EXHIBIT 10.22
PROPERTY MANAGEMENT AND LEASING AGREEMENT
(SOLANA)
THIS PROPERTY MANAGEMENT AND LEASING AGREEMENT (the "Agreement") is
made as of the 27th day of June, 2003, by and between XXXXXXX PARTNERS-SOLANA
LIMITED PARTNERSHIP, a Texas limited partnership (hereinafter referred to as
"Owner"), and XXXXXXX PROPERTIES-SOLANA SERVICES, L.P., a Texas limited
partnership (hereinafter referred to as "Manager"), with respect to the
following:
WHEREAS, Owner owns the land and improvements commonly known as Solana
located in Westlake, Texas, and more particularly described on Schedule 1
attached hereto (the "Property"),
WHEREAS, this Agreement shall not pertain to the Solana Marriott Hotel
located on the Property, that portion of the Property excluding the Solana
Marriott Hotel being referred to herein as the "Project," and
WHEREAS, Owner desires to engage Manager to manage, operate and lease
the Project, and Manager desires to accept such engagement upon the terms set
forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises and covenants contained herein, Owner and Manager hereby agree
as follows:
ARTICLE I.
EXCLUSIVE AGENCY
Owner hereby appoints Manager as the sole and exclusive leasing agent,
rental agent and manager of the Project and Manager hereby accepts such
appointment, upon the terms set forth herein, provided, however, that Manager
shall not perform any services, collect any fees or be reimbursed for any
expenses with regard to the Solana Marriott Hotel.
ARTICLE II.
TERM OF AGREEMENT
The term of this Agreement (the "Term") shall commence on the closing
date of the initial public offering of the common stock of Xxxxxxx Properties,
Inc., a Maryland corporation, and shall continue until the expiration or earlier
termination of that certain Noncompetition Agreement by and between Xxxxxxx
Properties, Inc. and Xxxxxx X. Xxxxxxx, III dated as of June 27, 2003 (the
"Noncompetition Agreement").
This Agreement may be terminated prior to the expiration of the Term
only upon the occurrence of one of the events set forth in Section 11.1 below.
ARTICLE III.
ANNUAL PLAN
3.1 Annual Plan. On or before November 1 of each calendar year
during the Term, Manager shall prepare and submit to Owner for its approval a
proposed annual plan for the promotion, operation, leasing, repair and
maintenance of the Project for each calendar year (the "Proposed Annual Plan").
For purposes of this Agreement, a "Fiscal Year" shall mean a calendar year
beginning on the first day of January and ending on the last day of December.
The Annual Plan for the remaining portion of Fiscal Year 2003 is attached hereto
as Exhibit "A".
3.2 Each Proposed Annual Plan shall include, among other matters:
(a) an "Operating Budget" which shall set forth, among
other matters, anticipated cash income and expenditures and reserve additions
for such Fiscal Year;
(b) a "Capital Budget" which shall set forth, among other
matters, anticipated and proposed capital expenditures for such year and the
source of funds in respect thereto;
(c) a "Reimbursement Schedule" of anticipated
reimbursements as contemplated by this Agreement;
(d) a "Leasing Plan" which shall include, among other
matters, a statement of the space that Manager projects to be leased during such
year, the projected minimum rent to be obtained for such space and the other
financial provisions of such projected leases (including free-rent periods, rent
abatements, contributions towards taxes and expenses and escalation provisions);
(e) a "Capital Expense Timeline" setting forth
anticipated estimated capital advances by Owner to Manager;
(f) a "Contingency Reserve" estimating funds necessary to
cover any reasonably anticipated capital and operating expenditures in excess of
the Annual Plan;
(g) an allocation of employment of personnel among
Manager (either directly or through subcontracts) and Owner; and
(h) a summary of any other significant activity Manager
expects to undertake during such Fiscal Year.
3.3 Approval of Proposed Annual Plan. Within in thirty (30) days
of Owner's receipt of the Proposed Annual Plan, Owner shall deliver to Manager
in writing its approval or disapproval of all matters contained in the Proposed
Annual Plan for the succeeding year. Any disapproval by Owner of a Proposed
Annual Plan shall include a reasonably detailed explanation of the reasons for
such disapproval. If Owner disapproves of any Proposed Annual Plan, Manager
shall submit to Owner a revised annual plan within twenty (20) days of its
receipt of Owner's written disapproval. Manager shall make a good faith effort
to have such revised annual plan satisfy each of the objections set forth in
Owner's written disapproval. Upon written approval of a proposed or revised
annual plan by Owner, such plan shall thereafter be the
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"Annual Plan" for the succeeding year for the purposes of this Agreement;
provided, however, that if Owner and Manager cannot agree upon an Annual Plan or
certain aspects thereof prior to January 1 of the succeeding year, the Annual
Plan from the prior year shall govern to the extent of such disputed items (with
appropriate adjustments based on increases or decreases in the yearly Consumer
Price Index as published each January by the U.S. Department of Labor, Bureau of
Labor Statistics and the actual amount of expenses not within the control of
Owner or Manager such as real property taxes and personal property taxes). The
parties acknowledge and agree that each Annual Plan shall provide sufficient
funds for Manager to operate the Project in a manner consistent with that for
the operation of similar first-class office buildings in Dallas, Texas.
3.4 Amendments to Annual Plan. Manager shall submit to Owner any
proposed revisions in the Annual Plan, all of which shall be subject to Owner's
approval. Any approved changes will be reflected in an amended Annual Plan which
shall be applicable for the remainder of the applicable Fiscal Year. However,
nothing in this Section 3.4 shall be construed as releasing Manager from its
obligation to manage the Project in accordance with the Annual Plan.
3.5 Obligation and Authority to Implement Annual Plan. Once
approved, Manager shall implement the Annual Plan, and shall be authorized
without the need of further approvals to make the expenditures and incur the
obligations provided for in such Annual Plan.
3.6 Performance Within Annual Plan. Manager shall use reasonable
diligence and employ commercially reasonable efforts to ensure that the actual
costs of maintaining and operating the Project shall not exceed the Annual Plan
either in total or in any accounting category. All expenses must be charged to
the proper account on either the operating budget or capital budget reflected in
the Annual Plan, and no expense may be classified or reclassified for the
purpose of avoiding an excess in the annual budgeted amount of an accounting
category. Pursuant to Section 6.5 below, Manager shall obtain Owner's prior
written consent to any expenditure which costs (i) in excess of 5% for any line
item in the budgets included in the Annual Plan, or (ii) $25,000, whichever is
less, and is not reasonably contemplated in the Annual Plan.
ARTICLE IV.
ACCOUNTING
4.1 Books and Records. Manager shall maintain adequate and
separate books and records for the Project on behalf of Owner, with sufficient
supporting documentation to ensure that all entries in the books and records are
accurate and complete. Such books and records shall be maintained by Manager at
Owner's address stated herein or at such other location as may be mutually
agreed upon in writing, except such documents used in the day-to-day operation
of the Project by Manager in the performance of its obligations hereunder which
may be maintained at the Project for the benefit of Owner. Manager shall
exercise such control over accounting and financial transactions as is
reasonably required to protect Owner's assets from theft, error or fraudulent
activity on the part of Manager's associates or employees. Losses arising from
such instances are to be borne by Manager.
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4.2 Accounting, Reports and Financial Statements. Manager shall
perform such accounting and financial reporting services regarding the Project
which is normally provided with respect to first-class office buildings in the
area and any additional accounting and financial reporting services which are
required pursuant to the documents and agreements governing Owner's lending
relationships ("Loan Compliance Requirements"). Without limiting the generality
of the foregoing, Manager shall, by the twentieth (20th) day of each month,
prepare and provide to Owner monthly operating reports for the immediately
preceding month (each, a "Monthly Report"), including, (i) an unaudited
year-to-date financial statement; (ii) statement of net operating income, (iii)
summary of all lease activity, (iv) a balance sheet, (v) a calculation of the
Management Fee (as defined below), (vi) a comparison of monthly and year-to-date
actual income and expense with the operating budget in the Annual Plan and,
(vii) on a quarterly basis only, an analysis of any significant variances
between budgeted and actual amounts. If requested by Owner, Manager shall also,
within ninety (90) days after the end of any Fiscal Year, prepare and provide to
Owner annual financial statements and, at Owner's cost and expense, cause such
statements to be audited. Upon request by Owner, Manager shall prepare and
supply to Owner periodic cash flow forecasts. Manager shall also provide to
Owner coordination for external and internal audits, tax planning and compliance
in a manner and form mutually agreeable by Owner and Manager, and Manager shall
provide additional information reasonably required by individual partners of
Owner for their financial statement purposes for an amount equal to the cost of
obtaining such work.
