MANAGEMENT AGREEMENT (Woodhollow)
Exhibit 10.4
(Woodhollow)
THIS MANAGEMENT AGREEMENT (this
“Agreement”),
is made and entered into this 12 day of December, 2008 (the “Effective Date”), by
and between RESOURCE REAL ESTATE MANAGEMENT, LLC, a Delaware limited liability
company (“RREM”) and RESOURCE
REAL ESTATE MANAGEMENT, INC., a Delaware corporation (“Manager”).
R E C I T A L
S
RRE Woodhollow Holdings, LLC, a
Delaware limited liability company (“Owner”) own that
certain multifamily apartment complex known as the Woodhollow Apartments
consisting of 108 apartment units and the common elements appurtenant thereto
located at 0000 Xxxxxxxxx Xxxxx, Xxxxxx, Xxxxx 00000 (the "Project").
Owner has engaged RREM pursuant to that
certain Asset Management Agreement dated the same date hereof to manage the
Project (the “Asset
Management Agreement”); pursuant to which, Owner has given RREM full
authority to act on its behalf. RREM desires to subcontract with and
employ Manager for the operation, direction, management and supervision of the
Project, as outlined below and Manager desires to assume such duties upon the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of
the premises and the mutual promises and covenants herein contained, RREM and
Manager agree as follows:
ARTICLE
I
DEFINITIONS
The following terms shall have the
following meanings when used in this Agreement:
1.01. Budget. A composite of
(i) an operations budget, which shall be an estimate of receipts and
expenditures for the operation of the Project (on a monthly cash basis) during a
Fiscal Year, and (ii) a capital budget, which shall be an estimate of capital
replacements, substitutions of and additions relating to the Project for a
Fiscal Year and for a five Fiscal Year period. The Budget shall
include leasing parameters for the Project.
1.02. Intentionally
Omitted.
1.03. Depository. An FDIC insured bank designated by
RREM.
1.04. Depository
Account. A trust fund
account for the benefit of Owner established and maintained in an FDIC insured
or guaranteed account to be opened by the Owner.
1.05 Disbursement
Account. A trust account
for the benefit of Owner, opened by Manager with an FDIC insured bank to pay for
“Operating Expenses” as defined in Section 4.01(b).
1.06 Fiscal/Budget
Year. The year
beginning on January 1st and
ending on December 31st.
1.07 Gross
Receipts. The entire amount of all receipts, determined on a
cash basis, from (a) tenant rentals collected pursuant to tenant leases of
apartment units, for each month during the term hereof; provided that there
shall be excluded from tenant rentals any tenant security deposits (except as
provided below); (b) cleaning, tenant security and damage deposits forfeited by
tenants in such period; (c) laundry and vending machines income; (d) any and all
other receipts from the operation of the Project received and relating to the
period in question; (e) proceeds from rental interruption insurance, but not any
other insurance proceeds or proceeds from third-party damage claims, and (f) any
other sums and charges collected in connection with termination of the tenant
leases. Gross Receipts also does not include the proceeds of (i) any
sale, exchange, refinancing, condemnation, or other disposition of all or any
part of the Project, (ii) any loans to Owner whether or not secured by all or
any part of the Project, (iii) any capital expenditures or funds deposited to
cover costs of operations made by Owner, and (iv) any insurance policy (other
than rental interruption insurance or proceeds from third-party damage
claims).
1.08 Incentive
Management Fee. The Incentive
Management Fee defined in Section 3.02 below.
1.9
Management
Fee. The Management Fee is defined in Section 3.01
below.
1.10 Project
Personnel. Those persons employed by Manager with RREM’s prior
approval to carry out Manager’s obligations under this Agreement (including, but
not limited to, the Project Manager, Assistant Manager, Maintenance Supervisor,
maintenance personnel, and other personnel necessary to the operation and
maintenance of the Project as specified in the Budget).
1.11. Security
Deposit Account. A trust account
for the benefit of Owner established by Owner and maintained in an FDIC insured
bank to hold tenant security deposits.
1.12. Term. The Term of this
Agreement shall commence on the date hereof, and shall terminate on the one-year
anniversary thereof; provided, however, that unless this Agreement has been
earlier terminated, the Term shall be automatically extended for additional one
(1) year periods, on a year-to-year basis, commencing on the day immediately
following the then-scheduled end of the Term. Notwithstanding the foregoing,
either RREM or Manager may terminate this Agreement by giving thirty (30) days
notice in writing to the other party without reason, and either party may also
terminate this Agreement for cause as specified by Sections 7.02 and 7.04
below.
1.12. Working
Capital Reserve. Twenty Thousand
Dollars ($20,000) of Working Capital reserve shall be maintained by Manager in
the Disbursement Account during the term hereof, used in connection with the
operation of the Project in accordance with the terms hereof and restored per
the terms of Sections 4.03 hereof.
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ARTICLE
II
DUTIES AND RIGHTS OF
MANAGER
2.01. Appointment
of Manager. For and in
consideration of the compensation hereinafter provided, Manager shall, and RREM
hereby grants to Manager the right to, supervise and direct the leasing,
management and operation of the Project. All services performed by
Manager under this Agreement shall be performed as an independent contractor of
RREM. All obligations or expenses incurred hereunder, for the benefit
of the Project and all purchases of or contracts for sales or services in bulk
or volume that Manager may obtain for discount or convenience in connection with
its operation of other apartment projects, shall be for the account of, on
behalf of, and at the expense of RREM (reasonably allocated between all
benefited projects) except as otherwise specifically provided
herein. RREM shall not be obligated to reimburse Manager for expenses
for: (i) office equipment or office supplies of Manager (unless incurred solely
for the Project), (ii) any overhead expenses of Manager incurred with respect to
any offices located at any place other than on the Project, (iii) costs relating
to accounting services performed hereunder, (iv) any salaries of employees of
Manager not accounted for in the approved Budget and its supporting payroll
schedule, or (v) any travel expenses of employees of Manager in supervising the
on-site Project Personnel and the operation of the Project, unless approved in
advance in writing by RREM.
