WESLEY VILLAGE APARTMENTS, CHARLOTTE, NORTH CAROLINA PROPERTY MANAGEMENT AGREEMENT BETWEEN GREP SOUTHEAST, LLC AND KBS LEGACY PARTNERS WESLEY LLC

Exhibit 10.59

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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇

PROPERTY MANAGEMENT AGREEMENT

BETWEEN

GREP SOUTHEAST, LLC

AND

KBS LEGACY PARTNERS ▇▇▇▇▇▇ LLC

TABLE OF CONTENTS


		Page

Recitals		1
ARTICLE 1.	DEFINITIONS	1
1.01. Definitions		1
ARTICLE 2.	APPOINTMENT AND SERVICES OF PROPERTY MANAGER	2
2.01. Term		2
ARTICLE 3.	COMPENSATION AND EXPENSES OF PROPERTY MANAGER	9
3.01. Fees		9
3.02. Expenses to be Borne by Property Manager		10
3.04. Nonperformance		12
ARTICLE 4.	PERSONNEL AND BONDING	12
4.01. Stability of Management Team		12
4.02. Fidelity Bond		12
4.03. Affiliates		13
ARTICLE 5.	COMPLIANCE WITH LAWS	13
5.01. Compliance		13
5.02. Notice		13
5.03. Hazardous Wastes		13
5.04. Asbestos and Similar Compliance Matters		14
ARTICLE 6.	FINANCIAL MATTERS	14
6.01. Books and Records		14
6.02. Reports		15
6.03. Audit		16
6.04. Other Reports and Statements		16
6.05. Contracts and Other Agreements		16
6.06. Final Accounting		16
6.07. Tax Returns		16
6.08. Certification		16
ARTICLE 7.	BANK ACCOUNTS	17
7.01. Property Accounts		17
7.02. Expenses Paid By Owner		17
ARTICLE 8.	INSURANCE AND INDEMNITY	17
8.01. INDEMNIFICATION		17
8.02. Property Manager’s Insurance Responsibility		20
8.03. Contract Documents; Indemnity Provisions		21
8.04. Ratings of Insurance Companies		21
8.05. Owner’s Insurance Responsibility		21
ARTICLE 9.	RELATIONSHIP OF PARTIES and REPRESENTATIONS and WARRANTIES	22
9.01. Nature of Relationship		22
9.02. Communications Between Parties		22
9.03. Relationship of Owner and Property Manager with Respect to Leasing		22
9.04. No Sales Brokerage Agreement		22
9.05. Confidentiality		23
9.06. Property Manager Not to Pledge Owner’s Credit		23


9.07 Representations and Warranties		23
ARTICLE 10.	TERMINATION	23
10.01. Termination by Owner Without Cause		24
10.02. Termination by Owner for Cause		24
10.03. Termination by Property Manager		24
10.04. Orderly Transition		25
10.05. Rights Which Survive Termination or Expiration		25
ARTICLE 11.	MISCELLANEOUS	25
11.01. Governing Law		25
11.02. Table of Contents and Headings		25
11.03. Entire Agreement		25
11.04. Successors and Assigns		26
11.05. Waiver		26
11.07. Time		26
11.08. Attorneys’ Fees		26
11.09. Further Acts		26
11.10. No Advertising		27
11.11. Signs		27
11.12. Owner Exculpatory Clause; Waivers of Jury Trial and Punitive Damages		27
11.14. Notices		27
11.15. Counterparts		28

EXHIBITS:


A -		LEGAL DESCRIPTION
B -		RENTAL GUIDELINES
C -		STANDARD RESIDENTIAL LEASE FORM

PROPERTY MANAGEMENT AGREEMENT

This PROPERTY MANAGEMENT AGREEMENT (this “Agreement”) is made as of November , 2012 (the “Effective Date”) between GREP SOUTHEAST, LLC, a Delaware limited liability company (“Property Manager”), and KBS LEGACY PARTNERS ▇▇▇▇▇▇ LLC, a Delaware limited liability company (“Owner”).

RECITALS

A. Owner is the record or beneficial owner of the Property (as defined below) and Property Manager is experienced in the management, operation, leasing, service, repair and supervision of residential apartment projects similar to the Property.

B. The parties desire to enter into this Agreement and set forth the terms and conditions under which Property Manager will manage the Property.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, Owner and Property Manager agree as follows:

AGREEMENT

ARTICLE 1. DEFINITIONS.

1.01. Definitions. As used in this Agreement, the following terms shall have the respective meanings set forth below:

“Affiliate” shall mean, when used with respect to any person (a) if such person is a corporation, any officer or director thereof and any person which is directly, or indirectly, the beneficial owner of more than 10% of any class of equity security (as defined in the Securities Exchange Act of 1934) thereof, or if any such beneficial owner is a partnership, any partner thereof, or if any such beneficial owner is a corporation, any person controlling, controlled by or under common control with such beneficial owner or of any officer or director of such beneficial owner or of any corporation occupying any such control relationship, (b) if such person is a partnership, any partner thereof, and (c) any other person which directly or indirectly controls or is controlled by or is under common control with such person. For the purpose of this definition, “control” (including the correlative meanings of the term “controlling,” “controlled by” and “under common control with”), with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise. The term “Affiliate” shall also mean, when used with respect to any individual, the parents and grandparents of such individual, the parents and grandparents of any other individual who is an Affiliate of such individual by virtue of any one or more of the foregoing clauses (a), (b) and (c) of this definition, any descendant (whether natural or adopted) of any such parents or grandparents and any spouse of any such descendant.

“Annual Business Plan” shall have the meaning described in Section 2.02(q).

“Approved Capital Budget” and “Approved Operating Budget” shall have the meanings described in Section 2.02(b).

“Fiscal Year” shall mean the twelve (12) months commencing January 1 and ending December 31.

“Gross Monthly Collections” shall mean the total gross monthly collections received from the Property, including, without limitation, tenant rental income, pet rents and other charges and miscellaneous income items of Owner as applicable. Any payments by tenants on account of any taxes imposed on rentals collected by Property Manager shall be excluded from Gross Monthly Collections. Any advance rental payments shall be included in Gross Monthly Collections when received. Security and other deposits shall not be included therein unless the same are no longer used for security purposes and are applied to income. Without limitation, any payment of money by a tenant to Owner or Property Manager in consideration for or in conjunction with a rental deposit, the termination, cancellation, expiration, renewal, extension or modification of a tenant’s lease, property insurance loss proceeds, remodeling and tenant improvement charge costs, condemnation proceeds, or proceeds received by Owner in connection with the sale of any portion of the Property or the refinancing of any indebtedness secured by a lien on any portion of the Property, shall be excluded from the Gross Monthly Collections. Proceeds of business interruption insurance shall be included in Gross Monthly Collections.

“Legacy” shall mean Legacy Partners Residential L.P., a Delaware limited partnership. Legacy has been retained by Owner as an independent contractor for the provision of certain record keeping and accounting services with respect to the Property. In the event Owner notifies Property Manager that Legacy is no longer retained by Owner, all references to Legacy shall be deemed references to Owner.

“Property” shall mean that certain real property consisting of 301 residential units (commonly known as the ▇▇▇▇▇▇ Village Apartments) and zero (-0-) square feet of retail space located in Charlotte, Mecklenburg County, North Carolina as more particularly described on Exhibit A attached hereto.

“Records Office” shall mean Property Manager’s offices located at the Property and its corporate office in Tampa, Florida.

“Rental Guidelines” shall mean those guidelines attached hereto as Exhibit B, as amended from time to time.

ARTICLE 2. APPOINTMENT AND SERVICES OF PROPERTY MANAGER.

2.01. Term. Owner hereby hires Property Manager as the exclusive manager of the Property upon the terms and conditions herein stated, and Property Manager hereby accepts said engagement, for a term beginning on the date of this Agreement and ending at 12:00 midnight on

the one-year anniversary of the beginning date, unless sooner terminated by Owner or Property Manager as provided in Article 10 of this Agreement. At the expiration of said term, this Agreement, if not renewed in writing by Owner and Property Manager, shall then be deemed a month-to-month agreement cancelable by either party on not less than thirty (30) days’ advance written notice, which notice may be given at any time during a month, provided that in any event the cancellation shall be effective at the end of the calendar month in which the thirty (30) day notice period ends.

2.02. Services of Property Manager. Property Manager shall direct, supervise, manage, operate, maintain and repair the Property and develop, institute and follow programs and policies to facilitate the efficient operation of the Property in compliance with this Agreement, the Rental Guidelines and all written directions of Owner on as profitable a basis as reasonably possible. Without limiting the generality of the foregoing and subject at all times to such procedures and directions that shall be set forth in this Agreement and the Rental Guidelines (as revised or amended from time to time), Property Manager shall do all of the following:

(a) Employees. Property Manager shall select, employ, pay, supervise and discharge all employees and personnel necessary for the operation, maintenance and protection of the Property (subject to the limitations set forth in Section 4.01 hereof). All persons so employed by Property Manager shall be employees of Property Manager or independent contractors retained by Property Manager, and not by Owner. All costs of gross salary and wages, payroll taxes, medical and dental insurance, worker’s compensation insurance, incentive leasing bonuses and other costs and employee benefit expenses payable on account of such employees, shall be included in the Approved Operating Budget. Property Manager shall fully comply with all applicable laws and regulations having to do with workers’ compensation, social security, unemployment insurance, hours of labor, wages, working conditions and other employer/employee-related subjects.