4.3 Copies of Documentation. Manager shall maintain, and make
available to Owner upon reasonable notice at the place of business maintained by
Manager the following:
(a) All bank statements, bank deposit slips and bank
reconciliations,
(b) Cash receipts and disbursement records,
(c) Trial balance,
(d) Paid invoices,
(e) Summaries of adjusting journal entries, and
(f) Supporting documentation for payroll, payroll taxes
and employee benefits.
ARTICLE V.
LEASING ACTIVITIES
Manager shall be the exclusive leasing agent of the Project, and shall
perform all leasing functions relating to the Project. As provided in Article IX
hereof, Manager shall be paid for such leasing activities in conformity with
Schedule 5 to this Agreement, which amounts shall be in addition to the
compensation otherwise payable to Manager hereunder. Without limiting the
generality of the foregoing, Manager's leasing function includes the following:
5.1 Leasing. Manager shall use commercially reasonable efforts to
lease all space in the Project which is now vacant, becomes vacant or is
projected to become vacant during the
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Term, subject to the limitations imposed by the Annual Plan, and Manager's
responsibilities shall include lease negotiation coordination, tenant
improvement coordination, governmental liaison, opening activities, tenant
liaison, facilitating tenant move-in and similar activities. Manager may, in its
sole discretion, engage the services of other outside cooperating real estate
brokers to lease space in the Project on behalf of Owner and who shall be paid
by Owner such commissions as may be included in the Annual Plan or are otherwise
established by Owner and Manager from time to time. Manager shall, so far as
possible, procure references from prospective tenants, investigate such
references and use its best judgment in the selection of prospective tenants.
Where appropriate, upon the occurrence of a vacancy or a projected vacancy,
Manager will prepare and disseminate adequate rental listings. After a vacancy
is listed, Manager will cooperate with brokers in an effort to aid in
successfully filling the vacancy. Manager shall establish procedures to ensure
that ample time is available to renew existing leases or obtain new tenants in
an effort to minimize vacancies and loss of income.
5.2 Lease Negotiations. Owner shall refer all inquiries concerning
the rental of space in the Project to Manager. All negotiations with prospective
tenants shall be conducted by Manager or under its direction. All leases shall
be prepared by Manager in the name of Owner and shall be in accordance with such
leasing guidelines as Owner and Manager shall agree upon from time to time.
Manager shall secure Owner's prior written approval before entering into any
lease that is not in compliance with the leasing plan set forth in the Annual
Plan. All leases shall be presented to and executed by Owner. Manager shall duly
and punctually comply with all the obligations of Owner under all leases with
tenants of space in the Project, but solely on behalf of Owner and at Owner's
expense.
5.3 Advertising and Promotion. Manager shall prepare all
advertising and promotional materials for the Project, which materials shall be
used only after Owner's approval and shall comply with all applicable laws,
ordinances and regulations. The costs of all advertising and promotional
materials shall be at Owner's sole cost and expense and shall either be in
accordance with the Approved Operating Budget or otherwise approved by Owner in
writing.
5.4 Rates. Rental rates for space in the Project shall be
established by Owner. Manager shall, promptly following the execution of this
Agreement and from time to time thereafter, provide market information and
general office space rental rate surveys and make recommendations to Owner with
respect to rental rates.
5.5 Lender Approval. Manager shall assist Owner, as requested, in
obtaining any approvals of proposed leases for the Project, the tenants and the
terms thereof which may be required from the Project's lenders, including senior
financing, mezzanine level financing or preferred equity (each, a "Lender" and
collectively, "Lenders") in accordance with the terms of the applicable loan
documents.
ARTICLE VI.
MANAGEMENT OF PROJECT
Manager shall manage, operate and maintain the Project in accordance
with the general standards applicable to other first-class office buildings in
the area and in accordance with Loan
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Compliance Requirements. Without limiting the generality of the foregoing,
Manager's functions hereunder shall include the following:
6.1 Manager Orientation. Manager has informed itself with respect
to the layout, construction, location, character, plan and operation of the
lighting, heating, plumbing, ventilating and elevator systems and any other
mechanical equipment and systems in the Project, and is familiar therewith, and
shall be responsible for enforcement of all warranties and guaranties pertaining
to the equipment of the Project, provided Owner has made available copies of all
such warranties or guarantees to Manager.
6.2 General Management Duties. Manager shall manage the Project in
an efficient and businesslike manner having due regard for the age and physical
condition of the Project. Manager, through its employees, independent
contractors and subcontractors, shall supply complete operational services for
the Project, provided that the nature and costs of such services are included in
the then current Approved Budgets, and provided further that the cost of such
services are comparable with general prevailing market conditions.
Notwithstanding anything contained in this Agreement to the contrary and as
reasonably requested by Owner, Manager shall perform its obligations under this
Agreement in a manner which does not cause Owner to violate any of its
obligations under Owner's organizational documents or any loan documents with
Lenders; provided, however, (i) that Owner shall make all such documentation
available to Manager for its review; and (ii) that such requests shall not
materially increase Manager's obligations or its non-reimbursable expenses under
this Agreement.
6.3 Subcontracting for Services. Manager shall be entitled to
subcontract with Xxxxxxx Properties Services, Inc., a Maryland corporation, a
wholly-owned subsidiary of Manager, or another affiliate of Manager (a
"Subcontractor"), to perform or cause to be provided any of the services
required of Manager hereunder; provided, however, that no such subcontract shall
relieve Manager from its obligations to Owner under this Agreement. All payments
made by Manager to a Subcontractor pursuant to any such subcontract shall be
reimburseable by Owner in accordance with the Annual Plan and the terms hereof.
6.4 Rent Collection. Subject to the Loan Compliance Requirements
and any "Cash Management System" (as hereinafter defined), Manager shall use
diligent efforts to collect for the account of Owner all rents and other charges
which may become due at any time from any tenant or from others for services
provided in connection with or for the use of the Project or any portion
thereof, and as directed by Owner, shall institute collection and legal
proceedings in the name of Owner for the collection thereof and for the
dispossession of tenants and other persons from the Project. All attorneys' fees
(including charges and disbursements incurred by counsel) and other third party
out-of-pocket costs incurred in connection with such proceedings shall be borne
by Owner. Manager shall collect and identify any income due Owner from
miscellaneous services provided to tenants or the public including, but not
limited to, parking income, tenant storage, and coin operated machines of all
types. Notwithstanding the foregoing, Manager shall collect rents and deposit
same or cause rents to be collected and deposited in the manner required by the
Loan Compliance Requirements.
6.5 Repairs and Maintenance. Manager shall, in the name of and at
the expense of Owner, make or cause to be made on behalf of Owner such ordinary
maintenance, repairs and
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alterations as Manager may deem advisable or necessary, subject to and within
the limitations of the Operating Budget. Such duties shall include, without
limitation, interior and exterior cleaning, painting, plumbing, carpentry,
engineering, landscaping and such other normal maintenance and repair work as
may be necessary or desirable. However, unless contained in the Annual Plan,
Manager shall secure Owner's prior written approval before making or authorizing
any expenditure which costs (i) in excess of 5% for any line item in the budgets
included in the Annual Plan, or (ii) $25,000, whichever is less, and is not
reasonably contemplated in the Annual Plan; provided, however, that Manager may
make expenditures in excess of the foregoing restrictions in the event of an
emergency if, in the opinion of Manager, such repairs are necessary to (a)
protect the Project, (b) maintain services to tenants as called for in their
leases, (c) avoid property damage to the Project or any improvements benefiting
or appurtenant thereto, and (d) avoid personal injury or death to persons at or
around the Project. Manager shall promptly advise Owner's designated
representative regarding any expenditures for such emergency repairs by
notifying a person designated by Owner for such purpose. The authority provided
to Manager in this Section 6.5 shall not extend to expenditures of the type
described in Section 6.6 below or to expenses to refurbish, rehabilitate or
remodel areas covered by new leases. The latter expenditures are subject to the
prior approval of Owner at the time of execution of new leases. Manager shall
promptly inform Owner of major increases in repair and maintenance costs not
reflected in the Annual Plan.
