)    Such liability or loss was not the result of  negligence or misconduct by the Advisor or its Affiliates.  
    15.03 Limitation on Payment of Expenses.  The Company shall pay or reimburse reasonable legal expenses and other costs incurred by the Advisor or its Affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the Maryland General Corporation Law, as amended from time to time) all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Company, (b) the legal proceeding was initiated by a third party who is not a stockholder or, if by a stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement and (c)  the Advisor or its Affiliates undertake to repay the amount paid or reimbursed by the Company, together with the applicable legal rate of interest thereon, if it is ultimately determined that the particular indemnitee is not entitled to indemnification. 
ARTICLE 16
MISCELLANEOUS
16.01 Notices.  Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:
To the Company or the Board:
Pacific Oak Strategic Opportunity REIT, Inc. 
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11766 Wilshire Blvd., Suite 1670
Los Angeles, CA 90025

To the Advisor:
Pacific Oak Capital Advisors, LLC
11766 Wilshire Blvd., Suite 1670
Los Angeles, CA 90025

Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 16.01.
16.02 Modification.  This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns, and any change or modification to this Agreement must be in accordance with Section 8.06 hereof, to the extent applicable.
16.03 Severability.  The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
16.04 Construction.  The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Delaware.
16.05 Entire Agreement.  This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.
16.06 Waiver.  Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.
16.07 Gender.  Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.
16.08 Titles Not to Affect Interpretation.  The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.
16.09 Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement 
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shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. 
ARTICLE 17
PORT PROVISIONS
17.01 Management of PORT Operations and Assets.  Notwithstanding anything to the contrary in this Agreement, the Advisor will not be responsible for managing the operations or assets of PORT.  PORA, an affiliate of the Advisor, will manage the operations and assets of PORT pursuant to the advisory agreement under which PORT has hired PORA as its external advisor.  All references to the power, authority, responsibility and duties of the Advisor with respect to the Company in this Agreement shall be deemed to exclude PORT, its operations and its assets.

[The remainder of this page is intentionally left blank.
Signature page follows.]
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    IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date and year first above written.

									
			
			PACIFIC OAK STRATEGIC OPPORTUNITY REIT, INC.

   By: /s/ Keith D. Hall
         Keith D. Hall, Chief Executive Officer

PACIFIC OAK CAPITAL ADVISORS, LLC

By:  Pacific Oak Holding Group, LLC, sole Member

By:  /s/ Peter McMillan III
                       Peter McMillan III, Member
            
By:/s/ Keith D. Hall
                       Keith D. Hall, Member

 

			

[Signature Page to Advisory Agreement of Pacific Oak Strategic Opportunity REIT, Inc.]Document

