DAKOTA HILL APARTMENTS, IRVING, TEXAS PROPERTY MANAGEMENT AGREEMENT BETWEEN MILESTONE MANAGEMENT, L.P., AND KBS LEGACY PARTNERS DAKOTA HILL LLC

Exhibit 10.28

DAKOTA HILL APARTMENTS, IRVING, TEXAS

BETWEEN

MILESTONE MANAGEMENT, L.P.,

AND

KBS LEGACY PARTNERS DAKOTA HILL 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. Nonpayment		11
ARTICLE 4. PERSONNEL AND BONDING		11
4.01. Stability of Management Team		11
4.02. Fidelity Bond		12
4.03. Affiliates		12
ARTICLE 5. COMPLIANCE WITH LAWS		12
5.01. Compliance		13
5.02. Notice		13
5.03. Hazardous Wastes		13
5.04. Asbestos and Similar Compliance Matters		14
ARTICLE 6. ACCOUNTING AND FINANCIAL MATTERS		14
6.01. Books and Records		14
6.02. Reports and Reconciliation of Accounts		14
6.03. Audit		15
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		16
7.01. Property Accounts		16
7.02. Expenses Paid from Property Bank Account		17
ARTICLE 8. INSURANCE AND INDEMNITY		18
8.01. INDEMNIFICATION		18
8.02. Property Manager’s Insurance Responsibility		19
8.03. Contract Documents; Indemnity Provisions		20
8.04. Ratings of Insurance Companies		21
8.05. Owner’s Insurance Responsibility		21
ARTICLE 9. RELATIONSHIP OF PARTIES and REPRESENTATIONS and WARRANTIES		21
9.01. Nature of Relationship		21
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	23
10.02.	Termination by Owner for Cause	23
10.03.	Termination by Property Manager	24
10.04.	Orderly Transition	24
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	25
11.05.	Waiver	25
11.07.	Time	26
11.08.	Attorneys’ Fees	26
11.09.	Further Acts	26
11.10.	No Advertising	26
11.11.	Signs	26
11.12.	Owner Exculpatory Clause; Waivers of Jury Trial and Punitive Damages	26
11.14.	Notices	27
11.15.	Counterparts	27

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 October 26, 2010 (the “Effective Date”) between MILESTONE MANAGEMENT, L.P., a Delaware limited partnership, doing business in Texas as TMG Milestone Management, L.P. (“Property Manager”), and KBS Legacy Partners Dakota Hill 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.

“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.

“Property” shall mean that certain real property consisting of approximately twenty and three tenths (20.3) acres and improvements constructed thereon consisting of five hundred and four (504) residential units (commonly known as the Dakota Hill Apartments) and zero (-0-) square feet of retail space located in the City of Irving, Texas 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 Dallas, Texas.

“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 and account as provided in this Agreement. Property Manager shall prepare on Microsoft Excel worksheets (using Yardi templates) and submit to Owner 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 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. Following approval by Owner the Approved Capital Budget and the Approved Operating Budget shall be promptly uploaded into the Yardi accounting system for the Property.

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. 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 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 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 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. Property Manager shall furnish copies of the certificates to Owner if requested by Owner.

(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 pay all normal operating expenses specifically provided for in the Approved Operating Budget not paid for by tenants of the Property in a manner commercially reasonable for the Property from funds in the Property Bank Account described in Section 7.01(a). 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 use reasonable efforts to maintain security adequate to the needs of the Property as directed by Owner from time to time. 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 caused 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”). Owner may elect to pay some or all of such bills for Taxes and, in such event, Property Manager shall remit all bills for Taxes to Owner not less than thirty (30) calendar days prior to the date on which each becomes delinquent. Upon Property Manager’s receipt of written notice from Owner of Owner’s election to pay a xxxx for Taxes, Property Manager shall pay such xxxx not less than fifteen (15) calendar days prior to the date on which it becomes delinquent. If Owner decides to contest any Taxes, Owner shall advise Property Manager and Property Manager shall not pay such Taxes until directed by Owner.