(b) Records and Budgets. Property Manager shall keep or cause to be kept at the Records Office suitable books of control as provided in this Agreement. Property Manager shall prepare on Microsoft Excel worksheets (using Yardi templates) and submit to Owner and Legacy such monthly, quarterly, annual or other operating and capital budgets as shall be required by Owner. Without limitation, Property Manager shall prepare and submit to Owner and Legacy a proposed operating budget and a proposed capital budget for the Property for the management and operation of the Property for the forthcoming Fiscal Year no later than November 1 of each year during the term hereof. All proposed operating budgets and capital budgets shall be on a form submitted by Property Manager and approved by Owner. Owner will consider the proposed budgets and endeavor to approve such budgets by December 1 of each year during the term hereof. The proposed budgets shall become the Approved Capital Budget and the Approved Operating Budget only when approved by Owner.

In the event an annual operating budget for a Property has not been approved by Owner prior to the commencement of any Fiscal Year during the term hereof, the operating budget for each month (the “Current Month”) until the annual operating

budget is approved shall be the amount of the most recent Approved Operating Budget for the Property for the same calendar month (“Base Month”), as adjusted to reflect (a) any increase or decrease between the Base Month and the Current Month in the Consumer Price Index for All Urban Consumers for the metropolitan area in which the Property is located (base year 1982-84=100) published by the United States Department of Labor, Bureau of Labor Statistics and (b) any increase or decrease in the occupancy of the Property between the Base Month and the Current Month and (c) any increase or decrease in the taxes, insurance and utilities of the Property.

Owner may revoke its approval of either Budget at any time upon twenty (20) days’ prior written notice to Property Manager and Legacy. Owner may amend its approval of either Budget and cause the Budget to be amended to conform to such approval at any time upon twenty (20) days’ prior written notice to Property Manager and, in such event, only the Budget as so amended shall be deemed approved.

With respect to the first Fiscal Year of the term, if not a full twelve months, Property Manager shall submit to Owner and Legacy for approval an operating and capital budget for the balance of such calendar year as soon as possible and no later than thirty (30) days after the date hereof.

Property Manager shall have the right, from time to time, during each calendar year to submit revised Budgets to Owner and Legacy for approval. Property Manager agrees to use diligence and all reasonable efforts to ensure that the actual costs of maintaining and operating the Property shall not exceed the Approved Operating Budget or the Approved Capital Budget pertaining thereto, as applicable.

(c) Leasing. Property Manager shall coordinate the leasing activities of the Property and, subject to Section 9.03 below, shall use commercially reasonable efforts to obtain responsible tenants for all unleased units and to renew existing leases at rental rates at least equal to the Rental Guidelines. Property Manager may negotiate and execute leases using the standard lease forms for Owner approved by Owner and attached hereto as Exhibit C. Any deviation from the standard lease forms or the Rental Guidelines shall require the prior written consent of Owner.

(d) Rent. Property Manager shall use reasonable efforts to ensure that all rents and all other monies payable under the leases are paid by the tenants of the Property as and when the same shall become due and payable directly to Property Manager. Property Manager shall adjust rentals and other required payments where adjustment is contemplated by the leases, shall notify Owner and tenants of such adjustments and shall sign and serve in the name of Owner such notices (except as limited by Section 2.02(e) below), including without limitation letters demanding past due and currently owed rents and other monies, as are deemed appropriate or necessary by Property Manager. Property Manager shall collect and identify any income due Owner from miscellaneous services provided to tenants or the public, including, but not limited to, parking income, tenant storage and cable television charges. All rents and other monies so collected by Property Manager shall be immediately deposited in the Property Bank Account (as

defined below).

(e) Collections. Property Manager shall undertake the collection of rents and monetary payments of every kind and of any form due from tenants of the Property. Property Manager shall use its best efforts to collect rent from new or renewing tenants of the Property using Electronic Funds Transfer (EFT) or Automatic Clearing House (ACH) debits from tenant’s accounts and such form of payment shall be a requirements of the approved form of lease; Property Manager shall use commercially reasonable efforts to collect rent from existing tenants of the Property using EFT or ACH debits from tenant’s accounts. Manager shall thereafter actively pursue collection of all such rent and payments. Except as allowed by applicable law, Property Manager shall not terminate any lease, lock out a tenant, institute a suit for rent or for use and occupancy, or institute proceedings for recovery of possession. In the event that any tenant at the Property shall be delinquent in any payment due to Owner beyond any applicable grace periods or otherwise be in default under the terms of its lease, Property Manager shall employ such methods as are commercially reasonable to either collect unpaid rent or to evict the tenant from the premises. Property Manager shall employ a collection agency to pursue payment collection and, except as otherwise required by applicable law, shall utilize legal counsel only if a tenant refuses to vacate an apartment unit following proper notice. The commencement of any litigation (other than for routine residential tenant eviction and residential rent collection matters, including bringing suit for and recovery of any delinquent rents or damages and possession of the premises in the name of Owner as an agent with a beneficial interest), shall require the prior written approval of Owner. In connection with all suits or proceedings (other than for routine residential tenant eviction and residential rent collection matters, including bringing suit for and recovery of any delinquent rents or damages and possession of the premises in the name of Owner as an agent with a beneficial interest), only legal counsel approved by Owner shall be retained, but Property Manager shall recommend legal counsel and furnish Owner with the estimated costs of legal services to be incurred in bringing such suit or proceeding.

(f) Maintenance. Property Manager shall maintain or cause to be maintained (to the extent not maintained by tenants) the Property and common areas thereof, external and internal, including, without limitation, sidewalks, signs, mechanical, electrical and other systems, parking lots and landscaping, in good and clean condition and repair, provided no maintenance expense, repairs or alterations other than emergency repairs, which are not specifically identified within the Approved Operating Budget, shall be undertaken without the prior written consent of Owner. Property Manager shall coordinate and supervise all construction activities (including, without limitation, tenant improvements, tenant refurbishment, common area refurbishment, maintenance and repairs) on the Property. All maintenance expenses, repairs or alterations (including, without limitation, alterations required for the occupancy of new tenants) requiring expenditures in excess of $25,000 shall, at Owner’s election, be planned and supervised by an architect, designer, inspector or general contractor designated by Property Manager and approved in writing by Owner. Property Manager shall institute and effectuate a preventative maintenance program. Notwithstanding the foregoing, in the event of an emergency in which there is an immediate danger to persons or property or in which

action is required in order to avoid suspension of services, Property Manager shall take such action as is reasonable and prudent under the circumstances and shall be reimbursed for any expense incurred in such action, even if not in the Approved Operating Budget, so long as Property Manager attempts to consult with Owner in advance and, in any event, notifies Owner within 48 hours of taking such action explaining the reasons therefor. Property Manager shall obtain all necessary receipts, releases, waivers, discharges and assurances necessary to keep the Property free of any mechanics’, laborers’, materials suppliers’ or vendors’ liens in connection with the maintenance or operation of the Property. All such documentation shall be in such form as required by Owner.

(g) Contracts. Property Manager shall not enter into any contract without Owner’s prior written approval (including approval of the provisions of any equipment lease); provided, however, that Owner’s prior written approval shall not be required with respect to any utility or service contract which is (i) entered into in the usual course of business, (ii) for a term of one year or less, and (iii) specifically provided for in the Approved Operating Budget. Without limiting the foregoing, each contract entered into by Property Manager pursuant to this Section 2.02(g) shall contain a thirty (30) day (or less) cancellation clause exercisable by Owner without cause and without penalty or fee, unless otherwise approved in writing by Owner. All utility, supply, service, vending and related contracts or equipment leases are to be entered into by Property Manager on behalf of Owner. Property Manager shall assure that any contractor performing work on the Property maintains insurance satisfactory to Owner, including, but not limited to, Workers’ Compensation Insurance (and, when required by law, compulsory Non-Occupational Disability Insurance) and insurance against liability for injury to persons and property arising out of all such contractor’s operations naming Property Manager and Owner as additional insureds. Property Manager shall obtain certificates of insurance for all such insurance before the work begins and Property Manager shall furnish copies of the certificates to Owner if requested by Owner; notwithstanding the forgoing, in lieu of delivering the required certificates Property Manager may use venders qualified through Compliance Depot.

(h) Purchases. Property Manager shall supervise and purchase or arrange for the purchase of all reasonable inventories, provisions, supplies and operating equipment which are provided for in the Approved Operating Budget or otherwise specifically approved by Owner in writing. To the extent available, Property Manager shall give, or obtain for Owner, all volume purchasing benefits and discounts available to Property Manager or to properties of the size and class of the Property.