6.6 Capital Improvements; Tenant Improvements. Any significant
development, capital improvement projects or tenant improvement projects shall
be administered and supervised by Manager or an affiliate thereof engaged by
Owner pursuant to a separate written development agreement. Notwithstanding the
foregoing, Manager shall, in the name of and at the expense of Owner, make or
cause to be made such capital improvements to the Project as are included in the
Capital Budget or are otherwise approved by Owner, as well as all remodeling and
refurbishing of tenant premises as approved by Owner in connection with new
leases. Manager shall make recommendations, select contractors and follow bid
procedures as required, from time to time, by Owner and shall supervise all such
work to ensure compliance with contract requirements and applicable law;
provided, however, that contractors selected by Manager pursuant to this Section
6.6 shall be limited to those included on a list of contractors which has been
pre-approved by Owner. For all such capital improvement projects, development
work or tenant improvement projects, Manager shall be paid a coordination fee as
set forth on Schedule 2 attached hereto.
6.7 Service Contracts. Manager shall, in the name of and at the
expense of Owner, contract for those utilities and other building operation and
maintenance services Manager shall deem advisable; provided that no service
contract shall be for a term exceeding one year without the prior written
approval of Owner, and the cost of all such services shall be included in the
Operating Budget or otherwise approved in writing in advance by Owner. Further,
at the time of execution of any service contract, the cost of the services to be
provided under such contract shall be comparable with general prevailing market
conditions. Manager shall, at the Owner's expense, purchase and keep the Project
furnished with all necessary supplies. All expenses shall be charged to Owner at
net cost, and Owner shall be credited with all rebates, refunds, allowances and
discounts allowed to Manager. No service contracts with any affiliate of Manager
or any affiliate of any of the members of Owner shall be entered into except in
accordance with the Loan Compliance Requirements and this Agreement.
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6.8 Tax and Mortgage Payments. If requested by Owner, Manager
shall obtain, verify and pay from Project Income (as defined below) all bills
for payments due under all mortgages, real estate, personal property and
improvement assessments with respect to the Project and Owner's personal
property located therein. In such event, all such expenses shall be included in
the Operating Budget.
6.9 Insurance. Manager shall, at Owner's cost and expense, obtain
and maintain insurance with respect to the Project in customary levels and in
accordance with the Annual Plan, which may be provided through an umbrella
policy. Manager shall also cooperate with Owner's insurance carrier in the
processing of claims and defense and settlement of lawsuits with respect to the
Project.
6.10 Writeoffs and Abandonments. Manager shall obtain the approval
of Owner for the writeoff, abandonment or reduction of any amounts otherwise due
Owner from Project operations.
6.11 Lockbox and Cash Management Arrangements. Manager shall
cooperate with Owner and the Lenders with respect to any lock box or cash
management arrangements established by Owner and any Lender (a "Cash Management
System"). All payments required to be made by Manager under this Agreement for
taxes, insurance, operating expenses, capital expenditures and other expenses
relating to the Project shall be subject to the terms and provisions of any such
Cash Management System. At Owner's direction, Manager shall coordinate with the
Lenders to cause all remaining funds, after all required payments and reserves
are made pursuant to any Cash Management System, to be deposited into one or
more Project Accounts (as defined below) established by Manager for the benefit
of Owner pursuant to Section 8.1 below.
6.12 Monitoring Accounts. Manager shall monitor, through computer
access to the extent available, all Project Accounts and other accounts
established by Manager on behalf of Owner and/or required by any Lender. In the
event Manager determines at any time that funds in such accounts are
insufficient for such purposes, Manager shall immediately inform Owner of such
insufficiency and provide Owner with a statement of outstanding amounts
currently due. Unless otherwise required by the Loan Compliance Requirements or
any Cash Management System, all funds received by Manager for or on behalf of
Owner (less any sums properly deducted by Manager pursuant to any of the
provisions of this Agreement and the Annual Plan) shall be deposited in the
appropriate Project Account maintained by Manager for the deposit of funds of
Owner and not mingled with the funds of Manager or any other project.
6.13 Return of Excess Funds in Project Account. Subject to the
terms of any Cash Management System and the Loan Compliance Requirements, on
each date that Manager provides Owner with a Monthly Report, Manager shall also
remit to Owner all funds, if any, that are available in the Project Accounts,
after deducting the Management Fee, Leasing Commissions (as defined below)
and/or reimbursements due to Manager and any Contingency Reserve or other
amounts agreed to from time to time by Owner and Manager.
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ARTICLE VII.
METHODS OF OPERATION
7.1 Contracting. All service contracts permitted to be entered
into pursuant to Section 6.7 above, all contracts for capital improvements and
all contracts for the refurbishing and modeling of tenant spaces which (a) cover
expenditures included within the Annual Plan or expenditures which are otherwise
approved in advance by Owner or (b) which are approved in advance by Owner or
otherwise meet criteria established by Owner for such contracts, shall be
executed by Manager as agent for Owner. Without relieving it of its obligations
hereunder, pursuant to Section 6.3 above, Manager shall be entitled, in its
discretion and at its cost, to enter in its own name into such subcontracts with
third parties or affiliates to perform any of the management functions which are
the subject of this Agreement as it may determine. All other contracts with
respect to the Project and all tenant leases shall be executed by Owner. Upon
any termination of this Agreement, Manager shall, if requested by Owner, assign
all assignable contracts executed by Manager to Owner.
7.2 Compliance With Laws. Subject to the other provisions of this
Agreement, Manager shall be responsible for operating and maintaining the
Project in compliance with known federal, state and municipal laws, ordinances,
regulations and orders relative to the leasing, use, operation, repair and
maintenance of the Project and with the rules, regulations or orders of the
local Board of Fire Underwriters or other similar body (collectively, the "Legal
Requirements") and in accordance with the Loan Compliance Requirements. At
Owner's expense, Manager shall promptly remedy any violation of any Legal
Requirements or Loan Compliance Requirements which comes to its attention, and
further agrees, at Owner's expense, to promptly provide to Owner written notice
of any known actual, alleged or threatened violation of or failure to comply
with any Legal Requirement or Loan Compliance Requirement. Expenses incurred in
so complying and in correcting any such violation shall be included in the
Annual Plan or otherwise approved in advance by Owner. Subject to the following
sentence, Manager shall also be responsible for compliance with all terms and
conditions contained in any ground lease or space lease or security instrument
affecting the Project and for remedying any breach thereof. Notwithstanding the
foregoing, however, Manager's responsibilities under this Section 7.2 shall not
extend to matters (i) caused by Owner's gross negligence or willful misconduct,
or (ii) as to which the expenditure of Owner's funds is required but disapproved
by Owner. Manager shall assist Owner in Owner's efforts to comply with Federal,
State or other governmental energy conservation laws, regulations, rules, etc.,
and, in addition, shall cooperate with Owner to implement such energy
conservation programs as Owner may desire to implement from time to time.
7.3 Bonding. All employees of Manager who handle or are
responsible for Owner's funds shall, if requested by Owner, be covered by a
fidelity bond. The amount of such bond shall be determined by Owner and the
premium therefor shall be an operating expense of the Project.
7.4 Legal Proceedings. Manager shall, at Owner's request and
expense, engage counsel and cause such legal proceedings to be instituted as may
be necessary to enforce payment of rent and compliance with leases or to
dispossess tenants. Manager shall use Owner's legal counsel or other legal
counsel approved by Owner to institute such actions, and all
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compromises shall be subject to the prior approval of Owner. Attorneys' fees and
costs so incurred shall be expenses of the Project but shall be submitted to
Owner for approval prior to payment. Manager shall deliver copies of all written
notices or other documentation evidencing actual or threatened lawsuits to Owner
promptly upon receipt by Manager.