(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 (except those provided in the Approved Operating Budget) on account thereof unless specifically instructed to do so by Owner in writing. 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 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. 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 three percent (3%) of Gross Monthly Collections (the “Management Fee”). Such compensation shall be payable monthly on or before the 20th 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 construction supervision fee equal to a percentage of the hard costs of such Capital Expenditures (the “Construction Supervision Fee”) as follows:


JOB COST:		FEE:
Under $100,000		8.0%
$100,000 - $249,999		6.5%
$250,000 - $499,999		6.0%
$500,000 – 4,999,999		5.0%
Over $5,000,000		Negotiable

(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, accounting and bookkeeping 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, management, accounting, bookkeeping (exclusive of checks and bank charges) 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) All costs incurred as a result of Property Manager’s breach of this Agreement, and/or the negligence and/or willful misconduct of Property Manager and/or any one or more of its Affiliates, employees, independent contractors, agents and/or other representatives;

(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. Nonpayment. If Property Manager fails to make any payment when required or fails to perform any act required under this Agreement, to the extent sufficient funds are available, 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) make such payment or 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) at least the following for the Property:

(i) a 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); and

(ii) an accountant working on Property matters and other properties (who shall be part of Property Manager’s in-house staff) who works from a central location (the costs and expenses for whom, if provided for in the Approved Operating Budget, shall be pro rated in light of the time spent working on 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 persons 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 persons 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. ACCOUNTING AND FINANCIAL MATTERS.

6.01. Books and Records. Property Manager shall cause to be kept for Owner at the Records Office accounts and books and records of the Property, pursuant to methods and systems, and in form and substance, approved by Owner, 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 on both a cash and accrual accounting basis utilizing the Yardi accounting software hosted by Legacy Partners Residential, Inc. Such accounts, books and records shall be kept in a secure location at the Records Office and shall be open to inspection by Owner and its representatives during normal business hours and Property Manager agrees to cooperate in making such accounts, books and records available for inspection. Upon the effective date of any termination of this Agreement, all of such books and 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 last working day of each month.

6.02.

Reports and Reconciliation of Accounts.

(a) On or before the last day of each month, Property Manager shall provide such reports and data to Owner 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) A 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) 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 on of amounts receivable or due to Owner accompanied by payment of same.

(vi) A reconciliation of the Property Bank Account, including a copy of the bank statement.

(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 (which shall include a list of retail leases executed, written lease proposals, security deposits and rents received, and leasing commissions earned on each retail lease). In addition, 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 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 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 theProperty 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 accounting within thirty (30) days after the effective date of said termination. Such final accounting 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 accounting 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 sales taxes, payroll taxes and other taxes directly related to the Property; excluding, however, federal and state income tax returns of Owner.

6.08. Certification. All financial statements shall be certified as true and correct in all material respects by Property Manager.

6.09. SAS 70 Type II Designation. The management of the Property shall be designated as SAS 70 Type II (to the extent such designation is still then available) compliant by a certified public accountant on or prior to December 1st of 2010 and each subsequent year after 2010. The SAS 70 Type II report should be an unqualified report and for 2010 the report shall cover at minimum a period from July through October and for each subsequent year after 2010, the report shall cover at minimum a period from April through September on an annual basis and must be issued by December 1st of each calendar year. If the Property Manager has a joint management agreement, all companies in the joint management agreement must be covered by the annual SAS 70 Type II report or each company is required to provide the Owner annually their individual SAS 70 Type II unqualified report.

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 Property Manager’s name, as agent for Owner, in an FDIC-insured bank designated or approved by Owner, which such account will be in compliance with applicable law. Owner may direct Property Manager to change depository banks or the depository arrangements. All funds so deposited shall be deemed to be trust funds held by Property Manager for the benefit of Owner and shall be held and disbursed as provided herein. Property Manager 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) A Working Capital Reserve equal to Fifty Thousand Dollars ($50,000) (the “Working Capital Reserve”) shall be funded upon execution of this Agreement and maintained in the Property Bank Account at all times throughout the term of the Agreement. A monthly cash payment will be made by Property Manager to Owner solely from funds in the Property Bank Account in excess of the amount of the Working Capital Reserve in an amount equal to the excess, if any, of the current month projected cash receipts less the current month’s budgeted operating and capital expenditures. This payment will be made to Owner on or before the tenth (10^th) day of each month. A reconciliation of receipts and expenditures will be prepared by Property Manager in accordance with Section 6.02 above to account for any prior period operating cash overage or shortage and any additional cash payments due to Owner will be made to Owner no later than the twenty-fifth (25^th) day of the current month and any overpayments made to Owner will be returned to Property Manager for deposit in the Property Bank Account no later than the thirtieth (30^th) day of the current month.