2.02. General
Operation. Subject to the
limitations imposed by the Budget from time to time, Manager shall operate the
Project in the same manner as is customary and usual in operation of comparable
facilities, and shall provide such services as are customarily provided by
operators of high quality projects of comparable class and standing consistent
with the Project’s facilities.
In addition to the other obligations
of Manager set forth herein, Manager shall render the following services and
perform the following duties for Owner in connection with the Project in a
commercially diligent and efficient manner: (a) maintain businesslike
relations with tenants whose service requests shall be received, considered,
recorded and acted upon in systematic fashion in order to show the action taken
with respect to each; (b) collect all monthly rentals due from tenants and rent
from users of recreational facilities in the Project, if any; (c) request,
demand, collect, and receive any and all charges or rents which become due to
Owner, and at Owner’s expense and RREM’s direction, coordinate and oversee such
legal action as may be necessary or desirable to collect rent and/or evict
tenants delinquent in payment of monthly rental or other charges (security
deposits, late charges, etc.) as more particularly described in Section 2.09
below; (d) prepare or cause to be prepared for execution by the Owner
(and/or RREM, as applicable) all forms, reports and returns, if any, required to
be filed by or on behalf of the Owner under applicable federal, state or local
laws and any other requirements relating to the employment of personnel
(anything contained herein to the contrary notwithstanding, however, Manager
shall not be obligated to prepare any of Owner’s or RREM’s state or federal
income tax returns; (e) use all reasonable efforts at all times
during the term of this Agreement to operate and maintain the Project according
to the highest standards achievable consistent with the operation of comparable
quality units; (f) advertise when necessary, within the constraints of the
Budget, the availability of units for rental and display “for rent” or other
similar signs upon the Project, it being understood that Manager may install one
or more signs on or about the Project stating that the Project is under
management of Manager and may use, in a tasteful manner, Manager’s name and logo
in any display advertising of the Project; (g) sign, renew and cancel tenant
leases for the Project as agent for owner, in compliance with standards
established by RREM and approved by Owner, on the lease form
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provided
by Manager, and on terms based upon criteria approved from time to time by Owner
and based upon Manager’s recommendations.
It is understood and agreed, however,
that Manager shall not, and does not, provide security services to the
Project. Should RREM choose to do so, RREM may direct that Manager,
on Owner’s behalf, to separately contract with a non-affiliated company (a
“Security
Company”) providing alarm systems, patrol and similar services (“Security
Services”). Manager shall have no duty to supervise or control
performance of Security Services for any Security Company but Manager shall, if
requested by RREM, evaluate and report its findings to RREM, as
directed. Without limiting the provisions of Section 6.03 of this
Agreement, RREM shall indemnify, defend, protect and hold Manager harmless for,
from and against any loss, liability, cost, expense, damage claim or cause of
action, including, without limitation, attorneys’ fees, court costs and other
litigation expenses and costs, arising from any personal injury, loss of
property or other matter occurring on or about the Project, relating to the acts
or omissions of a Security Company, any claimed inadequacy of Security Services,
the failure to provide Security Services or any other matter relating to the
security of the Project. The indemnification obligations of RREM in
this Section 2.02 shall survive the expiration or earlier termination of this
Agreement.
2.03. Budget.
(a) Manager
will submit to Owner for Owner’s approval, an initial capital and operating
budget (the “Initial
Budget”) for the first fiscal year (or partial fiscal year as
appropriate) on or before January 31, 2009 Manager shall submit to
RREM for Owner’s approval no later than sixty (60) days prior to the beginning
of each successive Fiscal Year the Budget for the ensuing Fiscal
Year. Manager shall provide RREM with such information regarding the
Budget as may be, from time to time, reasonably requested by
RREM. Upon receipt of the Budget from Manager, RREM shall promptly
deliver the Budget to Owner. Owner shall approve or object to the
Budget. Manager may proceed under the terms of the proposed Budget
for items that are not objected to and may take any action with respect to items
not approved if the expenditure is (i) less than Two Thousand Five Hundred
Dollars ($2,500), (ii) is, in the Manager’s reasonable judgment, required to
avoid personal injury, significant property damage, a default under any loan
encumbering the Project, a violation of applicable law or the suspension of a
service or (iii) non-discretionary items such as real estate taxes, insurance or
utilities. In the event that the items that are objected to are operational
expenditures (but not including real estate taxes, insurance, utilities and
similar items that cannot be controlled by Manager), as opposed to capital
expenditures, Manager shall be entitled to oversee and supervise the operation
of the Project using the prior year’s budget until the approval is
obtained. If the Budget is not approved, upon the request of RREM,
Manager will prepare and deliver to RREM, a revised Budget for the Fiscal
Year.
(b) Together
with submission of the annual Budget, Manager shall submit to RREM for approval
by Owner an operating plan for the general operation of the Project for the
subsequent Fiscal Year, including a proposed list of improvements to the
Project, general insurance plan, marketing plan and plan for the general
operation and maintenance of the Project (the “Operating
Plan”). Upon the request of RREM, Manager will prepare and
deliver to RREM, a revised Operating Plan for the Fiscal Year.
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(c) In
the event there shall be a substantial discrepancy between the actual results of
operations for any month and the estimated results of operations for such month
as set forth in the Budget or the Operating Plan, Manager shall, upon request,
furnish to RREM within fifteen (15) days after the expiration of such month a
written explanation as to why the discrepancy occurred. If
substantial variations have occurred or are anticipated by Manager during the
course of any Fiscal Year, Manager, upon RREM’s reasonable request, shall
prepare and submit to RREM a revised Budget and/or Operating Plan covering the
remainder of the Fiscal Year.