Exhibit 10.3

AMENDED AND RESTATED MANAGEMENT AGREEMENT
This AMENDED AND RESTATED MANAGEMENT AGREEMENT (this “Agreement”), entered into as of September 9, 2022, but effective as of September 1, 2022, is made and entered into by and among Pacific Oak Residential Trust, Inc., a Maryland corporation (“PORT”), and DMH Realty, LLC, a Florida limited liability company (“Property Manager”).
RECITALS
WHEREAS, PORT owns through its operating partnership, PORT OP LP, a Delaware limited partnership (the “Partnership”), or otherwise has the right to collect rents from, and contract for managerial services for, the single-family rental properties identified and described in Schedule A attached hereto, as adjusted by any properties acquired, directly or indirectly, by PORT or the Partnership, in accordance with this Agreement, minus any properties sold by PORT or the Partnership from time to time in accordance with this Agreement (collectively, the “Properties” and each, a “Property”); 
WHEREAS, the parties desire to enter into this Agreement, pursuant to which Property Manager will undertake certain management, acquisition, disposition and oversight functions with respect to the Properties as provided herein, subject to the limitations set forth herein; 
WHEREAS, the parties entered into the Management Agreement on October 15, 2021 (the “Original Agreement”); and 
WHEREAS, the parties desire to amend and restate the Original Agreement in its entirety with this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I    
APPOINTMENT OF PROPERTY MANAGER
Section 1.01    Appointment of Property Manager. PORT hereby appoints Property Manager the sole and exclusive manager for the Properties upon the terms and conditions set forth herein. Property Manager hereby accepts such appointment on the terms and conditions set forth herein and shall furnish the services of its organization for the management of the Properties.
Section 1.02    Independent Contractor Status. Property Manager is hereby engaged to manage the Properties as an independent contractor.
ARTICLE II
TERM OF AGREEMENT
Section 2.01    Term of Agreement. The Original Agreement commenced upon PORT’s acquisition or control of the Properties.  This Agreement shall commence on September 1, 2022 (the “Effective Date”) and shall continue until the last day of the calendar month following the two-year anniversary of the Effective Date (the “Term”). Upon expiration of the Term, this Agreement will automatically renew for additional one-year periods until terminated as provided in Article VIII.
ARTICLE III
PROPERTY MANAGER’S DUTIES AND RESPONSIBILITIES
Section 3.01    General Scope. Property Manager shall devote such efforts as are consistent with the Standard of Care (as defined below) in managing, coordinating and supervising the ordinary and 
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usual business and affairs pertaining to the identification, acquisition, operation, maintenance, leasing, licensing, rehabilitation, construction, disposition and management of the Properties and in compliance with the directives of PORT or PORT’s advisor, Pacific Oak Residential Advisors, LLC (“Advisor”), all pursuant to the terms, conditions and limitations of this Agreement. Property Manager shall have such responsibilities, and shall perform and take, or cause to be performed or taken, all such services and actions customarily taken by managing agents of property of similar nature, location, and character to that of the Properties consistent with the duties set forth in this Article III. Unless otherwise specifically provided in this Agreement or the written directives of PORT or Advisor (collectively, the “Guiding Documents”), all services and actions that Property Manager is required or permitted to perform or take, or cause to be performed or taken, in connection with the management of the Properties shall be performed or taken, as the case may be, on behalf of PORT and at PORT’s sole cost, expense, and risk. Property Manager’s authority is limited to performing the services set forth herein and the other Guiding Documents. Except as provided in the Guiding Documents, Property Manager shall have no authority (a) to execute any contract or agreement for or on behalf of PORT, (b) to provide additional services or modify existing services to tenants, or (c) to assume or create any obligation or liability or to make any representation, covenant, agreement or warranty for or on behalf of PORT.
Section 3.02    Standard of Care. Property Manager shall perform its duties and obligations hereunder in a commercially reasonable manner, consistent with the degree of care, skill, prudence, diligence and good faith that a property manager would use in managing other properties or performing similar services in the same geographic location (the “Standard of Care”). Without limiting the generality of the foregoing, Property Manager shall employ such efforts as are consistent with the Standard of Care to comply with all applicable requirements of federal, state and local laws, ordinances, rules, regulations and orders governing the leasing, promotion, management, use, operation, repair and maintenance of the Properties and the terms of any leases, mortgages or other agreements to which Properties are subject (collectively, the “Requirements” or individually a “Requirement”). Property Manager shall have in its employ at all times a sufficient number of capable employees to properly, adequately, safely and economically perform the duties hereunder. Further, Property Manager shall carry out its duties set forth herein in a manner that is consistent with PORT’s written instructions concerning its election to be taxed as a real estate investment trust under the Internal Revenue Code of 1986, as amended.
Section 3.03    Marketing Authorization. Property Manager is authorized to establish rental rates and implement marketing strategies in accordance therewith. Property Manager shall supervise the preparation of all advertising layouts, brochures, and campaigns. Advertising and promotional materials shall be prepared in accordance with Property Manager’s budget and full compliance with federal, state, and municipal fair housing laws, and Property Manager shall not use PORT’s name (or any Affiliate of PORT) without PORT’s express written approval.
Section 3.04    Acquisition and Disposition. Property Manager shall provide management, supervisory, administrative and logistical services and support to PORT and to Advisor consistent with the Standard of Care and the Guiding Documents in connection with (i) the identification and evaluation of Properties that might be suitable for purchase or other acquisition, (ii) the purchase or other acquisition of Properties, (iii) the financing or refinancing of Properties, and (iv) the sale or other disposition of Properties (including, without limitation, the structuring and negotiation of such transactions and the management of PORT’s dealings with brokers, appraisers, bankers and other professionals engaged by PORT in connection with such transactions). For purposes of clarification, Properties acquired, directly or indirectly, by PORT or the Partnership will be deemed Properties under this Agreement, and Properties sold by PORT or the Partnership shall no longer be deemed Properties under this Agreement, in either case regardless of whether this Agreement or any exhibit or schedule is formally amended to reflect the new or former Properties.
Section 3.05    Leasing. Property Manager shall exercise such efforts as are consistent with the Standard of Care to obtain and keep residents and will cooperate with any broker in any reasonable manner likely to aid in filling any vacancy. Property Manager is authorized, consistent with the Standard of Care and Guiding Documents, to negotiate, prepare, and execute all leases on PORT’s approved lease form, including all renewals and extensions of leases and to cancel and modify existing leases, provided such actions are taken in accordance with all Requirements.
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Section 3.06    Security Deposits. Property Manager is authorized to establish accounts on behalf of PORT for holding security deposits, if any, in accordance with all Requirements, and shall collect and refund security deposits in accordance with the terms of each resident’s lease and as may be required by applicable law. If required by statute, Property Manager will deposit security deposits into a separate interest-bearing account and pay residents the interest earned on such deposit; otherwise, Property Manager will deposit security deposits into the Operating Account (as defined below). When Property Manager reasonably deems appropriate, Property Manager may offset resident charges with forfeited security deposit amounts and disburse any surplus security deposits from the Operating Account.
Section 3.07    Collection of Rents and Enforcement of Leases. Property Manager shall exercise such efforts as are consistent with the Standard of Care to promptly collect all rents and other charges for services provided in connection with the use of the Properties. All monies collected shall be promptly deposited into the Operating Account unless otherwise directed by PORT. When necessary and permissible by applicable Requirements, Property Manager is authorized to institute the following actions: (a) terminate tenancies; (b) sign and serve such notices as are deemed reasonably necessary or expedient by Property Manager; (c) institute and prosecute actions and evict residents; (d) recover rents and other sums due by legal proceedings; and (e) settle, compromise, and release such actions or suits, or reinstitute such tenancies. Attorney’s fees, filing fees, court costs, and other reasonable and necessary expenses incurred in connection with such actions and not recovered from residents shall be paid out of the Operating Account.