(c) No non-Property funds shall be commingled with the funds in the Property Bank Account or TSD Account (collectively, the “Accounts”). Property Manager may not, under any circumstances, write a check payable to or in favor of, or transfer funds to, Property Manager or any Affiliate of Property Manager from the Accounts other than to (i) reimburse itself or an Affiliate for expenditures made on behalf of Owner and approved by Owner, or (ii) pay itself the Management Fee or other fee payable hereunder; provided that, within fifteen (15) days after payment to itself of the Management Fee or other fee, Property Manager shall provide Owner with a statement setting forth the calculations made in computing the Management Fee or other fee in detail reasonably satisfactory to Owner. Only those persons specifically authorized by Property Manager and approved by Owner shall have authority to write checks from the Property Bank Account. There shall be monetary limits on the checks Property Manager shall be authorized to write. Checks in excess of $25,000 (excluding debt service and those items provided for in the Approved Operating Budget) shall require the prior written consent of Owner.

7.02. Expenses Paid from Property Bank Account. The following costs are to be paid directly from the Property Bank Account:

(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 out of funds in the Property Bank Account.

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 NEGLIGENCE, WILLFUL MISCONDUCT OR OTHER WRONGFUL OR INTENTIONAL ACTS OR OMISSIONS OF PROPERTY MANAGER, BUT WITH REGARD TO NEGLIGENCE OF PROPERTY MANAGER (AS OPPOSED TO GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR OTHER WRONGFUL OR INTENTIONAL ACTS OR OMISSIONS) ONLY TO THE EXTENT SUCH DAMAGES ARE NOT COVERED BY THE INSURANCE MAINTAINED BY OWNER UNDER SECTION 8.05 BELOW, (IV) ANY INJURY, DAMAGE OR DEATH TO PROPERTY MANAGER, ITS OFFICERS, DIRECTORS, PARTNERS, EMPLOYEES, AGENTS AND OTHER REPRESENTATIVES, AND (V) ANY INJURY, DAMAGE AND/OR DEATH TO ANY INDEPENDENT CONTRACTORS OF PROPERTY MANAGER. THE OBLIGATIONS OF PROPERTY MANAGER UNDER THIS SUBSECTION (A) 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, AND (B) NOT WITHIN THE SCOPE OF PROPERTY MANAGER’S INDEMNITY SET FORTH IN SECTION 8.01(A) ABOVE.

(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:

(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 4.0l(b)(i), Property Manager’s accountant(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. Prior to entering into any leasing arrangement with any retail tenant, if any, Property Manager shall prepare and submit to Owner for its approval a written lease proposal setting forth proposed leasing terms, including, without limitation, duration of the lease, rental rate, tax and operating expense escalations, consumer price index adjustments, common area maintenance charges or other rental adjustments, rent and/or parking/other concessions, insurance requirements, expansion and renewal rights, tenant improvement allowance, the desired mix of tenants, and policy with respect to guarantees, and such other matters as Owner deems appropriate. The parties intend that Property Manager shall be obligated to give available residential units and any retail space at the Property exposure at least equal to the exposure Property Manager gives other available residential units and retail space in similar projects owned, leased, managed or operated by Property Manager or an Affiliate, 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 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. 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.

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, xxxx 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.

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 ninety (90) 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.

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, and the Accounts shall be immediately transferred as directed by Owner. Upon termination or expiration of this Agreement, Property Manager’s right to withdraw funds from the Accounts or any other 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) A final accounting, reflecting the balance of income and expenses for the

Property as of the date of termination or expiration;

(b) Any monies due to Owner and any tenant security deposits held by Property Manager with respect to the Property; 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 going 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 Dakota Hill LLC
		c/o KBS Capital Advisors, LLC
		000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
		Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
		Attn: Xxxxx Xxxxxx

With a copy to:		KBS Legacy Partners Dakota Hill LLC
		c/o Legacy Partners Residential Development, Inc.
		00000 Xxxx Xxxx, Xxxxx 000
		Xxxxxx, Xxxxx 00000-0000
		Attn: Xxxxxxx Xxxxxx, Jr.

With a copy to:		KBS Legacy Partners Dakota Hill LLC
		c/o Legacy Partners Residential Realty LLC
		0000 X. Xxxxx Xxxxxx, Xxxxx Xxxxx
		Xxxxxx Xxxx, Xxxxxxxxxx 00000
		Attn: W. Xxxx Xxxxx/Xxx X. Xxxx

Property Manager:		Milestone Management, L.P.
		0000 XXX Xxxxxxx, Xxxxx 000
		Xxxxxx, Xxxxx 00000
		Attn: Xxxxx Xxxxxxxx

With a copy to:		Milestone Management, L.P.
		0000 XXX Xxxxxxx, Xxxxx 000
		Xxxxxx, Xxxxx 00000
		Attn: Legal Department

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.

