SFR FLORIDA LLC A DELAWARE LIMITED LIABILITY COMPANY AMENDED AND RESTATED OPERATING AGREEMENT

Transcription

1 SFR ORIDA LLC A DELAWARE LIMITED LIABILITY COMPANY AMENDED AND RESTATED OPERATING AGREEMENT Dated as of September 6, 2012 Fannie Mae SFR v5

2 SFR ORIDA LLC A DELAWARE LIMITED LIABILITY COMPANY AMENDED AND RESTATED OPERATING AGREEMENT Table of Contents Page Article I Defined Terms... 1 Article II Name and Business Name; Continuation Company Offices and Resident Agent Names and Addresses of Members Purpose Term and Dissolution 20 Article III Capital Admission and Contribution of Managing Member; Closing Deliverables Contribution of Initial Member Capital Accounts Interest; Return of Capital Prorations; Repurchase Properties; Title Insurance 22 Article IV Allocations of Net Income and Net Loss; Distributions Allocations Cash Distributions Prior to Dissolution Termination Distributions Collection Account and Distribution Account Pre-Existing Tenant Incentive Payment Amounts 28 Article V Rights, Duties and Powers of the Managing Member Business Management; Tax Matters Member Powers Restrictions on Authority Other Activities Distributions Asset Management; Property Management Working Capital Reserve 43 Fannie Mae i v5

3 5.08 Replacement Reserve Security Deposit Account Certain Expenses Limitation of Liability; Indemnification Representations and Warranties of the Managing Member; Acknowledgments Representations and Warranties of the Initial Member; Fannie Mae Conservatorship Duties and Obligations of the Managing Member Excess Advances Asset Sale Restrictions Closing Fee 55 Article VI Rights and Liabilities of the Initial Member Liability No Right to Manage Removal and Replacement of the Managing Member Meetings Verification Agent Company Wind-down Mechanism Surveillance by the Initial Member Custodian 61 Article VII Transfer of Initial Member Interests Assignments Substituted Initial Members Managing Member Cooperation 62 Article VIII Withdrawal of the Managing Member; Transfer of the Managing Member s Interest Transfer and Withdrawal Obligation to Continue Interest of Managing Member After Withdrawal 63 Article IX Managing Member Defaults; Remedies Events of Default Remedies Power of Attorney 67 Fannie Mae ii v5

4 9.04 Security Interest 67 Article X Books and Records; Accounting; Tax Elections, Etc Books and Records Custody of Company Funds; Bank Accounts Fiscal and Tax Year Accrual Basis Accountants Federal Income Tax Elections Special Basis Adjustments Reports to Members 69 Article XI Confidentiality Confidentiality 69 Article XII Miscellaneous Notices Amendments Entire Agreement Headings Separability Provision Pronouns and Plurals Binding Agreement Counterparts; Execution Governing Law Submission to Jurisdiction Waiver of Jury Trial Construction Incorporation of Exhibits Company Property; No Partition No Benefit to Third Parties 74 Fannie Mae iii v5

5 SFR ORIDA LLC A DELAWARE LIMITED LIABILITY COMPANY AMENDED AND RESTATED OPERATING AGREEMENT Table of Exhibits EXHIBIT A Capital Contributions... A-1 EXHIBIT B EXHIBIT C Schedule of Properties...B-1 Reports to the Initial Member...C-1 EXHIBIT D Basis of Portion of Properties Contributed by Initial Member... D-1 EXHIBIT E Property Management Transition Plan... E-1 EXHIBIT F Form of Security Agreement... F-1 EXHIBIT G Insurance Requirements... F-1 Fannie Mae iv v5

6 SFR ORIDA LLC A DELAWARE LIMITED LIABILITY COMPANY AMENDED AND RESTATED OPERATING AGREEMENT This Amended and Restated Operating Agreement (this Agreement ) of SFR ORIDA LLC (the Company ), dated and effective as of September 6, 2012, is made by and among the following parties: PACIFICA L 47 LLC a Delaware limited liability company as the Managing Member and FANNIE MAE a federally-chartered corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. 1716, et seq. as the Initial Member. Recitals Terms in initial capital letters in this Agreement that are not otherwise defined shall have the meanings given to them in Article I hereof. The Company was organized as a limited liability company under the Act by the execution and filing of a certificate of formation in the office of the Secretary of State of Delaware on July 13, 2012, having Fannie Mae as the sole member. The affairs of the Company are governed by the Initial Operating Agreement. The purposes of this Agreement are to (i) provide for the continuation of the Company, (ii) provide for the admission of the Managing Member and the designation of Fannie Mae as the Initial Member, (iii) amend and restate the Initial Operating Agreement in its entirety, and (iv) set forth fully the rights, obligations, and duties of the parties hereto. NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, the Initial Member and the Managing Member hereby agree that the Initial Operating Agreement is amended and restated and shall be replaced in its entirety by this Agreement, which is stated in its entirety as follows: Article I Defined Terms For purposes of this Agreement, the following terms shall have the meanings specified below: Fannie Mae SFR v5

7 (a) Accountants means J.H. Cohn LLP or such other nationally-recognized firm of independent certified public accountants as may be engaged by the Managing Member with the Consent of the Initial Member. (b) Act means the Delaware Limited Liability Company Act, 6 Del. C , et seq., as the same may be amended from time to time (including any successor to such statute). (c) Adjusted Capital Account Deficit means, with respect to any Member, the deficit balance, if any, in such Member s Capital Account as of the end of the relevant taxable year, after giving effect to the following adjustments: (i) Credit to such Capital Account any amounts that such Member is obligated to restore pursuant to any provision of this Agreement, is otherwise treated as being obligated to restore under Treasury Regulation section (b)(2)(ii)(c), or is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulation sections (g)(1) and (i)(5); and (ii) Debit to such Capital Account the items described in Treasury Regulation sections (b)(2)(ii)(d)(4), (5), and (6). The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulation section (b)(2)(ii)(d) and shall be interpreted consistently therewith. (d) Affiliate means, when used with reference to a specified Person: (i) any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the specified Person; (ii) any Person that is an officer of, partner in, director of, legal representative of, successor or assignee of, trustee of, employee of (or serves in a similar capacity with respect to) the specified Person or of which the specified Person is an officer, partner, director, legal representative, successor, assignee, trustee or employee (or with respect to which the specified Person serves in a similar capacity); (iii) any Person that directly owns 10% or more of any class of the outstanding voting securities of or otherwise owns 10% or more in the specified Person; and (iv) the specified Person or the Immediate Family of the specified Person; provided, however, that Fannie Mae shall not be deemed to be an Affiliate of the Company or the Managing Member. (e) Affiliated Property Manager means an Affiliate of the Managing Member to whom the obligation to provide Property Management Services to the Company has been delegated pursuant to a Property Management Agreement. (f) Agreement means this Amended and Restated Operating Agreement of the Company, as the same may be amended, restated, amended and restated, or otherwise modified from time to time in accordance with its terms. (g) Allocated Replacement Reserve Release Amount has the meaning given in Section 5.08(e) hereof. (h) AM Portion has the meaning given in Section 5.06(c)(i) hereof. Fannie Mae v5

8 (i) Asset Management Fee means the fee payable by the Company to the Managing Member pursuant to Section 5.06(c)(i). (j) Asset Management Services means all services necessary to ensure the efficient and lawful operation of the Company, as specified in greater detail in Section 5.06(a) hereof. (k) Asset Proceeds means any and all proceeds with respect to any or all of the Properties, including but not limited to, (i) rent payments, fees, premiums, charges, late fees, penalties, other fees and charges, proceeds of title insurance policies and other insurance policies and condemnation payments; (ii) any and all proceeds from sales or other dispositions of any or all of the Properties (including from exercise of the Company Wind-down Mechanism); (iii) any recoveries from guarantees of any kind or nature with respect to the Properties; (iv) any interest or other earnings accrued and paid on any of the items referred to in the foregoing clauses (i) through (iii) while held in the Collection Account or any other account; and (v) any interest earned on Working Capital Reserve Draws, Replacement Reserve Draws and Excess Advances while held in the Collection Account or any other account. (l) Asset Sale Restriction Period means the three year period ending on the third anniversary of the Closing Date. (m) Asset Sale Restrictions means the restrictions on dispositions of Properties set forth in Section 5.16 hereof. (n) Assignee means a Person to whom the Initial Member or Managing Member has assigned all or a portion of its Interest, but who does not become a Substituted Member. (o) Available Funds means the excess of (i) the sum of (A) Asset Proceeds, (B) Working Capital Reserve Draws deposited in the Collection Account pursuant to Section 5.07(e), (C) Replacement Reserve Draws deposited in the Collection Account pursuant to Section 5.08(d), (D) Excess Advances deposited in the Collection Account pursuant to Section 5.15(a), and (E) Working Capital Reserve Surplus Amounts transferred to the Collection Account pursuant to Section 5.07(d), if any over (ii) all Company Expenses paid from the Collection Account pursuant to Section 5.10(b). For the avoidance of doubt, any amount on deposit in the Collection Account on the last Business Day before a Distribution Date shall constitute Available Funds and shall be transferred to the Distribution Account as required by Section 4.04(c). In addition, any Working Capital Reserve Draws deposited directly into the Distribution Account pursuant to Section 5.07(e), Replacement Reserve Draws deposited directly into the Distribution Account pursuant to Section 5.08(d), and Excess Advances deposited directly into the Distribution Account pursuant to Section 5.15(a) shall constitute Available Funds. (p) Bid Security Deposit Agreement means that certain Security Deposit Agreement between the Initial Member and the Managing Member (or an Affiliate of the Managing Member) entered into in connection with the Managing Member s (or such Affiliate s) request to review the Properties and the terms of the transaction. (q) Business Day means any day other than (i) a Saturday or a Sunday, (ii) any day on which banking institutions located in the City of New York, New York are required or authorized by law or executive order to close, (iii) any day on which banking institutions located in the Fannie Mae v5

9 city or cities in which the office of the Custodian designated in the notice section of the Custodial Agreement is located are required or authorized by law or executive order to close, or (iv) any day on which the Custodian is closed. (r) Capital Account has the meaning set forth in Section 3.03 hereof. (s) Capital Contribution means the total value of cash and property contributed to the Company by each Member. Any reference in this Agreement to the Capital Contribution of a then-member shall include a Capital Contribution previously made by any prior Member for the Interest of such then-member. (t) Capital Expenditures means expenditures, either paid directly or through condominium or home owner association assessments, for capital improvements or maintenance of the condition of the Properties, including, but not limited to, (i) repair, replacement, and improvement of roofs, gutters and drainage, siding, framing and structure, insulation, windows, doors, foundations, systems (electrical, plumbing, HVAC, alarm, etc.) and systems components (water heaters, compressors, etc.), interior surfaces and structures (flooring, walls, ceiling, stairs), appliances, fixtures, cabinets and counters, external stairs and walkways/ramps, patios, porches, decks, driveways, garages, pools, and land grading, and (ii) the related cost of materials, labor, travel, permits, and insurance. (u) Capital Transaction means the financing, refinancing, sale or other disposition by the Company of all or part of any Property, or any other transaction affecting the Company that is not in the ordinary course of its business. (v) Cause has the meaning set forth in Section 6.03 hereof. (w) Certificate of Formation means that certain certificate of formation of the Company filed in the Filing Office on July 13, (x) Certification of Property Management Transition means a Certification of Property Management Transition in the form attached to the Property Management Transition Plan. (y) Closing Date means the effective date of this Agreement, as first written above. (z) Closing Fee means an amount equal to Three Hundred Seventy-Five Dollars ($375.00) per Property. (aa) Code means the Internal Revenue Code of 1986, as amended from time to time. (bb) Collateral means all right, title and interest of the Managing Member as a member (but none of its obligations) under this Agreement, including, without limitation, its rights in its Interest and in the property and assets of the Company; its interest in and to all capital of and other accounts maintained by the Company; its interest in and to all distributions, refunds of capital, repayments of loans or advances, fees, or payments made by the Company, whether in cash, securities or other property, and whether during the continuance of or on account of the liquidation of the Company, and allocations of Net Income and Net Loss by the Company and all of its Fannie Mae v5

10 right, title and interest in and to any certificate, instrument or other evidence of any of the foregoing, and together with any and all additions and accessions thereto and replacements, products and proceeds thereof, wherever located. (cc) Collection Account means a segregated trust account established and maintained by the Custodian pursuant to the Custodial Agreement, as described in greater detail in Section 4.04 hereof. (dd) Collection Date means, with respect to a given Collection Period, the last day of such Collection Period. (ee) Collection Period means, with respect to (i) the initial Distribution Date, the period commencing on the Closing Date and running through and including the last calendar day of the month following the Closing Date, and (ii) for any other Distribution Date, the prior calendar month. (ff) Company means SFR Florida LLC. (gg) Company Expenses means, for any given period, the sum of the following amounts properly allocable to such period: (i) Property Expenses; (ii) Capital Expenditures; (iii) Custodial Fees; (iv) Verification Fees; (v) Asset Management Fees; (vi) except as otherwise provided in Section 5.10(d), Real Property Transfer Taxes (incurred after the Closing Date upon the direct or indirect actual or deemed sale of a Property, or an interest therein); and (vii) appraisal fees designated as Company Expenses pursuant to Section 6.06(b) hereof. (hh) Company Wind-down Mechanism means the provisions for winding down and liquidating the Company set forth in Section 6.06 hereof. (ii) Confidential Information has the meaning set forth in Section 11.01(b) hereof. (jj) Consent of the Initial Member (whether used as a noun or a verb, and including the related forms Consents and Consented ) means the written consent or approval of the Initial Member to various actions hereunder. Except as otherwise expressly provided herein, the consent or approval of the Initial Member may be granted or withheld in the Initial Member s sole and absolute discretion. (kk) Conservator means FHFA or any successor agency serving in a similar capacity with respect to the Initial Member. (ll) Consumer Protection Laws means any Legal Requirements that grant special protections to consumers (including buyers of residential real property), including any Legal Requirements that require sellers of residential real property to disclose certain matters to purchasers thereof. (mm) Controlling Interest means: (i) with respect to any Person, the following: Fannie Mae v5

11 (A) if such Person is a general partnership or a joint venture, fifty-one percent (51%) of all general partnership or joint venture interests in such entity; (B) if such Person is a limited partnership: (1) any general partnership interest; or (2) fifty percent (50%) of all limited partnership interests in such Person; (C) partnership: if such entity is a limited liability company or a limited liability (1) fifty percent (50%) of all membership or other ownership interests in such Person; (2) the amount of membership or ownership interests sufficient to have the power to appoint or change any manager; or (3) the interest of any manager; (D) if such Person is a corporation (other than a publicly-held corporation) with only one class of voting stock, fifty-one percent (51%) of voting stock in such corporation; (E) if such Person is a corporation (other than a publicly-held corporation) with more than one class of voting stock, the amount of shares of voting stock sufficient to have the power to elect the majority of directors of such corporation; (F) if such Person is a trust (other than a land trust or a publicly-held trust), the trustee of such trust or the ability to remove, appoint or substitute the trustee of such trust (unless the trustee of such trust after such removal, appointment or substitution is a trustee identified in the trust agreement approved by the Consent of the Initial Member); or (ii) the power or right in any agreement (including provisions contained in the organizational and/or governing documents of such Person) to control or otherwise limit or modify, directly or indirectly, the management and operations of such Person, including the power to: (A) cause a change in or replacement of the individual or entity that controls the management and operations of such Person; or (B) [Intentionally Deleted]. Fannie Mae v5

12 (nn) Custodial Agreement means that certain Custodial and Paying Agency Agreement entered into as of the Closing Date between the Company and the Custodian, and any similar agreement entered into with a successor Custodian with the Consent of the Initial Member. (oo) Custodial Fees means all amounts payable to the Custodian pursuant to the Custodial Agreement. (pp) Custodian means Wells Fargo Bank, National Association, or any other qualified Person selected by the Managing Member with the Consent of the Initial Member in accordance with Section 6.08 to serve in its respective capacity as the custodian and paying agent for the Company. (qq) Depreciation means, for purposes of maintaining Capital Accounts for each taxable year or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable for federal income tax purposes with respect to Company assets, except that if the Gross Asset Value of an asset differs from its adjusted tax basis, the depreciation, amortization, or other cost recovery deduction shall be an amount that bears the same ratio to the Gross Asset Values of such assets as the federal income tax depreciation, amortization, or other cost recovery deductions for such assets for such taxable year or other period bears to the adjusted tax basis of such asset, appropriately adjusted for any adjustments to the tax basis of such asset which occurs from time to time. (rr) Direct Overhead means overhead costs of the Managing Member in employing persons to perform Asset Management Services and Property Management Services including, but not limited to, payroll taxes, unemployment insurance, worker s compensation insurance, medical insurance, life insurance, pension charges, office rent, office operating expenses and employee recruitment costs. (ss) Distribution Account means a segregated trust account established and maintained by the Custodian pursuant to the Custodial Agreement, as described in greater detail in Section 4.04 hereof. (tt) Distribution Date means, with respect to each Collection Period, the 25 th day of the month immediately following the month in which the Collection Period ended. If the 25 th day of a given month falls on a day that is not a Business Day, then the Distribution Date for such month shall be the next Business Day. The first Distribution Date shall be November 25, (uu) Economic Capital Account means, with respect to any Member, such Member s Capital Account as of the date of determination, after crediting to such Capital Account any amounts that the Member is deemed obligated to restore under Treasury Regulation section (vv) Economic Risk of Loss has the meaning specified in Treasury Regulation section (ww) Effective Gross Income means, with respect to any period, the gross rental income from rental of the Properties actually received by the Company during such period; provided, however, that for purposes of calculating Effective Gross Income for a given period, any pre- Fannie Mae v5

13 paid rents shall be treated as received in the period to which such rents relate rather than the period in which such rents were actually received. (xx) Entity means any general partnership, limited partnership, corporation, limited liability company, limited liability partnership, joint venture, trust, business trust, cooperative, association, or other entity. (yy) ERISA means the United States Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder from time to time. (zz) Event of Bankruptcy means, with respect to any Person, (i) the entry of a decree or order for relief by a court having jurisdiction in respect of such Person in a case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) of such Person or for any substantial part of its property, or the issuance of an order for the winding-up or liquidation of its affairs and, unless the decree or order for relief was entered on the application of such Person, the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days, or (ii) the commencement by such Person of a proceeding seeking any decree, order or appointment referred to in clause (i), the consent by such Person to any such decree, order or appointment or the taking of any action by such Person in furtherance of any of the foregoing, (iii) the commencement against such Person of an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or similar law, which has not been vacated, discharged or bonded within 60 consecutive days, (iv) the admission by such Person of his or its inability to pay his or its debts as they become due, or (v) such Person becoming insolvent by the taking of any action or the making of any transfer or otherwise, as insolvency is or may be defined pursuant to the federal bankruptcy laws (as now or hereafter constituted) or any other applicable federal or state bankruptcy, insolvency or similar law. (aaa) Event of Default has the meaning set forth in Section 9.01 hereof. (bbb) Excess Advance has the meaning set forth in Section 5.15 hereof. (ccc) Exhibit A means Exhibit A to this Agreement, which identifies the names, addresses, and Capital Contributions of the Members of the Company, as such Exhibit may be amended from time to time. (ddd) Exhibit B means Exhibit B to this Agreement, which identifies the Properties owned by the Company and their initial respective Gross Asset Values as of the Closing Date, as such Exhibit may be amended from time to time. (eee) Exhibit C means Exhibit C to this Agreement, which is the list of the financial reports that the Managing Member shall provide to the Initial Member, as such Exhibit may be amended from time to time. Fannie Mae v5

14 (fff) Exhibit D means Exhibit D to this Agreement, which is a schedule showing the adjusted tax basis and the fair market value of that portion of the Properties contributed by the Initial Member. (ggg) Exhibit E means Exhibit E to this Agreement, which is the Property Management Transition Plan. (hhh) Exhibit F means Exhibit F to this Agreement, which is the form of Security Agreement. Exhibit G means Exhibit G to this Agreement, which contains the Insurance Re- (iii) quirements. (jjj) FHFA means the Federal Housing Finance Agency. (kkk) Filing Office means the office of the Secretary of State of the State. (lll) GLB has the meaning set forth in Section 11.01(g) hereof. (mmm)governmental Authority means any court, board, agency, commission, office, or other authority of any nature whatsoever for any governmental unit (foreign, federal, state, county, district, municipal, city or otherwise). (nnn) Gross Asset Value means with respect to any asset, the asset s adjusted tax basis for federal income tax purposes, except as follows: (i) The initial Gross Asset Value of any Company asset at the time that it is contributed by a Member to the capital of the Company shall be an amount equal to the gross fair market value of such asset (without regard to the provisions of Code section 7701(g)), as determined by agreement of the Members. (ii) The Gross Asset Values of all Company assets may be adjusted, as reasonably determined by the Managing Member, to equal their respective fair market values taking Code section 7701(g) into account (A) in connection with the contribution of money or other property (other than a de minimis amount) to the Company by a new or existing Member as consideration for an Interest in the Company or (B) in connection with the liquidation of the Company or the distribution by the Company of more than a de minimis amount of Company assets or money to a retiring or continuing Member as consideration for an Interest in the Company or in any other circumstances set forth in Treasury Regulation section (b)(2)(iv)(f)(5) or in any successor Treasury Regulation. (iii) The Gross Asset Values of all Company assets shall be adjusted to reflect any adjustments to the adjusted basis of such assets pursuant to Code sections 734(b) or 743(b), but only to the extent that such adjustments are required to be taken into account in determining Capital Accounts pursuant to Treasury Regulation Section (b)(2)(iv)(m). Fannie Mae v5