(i) Operating Expenses. Property Manager shall approve payment of all normal operating expenses specifically provided for in the Approved Operating Budget not paid for by tenants of the Property; Owner (or Legacy in its capacity as agent of Owner) shall pay such expenses in a manner commercially reasonable for the Property . Property Manager shall recommend that Owner purchase major items of new or replacement equipment when Property Manager believes such purchase to be necessary or desirable. Owner may arrange to purchase and install such items itself or may

authorize Property Manager to do so subject to any supervision and specification requirements and conditions prescribed by Owner. Prior to purchasing, Property Manager must obtain Owner’s specific written authorization for all capital expenditures that are not included in the Approved Capital Budget as well as for all capital expenditures of $25,000 or more that are included and itemized with specificity in any one (1) line item in the Approved Capital Budget. Unless otherwise directed by Owner, Property Manager shall obtain at least three (3) written estimates from qualified bidders for any capital improvement project if the cost of such project is reasonably expected to exceed $25,000. All capital improvement projects requiring expenditures in excess of $25,000 shall, at Owner’s election, be planned and supervised by an architect, designer, inspector or general contractor designated by Property Manager and approved in writing by Owner.

(j) Conservation Techniques. Property Manager shall provide proper energy management and utilize utility conservation techniques.

(k) Security. Property Manager shall not be responsible for the security of the Property or its residents, but shall keep Owner informed as to whether the security measures put in place by Owner appear to be adequate. Property Manager shall promptly notify Owner of any incidents or conditions which reflect on or affect the adequacy of the security provisions for the Property.

(l) Taxes. Property Manager shall obtain and cause to be verified bills for real estate and personal property taxes, sales taxes on rental payments, improvement assessments and other like charges which are or may become liens against any portion of the Property (collectively, “Taxes”). Property Manager shall remit all bills for Taxes to Owner and Legacy within fifteen (15) calendar days of receipt of such bills.

(m) Compliance. Property Manager shall operate the Property in compliance with all terms and conditions of applicable law, any ground lease, space lease, mortgage, deed of trust or other security instrument affecting the Property and of which Property Manager has knowledge, but Property Manager shall not be required to make any payment on account thereof. Property Manager shall also comply or supervise compliance with the provisions of any insurance policy or policies insuring Owner in relation to the Property (so as not to decrease the insurance coverage or increase the insurance premiums). Property Manager shall be responsible for performance by Owner under all license agreements, easement agreements, covenants, conditions, restrictions, documents of record, use permits, development agreements, operating agreements or other similar documents governing or applicable to the title, operation, management, occupancy, promotion and leasing of the Property known to Property Manager.

(n) Licenses and Permits. Property Manager shall assist in obtaining at Owner’s expense all licenses, permits or other instruments required for the operation of the Property or any portion thereof (collectively, “Licenses”). Property Manager shall send to Owner a copy of all initial or renewal license applications. Licenses shall be obtained in Owner’s name whenever possible. Any Licenses held in the name of Property

Manager shall be held by it on behalf of Owner, and upon the termination or expiration of this Agreement, Property Manager shall transfer or assign any such Licenses to Owner or to such person as Owner may direct. Property Manager shall keep in full force and effect all licenses, permits, consents and authorizations as may be necessary for the proper performance by Property Manager of its duties and obligations under this Agreement (including, without limitation, qualification to do business) or as may be required under any lease covering any portion of the Property. All such licenses, permits, consents and authorizations shall be in the name of Property Manager.

(o) Notice and Cooperation in Legal Proceedings. Owner and Property Manager shall forthwith give notice to each other of the commencement of any action, suit or proceeding against Owner or against Property Manager with respect to the operations of the Property or otherwise affecting the Property. Property Manager shall fully cooperate, and shall cause all its employees to fully cooperate, in connection with the prosecution or defense of all legal proceedings affecting the Property.

(p) Other Complaints and Notices. Property Manager shall handle promptly complaints and requests from tenants, concessionaires and licensees and notify Owner of any major complaint made by a tenant, concessionaire or licensee. Property Manager shall notify Owner promptly of: (i) any notice received by Property Manager or known to Property Manager of violation of any governmental requirements (and make recommendations regarding compliance therewith); (ii) any defect or unsafe condition in the Property known to Property Manager; (iii) any notice received by Property Manager or known to Property Manager of violation of covenants, conditions and restrictions affecting the Property or noncompliance with loan documents affecting the Property, if any; (iv) any fire, accident or other casualty or damage to the Property; (v) any condemnation proceedings, rezoning or other governmental order, lawsuit or threat thereof involving the Property; (vi) any violations relative to the leasing, use, repair and maintenance of the Property under governmental laws, rules, regulations, ordinances or like provisions; (vii) defaults under any leases or other agreements affecting the Property (excluding resident leases); or (viii) any violation of any insurance requirement. Property Manager shall promptly deliver to Owner copies of any documentation in its possession relating to such matters. Property Manager shall keep Owner reasonably informed of the status of the particular matter through the final resolution thereof. In the case of any fire or other damage to the Property or violation or alleged violation of laws respecting Hazardous Wastes (as defined in Section 5.03), Property Manager shall immediately give telephonic notice thereof to Owner. Property Manager shall complete all necessary and customary loss reports in connection with any fire or other damage to the Property. Property Manager shall retain in the records it maintains for the Property copies of all supporting documentation with reference to such notices.

(q) Business Plan and Property Review Program. Property Manager shall provide Owner and Legacy with a draft of a business plan for the Property for the forthcoming Fiscal Year no later than November 1 of each year during the term hereof containing such information as Owner may reasonably request, including (i) a list of all properties competitive with the Property, a list of the tenants of each and all other

reasonably available information respecting each, and (ii) basic demographic data relating to the market area of the Property, including population growth, major employers, employment and unemployment levels and, if the Property is a retail property, retail sales and housing starts. With respect to the first Fiscal Year of the term, Property Manager shall submit to Owner for approval a draft of a business plan for the balance of such calendar year as soon as possible and no later than thirty (30) days after the date hereof. Owner will consider the business plans and endeavor to approve such business plans within thirty (30) days of receipt of the draft of a business plan for first Fiscal Year and by December 1 of each subsequent year during the term hereof. The proposed business plans shall become the Annual Business Plan only when approved by Owner. In addition, Property Manager shall participate in Owner’s property review programs to the extent requested by Owner. Such review shall include asset, investment, financial and strategy profiles in form and substance satisfactory to Owner and such assistance as Owner may request in connection with appraisals of the Property. Property Manager shall respond, within 10 days, to Owner’s management evaluation reports concerning actions to be taken by Property Manager to correct or modify its management standards for the operations or financial services provided for the Property.

(r) General. Property Manager shall afford such supervision, professional management and in-house staff services as may be necessary or desirable to operate the Property in the same manner as is customary and usual in the operation of other properties of substantially comparable location, class, size and standing, and shall provide such services at the Property as are consistent with the Property’s size and existing facilities. Subject only to those express limitations set forth in this Agreement, Property Manager shall have control and discretion in the management and operation of the Property and in the performance of the foregoing services. Without limiting the foregoing, if applicable, Property Manager shall review and, if so directed by Owner, conduct an audit of each retail tenant’s compliance with its obligation to pay a percentage rent or any other amount determined on the basis of the tenant’s sales or gross or net income.

ARTICLE 3. COMPENSATION AND EXPENSES OF PROPERTY MANAGER.

3.01. Fees.

(a) Owner shall pay Property Manager, and Property Manager shall accept as full compensation for the property management services to be rendered to Owner hereunder during the term hereof, a sum equivalent to two percent (2%) of Gross Monthly Collections (the “Management Fee”). Such compensation shall be payable monthly on or before the 5th of the subsequent month.

(b) In the event that Property Manager is requested by Owner to coordinate and supervise major repairs or improvements to a Property (after its development is completed) that should be capitalized under generally accepted accounting principles (“Capital Expenditures”), Property Manager shall receive a mutually agreed upon construction supervision fee (the “Construction Supervision Fee”).

(c) If the Property includes retail space, Owner may agree to pay a leasing commission (the “Retail Commission”) to Property Manager, at a rate to be agreed upon, for retail leases executed during the term of this Agreement between Owner and the retail tenants procured or obtained by Property Manager. Notwithstanding the foregoing, Owner shall have the right in its sole and absolute discretion to reject any prospective retail lease, renewal or extension agreement and, in such event, no Retail Commission or other compensation shall be earned or payable in connection with such proposed retail lease, renewal or extension agreement or the activities of Property Manager, or any other broker in connection therewith.

(d) Except with respect to other services provided by Affiliates of Property Manager in accordance with Section 3.01(e), which shall be reimbursed by Owner pursuant to Section 3.01(e), Property Manager shall pay from the Management Fee all costs associated with or relating to its own office overhead and management personnel not located or employed at the Property, including without limitation, the salaries, wages and all other compensation, together with associated unemployment and social security taxes and contributions, as well as expenses specifically stated in this Agreement to be borne by Property Manager.

(e) If included in the Approved Capital Budget or with the prior approval and direction of Owner, Property Manager may obtain services and materials including, but not limited to, advertising, consulting, training, computer hardware and software, forms for use at the Property, contract services and building materials through the organization, subsidiaries or Affiliates of Property Manager for the benefit of the Property, provided the quality of service and the price thereof is competitive with comparable prices and services offered by third parties, and the costs therefore shall be reimbursed by Owner. All discounts, rebates and other savings realized thereon by Property Manager are to be passed on to Owner, in full.