[remainder of page intentionally left blank]

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

OWNER:

KBS LEGACY PARTNERS DAKOTA HILL 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/ Xxx X. Xxxx

Name: Xxx X. Xxxx

Title: Executive Vice President

PROPERTY MANAGER:

MILESTONE MANAGEMENT, L.P., a Delaware

limited partnership, doing business in Texas as

TMG Milestone Management, L.P.

BY:

Milestone Management GP, LLC, a

Delaware limited liability company, its

general partner, doing business in Texas

as TMG Milestone Management GP, LLC

By: /s/ Xxxxx Xxxxxxxx

Name: Xxxxx Xxxxxxxx

Its: President and COO

EXHIBIT A

LEGAL DESCRIPTION OF PROPERTY

BEING ALL of Lot 2R, Block A, of JEFFERSON AT VALLEY RANCH SUBDIVISION, REVISED, an addition to the City of Irving, Dallas County, Texas, described by Plat recorded in Volume 99215, Page 000, Xxxx Xxxxxxx, Xxxxxx Xxxxxx, Xxxxx.

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 D 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 fifteen (15) months, unless a longer lease is included in the Annual Business Plan (as defined in the Operating Agreement).

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 Management will do business in accordance with the Federal Fair Housing Law.

6)	Resident Income: Excepted 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.

10)	Rental Guideline Changes: Any material changes in the above guidelines shall be submitted to the Owner for review and approval.

B-1

EXHIBIT C

STANDARD RESIDENTIAL LEASE FORM

D-2

Qualifying Criteria

The Company and this community comply with all federal, state and local regulations regarding Fair Housing for all applicants and residents regardless of race, color, religion, sex, national origin, familial status or handicap.

Occupancy Standard

Two persons maximum per bedroom (Exception: Child under 24 months of age, unless otherwise dictated by state or federal law)

Age Requirements

Lease Holders must be at least 18 years of age. All Lease Holders and Occupants age 18 years or older are required to submit an application for approval.

Credit

Bankruptcy history is acceptable if discharged and good credit is reflected for the most recent 12 months. Medical accounts, debts to utility companies (water, gas, and electric) and foreclosures are exempted from the above evaluation. Unpaid collections/debt to no more than one landlord, not exceeding $1500.00, may be acceptable with a one month additional deposit. No credit is considered qualifying credit. International applicants may present a valid passport or other valid government identification in lieu of credit reporting in the U.S.

Additional Deposit

If prospective Lease Holder(s) does/do not satisfy the credit criteria (but not to the point of disqualification), an additional deposit in the amount of the standard application deposit will be required. Deposits are refundable in accordance with the application provisions.

Check Writing

Positive verification of check writing authorization or no checks will be accepted.

Previous Residences

All applicants and occupants must have positive rental history within the past 2 years. No evictions within the past five years will be acceptable. Addresses indicated on the credit report(s) must exactly match residences listed on the rental application.

Criminal

No applicant or occupant may have received deferred adjudication for, or have been convicted of, a felony offense of any kind. No applicant or occupant may have received deferred adjudication for, or been convicted of, a misdemeanor of a violent crime against persons within the previous ten years. No applicant or occupant may have been convicted of, or received deferred adjudication for, a misdemeanor of a property, drug possession under four ounces or weapons nature within the previous three years, or a misdemeanor of a sexual nature within the previous ten years.

Income

The exact income requirement for each application is determined by the credit rating(s) of the applicant(s). On average, the monthly rental amount cannot be more than 33% of the total gross income of all leaseholders. Allowances, third party support and other income require verification. Paycheck stubs covering at least 30 days, the previous year’s W-2 (if self employed) or an offer letter if the applicant has not yet begun employment, are acceptable verification of both income and employment. The income requirement may be modified if required by federal subsidy or financing programs. If a Guarantor is required, monthly rental amount cannot equal more than 14% of the Guarantor’s monthly income.

Employment

Lease Holder(s) must present evidence of stable work history for a minimum of one year. If not employed, must present evidence of regular income. If self-employed must present income tax return from the previous year and bank statements from the previous two months. Persons who hold commission-only or base plus commissions, tips and bonuses jobs are considered self-employed. A letter of intent to hire from the employer should be provided if employment has not yet begun.

Cosigner/Guarantor

If prospective Lease Holder(s) does/do not satisfy the income criteria, a cosigner or guarantor will be required in addition to the above additional deposit. If the prospective Lease Holder(s) is/are also fulltime students, only the guarantor will be required.