15 (iv) If the Gross Asset Value of an asset has been determined or adjusted pursuant to subsections (i), (ii) or (iii) above, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset. The foregoing definition of Gross Asset Value shall not be construed as expanding the purpose of the Company, as specified in Section 2.04 hereof, or the authority of the Members as specified in Article V and Article VI hereof. (ooo) HUD means the United States Department of Housing and Urban Development. (ppp) Hypothetical Liquidation means a hypothetical liquidation of the Company in accordance with the terms of this Agreement that includes a sale of all of the assets of the Company for cash at prices equal to their then Gross Asset Values (as maintained by the Company for purposes of, and as maintained pursuant to, the capital account maintenance provisions of Treasury Regulation section (b)(2)(iv)). (qqq) Immediate Family means, with respect to any Person, his spouse, parents, parents-in-law, descendants, nephews, nieces, siblings, and the spouses of any of the foregoing. (rrr) Initial Member means Fannie Mae, a federally-chartered corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. 1716, et seq. or any Substituted Initial Member, in such Person s capacity as such. (sss) Initial Member Parties means, collectively, the Initial Member and each and all of its regulators, its Conservator, officers, directors, employees, shareholders, partners, Affiliates, subsidiaries, principals, parents, trustees, attorneys, joint venturers, related parties and entities, contractors, and agents (including its property manager(s)), each and all of the predecessors, legal representatives, heirs, successors, and assigns of any of the foregoing and their respective subsidiaries, parents, Affiliates, joint venturers, directors, officers, members, principals, investors, shareholders, trustees, designees, lenders, beneficiaries, employees, agents, brokers, property managers, asset managers, representatives, predecessors, successors, assigns, contractors, subcontractors, fiduciaries, insurers, heirs, estates, servants, other related parties and persons, and attorneys, past and present. For the avoidance of doubt, Initial Member Parties shall not include (i) the Managing Member, any of its Affiliates, or any agents or representatives of the foregoing, or (ii) the Company. (ttt) Initial Member Property means any Property or Unit, the management of which has not yet been transitioned from the Initial Member to the Company or its Property Manager. (uuu) Initial Operating Agreement means that certain Operating Agreement of the Company dated as of July 17, (vvv) Insurance Requirements means the types and amounts of insurance coverage required to be maintained by the Company, as detailed on Exhibit G. (www) Interest means the entire ownership interest of a Member in the Company at any particular time, including the right of such Member to any and all benefits to which a Member Fannie Mae v5

16 may be entitled under this Agreement and the obligations of such Member to comply with this Agreement. (xxx) IRR Return Cashflow Multiple means $26,032,001.32, which is the amount paid by the Managing Member to acquire its interest in the Company pursuant to Section 3.01(a) (including the Managing Member s share of the Working Capital Reserve Initial Deposit Amount and the Replacement Reserve Initial Deposit Amount), multiplied by two. (yyy) IRR Return Date means the date on which the IRR Return Event occurs. (zzz) IRR Return Event means receipt, by the Managing Member, of cash distributions that (i) cause the aggregate amount of cash distributions to the Managing Member pursuant to Section 4.02(a)(ix) to equal or exceed the IRR Return Cashflow Multiple, and (ii) cause the IRR Return Threshold to equal zero. (aaaa) IRR Return Threshold means, as of the Closing Date, $13,016,000.16, which is the amount paid by the Managing Member to acquire its interest in the Company pursuant to Section 3.01(a) (including the Managing Member s share of the Working Capital Reserve Initial Deposit Amount and the Replacement Reserve Initial Deposit Amount). On each subsequent Distribution Date, the IRR Return Threshold shall equal the IRR Return Threshold on the immediately preceding Distribution Date (or the Closing Date, in the case of the initial Distribution Date), increased by the IRR Return Threshold Increase Amount for the current Distribution Date, and decreased by the amount of cash distributions to the Managing Member on the current Distribution Date pursuant to Section 4.02(a)(ix). For the avoidance of doubt, the IRR Return Threshold cannot be less than zero. (bbbb) IRR Return Threshold Increase Amount means, as of a given Distribution Date, the IRR Return Threshold as of the immediately preceding Distribution Date (or the Closing Date, in the case of the initial Distribution Date) multiplied by the Monthly Adjusted Annualized Yield. (cccc) IRS means the Internal Revenue Service. (dddd) [Intentionally Deleted] (eeee) Late Plan Fee has the meaning set forth in Section 5.06(a)(ii)(C). (ffff) Legal Requirements means all applicable federal, regional, state, and local laws, rules, regulations, statutes, decisions, orders, judgments, directives, decrees, codes, guidelines, or ordinances of any governmental or regulatory authority, court, or arbitrator, whether now in force or as amended or enacted in the future. (gggg) Liquidated Damages means the amount of liquidated damages determined pursuant to Section 9.02(a)(iv) hereof. (hhhh) Managing Member means Pacifica L47 LLC, a Delaware limited liability company, or any Person who becomes a Managing Member in accordance herewith, in such Person s capacity as such. Fannie Mae v5

17 (iiii) Managing Member Expenses means all costs and expenses (other than Company Expenses), including, without limitation, costs and expenses related to administration, management, overhead, reporting and related expenses of the Company, the Managing Member, the Properties and the Managing Member s responsibilities hereunder, including: (i) all overhead and administrative costs and expenses of the Company and the Managing Member; (ii) all costs and expenses incurred in connection with Property Management Services, including, without limitation, (A) fees and reimbursements payable to any Property Managers (including, without limitation, any onboarding fees), (B) costs and expenses incurred in providing Property Management Services and (C) salaries, benefits and related costs and expenses (including payroll taxes) of employees of the Managing Member, its Affiliates or any other Person engaged in connection with the provision of Property Management Services; (iii) all costs and expenses incurred in connection with Asset Management Services, including, without limitation, (A) costs and expenses incurred in providing Asset Management Services and (B) salaries, benefits and related costs and expenses (including payroll taxes) of employees of the Managing Member, its Affiliates or any other Person engaged in connection with the provision of Asset Management Services; (iv) all costs and expenses (including any fees of the Accountants) related to the maintenance of books and records (including the retention and storage of such books and records), preparation and/or filing of financial reports and tax returns of the Company including, without limitation, the reports and returns required by Sections 10.01, and and Exhibit C; and (v) except as otherwise provided in Section 3.05(a)(iii), Violation Payments (which, as provided for in Section 5.06(c)(ii), will be offset against the Asset Management Fee). (jjjj) Maximum Aggregate Pre-Existing TIPA Obligation has the meaning set forth in Section 4.05(a) hereof. (kkkk) Member means any Managing Member or Initial Member. (llll) Member Nonrecourse Debt means any Nonrecourse Debt (or portion thereof) for which a Member or related Person (within the meaning of Treasury Regulation section (b)) bears (or is deemed to bear) the Economic Risk of Loss. (mmmm) Member Nonrecourse Deductions has the meaning set forth in Treasury Regulation section (i)(2) for partner nonrecourse deductions, and the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a taxable year shall be determined in accordance with the rules of Treasury Regulation section (i)(2) (taking into account Treasury Regulation section (k), if applicable). (nnnn) Minimum Gain means the amount determined by computing with respect to each Nonrecourse Debt the amount of gain, if any, that would be realized by the Company if it disposed of the asset securing such liability (in a taxable transaction) in full satisfaction thereof (and for no other consideration), and by then aggregating the amounts so computed. For purposes of determining the amount of such gain with respect to a liability, the adjusted basis for federal income tax purposes of the asset securing the liability shall be allocated among all the liabilities that the asset secures in the manner set forth in Treasury Regulation section (d)(2). Fannie Mae v5

18 (oooo) Minimum Replacement Reserve Monthly Deposit means, for a given Distribution Date, the product of (i) $50.00 and (ii) the total number of Units owned by the Company on the immediately preceding Collection Date. (pppp) Monthly Adjusted Annualized Yield means approximately %, based on the annualized yield threshold of 25%. The Monthly Adjusted Annualized Yield equals (1 + annualized yield threshold) 1/12 1 or ( ) 1/12 1. (qqqq) Mutual NDA means that certain Mutual Non-Disclosure Agreement between the Initial Member and the Managing Member (or an Affiliate of the Managing Member) entered into in connection with the Managing Member s (or such Affiliate s) request to review the Properties and the terms of the transaction. (rrrr) Net Income means the taxable income of the Company for federal income tax purposes for each taxable year, calculated without regard to those items that are specially allocated in accordance with the Regulatory Allocations; provided, however, that in determining taxable income (i) any tax-exempt income received by the Company shall be included as an item of gross income, (ii) any expenditure of the Company described (or treated under Treasury Regulation section (b)(2)(iv)(i) as described) in Section 705(a)(2)(B) of the Code shall be treated as a deductible expense and (iii) in lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing taxable income or loss, there shall be taken into account Depreciation for such calendar year or other period. (ssss) Net Loss means the net loss of the Company for federal income tax purposes for each taxable year, calculated without regard to those items that are specially allocated in accordance with the Regulatory Allocations; provided, however, that in determining net loss (i) any tax-exempt income received by the Company shall be included as an item of gross income, (ii) any expenditure of the Company described (or treated under Treasury Regulation section (b)(2)(iv)(i) as described) in Section 705(a)(2)(B) of the Code shall be treated as a deductible expense, and (iii) in lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing taxable income or loss, there shall be taken into account Depreciation for such calendar year or other period. (tttt) 1940 Act means the Investment Company Act of 1940, as amended. (uuuu) Nonrecourse Debt means any liability (or portion thereof) of the Company that is considered nonrecourse for purposes of Treasury Regulation section (without regard to whether such liability is a recourse liability under Treasury Regulation section (a)(1)). (vvvv) Nonrecourse Deductions has the meaning set forth in Treasury Regulation section (b)(1) (taking into account Treasury Regulation section (k), if applicable). (wwww) Nonrecourse Liability means any liability (or portion thereof) of the Company for which no Member or related Person (within the meaning of Treasury Regulation section (b)) bears (or is deemed to bear) the Economic Risk of Loss. Fannie Mae v5

19 Offering means the offering of the Managing Member Interest by the Ini- (xxxx) tial Member. (yyyy) Offering Expenses means reasonable legal, accounting, printing, travel, and other customary expenses directly paid by the Initial Member in connection with the Offering. (zzzz) Optional Replacement Reserve Monthly Deposit means, for a given Distribution Date, such amount in excess of the Minimum Replacement Reserve Monthly Deposit as may reasonably be determined by the Managing Member from time to time. (aaaaa) Organizational Expenses means reasonable legal, accounting, escrow, printing, travel, qualification, filing and other customary expenses directly paid by the Initial Member in connection with the organization of the Company. (bbbbb) Percentage Interest, as to any Member, means (i) ninety percent (90%) for the Initial Member and ten percent (10%) for the Managing Member until the occurrence of a Shift Threshold Event, (ii) commencing upon the occurrence of a Shift Threshold Event, fifty percent (50%) for the Initial Member and fifty percent (50%) for the Managing Member until the occurrence, if ever, of an IRR Return Event, and (iii) commencing upon the occurrence of an IRR Return Event, seventy percent (70%) for the Initial Member and thirty percent (30%) for the Managing Member. (ccccc) Percentage Interest Shift means the occurrence of a Shift Threshold Event or an IRR Return Event. (ddddd) (eeeee) Person means any individual or Entity. PM Portion has the meaning given in Section 5.06(c)(i) hereof. (fffff) Pre-Existing TIPA Account means a segregated trust account established and maintained by the Custodian, as specified in greater detail in Section 4.05 hereof. (ggggg) (hhhhh) Priority of Payments has the meaning set forth in Section 4.02(a) hereof. Privacy Laws has the meaning set forth in Section 11.01(g) hereof. (iiiii) Prohibited Person means any Person that (i) is not in compliance with all applicable anti-money laundering laws, including, without limitation, the USA Patriot Act and the laws administered by OFAC, including, without limitation, Executive Order 13224, (ii) is on the Specially Designated Nationals and Blocked Persons List maintained by OFAC, (iii) is debarred by any Governmental Authority or is otherwise identified by a Governmental Authority as a person with whom a U.S. Person is prohibited from transacting business, (iv) has been charged with or convicted of a felony, or (v) has received written notice from the Initial Member that it is presently in default of, or has defaulted on, any legal obligations to the Initial Member. Fannie Mae v5

20 (jjjjj) Property or Properties means one or more of the properties owned directly by the Company or indirectly through the Company s ownership of one or more tiers of subsidiary limited liability companies and identified in Exhibit B to this Agreement. (kkkkk) Property Expenses means the costs and expenses of the Company associated with the day-to-day operations of the Properties, including, without limitation: (i) costs of routine maintenance, repair and upkeep of the Properties; (ii) homeowner association fees and similar fees imposed on the Properties; (iii) real property taxes and other government assessments; (iv) costs of utilities, including applicable water, sewer, trash removal and comparable charges and assessments; (v) marketing and advertising costs incurred in connection with the rental of the Properties; (vi) premiums for fire and hazard insurance and for liability insurance coverage; (vii) reasonable legal fees incurred in connection with claims, disputes, assessments, casualties, losses, rent collection or liabilities involving one or more specific Properties (but which do not include all or substantially all of the Properties); (viii) the cost of any counseling services described in Section 5.14(m); and (ix) reasonable fees paid to real estate brokers for services rendered in connection with the leasing and sale of the Properties; provided, however, that no such fees shall be paid to the Managing Member or any Affiliate of the Managing Member without the Consent of the Initial Member in accordance with Section 5.03(a)(vi) hereof. Property Expenses shall also include costs incurred by the Managing Member in its capacity as Tax Matters Member and/or the Company, including reasonable attorneys fees, in connection with an audit of the Company s tax returns by the IRS or any state or local government taxing authority, and any resulting contest, as provided in Section 5.01 hereof. Finally, Property Expenses shall include all other costs and expenses incurred in selling Properties in accordance with Section 5.16, including reserves for contingent third-party liabilities directly related to such sales, to the extent deemed reasonable by the Managing Member in good faith. (lllll) Property Management Agreement means an agreement between the Managing Member and a Property Manager for the provision of Property Management Services. (mmmmm) Property Management Default has the meaning given in Section 5.06(e). (nnnnn) Property Management Services means all services necessary to ensure the efficient, safe, and lawful operation and maintenance of the Properties, as specified in greater detail in Section 5.06(b). (ooooo) Property Management Transition Fee has the meaning set forth in the Property Management Transition Plan. (ppppp) Property Management Transition Period means the period commencing on the Closing Date and ending on the last day of the second (2nd) full month following the Closing Date. (qqqqq) Property Management Transition Plan means the plan for transitioning management of the Properties to the Managing Member during the time period following the Closing Date, which is attached to this Agreement as Exhibit E. Fannie Mae v5

21 (rrrrr) Property Manager means a Person to whom the obligation to provide Property Management Services to the Company has been delegated pursuant to a Property Management Agreement. (sssss) Property Transition means the process of transitioning the management of the Properties from the Initial Member to the Company or its Property Manager pursuant to the Property Management Transition Plan. (ttttt) 11.01(g) hereof. Protected Personal Information has the meaning set forth in Section (uuuuu) Real Property Transfer Tax means any tax imposed by a state, city, county, or other local jurisdiction upon the direct or indirect actual or deemed transfer of an interest in real property including, without limitation, deed recordation tax, real estate transfer tax, and tax upon the transfer of a beneficial or controlling interest in an entity owning real property. Regulatory Allocations has the meaning set forth in Section 4.01(i) hereof. (vvvvv) (wwwww) Replacement Reserve means a segregated trust account established and maintained by the Custodian, as specified in greater detail in Section 5.08(a) hereof. Replacement Reserve Balance means the amount on deposit in the Re- (xxxxx) placement Reserve. (yyyyy) Replacement Reserve Draws means amounts transferred from the Replacement Reserve to the Collection Account pursuant to Section 5.08(d). (zzzzz) Replacement Reserve Initial Deposit Amount means the aggregate amount contributed by the Members to the Replacement Reserve on the Closing Date, as specified in greater detail in Section 5.08(a)(i) hereof. (aaaaaa) Replacement Reserve Monthly Deposit means, for a given Distribution Date, the sum of the Minimum Replacement Reserve Monthly Deposit and the Optional Replacement Reserve Monthly Deposit. (bbbbbb) Replacement Reserve Target means, at various times, the amount required to be kept on deposit in the Replacement Reserve, as specified in greater detail in Section 5.08(c) hereof. (cccccc) Security Agreement means that certain Security Agreement dated of even date herewith, as the same may be amended, restated, amended and restated, or otherwise modified from time to time in accordance with its terms, the form of which is attached hereto as Exhibit F, pursuant to which the Managing Member has granted a security interest in the Collateral to the Initial Member. (dddddd) Security Deposit Account means a segregated trust account established and maintained by the Custodian, as specified in greater detail in Section 5.09 hereof. Fannie Mae v5

22 (eeeeee) Shift Threshold means $49,313,402.64, which is the amount paid by the Managing Member to acquire its Interest in the Company pursuant to Section 3.01(a) (excluding the Managing Member s share of the Working Capital Reserve Initial Deposit Amount and the Replacement Reserve Initial Deposit Amount), multiplied by four (ffffff) Shift Threshold Date means the date on which the Shift Threshold Event occurs. (gggggg) Shift Threshold Event means receipt, by the Initial Member, of aggregate cash distributions pursuant to Section 4.02(a)(ix) equaling the Shift Threshold. (hhhhhh) State means the State of Delaware. (iiiiii) Sub-Portfolio means a subset of the Properties located within a specific geographical region, as reflected on Exhibit B. (jjjjjj) Substituted Initial Member means any Person who is admitted to the Company as a successor to all or a portion of the Initial Member s Interest pursuant to Section (kkkkkk) Substituted Managing Member means any Person who is admitted to the Company as a successor to all or a portion of the Managing Member s Interest pursuant to Section 8.01(a). (llllll) Substituted Member means any Substituted Initial Member or Substituted Managing Member. (mmmmmm) Target Balance means, with respect to any Member as of the close of any period for which allocations are made under Article IV, the net amount such Member would receive in a Hypothetical Liquidation of the Company as of the close of such period. (nnnnnn) Tax Counsel means Pillsbury Winthrop Shaw Pittman LLP or another law firm selected by the Managing Member with the Consent of the Initial Member. (oooooo) Tax Matters Member means the Managing Member. (pppppp) Temporary Investments means readily marketable United States government securities, securities issued or fully guaranteed by United States government agencies, certificates of deposit and time or demand deposits in, or repurchase agreements constituting obligations of, commercial banks with deposits insured by the Federal Deposit Insurance Corporation and having a combined capital and surplus of not less than $100,000,000 or commercial paper rated P-1 by Moody s Investors Service, Inc., or investment grade rated commercial paper or tax exempt notes or bonds rated MIG-2 or better by Moody s Investors Service, Inc. or securities of public investment companies registered with the Securities and Exchange Commission with assets in excess of $100,000,000, substantially all of the assets of which are invested in substantially the same type of investments as any of the foregoing. (qqqqqq) Transitioned Property means any Property or Unit, the management of which has been transitioned from the Initial Member to the Company or its Property Manager. Fannie Mae v5

23 (rrrrrr) Treasury Regulations means temporary and final regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). (ssssss) Unit means a residential rental unit contained within a Property that, under applicable law, can be rented to tenants but cannot be transferred by a conveyance of fee simple title separately from the Property in which such unit is located. By way of example, each condominium unit within a duplex, triplex, or 4-plex shall constitute a Property hereunder rather than a Unit. Conversely, each rental unit in a duplex, triplex, or 4-plex that is not separately transferrable shall constitute a Unit. (tttttt) U.S. Person means any United States citizen, any permanent resident alien, any entity organized under the laws of the United States (including foreign branches), or any person in the United States. (uuuuuu) Verification Agent means Situs Real LLC, or any other Person as shall be selected from time to time by the Initial Member in its sole and absolute discretion pursuant to Section (vvvvvv) Verification Agent Agreement means that certain Verification Agent Agreement between the Company and the Verification Agent dated as of the Closing Date, or such successor agreement as the Initial Member may direct to be executed between the Company and the Verification Agent. (wwwwww) Verification Audit has the meaning set forth in Section 6.05 hereof. (xxxxxx) Verification Fees means fees payable to the Verification Agent pursuant to the Verification Agent Agreement. (yyyyyy) Violation Payments means any fines, penalties, late fees, additions to tax and interest on any of the foregoing that are attributable to (i) the failure of the Company, the Managing Member and/or the Properties to be in compliance with all applicable laws including, without limitation, environmental laws and building, health and safety codes, (ii) the failure to make any required filings, or obtain required permits or licenses, on a timely basis, and/or (iii) the failure to properly maintain any of the Properties in accordance with the standards set forth in Section 5.06 and applicable building, health and safety codes. (zzzzzz) Watchlist Properties means those Properties which are listed in the Watchlist Report that is included in the financial reports prepared in accordance with Exhibit C. (aaaaaaa) Withdrawal (including the forms Withdraw, Withdrawing, and Withdrawn) means, as to a Managing Member, the occurrence of Event of Bankruptcy, dissolution, liquidation, or voluntary or involuntary withdrawal, removal or retirement from the Company for any reason, including whenever a Managing Member may no longer continue as a Managing Member by law or pursuant to any terms of this Agreement. (bbbbbbb) Working Capital Reserve means a segregated trust account established and maintained by the Custodian, as specified in greater detail in Section 5.07(a) hereof. Fannie Mae v5