Section 3.08    Operating Expenditures.
(a)The term “Operating Expenditures” shall mean the aggregate of all actual, reasonable expenses incurred by Property Manager in accordance with this Agreement in connection with or arising from the identification, acquisition, financing, ownership, operation, management, repair, disposition, replacement, maintenance, and use or occupancy of the Properties including, without limitation, expenditures for: (i) license and permit fees, landowner association fees and assessments, and all other charges of any kind and nature by any governmental or public authority; (ii) management fees and any other reasonable expenses incurred by Property Manager consistent with the Guiding Documents; (iii) advertising and marketing expenses, and leasing fees and commissions; (iv) legal, accounting, engineering, and other professional and consulting fees and disbursements; (v) accounts payable to independent contractors providing labor, material, services and equipment to the Properties; (vi) premiums for insurance paid with respect to the Properties or the operations thereof; (vii) resident improvements and replacement and segregated reserves therefor; (viii) maintenance and repair of the Properties and all property and equipment used in connection with the operation thereof; (ix) renovation, improvement and development of the Properties and all property and equipment used in connection with the operation thereof; (x) refunds or security or other deposits to resident and contracting parties; (xi) funds reserved for contingent or contested liabilities, real estate taxes, insurance premiums, or other amounts not payable on a monthly basis; (xii) service contracts and public utility charges and assessments; (xiii) personnel administration charges and pre-employment screening and testing costs; (xiv) cost of third party revenue management programs; and (xv) costs of credit reports, bank charges, and like matters. Operating Expenditures may include (A) payroll, benefits and overhead expenses approved by PORT, and (B) other costs and expenses of Property Manager’s or its Affiliates’ personnel engaged in any Additional Services; provided, however, that Property Manager shall be responsible for paying, and shall not be reimbursed for, its general administrative overhead costs and expenses, including without limitation the costs and expenses of renting its offices, employing its general administrative staff, purchasing or renting its office equipment and supplies, and maintaining phone and internet connections.
(b)For purposes of clarification, Property Manager may perform (or cause its Affiliates to perform) certain services (including without limitation services related to leasing, onboarding, fit-up, inspecting, renovation, improvement, development, construction, maintenance, repair, cleaning, painting or decorating any of the Properties) that could be contracted or subcontracted out to third parties hereunder, and, for performing such services, Property Manager (or its Affiliates) shall be entitled to reimbursement for the costs and expenses incurred performing such services (in addition to the Leasing Fees, Property Management Fee, and Shared Fees contemplated under Article VI) at rates 
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commensurate with rates that would be payable to unrelated third parties if Property Manager engaged such unrelated third parties to perform such services (collectively, the “Additional Services”).
(c)Property Manager is authorized to incur expenses in connection with the operation and management of the Properties. Property Manager shall employ such efforts as are consistent with the Standard of Care to insure that the actual costs of maintaining and operating the Properties shall not be excessive in relation to comparable properties. In cases of emergency, Property Manager may make expenditures if such expenditures are necessary in the reasonable judgment of Property Manager to effectively protect the Properties or to prevent personal injury and is not in excess of $10,000 with respect to any individual Property or $250,000 collectively among all Properties during any calendar year. Property Manager will promptly notify PORT of any such emergency.
Section 3.09    Capital Expenditures.  Any capital expenditure (excluding expenditures related to acquisition activities and rehabilitation of newly acquired Properties) over $15,000 per Property shall be awarded on the basis of competitive bidding, solicited in the following manner: (a) a minimum of two (2) written bids shall be obtained for each purchase where possible and practical to obtain such bids; (b) each bid will be solicited in a form so that uniformity will exist in the bid quotes; (c) Property Manager shall provide Advisor with all bid responses accompanied by Property Manager’s recommendations as to the most acceptable bid; and (d) Advisor shall be free to accept or reject any and all bids, provided that if  Advisor fails to do so within three (3) Business Days, Property Manager shall provide written notice to Advisor that a failure to respond within one (1) Business Day shall constitute a deemed approval, and if Advisor fails to do so within such one (1) Business Day, such failure shall be deemed acceptance. PORT shall be responsible for capital expenditures and may pay some from its own resources or may authorize payment by Property Manager out of available funds in the Operating Account.
Section 3.10    Public Utility and Service Contracts. To the extent applicable, Property Manager shall negotiate and execute, in its capacity as PORT’s agent, contracts for water, electricity, gas, vermin or pest extermination, and any other services which are necessary to properly maintain the Properties. All required utility deposits will be the responsibility of PORT and each contract shall: (a) be in the name of, and expense of, PORT; and (b) include a provision for cancellation thereof by PORT or Property Manager.
Section 3.11    Reserved.
Section 3.12    Compliance with Regulations. Property Manager shall employ such efforts as are consistent with the Standard of Care to cause the Properties to be in compliance with all Requirements. Property Manager shall promptly give notice to Advisor of Property Manager’s receipt of any oral or written notice of the existence of a material violation of any material Requirement or as otherwise required by the Standard of Care (a “Violation”), and Property Manager shall promptly cure at PORT’s expense any such Violation applicable to any Property, other than a Violation that is required to be cured by the respective tenants under the leases in effect at the Property. Expenses incurred in curing any Violation applicable to any Property may be paid from the Operating Account to the extent such expenses have been budgeted for, and provided such expenses do not exceed $2,500 in any one instance. If (1) such expenses have not been so budgeted, (2) more than $2,500 is required to remedy a Violation, or (3) a Violation is one for which PORT may be subject to penalty, Property Manager shall immediately notify PORT of such Violation and advise PORT regarding a course of action for curing such Violation.
Section 3.13    Environmental Risk Management. PORT acknowledges and understands that Property Manager, except with respect to the obligations set forth in Section 3.04, is not responsible for (1) evaluating the presence or absence of hazardous or toxic substances, mold, waste, materials, electromagnetic field, radon or radioactive materials upon, within, above, or beneath the Properties; (2) maintaining or evaluating compliance with environmental, hazardous or solid materials or waste laws, rules and regulations except for any operating and maintenance plan applicable to the Properties or in connection with Property Manager’s construction management duties; or (3) conducting or ensuring clean-up or remediation of existing or identified hazardous material spills or contamination unless the parties otherwise agree in writing or as expressly provided herein.
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(a)    Accordingly, Property Manager’s obligations to PORT with respect to the presence of Hazardous Materials and/or with the compliance and enforcement of Hazardous Materials Laws shall be subject to, conditioned upon, and limited by the following:
(i)PORT may from time to time, at PORT’s sole discretion and expense, obtain from an independent environmental consultant retained by PORT, an environmental assessment report on the Properties (or any of them) and may have such assessment report periodically updated.
(ii)Except as provided by Section 3.13(a)(iii), Section 3.04, or as otherwise expressly agreed in writing by the parties, Property Manager shall not be obligated to make an independent determination as to the presence or absence of Hazardous Materials, or whether the Properties are in violation or compliance with any Hazardous Materials Laws. Property Manager may seek, on PORT’s behalf and at PORT’s expense, to enforce a resident’s compliance with any Hazardous Materials Laws in accordance with an environmental consultant’s recommendations contained in any environmental assessment report. Property Manager shall not have any obligation to determine whether or not PORT, any residents, the Properties, or any portion thereof is in compliance with Hazardous Materials Laws; provided, Property Manager shall promptly notify PORT of any violations or potential violations of Hazardous Materials Laws observed on the Properties.