2.04. Project
Personnel. Manager shall use
reasonable and prudent efforts to investigate, hire, train, instruct, pay,
promote, discharge and supervise the work of all its employees involved with the
management of the Project. Since it is acknowledged that the Project
may need a fulltime resident manager on site, it is agreed that one of the
Project Employees (including his/her spouse and dependent children) may live
rent-free in an apartment unit designated by RREM, and receive, in addition,
salary and normal benefits approved in advance and accounted for in the
Budget. All Project Personnel shall be employees of
Manager.
RREM
shall immediately reimburse Manager each pay period for the total aggregate
compensation, including salary, and other related costs and fringe benefits,
payable with respect to the Project Personnel who shall be accounted for in the
approved Budget and supporting payroll schedule, any temporary employees working
at the Project, the Project’s proportionate share of all costs relating to
roving maintenance and similar personnel, but only to the extent reflected in
the approved Budget. The term “fringe benefits” as used herein shall
mean and include the employer’s contribution of F.I.C.A., unemployment
compensation and other employment taxes, worker’s compensation, group life and
accident and health insurance premiums, 401K contributions, performance bonuses,
and disability and other similar benefits paid or payable by the Manager to its
employees in other apartment projects operated by Manager, but only to the
extent reflected in the approved Budget.
2.05. Contracts
and Supplies. Except as
otherwise provided herein, Manager, as sub-agent for Owner and at Owner’s
expense, and without compensation directly or indirectly to Manager, except as
expressly set forth herein, shall enter into written agreements with (i)
concessionaires, licensees, or other intended users of the facilities of the
Project, (ii) contractors furnishing services to the Project, including, but not
limited to, utilities, janitorial, trash collection, cleaning, vermin
extermination, furnace and air conditioning maintenance, security protection,
pest control, landscape and irrigation system maintenance, repair, maintenance,
and replacement of elements of the buildings, recreational facilities or common
areas (to the extent such work cannot reasonably and less expensively be done by
Project Personnel), and any other services that are reasonably
necessary to the maintenance and operation of first-class projects comparable to
the Project (herein called “Customary
Services”). Manager shall place purchase orders as and when
necessary to assure timely and adequate availability of such equipment, tools,
appliances, materials and supplies as are necessary to properly maintain and
operate the Project. Notwithstanding the foregoing, all contracts
(and renewals thereof) entered into by Manager, unless Manager has obtained
RREM’s prior written consent, must be: (a) cancelable without penalty
upon not more than thirty (30) days notice: and (b) have terms of one (1) year
or less, and (c) require the provider of such Customary Services pursuant to
such contract to comply with RREM’s insurance requirements. Manager
shall obtain competitive bids annually for any such contracts and, in connection
therewith, shall investigate the competency and history of all potential
bidders; develop and submit detailed specifications for work to be performed;
solicit and obtain such bids; conduct an analysis of bid results; and shall
submit all bids to RREM for review
5
and
approval, together with Manager’s recommendation with respect
thereto. Manager shall continually inspect the Project and ensure
that all contract specifications are being properly administered, and conduct
periodic complete walk-throughs of the Project with specific Customary Service
providers as often as reasonably necessary. Manager shall use
reasonable efforts to purchase all goods, supplies or services at the lowest
cost reasonably available from reputable sources in the metropolitan area where
the Project is located. In making any contract or purchase, Manager
shall use reasonable efforts to obtain favorable discounts for Owner and all
discounts, rebates or commissions under any contract or purchase order made
hereunder shall inure to the benefit of Owner. Manager shall make
payments under any such contract or purchase order to enable Owner to take
advantage of any such discount if Owner and/or RREM provides sufficient funds
therefor.
2.06. Alterations,
Repairs and Maintenance.
(a) Manager
shall make or install, or cause to be made and installed at Owner’s expense and
in the name of Owner, all necessary or desirable repairs, interior and exterior
cleaning, painting and decorating, plumbing, alterations, replacements,
improvements and other normal maintenance and repair work on and to the Project
as are customarily made by Manager in the operation of first-class apartment
projects; provided that no unbudgeted expenditure may be made for such purposes
without the prior approval of RREM, except emergency repairs involving manifest
danger to life or property, or when necessary to avoid criminal or civil
liability, or for the safety of the tenants, or to avoid the suspension of any
necessary service to the Project(“Emergency
Repairs”). Emergency Repairs may be made by the Manager
without prior approval and irrespective of the cost limitations imposed by
Section 2.03(a), provided that in each such instance, Manager shall, before
causing any such Emergency Repairs to be made, use reasonable efforts under the
circumstances to notify RREM of that repair. All such work shall be
performed by Project Personnel unless it is not reasonable for them to do so due
to the expertise, time constraints, or other considerations involved, and/or
because having them do so is more expensive.
(b) In
accordance with the terms of the approved Budget or upon written demand and/or
approval (except in the case of emergency) of RREM, from time to time during the
term hereof Manager shall, at Owner’s expense, make all required capital
improvements, replacements or repairs to the Project. Subject to
obtaining RREM’s prior written approval in regard to sums necessary to cover
costs of unbudgeted capital improvements, Manager shall first use any excess
funds in the Depository Account that are not committed to operating expenses,
and then shall use funds furnished by Owner for that purpose. The
award of a contract for a capital improvement exceeding $5,000 in cost shall be
approved by RREM.
2.07. Licenses
and Permits. Manager shall apply for, obtain, and maintain, in
the name and at the expense of Owner, all licenses and permits (including
deposits and bonds) required of Owner or Manager in connection with the
management and operation of the Project. RREM shall cause Owner to
execute and deliver any and all applications and other documents and to
otherwise cooperate to the fullest extent with Manager in applying for,
obtaining and maintaining such licenses and permits.