7.5 Employment of Personnel. Manager shall have in its employ at
all times a sufficient number of capable employees to enable it to properly,
adequately, safely and economically manage, operate and maintain the Project;
provided, however, that Manager may cause Owner to directly employ the personnel
listed on Schedule 3 under the heading "Owner's Employees", which personnel
shall operate under the supervision and direction of Manager. The remaining
personnel on Schedule 3 shall also be under the supervision and direction of
Manager. Manager may, in its discretion, cause additional or fewer on-site
employees to be employed either by Owner, Manager or a subcontractor for the
benefit of the Project as it deems necessary or appropriate in order to manage
the Project in a first-class manner consistent with comparable projects in the
area; provided, however, that employment of any additional on-site employees for
which no provision has been made in the Annual Plan must have the prior written
consent of Owner. All matters pertaining to the employment, supervision,
compensation, promotion and discharge of such employees, as well as union
negotiation and compliance with laws and regulations dealing with employee
matters, shall be coordinated by Manager; provided, however, that Owner shall
have the right to request that any particular employee be prohibited from
working at or for the benefit of the Project. The wages, salaries and other
compensation paid to employees of the Project, and to others who perform special
services for the benefit of the Project, shall be paid in accordance with
Article IX hereof. This Agreement is not one of employment of Manager by Owner,
but one with Manager engaged as an independent contractor in the business of
property management. In the event that any expenses are attributable in part to
the Project and in part to other properties owned and managed by Manager, such
expenses shall be prorated by Manager as appropriate from time to time and in a
manner agreeable to Owner and Manager. Upon request by Owner, Manager will
submit to Owner a report of all such prorations.
7.6 Services to Existing Tenants. At Owner's expense, Manager
shall perform services for tenants of the Project which are normally provided to
tenants of other first class buildings in the area or which are specifically
requested by Owner. Manager shall use commercially reasonable efforts to render
such services to tenants of the Project in an effort to minimize any cost to
Owner and in a manner that is consistent with the standards set forth in this
Agreement.
ARTICLE VIII.
FINANCIAL MATTERS
8.1 Bank Accounts. In coordination with Lenders and in compliance
with the terms of any Cash Management System, Manager (on behalf of Owner) shall
establish an operating trust account or accounts for the Project at such
bank(s), under such designation(s) and with such authorized signatures as Owner
may approve from time to time (each, a "Project Account") and, subject to the
Loan Compliance Requirements and any Cash Management System, all funds collected
from the operation of the Project, shall be deposited in the appropriate Project
Account(s), to be held in trust in such Project Account(s) for the benefit of
Owner, after all
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required disbursements and payments are made pursuant to any Cash Management
System and the Loan Compliance Requirements. All expenses of the Project,
including Management Fees, Leasing Commissions and reimbursements to be paid to
Manager, to the extent not already made pursuant to the Cash Management System,
shall be paid by Manager from the Project Account(s). If required by law, Owner,
any Cash Management System, or the Loan Compliance Requirements, a separate
account(s) for tenant security deposits shall be established in the same manner
as provided in the preceding sentence and shall be maintained as required by
law, any Cash Management System, Owner or the Loan Compliance Requirements.
Owner may require Manager to change banks, change accounts, change account
designations and make disbursements or distributions of Project funds from time
to time, and Manager shall promptly comply with all such directions from Owner.
8.2 Audits. Owner reserves the right to audit all books and
records maintained by Manager with respect to the Project. All audits shall be
at Owner's cost, shall be conducted by appointment during normal business hours
and shall be conducted at Manager's office where such books and records are
located. An audit may be conducted by Owner's employees or by independent
persons engaged by Owner. Any discrepancies noted in any audit shall be promptly
corrected.
ARTICLE IX.
COMPENSATION OF MANAGER
9.1 Compensation. For its services hereunder, Manager shall be
paid a monthly Base Management Fee, a monthly Incentive Management Fee and other
compensation as specified in Schedule 2 attached hereto (collectively, the
"Management Fee"). For the purposes of this Agreement, "Project Income" means
all Rent and all Other Income actually collected from Project operations during
such month, "Rent" shall mean all amounts collected from Project tenants other
than (i) security and other tenant deposits (other than as applied to pay rent
or additional rent) and (ii) rents paid in advance by tenants, except the
portion of any such advance payment applied to the rent due for the current
month, "Other Income" shall mean all income from the Project which shall
include, without duplication, operating expense reimbursements, fees, amounts
paid for after hours or excess utilities and/or air conditioning service,
amounts paid for special services rendered to tenants and vending machine rental
charges, but shall not include Rent, amounts received by Owner or tenants in
settlement of insurance claims, costs and fees recovered in litigation (except
amounts allocable to past due rent or additional rent), refunds or returns of
taxes paid, amounts paid under construction contracts, or proceeds from any sale
or financing of the Project or any portion thereof, "Net Cash Flow" shall mean
(a) Owner's Project Income plus any amounts released from reserves that were
originally funded from Project Income or Net Capital Proceeds realized by Owner
during the Term, less (b) funds used to pay operating expenses associated with
such portion of the Project (including Base Management Fees), funds used to pay
or establish reserves, debt service payments (including principal and interest),
funds used for capital repairs and replacements. Net Cash Flow shall not include
capital contributions, partner loans, or Net Capital Proceeds, "Net Capital
Proceeds" shall mean the net proceeds of a Capital Event realized by an Owner
after (a) payment of all expenses payble to unaffiliated third parties
associated with such Capital Event, (b) repayment of all indebtedness related to
such portion of the Project involved with the Capital Event (including partner
loans), and (c) an allowance is made for reasonable cash reserves, and "Capital
Event"
11
shall mean (a) a sale, transfer, exchange or other disposition of the Project or
any portion thereof, (b) a financing or refinancing of indebtedness related to
the Project, and (c) a condemnation, recovery of damage award and insurance
proceeds (to the extent not used to improve or repair such portion of the
Project).
9.2 Employee Compensation. The wages, salaries and other
compensation paid to employees who will be employed for the benefit of the
Project, and to others who perform special services for the benefit of the
Project, to the extent not otherwise paid through a Cash Management System,
shall be paid by Owner from a Project Account pursuant to this Section 9.2.
(a) All wages, salaries and other compensation paid to
employees of the Project, including, but not be limited to, unemployment
insurance, social security, worker's compensation, employee benefit packages and
other charges imposed by a governmental authority or provided for in a union
agreement, shall (a) as to employees of Manager or any Subcontractor, be
reimbursed by Owner to Manager (or directly to the applicable Subcontractor, if
requested by Manager) without profit or xxxx-up, and (b) as to employees of
Owner, be paid directly by Owner. Manager shall coordinate all disbursements and
deposits for all compensation and other amounts payable with respect to persons
employed in connection with the operation of the Project from an appropriate
Project Account. Manager shall maintain complete payroll records for all
employees.
(b) In addition to the employment of employees set forth
on Schedule 3, Manager may, in its discretion, from time to time employ
personnel of its general operations to perform direct special services for the
benefit of the Project; provided, however, that Manager shall obtain the prior
approval of Owner for the employment of such special personnel, except in
emergency situations or when timing requirements do not allow for such prior
approval. Owner shall reimburse Manager for such direct services rendered by
special personnel in an amount commensurate with normal and customary charges
for such services by similarly qualified persons. Persons whose compensation may
not be charged to Owner for services rendered to the Project includes the
general asset management personnel of Manager who are not on-site of the
Project.
9.3 Reimbursable Expenses. Office, and Other Services. Owner shall
reimburse Manager for all direct out-of-pocket expenses incurred by or on behalf
of Manager in connection with this Agreement without profit or xxxx-up, which
expenses shall be reflected in the Annual Plan, and shall include, but not be
limited to, normal office expenses and business and travel expenses associated
with operating an on-site business office. Further, Owner shall provide for the
use of Manager a furnished management office in the Project, to be utilized
directly for the benefit of the Project, together with high speed internet
service, e-mail, telephone service, office janitorial service, printed form and
customary office supplies and equipment (such as computers, photocopying
equipment and calculators). The method of finishing and equipping such office,
and the total cost thereof, shall be determined by Owner from time to time based
upon the recommendations of Manager.