24 (ccccccc) Working Capital Reserve Balance means the amount on deposit in the Working Capital Reserve. (ddddddd) Working Capital Reserve Draws means amounts transferred from the Working Capital Reserve to the Collection Account pursuant to Section 5.07(e). (eeeeeee) Working Capital Reserve Initial Deposit Amount means the aggregate amount contributed by the Members to the Working Capital Reserve on the Closing Date, as specified in greater detail in Section 5.07(a) hereof. (fffffff)working Capital Reserve Monthly Deposit means the amount required each month to replenish the Working Capital Reserve Balance to equal the Working Capital Reserve Target, as specified in greater detail in Section 5.07(a)(ii) hereof. (ggggggg) Working Capital Reserve Surplus Amount means the amount by which, as of a given Collection Date, the Working Capital Reserve Balance exceeds the Working Capital Reserve Target Amount. (hhhhhhh) Working Capital Reserve Target means, at various times, the amount required to be kept on deposit in the Working Capital Reserve, as specified in greater detail in Section 5.07(c) hereof Name; Continuation Article II Name and Business The name of the Company is SFR Florida LLC. Pursuant to the provisions of the Act and this Agreement, the parties hereto hereby continue the Company on the terms and conditions set forth herein. To the extent that the laws of other jurisdictions shall be applicable, the Company is intended to be qualified as a foreign limited liability company under such laws Company Offices and Resident Agent (a) The principal office of the Company is the office of the Managing Member identified in Exhibit A. (b) The registered office of the Company in the State is 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware The registered agent of the Company in the State for service of process is The Corporation Trust Company Names and Addresses of Members The names and business addresses of the Members shall be set forth in Exhibit A Purpose The purpose of the Company is to invest in those Properties identified in Exhibit B at- Fannie Mae v5

25 tached hereto and made a part hereof, and to hold, rent, sell, dispose of and otherwise deal with such Properties in accordance herewith. The business of the Company shall include participation in such activities as are related or incidental to the above. The Company shall not engage in any other business or activity Term and Dissolution The Company shall continue in full force and effect until December 31 of the year in which the 50 th anniversary of the effective date of this Agreement shall occur, except that the Company shall be dissolved and its assets liquidated prior to such date upon: (i) the sale or other disposition of all or substantially all of the assets of the Company in accordance herewith; (ii) the election to dissolve the Company made in writing by the Managing Member with the Consent of the Initial Member; (iii) the election to dissolve the Company by the Initial Member in accordance with the provisions of Section 6.06(a) hereof; (iv) the entry of a final decree of judicial dissolution of the Company under Section of the LLC Act; (v) at any time there are no members of the Company unless the Company is continued without dissolution in accordance with the Act; or (vi) by the Managing Member pursuant to Section 6.06(c). Upon dissolution of the Company in accordance herewith, the Managing Member (or, for purposes of this paragraph, its trustees, receivers or successors) shall promptly liquidate the Company s assets and apply and distribute the proceeds thereof in accordance with Section The Company shall not make distributions of its assets in kind, other than cash or purchase money indebtedness arising from the sale of assets, except as otherwise provided in this Agreement. Upon the dissolution and completion of the winding up of the Company in accordance with the Act, the Managing Member shall cause the Certificate of Formation of the Company to be cancelled in the manner required by the Act. The Company shall terminate when (i) all of the assets of the Company, after payment of or due provision for all debts, liabilities and obligations of the Company shall have been distributed to the Members in the manner provided for in this Agreement and (ii) the Certificate of Formation of the Company shall have been canceled in the manner required by the Act. Article III Capital 3.01 Admission and Contribution of Managing Member; Closing Deliverables (a) The Managing Member is hereby admitted to the Company in exchange for an aggregate payment of $13,016, Of this amount, $12,328, will be paid by the Managing Member to the Initial Member, which will be treated for federal income tax purposes as (i) an acquisition of an undivided interest in the Properties followed by (ii) a Capital Contribution of such interest in the Properties with a value and basis in the foregoing amount. The remaining amount of $687, shall be paid by the Managing Member as a Capital Contribution to the Company, of which amount $575, shall be the Managing Member s share of the Working Capital Reserve Initial Deposit Amount and $112, shall be the Managing Member s share of the Replacement Reserve Initial Deposit Amount. (b) Concurrently with the execution hereof, Managing Member will deliver to Initial Member such documents and/or materials (including legal opinions) as may be reasonably required by Initial Member. Fannie Mae v5

26 3.02 Contribution of Initial Member Fannie Mae shall continue as the Initial Member of the Company. Simultaneously with its admission, the Initial Member has made a Capital Contribution of the portion of the Properties not treated pursuant to Section 3.01(a) as sold to and then contributed by the Managing Member. For purposes of Code section 704(c), the Company s adjusted tax basis in, and the Gross Asset Value of, that portion of each of the Properties contributed by the Initial Member as of the Closing Date is set forth in Exhibit D attached hereto and made a part hereof. In addition, on the date hereof, the Initial Member shall make an additional Capital Contribution to the Company in the amount of $961,865.00, of which amount $575, shall be the Initial Member s share of the Working Capital Reserve Initial Deposit Amount, $112, shall be the Initial Member s share of the Replacement Reserve Initial Deposit Amount, and $274, shall be the Initial Member s contribution of the Maximum Aggregate Pre-Existing TIPA Obligation Capital Accounts (a) An individual capital account (a Capital Account ) shall be established and maintained by the Company on behalf of each Member in accordance with Treasury Regulation section (b)(2)(iv). The original Capital Account established for any Substituted Member shall be in the same amount as, and shall replace, the Capital Account of the Member that such Substituted Member succeeds, and, for the purposes of this Agreement, such Substituted Member shall be deemed to have made the Capital Contribution, to the extent actually paid in, of the Member that such Substituted Member succeeds. To the extent a Substituted Member receives less than 100% of the Interest of a Member it succeeds, the original Capital Account of such Substituted Member and its Capital Contribution shall be in proportion to the Interest it receives and the Capital Account of the Member who retains a partial Interest and its Capital Contribution shall continue, and not be replaced, in proportion to the Interest it retains. (b) A Member s Capital Account shall include generally, without limitation, the Capital Contribution of the Member (as of any particular date), (1) increased by the Member s distributive share of Net Income, and (2) decreased by the Member s distributive share of Net Loss and distributions to such Member. For purposes of the foregoing, distributions of property to a Member shall result in a decrease in such Member s Capital Account equal to the Gross Asset Value, as of the date of distribution, of such property (less the amount of indebtedness, if any, of the Company which is assumed by such Member and/or the amount of indebtedness, if any, to which such property is subject, as of the date of distribution, subject to the provisions of Code section 7701(g)) distributed to such Member. (c) In the event that the Capital Contribution of a Member consists of property having a Gross Asset Value that differs from the contributed property s adjusted tax basis, or in the event the Gross Asset Values of Company assets are adjusted under and pursuant to clause (ii) of the definition of Gross Asset Value, the Members Capital Accounts shall be adjusted thereafter in accordance with the provisions of Treasury Regulation section (b)(2)(iv)(g) with respect to allocations to the Members of Depreciation, gain and/or loss, as computed for book purposes. Fannie Mae v5

27 (d) In the event that the provisions of Treasury Regulation section (b)(2)(iv) fail to provide guidance on how adjustments to the Capital Accounts of the Members should be made to reflect particular adjustments on the books of the Company, then such Capital Account adjustments shall be made by the Managing Member in its reasonable determination (with the Consent of the Initial Member), with the review and concurrence of the Accountants and/or Tax Counsel, in a manner that (1) maintains equality between (A) the aggregate Capital Accounts of the Members and (B) the amount of Company capital reflected on the Company s balance sheet, as computed for book purposes in accordance with Treasury Regulation section (b), (2) is consistent with the underlying economic arrangement among the Members, and (3) is based, wherever practicable, on federal tax accounting principles Interest; Return of Capital No Member shall be paid interest on any Capital Contribution. The Company shall not redeem or repurchase the Interest of the Managing Member or of the Initial Member, and no Member shall have the right to withdraw its Capital Contribution or to demand and receive property of the Company in return for its Capital Contribution, except as may be specifically provided herein or required by applicable law. If the Company does not promptly use any Capital Contribution (or portion thereof) of a Member that is made in cash for a purpose authorized hereunder, the Company shall either hold such amounts in cash or invest such amounts in Temporary Investments, pending use for such authorized purposes Prorations; Repurchase Properties; Title Insurance (a) Amounts related to the Properties will be prorated for the calendar month of the Closing Date as follows: (i) The Initial Member and the Company will prorate for rent and for condominium or planned unit development or similar community assessments, municipal water charges, and real estate taxes (and not for other costs and expenses due on or incurred in connection with the ownership or operation of any Property regardless of when incurred) on a per diem basis effective as of 11:59 p.m. on the day immediately preceding the Closing Date, if possible, or, alternatively and as deemed reasonably necessary by the Initial Member, as of a date occurring within five (5) days before or after the day immediately preceding the Closing Date. The Initial Member will be solely entitled to rent accrued, and responsible for condominium or planned unit development or similar community assessments, municipal water charges and real estate taxes incurred prior to the Closing Date, and the Company will be solely entitled to rent accrued, and responsible for condominium or planned unit development or similar community assessments, municipal water charges and real estate taxes incurred from and after the Closing Date. The Company will be responsible for any municipal water and sewer charges, utility charges, common area charges, condominium or planned unit development or similar community assessments, co-operative fees, and maintenance fees, whether incurred prior to or from and after the Closing Date, except to the extent prorated hereunder. (ii) The Initial Member will not be responsible for any taxes, penalties, or interest assessed or due as a result of retroactive, postponed, or additional taxes resulting Fannie Mae v5

28 from any change in use of, or construction on, or improvement to any Property, or an adjustment in the value of any Property. (iii) The Initial Member will pay all Violation Payments with respect to which the Initial Member has received notice prior to the Closing Date, and the Managing Member will pay all other Violation Payments. (iv) Without limiting the foregoing, the Company will be responsible for the satisfaction, at its sole cost and expense, of any requirements imposed by or on behalf of a condominium, planned unit development, homeowners association or similar community association in connection with this transaction (including, without limitation, the payment of any transfer fees). (v) Delinquent rent and any associated late fees due to the Company that are owed by tenants occupying Properties on the Closing Date (collectively, Delinquent Rent ) will not be prorated, but will be allocated between the Initial Member and the Company as follows: (x) the Initial Member will be entitled to retain Delinquent Rent received after the Closing Date with respect to an Initial Member Property, and (y) the Company will be entitled to retain Delinquent Rent received with respect to a Transitioned Property. (b) In certain limited cases, the Initial Member may be required to repurchase a Property from the Company to satisfy certain third party claims that have not been identified by the Closing Date. In the event that the Initial Member determines, in its sole and absolute discretion, that it must repurchase a Property from the Company, the Company shall sell said Property to the Initial Member for the Property s Gross Asset Value, as set forth in Exhibit B as of the Closing Date. The Initial Member s right to repurchase any Property shall terminate on the second anniversary of the Closing Date. Upon receipt of written notice from the Initial Member of a repurchase request, the Managing Member shall take all actions required and execute on behalf of Company any documentation necessary to deliver the subject Property to the Initial Member without any encumbrances to title, other than those encumbrances to title existing on the Closing Date. (c) The cost of owner s title insurance policies insuring the Company s interests in the Properties shall be shared equally by the Members Allocations Article IV Allocations of Net Income and Net Loss; Distributions (a) Net Income and Net Loss. Except as otherwise specifically provided in Sections 4.01(b) through 4.01(i), and subject to Section 4.01(j) and the other provisions of this Article IV, for each taxable year or portion thereof Net Income and Net Loss shall be allocated to the Members in such ratio or ratios as may be required to cause the balance of each Member s Economic Capital Account to equal, as nearly as possible, such Member s Target Balance. Fannie Mae v5

29 (b) Allocations in the Year of Dissolution and Termination. In the taxable year in which the Company is dissolved and terminated, if the Members Capital Account balances do not equal their respective Target Balances, then individual items of Company gross income and loss shall be allocated for such taxable year and, to the extent permitted by the Treasury Regulations, prior taxable years, to cause each Member s Capital Account balance to equal, as nearly as possible, such Member s Target Balance. (c) Limitation on Allocations of Net Loss. Notwithstanding the foregoing provisions of Section 4.01(a), in no event shall any Net Loss be allocated to a Member to the extent that such allocation would cause or increase, as of the end of the Company taxable year, an Adjusted Capital Account Deficit in such Member s Capital Account. Any Net Loss that is not allocated to a Member by virtue of the application of this Section 4.01(c) shall be allocated to the remaining Member. (d) Nonrecourse Deductions. Nonrecourse Deductions for any taxable year shall be allocated to the Members in accordance with their Percentage Interests. (e) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any taxable year shall be specially allocated to the Member or Members that bear the Economic Risk of Loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulation sections (b)(4) and (i). (f) Minimum Gain Chargeback. Notwithstanding any other provision of this Section 4.01, if there is a net decrease in the Company s Minimum Gain attributable to Nonrecourse Liabilities during any taxable year, each Member shall be specially allocated a pro rata portion of each of the Company s items of income and gain for such year (and, if necessary for subsequent years) in proportion to, and to the extent of, an amount equal to such Member s share of the net decrease in such Minimum Gain during such taxable year as determined in accordance with the provisions of Treasury Regulation section (g)(2). In the event that such net decrease in the Company s Minimum Gain occurs in connection with the disposition of one or more Properties securing a Nonrecourse Liability, then any items of Company income or gain allocated in accordance with the previous sentence shall first consist of gain recognized by the Company as a result of such disposition. It is the intent that the allocations provided in this Section 4.01(f) shall be determined in accordance with and only to the extent required by Treasury Regulation section (f) and (j)(2)(i). (g) Member Minimum Gain Chargeback. Notwithstanding any other provision of this Section 4.01, if there is a net decrease in the amount of the Company s Minimum Gain during any taxable year with respect to a Member Nonrecourse Debt, the Member bearing the Economic Risk of Loss with respect to such Member Nonrecourse Debt shall be specially allocated a pro rata portion of each of the Company s items of income and gain for such taxable year (and, if necessary, for subsequent years) in proportion to, and to the extent of the amount of such Member s share of the net decrease in such Minimum Gain during such taxable year as determined in accordance with the provisions of Treasury Regulation section (i)(4). In the event that such net decrease in the Company s Minimum Gain occurs in connection with the disposition of one or more Properties securing a Member Nonrecourse Debt, then any items of Company in- Fannie Mae v5

30 come or gain allocated in accordance with the previous sentence shall first consist of gain recognized by the Company as a result of such disposition. It is the intent that the allocations provided in this Section 4.01(g) shall be determined in accordance with and only to the extent required by the provisions of Treasury Regulation section (i) and (j)(2)(ii). (h) Qualified Income Offset. In the event a Member unexpectedly receives in any taxable year any adjustments, allocations, or distributions described in Treasury Regulation section (b)(2)(ii)(d)(4), (5), or (6) that cause or increase an Adjusted Capital Account Deficit of such Member, items of Company income and gain shall be specially allocated to such Member in such taxable year (and, if necessary in subsequent taxable years), in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible. (i) Curative Allocations. The allocations set forth in Sections 4.01(c), 4.01(d), 4.01(e), 4.01(f), 4.01(g) and 4.01(h) hereof (the Regulatory Allocations ) are intended to comply with certain requirements of Treasury Regulation sections (b) and It is the intent of the Members that, to the extent possible, all Regulatory Allocations will be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, deduction, or loss pursuant to this Section 4.01(i). Accordingly, notwithstanding any other provisions of this Section 4.01 (other than the Regulatory Allocations), the Managing Member shall make such offsetting special allocations of Company income, gain, deduction, or loss in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations had not occurred. In exercising its discretion under this Section 4.01(i), the Managing Member shall take into account any future Regulatory Allocations under Sections 4.01(f) and 4.01(g) hereof that, although not yet made, are likely to offset Regulatory Allocations made under Sections 4.01(d) and 4.01(e). (j) Compliance with Code Section 704(b). The allocation provisions contained in this Article IV are intended to comply with Code Section 704(b) and the Treasury Regulation promulgated thereunder, and shall be interpreted and applied in a manner consistent therewith. (k) Allocation of Tax Items. The respective interests of the Members in the Net Income, Net Loss, or items thereof shall remain as set forth above unless changed by amendment to this Agreement or by an assignment of a Company Interest authorized by the terms of this Agreement. Except as otherwise provided herein, for tax purposes all items of income, gain, loss, deduction, or credit shall be allocated to the Members in the same manner as are Net Income and Net Loss from operations; provided, however, that with respect to property contributed to the Company by a Member, such items shall be shared among the Members so as to take into account the variation between the adjusted tax basis of such property and its Gross Asset Value at the time of contribution in accordance with Code section 704(c) and utilizing the traditional method as set forth in Treasury Regulation (b). (l) Excess Nonrecourse Liabilities. For purposes of allocating Company Nonrecourse Liabilities among the Members pursuant to Treasury Regulation section (a)(3), each Member s interest in Company profits shall equal its Percentage Interest. Fannie Mae v5

31 (m) Effect of Assignment or Transfer. In the event of an assignment or a transfer of a Member s Interest to an Assignee or a Substituted Member, as the case may be: (i) Net Income or Net Loss for the taxable year in which the assignment or transfer occurs shall be apportioned between the assigning Member and the Assignee or Substituted Member, as the case may be, on a pro rata basis according to the number of days (as of the end of each day) that each was recognized as the holder of such Interest, and (ii) gain or loss from Capital Transactions shall be allocated to the assigning Member or the Assignee or Substituted Member, as the case may be, that held such Interest as of the date of the Capital Transaction giving rise to such gain or loss Cash Distributions Prior to Dissolution (a) On each Distribution Date, the Managing Member shall cause all Available Funds on deposit in the Distribution Account to be paid, applied or distributed by the Custodian in the following priority (the Priority of Payments ): (i) To pay Custodial Fees; (ii) To pay the remaining Property Expenses, Capital Expenditures, Real Property Transfer Taxes incurred after the Closing Date upon the direct or indirect actual or deemed sale of a Property, or an interest therein (except as otherwise provided in Section 5.10(d)), and appraisal fees designated as Company Expenses pursuant to Section 6.06(b), funded from Working Capital Reserve Draws and Excess Advances; (iii) (iv) To pay Verification Fees; To pay the Late Plan Fee; (v) To pay the Asset Management Fee in accordance with Section 5.06(c) hereof (including amounts accrued from prior Distribution Dates); (vi) To deposit the Replacement Reserve Monthly Deposit in the Replacement Reserve Account; (vii) To deposit the Working Capital Reserve Monthly Deposit in the Working Capital Reserve; (viii) To reimburse the Managing Member for the amount of any unreimbursed Excess Advances; and (ix) To the Members with respect to their Interests, on a pro rata basis in proportion to their respective Percentage Interests as of the corresponding Distribution Date. If distributions of Available Funds to the Members pursuant to Section 4.02(a)(ix) on a given Distribution Date are of an amount sufficient to cause a Percentage Interest Shift, such that the Members Percentage Interests change on such Distribution Date, then Available Funds up to the amount causing the Percentage Interest Shift shall be distributed in accordance with the Percentage Interests in effect prior to such Percentage Interest Shift, and any remaining Available Funds shall be distributed in accordance with the Percentage Interests taking effect upon the occurrence Fannie Mae v5