Signature of Applicant Date				Signature of Applicant Date

Signature of Applicant Date				Signature of Applicant Date

Signature of Owner’s Representative Date

LAUNDRY EQUIPMENT ADDENDUM

This ADDENDUM (“Addendum”) shall become a part of the APARTMENT LEASE CONTRACT, (“Contract”) dated the day of , , for apartment number , between Apartments (“Owner”), and , , , and , (“Resident”).

This Addendum also operates as a release, waiver and indemnity agreement between Resident named below, and Owner as of the date set out below.

RECITALS

1. Owner desires to lease to Resident and Resident desires to lease from Owner certain Equipment (“Equipment”) described below that is (check one) included in the rent for his/her/their apartment unit or not included in the rent and is an additional monthly cost of $ , payable to the leasing office on or before the of the month.


RESIDENT(S):						EQUIPMENT:

NAME(S)						FULL SIZE: ¨ STACKABLE: ¨
						MAKE:
						MODEL:
						MODEL:
APT. #

THE PARTIES AGREE AS FOLLOWS:

2. Both parties desire to enter into this Addendum, including the Release, Waiver and Indemnity provisions.

a. UPON EXPIRATION OF THE INITIAL LEASE TERM, THIS ADDENDUM SHALL CONTINUE ON A MONTH-TO-MONTH BASIS, UNLESS CANCELLED BY EITHER THE RESIDENT OR OWNER. AFTER PROVIDING A 30 DAY NOTICE IN WRITING.

b. Resident will pay Owner far the repair of damages (other than normal wear and tear) to, or the loss of Equipment. Resident will clean Equipment before returning.

c. Owner may remove the Equipment at a reasonable hour from the Resident’s apartment if Owner believes the Equipment is being abused by Resident. Resident will pay Owner for the repair of damages to or loss of the Equipment other than normal wear and tear. In addition, Resident will be charged a Fifty dollar ($50.00) retrieval fee.

d. The Equipment will be used only by the Resident’s household and only at the above address.

e. The Equipment remains at all times the sale and exclusive property of Owner and no ownership interest, either legal or equitable, nor any possessory interest in the Equipment shall at any time attach to Resident.

f. Owner agrees to repair the Equipment, if necessary, and keep the Equipment in satisfactory operation at no cost to Resident, except those damages caused by Resident or others. Resident is not authorized to repair the Equipment for any reason. Resident agrees to notify Owner in writing of any Equipment malfunction. Resident agrees to allow Owner, or its authorized agents, representatives and employees reasonable access to the Equipment in Resident’s apartment for the purpose of repair, maintenance, replacement or removal of the Equipment.

g. By this instrument, Resident releases Owner and its agents, representatives and officers, directors and employees of any and all claims, liabilities and actions, of whatever nature, resulting from or arising out of Resident’s lease and use of the Equipment and the presence in Resident’s unit of any representative of Owner for the repair, maintenance or removal of the Equipment.

h. By this instrument, Resident waives any and all claims, liabilities and actions of whatever nature it may have against. Owner, arising out of, or resulting from Resident’s lease and use of the Equipment and the presence in Resident’s apartment of any representative of Owner for the repair, maintenance or removal of the Equipment.

i. Resident agrees to indemnity Owner for any and all damages of whatever nature or kind arising out of the willful or negligent misuse of the Equipment while such Equipment is being leased by Resident.

j. The parties acknowledge that this written addendum is the entire agreement of the parties relative to the Equipment in the above referenced unit. Any agreement that in any way varies the terms of this Addendum shall be unenforceable and completely void unless such agreement is in writing and signed by both parties.

DATED THIS day of .

BY SIGNING THIS ADDENDUM, I/WE AM/ARE GRANTING OWNER PERMISSION TO PROVIDE TEMPORARY ACCESS TO MY/OUR APARTMENT TO REPRESENTATIVES OR AGENTS OF FOR THE SOLE PURPOSE OF DELIVERING AND INSTALLING THE EQUIPMENT OUTLINED IN THIS ADDENDUM.

Resident

Owner’s Representative

Revised 4/05

AUTO DEBIT PROGRAM

MILESTONE’S AUTO PAY PROGRAM

This is a reliable and confidential way to have your rent and other charges paid from your bank account. With this program, your payment is electronically debited from your checking or savings account as a regularly scheduled payment.

NO COST TO YOU

This is a free service to Milestone residents.

PEACE OF MIND

You don’t need to worry about getting your rent check in on time or paying late fees.