(iii)Property Manager shall be responsible for any Hazardous Materials which it uses or introduces to the Properties, including storage, containment, removal, or remediation as required by applicable law. To the extent Hazardous Materials (such as cleaning supplies or fuel) are required by Property Manager in the discharge of its duties under this Agreement, Property Manager shall only use and store quantities of such Hazardous Materials as are permitted under applicable law, and shall store, use and dispose of such Hazardous Materials in accordance with applicable laws. In connection with the foregoing, Property Manager hereby agrees to and shall indemnify, protect, defend, save, and hold harmless PORT, its principals and employees, and their respective successors and assigns from any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost, or expense (including attorney’s fees and expenses) arising out of or relating in any way to Property Manager’s violation of this Section 3.13(a)(iii).
(iv)Property Manager shall not be responsible for the abatement, clean-up or remediation of any spill of or contamination from any Hazardous Materials upon, beneath, or within all, or any portion, of the Properties (other than Hazardous Materials introduced, used or stored by Property Manager in violation of Section 3.13(a)(iii)), and the entire responsibility for such clean-up, abatement, or remediation shall lie with PORT and PORT’s environmental consultation. However, Property Manager shall cooperate with PORT in coordinating and supervising any abatement, clean-up, monitoring or remedial action on a Property site. PORT agrees that, with respect to any abatement, clean-up, or remedial action, PORT shall employ a qualified and licensed environmental clean-up company to undertake such clean-up and remediation, and PORT’s environmental consultant shall oversee the entire abatement, clean-up and remediation process and the obtaining of any required governmental approvals. If the clean-up or remediation is the responsibility of any resident of the Properties and/or PORT’s environmental consultant, Property Manager shall, on PORT’s behalf, require the resident to utilize qualified and licensed environmental clean-up companies and ensure that the clean-up and remediation is conducted to PORT’s satisfaction and in accordance with all Hazardous Materials Laws, governmental laws and approvals of which Property Manager is aware.
(v)In connection with the foregoing, PORT hereby agrees to and shall indemnify, protect, defend, save, and hold harmless Property Manager, its principals and employees, and their respective successors and assigns from any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost or expense (including attorney’s fees and expenses) arising out of or relating in any way to (1) the actions, or failure to act, by Property Manager in following PORT’s and PORT’s environmental consultant’s directions, (2) PORT’s failure or refusal to employ an environmental consultant with respect to the Properties, (3) the acts, omissions, or negligence of PORT, PORT’s environmental consultant, or the failure of such environmental consultant, to fulfill its obligations with respect to the Properties, (4) any 
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violation of Hazardous Materials Laws applicable to the Properties, (5) the designation of Property Manager as an “operator” or the Properties as a “regulated facility” under Hazardous Materials Laws, or otherwise liable as a party under any Hazardous Materials Laws, or as a party in any claim for contribution, cost recovery or indemnity against Property Manager, or its insurer arising out of the foregoing, and (6) any condition or circumstance arising initially prior to the date of this Agreement (regardless of whether such condition or circumstance continues). The foregoing indemnity shall not apply to any claim, cause of action, liability, loss, demand, damages (including damages associated with any environmental law), fine, penalty, injury, cost, or expense (including attorney’s fees and expenses) resulting from an indemnified party’s sole or gross negligence or willful misconduct.
(b)    The indemnities herein shall be immediately vested and shall survive the expiration or termination of this Agreement.
Section 3.14    Disclaimer of Certain Liabilities. Property Manager assumes no liability for any acts or omissions of PORT. Property Manager assumes no liability for any failure of, or default by, any tenant in the payment of any rent or other charges due PORT or in the performance of any obligations owed by any tenant to PORT pursuant to any lease or otherwise.
Section 3.15    No Requirement to Advance Funds. In no event shall Property Manager advance any monies on behalf of PORT, lend its credit to the Properties, or incur any liability in Property Manager’s own name.
Section 3.16    Representations. Property Manager represents and warrants to PORT as follows:
(a)    Property Manager (i) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Florida, (ii) has qualified or will qualify to do business as a foreign corporation and will remain so qualified, and is and will remain in good standing, in each jurisdiction where the character of its property or the nature of its activities makes such qualification necessary and in which failure to so qualify would have a material adverse effect upon Property Manager or its ability to perform its obligations hereunder, (iii) has and will have full limited liability company power to own its property, carry on its business as presently conducted, and to enter into and perform it obligations under this Agreement and (iv) has and will have all licenses or other governmental approvals necessary to perform it obligations hereunder.
(b)    The execution and delivery by Property Manager of this Agreement has been duly authorized by all necessary limited liability company action on the part of Property Manager. Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on Property Manager or its property or the certificate of formation of Property Manager, or any of the provisions of any indenture, mortgage, contract or other instrument to which Property Manager is a party or by which it is bound or result in the creation or imposition of any lien, charge or encumbrance upon any of its property pursuant to the terms of any such indenture, mortgage, contract or other instrument.
(c)    The execution and delivery by Property Manager of this Agreement does not require the consent or approval of, the giving of notice to, the registration or filing with, or the taking of any other action in respect of any state, federal or other governmental authority or agency.
(d)    This Agreement has been duly executed and delivered by Property Manager and, assuming due authorization, execution and delivery by PORT, constitutes a valid and binding obligation of Property Manager enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and general principles of equity).
(e)    There are no actions, suits, or proceedings pending, or, to the knowledge of Property Manager, threatened or likely to be asserted against or affecting Property Manager before or 
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by any court, administrative agency, arbitrator, or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of Property Manager will be determined adversely to Property Manager or if determined adversely to Property Manager, will materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect Property Manager’s ability to perform its obligations under this Agreement. Property Manager is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by the above mentioned documents.
(f)    No consents, approvals, waivers or notifications of members, creditors, lessors or other nongovernmental persons are required to be obtained by Property Manager in connection with the execution and delivery of this Agreement and the consummation of all the transactions herein contemplated.
(g)    Property Manager is not (and no person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Property Manager shall be) subject to sanctions of the United States government or in violation of any federal, state, municipal or local laws, statutes, codes, ordinances, orders, decrees, rules or regulations (“Laws”) relating to terrorism or money laundering, including, without limitation, Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56, the “Patriot Act”).
(h)    Neither Property Manager nor any person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in Property Manager is a “Prohibited Person,” which term is defined as: (i) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (ii) a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a person or entity with whom Property Manager is prohibited from dealing or otherwise engaging in any transaction by any terrorism or anti-money laundering Law, including the Executive Order and the Patriot Act; (iv) a person or entity who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or (v) a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website, https://www.treasury.gov/ofac/downloads/sdnlist.pdf, or any replacement website or other replacement official publication of such list.
(i)    As of the Effective Date, Property Manager has no actual knowledge of any illegal activities relating to controlled substances on any Property.
(j)    As of the Effective Date, to Property Manager’s actual knowledge, (i) each Property is being used exclusively as a residential rental property and (ii) no illegal activity is taking place at any Property.
Section 3.17    Advisor. Notwithstanding anything to the contrary herein, the duties and responsibilities of Property Manager set forth herein are subject in all respects to the authority of Advisor.