32 of such Percentage Interest Shift. (b) The foregoing notwithstanding, if there are any unpaid Liquidated Damages on a Distribution Date, then any AM Portion remaining after the application of the Violation Payment offset provisions in Section 5.06(c)(ii), and the portion of Available Funds in the Distribution Account otherwise payable or distributable to the Managing Member pursuant to Sections 4.02(a)(viii) and 4.02(a)(ix), up to the amount of the unpaid Liquidated Damages, shall instead be paid directly to the Initial Member as Liquidated Damages Termination Distributions (a) Cash Distributions. Upon dissolution and winding up of the Company, after payment of, or adequate provision for, the debts and obligations of the Company (including, without limitation, any outstanding Excess Advances), in accordance with the Act, the remaining assets of the Company shall be distributed to the Members by the Custodian in accordance with the positive balances in their Capital Accounts (after taking into account all Capital Account adjustments for the Company taxable year). In the event that a Member has a negative balance in its Capital Account following the liquidation of the Company or its Interest in the Company (after taking into account all Capital Account adjustments for the Company taxable year in which the liquidation occurs), such Member shall have no obligation to restore such deficit to the Company. (b) Distributions in Kind. With respect to assets distributed in kind to the Members in liquidation or otherwise, (i) any unrealized appreciation or unrealized depreciation in the values of such assets shall be deemed to be gains and losses realized by the Company immediately prior to the liquidation or other distribution event; and (ii) such gains and losses shall be allocated to the Members in accordance with Section 4.01(a), and any property so distributed shall be treated as a distribution of an amount in cash equal to the excess of such fair market value over the outstanding principal balance of and accrued interest on any debt by which the property is encumbered. For the purposes of this Section 4.03(b), unrealized appreciation or unrealized depreciation shall mean the difference between the fair market value of such assets, taking into account the fair market value of the associated financing (but subject to Section 7701(g) of the Code) and the Company s adjusted tax basis for such assets as determined under Treasury Regulation section (b). This Section 4.03(b) is intended merely to provide a rule for allocating unrealized gains and losses upon liquidation or other distribution event, and nothing contained in this Section 4.03(b) or elsewhere herein is intended to treat or cause such distributions to be treated as sales for value or to authorize such distributions if not otherwise permitted Collection Account and Distribution Account (a) On or before the Closing Date, the Managing Member shall cause the Custodian to establish and maintain the Collection Account and the Distribution Account. (b) The Collection Account shall be used to hold the following types of Company funds (each a Subtype ) before such funds are applied, as provided in this Agreement: (i) Asset Proceeds; (ii) Working Capital Reserve Draws; (iii) Replacement Reserve Draws; and (iv) Excess Advances made to fund Property Expenses, Real Property Transfer Taxes incurred Fannie Mae v5

33 after the Closing Date upon the direct or indirect actual or deemed sale of a Property, or an interest therein (except as otherwise provided in Section 5.10(d)), and appraisal fees designated as Company Expenses pursuant to Section 6.06(b), Capital Expenditures, Custodial Fees, and Verification Fees. The Managing Member shall cause the Custodian to separately track and account for each Subtype on deposit in the Collection Account. Any interest or other earnings on a Subtype of funds on deposit in the Collection Account shall be added to such Subtype, with the sole exception of interest or other earnings on Excess Advances on deposit in the Collection Account, which shall be treated as additional Asset Proceeds. If the Managing Member comes into possession of any amounts required to be held in the Collection Account, it shall promptly transfer such amounts to the Custodian for deposit into the Collection Account. (c) The Distribution Account shall be used to hold Available Funds prior to their distribution pursuant to Section On the last Business Day before each Distribution Date, the Managing Member shall cause all Available Funds on deposit in the Collection Account to be transferred to the Distribution Account Pre-Existing Tenant Incentive Payment Amounts (a) On or before the Closing Date, the Managing Member shall cause the Custodian to establish and maintain a segregated trust account (the Pre-Existing TIPA Account ) to hold amounts relating to the Initial Member s relocation assistance obligations ( Pre-Existing TIPA Obligations ) under Property leases entered into prior to the Closing Date. On the Closing Date, the Initial Member shall cause an amount (the Maximum Aggregate Pre-Existing TIPA Obligation ) equal to the aggregate Pre-Existing TIPA Obligations to be deposited in the Pre- Existing TIPA Account. The Pre-Existing TIPA Account, if invested, may only be invested in Temporary Investments. All interest and earnings on amounts on deposit in the Pre-Existing TI- PA Account shall be added to the Pre-Existing TIPA Account. (b) If the Members agree that there was a shortfall in the funding of the Pre-Existing TIPA Account on the Closing Date because the amount determined prior to the Closing Date to be the Maximum Aggregate Pre-Existing TIPA Obligation was less than the actual aggregate of the Pre-Existing TIPA Obligations on the Closing Date, then the Initial Member shall cause additional funds to be deposited into the Pre-Existing TIPA Account in the amount of such shortfall; provided, however, that the Initial Member shall not be required to fund such shortfall until the Managing Member notifies the Initial Member that the balance in the Pre-Existing TIPA Account is insufficient to meet Pre-Existing TIPA Obligations that are currently payable, and then the Initial Member shall be required to fund only such portion of the shortfall as needed to meet Pre-Existing TIPA Obligations in the then-current month and the succeeding three month period. (c) Amounts on deposit in the Pre-Existing TIPA Account shall be used to satisfy Pre-Existing TIPA Obligations as and when such obligations come due. Amounts corresponding to tenancies that are continued after the Closing Date shall remain on deposit in the Pre-Existing TIPA Account. Any amount in the Pre-Existing TIPA Account corresponding to a tenancy that is terminated shall, unless paid to or on behalf of the tenant, be returned to the Initial Member, together with any accrued interest, and shall not be subject to the Priority of Payments contained in Section 4.02(a). Fannie Mae v5

34 (d) Tenant relocation assistance and other tenant incentive payment obligations arising under tenancies commencing on or after the Closing Date, as well as new or increased assistance or obligations to tenants whose tenancies commenced prior to the Closing Date, shall be treated as Property Expenses, and shall not be payable from the Pre-Existing TIPA Account. Article V Rights, Duties and Powers of the Managing Member 5.01 Business Management; Tax Matters Member (a) The Managing Member shall be responsible for the conduct of the Company s affairs. All Members hereby acknowledge and agree that the Managing Member shall be the Company s tax matters partner pursuant to Code section 6231 in connection with any audit of the federal income tax returns of the Company. The Company may engage Accountants and Tax Counsel to assist the Tax Matters Member in discharging its duties hereunder. Within five calendar days after the receipt of any correspondence or communication relating to the Company or a Member from the IRS, the Tax Matters Member shall forward to each Member a photocopy of all such correspondence or communication(s). The Tax Matters Member shall, within five calendar days thereafter, advise each Member in writing of the substance and form of any conversation or communication held with any representative of the IRS. If the Member designated as Tax Matters Member withdraws from the Company, the Initial Member shall designate a successor Tax Matters Member in accordance with Treasury Regulation section (a)(7)-1 or any successor Regulation. The successor Tax Matters Member shall notify the IRS of its designation as such for such year as well as for all prior years that the withdrawn Member was serving as Tax Matters Member. (b) Without the Consent of the Initial Member, the Tax Matters Member shall have no authority to (i) extend the statute of limitations for assessing or computing any tax liability against the Company (or the amount or character of any Company partnership items (within the meaning of Section 6231(a)(3) of the Code)), (ii) settle any audit with the IRS concerning the adjustment or readjustment of any partnership item(s), (iii) seek judicial review of an IRS determination, or (iv) select the forum for judicial review of any IRS determination. In the event of any Company-level proceeding instituted by the IRS pursuant to Sections 6221 through 6233 of the Code, the Tax Matters Member shall consult with the Initial Member regarding the nature and content of all action and defense to be taken by the Company in response to such proceeding Powers Subject to the other provisions of this Agreement, the Managing Member shall have all the authority, rights, and powers generally conferred by law, including the authority, rights, and powers of a managing member in a limited liability company, and shall have all the authority, rights, and powers necessary or appropriate to effect the purposes of the Company in accordance herewith, including, without limitation, the following (each of which is being exercised on behalf of, and in the name of, the Company): Fannie Mae v5

35 (a) To acquire, hold, lease, operate, dispose of and otherwise deal with the Properties and to enter into all agreements, instruments, leases and documents as may be reasonably required in connection therewith; (b) To contract and deal with, from time to time, any Person in connection with the management and operation of the Company s business, in accordance herewith as may be necessary to carry out the purposes of the Company hereunder; (c) To place record title to, or the right to use, Company assets in the name or names of a nominee or nominees, or trustee or trustees, for any purpose beneficial to the Company and the Initial Member; (d) To deposit, withdraw, invest, pay, retain and distribute the Company s funds in a manner consistent with this Agreement; (e) To make such elections under the Code and other relevant tax laws as to the treatment of items of Company income, gain, loss, deduction, and credit, and as to all other relevant matters, as the Managing Member in good faith deems necessary or appropriate and in the best interests of the Initial Member including, without limitation, elections referred to in Section 754 of the Code (subject to Section 10.07), selection of the manner and method of determining depreciation of the capital assets of the Company, determination of which items of cash outlay are to be capitalized or treated as current expenses, and selection of the method of accounting and bookkeeping procedures to be used by the Company consistent with the terms hereof; (f) To become qualified as a foreign limited liability company in the states in which the Properties are located or in any other jurisdiction in which the Managing Member deems such qualification to be in the interests of the Company and the Initial Member; (g) To enter into any kind of activity and to perform and carry out contracts of any kind necessary to the accomplishment of the purposes of the Company hereunder (and in accordance herewith), so long as said activities and contracts may be lawfully carried on or performed by a limited liability company under the laws of the State; (h) To exercise all other rights and powers permissible under the Act (unless expressly limited herein or under the Act); and (i) foregoing. To execute, acknowledge and deliver any necessary instruments to effectuate the 5.03 Restrictions on Authority (a) Notwithstanding any other provision of this Agreement to the contrary, the Managing Member shall have no authority to do any of the following acts without the Consent of the Initial Member: (i) Cause the Company to merge or consolidate with or convert into any other Entity or Person; Fannie Mae v5

36 (ii) Cause the Company to sell, convey, assign, pledge, encumber, transfer, or dispose of any of the Properties or other assets of the Company except as permitted by Section 5.16 hereof; (iii) Provide any financing, or cause the Company to provide financing, in connection with any sale, conveyance, transfer, or disposition of any of the Properties; (iv) Sell, convey, transfer, or dispose of any Property in a transaction that provides recourse against the Initial Member or the Initial Member s Interest; (v) Cause or permit the disbursement of funds from the Collection Account, Working Capital Reserve, Replacement Reserve, Pre-Existing TIPA Account, Security Deposit Account, or Distribution Account, other than disbursements expressly authorized by this Agreement; (vi) Receive (or cause or permit its Affiliates or the Affiliates of any Property Managers to receive) any fees, compensation, indemnification or reimbursement from the Company, other than as expressly provided in this Agreement; (vii) Cause the Company to enter into any contract or other similar arrangement with the Managing Member or any Affiliate of the Managing Member, unless such contract or arrangement provides for compensation that is no greater than the compensation that would be payable under a comparable contract negotiated at arm s length under market terms; (viii) Cause the Company to purchase any commercial paper or invest in any financial instruments that are issued by an Affiliate of the Managing Member; (ix) other Person; Borrow money or incur any liability or debt from the Company or any (x) With the sole exception of Excess Advances, cause or permit the Company to borrow money, issue evidences of indebtedness, incur any liability or debt, or refinance any indebtedness of the Company; (xi) Invest or consent to the investment of any Capital Contributions, the Working Capital Reserve, the Replacement Reserve Account, the Pre-Existing TIPA Account, or other funds of the Company in any assets other than Temporary Investments; (xii) Permit the Company to lend money (or guarantee a loan) or hold any loan to any Person; (xiii) Cause the Company to acquire, invest in, manage or hold any real property other than the Properties specified in Exhibit B; (xiv) Cause the Company to commence a case under Chapter 11, Title 11, United States Code or any successor provision of federal bankruptcy law or any analogous provision of applicable state bankruptcy or insolvency law; Fannie Mae v5

37 (xv) Admit any other Person as a Member of the Company other than in accordance with the provisions of Article VII; (xvi) Deposit any cash held by the Company in accounts that are not insured by the Federal Deposit Insurance Corporation; (xvii) Sell, convey, assign, finance, pledge, encumber, transfer or dispose of the Interest of the Managing Member, or permit the transfer, assignment, financing, pledge, encumbrance or disposition of any direct, indirect or beneficial interest in the Managing Member, other than as expressly provided in Section 8.01; (xviii) Amend this Agreement, the Security Agreement, or any other agreement between the Company and the Managing Member and/or any of its Affiliates; (xix) (xx) Dissolve, terminate or wind up the Company; Commingle the funds of the Company with those of any other Person; (xxi) Withdraw (including any removal or retirement) as the Managing Member of the Company; (xxii) Terminate (or cause the Company to terminate) the Custodial Agreement or enter (or cause the Company to enter) into any amendment thereto or substitute therefor; (xxiii) Except as reasonably necessary in connection with the performance of routine Property Management Services pursuant to Section 5.06(b), bring or defend actions at law or in equity or in connection therewith, pay extend, renew, modify, adjust, submit to arbitration, prosecute, defend or compromise any obligation, suit, liability, cause of action or claim (including taxes) either in favor of or against the Company; (xxiv) Engage or dismiss any Property Manager, including any replacement for a dismissed Property Manager. (b) Notwithstanding any other provision of this Agreement to the contrary, the Managing Member shall have no authority to do any of the following acts: Perform any act in violation of any applicable law or regulation thereunder; (i) (ii) Perform any act in violation of any provision of this Agreement or the Security Agreement, including (but not limited to) a Company purpose as set forth in Article II hereof; (iii) Do any act for which the Consent of the Initial Member is required under any provision of this Agreement or the Security Agreement until such Consent has been granted; Fannie Mae v5

38 (iv) Perform any act that would subject the Initial Member to any loss of its limited liability protection for Company obligations; (v) 4.03(b); Distribute any asset of the Company in kind except pursuant to Section (vi) Convert Company property to its own use or assign rights in specific Company property for other than a Company purpose; (vii) Receive any rebate or give-up or participate in any reciprocal business arrangements that would circumvent any provision of this Agreement; (viii) Do any act that would make it impossible or impractical to carry on the ordinary business of the Company as contemplated herein; (ix) Except as reasonably necessary in connection with the performance of routine Property Management Services pursuant to Section 5.06(b), confess any judgment on behalf of or against the Company; or (x) Engage any Prohibited Person as a Property Manager Other Activities Members and any of their Affiliates may engage or possess an interest, independently or with others, in other businesses or ventures, and neither the Company nor any other Member shall have any rights in or to such ventures or the income or profits derived therefrom Distributions Except as provided in Section 4.03, each Member shall look solely to the assets of the Company for all distributions and shares of Net Income and Net Loss, and shall have no recourse therefor (upon dissolution or otherwise) against any other Member. No Member shall have any right to demand or receive property other than money upon dissolution and winding up of the Company, except as otherwise expressly provided for herein. This Section 5.05 shall not be construed to limit or otherwise curtail the Initial Member s rights and the Managing Member s obligations under Section 9.02(a)(iv) Asset Management; Property Management (a) Asset Management Services. The Managing Member shall provide all services necessary to ensure the efficient operation of the Company, including, without limitation, the following services (the Asset Management Services ): (i) General Management Duties. The Managing Member shall take all actions and do all things necessary to manage the Company in accordance with this Agreement. Without limiting the foregoing, the Managing Member shall perform the services set forth in this Section 5.06(a)(i), as follows: Fannie Mae v5

39 (A) the Company; The administration, management and direction of the business of (B) The maintenance of books and records of the Company, as specified in Section 10.01, in accordance with sound federal income tax accounting principles upon the advice of the Accountants, including information relating to the sale by the Managing Member or any of its Affiliates of goods or services to the Company; (C) The safekeeping and use of all funds and assets of the Company, including the maintenance of bank accounts; (D) The furnishing to the Initial Member of all financial statements, tax returns, and other reports and information required by this Agreement, including, without limitation, the tax returns and annual, quarterly, and monthly reports specified in Article X and Exhibit C; (E) Engagement of, consultation with, and coordination of the activities of attorneys, including the development of legal strategies relating to Company matters; (F) Consultation with and coordination of the activities of the Accountants and other professionals for the benefit of the Company; and (G) The development and maintenance of favorable community relations between the Company and various social and community organizations. (ii) Budget and Business Plan. (A) The Managing Member shall be responsible for the preparation, implementation and oversight of an annual operating budget and business plan for the Company (collectively, the Business Plan ), which shall require the Consent of the Initial Member prior to its implementation. Among other things, the Business Plan shall set forth the estimated income, operating expenses, and capital expenses for the Properties for the applicable year, such as real estate taxes, utilities, mortgage payments, insurance premiums, maintenance expenses, reserves for replacement and other similar items. The Business Plan shall also contain recommendations related to any procedures that the Managing Member deems advisable for the more efficient, sound and economic management and operation of the Properties, and information regarding projected Asset sales. (B) The Managing Member shall deliver the initial Business Plan to the Initial Member on before the Closing Date. Thereafter, each subsequent annual Business Plan shall encompass a full calendar year and shall be presented to the Initial Member no later than November 1 prior to the calendar year to which such Business Plan relates. No later than December 15 after receipt of a Business Plan, the Initial Member shall either Consent to the submitted Business Plan or provide the Managing Member with a description of the concerns to be satisfactorily ad- Fannie Mae v5

40 dressed in order to obtain the Initial Member s Consent. If revisions to a Business Plan are required, the Managing Member will have until January 10 to deliver to the Initial Member a revised Business Plan that satisfactorily addresses the concerns raised by the Initial Member, and the Initial Member will have until January 20 to either provide its final Consent, which Consent shall not be unreasonably withheld, or provide the Managing Member with a description of any remaining concerns. Thereafter, until a mutually acceptable Business Plan has been delivered to the Initial Member, the Managing Member shall have ten Business Days to respond to any objections raised by the Initial Member, and the Initial Member shall have ten Business Days to either provide its final Consent, which Consent shall not be unreasonably withheld, or provide the Managing Member with a description of any remaining concerns. (C) If the Business Plan for a given year is not delivered to the Initial Member on November 1 of the preceding year, or if the Business Plan has not been approved by the Initial Member by January 31 of such year, then thirty percent (30%) of the Asset Management Fee that would otherwise be payable to Managing Member ( Late Plan Fee ) shall instead be payable to the Initial Member on each subsequent Distribution Date until such Business Plan has been submitted, with required revisions, for final Consent by the Initial Member and such final Consent has been received. (D) In the case of each date specified in this Section 5.06(a)(ii), if the date falls on a day that is not a Business Day, then the next Business Day after such date shall be substituted therefor. (iii) Strategic Leasing and Property Management Duties. The Managing Member shall undertake the following strategic leasing and property management duties: (A) Prepare studies of the Property market areas and prepare marketing plans for the Properties; (B) Determine levels of rent and contractual terms of leases, subject to applicable laws; (C) Determine how Property Management Services will be delivered, and engaging and overseeing any Property Managers necessary to perform this function; and (D) Meet with the Initial Member on a regular basis to keep it apprised of the progress of the leasing activities. (iv) Transition of Properties. (A) The Managing Member shall oversee the execution of the Property Management Transition Plan and the transition of Properties pursuant to such plan, as specified more fully in the Property Management Transition Plan. The Managing Member acknowledges that Initial Member or its delegates will provide Fannie Mae v5

41 limited Property Management Services with respect to the Initial Member Properties prior to the transition of such Properties to the control of the Company or its Property Manager pursuant to the Property Management Transition Plan, and will be entitled to retain the Property Management Transition Fee in accordance with the Property Management Transition Plan. (B) Managing Member acknowledges and agrees that Initial Member s agreement to conduct limited property management services, in accordance with the Property Management Transition Plan during the Property Management Transition Period, is an accommodation to Managing Member, and, notwithstanding any provision herein to the contrary, if Initial Member (or its delegate) does not undertake any of such services, Initial Member will not be considered to have breached any of the terms of this Agreement or any other agreement between Initial Member and Managing Member; provided, however, that in such case, Managing Member may notify Initial Member of its intent immediately to cause the Company or the Company s Property Manager to assume management of the applicable Property, whereupon the Managing Member will receive a credit in the amount of the Property Management Transition Fee (as defined in the Property Management Transition Plan), if any, allocable to the immediately preceding payment period with respect to the related Property. Initial Member s payment of such amount shall be deemed to effect the transition of the management of the applicable Property to the Company. (v) Dispositions. The Managing Member will perform all services required in connection with dispositions of the Properties as permitted by, and in accordance with, Section 5.16 hereof. Without limitation, such services shall include developing a marketing plan for the Properties, determining which Properties to sell and the asking prices for such Properties. (vi) The Managing Member shall select, employ, supervise and discharge all employees and agents required to perform Asset Management Services in accordance with the terms of this Agreement. Such personnel shall, in every instance, be employees or agents of the Managing Member (and not of the Company), and compensation for the services of such employees or agents (as evidenced by payroll documents, worker s compensation and all other benefits, and Direct Overhead, FICA, FUTA, health, etc.) shall be considered an expense of the Managing Member, and shall not be payable directly by the Company. The Managing Member shall be responsible for complying with all laws and regulations and collective bargaining agreements affecting the employment of its employees and agents. The Managing Member will, throughout the term of this Agreement, be an equal opportunity employer. (b) Property Management Services. The Managing Member shall provide all services necessary to ensure the efficient, safe, and lawful operation and maintenance of the Properties, including, without limitation, the following services (the Property Management Services ): (i) General Management Duties. The Managing Member shall take all ac- Fannie Mae v5