2.08. Compliance
with Laws. Manager shall use
all reasonable efforts to cause all such acts and things to be done in and about
the Project as are required by this Agreement or by any laws,
6
regulations
and requirements of any federal, state or municipal government having
jurisdiction respecting the use or manner of use of the Project or the
maintenance or operation thereof.
2.09. Legal
Proceedings. Manager shall
institute, in its own name or in the name of Owner and/or RREM (as applicable),
all legal actions or proceedings that Manager deems reasonable in order to
collect rent, or other income from the Project pursuant to the Leases and to
evict and dispossess tenants or other persons in possession, or to otherwise
cancel, terminate, or enforce any lease, license, concession or Customary
Service contract for the breach thereof by the tenant, licensee, concessionaire,
or contractor. All decisions with respect to settlement or case
management shall be made only after consultation with and approval by
RREM. In each such instance where expenses related to such action are
expected to exceed $2,000.00 Manager shall, before taking or causing to be taken
any such action, use reasonable efforts under the circumstances to notify RREM
of the need for this action, and obtain RREM’s approval. Manager
shall promptly notify RREM of any order, rule, or determination or notice of
violation of any law or order of any governmental authority.
2.10. Debts of
Owner. In the
performance of its duties as Manager, Manager shall act solely on behalf of
Owner in Manager's capacity as an independent contractor. All debts
and liabilities to third persons incurred by Manager pursuant to this Agreement
and in the course of its operation and management of the Project shall be the
debts and liabilities of Owner only, and Manager shall not be liable for (and is
hereby indemnified with respect to) any such debts or liabilities, except to the
extent Manager has exceeded its authority hereunder. Manager shall
have no responsibility to make payments on any indebtedness incurred directly by
Owner whether or not secured by the Project or any portion
thereof. Without limiting the provisions of Section 6.03 of this
Agreement, RREM shall indemnify, defend, protect and hold Manager harmless for,
from and against any loss, liability, cost, expense, damage claim or cause of
action, including, but not limited to attorneys’ fees, court costs and other
litigation expenses and costs, arising from any debt, liability or payment for
which Manager is being exculpated pursuant to this Section 2.10. The
indemnification obligation of RREM in this Section 2.10 shall survive the
expiration or earlier termination of this Agreement.
ARTICLE
III
MANAGEMENT
FEES
3.01 Management
Fee. In
addition to the other reimbursements to Manager provided for elsewhere in this
Agreement, RREM shall, on a monthly basis, pay to Manager for its property
management services a Management Fee equal to three percent (3.0%) of Gross
Receipts (or a prorated portion for the first month if the Commencement Date
occurs on other than the first day of the month). If this Agreement
is terminated anytime other than last day of a calendar month, other than for
cause, Manager shall be entitled to receive the Management Fee on a pro rated
basis for the month this Agreement is terminated.
3.02 Incentive
Management Fee, In addition to
the Management Fee, RREM shall, on an annual basis, pay to Manager, an Incentive
Management Fee equal to thirty percent (30%) of the actual income for each
calendar year in excess of 110% of the budgeted income for such calendar year,
not to exceed $7,500.
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3.03 Construction
Management Fee. If Manager is
requested by RREM to provide construction management services for new capital
improvements (and not maintenance or repairs), RREM shall pay a construction
management fee to Manager equal to seven and one-half percent (7.5%) of the
total cost of such work performed costing $50,000 or more.
3.04 Other
Fees. With the prior
approval and direction of RREM, Manager may obtain services and materials,
including, but not limited to, advertising, consulting, computer hardware and
software, forms for use at the Project, contract services, accounting and
bookkeeping services and building materials, through the organization
subsidiaries or affiliates of Manager for the benefit of the Project, provided
the quality of service and the price thereof is competitive with comparable
prices and services offered by third parties, and the costs therefore shall be
reimbursed by through RREM. All discounts, rebates and other savings
realized as a result of such services being supplied by an affiliate of Manager
shall inure solely to the benefit of Owner.
3.05 Place of
Payment. All sums payable
by RREM to Manager hereunder shall be payable to Manager at 00000 XXX Xxxxxxx,
Xxxxx 000, Xxxxx, XX 00000, unless the Manager shall from time to time specify a
different address in writing.
ARTICLE
IV
PROCEDURE FOR HANDLING
RECEIPTS AND OPERATING CAPITAL
4.01. Bank
Deposits.
(a) All monies received by Manager for or on behalf of Owner shall be
deposited into the “Depository Account” which shall be an interest bearing
account designated by RREM in Owner’s name. Manager shall account for
such funds consistent with the system of accounting for the Project approved by
Owner. All funds on deposit shall be and remain under the sole and
exclusive control of Owner, subject to the provisions hereof.
(b) A “Disbursement Account” shall
also be established to pay the normal and reasonable expenses incident to the
operation and maintenance of the Project. The Disbursement Account
shall be under the signatory control of the Manager.
4.02. Security
Deposits. Manager shall
comply with all applicable laws with respect to security
deposits. All security deposits and other funds received by Manager
shall be promptly deposited in the Security Deposit Account and at all times be
the property of Owner, subject to Owner’s obligation to refund the same to
tenants if and when required by the leases.
4.03. Transfer
and Disbursement Account. Upon written
request of Manager with supporting documentation, RREM shall weekly wire funds
from the Depository Account into the Disbursement Account in the amount of
disbursements to be made on behalf of the Project approved by
RREM. Manager shall write checks from the Disbursement Account
to pay for (i) costs and expenses of maintaining, operating, leasing, and
supervising the operation of the Project, in accordance with the approved Budget
and (ii) security deposit reimbursement to tenants to the extent they are
entitled reimbursement under the leases, or payment of rent, damages, or other
purposes for which security deposits may be used pursuant to the
leases.