12
9.4 Non-Reimbursable Expenses. Except as otherwise set forth on
Schedule 2, the following expenses or costs incurred by or on behalf of Manager
in connection with this Agreement shall be at the sole cost and expense of
Manager and shall not be reimbursed by Owner:
(a) Cost of gross salary and wages, payments of all
taxes, insurance, worker's compensation and other benefits of Manager's office
personnel not employed on site of the Project and not employed as special
personnel as provided in Section 9.2(b) above. Such personnel include, without
limitation, those identified on Schedule 4 hereof.
(b) General accounting and reporting services which are
considered to be within the reasonable scope of the Manager's responsibility
under this Agreement.
(c) Cost of advances made to employees and the cost of
local travel by Manager's employees or associates to and from the Project.
(d) Cost attributable to losses arising from negligence
or fraud on the part of Manager, Manager's associates or Manager's employees.
9.5 Payment of Expenses. Payment or reimbursement of the amounts
described in Sections 9.1 through 9.3 above shall be as follows:
(a) The monthly Management Fee payable pursuant to
Section 9.1 above shall be calculated and paid concurrently with Manager's
submission of its monthly accounting to Owner and, upon submission of such
accounting, Manager may pay such fee from Project operating funds then in its
possession or control or in a Project Account.
(b) Employee expenses and out of pocket expenses pursuant
to Sections 9.2 and 9.3 shall be reimbursed to Manager at the time incurred by
Manager and Manager may reimburse such expenses from time to time from Project
operating funds under its possession or control or in a Project Account. A
detailed summary of such reimbursable expenses shall be included on Manager's
monthly accounting to Owner.
ARTICLE X.
INSURANCE AND INDEMNIFICATION.
10.1 Indemnity and Hold Harmless. Owner agrees to:
(a) Hold and save Manager free and harmless from any
damage or injuries to persons or property by reason of any cause whatsoever
either in and about the Project or elsewhere when Manager is carrying out the
provisions of this Agreement or acting under the express or implied directions
of Owner.
(b) Reimburse Manager upon demand for any moneys which
Manager is required to pay out for any reason whatsoever, under this Agreement
or in connection with, or as an expense in defense of any claim, civil or
criminal action, proceeding, charge or prosecution made, instituted or
maintained against Manager or Owner and Manager, jointly or severally, affecting
or due to the condition or use of the Project or acts or omissions of Manager or
13
employees of Owner or Manager, or arising out of or based upon any law,
regulation, requirement, contract, or award relating to the hours of employment,
working conditions, wages or compensation of employees or former employees.
(c) Defend promptly and diligently, at Owner's expense,
any claim, action or proceeding brought against Manager or Manager and Owner
jointly or severally arising out of or connected with any of the foregoing, and
to hold harmless and fully indemnify Manager from any judgment, loss or
settlement on account thereof.
The foregoing agreement of Owner shall expressly extend to any liabilities,
claims and costs of defense arising out of or resulting from failure or refusal
of Owner to authorize compliance with any law, rule, order or determination of
any governmental authority with respect to the Project, where such matter is
promptly brought to Owner's attention by Manager, and Owner declines to comply
with the same. Nothing contained herein, however, shall relieve Manager of
responsibility to Owner for Manager's gross negligence or willful misconduct,
unless such gross negligence or willful misconduct is covered by Owner's
insurance. The provisions of this Section 10.1 shall survive the expiration or
termination of this Agreement.
10.2 Insurance.
(a) Owner's Insurance. Owner agrees to carry public
liability, elevator liability and contractual liability insurance (specifically
insuring the indemnity provisions contained in Section 10.1 above), and such
other insurance as the parties agree to be necessary or desirable for the
protection of the interests of Owner and Manager, which may be provided through
an umbrella policy. In each such policy of insurance, Owner shall designate
Manager as a party insured with Owner and the carrier and the amount of coverage
in each policy shall be mutually agreed upon by Owner and Manager. A certificate
of each policy issued by the carrier shall be delivered promptly to Manager by
Owner. All policies shall provide for 30 days' written notice to Manager and
Owner prior to cancellation, non-renewal or material amendment.
(b) Manager's Insurance. If requested by Owner at any
time during the Term, Manager (as a reimbursable expense under this Agreement)
and any independent contractors employed by Manager (at such contractor's
expense) shall maintain in full force and effect commercial general liability,
workers' compensation, employer's liability and such other insurance as Owner
may reasonably require with such limits as are customary for managers of similar
first class projects in the area.
10.3 Conditions. Owner's obligations under Sections 10.1 and 10.2
are upon the condition that Manager:
(a) Notifies Owner within five (5) business days after
Manager receives notice of any such loss, damage or injury.
(b) Takes no action (such as admission of liability)
which might bar Owner from obtaining any protection afforded by any policy Owner
may hold or which might prejudice Owner in its defense to a claim based on such
loss, damage or injury.
14
(c) Agrees that Owner shall have the exclusive right, at
its option, to conduct the defense to any claim, demand or suit within limits
prescribed by the policy or policies of insurance.
(d) Cooperates with Owner in disposition of claims,
including furnishing all available information to Owner's carrier.
(e) Recognizes that the foregoing shall not affect the
general requirement of this Agreement that the Project shall be managed,
operated and maintained in a safe condition and in a proper and careful manner.
10.4 Insurance Provisions. Owner shall include, in its hazard
policy covering the Project, personal property, fixtures and equipment located
thereon, and Manager shall include in any fire policies for its furniture,
furnishings or fixtures situated at the Project, appropriate clauses pursuant to
which the respective insurance carriers shall waive all rights of subrogation
with respect to losses payable under such policies. If such clauses are
available and obtained in the respective insurance policies of Owner and
Manager, each of Owner and Manager waive any claim against the other covered by
their respective aforementioned policies of insurance.
10.5 Third Party Insurance. If requested by Owner, Manager shall
require that all contractors and service companies operating in or on the
Project maintain such worker's compensation, employer's liability and
comprehensive general liability insurance as may be reasonably required by
Owner, including any special coverage required by Owner in connection with
hazardous operations.
ARTICLE XI.
TERMINATION OF AGREEMENT
11.1 Termination. Notwithstanding the provisions of Article II
hereof, this Agreement may be terminated prior to the expiration of the Term
upon any of the following events:
(a) Manager may resign at any time, for any reason or no
reason, upon giving Owner at least ninety (90) days prior written notice; or,
(b) Upon thirty (30) days prior written notice, Owner may
terminate this Agreement upon closing of a sale, transfer or exchange by Owner
(including foreclosure) of Owner's entire interest in the Project or it's right
to collect the income therefrom, unless the transferee elects prior to such
closing and by written notice consented to by Manager, to assume the obligations
of Owner pursuant to this Agreement accruing subsequent to such closing;
(c) Upon thirty (30) days prior written notice to
Manager, Owner may terminate this Agreement at any time for "cause," as such
term is hereafter defined, provided that, with respect to any cause for
termination pursuant to subsections (i) or (ii) below which is reasonably
susceptible of cure, Owner shall not be entitled to terminate for such cause
unless (1) Manager shall fail, after Owner gives Manager written notice of the
existence of such cause for termination hereof, to cure the cause for
termination promptly, and in any event within ninety (90) days after such
written notice, or (2) if the cure for such cause for termination would
reasonably require more than ninety (90) days to complete (except that there
shall be no
15
opportunity to cure a cause for termination described in subsection (iii) below)
Manager shall fail to commence to cure such cause for termination promptly, and
in any event within said ninety (90) day period and thereafter diligently
prosecute the same to completion. The term "cause"' as used herein in connection
with the termination of this Agreement shall mean (i) the failure by Manager (in
the reasonable opinion of Owner) to comply with a material provision of this
Agreement, (ii) the failure by Manager (in the reasonable opinion of Owner) to
exercise prudent managerial skill and efficiency in the management of the
Project which has a material adverse impact on Owner, (iii) fraud, intentional
misrepresentation, or breach of trust or the intentional breach of a material
provision of this Agreement by Manager, (iv) any action taken by or against
Manager pursuant to any statute pertaining to bankruptcy or insolvency or the
reorganization of Manager (unless, in the case of an involuntary case filed
against Manager, the same is dismissed within one hundred twenty (120) days),
the making by Manager of any general assignment for the benefit of creditors;
the appointment of a trustee or receiver to take possession of all or any
portion of Manager's assets or of Manager's interest in this Agreement, where
possession is not restored to Manager within one hundred twenty (120) days; or
the attachment, execution or other judicial seizure of all or any portion of
Manager's interest in this Agreement, where such seizure is not discharged
within one hundred twenty (120) days or (v) an assignment of this Agreement by
Manager that is not permitted by Section 12.4 hereof. If the parties dispute
whether "cause" exists for purposes of this Section 1 l.l(c), the parties shall
initiate the dispute resolution provisions contained in Section 12.13 below.