42 tions and do all things necessary to manage and lease the Properties in accordance with this Agreement and the leases of the Properties. Without limiting the foregoing, the Managing Member shall perform the services set forth in this Section 5.06(b)(i), as follows: (A) Collect rents and other charges or income from the Properties, and comply with the terms of all existing and future leases entered into and covering any of the Properties. In connection with the foregoing, the Managing Member may engage collection agencies and/or legal counsel, file and prosecute actions to recover possession of any Property, or settle, compromise or release such actions. All costs incurred therefor by the Managing Member, including court costs and attorneys fees, shall be Property Expenses. Notwithstanding the foregoing, the Managing Member, in its reasonable discretion and in accordance with reasonable and customary business practices, may waive current-month late charges and settle any dispute arising in connection with the payment or collection of rent or other income pertaining to the Properties; (B) Process payments for Property Expenses, Capital Expenditures, Real Property Transfer Taxes incurred after the Closing Date upon the direct or indirect actual or deemed sale of a Property, or an interest therein (except as otherwise provided in Section 5.10(d)), and appraisal fees designated as Company Expenses pursuant to Section 6.06(b), by causing the Custodian to disburse funds from the Collection Account and the Distribution Account in the manner specified in Sections 5.10(b) and 4.02(a); (C) In accordance with the terms of the leases of the Properties and subject to applicable law, collect all security deposits of tenants, and remit such deposits to the Custodian for deposit in the Security Deposit Account. The Managing Member shall determine the amounts of future security deposits under future leases according to applicable law and standard practices in the markets in which the Properties are located, including, without limitation, sizing security deposits with reference to tenant creditworthiness and other customary risk factors. Upon the termination of a lease and vacation of the Property, the Managing Member shall apply the corresponding security deposit to restore the Property in the manner specified in the applicable lease, and then return the balance, if any, to the tenant (along with interest, if any, required to be paid under the lease and applicable law); (D) Perform the leasing responsibilities described in Section 5.06(b)(ii) of this Agreement; (E) Agreement; Maintain the Properties as provided in Section 5.06(b)(iii) of this (F) Cause the Company to comply with all of the terms and conditions of the leases for each of the Properties; (G) Respond promptly to written complaints and written requests from Fannie Mae v5

43 tenants of the Properties; (H) As and when determined by the Managing Member in its reasonable discretion, institute proceedings or applications for reduction of real estate tax assessments of the Properties for the current and any future tax years during the term of this Agreement; (I) To the extent commercially reasonable, maximize local experience and expertise and contract with local service providers for repair, leasing and maintenance and other applicable services; and (J) legal matters. Pursue and promptly respond to Unit- and Property-level or other (ii) Leasing Duties. The Managing Member shall perform the usual and customary duties and functions of an exclusive leasing agent for the Properties in a faithful, first-class and diligent manner, and shall use the best efforts of its organization to obtain tenants, and to negotiate leases with such tenants, for the Properties. The Managing Member s leasing responsibilities shall include the following services: (A) (B) Installing appropriate signage on the Properties; Marketing vacant units for rent; (C) Obtaining and investigating prospective tenants for the Properties, and obtaining references and credit reports on such prospective tenants; and (D) Evicting tenants for breach of lease. (iii) Maintenance and Operation of the Properties. (A) The Managing Member shall select, employ, supervise and discharge all employees and agents required to operate, lease, maintain and manage the Properties in accordance with the terms of this Agreement and the leases of the Properties. Such personnel shall, in every instance, be employees or agents of the Managing Member (and not of the Company), and compensation for the services of such employees or agents (as evidenced by payroll documents, worker s compensation and all other benefits, and Direct Overhead, FICA, FUTA, health, etc.) shall be considered an expense of the Managing Member, and shall not be payable directly by the Company. The Managing Member shall be responsible for complying with all laws and regulations and collective bargaining agreements affecting the employment of its employees and agents. The Managing Member will, throughout the term of this Agreement, be an equal opportunity employer. (B) The Managing Member shall be liable to the Company for any act or omission on the part of any on-site personnel hired by the Managing Member, and for any act or omission of any other person employed, retained, supervised, or contracted with by the Managing Member on behalf of the Company. Fannie Mae v5

44 (C) The Managing Member shall keep the Properties in clean and orderly condition at all times, in accordance with commercially reasonable criteria developed by the Company, as amended from time to time, and as required by the terms of the leases of the Properties and all applicable legal and insurance requirements, including, without limitation, all applicable local health, safety and building codes. The Managing Member shall make or supervise all necessary repairs to the Properties and purchase all supplies necessary for the maintenance and operation of the Properties. (D) The Managing Member shall cause the Company to keep all public utilities necessary to the operation of each Property, including, but not limited to, sanitary and storm sewers, water, gas (if applicable), and electricity, operating in working condition, to the extent required by applicable law and pursuant to the leases of the Properties. (E) Any rebate or discount obtained by the Managing Member in connection with an expenditure made pursuant to this Section 5.06(b)(iii) shall inure to the benefit of the Company. (iv) Remittance to Custodian. The Managing Member shall remit all rents and other charges collected from the tenants of each Property to the Custodian for deposit in the Collection Account or Security Deposit Account, as applicable. (v) Insurance. The Managing Member shall cause the Company to maintain, with financially sound insurers with an A.M. Best Co. rating of A-V or better, insurance satisfying the Insurance Requirements, as set forth in Exhibit G. At least annually, the Managing Member shall cause all insurers to provide insurance certificates setting forth the insurance coverages being provided to or for the benefit of the Company. Such certificates must show that the Insurance Requirements have been satisfied. (vi) Taxes. The Managing Member shall pay or cause the Company to pay when due all taxes and other governmental assessments on or related to the Properties. (vii) Property Site Visits. The Managing Member shall conduct site visits to the Properties on a basis that, in the Managing Member s reasonable judgment, will allow the Managing Member to monitor adequately the condition and operation of each Property and promptly prepare and submit a detailed report on the physical condition of such Properties to the Initial Member, but no less frequently than once per year for each Property. In furtherance, and not in limitation, of the foregoing, the Managing Member shall (i) conduct a site visit to all Watchlist Properties on no less than a monthly basis, (ii) perform an external inspection of each Property on no less than a quarterly basis, and (iii) conduct an annual scheduled interior and exterior inspection of each Property. (viii) Compliance with Laws. The Managing Member shall cause each Property to comply with all applicable federal, regional, state and local laws, rules, regulations, statutes, decisions, orders, judgments, directives, decrees, codes, guidelines or ordinances of any governmental or regulatory authority, court or arbitrator, whether now in force or Fannie Mae v5

45 as amended or enacted in the future. The Managing Member shall perform all services, including, without limitation, all leasing, rent collection, fees and charges, and evictions, in full compliance with applicable laws. (ix) Environmental Compliance. The Managing Member shall maintain each Property so that there is no discharge, release, spillage, uncontrolled loss or seepage of any oil, petroleum or chemical liquids or solids, liquid or gaseous products or any hazardous wastes or hazardous substances (as such terms are used in the Comprehensive Environmental Response, Compensation and Liability Act of 1980) that could cause a risk to the health or safety of the occupants of such Property. The Managing Member shall maintain the Properties to ensure that the Properties are not in violation of any local, state, or federal law or regulation and are not in violation of the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Toxic Substance Control Act, Safe Drinking Water Control Act, Comprehensive Environmental Resource Compensation and Liability Act, or Occupational Safety and Health Act, and the Managing Member shall promptly deliver to the Initial Member a copy of any notice received from any source whatsoever of the existence of any such hazardous condition on any Property or of a violation of any such local, state, or federal law or regulation with respect to any Property. (c) Compensation for Asset Management and Property Management Services. (i) Asset Management Fee. Other than collection and eviction costs as provided in Section 5.06(b)(i)(A), as full compensation for Asset Management Services and Property Management Services, and subject to Section 5.06(a)(ii)(C), Section 5.06(c)(ii) and the Property Management Transition Plan, the Company shall pay the Managing Member a fee for each Collection Period (the Asset Management Fee ) equal to 20% of Effective Gross Income actually received during such Collection Period. The Asset Management Fee shall be paid solely from Available Funds pursuant to Section The Asset Management Fee shall be cumulative, and any amount not paid on a given Distribution Date shall accrue without interest and shall be payable on the next Distribution Date(s), as necessary. The Asset Management Fee is hereby allocated (i) 60% for Asset Management Services (the AM Portion ) and (ii) 40% for Property Management Services (the PM Portion ). (ii) Violation Payment Offset. Except as otherwise provided in Section 3.05(a)(iii), the Managing Member is obligated to pay all Violation Payments. In the event that the Company (rather than the Managing Member) pays any Violation Payments, the Company shall offset such amounts against the AM Portion. For each Collection Period, the Company shall offset against the AM Portion the amount of any Violation Payments actually made by the Company and not previously offset pursuant to this Section 5.06(c)(ii) in an earlier Collection Period. If, upon offsetting Violations Payments, the AM Portion has been reduced to zero and there remains unreimbursed Violation Payments, then such unreimbursed Violation Payments shall be carried forward and offset against the next succeeding installment(s) of the AM Portion of the Asset Management Fee. For the avoidance of doubt, the PM Portion, including, without limitation, any part of the PM Portion that may be retained by the Initial Member as the Property Management Transition Fee pursuant to the Property Management Transition Plan, shall Fannie Mae v5

46 not be subject to offset. (d) Use of Third-Party Property Managers. (i) Delegation of Property Management Services. The Managing Member is hereby authorized to delegate the performance of Property Management Services to one or more qualified Property Managers by causing the Company to negotiate and enter into Property Management Agreements; provided, however, that the Managing Member shall remain primarily and fully liable hereunder for the performance of any such delegated Property Management Services, and the Managing Member shall be responsible for supervising and diligently monitoring all services performed by Property Managers. Property Managers shall be paid by the Managing Member from the proceeds of the Asset Management Fee or other Managing Member funds (which are not reimbursable amounts). Each Property Manager shall enter into a written agreement with the Managing Member, which shall specify, inter alia, that the Company is an intended third-party beneficiary of the agreement and that the Property Manager shall have no recourse whatsoever for payment against the Company or the Initial Member. Amounts payable to Affiliated Property Managers must not exceed the amounts that would customarily be incurred for such services from unrelated third parties on an arm s length basis in the applicable market. The selection of each Property Manager shall require the Consent of the Initial Member. In no event shall any Prohibited Person be engaged as a Property Manager. (ii) Termination of Property Management Agreements; Replacement of Property Managers. (A) Except as otherwise provided in this paragraph below, upon the occurrence of a Property Management Default (as hereinafter defined) by a Property Manager, the Managing Member shall immediately notify the Initial Member and, if so directed by the Initial Member, the Managing Member shall promptly dismiss the Property Manager and terminate the corresponding Property Management Agreement. Upon such dismissal and termination, unless the dismissed Property Manager was an Affiliated Property Manager, the Managing Member shall itself provide the Property Management Services that had been the subject of the terminated Property Management Agreement; provided, however, that the Managing Member may delegate such services to a successor Property Manager upon or after termination of the Property Management Agreement with the Consent of the Initial Member, both as to the act of delegating such services and to the identity of the Property Manager; provided, further, that in no event shall any Prohibited Person be engaged as a successor Property Manager. In the case of a Property Management Default by, or an Event of Bankruptcy with respect to, an Affiliated Property Manager, or upon the occurrence of Cause under Section 6.03(a), the Initial Member, in its sole and absolute discretion, shall be authorized, if it so elects, to dismiss the Affiliated Property Manager, terminate the corresponding Property Management Agreement, and appoint a replacement Property Manager without any requirement of obtaining the consent or approval of the Managing Member. (B) Without limiting the provisions of Section 9.01(b) with respect to an Affiliated Property Manager, immediately upon obtaining knowledge of the occurrence of an Fannie Mae v5

47 Event of Bankruptcy with respect to a Property Manager that is not an Affiliated Property Manager, the Managing Member shall notify the Initial Member of the occurrence of such Event of Bankruptcy and enforce the terms of the related Property Management Agreement. (iii) Initial Member Power of Attorney. The Managing Member hereby grants to the Initial Member an irrevocable power of attorney, coupled with an interest, to take any action and to execute and deliver any and all documents and instruments on behalf of the Managing Member and the Company as the Initial Member may deem necessary or appropriate to effectuate the provisions of Section 5.06(d)(ii). (iv) Required Terms. The Managing Member shall not enter into any Property Management Agreement unless such agreement is terminable without penalty upon the occurrence of specified events of default (which events of default shall include, without limitation, all Property Management Defaults and an Event of Bankruptcy with respect to the related Property Manager) and unless such agreement contains provisions authorizing the surveillance activities of the Initial Member specified in Section 6.07(c) hereof. The Managing Member shall not be permitted to dismiss any Property Manager or select a replacement for a dismissed Property Manager without the Consent of the Initial Member. During the period that any proceeding to remove a Property Manager is pending, the Managing Member shall fully perform all Property Management Services encompassed within the corresponding Property Management Agreement. (e) Property Management Defaults. Each of the following events shall constitute a Property Management Default : (i) A Property shall be subject to a substantial building code or similar violation, which shall not have been cured within 15 days after notice from the applicable governmental agency or department (or such longer period, up to 90 total days from the date of notice, as may reasonably be needed to cure, but only if the Managing Member or Property Manager, as the case may be, is diligently pursuing such cure); (ii) The Company, the Managing Member, or a Property Manager is cited by any governmental agency for any other material violation of applicable law, rule, or regulation relating to a Property, and such violation has not been cured within 90 days; (iii) [Intentionally Deleted]; (iv) A Property Manager shall act or fail to act in a manner constituting gross negligence, intentional misconduct, fraud, or breach of fiduciary duty in the conduct of its duties and obligations under a Property Management Agreement; or (v) Any other act or failure to act of a Property Manager constituting an event of default under a Property Management Agreement, which default is not cured within any applicable cure period under such Property Management Agreement. (f) Property Management Services during the Property Management Transition Period. The Managing Member will complete the Property Transition by the end of the Property Fannie Mae v5

48 Management Transition Period in accordance with the Property Management Transition Plan. The failure by the Managing Member to satisfy all of the requirements of the Property Management Transition Plan (including, but not limited to, the obligation to complete the Property Transition by the end of the Property Management Transition Period) will subject the Managing Member to liquidated damages, as specified in Section 9.02(a)(iv)(D) Working Capital Reserve The Managing Member is expressly authorized for, in the name of, and on behalf of, the Company, and is directed to cause the Custodian to establish and maintain a Company working capital reserve (the Working Capital Reserve ), as follows: (a) Funding and Replenishment. (i) Working Capital Reserve Initial Deposit. Each Member shall contribute $575, to the Company on the Closing Date (collectively, the Working Capital Reserve Initial Deposit Amount ), which the Managing Member shall cause to be deposited in the Working Capital Reserve. (ii) Funding from the Distribution Account. On each Distribution Date, the Managing Member shall, pursuant to the Priority of Payments in Section 4.02(a), cause funds held in the Distribution Account to be deposited into the Working Capital Reserve (the Working Capital Reserve Monthly Deposit ) in the amount equal to the excess, determined as of the immediately preceding Collection Date, of the Working Capital Reserve Target Amount over the Working Capital Reserve Balance. (iii) Funding from Excess Advances. If, on any Distribution Date, after giving effect to the Priority of Payments in Section 4.02(a), the Working Capital Reserve Balance is less than the Working Capital Reserve Target, the Managing Member shall make an Excess Advance to the Working Capital Reserve in the amount by which the Working Capital Reserve Balance is less than the Working Capital Reserve Target. (b) Permitted Uses. The Working Capital Reserve shall be used only for the following purposes: (i) to pay Property Expenses, Real Property Transfer Taxes incurred after the Closing Date upon the direct or indirect actual or deemed sale of a Property, or an interest therein (except as otherwise provided in Section 5.10(d)), and appraisal fees designated as Company Expenses pursuant to Section 6.06(b) after Asset Proceeds have been exhausted; (ii) to pay Capital Expenditures after Replacement Reserves have been exhausted; (iii) to pay Custodial Fees (as provided in Section 4.02(a)(i)); and (iv) to pay Verification Fees (as provided in Section 4.02(a)(iii)). In no event shall funds be drawn from the Working Capital Reserve to pay the Asset Management Fee or Managing Member Expenses. The Working Capital Reserve, if invested, may only be invested in Temporary Investments. All interest and earnings on amounts on deposit in the Working Capital Reserve shall be added to the Working Capital Reserve Balance. No Member shall have any obligation to restore any losses realized on Temporary Investments. (c) Working Capital Reserve Target. The Working Capital Reserve Target, as of a given Distribution Date, shall be: Fannie Mae v5

49 (i) Prior to the third anniversary of the Closing Date, an amount, as determined by the Managing Member, between the Working Capital Reserve Initial Deposit Amount and 110% of the Working Capital Reserve Initial Deposit Amount; and (ii) On or after the third anniversary of the Closing Date, the amount, as reasonably determined by the Managing Member as of each Collection Date, of projected Property Expenses for the following 3 months. (d) Working Capital Reserve Surplus Amounts. If, on any Distribution Date, there is a Working Capital Reserve Surplus, the Managing Member shall either, in its reasonable discretion, transfer such Working Capital Reserve Surplus to the Collection Account or retain such Working Capital Reserve Surplus in the Working Capital Reserve. (e) Mechanics of Use. Except as provided in the immediately following sentence, all Working Capital Reserve Draws shall be deposited into the Collection Account before being applied for any purpose. If (i) any amounts payable pursuant to Section 4.02(a) are due, (ii) there are insufficient funds on deposit in the Distribution Account to pay such amounts, and (iii) such amounts are required to be funded from Working Capital Reserve Draws pursuant to Section 5.07(b), then the Managing Member shall cause a Working Capital Reserve Draw to be deposited directly into the Distribution Account rather than the Collection Account Replacement Reserve The Managing Member is expressly authorized for, in the name of, and on behalf of, the Company, and is directed to cause the Custodian to establish and maintain a Company replacement reserve (the Replacement Reserve ), as follows: (a) Funding and Replenishment. (i) Replacement Reserve Initial Deposit. Each Member shall contribute $112, to the Company on the Closing Date (collectively, the Replacement Reserve Initial Deposit Amount ), which the Managing Member shall cause to be deposited in the Replacement Reserve. (ii) Funding from the Distribution Account. On each Distribution Date, the Managing Member shall, pursuant to the Priority of Payments in Section 4.02(a), cause funds held in the Distribution Account to be deposited into the Replacement Reserve in the amount equal to the Replacement Reserve Monthly Deposit. (iii) Funding from Excess Advances. If, on any Distribution Date, after giving effect to the Priority of Payments in Section 4.02(a), the Replacement Reserve Balance is less than the Replacement Reserve Target, the Managing Member shall make an Excess Advance to the Replacement Reserve in the amount by which the Replacement Reserve Balance is less than the Replacement Reserve Target. (b) Permitted Uses. The Replacement Reserve shall be used only to pay Capital Expenditures. In no event shall funds be drawn from the Replacement Reserve to pay Property Expenses, Custodial Fees, Verification Fees, the Asset Management Fee or Managing Member Ex- Fannie Mae v5

50 penses. The Replacement Reserve, if invested, may only be invested in Temporary Investments. All interest and earnings on amounts on deposit in the Replacement Reserve shall be added to the Replacement Reserve Balance. No Member shall have any obligation to restore any losses realized on Temporary Investments. (c) Replacement Reserve Target. The Replacement Reserve Target, as of a given Distribution Date, shall be the product of (A) $ and (B) the total number of Units owned by the Company on the immediately preceding Collection Date. (d) Mechanics of Use. Except as provided in the immediately following sentence, all Replacement Reserve Draws shall be deposited into the Collection Account before being applied for any purpose. If (i) any amounts payable pursuant to Section 4.02(a) are due, (ii) there are insufficient funds on deposit in the Distribution Account to pay such amounts, and (iii) such amounts are required to be funded from Replacement Reserve Draws pursuant to Section 5.08(b), then the Managing Member shall cause a Replacement Reserve Draw to be deposited directly into the Distribution Account rather than the Collection Account. (e) Release. Upon the sale of a Property, the Managing Member may elect to release a portion of the Replacement Reserve Balance up to the amount (the Allocated Replacement Reserve Release Amount ) equal to (i) the Replacement Reserve Initial Deposit Amount divided by the number of Units as of the Closing Date, increased by (ii) the aggregate Minimum Replacement Reserve Monthly Deposits made with respect to the Property and (iii) insurance proceeds deposited in the Replacement Reserve with respect to the Property, and reduced by (iv) the aggregate amount of Capital Expenditures previously made with respect to such Property. All Allocated Replacement Reserve Release Amounts shall be deposited in the Collection Account and treated as Asset Proceeds. (f) Insurance Proceeds. All proceeds of insurance claims relating to occurrences that necessitated the making of Capital Expenditures shall be promptly deposited in the Replacement Reserve Security Deposit Account The Managing Member is expressly authorized for, in the name of, and on behalf of, the Company, and is directed to cause the Custodian to establish and maintain a Company account (the Security Deposit Account ) to hold tenant security deposits, such Security Deposit Account to be maintained in accordance with all Legal Requirements, including, but not limited to, Legal Requirements that lease security deposits be held in accounts maintained in the state in which the applicable property is located. If the Managing Member comes into possession of any tenant security deposits, it shall promptly transfer such amounts to the Custodian for deposit into the Security Deposit Account Certain Expenses (a) Organizational Expenses and Offering Expenses. All Organizational Expenses and Offering Expenses shall be the sole responsibility of the Initial Member, and the Company shall have no liability therefor. Fannie Mae v5