Section 3.18    Additional Covenants. Property Manager shall exercise such efforts as are consistent with the Standard of Care to comply with the terms and conditions of any additional requirements of Lender(s) to the Properties and agrees not to knowingly or intentionally take any action in material contravention thereof.
ARTICLE IV
BANKING AND FINANCIAL RECORDS
Section 4.01    Account Agency Agreement & Bank Accounts. Concurrent with the commencement of this Agreement, PORT and Property Manager shall enter into a joint account agreement (the “Account Agency Agreement”) at PORT’s platform bank or other bank acceptable to 
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PORT (the “Operating Account”). PORT shall retain the ability to change the platform banks at its discretion with reasonable notice to Property Manager. It is understood that the bank account contemplated and authorized by the Account Agency Agreement shall be a non-interest bearing checking account.
Section 4.02    Financial Recordkeeping. Financial records include, but are not limited to, general ledgers for each account, journal entries, all supporting documentation and calculations used to create journal entries, trial balances, financial statements, bank statements, bank reconciliations, tax reports, accounts payable and receivable records, rent rolls, tenant information, portfolio analysis routinely created or created at the request of PORT, ad hoc reports requested by PORT from time to time and any other financial records and reports listed on Schedule B. At PORT’s cost, Property Manager shall maintain, at Property Manager’s premises and electronically in a centralized location designated and accessible by PORT, and maintain in a manner customary and consistent with generally accepted accounting principles, financial records based on PORT’s fiscal year-end. Property Manager shall not delete, destroy, relocate or otherwise make any historical record inaccessible to PORT without PORT’s prior written consent. Property Manager shall use the Company’s chart of accounts. PORT shall bear the expense of maintaining financial records electronically and the expense of storing historical financial records that are more than 36 months old.
Section 4.03    Internal Controls Environment. Property Manager shall continuously maintain an internal control environment that is customary and consistent with the size and complexity of PORT’s business. At PORT’s expense, PORT may hire consultants and other advisors to further develop and refine Property Manager’s internal controls. Property Manager agrees, at PORT’s expense, to implement all reasonable suggestions PORT makes to modify internal controls and agrees to periodic testing and remediation of any identified deficiencies. Property Manager also agrees to assist in an audit of the internal controls if requested by PORT, to be completed at PORT’s expense and in accordance with Section 4.05 herein.
Section 4.04    Required Financial Reports. Property Manager shall furnish as listed on Schedule B monthly reports of collections, disbursements, and other accounting matters, on a schedule agreed to by PORT and any Lender(s). To support the monthly financial reports, Property Manager shall maintain at Property Manager’s premises copies of the following: (a) bank statements, bank deposit slips, and cancelled checks; (b) comprehensive bank reconciliations; (c) detailed cash receipt records; (d) summaries of adjusting journal entries, and (e) supporting documentation for payroll, payroll taxes, and employee benefits.
Section 4.05    PORT’s Right to Audit and Test. Property Manager, in the conduct of its responsibilities and obligations to PORT hereunder, shall maintain complete, accurate, and separate books and records for the Properties, the entries to which shall be supported by sufficient documentation to ascertain that said entries are properly and accurately recorded with regard to each Property. Such books and records shall be maintained in accordance with PORT’s financial information requirements and shall at all times be the property of PORT. Property Manager shall maintain such books and records for a period of not less than 12 months after the date of expiration or earlier termination of this Agreement, except that upon any termination of this Agreement by PORT, Property Manager shall immediately deliver to PORT all such books and records. PORT reserves the right to conduct an examination of the books and records maintained by Property Manager for PORT or that relate to the calculation of the fees, expenses, or other compensation paid or payable pursuant to this Agreement, and to perform any and all audit tests (whether conducted by the external auditors or PORT’s internal audit team) relating to Property Manager’s activities, either at the Properties, or at the office of Property Manager; provided such examination and tests are related to those activities performed by Property Manager for PORT or the calculation of the fees, expenses, or other compensation paid or payable pursuant to this Agreement. PORT may also conduct periodic testing of Property Manager’s internal controls. PORT shall give Property Manager not less than forty-eight (48) hours written notice of any such audit, examination or testing. Any and all such audits conducted either by PORT’s employees or appointees will be at the sole expense of PORT.
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Section 4.06    Disbursement of Deposits. If requested by PORT, Property Manager shall remit to PORT with the monthly financial report all unexpended operating funds, except for a reserve of contingencies, as provided in Section 5.01 below, which shall remain in the Operating Account.
ARTICLE V
PORT’S DUTIES AND RESPONSIBILITIES
Section 5.01    Initial Deposits and Contingency Reserves. Immediately upon the commencement of this Agreement, to the extent not previously deposited, PORT shall deposit into the Operating Account the following amounts: (a) the sum of $100,000 to be deposited in the Operating Account as an initial deposit representing the estimated disbursements for Operating Expenditures to be made in the first month following the commencement of this Agreement. Furthermore, PORT authorizes Property Manager to maintain a contingency reserve of $250 per Property at all times in the Operating Account to enable Property Manager to pay obligations of PORT under this Agreement as they become due in accordance with this Agreement.
Section 5.02    Insufficient Operating Funds. If a cash flow deficit can be anticipated in the next budgeted month of operations, PORT agrees to, prior to the commencement of the next budgeted month, remit to Property Manager sufficient funds to cover the anticipated deficiency and fully fund the Operating Expenditures and approved contingency reserves. In the event that funds in the Operating Account become insufficient to cover all Operating Expenditures and approved contingency reserves, PORT agrees to, within three (3) days of notice, remit to Property Manager sufficient funds to cover the deficiency and replenish the contingency reserves. Notwithstanding any provision hereof to the contrary, Property Manager’s performance under this Agreement shall be excused and shall in no event be in default in the event there are insufficient funds in the Operating Account to perform its services described hereunder unless due to the gross negligence or willful misconduct of Property Manager.
Section 5.03    Property Manager’s Compensation. PORT agrees to pay Property Manager, as compensation for services rendered in managing and leasing the Properties in accordance with the terms of this Agreement, the compensation as specified in Article VI below. Property Manager’s compensation may be paid to itself by Property Manager, on behalf of PORT when due hereunder from the Operating Account.
Section 5.04    Property Manager’s Costs to be Reimbursed. PORT agrees to reimburse Property Manager for all direct costs incurred in managing and leasing the Properties in accordance with the terms of this Agreement. Property Manager’s reimbursement may be paid to itself by Property Manager, on behalf of PORT, from the Operating Account as incurred by Property Manager.
Section 5.05    Representations. As of the Effective Date, PORT represents and warrants to Property Manager as follows:
(a)    PORT is a corporation duly formed, validly existing and in good standing under the laws of the State of Maryland, (ii) has qualified or will qualify to do business as a foreign corporation and will remain so qualified, and is and will remain in good standing, in each jurisdiction where the character of its Properties or the nature of its activities makes such qualification necessary and in which failure to so qualify would have a material adverse effect upon PORT or its ability to perform its obligations hereunder, (iii) has and will have full corporate power to own the Properties, carry on its business as presently conducted, and to enter into and perform it obligations under this Agreement and (iv) has and will have all licenses or other governmental approvals necessary to perform it obligations hereunder.
(b)    The execution and delivery by PORT of this Agreement has been duly authorized by all necessary corporate action on the part of PORT. Neither the execution and delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof, will conflict with or result in a breach of, or constitute a default under, any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on PORT or its Properties or the certificate of formation of PORT, or any of the provisions of any indenture, mortgage, contract or other instrument to which PORT is a party or by which it is bound or result in the creation or 
9