EASE OF USE

Your payment will be shown on your monthly bank statement as a debit with date paid, reference number, amount and item description. It typically reads “Ocius ACH” or a variation of.

TO ENROLL:

•

Visit the XxXxxxxxxxXxxxxxx.xxx website after receiving your first Resident Statement in the mail. You will need some important information from your statement in order to create your user name and password.

•

Follow the instructions for New Resident Sign Up on the website.

•

Attach a voided check to the authorization form that prints when signing up.

•

Return enrollment form and voided check to the community leasing office.

•

Payments will be processed on the 1^st business day of each month (if the date falls on a weekend or holiday, payment will be processed on the next business day.)

•

If payment is denied, all applicable fees will apply.

•

This enrollment form must be provided to your property management office by the 20^th of the month prior to the selected first electronic payment date.

•

To make a change, notify your Community Director in writing by completing the “Change” portion of this form below at least ten days before the next scheduled payment.

•

This service will continue until written notice to cancel is received by the Community Director by completing the “Stop” portion of this form below at least ten days before the next scheduled payment.

CHECK ONE:

¨	YES – I would like to participate in the Auto Debit Program.

¨	STOP – Please stop my participation in the Auto Debit Program.

Stop month:

¨	DECLINE – I do not wish to participate in the Auto Debit Enrollment Program,



Resident signature	Date	Resident signature	Date


Resident signature	Date	Resident signature	Date


Owner’s Representative Signature		Date

Revised 02-16-10

LOGO

CREDIT/DEBIT CARD PROGRAM

(property name), hereinafter called COMPANY:

To ENROLL:

•

Follow the instructions for New Resident Sign Up on the website.

•

You will receive a receipt “Pending” approval of the management office.

I hereby authorize the COMPANY, to initiate credit/debit card transactions and to initiate, if necessary, any adjustments for any transaction in error, to credit and/or debit the same to such amount. This authority is to remain in effect until COMPANY has received written notification of its termination in such time and in such manner as to afford COMPANY a reasonable opportunity to act on it.

CHECK ONE:

¨ ONE-TIME CHARGE – I would like my credit/debit card charged one-time for the amount due specified by the Company.*

¨ MONTHLY CHARGES – I would like my credit/debit card set up to be charged monthly for the amount due specified by the Company.*

¨ STOP – Please stop my participation in the Credit/Debit Card Program.

¨ DECLINE – I do not wish to participate in the Credit/Debit Card Program.

*YOU WILL BE CHARGED A FLAT FEE PER USE OF THIS SERVICE.



Resident signature	Date	Resident signature	Date


Resident signature	Date	Resident signature	Date


Owner’s Representative Signature		Date

Revised 02-16-10


		MILESTONE COMMUNITY POLICIES

All policies apply to residents and their guests and are subject to change. Please remember your neighbors and help us to maintain a quiet, clean community environment.

Rental Payment

Although your rental payment polices are stated in your Lease Contract, we will explain them further here:

•

Only one personal check will be accepted for apartment rent. No partial payments will be accepted.

•

As stated in your lease, if the office receives your rent after the date specified in your lease, a late charge will be assessed.

•

When allowed by law, no personal checks will be accepted for rental payment after the 5^th of the month.

•

A returned check fee plus applicable late charges will be assessed on all checks returned by a bank for any reason. Checks will not be redeposited. Returned checks must be paid by a cashier’s check or money order within 24 hours of notification.

•

After two returned checks, we may no longer accept personal checks for rental payments (or any other charges).

•

Cash is never accepted.

Keys and Locks

The care and maintenance of the keys and locks to your apartment is of critical importance.

•

We do not offer lockout service after business hours.

•

Our staff will be happy to make a duplicate of your apartment key for a minimum charge of $5.00. The legal resident of the apartment is required to show current photo identification.

•

If you wish to have your locks changed, a reasonable charge will be levied. Payment in advance of lock change is not required.

Insurance

The apartment community provides no guarantee of personal safety and security. Renter’s insurance ¨is ¨is not required as a term of residency at all Milestone Communities. A copy of your renter’s insurance policy may be required upon move-in.

Ins. Company: Policy Number: Effective Dates:

Utilities

You are responsible for all utilities, related deposits, and any charges or fees related to utilities for your apartment home. Per your lease contract you must not allow any utilities, other than cable or internet, to be disconnected.