51 (b) Company Expenses. All Company Expenses (except for Custodial Fees, Verification Fees, and Asset Management Fees, which shall be payable solely from Available Funds on deposit in the Distribution Account in the manner specified in Section 4.02(a)) shall be paid by the Company from Asset Proceeds, Working Capital Reserve Draws, Replacement Reserve Draws, Excess Advances, and Working Capital Reserve Surplus Amounts transferred to the Collection Account, if any. The Managing Member shall cause the Custodian to pay Company Expenses, as and when such Company Expenses become due, by disbursing funds directly from the Collection Account to pay such Company Expenses. Company Expenses (including, in this case, Custodial Fees, Verification Fees, and Asset Management Fees) shall also be payable from Available Funds in the manner specified in Section 4.02(a). (c) Managing Member Expenses. All Managing Member Expenses shall be payable from the Asset Management Fee or from the Managing Member s own resources. In no event shall any Managing Member Expenses be paid from Company assets or revenues. (d) Real Property Transfer Taxes. The Members shall pay their respective shares, as determined by applicable law or custom and consistent with any applicable exemptions, of all Real Property Transfer Taxes that may arise from the admission of the Managing Member to the Company. All Real Property Transfer Taxes arising from direct or indirect actual or deemed sales of Properties, or interests therein, after the Closing Date shall be Company Expenses; provided, however, that any Real Property Transfer Taxes arising from a transfer or Withdrawal of the Managing Member in violation of Section 8.01 shall be a Managing Member Expense Limitation of Liability; Indemnification (a) The Managing Member shall have no liability to the Company or the Initial Member for any loss suffered by the Company or Initial Member that arises out of any action or inaction or course of conduct of the Managing Member so long as the Managing Member, in good faith, determined that such action or inaction or course of conduct was in the best interest of the Company and the Initial Member and such action or inaction or course of conduct did not constitute gross negligence, intentional misconduct, fraud, breach of fiduciary duty, violation of any law, failure by the Managing Member to perform its duties as Tax Matters Member, any action(s) performed outside the scope of the authority of the Managing Member under this Agreement, a misrepresentation of a material item set forth in this Agreement, or a breach of any material provision of this Agreement or the Security Agreement. (b) The Managing Member shall be indemnified by the Company against any losses, liabilities or expenses incurred in performing its duties hereunder (excluding Managing Member Expenses and business losses resulting from the operations of the Company, including provision of the Asset Management Services), provided, however, that the same were not the result of gross negligence, intentional misconduct, fraud, breach of fiduciary duty, violation of any law, failure by the Managing Member to perform its duties as Tax Matters Member, actions performed outside the scope of the authority of the Managing Member under this Agreement, a misrepresentation of any item set forth in this Agreement or a breach of any provision of this Agreement. Notwithstanding the preceding sentence, the Managing Member (and its Affiliates and any Person acting as a broker-dealer) shall not be indemnified for any losses, liabilities or expenses arising from or out of any alleged or actual violation of federal or state securities laws Fannie Mae v5

52 and nothing contained herein shall constitute a waiver by the Initial Member of any right that it may have against any party under federal or state securities laws. Further, the Company shall not pay for any insurance covering liability of the Managing Member (or its Affiliates) for any action or inaction or course of conduct for which indemnification is not permitted hereunder. Any indemnity under this Section 5.11(b) shall be payable solely from the assets of the Company and no Member shall be personally liable therefor. (c) The Managing Member shall defend, indemnify and hold harmless (i) the Company and the Initial Member Parties from any liability, loss, damage, fee, cost or expense incurred by reason of any demand, claim, suit, action or proceeding arising out of any action or omission of the Managing Member (whether in its capacity as the managing member of the Company or otherwise) or (solely as to the Initial Member Parties) the Company constituting gross negligence, intentional misconduct, fraud, breach of fiduciary duty, violation of any law, failure by the Managing Member to perform its duties as Tax Matters Member, actions performed outside the scope of the authority of the Managing Member under this Agreement, a misrepresentation by the Managing Member of a material item set forth in this Agreement, or a breach by the Managing Member of any provision of this Agreement; and (ii) the Initial Member Parties from any liability, loss, damage, fee, cost or expense incurred by any such Initial Member Party for Company or other obligations (including, without limitation, any liability under any statute, regulation, ordinance or other provision of local, state or federal law pertaining to the protection of the environment or otherwise pertaining to public health or employee health and safety), including all legal fees and costs incurred in defending against any claim or liability if an action is filed. The indemnification agreement contained in this Section 5.11(c) shall be a recourse obligation of the Managing Member and shall survive the dissolution of the Company, the sale or other transfer of the Managing Member s or Initial Member s Interest, the sale of any or all of the Properties, and/or the Withdrawal of the Managing Member from the Company Representations and Warranties of the Managing Member; Acknowledgments (a) The Managing Member represents and warrants to the Initial Member that the following are presently true and will be true continuously throughout the term of the Agreement: (i) The Managing Member is a limited liability company, duly organized, validly existing and in good standing under the laws of the state of Delaware. The Managing Member has registered or qualified to conduct business in all jurisdictions in which the failure to be so registered would adversely affect its ability to perform its obligations hereunder; (ii) No event, action, investigation, litigation, occurrence or proceeding is pending that would adversely affect the ability of the Managing Member or any Affiliate to perform their respective obligations hereunder or under any other agreement with respect to the Properties; (iii) The execution and delivery of this Agreement and all instruments pertaining hereto and the performance of all acts heretofore or hereafter made or taken or to be made or taken pertaining to the Company or this Agreement by the Managing Member Fannie Mae v5

53 have been or will be duly authorized by all necessary corporate or other action and the consummation of any such transactions with or on behalf of the Company will not constitute a breach or violation of, or a default under, the organizational documents or other governing instruments of the Managing Member (or any Affiliate), any agreement by which the Managing Member (or such Affiliate) or any of its properties is bound, or result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Managing Member pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, operating or partnership agreement or other agreement or instrument to which the Managing Member is a party or by which any of the Managing Member s assets are subject, nor constitute a violation of any applicable law, administrative regulation, or court decree; (iv) No Event of Bankruptcy with respect to the Managing Member (or any Affiliate) has occurred; (v) The Managing Member will comply with, and will cause the Company and the Properties to comply with, all applicable local, state and federal laws, statutes, regulations, rules and ordinances (including, without limitation, all applicable filing and disclosure requirements); (vi) The Managing Member shall require the Company to obtain all consents or approvals of any Governmental Authority or any other person that are necessary in connection with the acquisition, holding, lease, repair and disposition of the Properties; (vii) No election will be made pursuant to Treasury Regulation section that would cause the Company to be treated as an association taxable as a corporation for federal income tax purposes; (viii) The Managing Member (i) is in compliance with all applicable anti-money laundering laws, including, without limitation, the USA Patriot Act, and the laws administered by the United States Treasury Department s Office of Foreign Assets Control ( OFAC ), including, without limitation, Executive Order 13224, (ii) is not, nor is any affiliate of the Managing Member, on the Specially Designated Nationals and Blocked Persons List maintained by OFAC, and (iii) is not otherwise identified by a government entity or legal authority as a person with whom a U.S. Person (as defined below) is prohibited from transacting business. As used herein, U.S. Person shall mean any United States citizen, any permanent resident alien, any entity organized under the laws of the United States (including foreign branches), or any person in the United States; (ix) Neither the Managing Member nor any Person having a direct, indirect or beneficial interest in the Managing Member is a foreign person within the meaning of Code sections 897 and 1445; (x) The Managing Member represents, warrants and agrees that either (i) it is not (A) a benefit plan investor within the meaning of 29 C.F.R , as modified by Section 3(42) of ERISA or (B) a governmental, church, non-u.s. or other plan subject to any federal, state, local or non-u.s. law (a Similar Law ) materially similar to Fannie Mae v5

54 Section 406 of ERISA or Section 4975 of the Code, or (ii) its investment in the Company will not constitute or otherwise result in a non-exempt violation of Section 406 of ERISA or Section 4975 of the Code (or, in the case of any plan subject to a Similar Law, a violation of any applicable Similar Law); (xi) The Managing Member is not a consumer as defined in any Consumer Protection Laws. The Managing Member has conducted such inspections of the Properties as it deems necessary to review and evaluate the issues to which such laws are addressed; (xii) All information provided to the Initial Member by the Managing Member in connection with this Agreement and the transactions contemplated hereby, including all information delivered to the Initial Member in connection with the Managing Member, or any Affiliate of the Managing Member, qualifying to bid on the Properties, is accurate and complete in all respects. Without limiting the foregoing, none of the representations and warranties of the Managing Member set forth in this Agreement or in any other agreement, document, or instrument provided by the Managing Member to the Initial Member in connection with this Agreement and the transactions contemplated hereby contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; (xiii) The Managing Member is an accredited investor within the meaning of Regulation D under the Securities Act of The Managing Member has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Interest of the Managing Member and is able to bear the economic risk of that investment. The Managing Member has had the opportunity to ask questions of, and receive answers to such questions from, the Initial Member; (xiv) None of the representations and warranties of the Managing Member set forth in this Agreement or in any other agreement, document or instrument provided by the Managing Member to the Initial Member in connection with this Agreement and the transactions contemplated hereby contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; and (xv) The Managing Member is purchasing its Interest for its own account for investment purposes only, and not for the account of any other person and not for distribution, assignment or resale to others. (xvi) Neither the Managing Member nor any Affiliate of the Managing Member has breached the terms of the Mutual NDA or Bid Security Deposit Agreement applicable to the Managing Member or any Affiliate of the Managing Member. (b) The Managing Member acknowledges, represents and agrees as follows: Fannie Mae v5

55 (i) The Properties have been acquired by the Company in AS IS, WHERE IS, WITH ALL FAULTS condition as of the Closing Date; (ii) The Initial Member has not made, and does not and will not make, any representations or warranties, express or implied, regarding the Properties; (iii) The Initial Member is under the conservatorship of FHFA, as detailed below in Section 5.13(b); (iv) All documents and information provided by the Managing Member to the Initial Member in connection with the execution and delivery of this Agreement and the transactions contemplated hereby are subject to examination and verification by FHFA. The Managing Member represents, agrees and acknowledges that all such documents and information are true and correct as of the Closing Date, and that any misrepresentations therein may result in civil and/or criminal liability pursuant to applicable law; and (v) If the Managing Member becomes aware of fraud, waste, abuse, mismanagement, or misrepresentations hereunder, the Managing Member shall contact FHFA or the FHFA Office of Inspector General Hotline as follows: online at by telephone at (toll-free); by facsimile at ; or by mail at Hotline, FHFA- Office of Inspector General, th Street, SW, Washington, DC Representations and Warranties of the Initial Member; Fannie Mae Conservatorship (a) Representations and Warranties of the Initial Member. The Initial Member represents and warrants to the Managing Member that the following are presently true as of the Closing Date: (i) The Company is a duly organized limited liability company validly existing under the laws of the State, and has complied with all filing requirements necessary under the Act for the preservation of the limited liability of the Members; (ii) The Initial Member is a federally-chartered corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C. 1716, et seq.; (iii) The execution and delivery of this Agreement and all instruments pertaining hereto and the performance of all acts heretofore or hereafter made or taken or to be made or taken pertaining to the Company or this Agreement by the Initial Member have been or will be duly authorized by all necessary corporate or other action and the consummation of any such transactions with or on behalf of the Company will not constitute a breach or violation of, or a default under, the organizational documents or other governing instruments of the Initial Member or any agreement by which the Initial Member or any of its properties is bound, or result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Initial Member pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, operating or partnership agreement or Fannie Mae v5

56 other agreement or instrument to which the Initial Member is a party or by which any of the Initial Member s assets are subject, nor constitute a violation of any applicable law, administrative regulation, or court decree; and (iv) The amount funded to the Pre-Existing TIPA Account equals the Maximum Aggregate Pre-Existing TIPA Obligation. (b) Fannie Mae Conservatorship. (i) On September 6, 2008, the Director of FHFA appointed FHFA as Fannie Mae s conservator, pursuant to its authority under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Federal Housing Finance Regulatory Reform Act of 2008, or 2008 Reform Act (together, the GSE Act ). The conservatorship has no specified termination date and there continues to be uncertainty regarding the future of Fannie Mae, including how long Fannie Mae will continue to exist in its current form, the extent of Fannie Mae s role in the market, and what form Fannie Mae will have after the conservatorship is terminated. (ii) Upon its appointment, FHFA immediately succeeded to (A) all rights, titles, powers and privileges of Fannie Mae, and of any shareholder, officer or director of Fannie Mae with respect to Fannie Mae and its assets, and (B) title to the books, records and assets of any other legal custodian of Fannie Mae. The Conservator has since delegated specified authorities to Fannie Mae s Board of Directors and has delegated to management the authority to conduct Fannie Mae s day-to-day operations. FHFA retains the authority to withdraw its delegations at any time. (iii) FHFA has broad powers when acting as Fannie Mae s conservator. As conservator, FHFA can direct Fannie Mae to enter into contracts or enter into contracts on Fannie Mae s behalf. Further, FHFA may transfer or sell any of Fannie Mae s assets or liabilities (subject to limitations and post-transfer notice provisions for transfers of certain types of financial contracts), without any approval, assignment of rights or consent of any party. (iv) Under the GSE Act, FHFA must place Fannie Mae into receivership if the Director of FHFA makes a written determination that Fannie Mae s assets are less than Fannie Mae s obligations or if Fannie Mae has not been paying its debts, in either case, for a period of 60 days. In addition, the Director of FHFA may place Fannie Mae in receivership at his discretion at any time for other reasons, including conditions that FHFA has already asserted existed at the time the Director of FHFA placed Fannie Mae into conservatorship Duties and Obligations of the Managing Member (a) The Managing Member shall promptly take all action that may be necessary or appropriate in order to qualify the Company in each jurisdiction in which the Company is doing business or in which such qualification is necessary to protect the limited liability of the Members or is required by law. Fannie Mae v5

57 (b) The Managing Member shall diligently and faithfully devote such of its time to the business of the Company as may be necessary and shall at all times act in a fiduciary manner toward the Company and the Initial Member and to conduct the affairs of the Company in accordance with the terms of this Agreement, in a manner consistent with the purpose of the Company, and in the best interests of the Company and the Initial Member. (c) The Managing Member shall take or cause the Company to take any and all steps necessary to assure that the Company shall at all times be classified as a partnership for federal income tax purposes and not as an association taxable as a corporation. Consistent with the foregoing, the Managing Member shall not make an election pursuant to Treasury Regulation section to cause the Company to be treated as an association taxable as a corporation for federal income tax purposes. (d) The Managing Member shall file or cause to be filed for recordation in the office of the appropriate authorities of the State, and in the proper office or offices in each other jurisdiction in which the Company is formed or qualified, such certificates, including limited liability company and fictitious name certificates, and other documents as are required by the applicable statutes, rules or regulations of any such jurisdiction. (e) The Managing Member shall prepare or cause to be prepared and shall file on or before the due date (or any extension thereof) any federal, state or local tax returns required to be filed by the Company. The Managing Member shall cause the Company to pay any taxes payable by the Company. (f) The Managing Member will cause the Company to comply with all applicable federal, regional, state and local laws, rules, regulations, statutes, decisions, orders, judgments, directives, decrees, codes, guidelines or ordinances of any governmental or regulatory authority, court or arbitrator, whether now in force or as amended or enacted in the future. The Managing Member shall cause the Company to make all required filings and take all other actions within applicable time limits as necessary to comply with the covenant expressed in the foregoing sentence. (g) The Managing Member shall take all action necessary to assure that the Company shall not be deemed or required to register as an investment company (as such term is defined in the 1940 Act). (h) The Managing Member shall inform the Initial Member on a timely basis when the Managing Member becomes aware of any event or occurrence that is asserted by any federal, state or local governmental entity to be a violation of any federal, state or local statute or regulation by the Company or a Property. The Managing Member shall send a copy of such report to the Initial Member, monitor the correction of such asserted violation, and report to the Initial Member regarding the corrective measures and the adverse consequences resulting from such asserted violation, if any. With respect to any asserted building code or environmental law violations that are to be corrected or remediated during the repair or rehabilitation of any Property, the Managing Member will certify at or prior to completion of repair or rehabilitation that such asserted violations have been timely and fully corrected or remediated in strict compliance with applicable law. Fannie Mae v5

58 (i) The Managing Member shall have fiduciary responsibility for the safekeeping and use of all funds and assets of the Company, whether or not in its immediate possession or control. The Managing Member shall not employ, or permit another to employ, such funds or assets in any manner except for the exclusive benefit of the Company. The Managing Member shall not employ any Person as an employee of the Company. (j) (k) Except as expressly authorized by this Agreement, the Managing Member and its Affiliates shall not accept or receive any fee, commission, consideration, ownership interest, or other payment or remuneration from the Company or with respect to any Property. (l) The Managing Member shall use all commercially reasonable efforts to maximize the operating performance and eventual sale proceeds from the Properties; provided, however, that (i) the Managing Member shall comply with all applicable rent control laws (or any other rent restrictions that may be imposed by law) and (ii) tenants shall receive no less than sixty (60) days prior written notice of any contractual change of rent and lease terms, subject to applicable law that may require greater advance notice. (m) The Managing Member shall cause the Company to: notify tenants of housing and credit counseling opportunities available through HUD-approved housing counseling agencies in order to assist with credit repair; notify tenants that the above-described housing and credit counseling opportunities, if requested by the tenant, shall be provided at the expense of the Company (which shall be treated as a Property Expense); for existing tenants as of the Closing Date, provide such notification no later than thirty (30) days after the end of the Property Management Transition Period; for new tenants, provide such notification no later than thirty (30) days after tenant moves into the Property or executes a lease, whichever is earlier; and take all necessary actions (including making payments) to ensure the aforementioned counseling services are provided promptly to the requesting tenant. (n) The Managing Member shall timely inform current and future tenants that, at the tenant s request, the Managing Member will collect and report, or cause to be collected and reported, individual tenant rent payment histories created after the Closing Date to credit reporting agencies that accept and are able to receive such tenant payment history (except to the extent that releasing such information is prohibited by applicable law or by the tenant s lease that was in effect as of the Closing Date). (o) The Managing Member shall implement the Property Management Transition Plan in a timely manner following the Closing Date. Fannie Mae v5

59 5.15 Excess Advances The Managing Member shall make advances to the Company ( Excess Advances ) as follows: (a) Advances to Fund Certain Expenses. The Managing Member shall (except as provided in the last paragraph of this Section 5.15(a)) deposit its own funds in the Collection Account as necessary: (i) To fund Property Expenses, Real Property Transfer Taxes incurred after the Closing Date upon the direct or indirect actual or deemed sale of a Property, or an interest therein (except as otherwise provided in Section 5.10(d)), and appraisal fees designated as Company Expenses pursuant to Section 6.06(b), Custodial Fees (as provided in Section 4.02(a)(i)), and Verification Fees (as provided in Section 4.02(a)(iii)) after Asset Proceeds have been fully expended and the Working Capital Reserve Account Balance has been reduced to zero; and (ii) To fund Capital Expenditures after the Replacement Reserve Account Balance and the Working Capital Reserve Account Balance have been reduced to zero and Asset Proceeds have been fully expended. The foregoing notwithstanding, if (A) any amounts payable pursuant to Section 4.02(a) are due, (B) there are insufficient funds on deposit in the Distribution Account to pay such amounts, and (C) such amounts are required to be funded from Excess Advances pursuant to this Section 5.15(a), then the Managing Member shall deposit its own funds directly into the Distribution Account rather than the Collection Account. (b) Advances to Fund Reserves. (i) The Managing Member shall deposit its own funds in the Working Capital Reserve, as specified in Section 5.07(a)(iii); and (ii) The Managing Member shall deposit its own funds in the Replacement Reserve, as specified in Section 5.08(a)(iii). (c) Terms of Excess Advances. Excess Advances shall be treated as non-interest bearing loans, and shall be repayable as provided herein in Sections 4.02 and Initial Member. The Initial Member shall have no obligation to make Excess Ad- (d) vances Asset Sale Restrictions (a) Prohibited Dispositions. Unless otherwise Consented to by the Initial Member, (i) no Property may be sold, transferred or otherwise conveyed ( Disposed ) by the Company within ninety (90) days following the Closing Date, and (ii) no Property may be Disposed of to the Managing Member, a Property Manager, a subcontractor retained by the Managing Member or a Property Manager, or any Affiliate of any of the foregoing parties. Fannie Mae v5