During any such pending dispute, Manager shall remain fully responsible for its
obligations and duties hereunder and all Management Fees shall continue to be
paid to Manager until the effective date of the termination of this Agreement.
11.2 Obligations Upon Termination. Upon the termination of this
Agreement by any means:
(a) Owner shall remain bound by all contracts entered
into by Manager in the name of Owner within the limitations contained in this
Agreement and the Annual Plan, and shall remain obligated to Manager for all
Management Fees earned by Manager through the date of termination and for all
reimbursements due to Manager pursuant to this Agreement. Upon termination of
this Agreement, the determination of Net Cash Flow and Net Capital Proceeds (if
applicable), as such determination relates to the calculation of any Incentive
Management Fees, shall not be decreased by the amount held in any reserves that
are funded from Project Income earned during the term (and not theretofore
released).
(b) Manager shall remain obligated:
(i) To render to Owner a final accounting of
income and expenses of the Project as provided in this Agreement through the
effective date of such termination.
(ii) To deliver to Owner all income and all
security deposits from the Project in Manager's possession after reimbursement
of all expenses and payment of all management fees which Manager is entitled to
receive from such funds.
(iii) To deliver to Owner all keys, records,
contracts, leases, receipts, unpaid bills and other documents relative to the
Project and in Manager's possession at date of termination.
16
(iv) Assign to Owner all of its rights and
obligations in any contracts entered into in accordance with the terms of this
Agreement, and Owner (or its designee) shall assume all of the obligations
thereunder.
ARTICLE XII.
GENERAL PROVISIONS
12.1 Independent Contractor. It is expressly understood and agreed
that Manager will act as an agent for Owner and as an independent contractor in
the performance of this Agreement.
12.2 Notices. Any notice which must or may be given under this
Agreement or by law shall, except as otherwise provided, be in writing and shall
be deemed to have been given (i) when physically received by personal delivery
(which shall include the confirmed receipt of a telecopied facsimile
transmission), or (ii) three business days after being deposited in the United
States certified or registered mail, return receipt requested, postage prepaid,
or (iii) one business day after being deposited with a nationally known
commercial courier service providing next day delivery service (such as Federal
Express). All notices shall be addressed and delivered to the addresses set
forth on the signature page of this Agreement, or to such other addresses which
may be provided by any party hereto to the other in writing.
12.3 Attorneys' Fees. If suit or action is instituted in connection
with any controversy arising out of this Agreement, the prevailing party shall
be entitled to recover, in addition to costs, such sum as the court may adjudge
reasonable as attorneys' fees in such suit or action and on any appeal from any
judgment or decree entered therein.
12.4 Assignment. This Agreement and the rights and obligations
hereunder, shall not be assignable by either party hereto without the written
consent of the other; provided, however, that the foregoing shall not extend to
assignments by Manager to any affiliate of Xxxxxxx Properties, Inc., assignments
required by any insurance carrier in any matter relating to subrogation or an
assignment by Owner in connection with a sale of the Project; provided, further,
that Manager may subcontract with affiliates of Manager and/or third parties to
assist in carrying out its duties hereunder as set forth in this Agreement.
12.5 Amendments. Except as otherwise provided herein, all
amendments to this Agreement shall be in writing and executed by the party to be
charged.
12.6 Integration. This Agreement, and the Schedules attached hereto
and made a part hereof, supersede and take the place of any and all previous
management agreements entered into between the parties hereto relating to the
Project.
12.7 Governing Law. This Agreement is executed with respect to a
project located in the State of California and shall be governed by and
construed in accordance with the laws of such state.
12.8 Cooperation. Should any claim, demand, action or other legal
proceeding arising out of matters covered by this Agreement be made or
instituted by any third party against a party to this Agreement, the other party
to this Agreement shall furnish such information and
17
reasonable assistance in defending such proceeding as may be requested by the
party against whom such proceeding is brought.
12.9 Waiver of Rights. The failure of Owner or Manager to seek
redress for violation, or to insist upon the strict performance of any covenant,
agreement, provision or condition of this Agreement, shall not constitute a
waiver of the terms of such covenant, agreement, provision or condition at any
subsequent time, or of the terms of any other covenant, agreement, provision or
condition contained in this Agreement.
12.10 Successors and Assigns. This Agreement and each of the
provisions hereof shall be binding upon and insure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
assigns.
12.11 Non-Discrimination. There shall be no discrimination against
or segregation of, any person, or group of persons on account of race, color,
creed, national origin or ancestry in the sale, lease, sublease, transfer, use,
occupancy, tenure or enjoyment of the Project, nor shall Owner, Manager or any
person claiming under or through them, establish or permit any such practice or
practices of discrimination or segregation with reference to the selection,
location, number, use or occupancy of tenants, lessees, subtenants, sublessees
or vendees of the land.
12.12 Subordination. This Agreement, and any and all rights of
Manager hereunder, are and shall be subject and subordinate to any financing
(whether senior financing, mezzanine level financing, or preferred equity)
respecting the Project (or any portion thereof), including financings with
affiliates of Manager (but excluding financings with affiliates of Owner)
(collectively, the "Property Financings", and any ground or master lease with
respect to the Project or any portion thereof, including any such leases with
affiliates of Manager (but excluding any such leases with affiliates of Owner)
(collectively, "Leases"), and all renewals, extensions, modifications,
consolidations and replacements thereof, and to each and every advance made or
hereafter to be made under any such Property Financings or Leases. This section
shall be self-operative and no further instrument of subordination shall be
required. In confirmation of such subordination, Manager shall promptly execute,
acknowledge and deliver any instrument that Owner, the landlord under any of the
Leases or the holder of any such Property Financings or the trustee or
beneficiary of any deed of trust or any of their respective successors in
interest may reasonably request to evidence such subordination. At any time and
from time to time, upon not less than ten (10) business days prior notice from
Manager or Owner, Manager shall furnish to Owner, or a designee thereof, an
estoppel certifying that this Agreement is unmodified and in full force and
effect (or that this Agreement is in full force and effect as modified and
setting forth the modifications), the date to which Manager has been paid
hereunder, that to the knowledge of the certifying party, no default or an event
of default has occurred and is continuing or, if a default or an event of
default shall exist, specifying in reasonable detail the nature thereof and the
steps being taken to remedy the same, and such additional information as the
requesting party may reasonably request. Any subordination or estoppel furnished
pursuant to this Section 12.12 may be relied upon by Owner, and its affiliates,
lenders, and any prospective landlord or lender of the applicable Project.
Manager shall not unreasonably withhold its consent to any amendment to this
Agreement reasonably required by such lender or lessor, provided that such
amendment does not (i) increase Manager's financial
18
obligations hereunder, or (ii) have a material adverse effect upon Manager's
rights hereunder, or (iii) materially increase Manager's non-economic
obligations hereunder.
12.13 Dispute Resolution. The parties hereby agree that, in order to
obtain prompt and expeditious resolution of any disputes under this Agreement,
each claim, dispute or controversy of whatever nature, arising out of, in
connection with, or in relation to the interpretation, performance or breach of
this Agreement (or any other agreement contemplated by or related to this
Agreement or any other agreement between the parties), including without
limitation any claim based on contract, tort or statute, or the arbitrability of
any claim hereunder (an "Arbitrable Claim"), shall be settled by final and
binding arbitration conducted in Los Angeles, California. The arbitrability of
any Arbitrable Claims under this Agreement shall be resolved in accordance with
a two-step dispute resolution process administered by Judicial Arbitration &
Mediation Services, Inc. ("JAMS") involving, first, mediation before a retired
judge from the JAMS panel, followed, if necessary, by final and binding
arbitration before the same, or if requested by either party, another JAMS
panelist. Such dispute resolution process shall be confidential and shall be
conducted in accordance with California Evidence Code Section 1119.