Electric Company: Account Number:

Gas Company: Account Number:

Occupants

If, during the term of the lease, the resident has an additional child either by birth or adoption, and such additional child exceeds the maximum occupancy restrictions of the apartment, the resident must either transfer into a larger apartment or vacate the apartment at the end of the lease term. The addition of any person to the apartment must be reported to the office. The addition of any person, other than infant by birth or adoption, in excess of the maximum occupancy limitation, shall constitute a branch of the lease contract. All occupants over 18 years must be screened for criminal and residency history through the Milestone application process and an application fee must be paid prior to move in.

Transferring

Occasionally residents choose to transfer to another apartment within the Community or to another Milestone Community within the nation.

Community On-Site Transferring

•

A written notice to vacate, in accordance with your lease, must be given.

•

The Community Director must approve the transfer.

•

After 4 months of initial lease, no transfer fee applies.

•

A $200.00 transfer fee applies if within the first 4 months of the initial lease.

•

Application fee is waived. The community must still screen the resident(s) for the new apartment.

•

We will waive the reletting fee.

National Relocation Program

•

Application fee is waived. The new property must still prescreen the resident(s).

•

The resident must have been in good standing in the present apartment for a minimum of six months.

•

The transfer fee of half the realized concessions (as documented on the concession addendum) is waived after 6 months of the initial lease term.

•

A written notice to vacate, in accordance with your lease, must be given.

•

The new community awards a $100 concession to the resident This concession is in addition to any standing concession already in place at the new community.

I acknowledge receipt of these additional provisions to the Community Policies, thereby becoming a part of the Lease Agreement.


Resident(s)
				Owner’s Representative


				Date Signed

Revised 7/9/09

LEASE ADDENDUM REGARDING

MOVE-OUT NOTICE


1.	Addendum. This is an addendum to the TAA Lease Contract for Apt. No. in the Apartments in , Texas OR the house, duplex, etc. located at (street address) in , Texas.	intended move out, provided that all other requirements below are met. • The move-out date in your notice [check one]: must be the last day of the month; or may be the exact day designated in your notice. If neither is checked, the second applies.

2.	Replacement of Lease Contract language. The language of paragraph 37 the TAA Lease Contract is entirely replaced by the language of this addendum.	• Your move-out notice must be in writing. Oral move-out notice will not be accepted and will not terminate your Lease Contract.

3.	Move-out notice. Before moving out, you must give our representative advance written move-out notice as provided below.	• Your move-out notice must not terminate the Lease Contract sooner than the end of the Lease Contract term renewal period.

	Your move-out notice will not release you from liability for the full term of the Lease Contract or renewal term. You will sill be liable for the entire Lease Contract term if you move out early (paragraph 22) except under the military clause (paragraph 23). YOUR MOVE-OUT NOTICE MUST COMPLY WITH EACH OF THE FOLLOWING: • We must receive advance written notice of your move-out date. The advance notice must be at least the number of days of notice required in paragraph 3 or in special provisions—even if the Lease Contract has become a month-to-month lease. If a move-out notice is received on the fist, it will suffice for move-out an the last day of the month of	• If we require you to give us more than 30 days written notice to move-out before the end of the lease term, we will give you one written reminder not less than 5 days nor more than 90 days before your deadline for giving us your written move-out notice. For month-to-month lenses under such circumstances. you acknowledge that you must give us days move-out notice, but we are not required to give you any additional advance reminder notices.
		YOUR NOTICE IS NOT ACCEPTABLE IF IT DOES NOT COMPLY WITH ALL OF THE ABOVE. Please use our written move-out form. You must obtain from our representative written acknowledgment that we received your move-out notice. If we terminate the Lease Contract, we must give you the same advance notice—unless you are in default.


Resident or Residents [All residents must sign here]				Owner or Owner’s Representative [signs here]


				Date of Lease Contract

Revised 10/08

Photo Identification

For Identification purposes, attach a Copy of Driver’s License or a traceable photo identification card at time of move-in:

Refusal

I refuse to provide have a copy of my photo identification card made for identification purposes. I know if there is no photo identification in the apartment file, access to my apartment will be denied.




Residents Signature		Date

4/05

Pest Control Information and Prevention Addendum

It is our goal to maintain the highest quality living environment for our residents. Therefore, know that management has inspected your apartment prior to the lease begin date, and is not aware of any pest control issues in the apartment at the time of move in.

It is important that Resident(s) keep the interior of the unit in a clean and sanitary condition and promptly notify management of any sightings of bed bugs and/or other pest control issues in the apartment home.

Proper bed bug education and cooperation from our residents is very important.

•

Bed bugs are small parasitic insects that feed on human blood.