60 (b) Permitted Dispositions During the Asset Sale Restriction Period. Subject to the prohibition on certain Dispositions contained in Section 5.16(a) and the annual limit on Dispositions contained in Section 5.16(c), during the Asset Sale Restriction Period the Managing Member may Dispose of Properties as provided in this Section 5.16(b): (i) The Managing Member may Dispose of Properties during the Asset Sale Restriction Period without obtaining the Consent of the Initial Member if the sale price for the Property equals or exceeds the lesser of (A) 110% of the Property s Gross Asset Value, as set forth in Exhibit B as of the Closing Date, or (B) the value specified for the Property in the Initial Member s data tape as of the Closing Date, as specified in Exhibit B; and (ii) The Managing Member may Dispose of Properties during the Asset Sale Restriction Period in transactions that do not meet the price requirements set forth in Section 5.16(b)(i) if the Initial Member Consents to such Dispositions and if one of the following requirements is satisfied: (A) The Property has been actively marketed for rent at market rents, but has remained unrented for at least one hundred twenty (120) days; (B) The Property is under lease but has not produced positive net operating income after at least six consecutive months of operations; or (C) The cost of repairs necessary to make the Property habitable exceed the value of the Property or would render the Property not commercially viable for ongoing rental operations. (c) Annual Limit During the Asset Sale Restriction Period. No more than ten percent (10%) of the total number of Properties contained within a Sub-Portfolio owned by the Company on the Closing Date may be sold in each twelve month period during the Asset Sale Restriction Period ending on an anniversary of the Closing Date; provided, however, that this limitation may be increased to a total of fifteen percent (15%) if the Properties that are Disposed of in excess of the foregoing ten percent limitation are sold to local government entities, not-forprofit entities and/or tenants then occupying the Properties who certify in writing that the Properties will be purchased for owner occupancy for a period of at least 12 months. Notwithstanding that Dispositions in a given twelve-month period may fall short of the ten percent limit, the limit in subsequent years shall not be increased Closing Fee On or before the Closing Date, the Managing Member shall pay the Closing Fee to the Initial Member for each Property. Fannie Mae v5

61 Article VI Rights and Liabilities of the Initial Member 6.01 Liability Except as otherwise expressly required by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Initial Member shall not be obligated personally for any such debts, obligations or liabilities of the Company solely by reason of being a member of the Company. The Initial Member shall be liable only to make its Capital Contribution as and when due under Section 3.02 hereunder. Except for the foregoing, the Initial Member shall not be required to make any further capital contributions or lend any funds to the Company No Right to Manage Except upon the Initial Member s appointment of itself as a Managing Member pursuant to Section 6.03(d) hereof or as otherwise expressly provided herein, the Initial Member shall not take part in the management, control, conduct or operation of the Company, or have any right, power or authority to act for or bind the Company Removal and Replacement of the Managing Member (a) The Initial Member shall have the right at any time to remove the Managing Member, effective immediately upon notice to the Managing Member, for any of the following reasons (each constituting Cause ), provided, however, that in each case notification of the existence of Cause shall first be given to the Managing Member, and the Managing Member shall be given fifteen (15) days (or such shorter period as is necessary to protect the essential interests of the Company or the Initial Member, and no cure period shall be provided in the case of clause (i) below, and the cure period with respect to clause (iii) below shall be limited to two (2) Business Days) to cure such Cause: (i) Any gross negligence, intentional misconduct, or fraud; (ii) Any breach of fiduciary duty in the performance of its duties and obligations as the Managing Member or any act outside the scope of its duties and obligations as the Managing Member pursuant to this Agreement that has a material adverse effect on the Company, the Initial Member or the Initial Member s Interest, or any action or inaction or course of conduct by the Managing Member (or any of its Affiliates) that would qualify as an event of removal or withdrawal with respect to such Managing Member under the Act; (iii) Any failure to timely remit or cause remittance of Asset Proceeds or other Company funds to the Custodian as and when required by this Agreement and the Custodial Agreement; (iv) Failure by the Managing Member in any respect to comply with any of its representations, warranties, covenants or other obligations in this Agreement or the Security Agreement (which failure has a material adverse effect on the Company, the Initial Fannie Mae v5

62 Member, or the Initial Member s Interest); provided that (A) a material failure to comply with the reporting requirements set forth in Exhibit C and (B) the purported transfer or attempted direct or indirect transfer of the Managing Member s Interest, or the transfer of a direct, indirect or beneficial interest in the Managing Member, in violation of Section 8.01 hereof, shall each be deemed to have a material adverse effect on the Initial Member and its Interest; (v) Any action, inaction, or course of conduct by the Managing Member (or any of its Affiliates) that violates any applicable federal or state law or any federal or state securities law in connection with the Company; (vi) Any action, inaction, or course of conduct by the Managing Member (or any of its Affiliates) that would cause the Company to fail to qualify as a limited liability company under the Act; (vii) Any action, inaction, or course of conduct by the Managing Member (or any of its Affiliates) that would cause, or purport to cause, the Initial Member to be liable for Company obligations in excess of its Capital Contribution; (viii) Any Event of Bankruptcy with respect to the Managing Member; (ix) Any action, inaction, or course of conduct not permitted by this Agreement or inconsistent with the purpose and investment objectives of the Company; or (x) The occurrence of a Property Management Default by the Managing Member or an Affiliated Property Manager, or with respect to a Property managed by the Managing Member or an Affiliated Property Manager. (b) If the Managing Member is removed by the Initial Member (after expiration of any applicable cure period) pursuant to Section 6.03(a), then (i) the Managing Member shall forfeit all management and voting rights to which it was otherwise entitled under this Agreement or at law (including the Act), (ii) all payments and distributions to which the Managing Member would otherwise be entitled (including fees that had accrued prior to the date of removal and repayment of any loans or advances made by the Managing Member) shall be treated as paid to the Managing Member, but shall be applied by the Company to the extent necessary to compensate and/or reimburse the Company and/or the Initial Member for any damages, claims, liabilities, costs and expenses incurred by either or both of them (including reasonable attorneys fees) as a result of the actions or inaction of the Managing Member giving rise to the removal. However, unless the Initial Member forecloses on the Managing Member s Interest or causes a forced sale of the Managing Member s Interest, as provided in Section 6.03(c), the Managing Member shall retain its economic interest in the Company. (c) Upon removal of the Managing Member for Cause, the Initial Member shall be entitled to exercise any and all rights and remedies with respect to the Collateral, specifically including the right to foreclose on the Collateral and transfer the Collateral (including, without limitation, the Managing Member s Interest) to a designee of the Initial Member, which designee may be admitted to the Company as a Substituted Managing Member. In addition, the Initial Member shall also have the right to cause a forced sale of the Interest of the Managing Member Fannie Mae v5

63 on such terms as the Initial Member may determine are commercially reasonable. The proceeds of such sale shall be applied first to cover the costs incurred by the Company and/or the Initial Member in connection with the removal of the Managing Member and such sale, and then to compensate and/or reimburse the Company and/or the Initial Member for any damages, claims, liabilities, costs and expenses incurred by either or both of them (including reasonable attorneys fees) as a result of the actions or inaction of the Managing Member giving rise to the removal. Any remaining sale proceeds after payment of the foregoing costs, compensation and reimbursements shall be paid to the Managing Member, and the Managing Member s Interest in the Company shall be terminated. (d) Upon removal of the Managing Member, the Initial Member shall have the right to admit a Substituted Managing Member (or appoint itself as Managing Member) for the Company or appoint a non-member manager of the Company, in either case providing such compensation from, and/or economic interest in, the Company as the Initial Member determines is reasonable in its sole and absolute discretion. (e) No remedy referred to in this Section 6.03 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to the Initial Member at law or in equity; and the exercise or beginning of exercise by the Initial Member of any one or more of such remedies shall not preclude the simultaneous or later exercise by the Initial Member of any or all of such other remedies. No waiver by the Initial Member of any action, inaction, occurrence or event which constitutes Cause shall in any way be, or be construed to be, a waiver of any future or subsequent action, inaction, occurrence or event which constitutes Cause Meetings The Managing Member or the Initial Member may call meetings of the Company for any matters for which the Initial Member may vote or consent (as set forth in this Agreement). The Managing Member shall give the other Members written notice of the meeting so called, which shall be scheduled not less than 15 nor more than 60 days from the date of notice. All meetings shall be held at the principal office of the Company or of the Initial Member Verification Agent (a) The Company shall engage the services of the Verification Agent pursuant to the terms of the Verification Agent Agreement to provide the Initial Member with periodic audits and reconciliations of Company Expenses ( Verification Audits ), as specified herein. The Verification Agent shall work at the sole direction, and for the sole benefit, of the Initial Member, and shall be selected, terminated and replaced by the Company at the direction of the Initial Member in its sole and absolute discretion. The Company shall not enter into the Verification Agent Agreement without the Consent of the Initial Member. By its execution of this Agreement, the Initial Member hereby appoints Situs Real LLC as initial Verification Agent pursuant to the Verification Agent Agreement by and between the Company and Situs Real LLC, dated as of the date hereof; provided, however, that notwithstanding the terms of the Verification Agent Agreement, Initial Member agrees not to request the review of more than 500 expense line items (as referenced in Exhibit B to the Verification Agent Agreement) for any single Verification Audit Fannie Mae v5

64 unless the results of such Verification Audit indicate, in Initial Member s reasonable discretion, that the review of additional expense line items is required to reconcile Company Expenses as contemplated by this Agreement. (b) The Managing Member shall make all books and records of the Company and of the Properties available to the Verification Agent during regular business hours, and shall otherwise promptly cooperate with the Verification Agent in connection with the performance of Verification Audits. (c) Initially, the Verification Agent will perform Verification Audits on a quarterly basis, with the first Verification Audit occurring in the seventh month following the month of the Closing Date and encompassing the three month period immediately preceding the seventh month. Upon the completion of four consecutive Verification Audits with no materially adverse findings, as determined by the Initial Member in its sole and absolute discretion, the frequency of Verification Audits shall be reduced to two per year (with each audit encompassing the immediately preceding six month period). (d) Notwithstanding anything in this Agreement to the contrary, the Initial Member shall have the right in its sole and absolute discretion to direct the Managing Member to enter into successor or replacement Verification Agent Agreements on behalf of the Company on such terms as the Initial Member determines are reasonable for the services to be performed thereunder Company Wind-down Mechanism (a) At any time on or after the tenth (10 th ) anniversary of the Closing Date, the Initial Member shall have the right, by written notice to the Managing Member, to offer the thenremaining Properties for purchase by the Managing Member at the aggregate fair market value for the portfolio of the remaining Properties (the FMV Price ), as determined pursuant to Section 6.06(b). The Managing Member shall have thirty (30) Business Days to accept such offer of purchase. If the Managing Member declines the offer to purchase or fails to accept such offer within the foregoing thirty Business Day period, then the Initial Member shall have the right, exercisable in its sole and absolute discretion, to require the Managing Member to sell the Properties and dissolve, wind up and liquidate the Company. If the Initial Member so elects, the Managing Member shall promptly commence marketing activities for an orderly sale of the remaining Properties. (b) The FMV Price shall be determined by consensus of the Members or by such other method of valuation as agreed to by the Members in their respective sole and absolute discretion; provided, however, that if the Members cannot agree on the FMV Price, it shall be determined as follows. The Managing Member and the Initial Member shall select a mutually acceptable appraiser who shall determine the FMV Price in accordance with the foregoing (the cost of such appraiser being a Company Expense). In the event that the parties are unable to agree upon an appraiser, the Managing Member and the Initial Member shall each select an appraiser (each Member shall pay the cost of its own appraiser.). If the difference between the two appraisals is within ten percent (10%) of the lower of the two appraisals, the FMV Price shall be the average of the two appraisals. If the difference between the two appraisals is greater than ten Fannie Mae v5

65 percent (10%) of the lower of the two appraisals, then the two appraisers shall jointly select a third appraiser (the cost of such appraiser being a Company Expense). If the two appraisers are unable jointly to select a third appraiser, either the Managing Member or the Initial Member may, upon written notice to the other, request that the appointment be made by the American Arbitration Association. If the third appraisal is less than the first two, then the FMV Price shall be the average of the two lowest appraisals. If the third appraisal is greater than the first two, then the FMV Price shall be the average of the two highest appraisals. If the third appraisal falls between the previous two appraisals, the FMV Price shall be the value established by the third appraisal. Any appraiser selected pursuant to this Section shall be an MAI appraiser with at least five (5) years of experience in valuing single family rental properties. (c) Once the FMV Price has been determined, the entire FMV Price shall be paid to the Company at the closing in cash or immediately available funds. Such closing shall occur within ninety (90) days of the determination of the FMV Price. The Initial Member shall be responsible only for its own attorneys fees incurred in connection with the closing. All other costs of the transaction shall be paid by the Managing Member. Upon receipt by the Company of the FMV Price, the Managing Member shall proceed to dissolve, wind up and liquidate the Company in accordance with Section 2.05 hereof Surveillance by the Initial Member The Managing Member acknowledges that the Initial Member may from time to time review the Managing Member s compliance with the provisions of this Agreement, and consents to and agrees to facilitate and cooperate with such review. Without limiting the foregoing, the Managing Member agrees as follows: (a) Title Searches and Inspections. After the Closing Date, the Initial Member may, in its sole and absolute discretion, and without notice to the Managing Member, conduct (or cause to be conducted) (i) searches of land records or other public records with respect to the Properties, and/or (ii) visual external inspections of the Properties, in either case for any purpose whatsoever (including to verify compliance with the Asset Sale Restrictions). (b) Inspection of Company Books and Records. After the Closing Date (but no more frequently than semi-annually), on at least ten (10) days prior written notice to the Managing Member, the Initial Member may, in its sole and absolute discretion, conduct a site visit of the Managing Member s corporate headquarters or relevant place of business. During each such visit, the Managing Member will make available to the Initial Member its senior officers and any personnel or agents working on the management of the Company and/or management and disposition of the Properties for interviews regarding compliance with the terms of this Agreement. The Managing Member will also provide to the Initial Member all records and documents related to compliance with the terms of this Agreement. (c) Interaction with Property Managers. After the Closing Date (but no more frequently than semi-annually), on at least ten (10) days prior written notice to the Managing Member, the Initial Member may, in its sole and absolute discretion, conduct site visits of Property Managers corporate headquarters or relevant places of business. During each such visit, the Property Managers will make available to the Initial Member its senior officers and any person- Fannie Mae v5

66 nel or agents working on the management of Properties for interviews regarding compliance with the terms of the Property Management Agreements. The Property Managers will also provide to the Initial Member all records and documents related to compliance with the terms of the Property Management Agreements. As provided in Section 5.06(d)(iv), the Managing Member shall not enter into any Property Management Agreement unless it contains provisions authorizing the surveillance activities specified in this Section 6.07(c) Custodian (a) Engagement. During the term of this Agreement, the Managing Member shall cause the Company to engage the services of the Custodian pursuant to the terms of the Custodial Agreement to provide the Company with the custodial and paying agency services to be provided by the Custodian pursuant to this Agreement, including holding originals of such documents and instruments of the Company as the Initial Member requires in its sole and absolute discretion. No Custodian shall be selected by the Managing Member without the Consent of the Initial Member, and the Company shall not enter into any Custodial Agreement without the Consent of the Initial Member. By its execution of this Agreement, the Initial Member hereby consents to the appointment of Wells Fargo Bank, National Association, as initial Custodian pursuant to the Custodial and Paying Agency Agreement by and between the Company and Wells Fargo Bank, National Association, dated as of the date hereof. (b) Removal. The Managing Member may cause the Company to remove the Custodian and terminate the Custodial Agreement in accordance with the terms thereof, provided, however, that the Managing Member shall provide notice to the Initial Member of such election ten (10) days prior to the delivery of any related notice to the Custodian, except (i) in the case of an uncured default by the Custodian under the Custodian Agreement, or (ii) under the circumstances described in the following provisions of this Section 6.08(b). Notwithstanding the foregoing, (i) if an Event of Bankruptcy with respect to the Custodian occurs, the Managing Member immediately shall cause the Company to terminate the Custodial Agreement in accordance with the terms thereof, and (ii) if the Custodian shall, at any time, fail to satisfy the requirements described in Section 6.08(c), the Managing Member immediately shall notify the Initial Member of such failure, and if the Initial Member so directs the Managing Member in writing, the Managing Member shall cause the Company to terminate the Custodial Agreement in accordance with the terms thereof. Upon any removal of the Custodian and termination of the Custodial Agreement by the Company, concurrently therewith the Managing Member shall cause the Company to appoint a replacement Custodian pursuant to the terms of this Agreement (which replacement Custodian shall satisfy the requirements described in Section 6.08(c)). (c) Custodian Requirements. The Custodian shall at all times be a bank or trust company organized under the laws of the United States of America or any state, having a combined capital and surplus of at least $100,000,000 (or an affiliate of a corporation meeting that requirement which guarantees the obligations and liabilities of the Custodian) and subject to supervision or examination by federal or state banking authorities. The Custodian shall at all times maintain (i) a long-term, senior unsecured debt rating of at least A2 by Moody s Investors Service, Inc., and (ii) a long-term senior unsecured debt rating of at least A from Standard & Poor s Ratings Group. Fannie Mae v5

67 Article VII Transfer of Initial Member Interests 7.01 Assignments (a) The Initial Member may freely assign or otherwise dispose of all or any part of its Interest without the consent of the Managing Member or any other Person. (b) An Assignee of an Initial Member shall have the right to receive the same share of Net Income, Net Loss, tax credits, and distributions of the Company to which the assigning Initial Member would have been entitled if no such assignment had been made by such Initial Member. The Initial Member shall retain all other rights associated with its Interest, including, without limitation, all Consent rights Substituted Initial Members The Initial Member shall have the right to cause to be admitted to the Company, as a Substituted Initial Member, any Person including, without limitation, an Assignee to whom the Initial Member has assigned all or any portion of its Interest; provided, however, that each Substituted Initial Member shall agree to be bound by all the provisions of this Agreement Managing Member Cooperation In conjunction with any assignment or other disposition of all or any part of the Initial Member s Interest in accordance with the provisions of this Article VII, the Initial Member shall be authorized to disclose information regarding the Managing Member, its Affiliates, the Company and the Properties. The Initial Member shall also be authorized to initiate contact with any lender, government agency, or other third-party whose consent may be required for such disposition, and to take any other actions needed to obtain required consents. The Managing Member will take all commercially reasonable actions necessary or appropriate to cooperate with the Initial Member in obtaining any required consents and otherwise to facilitate the disposition of the Initial Member s Interest. These actions may include, without limitation: providing financial statements; credit reports; information and reports regarding the Properties; and reaffirming the accuracy of the representations and warranties set forth in Section 5.12 hereof. Article VIII Withdrawal of the Managing Member; Transfer of the Managing Member s Interest 8.01 Transfer and Withdrawal (a) The Managing Member may not Withdraw from the Company or transfer all or any part of its Interest in the Company without the Consent of the Initial Member; provided, however, that if such Consent is given, the transferee s admission to the Company as the Substituted Managing Member shall be subject to its agreement to be bound by all the provisions of this Agreement, including all of the obligations of the Managing Member hereunder, pursuant to a written instrument satisfactory to the Initial Member in its sole and absolute discretion. Fannie Mae v5

68 (b) For purposes of this Agreement, the transfer of any direct, indirect, or beneficial ownership interest in the Managing Member which constitutes a Controlling Interest in the Managing Member shall be treated and deemed as a transfer of all of the Managing Member s Interest for all purposes of this Agreement, and shall require the Consent of the Initial Member pursuant to Section 8.01(a). The transfer of any direct, indirect, or beneficial ownership interest in the Managing Member which is less than a Controlling Interest shall be permitted without the Consent of the Initial Member, unless such transfer is to a Prohibited Person; for the avoidance of doubt, there shall be no transfer of any direct, indirect or beneficial ownership in the Managing Member to a Prohibited Person under any circumstances. (c) In the event that a Managing Member Withdraws from the Company with the Consent of the Initial Member, such Managing Member shall be and shall remain liable for all obligations and liabilities incurred by the Managing Member or the Company before such approved Withdrawal becomes effective, but, subject to the Act, shall be free of any obligation or liability incurred on account of the activities of any remaining or Substituted Managing Members or the Company from and after the date that such approved Withdrawal becomes effective (such remaining or Substituted Managing Members being liable for such obligations or liabilities). (d) In the event of the Withdrawal of the Managing Member in violation of this Section 8.01 or a removal of the Managing Member with Cause pursuant to Section 6.03, the Managing Member shall be fully liable to the Company and the remaining Members for any obligation or liability incurred on account of the activities of any Managing Member or the Company through the date of the admission of a Substituted Managing Member or, if no Substituted Managing Member is selected by the Initial Member, through the date of complete liquidation of the Company. (e) The Managing Member will notify the Initial Member within thirty (30) days after the occurrence of any transfer of a direct or indirect interest in Managing Member to any Person. (f) For purposes of this Section 8.01 and any other provision of this Agreement restricting the direct or indirect transfer of interests in the Managing Member, transfer shall be deemed synonymous with sell, convey, assign, finance, pledge, encumber, and dispose Obligation to Continue Upon the Withdrawal of a Managing Member, any remaining Managing Member(s) (including any Substituted Managing Members) shall have the right and obligation to continue the business of the Company Interest of Managing Member After Withdrawal Upon the Withdrawal of the Managing Member, the Withdrawn Managing Member shall be compensated for its Interest as follows: (a) In the event of the Withdrawal of the Managing Member in violation of Section 8.01, the Managing Member shall forfeit its Interest and shall not be entitled to any payment for its Interest or any fees otherwise payable hereunder (whether or not accrued as of the date of Fannie Mae v5