imposition of any lien, charge or encumbrance upon any of the Properties pursuant to the terms of any such indenture, mortgage, contract or other instrument. The execution and delivery by PORT of this Agreement does not require the consent or approval of, the giving of notice to, the registration or filing with, or the taking of any other action in respect of any state, federal or other governmental authority or agency.
(c)    This Agreement has been duly executed and delivered by PORT and, assuming due authorization, execution and delivery by Property Manager, constitutes a valid and binding obligation of PORT enforceable against it in accordance with its terms (subject to applicable bankruptcy and insolvency laws and other similar laws affecting the enforcement of the rights of creditors generally and general principles of equity).
(d)    There are no actions, suits, or proceedings pending, or, to the knowledge of PORT, threatened or likely to be asserted against or affecting PORT before or by any court, administrative agency, arbitrator, or governmental body (i) with respect to any of the transactions contemplated by this Agreement or (ii) with respect to any other matter which in the judgment of PORT will be determined adversely to PORT or if determined adversely to PORT, will materially and adversely affect it or its business, assets, operations or condition, financial or otherwise, or adversely affect PORT’s ability to perform its obligations under this Agreement. PORT is not in default with respect to any order of any court, administrative agency, arbitrator or governmental body so as to materially and adversely affect the transactions contemplated by the above mentioned documents.
(e)    No consents, approvals, waivers or notifications of members, creditors, lessors or other nongovernmental persons are required to be obtained by PORT in connection with the execution and delivery of this Agreement and the consummation of all the transactions herein contemplated.
(f)    PORT is not (and no person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in PORT shall be) subject to sanctions of the United States government or in violation of any Laws relating to terrorism or money laundering, including, without limitation, the Executive Order and the Patriot Act. Neither PORT nor any person or entity owning a beneficial interest equal to or greater than twenty percent (20%) in PORT is a Prohibited Person.
ARTICLE VI
COMPENSATION OF PROPERTY MANAGER
Section 6.01    Leasing Fees. PORT shall pay to Property Manager on a monthly basis in arrears, the following fees in connection with ongoing lease activity: (a) for all newly placed tenants, one-half of one month’s rent applicable to the initial rent period, and (b) for all renewal tenants, $100.
Section 6.02    Property Management Fee. PORT shall pay to Property Manager, on a monthly basis in arrears, fees for services provided by Property Manager to manage each Property (the “Property Management Fee”) equal to the following: 
(a)    For all Collected Rental Revenues up to $50,000,000 per annum (or $4,166,667 per month), 8%;
(b)    For all Collected Rental Revenues in excess of $50,000,000 per annum, but less than or equal to $75,000,000 per annum (or $6,250,000 per month), 7%; and
(c)    For all Collected Rental Revenues in excess of $75,000,000 per annum (or $6,250,000 per month), 6%.
Section 6.03    Shared Fees. PORT shall pay to Property Manager on a monthly basis in arrears, the following portion of additional fees actually collected from any Properties: (a) from application fees collected, 100% to Property Manager, (b) from insufficient funds fees collected, 50% to Property Manager; (c) from any late fees collected, 50% to Property Manager, and (d) from any other fees, 50% to Property Manager. For the avoidance of doubt, PORT shall retain 100% of the following fees: (x) any move-in fees, and (y) any pet fees.
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Section 6.04    Definitions. “Collected Rental Revenues” shall mean the amount of rental revenue actually collected for each Property per the terms of the lease pertaining to each Property (including lease breakage fees) or pursuant to any early termination buyouts, but excluding other income items, fees or revenue collected by Property Manager, including but not limited to: application fees, insufficient funds fees, late fees, move-in fees, pet fees, and security deposits (except to the extent applied to rent per the terms of the lease pertaining to any Property).
Section 6.05    Additional Services; No Other Compensation. The Leasing Fees, Property Management Fee, and Shared Fees are in addition to the reimbursements otherwise due to Property Manager under this Agreement, including for the Additional Services as described in Section 3.09. Property Manager expressly agrees that Property Manager shall not be entitled to receive any other compensation or other payments from PORT for services provided in respect of the Property (including, without limitation, for construction management, legal, tenant coordination, design, engineering, consulting or any other services performed by Property Manager or its Affiliates) unless expressly provided for in this Agreement or pursuant to a separate written agreement between PORT and Property Manager.
Section 6.06    Election of Payment in Shares. Property Manager may elect, in its sole discretion, to receive payment of up to 2.0% of the Property Management Fee in any monthly period(s) in cash or cash equivalent aggregate net asset value amounts of Class A common shares of PORT, with the value per share equal to the most recent net asset value per share determined in accordance with PORT’s valuation guidelines.  Such common shares issued to the Property Manager are eligible to participate in PORT’s share repurchase program, subject to the applicable limits, holding period and early repurchase deduction therein, provided that in the applicable repurchase period all repurchase requests made in good order from unaffiliated stockholders are satisfied first as a priority.  
ARTICLE VII
INSURANCE AND INDEMNIFICATION
Section 7.01    Property and Liability Insurance. Property Manager shall, at PORT’s sole cost and expense, promptly obtain and keep in force at all times adequate insurance against physical damage (e.g., fire with extended coverage endorsement) and against liability for loss, damage, or injury to property or persons which might arise out of the occupancy, management, operation, or maintenance of the Properties and in accordance with the policies of PORT and/or Lender(s).
Section 7.02    Workers’ Compensation Insurance. Property Manager shall maintain workers’ compensation insurance covering all employees of Property Manager employed in, on, or about the Properties so as to provide statutory benefits required by state and federal laws.
Section 7.03    Fidelity Bond. Property Manager will maintain, at Property Manager’s expense, a comprehensive fidelity bond covering all employees of Property Manager who handle or are responsible for the safekeeping of any monies of PORT, and shall provide evidence of such policies to PORT.
Section 7.04    Indemnification. PORT shall indemnify, defend, and hold harmless Property Manager and its agents and employees from and against all claims, liabilities, losses, damages, and/or expenses arising out of (i) Property Manager’s performance under this Agreement, or (ii) facts, occurrences, or matters first arising prior to the date of this Agreement. PORT, at its own cost and expense, shall defend any action or proceeding against Property Manager arising therefrom. Notwithstanding the foregoing, PORT shall not be required to indemnify Property Manager against damages or expenses suffered as a result of the gross negligence, willful misconduct, or fraud on the part of Property Manager, its agents or employees. Property Manager shall indemnify, defend and hold harmless PORT and its agents from and against all claims, liabilities, losses, damages and/or expenses arising out of the gross negligence, willful misconduct, or fraud on the part of Property Manager, its agents, or employees, and shall at its own cost and expense defend any action or proceeding against PORT arising therefrom.
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ARTICLE VIII
TERMINATION
Section 8.01    Termination. Notwithstanding the provisions of Article II above, this Agreement may also be terminated as follows:
(a)Automatically, in the event of an initial public offering of PORT’s common shares in the public markets with a concurrent listing of the common shares on a national securities exchange (an “IPO”); a sale of all or substantially all of PORT’s equity interests or Properties, a merger, or a share exchange, in a transaction that provides PORT’s stockholders with any combination of cash and/or securities of a publicly traded company in exchange for their common shares; or if the advisory agreement between PORT and Advisor is terminated (including through non-renewal) (except for cause) by PORT;