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4.04. Authorized
Signatories. In addition to
any signatory designated by Owner, any persons from time to time designated by
Manager, and approved in writing by Owner, shall be authorized signatories on
the Disbursement Account, and shall have authority to make disbursements from
such Disbursement Account for the purpose of fulfilling Manager’s obligations
hereunder. Funds over Five Thousand Dollars ($5,000.00) may be
withdrawn from the Disbursement Account in accordance with this Article IV, only
upon the signature of at least two (2) individuals who have been granted that
authority by Manager and funds over Twenty Five Thousand Dollars ($25,000) may
be withdrawn from the Disbursement Account in accordance with this Article IV
only upon the additional prior written approval of Owner, excluding property
taxes. All persons who are authorized signatories or who in any way
handle funds for the Project (on-site or off-site) shall be insured for
dishonesty in the minimum account of $500,000.00 per occurrence or loss with not
more than a $5,000.00 deductible. A certificate confirming such
insurance naming Manager, RREM and Owner as named insureds and confirming that
it will not be modified or cancelled without at least thirty (30) days prior
written notice to RREM shall be delivered to RREM within 10 days after the date
hereof. Any expense relating to such bonds shall be paid by Manager without
reimbursement.
ARTICLE
V
Accounting
5.01. Books of
Accounts. Manager shall
maintain adequate and separate books and records for the Project with the
entries supported by sufficient documentation to ascertain their accuracy with
respect to the Project. RREM agrees to provide to Manager any
financial or other information reasonably requested by Manager to carry out its
services hereunder. Manager shall maintain such books and records at
the Manager’s office, at the Project or at a designated office readily
accessible to the RREM and/or Owner. Manager shall ensure such
control over accounting and financial transactions as is commercially reasonably
necessary to protect the Owner’s assets from theft, error or fraudulent activity
by Manager’s employees. Manager shall bear losses arising from such
instances, including, without limitation, the following: (a) theft of
assets by Manager’s employees, principals or officers or those individuals
associated or affiliated with Manager; (b) overpayment or duplicate payment
of invoices arising from either gross negligence or willful misconduct, unless
credit is subsequently received; (c) overpayment of labor costs arising
from either the gross negligence or willful misconduct of Manager, unless credit
is subsequently received by the Owner; (d) overpayment resulting from
payment from suppliers to Manager’s employees or associates arising
from the purchase of goods or services for the Project; and
(e) unauthorized use of facilities by Manager or Manager’s employees or
associates.
5.02. Financial
Reports. No later than the
fifteenth (15th)
calendar day following the close of each month and calendar quarter, Manager
shall furnish to RREM a report of all significant transactions occurring during
the prior month as described on Exhibit A attached hereto. Manager
also shall deliver to RREM within a reasonable time after (i) the close of a
calendar year and (ii) the termination of this Agreement, a balance sheet for
the Project. This report shall show all collections, delinquencies,
uncollectible items, vacancies and other matters pertaining to the management,
operation and maintenance of the Project during the month. Upon the
termination of this Agreement, Manager shall deliver to RREM all reports
described on Exhibit A within thirty (30) calendar days of the effective date of
termination. The statement of income and expenses, the
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balance
sheet and all other financial statements and reports shall be prepared on an
accrual basis in accordance with, to the extent possible, generally accepted
accounting principals (except that footnote disclosures are not
required). Manager may, but shall not be required, to, obtain audited
financial statements for Project. Upon request by RREM, Manager shall
also comply with all reporting requirements relating to the operation of the
Project required under any mortgage or deed of trust affecting the Project.
Notwithstanding the foregoing, RREM reserves the right to reasonably request
that the financial reports be provided in a different format at no additional
cost.
5.03. Supporting
Documentation. As additional
support to the quarterly financial statement, unless otherwise directed by RREM,
and at the expense of RREM, Manager shall maintain and make available at
Manager’s office or at the Project or at a designated office readily accessible
to RREM and/or Owner, copies of the following: (a) all bank statements,
bank deposit slips, bank debit and credit memos, canceled checks and bank
reconciliations; (b) detailed cash receipts and disbursement records;
(c) detailed trial balance for receivables and payables and billed and
unbilled revenue items; (d) rent roll of tenants; (e) paid invoices
(or copies thereof); (f) summaries of any adjusting journal entries;
(g) supporting documentation for payroll, payroll taxes and employee
benefits; (h) appropriate details of accrued expenses and property records;
(i) information regarding the operation of the Project necessary for
preparation of the tax returns for the Owner; and (j) market study of
competition (quarterly only). In addition, Manager shall deliver
quarterly to RREM with the quarterly financial statement, copies of the
documents described in (a) (statements and reconciliations only), (b), (c),
(d) and (h) above. Manager shall deliver a copy of the document
described in (j) to RREM upon receipt of a written request.
ARTICLE
VI
GENERAL
COVENANTS
6.01. Operating
Expenses. RREM shall cause
Owner to be solely responsible for the costs and expenses of maintaining and
operating the Project in accordance with the provisions of this Agreement, and
shall pay all such costs and expenses, to the extent contemplated by this
Agreement or incurred in accordance with the Budget, except if such costs and/or
expenses are (i) attributable to costs arising from gross negligence or
willful misconduct of Manager or Manager’s associates and/or employees; or
(ii) cost of insurance purchased by Manager for its own
account.
6.02. Right of
Inspection and Review. Owner, RREM and
its accountants, attorneys, and agents shall have the right to enter upon any
part of the Project at all reasonable times during the term of this Agreement
for the purpose of examining or inspecting the Project or examining or making
extracts of books and records of the Project, but any inspection shall be done
with as little disruption to the business of the Project as possible during
normal office hours and with reasonable notice.