(i) Mediation. In the event any Arbitrable Claim
is not resolved by an informal negotiation between the parties within
fifteen (15) days after either party receives written notice that a
Arbitrable Claim exists, the matter shall be referred to the Los
Angeles, California office of JAMS, or any other office agreed to by
the parties, for an informal, non-binding mediation consisting of one
or more conferences between the parties in which a retired judge will
seek to guide the parties to a resolution of the Arbitrable Claims. The
parties shall select a mutually acceptable neutral arbitrator from
among the JAMS panel of mediators. In the event the parties cannot
agree on a mediator, the Administrator of JAMS will appoint a mediator.
The mediation process shall continue until the earliest to occur of the
following: (i) the Arbitrable Claims are resolved, (ii) the mediator
makes a finding that there is no possibility of resolution through
mediation, or (iii) thirty (30) days have elapsed since the Arbitrable
Claim was first scheduled for mediation.
(ii) Arbitration. Should any Arbitrable Claims
remain after the completion of the mediation process described above,
the parties agree to submit all remaining Arbitrable Claims to final
and binding arbitration administered by JAMS in accordance with the
then existing JAMS Arbitration Rules. Neither party nor the arbitrator
shall disclose the existence, content, or results of any arbitration
hereunder without the prior written consent of all parties. Except as
provided herein, the California Arbitration Act shall govern the
interpretation, enforcement and all proceedings pursuant to this
subsection. The arbitrator is without jurisdiction to apply any
substantive law other than the laws selected or otherwise expressly
provided in this Agreement. The arbitrator shall render an award and a
written, reasoned opinion in support thereof. Such award may include
reasonable attorneys' fees to the prevailing party. Judgment upon the
award may be entered in any court having jurisdiction thereof.
(iii) Costs. The parties shall bear their
respective costs incurred in connection with the procedures described
in this Section 12.13, except that the parties
19
shall equally share the fees and expenses of the mediator or arbitrator
and the costs of the facility for the hearing.
(iv) Survivability. This dispute resolution
process shall survive the termination of this Agreement. The parties
expressly acknowledge that by signing this Agreement, they are giving
up their respective right to a jury trial.
20
IN WITNESS WHEREOF, Owner and Manager have executed this Property
Management and Leasing Agreement as of the day and year first above written.
"MANAGER"
XXXXXXX PROPERTIES-SOLANA SERVICES, L.P.
a Texas limited partnership
By: MP-Solana Services GP, LLC
a California limited liability company
Its General Partner
By: Xxxxxxx Properties Services, Inc.
a Maryland corporation
Its Sole Member
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxxxx
President
NOTICE ADDRESS FOR MANAGER
c/x Xxxxxxx Properties, Inc.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X.Xxxxxxx III
Xxxx Lammas
21
"OWNER"
XXXXXXX PARTNERS-SOLANA LIMITED PARTNERSHIP
a Texas limited partnership
By: Xxxxxxx Partners-Solana GP Limited Liability Company
a Delaware limited liability company
Its General Partner
By: Xxxxxxx Partners-Solana Business Trust
a Delaware business trust
Its sole member and manager
By: /s/ Xxxxxx X. Xxxxxxx III
------------------------------
Xxxxxx X. Xxxxxxx III
Managing Trustee
NOTICE ADDRESS FOR OWNER
c/x Xxxxxxx Properties, Inc.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx III
Xxxx Lammas
22
SCHEDULE 1
LEGAL DESCRIPTION
Xxx 0, Xxxxx 0; Xxxx 0Xx xxx 0X, Xxxxx 2; and Xxx 0, Xxxxx 0; xxx xx Xxxxxxxx/
Xxxxxxxxx Xxxx Addition Xx. 0, Xxxx xx Xxxxxxxx, Xxxxxxx Xxxxxx, Xxxxx.
PLUS THE 8.286 ACRE TRACT DESCRIBED BELOW:
BEING a tract of land out of the Xxxx Xxxxx Survey, Abstract No.
528, Xxxxxx County, Texas, and being a portion of a tract of
land described in a deed to Xxxxxxx-Xxxxxxx, Inc. per deed
recorded in Volume 676, Page 000, Xxxx Xxxxxxx, Xxxxxx Xxxxxx,
Xxxxx; said tract of land being more particularly described by
metes and bounds as follows:
BEGINNING at a 5/8 inch Xxxxx-Xxxxxxx capped steel rod, being the
Southeast corner of The Greens of Trophy Club recorded in
Cabinet D, Page 4, D.R.D.C.T., and being on the North R.O.W.
line of State Highway No. 114 ( a variable width R.O.W.); from
said Beginning Point a TxDOT monument with Aluminum Disk
(control monument) bears North 71 degrees 04 minutes 48
seconds West 1971.53 feet;
THENCE North 18 degrees 45 minutes 00 seconds East, along the East
line of said The Greens of Trophy Club a distance of 403.73
feet to a 5/8 inch Xxxxx-Xxxxxxx capped steel rod being the
Northeast corner of said The Greens of Trophy Club on the
South line of Trophy Club Section Nine to the Town of Trophy
Club per plat recorded in Volume 16, Page 00, Xxxx Xxxxxxx,
Xxxxxx Xxxxxx, Xxxxx;
THENCE South 70 degrees 56 minutes 00 seconds East along said South
line of Trophy Club Section Nine a distance of 455.84 feet to
a point for corner from which a 5/8 inch steel rod bears South
72 degrees 44 minutes East, a distance of 0.30 feet;
THENCE South 75 degrees 13 minutes 24 seconds East along said South
line of Trophy Club Section Nine and the South line of the
remainder of a 307.91 Acre tract of land described in a deed
recorded in Volume 676, Page 153, D.R.D.C.T., a distance of
416.50 feet to a 5/8 inch steel rod (control monument);
THENCE South 40 degrees 17 minutes 50 seconds East along said
remainder of 307.91 Acre tract a distance of 59.68 feet to a
5/8 inch Xxxxxx & Xxxxxxx capped steel rod being the beginning
of a curve to the left, whose center bears South 40 degrees 18
minutes 47 seconds East a distance of 586.27 feet, and whose
chord bears South 26 degrees 41 minutes 08 seconds West, a
distance of 458.18 feet;
THENCE Southwesterly along said curve to the left, through a central
angle of 46 degrees 00 minutes 11 seconds, an arc length of
470.72 feet to a 5/8 inch Xxxxx-Xxxxxxx capped steel rod on
the said North R.O.W. line of State Highway 114 being the
beginning of a curve to the left, whose center bears South 32
degrees 07 minutes 49 seconds West, a distance of 1959.86
feet, and whose chord bears North 64 degrees 28 minutes 30
seconds West, a distance of 450.87 feet;
Schedule 1-1
THENCE Northwesterly along said curve to the left and said North
R.O.W. line, through a central angle of 13 degrees 12 minutes
37 seconds, an arc length of 451.87 feet to a TxDOT aluminum
monument in concrete;
THENCE North 71 degrees 04 minutes 48 seconds West along said North
R.O.W. line, a distance of 411.54 feet to the POINT OF
BEGINNING and embracing 360,916 Square Feet or 8.286 Acres of
Land.
Schedule 1-2
SCHEDULE 2
In addition to the expense reimbursements set forth in the Property
Management and Leasing Agreement, Owner agrees to pay to Manager the Management
Fees and Leasing Commissions set forth below for all of the services required of
Manager pursuant to this Agreement.
1. Base Management Fee. Owner shall pay Manager an annual fee
(payable on a monthly basis) equal to three percent (3.00%) of the Project
Income, excluding any Project Income attributable to portions of the Project
separately managed by third parties including (a) the health club, (b) the
Chile's restaurant, and (c) the Solana Marriot Hotel.