3.02. Expenses to be Borne by Property Manager. Unless otherwise provided in the Approved Operating Budget or Section 4.01(b) below, expenses incurred in rendering all overall supervisory, lease negotiation (exclusive of lease commissions, if any), rent and other collection (exclusive of on-site personnel, attorneys’ fees and outside collection agency fees), lease enforcement (exclusive of on-site personnel and attorneys’ fees), lease termination (exclusive of on-site personnel and attorneys’ fees), management and recordkeeping and other services to be rendered by Property Manager in connection with the operations of the Property shall be borne by Property Manager and not charged to Owner. Without limiting the generality of the foregoing provisions of this section, the following expenses and costs incurred by and/or on behalf of Property Manager shall be at the sole cost and expense of Property Manager and shall not be reimbursed by Owner:

(a) All costs of gross salary and wages, payroll taxes, insurance, workmen’s compensation and other costs of Property Manager’s corporate office and executive personnel (other than full time or part time personnel whose positions and salaries are specifically authorized in the Approved Operating Budget);

(b) Property Manager’s indemnification obligations under Section 8.01(A) below;

(c) Unless otherwise provided in the Approved Operating Budget, all costs of forms, accounting materials, administrative materials, papers, ledgers and other supplies and equipment used in Property Manager’s corporate office, all costs of Property Manager’s data processing equipment located at Property Manager’s corporate office and all costs of data processing provided by computer service companies to Property Manager’s corporate office;

(d) All costs of bonuses, incentive compensation, profit sharing or any pay advances to employees employed by Property Manager in connection with the operation and management of the Property, except for payments to individuals specifically set forth in the Approved Operating Budget or otherwise approved in writing by Owner in advance;

(e) All costs of automobile purchases and/or rentals, unless provided for in the Approved Operating Budget or Approved Capital Budget or the automobile is being provided by Owner;

(f) All costs of comprehensive crime insurance purchased by Property Manager for its own account;

(g) All costs of meals, travel and hotel accommodations for Property Manager’s home or regional office personnel who travel to and from the Property, unless expressly authorized by Owner; and

(h) All costs (exclusive of fees that are directly property related, e.g., registration fee) of obtaining and maintaining such licenses, permits, consents and authorizations as are required by Section 2.02(n).

3.03. Noncustomary Services. Notwithstanding anything provided in this Agreement to the contrary, Property Manager shall not furnish or render to the tenants of the Property services other than those services customarily furnished to tenants of properties similar to the Property unless: (a) Property Manager makes a separate, adequate charge to tenants for such services; (b) such separate charge is received and retained by Property Manager; (c) Property Manager bears the cost of providing such services; (d) Property Manager first obtains the consent in writing of Owner; and (e) Property Manager certifies in writing to Owner that (i) Property Manager qualifies as an independent contractor with respect to Owner (and Owner’s direct and indirect beneficial owners) under Section 856(d)(3) of the Internal Revenue Code, and (ii) Owner (and Owner’s direct and indirect beneficial owners) does not derive or receive any income from Property Manager. For purposes of this Section 3.03, it is agreed, without limitation, that the furnishing of water, heat, light and air conditioning, public entrances and exits, the performance of general maintenance and of janitorial services and cleaning services, the collection of trash, watchmen or guard services and parking facilities are examples of services customarily furnished

to the tenants of similar properties.

3.04. Nonperformance. If Property Manager fails to perform any act required under this Agreement, then Owner, after ten (10) days’ written notice to Property Manager (or, in the case of any emergency, without notice) and without waiving or releasing Property Manager from any of its obligations hereunder, may (but shall not be required to) perform such act. Owner shall have (in addition to any other right or remedy) the right to offset all costs and expenses incurred in exercising its rights under this Section 3.04 against any sums due or to become due to Property Manager, including, without limitation, the Management Fee.

ARTICLE 4. PERSONNEL AND BONDING.

4.01. Stability of Management Team. Owner and Property Manager recognize the benefits inherent in promoting stability in the management team engaged in the operation of the Property.

(a) Property Manager shall, in the hiring of all employees and in retaining independent contractors, use reasonable care to select qualified, competent and trustworthy employees and independent contractors. Subject to the provisions of this Section 4.01, the selection, terms of employment (including rates of compensation) and termination thereof, and the supervision, training and assignment of duties of all employees of Property Manager engaged in the operation of the Property shall be the duty and responsibility of and shall be determined by Property Manager. All personnel at the Property shall be employees of Property Manager and/or contractors of Property Manager.

(b) Property Manager shall employ at Property Manager’s sole cost and expense (unless otherwise provided in the Approved Operating Budget) a regional manager who works from the Records Office and manages the Property and other properties (the costs and expenses for whom, if provided for in the Approved Operating Budget, shall be pro rated in light of the time spent managing the Property as opposed to other properties).

4.02. Fidelity Bond. Property Manager, at Property Manager’s cost, shall obtain a fidelity bond or bonds covering Property Manager, and all employees and agents of Property Manager (but not Legacy or its employees or agents) who handle, have access to, or are responsible for, Owner’s monies in such amount and in such forms as are reasonably acceptable to Owner, at all times and to cover all periods, during the term of this Agreement. Any changes in such bond(s) must be approved by Owner. Property Manager hereby agrees to add Owner as a joint loss payee under its blanket crime policy as it pertains to the Property. Property Manager hereby assigns all proceeds of said bond(s) as they relate to the Property to Owner and agrees to execute such further assignments and notices thereof as shall be required by Owner. Such bond(s) shall indemnify Owner against any loss of money or other property which Owner shall sustain through any criminal, fraudulent or dishonest act or acts committed by Property Manager or any of its employees or agents, during the performance of their obligations under this Agreement or their employment. Alternatively, Property Manager may obtain a crime insurance policy covering the Property Manager, and all employees and agents of Property Manager (but not Legacy or its

employees or agents) who handle, have access to, or are responsible for, Owner’s monies which shall be obtained at Manager’s sole expense and shall provide Owner coverage of Two Million Dollars ($2,000,000.00) per occurrence with a Fifty Thousand Dollar ($50,000.00) deductible which deductible shall be an expense of Manager. Owner shall be furnished by Property Manager with a certificate or other satisfactory documentation relating to the bond(s) or alternative crime insurance policy immediately upon issuance thereof.

4.03. Affiliates. Property Manager shall not contract for outside services for the Property with any Affiliate of Property Manager without the prior written consent of Owner.

ARTICLE 5. COMPLIANCE WITH LAWS.

5.01. Compliance. Property Manager shall comply fully with and abide by all laws, rules, regulations, requirements, orders, notices, determinations and ordinances (collectively, “Requirements”) of any federal, state or municipal authority to the extent applicable, including, but not by way of limitation, the federal Occupational Safety and Health Act (OSHA) statutes, rules and regulations, and all requirements of the insurers of the Property and Owner’s liabilities with regard thereto. If the cost of compliance is (i) not included in the Approved Operating Budget or Approved Capital Budget or (ii) in excess of $10,000, Property Manager shall notify Owner promptly and obtain Owner’s prior written approval prior to making the expenditure.

5.02. Notice. Property Manager shall promptly notify Owner of any non-compliance with, or alleged violation of, any Requirement after becoming aware of the same.

5.03. Hazardous

Wastes.

(a) Property Manager shall not place, cause or permit to be placed on the Property, other than in the ordinary course of performing its obligations under this Agreement and in compliance with applicable law, any hazardous or toxic wastes or substances, as such terms are defined by federal, state or municipal statutes or regulations promulgated thereunder (collectively, “Hazardous Wastes”). If Property Manager discovers the existence of any Hazardous Wastes on the Property (other than Hazardous Wastes used, generated or stored in the ordinary course of business and in compliance with applicable law), Property Manager shall immediately notify Owner. If such Hazardous Wastes were placed or knowingly permitted to be placed on the Property by Property Manager, Property Manager shall, at its cost, diligently arrange for and complete the immediate removal thereof in accordance with applicable laws and Owner’s directions. Except as expressly provided herein to the contrary, Property Manager shall not be responsible for any Hazardous Wastes present on the Property prior to the Effective Date hereof, unless deposited thereon by Property Manager, nor shall Property Manager be responsible for any Hazardous Wastes brought onto the Property by a person other than Property Manager, its agents or employees. Property Manager shall immediately notify Owner of any notice received by Property Manager from any governmental authority of any actual or threatened violation of any applicable laws, regulations or ordinances governing the use, storage or disposal of any Hazardous Wastes and shall cooperate with Owner in responding to such notice and correcting or contesting any alleged violation at Owner’s

expense.

(b) Property Manager shall provide its employees, agents, consultants, governmental entities and the public with any notices or disclosures concerning Hazardous Wastes associated with the Property required to be delivered by Property Manager under any applicable laws, including without limitation, any notices or disclosures concerning Hazardous Waste which Property Manager has received from Owner. Owner shall have the right to review such notices and disclosures before their distribution or submission by Property Manager and shall have the right, but not the obligation, to prescribe the form and content of any such notices or disclosures as long as the form and content prescribed by Owner comply with all applicable laws relating to such notices or disclosures. Owner shall provide Property Manager with any notices or disclosures concerning Hazardous Waste associated with the Property required to be delivered by Owner under any applicable laws.