6.03. Indemnification
and Hold Harmless.
(a) Indemnification
and Hold Harmless By RREM. RREM shall indemnify, hold harmless
and defend Manager (and Manager’s partners, directors, shareholders, officer,
employees and agents), with counsel reasonably satisfactory to Manager for, from
and against any and all liabilities, claims, causes of action, losses, demands
and expenses whatsoever including, but not
10
limited
to attorneys’ fees, court costs and other litigation expenses and costs arising
out of or in connection with the ownership, maintenance or operation of the
Project or this Agreement, except to the extent arising directly from the gross
negligence or willful misconduct of Manager (collectively “Claims”), including
but not limited to Claims involving security services as to which Manager is
acting under the express or implied directions of RREM, and the loss of use of
property following and resulting from damage or
destruction. Owner’s Liability Insurance (as defined in Section 8.01
below) will be required to cover all actions of Manager where the Owner’s
insurer agrees to provide Owner and Manager a defense (whether or not such
defense is provided with a reservation of rights by the insurer) in accordance
with the terms of such insurance policy. The indemnification by RREM
contained in this Section 6.03 is in addition to any other indemnification
obligations of RREM contained in this Agreement.
(b) Indemnification
By Manager. Manager shall indemnify Owner and RREM (and their
respective directors, shareholders, members, trustees, agents, employees and
officers) with counsel reasonably satisfactory to RREM for, from and against any
and all Claims which arise out of the gross negligence or willful misconduct of
Manager.
(c) Survival
of Covenants. The indemnification and hold harmless
obligations of the parties in this Section 6.03 shall survive the expiration or
earlier termination of this Agreement.
6.04.
Covenants
Concerning Payment of Operating Expenses. If there are not
sufficient funds in the Depository Account to move to the Disbursement Account
in order to make any payment of operating expenses, Manager shall immediately
notify RREM in writing. Upon receipt of written notice by RREM, RREM
will notify Owner of the deficiency. Owner will deposit funds within
fifteen (15) days of written notification to RREM into the Disbursement
Account. Owner further recognizes that the Project may be operated in
conjunction with other projects and that costs may be allocated or shared
between such projects on a more efficient and less expensive method of operation
in an effort to save costs and operate the Project in a more efficient
manner.
ARTICLE
VII
DEFAULTS; TERMINATION
RIGHTS
7.01.
Default
by Manager. Manager shall be
deemed to be in breach hereunder in the event Manager shall fail to keep,
observe or perform any covenant, agreement, term or provision of this Agreement
to be kept, observed or performed by Manager, and such breach shall continue for
a period of thirty (30) days after notice thereof by RREM to Manager, or if such
breach cannot be cured within thirty (30) days, then such additional period as
shall be reasonable, provided that Manager is capable of curing same and is
diligently proceeding to cure such breach, and provided further that if such
breach is a failure to pay money, such, cure period shall be five (5) days after
notice from RREM with no additional period thereafter.
7.02. Remedies
of RREM. Upon the
occurrence of a breach by Manager as specified in Section 7.01 hereof, RREM
shall be entitled to immediately terminate this Agreement and RREM shall have
the right to pursue any other remedy it may have at law or in
equity. Following such a termination, RREM shall have no further
obligation to pay any Fee due
hereunder. Notwithstanding
11
such
termination, Manager shall not be relieved of any liability arising as a result
of Manager’s default and the resulting termination of this
Agreement.
7.03. Defaults
by RREM. RREM shall be
deemed to be in breach hereunder in the event RREM shall fail to keep, observe
or perform any covenant, agreement, term or provision of this Agreement to be
kept, observed or performed by RREM, and such breach shall continue for a period
of thirty (30) days after written notice thereof by Manager to RREM, or if such
breach cannot be cured within thirty (30) days, then such additional period as
shall be reasonable provided RREM is capable of curing same and is diligently
proceeding to cure such breach, provided that such breach is a failure to pay
money, such cure period shall be five (5) days after written notice from Manager
with no additional period thereafter.
7.04. Remedies
of Manager. Upon the occurrence of a breach by RREM as
specified in Section 7.03 hereof, Manager shall be entitled to immediately
terminate this Agreement and upon any such termination by Manager pursuant to
this Section 7.04, Manager shall have the right to pursue any other remedy it
may have at law or in equity, it being expressly understood that following such
a termination, Manager shall have no further obligation to perform any of its
obligations hereunder other than pursuant to Section 7.05 below, however,
notwithstanding such termination, RREM shall continue to be obligated to pay and
perform all of its obligations which have accrued as of the date of
termination.
7.05. Expiration
of Term. Upon the expiration of the Term hereof pursuant to
Section 1.12 hereof, or the earlier termination hereof pursuant to either of
Section 7.02 or 7.04, Manager shall deliver to Owner all funds, including tenant
security deposits, but save and except such sums that are due and owing to
Manager hereunder and the books and records of Owner then in the possession or
control of Manager. Within thirty (30) days following expiration or
termination, Manager shall deliver to Owner a final accounting, in writing, with
respect to the operations of the Project. This provision shall
survive the expiration or earlier termination of this Management
Agreement.
7.06 Termination
of Asset Management Agreement. Notwithstanding
anything to the contrary contained herein, unless the holder of the mortgage on
the Property otherwise determines to keep this Management Agreement in effect,
this Management Agreement shall automatically terminate upon Manager receiving
written notification from RREM or Owner that Owner has terminated the Asset
Management Agreement. Upon such termination, the parties hereto shall
have no further obligation to the other, unless otherwise specifically set forth
herein.