2. Incentive Management Fee. Owner shall pay Manager an annual
fee (payable on a monthly basis) equal to five percent (5%) of the Net Cash Flow
and Net Capital Proceeds from the Project which, if distributed to the partners
of Owner, would not result in a breach or default under any Property Financings
or other material agreements with unaffiliated third parties (other than
affiliates of Manager) relating to the Property to which Owner is a party, and
would not otherwise violate any applicable law.
3. Leasing Commission. Owner shall pay leasing commissions to
Manager in amount in accordance with the Leasing Commission Schedule attached
hereto as Schedule 5 (collectively, "Leasing Commissions").
4. Capital Improvements Coordination Fee. In connection with any
significant development project or capital improvement project (other than
tenant improvement projects) which is supervised or administered by Manager, and
not otherwise subject to a separate development agreement with an affiliate of
Manager, Manager shall be paid a coordination fee equal to three percent (3%) of
the total cost of the work.
5. Tenant Improvements Coordination Fee. In connection with any
tenant improvement project which is supervised or administered by Manager,
Manager shall be paid a coordination fee equal to the greater of (i) three
percent (3%) of the total cost of the work, and (ii) the coordination fee, or
similar arrangement, allocated in the terms of the underlying lease.
In the event of the termination of this Agreement as provided in Article XI
hereof, the compensation of Manager shall be prorated as of the effective date
of such termination.
Schedule 2-1
SCHEDULE 3
(SCHEDULE OF EMPLOYEES)
1. OWNER'S EMPLOYEES
President (benefits and bonuses set forth in the President's employment
agreement with the Owner will be borne by Manager)
Vice President
Property Manager
Project Accountant
Executive Assistant
Executive Secretary
Data Processing Clerk
Receptionist
2. MANAGER'S EMPLOYEES
Senior Vice President, Regional Leasing and Marketing
Schedule 3-1
SCHEDULE 4
(NON-REIMBURSABLE PERSONNEL)
Senior Executives
Controller
Assistant Controller
Project Accounting Manager
Project Accountant
Schedule 4-1
SCHEDULE 5
(SCHEDULE OF LEASING COMMISSIONS)
Subject to the terms of the Property Management and Leasing Agreement
to which this Schedule 5 is attached, Owner agrees to pay to Manager leasing
commissions as follows:
1. Commission Rate. Owner shall pay commissions to Manager in
accordance with this commission schedule (this "Schedule") for leases of any
space in the Project, including for expansions by existing tenants in the
Project, as follows: (i) four and one-half percent (4 1/2%) of the total Minimum
Base Rent for the first ten years of the lease term and (ii) two and one-
quarter percent (2 1/4%) of the total Minimum Base Rent for the eleventh through
fifteenth years of the lease term. In the event the lease term is in excess of
fifteen years, no commission shall be paid on said excess term. In the event a
prospective tenant executes a lease for space in the Project, but does not
actually pay rent for such space for reasons unrelated to any default of Owner,
Manager shall not be entitled to any commission with respect to such lease, and
shall refund to Owner any commissions paid with respect thereto.
2. Computation of Commissions. Commissions shall be computed in
accordance with the above rates based upon the "Minimum Base Rent" set forth in
the lease, as follows:
(a) The term "Minimum Base Rent" shall mean the fixed
minimum annual rent for any given year (which includes Landlord's stipulated
base operating expenses and taxes and also includes any rent due for must-take
space in years in which rent on such space is due) provided in the lease for
space in the Project, excluding any and all other additional rent (such as, but
not limited to, operating expense escalations, tax escalations, payments for
tenant improvements in excess of building standard provided by Landlord,
percentage rent, cost-of-living escalation or parking).
(b) Minimum Base Rent shall be reduced by the net cost to
Owner of any rental concessions of any kind, including but not limited to,
tenant improvements in excess of building standard, free rent, lease buy-outs,
tax or operating expense concessions.
(c) If a rental concession is made by Owner allowing
tenant not to pay rent for an initial portion of the lease term, then the
commission shall be determined as follows: First, there shall be calculated the
average Minimum Base Rent for the entire term of the lease period on a straight
line basis (the "Average Minimum Rent"), which shall be the product of (i) the
aggregate Minimum Base Rent payable by the tenant during the term of the lease,
divided by the number of months in the term of the lease, (ii) multiplied by
twelve (12). Second, commissions shall be payable in accordance with the terms
of Paragraph 1 above except that for purposes of calculating the commissions
pursuant to Paragraph 1 the Average Minimum Rent shall be used in lieu of the
Minimum Base Rent.
3. Options to Extend or Renew the Term
(a) In the event a tenant exercises an option or right of
first refusal contained in the lease to renew or extend the original term of the
lease, Owner shall pay Manager a
Schedule 5-1
commission on the Minimum Base Rent during the renewal or extension period in
accordance with Paragraph 1 above, computed as if such renewal or extension term
were part of the initial term of the lease.
(b) In the event a tenant leases additional space
pursuant to an option or right of first refusal contained in its lease, Owner
shall pay to Manager a commission on the Minimum Base Rent for such additional
space in accordance with Paragraph 1 above, computed as if the tenant had been
obligated to lease such additional space under the original lease. To
illustrate, assume that a tenant entered into a lease with a twenty-year term
with an option to lease additional space at any time during the term of the
lease for the balance of the term of the lease. Assume that the tenant exercised
the option to lease the additional space commencing the fourth year of the term
of the lease. Manager would be entitled to a commission of 4 1/2% of the annual
additional Minimum Base Rent for the first seven years (i.e., the 4th through
10th years) and 2 1/4% of the additional annual Minimum Base Rent for following
five years (i.e., the 11th through 15th years).
(c) Commissions pursuant to Paragraph 3(a) and (b), above,
attributable to options exercised after the original occupancy
by tenant shall be deemed payable upon exercise of the option.
In the case of options exercised prior to the occupancy, such
commissions shall be due and payable in the same manner as if
the option had been exercised on the date the lease was
executed.
4. Other Broker Commissions.
(a) If a licensed real estate broker other than Manager,
or a broker affiliated or associated with Manager (an "Outside Broker"), is the
broker of record of any lease, lease expansion, or lease renewal or extension in
the Project, Owner will pay such Outside Broker a commission in accordance with
Paragraph 1 above, provided that Owner may in its sole discretion agree to pay
an Outside Broker a commission calculated using a higher percentage of Minimum
Base Rent for lease years beginning with lease year eleven, if Owner believes
that market conditions require that commissions payable to the Outside Broker be
calculated using such higher percentage.
(b) With respect to any lease, lease expansion, or lease
renewal or extension entered into by Owner for the Project prior to the
termination of this Agreement, where Owner pays a commission to an Outside
Broker referred to in Paragraph 3(a) above of this Schedule, then Manager shall
be entitled to a commission only in the amount of 50% of the commission Manager
otherwise would have been entitled to pursuant to this Schedule; provided,
however, in no event shall the aggregate commissions paid by Owner to all
brokers (including Manager) for any such lease exceed one hundred fifty percent
(150%) of a full commission as computed in accordance with this Schedule without
the express written consent of Owner.
5. Cancellation Clauses. Where the tenant has the right to cancel
a lease prior to the expiration date, Manager shall initially be paid a
commission based on the aggregate Minimum Base Rent for the uncancellable
portion of the term, plus any cancellation penalty or fee payable by tenant
pursuant to the lease. If, thereafter, the lease is not cancelled by the tenant,
Manager shall be paid the balance of the commission based on the aggregate
Minimum Base Rent for the
Schedule 5-2
remaining portion of the lease term, less the cancellation fee or penalty
computed as if there had been no right of cancellation in the lease. A lease
shall not be deemed cancelled within the meaning of this paragraph unless the
tenant is not obligated to pay rent.
6. Time of Payment. Except as otherwise provided, commissions
earned by Manager (or any other broker) pursuant to this Agreement are payable
as follows:
(a) One-half upon execution of the lease by tenant and
Owner; and
(b) One-half upon occupancy by tenant, but in no event
later than ninety (90) days after the date the lease is signed by Owner and
tenant.
Schedule 5-3
EXHIBIT "A"
2003 ANNUAL PLAN
A-l