69 Withdrawal or removal), and shall also be fully liable to the Company and the remaining Members for any losses, damages, costs and expenses incurred as a result of such Withdrawal. Any loans or advances made by the Managing Member to the Company shall be repaid to the Managing Member in the same priority and at the same time as if the Managing Member had not Withdrawn from the Company; provided, however, that the Company and the Initial Member shall have the right to offset against such repayments the amount of any losses, damages, costs and expenses incurred as a result of such Withdrawal. (b) In the event of a Withdrawal of the Managing Member in conformity with Section 8.01, the Managing Member shall be entitled to payment from the Company for such amount and upon such terms as the Managing Member and the Initial Member shall mutually agree Events of Default Article IX Managing Member Defaults; Remedies The occurrence of any one or more of the following events (each an Event of Default ) shall constitute a default under this Agreement: (a) Failure of the Managing Member to timely remit or cause remittance of Asset Proceeds or other Company funds to the Custodian as and when required by this Agreement and the Custodial Agreement; (b) Event of Bankruptcy of the Company, the Managing Member, or any Affiliated Property Manager (unless, in the case of an Event of Bankruptcy of an Affiliated Property Manager, a replacement Property Manager is engaged pursuant to a Property Management Agreement approved by the Initial Member in its sole and absolute discretion within thirty (30) days after such Event of Bankruptcy); (c) Failure of the Company to comply in any material respect with its obligations under the Custodial Agreement and the Verification Agent Agreement, including, without limitation, failure to make any payment required to be made to the Custodian or the Verification Agent; (d) Failure of the Managing Member to cause any Property Expenses or Capital Expenditures to be paid in a timely manner; (e) Transfer of the Managing Member s Interest (including a deemed transfer as described in Section 8.01(b)) or Withdrawal of the Managing Member, except as permitted by Section 8.01; (f) Failure of the Company or Managing Member, as applicable, to comply in any respect with and enforce the provisions of this Agreement, including, but not limited to, the Asset Sale Restrictions and the requirement to make Excess Advances (if applicable); (g) Failure of the Company or the Managing Member, as applicable, to cause the liquidation of the Properties upon the exercise of the Company Wind-down Mechanism; Fannie Mae v5

70 (h) Failure of the Managing Member to satisfy any of its obligations in the Property Management Transition Plan (including, but not limited to, the obligation to complete the Property Transition by the end of the Property Management Transition Period); (i) Breach by the Managing Member of any representation, warranty, and/or covenant contained in this Agreement or the Security Agreement; (j) Any event constituting Cause under Section 6.03(a) hereof; (k) Failure of the Managing Member to comply in any material respect with its obligations under any Property Management Agreement; and (l) The entry of a final decree of dissolution of the Company by a court of competent jurisdiction (as described in clause (iv) of Section 2.05), unless the Initial Member has Consented to such dissolution Remedies (a) Upon an Event of Default, the Initial Member shall be entitled to exercise any remedy available to Initial Member at law or in equity (including an action for damages of any kind or for specific performance), as well as any one or more of the following remedies, in its sole and absolute discretion (subject to any applicable notice and cure period set forth in Section 6.03): (i) Removal of the Managing Member. Remove the Managing Member pursuant to Section 6.03 including, without limitation, the right to offset amounts otherwise payable to the Managing Member as specified in Section 6.03(b) and the right to foreclose on the Managing Member s Interest as specified in Section 6.03(c). (ii) Appointment of Substituted Managing Member. Appoint a Substituted Managing Member in accordance with Section 6.03, whereupon such Substituted Managing Member shall immediately succeed to all or such portion, as the Initial Member and Substituted Managing Member shall agree, of the rights, powers, duties and obligations of the Managing Member hereunder, and the Managing Member shall promptly take such actions as may be reasonably requested by the Initial Member to facilitate the transition to such Substituted Managing Member. (iii) Dismissal and Replacement of Affiliated Property Managers. Cause the dismissal of any Affiliated Property Managers, and authorize the appointment of successor Property Managers, as specified in 5.06(d)(ii) hereof. (iv) Liquidated Damages. In lieu of the remedies described in Sections 9.02(a)(i) through 9.02(a)(iii), and only if the Initial Member has not been promptly and fully reimbursed pursuant to the indemnification provisions contained in Section 5.11 hereof, the Initial Member may require the Managing Member to pay (within two (2) Business Days after the Managing Member s receipt of a demand therefor by the Initial Member in writing) liquidated damages upon the occurrence of certain Events of Default as follows: Fannie Mae v5

71 (A) Upon any action or omission of the Managing Member constituting gross negligence, intentional misconduct, fraud, breach of fiduciary duty, or violation of any law, the Managing Member shall be liable for liquidated damages in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00); (B) Upon a sale of a Property in violation of the Asset Sale Restrictions, the Managing Member shall be liable for liquidated damages equal to the greater of $25,000 or the amount of economic benefit from such sale (which cannot exceed the sale price for the Property) that is payable or distributable to the Managing Member pursuant to Section 4.02 hereof, as determined by the Initial Member, in its reasonable discretion; (C) Upon a failure by the Managing Member to make a required payment or delivery of funds to any person (the amount of such payment or delivery being referred to herein as a Defaulted Payment Amount ), including, without limitation, failure to timely remit or cause the remittance of Asset Proceeds or other Company funds to the Custodian as and when required by this Agreement and the Custodial Agreement, failure to make Excess Advances as and when due hereunder, failure to cause any Property Expenses or Capital Expenditures to be paid in a timely manner, or failure to make payments required to be made to the Custodian and Verification Agent, the Managing Member shall be liable for liquidated damages in the amount of five percent (5%) of the Defaulted Payment Amount per day until such Defaulted Payment Amount is paid or delivered as required; (D) Upon the failure of the Managing Member to satisfy any obligation of the Managing Member set forth in the Property Management Transition Plan (including, but not limited to, the obligation to complete the Property Transition by the end of the Property Management Transition Period), the Managing Member shall be liable for liquidated damages in the amount of Fifty Dollars ($50) per Property per day for each day such obligation, with respect to such Property, has not been satisfied (provided, however, that payment of such liquidated damages will not affect the Initial Member s right to retain the Property Management Transition Fee for any Properties for which no Certification of Property Management Transition has been properly executed and delivered to the Initial Member at the end of the Property Management Transition Period); and (E) Upon the failure of the Managing Member to timely provide to the Initial Member any report or information required pursuant to Section and Exhibit C hereof, the Managing Member shall be liable for liquidated damages in the amount of Two Hundred Fifty Dollars ($250) per day for each day that any such report or information has not been provided beyond the due date for such report or information. If any Event of Default described in Sections 9.02(a)(iv)(A) through 9.02(a)(iv)(E) above occurs three or more times within a single calendar year or five or more times over any period, then upon each subsequent occurrence of such Event of Default, the amount of Fannie Mae v5

72 liquidated damages provided for in Sections 9.02(a)(iv)(A) through 9.02(a)(iv)(E) respectively shall be increased by one hundred percent (100%). For the avoidance of doubt, in determining the frequency of Events of Default under this paragraph, each subsection of Section 9.02(a)(iv) shall be evaluated separately, such that Events of Default described in a given subsection of Section 9.02(a)(iv) shall not be aggregated with Events of Default described in any other subsection of Section 9.02(a)(iv). Managing Member acknowledges that the Events of Default described in this Section 9.02(a)(iv) will cause the Initial Member to incur economic damages and losses of types and in amounts that would be difficult to compute and ascertain with certainty as a basis for recovery by the Initial Member of actual damages, and that the Liquidated Damages described in this section represent a fair, reasonable, and appropriate estimate thereof. The Liquidated Damages described in this section are intended to represent estimated actual damages and are not intended as a penalty. (b) The Initial Member s rights and remedies under this Agreement are cumulative and may be exercised singularly (and in such order as the Initial Member may determine in its sole and absolute discretion) or concurrently. Neither any failure nor delay on the part of Initial Member to exercise any other right or remedy shall operate as a waiver thereof nor shall any single or partial exercise of any right or remedy preclude any other or further exercise thereof or of any other right or remedy howsoever arising. In no event shall the Initial Member have any obligation to seek or exhaust any particular remedy prior to exercising any other remedy, and the Managing Member hereby waives any and all right to require the marshalling of assets in connection with any exercise by the Initial Member of its remedies hereunder. Under no circumstances shall the Initial Member be deemed or construed to have waived its right to foreclose upon the Collateral or to exercise any of its other rights or remedies unless such waiver is in writing and executed by a duly authorized representative of Initial Member. A waiver of any right or remedy on any one occasion shall not operate as a waiver of such right or remedy on any future occasion or as a waiver of any other right or remedy Power of Attorney Upon the occurrence and continuation of an Event of Default, the Managing Member hereby irrevocably constitutes and appoints the Initial Member as its attorney-in-fact, with full power of substitution and revocation, without limitation, to execute, assign or endorse any documents on behalf of the Managing Member to transfer the Collateral on the books of the Company. It is understood and agreed that the foregoing power is irrevocable, being coupled with an interest sufficient in law to support an irrevocable power Security Interest As specified in greater detail in the Security Agreement, the Managing Member has granted to the Initial Member a first-lien security interest in the Collateral to secure the payment of all indebtedness evidenced by and the performance of all of the obligations arising under this Agreement. Fannie Mae v5

73 10.01 Books and Records Article X Books and Records; Accounting; Tax Elections, Etc. The Company shall maintain all books and records that are required under the Act or by any governmental agencies having jurisdiction. The books and records shall be available for examination and copying by any Member, or its duly authorized representatives, at the principal office of the Company at any and all reasonable times Custody of Company Funds; Bank Accounts (a) The Managing Member shall have fiduciary responsibility for the safekeeping and use of all funds and assets of the Company, whether or not in the immediate possession or control of the Managing Member. The funds of the Company shall not be commingled with the funds of any other Person and the Managing Member shall not employ, or permit any other Person to employ, such funds in any manner except for the benefit of the Company; and (b) The bank accounts of the Company shall be maintained with such financial institutions as the Managing Member shall reasonably determine. All deposits and other funds not needed in the operation of the business shall be held in cash or invested in Temporary Investments maturing within one year Fiscal and Tax Year The fiscal and taxable year of the Company shall be the calendar year or such other year end that may be required by the Code Accrual Basis The books of the Company shall be kept on the accrual basis Accountants The Accountants shall prepare, for execution by the Managing Member, all tax returns of the Company and shall prepare all annual financial reports to the Members Federal Income Tax Elections All elections required or permitted to be made by the Company under the Code shall be made by the Managing Member in such manner as will be most advantageous to the Initial Member Special Basis Adjustments In the event of a transfer of all or any part of the Interest of the Initial Member, the Company shall elect, pursuant to Section 754 of the Code, to adjust the basis of the Company property if such election would be advantageous to the Initial Member and/or its transferee. Each Fannie Mae v5

74 Member agrees to furnish the Company with all information necessary to give effect to such election Reports to Members The Managing Member shall cause to be prepared and delivered to the Initial Member the items set forth in Exhibit C attached hereto and made a part hereof Confidentiality Article XI Confidentiality (a) If the Managing Member obtains access to Confidential Information (defined below) in connection with this Agreement and/or the transactions contemplated hereby, the Managing Member agrees: (i) not to directly or indirectly disclose the Confidential Information to any third party without the Initial Member s prior written consent; and (ii) to use the Confidential Information only as reasonably necessary to perform its obligations under this Agreement. (b) Confidential Information means: (x) all information about, developed by, or belonging to the Initial Member that is disclosed or otherwise becomes known to the Managing Member in connection with this Agreement and/or the transactions contemplated hereby and that is not a matter of public knowledge; (y) all trade secrets, customer information and intellectual property owned or licensed by the Initial Member; and (z) all Protected Personal Information (as defined below), with respect to any Person, contained in the Initial Member s records, or that is disclosed to or otherwise becomes known to the Managing Member in connection with this Agreement and/or the transactions contemplated hereby (including, by way of example and without limitation, names, addresses, telephone numbers, social security numbers, drivers license numbers, credit card, debit card and other financial account numbers, payroll and other financial information, employee identification numbers and health information). (c) The terms of this Agreement, along with the fact of this Agreement s existence, are the Confidential Information of each Member, which may be disclosed by a Member, only to the extent reasonably necessary, to its legal and financial advisors and other third parties providing services in connection with this Agreement and who are under an obligation to protect the confidentiality of the Confidential Information. The Managing Member will be responsible for any violation or breach of the terms of this Agreement by Managing Member or any of Managing Member s representatives or agents or any other Person to whom Managing Member provides access to any Confidential Information. (d) The Managing Member shall use at least the same degree of care to protect the Confidential Information from unauthorized disclosure or access that the Managing Member uses to protect its own confidential information, but not less than reasonable care. The Managing Member shall immediately notify the Initial Member of any actual or suspected loss or unauthorized use, disclosure of or access to the Confidential Information of which it becomes aware and shall take all steps reasonably requested by the Initial Member to limit, stop or otherwise prevent such loss or unauthorized use, disclosure or access. Fannie Mae v5

75 (e) Information of the Initial Member shall not be considered Confidential Information if it: (i) was previously rightfully known by the Managing Member free of any obligation to keep it confidential; (ii) is or becomes publicly known through no wrongful act of the Managing Member or any of the Managing Member s Affiliates, advisors, representatives or agents; or (iii) is independently developed by the Managing Member without reference to the Confidential Information. (f) To the extent that Managing Member is legally compelled or receives any request or demand to disclose any Confidential Information pursuant to the requirements of any laws, rules or regulations, including any securities listing requirements or in connection with or pursuant to any action, suit, subpoena, arbitration or other dispute resolution process or other legal proceedings, whether civil or criminal, including before any court or administrative or legislative body, Managing Member must notify Initial Member as soon as practicable after becoming aware of or receiving notice of such legally required disclosure or request or demand for disclosure (but prior to making such disclosures) so that Initial Member can seek an appropriate protective order and/or waive Managing Member s compliance with this Agreement. Notice is to be in writing in accordance with Section of this Agreement. Notwithstanding anything to the contrary contained herein and to the extent that Managing Member is legally compelled or receives any request or demand to disclose any Confidential Information to any governmental agency, regulatory authority or self-regulatory authority (including, without limitation, bank and securities examiners) having authority to regulate or oversee any aspect of the Managing Member s business, Managing Member may disclose such Confidential Information without advance notice to Initial Member subject to Managing Member s formal request that such information be treated in confidence, if failure to disclose such Confidential Information would subject Managing Member to liability for contempt or censure or other legal penalty or liability. (g) With respect to any nonpublic personal information, as defined in the Gramm- Leach-Bliley Act, ( GLB ) and any information that is subject to any applicable privacy or data security law, including information that identifies, relates to or describes a particular individual (collectively, Protected Personal Information ), Managing Member will exercise at least the degree of care required by applicable privacy, data security and data disposal laws and the corresponding rules and regulations (collectively, Privacy Laws ). Managing Member will collect, store and dispose of Protected Personal Information: (i) in a commercially reasonable manner designed to prevent unauthorized access to or use of Protected Personal Information; and (ii) in accordance with all applicable Privacy Laws, including the Fair Credit Reporting Act and its regulations. Managing Member will not copy or reproduce Protected Personal Information, except to the extent necessary (in the Managing Member s reasonable determination) to perform Managing Member s obligations under this Agreement. Managing Member shall: (w) utilize a secure website, encryption or a similar commercially reasonable method of protecting all Protected Personal Information in its possession or control while in transit through external networks and implement commercially reasonable security measures with respect to such Protected Personal Information while in storage on networks and systems, (x) ensure that Protected Personal Information is isolated from, and not accessible to, any party, other than the party who is authorized to access it, at every technology-tier, including at the network, operating system, web server, application server and database server levels, (y) implement policies and/or procedures to prohibit its personnel from sending Protected Personal Information to, or storing Protected Personal Information on, their home computers or personal or non-work-related accounts, Fannie Mae v5

76 and (z) not send or process Protected Personal Information outside of the United States without Initial Member s written permission. In the case of an actual or suspected breach of the confidentiality of Protected Personal Information under the applicable Privacy Laws, or any unauthorized access, use, disclosure or loss of Protected Personal Information, Managing Member shall notify Initial Member immediately upon discovering such incident, and in no case later than twenty four (24) hours after Managing Member has become aware of that incident. In the case of notice to be sent to Fannie Mae under Section 12.01, such notice shall be also sent via to privacy_workinggroup@fanniemae.com. The parties shall reasonably cooperate in providing any information necessary to investigate the incident, provided that Initial Member shall have the sole right to decide whether it will investigate the incident alone (without precluding Managing Member from conducting its own investigation), investigate the incident together with Managing Member, or request that Managing Member lead the investigation and report detailed findings as to the cause and impact of the breach as well as the remediation actions taken. If Initial Member determines in its reasonable discretion that it is advisable, prudent or necessary that any affected individuals must be notified of the incident, Managing Member shall pay for all expenses related to the investigation of the incident, the cost of the notifications, the cost of credit monitoring services, and other remediation costs, including Initial Member s reasonable out-of-pocket legal expenses, and any fines imposed by any government agency. (h) Managing Member will deliver written notice to Initial Member promptly of any improper disclosure of any of the Confidential Information or of any violation or breach of any provision of this Agreement that comes to Managing Member s attention or of which Managing Member becomes aware unless such notification itself would violate any applicable law, regulation or court order. (i) Notwithstanding anything else herein to the contrary, the Initial Member and/or its Conservator may, without prior notice to or the prior consent of the Managing Member, disclose information related to the structure, processes, procedures and terms (including the Capital Contribution of the Managing Member) of the transaction, the transaction documents (including this Agreement), the identity and place of business of the parties hereto, and the location of the Properties. Any information disclosed will be redacted to exclude Protected Personal Information of the Managing Member and its Affiliates that was disclosed to or otherwise became known to Initial Member in connection with this Agreement. Under no circumstances shall the Managing Member have any claim or cause of action whatsoever related to any permitted disclosure by the Initial Member and/or the Conservator hereunder. (j) The Managing Member shall not, nor shall it permit any of its Affiliates to, use the Initial Member s (or any Affiliate s) name in connection with any of its business operations, and nothing in this Agreement is intended to permit or authorize the Managing Member or any of its Affiliates, representatives, or agents to contract on behalf of the Initial Member or any of its Affiliates. (k) Each Member acknowledges that the Mutual NDA and the Bid Security Deposit Agreement shall be superseded by the terms of this Agreement. Fannie Mae v5

77 (l) The Initial Member s obligations under this Article XI shall survive only until the expiration of the Asset Sale Restriction Period. The Managing Member s obligations under this Article XI shall survive in perpetuity Notices Article XII Miscellaneous Notices to a Member shall be sent to its address as set forth on Exhibit A. Any Member may require notices to be sent to a different address or addresses by giving notice to the Company in accordance with this Section Any notice or other communication required or permitted hereunder shall be in writing, and shall be deemed to have been received on the earliest of (a) the date of personal delivery, (b) the date that is five (5) days after the date of mailing thereof, when it is sent via the U.S. mails, (c) the date that is the next Business Day after the date it is sent by overnight delivery service, when it is sent via overnight delivery service, or (d) the date it is sent by facsimile transmission, when it is sent via facsimile transmission Amendments This Agreement may not be amended or modified except by written instrument duly authorized, executed and delivered by each Member Entire Agreement This Agreement constitutes the entire agreement among the parties and supersedes any prior agreement or understanding among them with respect to the subject matter hereof Headings All section headings in this Agreement are for convenience of reference only and are not intended to modify the meaning of any section Separability Provision If the operation of any provision of this Agreement would contravene the provisions of the Act, or would result in the imposition of general liability on any Member, such provision shall be void and ineffectual. If any provision of this Agreement or the application of such provision to any Person or circumstance shall be held invalid, the remainder of this Agreement, or the application of such provision to any Person or circumstance other than those as to which it is held invalid, shall not be affected thereby Pronouns and Plurals All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter as the identity of the Person or Persons may require. Where the context admits, the singular forms of terms used herein shall include the plural and the plural shall include the singular. Fannie Mae v5

78 12.07 Binding Agreement This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, their permitted successors, heirs, legatees, devisees, assigns, legal representatives, executors and administrators, except as otherwise provided herein Counterparts; Execution This Agreement may be executed in several counterparts, and all so executed shall constitute one agreement, binding on all the parties hereto Governing Law This Agreement shall be governed by and construed in accordance with the laws of the State, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any jurisdiction other than the State Submission to Jurisdiction Each Member hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Delaware, or the United States of America located in Delaware, for purposes of all legal proceedings arising out of or relating to this Agreement or the transaction contemplated by this Agreement. Each of the Members irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Each of the Members further irrevocably and unconditionally waives personal service of process and consents to the service of process of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, return receipt requested, to it at its address set forth in Exhibit A, such service to become effective two (2) Business Days after mailing Waiver of Jury Trial EACH OF THE MEMBERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT Construction The Members have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Members and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word including shall mean including without limitation. Whenever an obligation is placed on the Managing Member, or a Property Manager, or any Affiliate of any such party, to Fannie Mae v5

79 act or refrain from acting, such obligation shall be deemed to apply to the Managing Member, the applicable Property Manager, and any Affiliate of any such party Incorporation of Exhibits The Exhibits identified in this Agreement are incorporated herein by reference and made a part hereof Company Property; No Partition No Member or successor in interest to any Member may have any property of the Company partitioned, or file a complaint or institute any proceeding at law or in equity to have the property partitioned, and each Member for itself, its successors, representatives, and assigns, hereby waives any right to proceed under any applicable law or otherwise to partition any Company property. A creditor of a Member shall not have any recourse against the property of the Company No Benefit to Third Parties The provisions of this Agreement shall not be construed for the benefit of or as enforceable by any Person not a party hereto. [ signatures are on the next page ] Fannie Mae v5

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