ARTICLE
VIII
INSURANCE
8.01 Owner's
Liability Insurance. During the term
of this Agreement and all renewals thereof, RREM shall cause Owner, at Owner's
expense, to carry and maintain primary commercial general liability insurance on
an "occurrence" basis, naming Manager as an additional insured, with limits of
not less than Five Million Dollars ($5,000,000.00) per occurrence (the "Owner's Liability
Insurance"). RREM shall cause Owner to name Manager as an
additional insured on Owner’s
12
Liability
Insurance. If the Owner's Liability Insurance has a deductible, or
similar clause, Owner shall be responsible for paying any losses that are not
covered by the Owner's Liability Insurance because of said deductible or similar
clause.
8.02. Insurance
Carried by Manager. Manager shall maintain the following
insurance during the term of this Agreement, as approved by RREM:
(a) Workers’
Compensation Insurance complying with the laws of the State in which the work is
to be performed covering all its employees whether or not working at or in
connection with the Project, as a Project Personnel expense under Section 2.04
above;
(b) Employers’
Liability Insurance with minimum liability limits of $1,000,000 Bodily Injury by
Accident per accident, $1,000,000 Bodily Injury by Disease per person and
$1,000,000 Bodily Injury by Disease policy limit, at Manager’s expense as part
of its overhead;
(c) Commercial
General Liability Insurance with minimum limits of $1,000,000 Combined Single
Limit for Bodily Injury and Property Damage, each occurrence/$2,000,000 General
Aggregate, at Manager’s expense as part of its overhead;
(d) Automobile
Liability Insurance covering non-owned and hired automobile equipment with
minimum limit of $1,000,000 for injury or death of any one person, for any
occurrence and property damage, at Manager’s expense as part of its overhead;
and
(e) Employees
Dishonesty Insurance as described in Section 4.04 above, at Manager’s expense as
part of its overhead.
Insurers
providing the coverage to Owner and Manager described in this Article VIII shall
have a Best’s rating of A-VII or better. RREM reserves the right to
approve the insurer’s form and content of Manager’s insurance
policies. All policies will contain severability of interest
provisions. Within thirty (30) days of the date of this Agreement,
RREM shall provide Manager with Certificates of Insurance evidencing Owner’s
insurance. Such certificates will be endorsed to provide thirty (30)
days prior written notice to the insured and all additional insureds of any
material change or cancellation of coverage.
8.03. Owner's
Liability Insurance shall be Primary. In connection
with claims by third parties, as between Owner's Liability Insurance and
Manager's Liability Insurance, Owner's Liability Insurance shall be considered
the primary coverage. No claim shall be made by Owner or its
insurance company under or with respect to any insurance maintained by Manager
except in the event that Owner's Liability Insurance is exhausted or in the
event such claim is caused solely by the gross negligence (except actions or
policies specifically approved or required by Owner) or willful misconduct
(except actions or policies specifically approved or required by Owner) on the
part of Manager or Manager's employees. RREM shall cause Owner
to have its insurance carrier accept and endorse these coverage
requirements.
8.04. Waiver of
Subrogation. Each insurance
policy maintained by Owner or by Manager as required herein shall contain a
waiver of subrogation clause, so that no insurer shall have any claim over or
against Owner or Manager, as the case may be, by way of subrogation or
otherwise, with
13
respect
to any claims that are insured under such policy. All insurance
relating to the Project shall be only for the benefit of the party securing said
insurance and all others named as insureds. Owner and Manager hereby
release each other from all rights of recovery under or through subrogation or
otherwise for any and all losses and damages to the extent of such insurance
coverage and agree that no insurer shall have a right to recover any amounts
paid with respect to any claim against Owner or Manager by subrogation,
assignment or otherwise.
8.05. Handling
Claims. Manager shall
report to RREM promptly in writing all accidents and claims of which it is aware
for damage and injury relating to the ownership, operation, and maintenance of
the Project and any damage or destruction to the Project coming to the attention
of Manager. Manager shall not settle on Owner's behalf any claims with Owner’s
insurers or any third-party claimant without Owner’s prior consent.
8.06. Environmental
Matters.
(a) Manager
shall not knowingly place or cause to be placed on, in, under or around the
Project, any Hazardous Substances (as defined below). Manager shall take all
commercially reasonable steps to cause any tenants who do same to remove such
Hazardous Substances in a timely manner. Without limiting the
provisions of Section 6.03 of this Agreement, RREM agrees to defend, indemnify,
and hold harmless Manager and its partners, officers, employees and agents, for,
from and against any and all actions, administrative proceedings, causes of
action, charges, claims, commissions, costs, damages, decrees, demands, duties,
expenses, fees, fines, judgments, liabilities, losses, obligations, orders,
penalties, recourses, remedies, responsibilities, rights, suits and undertakings
of every nature and kind whatsoever, including, but not limited to, attorneys'
fees, court costs and other litigation expenses and costs, from the presence of
Hazardous Substances on, under or about the Project, except to the extent that
the Hazardous Substances are present as a result of the gross negligence or
willful misconduct of Manager or the breach of Manager’s obligations pursuant to
the first sentence of this Section 8.06. Without limiting the generality of the
foregoing, the indemnification provided by this paragraph specifically shall
cover costs incurred in connection with any investigation of site conditions or
any remediation, removal or restoration work required by any federal, state or
local governmental agency because of the presence of Hazardous Substances in,
on, under or about the Project, except to the extent that the Hazardous
Substances are present as a result of the gross negligence or willful misconduct
of Manager or the breach of Manager’s obligations pursuant to the first sentence
of this Section 8.06. For purposes of this section, “Hazardous
Substances” shall mean (i) all substances defined as hazardous materials,
hazardous wastes, hazardous substances, or extremely hazardous waste under any
applicable federal, state, or local law or regulation, and (ii) mold, mold
contamination, mold spores, bacterial contaminants and/or any and all substances
or materials related thereto. The indemnification obligation of RREM
in this Section 8.06 shall survive the expiration or earlier termination of this
Agreement.