(c) Without limiting any other indemnification obligations provided by law or specified in this Agreement, Property Manager shall indemnify, defend (at Property Manager’s sole cost and expense and with legal counsel approved by Owner which approval shall not be unreasonably withheld) and hold harmless the Owner, its agents, employees and contractors from and against any and all claims, demands, losses, damage, disbursements, liabilities, obligations, fines, penalties, actions, causes of action, suits, costs and expenses, including without limitation, reasonable attorneys’ fees and costs, and all other professionals’ or consultants’ expenses incurred in investigating, preparing for, serving as a witness in, or defending any action or proceeding, whether actually commenced or threatened, or in removing or remediating any Hazardous Wastes on, under, from or about the Property, arising out of or relating to, directly or indirectly, Property Manager’s breach of any of the terms of this Section 5.03. This indemnity shall survive termination of this Agreement.

5.04. Asbestos and Similar Compliance Matters. If the Property is subject to the Occupational Safety and Health Administration’s regulations relating to asbestos, or to any state law or regulation relating to asbestos or to any state law or regulation relating to carcinogenic or toxic chemicals, Property Manager shall, at Owner’s expense, comply with such laws and regulations as they relate to the Property.

ARTICLE 6. FINANCIAL MATTERS.

6.01. Books and Records. Property Manager shall cause to be kept for Owner at the Records Office books and records of the Property, pursuant to methods and systems, and in form and substance, approved by Owner and Legacy, showing all receipts, expenditures and all other records necessary or convenient for the recording of the results of operations of the Property. Such books are to be maintained utilizing the Yardi accounting software hosted by Legacy. Original records maintained by Property Manager shall be kept in a secure location at the Records Office and shall be open to inspection by Owner and Legacy and their representatives during normal business hours and Property Manager agrees to cooperate in making such books and records available for inspection. Upon the effective date of any termination of this Agreement, all of such records shall be delivered forthwith to Owner so as to ensure the orderly continuance of the operation of the Property. Cut-off date for books on a monthly basis will be

the 23^nd day of each month or as modified by Legacy.

6.02. Reports.

(a) On or before the last day of each month, Property Manager shall provide such reports and data to Owner and Legacy as shall be required from time to time by Owner. Without limitation, Property Manager shall provide the following to Owner for the current calendar month:

(i) Reports and data necessary to generate detailed report of all monies collected (identified by tenant or other source) which shall include, but not be limited to, rents collected (including laundry or other vending income, garage or parking income, percentage rent and other amounts payable under any retail leases, if any), rents prepaid beyond the current month, and security deposits collected, and of vacancies and delinquent rents.

(ii) Reports and data necessary to generate a detailed report of all expenses paid.

(iii) A comparison of the current month and year-to-date account of actual revenue and expenses to budgeted amounts; calculations of monthly and year-to-date variances from the Approved Operating and Capital Budgets, appropriate descriptions of any significant monthly or year-to-date variances, and, if requested by Owner, a revised annualized projection of monies to be collected and expenses to be paid for the balance of the calendar year.

(iv) A written report describing any material changes in the Property which occurred during the month or are anticipated to occur.

(v) A reconciliation of amounts receivable or due to Owner.

(vii) Any other special information as required from time to time by Owner.

(b) Property Manager shall provide a monthly management report to be submitted with the applicable monthly financial statements which shall contain without limitation, the recommendations of Property Manager regarding the physical condition or operation of the Property and leasing status reports. In addition, if applicable, on or before January 30 after the end of each calendar year, Property Manager shall at its sole cost and expense submit to Owner an annual report summarizing all retail leasing activities, if any.

(i) Market surveys and any other tenant information in accordance with Section 2.02(q) above.

(ii) Reports covering on-site physical inspections and operating reviews.

(iii) A current inventory of personal property and equipment used in connection with the Property. Such an inventory shall be submitted to Owner no later than thirty (30) days prior to the end of each calendar year.

6.03. Audit. Owner shall have the right to conduct an audit of the Property’s operations at any time. Property Manager, to the extent responsible under the terms of this Agreement, shall promptly correct all weaknesses and errors disclosed by Owner’s audits, and shall timely inform Owner in writing of all corrective actions taken. Owner’s audit shall be at Owner’s expense unless an error is discovered attributable to the services provided under this Agreement that is equal to or greater than two percent (2%) of annual gross receipts of the Property for the period audited, in which case Property Manager shall bear the full cost of the subject audit. Any adjustments in amounts due and owing from Owner or Property Manager shall be paid within fifteen (15) calendar days following Owner’s receipt of the audit.

6.04. Other Reports and Statements. Property Manager shall furnish to Owner, as promptly as practicable, such other reports, statements or other information with respect to the operations of the Property as Owner may from time to time reasonably request.

6.05. Contracts and Other Agreements. Property Manager shall maintain at the Records Office one original (or a copy, if no original is available) of all contracts, occupancy leases, lease abstracts, tenant income certifications, equipment leases, maintenance agreements and all other agreements relating to the Property.

6.06. Final Accounting. Following termination of this Agreement, whether by expiration of the term hereof or sooner, Property Manager shall be responsible for preparing a final report within thirty (30) days after the effective date of said termination. Such final report shall set forth all current income, all current expenses, and all other expenses contracted for on Owner’s behalf but not yet incurred in connection with the Property. The final report shall also include all other items reasonably requested by Owner. Property Manager shall be entitled to receive a prorated share of its Management Fee to the date of termination and all earned but unpaid Construction Supervision Fees.

6.07. Tax Returns. Property Manager shall file all tax returns for all payroll taxes and other taxes directly related to the Property; excluding, however, federal and state income tax returns of Owner; Property Manager will advise and assist Legacy in the preparation and filling of any required sales tax returns.

6.08.

Certification. All financial reports prepared solely by Property Manager shall be certified

as true and correct in all material respects by Property Manager.

ARTICLE 7. BANK ACCOUNTS.

7.01. Property Accounts.

(a) All funds received by Property Manager derived from the operation of the Property, as well as working capital furnished by Owner, shall be deposited in an account (the “Property Bank Account”) in the Property’s name, as established by Legacy, which such account will be in compliance with applicable law. All funds so deposited shall be deemed to be trust funds held for the benefit of Owner. Legacy shall establish another custodial and/or trust account as required by applicable law or the Owner for the deposit of tenant security deposits (the “TSD Account”).

(b) No non-Property funds shall be commingled with the funds in the Property Bank Account or TSD Account (collectively, the “Accounts”).

(c) Only officer’s, employees or agents of Legacy specifically authorized by Owner shall have authority to write checks from the Accounts.

7.02. Expenses Paid by Owner. The following costs are to be paid directly by Owner (or Legacy, acting on Owners behalf):

(a) Any and all costs necessary for the management, operation and maintenance of the Property, provided such costs are provided for and are within the limits of the Approved Operating Budget or specifically approved in writing by Owner;

(b) Capital expenditures provided for in the Approved Capital Budget or authorized in writing by Owner and directed by Owner to be incurred by Property Manager; and

Property Manager shall not be obligated to make any advance to or for the account of Owner or to pay any sums except as otherwise provided in this Agreement.

ARTICLE 8. INSURANCE AND INDEMNITY.

8.01. INDEMNIFICATION.

(A) PROPERTY MANAGER AGREES TO AND SHALL, COMPLETELY AND TO THE MAXIMUM EXTENT PERMITTED BY LAW, INDEMNIFY, DEFEND (WITH COUNSEL REASONABLY ACCEPTABLE TO OWNER), PROTECT AND HOLD OWNER AND ITS RESPECTIVE PRINCIPALS, OFFICERS, DIRECTORS, SHAREHOLDERS, PARTNERS,

MEMBERS, EMPLOYEES, AUTHORIZED SUCCESSORS, AUTHORIZED ASSIGNS AND AGENTS HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, ACTIONS, FINES, PENALTIES, LIABILITIES, LOSSES, TAXES, DAMAGES, INJURIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION, ACTUAL ATTORNEYS’, CONSULTANTS’ AND EXPERT WITNESS’ FEES, AND DEFENSE COSTS AT BOTH THE TRIAL AND APPELLATE LEVELS) (COLLECTIVELY, “DAMAGES”) IN ANY MANNER RELATED TO, ARISING OUT OF OR RESULTING FROM (I) ANY FAILURE OF PROPERTY MANAGER TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT CAUSING DAMAGE TO OWNER, BUT ONLY TO THE EXTENT SUCH DAMAGES ARE NOT COVERED BY THE INSURANCE MAINTAINED BY OWNER UNDER SECTION 8.05 BELOW, (II) ANY ACTS OF PROPERTY MANAGER BEYOND THE SCOPE OF ITS AUTHORITY UNDER THIS AGREEMENT, (III) ANY GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR OTHER WRONGFUL OR INTENTIONAL ACTS OR OMISSIONS OF PROPERTY MANAGER, AND (IV) ANY INJURY, DAMAGE OR DEATH TO PROPERTY MANAGER, ITS OFFICERS, DIRECTORS, PARTNERS, EMPLOYEES, AGENTS AND OTHER REPRESENTATIVES. THE OBLIGATIONS OF PROPERTY MANAGER UNDER THIS SUBSECTION (A) NOT ARISING FROM GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR OTHER WRONGFUL OR INTENTIONAL ACTS OR OMISSIONS OF PROPERTY MANAGER SHALL APPLY ONLY TO THE EXTENT DAMAGES OF AN INDEMNIFIED PARTY ARE NOT FULLY PAID BY OWNER’S COMMERCIAL GENERAL LIABILITY INSURANCE DESCRIBED BELOW IN SECTION 8.05(B). NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT TO THE CONTRARY, PROPERTY MANAGER’S OBLIGATIONS UNDER THIS SECTION 8.01 SHALL SURVIVE THE EXPIRATION, TERMINATION OR CANCELLATION OF THIS AGREEMENT, AND SHALL BIND ANY AND ALL OF THE HEIRS, SUCCESSORS, ASSIGNS, TRANSFEREES AND REPRESENTATIVES OF PROPERTY MANAGER. THE RIGHTS OF OWNER UNDER THIS SECTION 8.01 SHALL ALSO INURE TO THE BENEFIT OF ANY AND ALL OF THEIR PRINCIPALS, OFFICERS, DIRECTORS, SHAREHOLDERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS, TRUSTEES, HEIRS, BENEFICIARIES, TRUSTS, SUCCESSORS, ASSIGNS, TRANSFEREES AND REPRESENTATIVES, AND TO THE BENEFIT OF ANY AND ALL PERSONS AND LEGAL ENTITIES WHO ARE, COULD BE OR ARE ALLEGED TO BE, LIABLE FOR THE OBLIGATIONS OF OWNER OR SUCH PRINCIPALS, OFFICERS, DIRECTORS, SHAREHOLDERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS, TRUSTEES, HEIRS, BENEFICIARIES, TRUSTS, SUCCESSORS, ASSIGNS, TRANSFEREES AND REPRESENTATIVES.