(b)by Property Manager, in the event PORT defaults in the performance of any of its obligations under this Agreement and fails to cure such default within fifteen (15) days after its receipt from Property Manager of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, with respect to any non-monetary default that cannot be cured within fifteen (15) days, PORT shall have such additional period as shall be reasonable, provided that PORT has commenced to cure such default within such fifteen (15) day period, has proceeded to prosecute such cure with due diligence, and such cure is completed within sixty (60) days after PORT’s receipt of the notice of default; or
(c)by PORT, in the event Property Manager defaults in the performance of any of its obligations under this Agreement and fails to cure such default within fifteen (15) days after its receipt from PORT of a notice of default (specifying in reasonable detail the nature of the default complained of); provided, however, that if such default cannot be cured within fifteen (15) days, then such additional period as shall be reasonable, provided that Property Manager has commenced to cure such default within such fifteen (15) day period, has proceeded to prosecute such cure with due diligence and such cure is completed within sixty (60) days after Property Manager’s receipt of the notice of default; or
(d)by either PORT or Property Manager, if a Bankruptcy Event occurs with respect to the other party, or if any involuntary bankruptcy petition shall be filed against the other party and is not dismissed within sixty (60) days of the date of such filing, or in the event the other party shall make an assignment for the benefit of creditors, or take advantage of any insolvency statute or similar law, in any such event, termination to become effective upon written notice to the other party; or
(e)by PORT, without cause upon not less than ninety (90) days prior written notice to Property Manager.
Any amounts accruing to Property Manager prior to such termination shall be due and payable upon termination of this Agreement; provided, however, that in the event this Agreement is terminated pursuant to Section 8.01(c), no further fees or expenses shall be payable to Property Manager thereafter, other than reimbursement of expenses properly documented and supported by invoices or receipts.
Section 8.02    Termination Fee. If PORT terminates this Agreement pursuant to Section 8.01(a) before the end of the Term or any subsequent term year, then PORT shall be obligated to pay Property Manager an amount equal to two times the sum of the annual Property Management Fee for the trailing 12-month period.  If PORT terminates this Agreement pursuant to Section 8.01(e) before the end of the Term or any subsequent term year, then PORT shall be obligated to pay Property Manager an amount equal to three times the sum of the annual Property Management Fee for the trailing 12-month period. Any amounts accruing to Property Manager prior to such termination shall be due and payable upon termination of this Agreement. To the extent funds are available, such sums shall be payable from the Operating Account. Any amount due in excess of the funds available from the Operating Account shall be paid by PORT to Property Manager upon demand. For the avoidance of doubt, Leasing Fees, Shared Fees, and fees attributable to Additional Services are not considered in the calculation of the Termination Fee.
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Section 8.03    PORT Responsible for Payments. PORT will be responsible for the direct handling and payment of invoices received after notice of termination. Upon notice of termination, Property Manager will submit to PORT written notice of all obligations payable with respect to the Properties through the termination date.
Section 8.04    Final Accounting. Within sixty (60) days after termination, Property Manager shall deliver to PORT: (a) a final accounting, reflecting the balance of income and expenses on the Properties as of the date of termination; (b) all records, contracts, leases, receipts, deposits, unpaid bills, and other papers or documents which pertain to the Properties; and (c) all remaining funds held by Property Manager with respect to the Properties. In consideration of performing the services contemplated under the preceding sentence during such post-termination period, provided this Agreement is not terminated pursuant to Section 8.01(c), PORT shall pay Property Manager an accounting fee equal to $75,000 per month.
Section 8.05    Property Manager’s Retention of Copies. Property Manager shall be entitled to retain copies of all documents referred to in Section 8.04.
Section 8.06    Survival of Obligations. All obligations of the parties hereunder, as to which performance is contemplated to occur after termination, shall survive termination of this Agreement. Without limiting the generality of the foregoing, all representations and warranties of the parties contained herein and all provisions of this Agreement that require PORT to have insured or to defend, reimburse, or indemnify Property Manager shall survive the termination of this Agreement; and if Property Manager is or becomes involved in any proceeding or litigation by reason of having been PORT’s agent, such provisions shall apply as if this Agreement were still in effect.
ARTICLE IX
RESERVED
ARTICLE X
PROPERTY MANAGER RESTRUCTURING
Section 10.01    Subcontracting. Property Manager is authorized to subcontract or delegate any of its responsibilities hereunder to any of its Affiliates provided that such Affiliate executes a joinder to this Agreement, in form and substance satisfactory to PORT.
ARTICLE XI
MISCELLANEOUS
Section 11.01    Notices. All notices or other communications required or permitted by this Agreement shall be in writing and shall be deemed to have been duly received (i) if given by electronic mail transmitted delivery receipt requested, upon receipt of a delivery receipt, (ii) if given by certified or registered mail, return receipt requested, postage prepaid, three (3) Business Days after being deposited in the U.S. mails and (iii) if given by courier or other means, when received or personally delivered, and, in any such case, addressed as follows:
If to PORT:
Pacific Oak Residential Trust, Inc.
13901 Sutton Park Dr. S., Suite B 160
Jacksonville, FL 32224
Attention:  Michael Gough 
Email: mgough@pac-oak.com
If to Property Manager:
DMH Realty LLC 
13901 Sutton Park Dr S., Suite B 160
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Jacksonville, FL 32224
Attention: Mark Peta and Dan Umstead 
Email: mpeta@pac-oak.com and dumstead@pac-oak.com
or to such other addresses as may be specified by any such person to the other person pursuant to notice given by such person in accordance with the provisions of this Section 11.01.
Section 11.02    Governing Law; Waiver of Jury Trial. THE PROVISIONS OF THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA AS AT THE TIME IN EFFECT, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. THE PARTIES TO THIS AGREEMENT HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF FLORIDA, INCLUDING ANY APPELLATE COURTS THEREOF. THE PARTIES ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
Section 11.03    Entire Agreement. This Agreement sets forth the final, entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof.
Section 11.04    Amendment; Modification. This Agreement shall not be amended, supplemented, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by the parties hereto, or their respective successors or assignees; provided that PORT shall deliver an updated Schedule A to Property Manager each month in accordance with Section 11.01.
Section 11.05    Severability. The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.
Section 11.06    Construction. This Agreement shall be construed as if jointly drafted by PORT and Property Manager. Headings for sections, subsections, and other parts of this Agreement are for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.
Section 11.07    Counterparts. This Agreement and any amendments, waivers, consents, or supplements may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all of which counterparts together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile, scanned pages or electronic signature shall be effective as delivery of a manually executed counterpart to this Agreement
Section 11.08    Transferability; Successors and Assigns. This Agreement is not transferable by Property Manager. The rights of PORT hereunder are transferable to any of its respective Affiliates upon no less than ten (10) days’ prior written notice to Property Manager. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
Section 11.09    Confidentiality. No party to this Agreement will disclose the terms of this Agreement to any third party without the consent of the other parties hereto, except as required by securities or other applicable laws. Notwithstanding the above provisions, each party may disclose the terms of this Agreement (i) in connection with the requirements of a public or private offering or securities filing, (ii) to accountants, banks, and financing sources (both debt and equity) and their 
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advisors, (iii) in connection with the enforcement of this Agreement or rights under this Agreement, or (iv) in connection with a merger or acquisition (whether by an equity or asset transfer), or the like.
[Signature page follows]