(b) Without
limiting the indemnifications set forth in Section 8.06(a) above, RREM and
Manager further agree that RREM is solely responsible for any and all conditions
at the Project that could give rise to bodily injury or property damage claims
stemming from the presence of mold, mold contamination, mold spores, bacterial
contaminants and/or any and all substances or materials related
thereto. Manager shall endeavor to inform RREM of the availability
and cost of insurance to cover any and all conditions at the Project that could
give rise to bodily injury or property damage claims stemming from the presence
of mold, mold contamination, mold spores,
14
bacterial
contaminants and/or any and all substances or materials related thereto, but the
decision of whether or not to purchase insurance relating to such risk is solely
that of the RREM, and Manager shall have no obligation or liability whatsoever
therefor. RREM’s or Owner’s failure to purchase or consider insurance
alternatives for such risk shall not in any manner alter Manager’s obligations
or liabilities hereunder.
ARTICLE
IX
MISCELLANEOUS
PROVISIONS
9.01. Governing
Law. This Agreement
shall be governed by and construed and interpreted in accordance with the laws
of the State of Texas.
9.02. Notices. Any notice or
communication hereunder must be in writing, and may be given either by personal
delivery or by private courier with an acknowledged receipt or by registered or
certified mail, and if given by registered or certified mail, the notice shall
be deemed to have been given and received three (3) business days after a
registered or certified letter containing such notice, properly addressed, with
postage prepaid, is deposited in the United States mail; and if given otherwise
than by registered mail, it shall be deemed to have been given when delivered to
and received by the party to whom it is addressed. Such notices or
communications shall be given to the parties hereto at the addresses set forth
opposite the names of the respective parties on the signature page
hereof. Any party hereto may at any time by giving ten (10) days
written notice to the other party hereto designate any other address in
substitution of the foregoing address to which such notice or communication
shall be given.
9.03. Severability. If any term,
covenant or condition of this Agreement or the application thereof to any person
or circumstance shall, to any extent, be invalid or unenforceable, the remainder
of this Agreement or such other documents, or the application of such term,
covenant or condition to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term, covenant or condition of this Agreement or such other documents shall be
valid and shall be enforced to the fullest extent permitted by law.
9.04. No Joint
Venture or Partnership. RREM and Manager
hereby agree that nothing contained herein or in any document executed in
connection herewith shall be construed as making any combination of Manager,
Owner and RREM joint venturers or partners.
9.05. Modification;
Termination. This Agreement
terminates any and all prior management agreements among RREM and Manager,
related to the Project, and any amendment, modification, termination or release
of this Agreement may be affected only by a written instrument executed by
Manager and RREM.
9.06. Attorneys’
Fees. Should either
party employ an attorney or attorneys to enforce any of the provisions hereof or
to protect its interest in any manner arising under this Agreement, or to
recover damages for the breach of this Agreement, the prevailing party in such
action shall be entitled to recover all reasonable costs, damages and expenses,
including attorneys’ and experts’ fees, and costs expended or incurred in
connection therewith.
15
9.07. Total
Agreement. This Agreement is
a total and complete integration of any and all agreements existing among
Manager and RREM and supersedes any prior oral or written agreements, promises
or representations between them.
9.08. Successors
and Assigns. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their permitted successors and assigns. This Agreement is not
assignable by Manager without RREM’s consent.
[SIGNATURES
CONTAINED ON FOLLOWING PAGE]
16
IN WITNESS WHEREOF, the parties hereto
have executed this Management Agreement as of the day and year first above
written.
| ADDRESS | RREM | ||
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RESOURCE
REAL ESTATE MANAGEMENT, LLC
|
|||
|
One
Crescent Drive
|
By:
|
|
|
|
Suite
203
|
Name
|
||
|
Navy
Yard Corporate Center
|
Title
|
||
|
Xxxxxxxxxxxx,
XX 00000
|
|||
| ADDRESS | MANAGER | ||
|
RESOURCE
REAL ESTATE MANAGEMENT, INC.
|
|||
|
00000
XXX Xxxxxxx
|
By:
|
|
|
|
Xxxxx
000
|
Xxxx
|
||
|
Xxxxx,
XX 00000
|
Title
|
||
17
Exhibit
A
I. MONTHLY REPORTING
REQUIREMENTS
Manager
must provide the following by the 15th day
of every calendar month:
|
|
·
|
Operating
Statements on a Accrual basis in both traditional P&L format (to GAAP
Net Income) and RAI Real Estate format (to NOI, Net Cash Flow, and Ending
Cash), showing MTD and YTD in Actual/Budget/Variance column
format
|
|
|
·
|
Accrual
basis variance analysis, with tenant-level detail for income, TI, and
leasing expenses
|
|
|
·
|
Check
Register for the current month
|
|
|
·
|
VOID
Check register
|
|
|
·
|
Balance
Sheets on Accrual basis
|
|
|
·
|
Rent
Roll and Vacancy reports
|
|
|
·
|
Aged
Accounts Receivable trial balance
|
|
|
·
|
Security
Deposit detail ledger
|
|
|
·
|
General
Ledger reports on a Accrual basis
|
|
|
·
|
All
above information in no more than three (3) hardcopies, with financial
statements in a electronic format
|
|
|
·
|
Copy
of Bank Statement(s) and
reconciliation(s)
|
|
|
·
|
Copies
of invoices for individual capital expenditures exceeding
$5,000
|
|
|
·
|
Ending
trial balance on accrual basis
|
|
|
·
|
Net
activity trial balance on accrual
basis
|
II. QUARTERLY REPORTING
REQUIREMENTS
In
addition to the monthly requirements (above), the Manager must provide the
following by the 15th day
of every calendar month following each calendar quarter end:
|
|
·
|
QTD
Operating Statements in Actual/Budget/Variance column
forma
|