(B) OWNER AGREES TO AND SHALL, COMPLETELY AND TO THE MAXIMUM EXTENT PERMITTED BY LAW, INDEMNIFY, DEFEND (WITH COUNSEL REASONABLY ACCEPTABLE TO PROPERTY MANAGER), PROTECT AND HOLD PROPERTY MANAGER (AND ITS

EMPLOYEES, AGENTS, SUCCESSORS, ASSIGNS AND TRANSFEREES) HARMLESS FROM AND AGAINST ANY AND ALL DAMAGES IN ANY MANNER RELATED TO OR ARISING OUT OF PROPERTY MANAGER’S PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT WHICH ARE (A) WITHIN THE SCOPE OF ITS AUTHORITY UNDER THIS AGREEMENT, (B) NOT RELATED TO, ARISING OUT OF OR RESULTING FROM ANY NEGLIGENCE, WILLFUL MISCONDUCT OR OTHER WRONGFUL OR INTENTIONAL ACTS OR OMISSIONS OF PROPERTY MANAGER (PROVIDED, HOWEVER, NOTWITHSTANDING THIS CLAUSE (B) WITH RESPECT TO CLAIMS, ACTIONS, SUITS, AND PROCEEDINGS MADE BY UNAFFILIATED THIRD PARTIES ARISING OUT OF OR RESULTING FROM BODILY INJURY, PROPERTY DAMAGE, ADVERTISING INJURY OR PERSONAL INJURY, THE INDEMNIFICATION, DEFENSE AND HOLD HARMLESS OBLIGATIONS UNDER THIS SUBSECTION 8.01(B) SHALL APPLY UNLESS THE ACT OR OMISSION OF PROPERTY MANAGER CONSTITUTES GROSS NEGLIGENCE (AS OPPOSED TO MERE NEGLIGENCE), FRAUD, MALFEASANCE, OR WILLFUL, RECKLESS OR CRIMINAL MISCONDUCT) AND (C) NOT OTHERWISE WITHIN THE SCOPE OF PROPERTY MANAGER’S INDEMNITY SET FORTH IN SECTION 8.01(A) ABOVE. NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS AGREEMENT TO THE CONTRARY, OWNER’S OBLIGATIONS UNDER THIS SECTION 8.01 SHALL SURVIVE THE EXPIRATION, TERMINATION OR CANCELLATION OF THIS AGREEMENT, AND SHALL BIND ANY AND ALL OF THE HEIRS, SUCCESSORS, ASSIGNS, TRANSFEREES AND REPRESENTATIVES OF OWNER. THE RIGHTS OF PROPERTY MANAGER UNDER THIS SECTION 8.01 SHALL ALSO INURE TO THE BENEFIT OF ANY AND ALL OF THEIR PRINCIPALS, OFFICERS, DIRECTORS, SHAREHOLDERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS, TRUSTEES, HEIRS, BENEFICIARIES, TRUSTS, SUCCESSORS, ASSIGNS, TRANSFEREES AND REPRESENTATIVES, AND TO THE BENEFIT OF ANY AND ALL PERSONS AND LEGAL ENTITIES WHO ARE, COULD BE OR ARE ALLEGED TO BE, LIABLE FOR THE OBLIGATIONS OF PROPERTY MANAGER OR SUCH PRINCIPALS, OFFICERS, DIRECTORS, SHAREHOLDERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS, TRUSTEES, HEIRS, BENEFICIARIES, TRUSTS, SUCCESSORS, ASSIGNS, TRANSFEREES AND REPRESENTATIVES.

(C) THE RIGHTS AND OBLIGATIONS OF INDEMNITY PROVIDED IN THIS SECTION 8.01 SHALL NOT BE EXCLUSIVE AND SHALL BE IN ADDITION TO SUCH OTHER RIGHTS AND OBLIGATIONS AS OTHERWISE EXIST INDEPENDENT OF THE PROVISIONS OF THIS SECTION 8.01.

8.02. Property Manager’s Insurance Responsibility.

(a) The Property Manager shall maintain during the term of this Agreement, and any extensions or renewals thereof, each of the following insurance coverages with deductibles, if applicable:

(i) Workers’ Compensation Insurance at no less than statutory requirements including employer’s liability with a limit of not less than $1,000,000 each accident for bodily injury accident and $1,000,000 each employee and policy limit for bodily injury by disease.

(ii) Non-Occupational Disability Insurance when required by law, if applicable.

(iii) Commercial General Liability Insurance with a minimum combined bodily injury and property damage per occurrence limit of liability of $5,000,000, a products-completed operations aggregate limit of $5,000,000 and a general aggregate limit of $10,000,000. Limits of liability may be satisfied through the maintenance of a combination of primary and umbrella/excess liability policies.

(iv) Automobile Liability Insurance covering owned, hired and nonowned vehicles, separate coverage in an amount not less than $1,000,000 combined single limit for bodily injury and property damage of $1,000,000 each accident.

(v) Errors and Omissions Insurance coverage in an amount not less than $1,000,000 each claim and general aggregate.

(b) Property Manager shall promptly provide Owner no later than three (3) days after the Effective Date with certificates of insurance or other satisfactory documentation which evidence that all required insurance is in full force and effect. Upon request, Property Manager shall provide Owner with a copy of the foregoing insurance policies. The insurance as required in Subsections 8.02(a)(i), (ii) and (v) to be maintained by Property Manager shall provide that the insurer shall provide to Owner thirty (30) days’ advance notice of cancellation or material change. The liability policies required by Subsections 8.02(a)(iii) and (iv) shall provide that the insurer shall provide to Owner thirty (30) days’ advance notice of cancellation or material change and shall name Owner and its principals, officers, directors, shareholders, partners, members, trustees, beneficiaries and employees as additional insureds. All liability policies shall be written to apply to all bodily injury, property damage, personal injury and other covered loss, however occasioned, which occurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period. Such liability policies also shall contain endorsements including cross-liability and waiver of subrogation, and shall contain such other endorsements as may be reasonably required by Owner. The liability policies

required by Subsections 8.02(a)(iii) shall include broad form contractual liability insurance coverage.

8.03. Contract Documents; Indemnity Provisions. Property Manager shall use its best efforts to include in service and supply contracts prepared or executed by Property Manager respecting the Property provisions to the effect that the other contracting party shall, to maximum extent permitted by law, indemnify, defend (with counsel reasonably acceptable to Owner), protect and hold harmless Property Manager and Owner and their respective principals, officers, directors, shareholders, partners, members, managers, trustees, beneficiaries and employees from and against any and all Damages in any manner related to, arising out of and/or resulting from any damage to or injury to, or death of, persons or property caused or occasioned by or in connection with or arising out of any acts or omissions of said contracting party or its employees or agents or contractors and agree that no principal, officer, director, shareholder, partner, member, manager, investor, trustee, officer, employee or agent of Owner shall be personally liable for any of the obligations of Owner hereunder.

8.04. Ratings of Insurance Companies. All insurance required to be carried by Property Manager shall be written with companies having a policyholder and asset rate, as circulated by Best’s Insurance Reports, of A-:VIII or better unless an exception is approved by Owner.

8.05. Owner’s Insurance Responsibility. Owner shall maintain during the term of this Agreement, and any extensions thereof, each of the following insurance coverages which shall be primary and noncontributory insurance with respect to the Property:

(a) All-Risk Property Damage Insurance and Loss of Rents Insurance coverage on the Property.

(b) Commercial General Liability Insurance coverage with a minimum general aggregate limit of not less than $10,000,000. Property Manager shall be designated an insured under Owner’s commercial general liability insurance policy while acting within the scope of its authority as Owner’s property manager. All other terms and conditions of this Agreement (including, without limitation, the indemnification provisions of Section 8.01 and Property Manager’s obligation to maintain insurance described in Section 8.02) shall not be affected by this Section 8.05(b).