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IN WITNESS WHEREOF, the parties have executed and delivered this AMENDED AND RESTATED MANAGEMENT AGREEMENT effective as of the date first written above.
Pacific Oak Residential Trust, Inc.
By: /s/ _Michael S. Gough
Name: Michael S. Gough 
Title: Chief Executive Officer, President, and Director
DMH Realty, LLC
By: /s/ Michael S. Gough 
Name: Michael S. Gough
Title: Manager

[Signature Page to Amended and Restated Management Agreement]
EAST\191841294.14

Schedule A
The Properties

A-1

Schedule B
Financial Record and Reports
(to be provided monthly unless otherwise noted)
1.    Profit and Loss Statement (actual versus budgeted)
2.    Rent Roll with Security Deposit
3.    Leasing status report
4.    Statement of Cash Flows
5.    Monthly General Ledger detail
6.    Capital Expenditure Report
7.    Aged Receivable Report
8.    Management Fee Calculation
9.    Casualty reports (quarterly) detailing all damages and potential insurance claims
10.    Liability reports (quarterly) detailing all current and potential legal claims from tenants, vendors, and third parties related to the Properties
11.    Real estate tax analysis (quarterly)

B-1

Schedule C
Defined Terms
Capitalized terms used in this Agreement but not otherwise defined herein have the following definitions:
“Affiliate” shall mean, with respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with the power to vote, 10% or more of the outstanding voting securities of such other Person; (ii) any Person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person; and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.
“Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq., as amended from time to time.
“Bankruptcy Event” with respect to any Person, means the occurrence of any of the following:
(a)    Such Person voluntarily files for bankruptcy protection under the Bankruptcy Code.
(b)    Such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.
(c)    Any Property becomes an asset in a voluntary bankruptcy or becomes subject to any voluntary reorganization, receivership, insolvency proceeding, or other similar voluntary proceeding pursuant to any other federal or state law affecting debtor and creditor rights.
(d)    An order of relief is entered against such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party. If such Person, any general partner of such person if such Person is a general partnership, or any Related Party has solicited creditors to initiate or participate in such a proceeding, regardless of whether any of the creditors solicited actually initiates or participates in the proceeding, then such proceeding will be considered as having been initiated by a Related Party.
(e)    An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against such Person (by a party other than PORT) but only if such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person to contribute or cause the contribution of additional capital to such Person.
(f)    If such Person is a general partnership, any of the following occur:
(i)    Any general partner of such Person voluntarily files for bankruptcy protection under the Bankruptcy Code.
(ii)    Any general partner of such Person voluntarily becomes subject to any reorganization, receivership, insolvency proceeding, or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights.
(iii)    An order of relief is entered against any general partner of such Person pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor 
C-1

rights in any involuntary bankruptcy proceeding initiated or joined in by a Related Party.
(iv)     An involuntary bankruptcy or other involuntary insolvency proceeding is commenced against any general partner of such Person (by a party other than PORT) but only if such Person or such general partner of such Person has failed to use commercially reasonable efforts to dismiss such proceeding or has consented to such proceeding. “Commercially reasonable efforts” will not require any direct or indirect interest holders in such Person or such general partner of such Person to contribute or cause the contribution of additional capital to such Person.
“Business Day” means any day other than a Saturday, a Sunday, or any other day on which PORT or the national banking associations are not open for business.
“Governmental Authority” means any board, commission, department, agency or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, which has or acquires jurisdiction over any Property, or the use, operation or improvement of any Property, or over Property Manager.
“Hazardous Materials” means petroleum and petroleum products and compounds containing them, including  gasoline,  diesel  fuel  and  oil;  explosives; flammable materials; radioactive materials; polychlorinated biphenyls (PCBs) and compounds containing them; lead and lead-based paint; asbestos or asbestos containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on any Property is prohibited by any Governmental Authority; any substance that requires special handling and any other material or substance now or in the future that (i) is defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” by or within the meaning of any Hazardous Materials Law, or (ii) is regulated in any way by or within the meaning of any Hazardous Materials Law.
“Hazardous Materials Law” and “Hazardous Materials Laws” means any and all federal, state and local laws, ordinances, regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future, including all amendments, that relate to Hazardous Materials or the protection of human health or the environment and apply to Property Manager or to any Property. Hazardous Materials Laws include the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their state analogs.
“Lender” means any lender providing a loan to PORT which is secured by a mortgage or deed of trust on any Property.
“Person” means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Internal Revenue Code of 1986, as amended from time to time (the “Code”)), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
“Related Party” means all the following:
(a)    Property Manager.
(b)    Any general partner of Property Manager if Property Manager is a general partnership.
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(c)    Any Person that holds, directly or indirectly, any ownership interest (including any shareholder, member or partner) in Property Manager, any general partner of Property Manager if Property Manager is a general partnership, or any Person that has a right to manage Property Manager or any general partner of Property Manager if Property Manager is a general partnership.
(d)    Any creditor of Property Manager that is related by blood, marriage or adoption to Property Manager.
(e)    Any creditor of Property Manager or any general partner of Property Manager if Property Manager is a general partnership that is related to any partner, shareholder or member of, or any other Person holding an interest in, Property Manager or any general partner of Property Manager, if Property Manager is a general partnership.

C-3

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