•

Bed bugs range in color from dark red to nearly clear in color. At the smallest sizes, bed bugs can be difficult to see and may appear to be translucent yellowish white. Full grown, bed bugs are about the size of an apple seed.

•

Signs of bed bugs are commonly found beneath or near edges of mattresses and near the xxxxxxx seams. Bed bugs may also congregate near the wall-ceiling juncture, along the floor-wall juncture near or behind molding, behind or near wall hangings, in or near electrical outlets or other such places.


If you think you have a bed bug infestation contact the property management office immediately so that we can schedule a professional inspection and treatment of your apartment home.

All Residents agree to the following terms:

1.	Visually inspect apartment home for the presence of bed bugs at the time of move in and report any findings to the management office immediately.

2.	Keep the apartment home in clean and sanitary condition at all times.

3.	Acquiring furniture from dumpsters or other unknown or unsanitary sources is not permitted.

4.	Resident(s) agrees to immediately notify landlord of any pest control issues.

5.	Resident(s) full cooperation with the pest control company and management in regards to access and treatment is mandatory.

6.	Resident(s) must allow access to your apartment home for inspection in the event of a bed bug infestation in an adjacent unit.

Failure of the Resident(s) to comply with reporting information regarding bed bugs, misrepresentation of information, or failure to comply with or pay for pest control treatment as a result of bedbugs in the unit could result in the termination of the lease and would entitle the Owner to pursue any rights and remedies available under the lease terms or applicable law.

8.	Failure to comply with reporting or recommended treatments could result in the termination of the lease.



Resident Signature/Date				Resident Signature/Date


Resident Signature/Date				Resident Signature/Date


Community Representative Signature/ Date


1		Revised 8/2010

Bed Bug Awareness

Bed bugs’ increased presence across the United States in recent decades can be attributed largely to a surge in international travel and trade. While bed bugs are, by their very nature, more attracted to clutter, they are certainly not discouraged by cleanliness. Bed bugs know no social or economic bounds.

Identifying Bed Bugs

What are bed bugs?

Adult bed bugs are small, xxxxxxx-xxxxx colored Insects. They have flat bodies, no wings, and are about the size of an apple seed. Young bed bugs are much smaller and almost colorless. Bed bugs feed on the blood of humans and warm blooded animals. The lifespan of a bed bug is 10 to 18 months. They are nocturnal and feed at night.

How do I know if I have bed bugs?

Bed bugs are very secretive and efficient parasites. They are capable of hiding in the tiniest of places but most are associated near where the host sleeps or rests. Even the most experienced professionals report that it is difficult to find bed bugs in many cases. However, there are “tell tale” signs that you may notice if bed bugs are present and no actual insects are seen. These signs include the presence of staining and fecal matter left by bed bugs.

What exactly should I look for?

If you are concerned that bed bugs may be in your home look for signs. Bed bugs feed on blood and their fecal matter may appear as dark blood stains on your bedding materials including sheets, blankets, pillows, mattresses, or box springs. Such staining may also appear on couches, chairs, or throw pillows where people may sit or lay when watching television. Staining may also be found on walls and furniture around and in areas where bed bugs hide. Bed bugs molt or shed their skin as they grow in a similar fashion as a snake does. You may find bed bug empty “skins” left behind from a bed bug that molted.

Prevention

How can I prevent bed bugs from entering my home?

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Take a few moments upon arriving at a travel destination to thoroughly inspect your accommodations for evidence of bed bugs.

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Thoroughly inspect luggage and belongings before departing for home.

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Washing clothing and bedding immediately after returning from a trip can prevent some infestations.

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Be aware that reports of bed bug infestations have surfaced in train cars, ships, airplanes and buses.

Bed Bug Don’ts

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Do not bring used furniture from unknown sources into your apartment. Countless bed bug infestations have stemmed directly from the introduction into a resident’s apartment home of second-hand and abandoned furniture.

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While there are many pesticides available to the public, successful bed bug treatment requires thorough treatment methods best performed by professionals and this professional service treatment is being provided to you by an approved pest control company authorized by property management It may, however, be necessary for you to treat some of your more sensitive items yourself (such as clothing and electronics) with products that can be easily found at your local drugstore or home center.

What should I do if I think I have bed bugs?

You should immediately call the property management office so that we can schedule a professional inspection and treatment, if needed, of your apartment.


2		Revised 8/2010

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DAKOTA HILL APARTMENTS, IRVING, TEXAS PROPERTY MANAGEMENT AGREEMENT BETWEEN MILESTONE MANAGEMENT, L.P., AND KBS LEGACY PARTNERS DAKOTA HILL LLC

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