8.06. Property Manager’s Duties in Case of Loss. Property Manager shall:

(a) Immediately notify Owner of any fire or other damage to the Property; and in the event of any serious damage to the Property or any releases of hazardous materials or contaminants, telephone Owner so that an insurance adjustor may view the Property before repairs are started, but in no event shall Property Manager settle any losses, complete loss reports or adjust losses on behalf of Owner or meet with any federal, state or local regulatory agency without the prior written consent of Owner.

(b) Promptly notify Owner of any personal injury or property damage occurring to or claimed by any tenant or third party on or with respect to the Property;

and immediately forward copies to Owner of any summons, subpoena or other like legal document served upon Property Manager relating to actual or alleged potential liability of Owner, Property Manager or the Property.

ARTICLE 9. RELATIONSHIP OF PARTIES and REPRESENTATIONS and WARRANTIES.

9.01. Nature of Relationship. In taking any action pursuant to this Agreement, Property Manager will be acting only as an independent contractor, and nothing in this Agreement, expressed or implied, shall be construed as creating a partnership or joint venture or an employment relationship or that of principal and agent between Property Manager (or any person employed by Property Manager) and Owner or any other relationship between the parties hereto except that of property owner and independent contractor.

9.02. Communications Between Parties. Owner shall rely on Property Manager to direct and control all operations at the Property; provided, however, Owner reserves the right to communicate directly with the manager specified in Subsection 4.01(b)(i), Property Manager’s bookkeeper(s) working on Property matters, all tenants and tenants’ representatives, all lease prospects, all advertising, management, cleaning and servicing firms doing work for the Property, and all parties contracting with Owner or Property Manager with respect to the Property.

9.03. Relationship of Owner and Property Manager with Respect to Leasing. Property Manager shall not be entitled to any commission or other fee in connection with the leasing of apartment units at the Property, except as specifically provided in Article 3 hereof. On-site employees of Property Manager shall be entitled to receive incentive leasing bonuses as may be included in the Approved Operating Budget. Property Manager shall procure references from prospective tenants, investigate such references, and use its best judgment in the selection of prospective tenants. As soon as practicable prior to any residential unit vacancy, Property Manager shall prepare rental listings and attempt to find a new tenant for such unit. The parties intend that Property Manager shall be obligated to give available residential units at the Property exposure at least equal to the exposure Property Manager gives other available residential units in similar projects owned, leased, managed or operated by Property Manager or an Affiliate within a five (5) mile radius of the Property, and Owner shall have the right to terminate this Agreement pursuant to Section 10.02(e) below if Property Manager fails so to do. The parties also intend that the Property Manager shall be obligated to use reasonable efforts in accordance with the Annual Business Plan to retain existing tenants at the Property, and Owner shall have the right to terminate this Agreement pursuant to Section 10.02(e) below if Property Manager fails so to do.

9.04. No Sales Brokerage Agreement. There are no sales brokerage agreements between Owner and Property Manager; Property Manager has no brokerage agreement or understanding (exclusive or otherwise) with respect to the sale of all or part of the Property on behalf of Owner; and in the event that Owner effects a sale of the Property, whether on its own or through the use of others, brokers or otherwise, Property Manager shall be entitled to no compensation, fee or

commission or other payment on account of such sale under this Agreement. Unless specifically approved by Owner, Property Manager shall have no right to obligate Owner for the payment of any fees or commissions to any outside real estate agent or broker for tenant leases. Except as expressly provided to the contrary elsewhere herein or as otherwise approved by Owner in writing, Property Manager shall be fully responsible for any compensation due employees of Property Manager and any real estate brokers cooperating with Property Manager. Property Manager shall indemnify and hold Owner harmless with respect to any action, proceeding, claim, liability, loss, cost or expense (including reasonable attorneys’ fees) arising in connection with any claim for brokerage or finder’s fees or any other like payment payable as a result of a breach under this Section 9.04 by Property Manager. Property Manager’s obligations with respect to the foregoing indemnity shall survive the expiration or earlier termination of this Agreement.

9.05. Confidentiality. Except as may be otherwise required by law, Property Manager and Owner shall maintain the confidentiality of all matters pertaining to this Agreement and all operations and transactions relating to the Property. Owner shall cause Legacy not to disclose any such confidential information other than as permitted in this Agreement

9.06. Property Manager Not to Pledge Owner’s Credit. Property Manager shall not, except in the purchase of goods, wares, merchandise, materials, supplies and services reasonably required in the ordinary course of business in the operation of the Property or as may be otherwise required in the performance of its obligations under this Agreement and in either case as previously approved by Owner, pledge the credit of Owner; nor shall Property Manager, in the name or on behalf of Owner, borrow any money or execute any promissory note, installment purchase agreement, ▇▇▇▇ of exchange or other obligation binding on Owner or the Property.

9.07 Representations and Warranties.

(a) Property Manager represents and warrants that (i) Property Manager has full power, authority and legal right to execute, deliver and perform this Agreement and to perform all of its obligations hereunder and (ii) the execution, delivery and performance of all or any portion of this Agreement do not and will not (x) require any consent or approval from any governmental authority, (y) violate any provisions of law or any government order or (z) conflict with, result in a breach of, or constitute a default under, the charter or bylaws of Property Manager or any instrument to which Property Manager is a party or by which it or any of its property is bound.

(b) Owner represents and warrants that it has full power, authority and legal right to execute, deliver and perform this Agreement.

(c) Property Manager acknowledges and agrees that Owner is relying upon the representations and warranties set forth in Sections 9.07 (a) in entering into this Agreement, and Owner acknowledges and agrees that Property Manager is relying upon the representations and warranties set forth in Section 9.07 (b) in entering into this Agreement.

ARTICLE 10. TERMINATION.

10.01. Termination by Owner Without Cause. This Agreement may be terminated by Owner at any time without cause and upon written notice to Property Manager by Owner, effective thirty (30) days from the date of such notice, which shall be considered the effective date of termination; provided, however, in the event Owner terminates the Agreement without cause under this Section 10.1 prior to the date which is six (6) months after the Effective Date, Owner shall pay Manager a termination fee equal to one (1) month’s Management Fee (such monthly fee to be determined by calculating the average monthly Management Fee over such initial term) upon receipt of the materials required under Section 6.06.

10.02. Termination by Owner for Cause. This Agreement may be terminated by Owner (or the Property Manager may be required by Owner to change its personnel assigned as Property Manager for the Property) at any time during the term hereof upon written notice to Property Manager effective immediately for any of the following causes:

(a) If Property Manager shall suspend or discontinue business;

(b) If a court shall enter a decree or order for relief in respect of Property Manager in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal, state or foreign bankruptcy, insolvency or other similar law, or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of Property Manager or for any substantial part of its property, or for the winding-up, dissolution or liquidation of its affairs, and such decree or order shall continue unstayed and in effect for a period of sixty (60) consecutive days or if Property Manager shall consent to any of the foregoing;

(c) If Property Manager shall commence a voluntary case or action under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy insolvency or other similar law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Property Manager or for any substantial part of its property, or make any assignment for the benefit of creditors, or admit in writing that it is unable, or fail generally to pay its debts as such debts become due, or take action in furtherance of any of the foregoing;

(d) If Property Manager is grossly negligent or engages in willful misconduct with respect to its duties or obligations to Owner under this Agreement; or

(e) If Property Manager commits any other material default in the performance of any of its obligations under this Agreement, unless such default is cured with thirty (30) days after written notice of such default is given to Property Manager, or, if not curable within thirty (30) days, commenced within such thirty (30) days and diligently prosecuted to completion.

10.03. Termination by Property Manager. This Agreement may be terminated by Property Manager, without cause, upon sixty (60) days’ written notice to Owner. This Agreement may be terminated by Property Manager for cause if Owner commits any material default in the

performance of any of its obligations under this Agreement, including, without limitation, its obligation to pay to Property Manager any fees due and payable under Section 3.01 above, and such default shall continue for a period of thirty (30) days after notice thereof by Property Manager to Owner for non-monetary default or ten (10) days after notice for monetary default.

10.04. Orderly Transition. In the event of any termination or expiration of this Agreement, Property Manager shall use its best efforts to effect an orderly transition of the management and operation of the Property to an agent designated by Owner and to cooperate with such agent. Upon termination or expiration of this Agreement, Property Manager’s rights, if any, to withdraw funds from any account which contains funds collected in connection with the Property shall terminate. Property Manager shall remove all signs that it may have placed at the Property containing its name and repair any resulting damage. In addition, Property Manager shall deliver the following to Owner on or before thirty (30) days following the termination or expiration date:

(a) Deliver such information as is necessary to prepare a final report, reflecting the balance of income and expenses for the Property as of the date of termination or expiration; and

(c) All keys, property, supplies, records, contracts, drawings, leases and correspondence, in existence at the time of termination or expiration and all other papers or documents pertaining to the Property. All data, information and documents shall at all times be the property of Owner.

10.05. Rights Which Survive Termination or Expiration. Termination and/or expiration of this Agreement shall in no event terminate or prejudice any right arising out of or accruing in connection with the terms of this Agreement attributable to events and circumstances occurring prior to termination or expiration of this Agreement, and/or all rights and obligations specified in this Agreement to survive such termination and/or expiration.

ARTICLE 11. MISCELLANEOUS.

11.01. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State in which the property is located without giving effect to the conflict of law principles of such State.

11.02. Table of Contents and Headings. The Table of Contents preceding this Agreement and the headings of the various articles and sections of this Agreement have been inserted for convenient reference only and shall not have the effect of modifying or amending the express terms and provisions of this Agreement.

11.03. Entire Agreement. This Agreement contains the entire agreement between the parties with regard to the subject matter hereof, and this Agreement shall not be amended, modified or cancelled except in writing signed by both parties or by their duly authorized agents.

11.04. Successors and Assigns. All terms, conditions and agreements herein set forth shall inure to the benefit of, and be binding upon the parties, and any and all of their respective permitted heirs, successors, representatives and assigns. Notwithstanding the foregoing, this Agreement may not be assigned by Property Manager nor shall Property Manager delegate any of its duties hereunder without Owner’s prior written consent, which consent may be granted or withheld in Owner’s sole and absolute discretion. Any attempted assignment or delegation by Property Manager hereunder in violation of this Section 11.04 shall be null and void and of no force or effect.

11.05. Waiver. The failure of either party to insist upon a strict performance of any of the terms or provisions of this Agreement or to exercise any option, right or remedy herein contained, shall not be construed as a waiver or as a relinquishment for the future of such terms, provisions, option, right or remedy, but the same shall continue and remain in full force and effect. No waiver by either party of any terms or provisions hereof shall be deemed to have been made unless expressed in writing and signed by such party. In the event of consent by Owner to an assignment of this Agreement, no further assignment shall be made without the express written consent of Owner.

11.06. Severability. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under all applicable laws. However, if any provision of this Agreement is invalid under any applicable law, such provision shall be ineffective only to the extent of such invalidity without invalidating the remaining provisions of this Agreement and, to the fullest extent possible, this Agreement shall be interpreted so as to give effect to the stated written intent of the parties.

11.07. Time. Time is of the essence of this Agreement.

11.08. Attorneys’ Fees. In the event of any legal or equitable proceeding for enforcement of any of the terms or conditions of this Agreement, or any alleged disputes, breaches, defaults or misrepresentations in connection with any provision of this Agreement, the prevailing party in such proceeding, or the non-dismissing party where the dismissal occurs other than by reason of a settlement, shall be entitled to recover its reasonable costs and expenses, including without limitation reasonable attorneys’ fees and costs, paid or incurred in good faith at the pre-trial, trial and appellate levels, and in enforcing any award or judgment granted pursuant thereto. Any award, judgment or order entered in any such proceeding shall contain a specific provision providing for the recovery of attorneys’ fees and costs incurred in enforcing such award or judgment, including without limitation (a) post-award or post-judgment motions, (b) contempt proceedings, (c) garnishment, levy, and debtor and third party examinations, (d) discovery and (e) bankruptcy litigation. The “prevailing party”, for purposes of this Agreement, shall be deemed to be that party that obtains substantially the result sought, whether by dismissal, award or judgment.

11.09. Further Acts. Owner and Property Manager shall execute such other documents and perform such other acts as may be reasonably necessary and/or helpful to carry out the purposes of this Agreement.

11.10. No Advertising. No publication, announcement or other public advertisement of the name of Owner in connection with the Property shall be made by Property Manager, except as may be required by applicable law or with the prior written consent of Owner.

11.11. Signs. Signs and building directories are prohibited unless specifically approved by Owner. Property Manager may place reasonable leasing signs as required with the prior approval of Owner. All signs must meet all requirements of local sign codes and ordinances.

11.12. Owner Exculpatory Clause; Waivers of Jury Trial and Punitive Damages. Property Manager agrees that no principal, officer, director, shareholder, partner, member, investor, manager, representative, trustee, officer, employee or agent of Owner or of its members or partners shall be personally liable for any of the obligations of Owner hereunder and that Property Manager must look solely to the assets of Owner for the enforcement of any claims against Owner arising hereunder. In addition, Property Manager hereby waives in connection with any such claim any right it may have to a jury trial and any punitive or consequential damages.

11.14. Notices. Any notice required or desired to be given under this Agreement shall be given in writing and shall be deemed sufficiently given and served for all purposes when personally delivered or delivered by any generally recognized courier, or by certified or registered mail, addressed to the appropriate address shown below. Any notice given by depositing it in the United States mail as certified or registered mail, postage prepaid, shall be deemed given five (5) business days after deposit.


Owner:		KBS Legacy Partners ▇▇▇▇▇▇ LLC c/o KBS Capital Advisors, LLC ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇

With a copy to:		KBS Legacy Partners ▇▇▇▇▇▇ LLC c/o Legacy Partners Residential Realty LLC ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇▇ ▇. ▇’▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇

With a copy to:		KBS Legacy Partners ▇▇▇▇▇▇ LLC c/o Legacy Partners Residential Realty LLC ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attn: W. ▇▇▇▇ ▇▇▇▇▇/▇▇▇ ▇. ▇▇▇▇

Property Manager:		GREP Southeast, LLC ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇ ▇▇▇▇▇▇


Legacy:		Legacy Partners Residential L.P. ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇▇ ▇▇▇▇▇▇

With a copy to:		Legacy Partners Residential L.P. ▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attn: W. ▇▇▇▇ ▇▇▇▇▇/▇▇▇ ▇. ▇▇▇▇

11.15. Counterparts. This Agreement may be executed in any number of counterparts and each such counterpart shall be deemed to be an original instrument, but all such executed counterparts together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed as of the Effective Date.


OWNER:	KBS LEGACY PARTNERS ▇▇▇▇▇▇ LLC, a Delaware limited liability company

	By:	KBS LEGACY PARTNERS PROPERTIES LLC, a Delaware limited liability company, its sole member

			By: KBS LEGACY PARTNERS LIMITED PARTNERSHIP, a Delaware limited partnership, its sole member

				By: KBS LEGACY PARTNERS APARTMENT REIT, INC., a Maryland corporation, its sole general partner

				By: /s/ ▇▇▇ ▇. ▇▇▇▇
				Name: ▇▇▇ ▇. ▇▇▇▇
				Title: Executive Vice President

PROPERTY MANAGER:		GREP SOUTHEAST, LLC, a Delaware limited liability company

		By:	GREP General Partner, LLC a Delaware Limited Liability Company Its: General Partner

			By:	/s/ ▇▇▇▇ ▇▇▇▇▇▇
			Name:	▇▇▇▇ ▇▇▇▇▇▇
			Title:	Vice-President

EXHIBIT A

LEGAL DESCRIPTION OF PROPERTY

LYING AND BEING in the City of Charlotte, County of Mecklenburg, North Carolina, and more particularly described as follows:

BEING all of Tract 2, Tract 3 and Tract 6 on plat recorded in Map Book 50, Page 862, Mecklenburg County Public Registry, as modified and affected by plats recorded in Map Book 51, page 392 and MapBook 53, page 499. (Description is subject to possible revision upon receipt of current survey).

TOGETHER WITH all easements, rights, and appurtenances contained in declaration of Easements recorded in Book 24097, page 749, Mecklenburg County Public Registry.

A-1

EXHIBIT B

RENTAL GUIDELINES

Property Manager may enter into new leases for space at the Property and renew or extend existing leases without Owner’s prior written consent provided that each such lease:

1)	for residential apartment units:

is documented using, and does not materially deviate from, the standard lease form attached as Exhibit C to this Agreement, other than changes required by law or any governmental agency; and

shall be for initial terms of at least six (6) months and not more than twelve (12) months, unless a longer lease is included in the Annual Business Plan.

2)	provides for rental rates and terms no less than the suggested daily rates provided by YieldStar unless otherwise approved by Owner.

is not for a corporate apartment unit except that the Property Manager may enter into an arms-length lease for corporate apartment units of up to ten percent (10%) of the total number of apartment units, unless the Annual Business Plan provides for more than ten percent (10%) of the total number of apartment units to be available as corporate apartment units; provided, however, unless otherwise approved by Owner Property Manager will not allow more than 10 corporate leases to expire in any given month.

is an arms-length transaction with a tenant that is not an Affiliate of Owner or Property Manager (with the exception of apartment units which may be leased to employees of an Affiliate of the Owner or Property Manager as designated in, and at rental rates no less than those set forth in, the Annual Business Plan).

5)	Equal Housing Opportunity: Property Manager will do business in accordance with the Federal Fair Housing Law.

6)	Resident Income: Except as approved by Owner in writing, prospective residents will have monthly income which will at a minimum be three times the monthly rent.

Credit: All prospective residents must have satisfactory credit as determined in the best judgment of Property Manager. As evidence of prospective residents’ satisfactory credit history, Property Manager shall procure a background check and credit report for prospective tenants from a national reporting agency.

8)	Employment: Property Manager shall confirm employment and salary for prospective tenants for at least the prior three years by, among other satisfactory methods, contacting prior employers of prospective tenants.

9)	Previous Residence: If appropriate, Property Manager shall confirm satisfactory residency for prospective tenants, including without limitation, contacting previous landlords of prospective tenants.