EXHIBIT 10.26
PROPERTY MANAGEMENT AGREEMENT
BETWEEN
XXXXXX REALTY FINANCE PARTNERSHIP, L.P., a Delaware united partnership, as Owner
AND
XXXXXX REALTY, L.P., a Delaware limited partnership, as Manager
Dated as of ___ 1997
PROPERTY MANAGEMENT AGREEMENT
THIS PROPERTY MANAGEMENT AGREEMENT (the "AGREEMENT") is made as of January
__, 1997 (the "COMMENCEMENT DATE"), between Xxxxxx Realty Finance Partnership,
L.P., a Delaware united partnership ("OWNER") and XXXXXX REALTY, L.P., a
Delaware limited partnership ("MANAGER").
BACKGROUND
A. Owner owns, directly or indirectly, or leases certain real property
(including the improvements, if any, thereon) as set forth in Exhibit "A"
----------
hereto, each such property is referred to herein as a "Property" and all are
collectively referred to as "Properties."
B. Owner desires to obtain the services of Manager, on an "independent
contractor" basis, with complete authority and control over the supervision,
management and operation of each Property, to be the sole and exclusive
manager/operator of the Property, pursuant to the terms of this Agreement, and
to have the exclusive authority and control to (i) operate and manage the
buildings and improvements located within each Property, and perform any and all
other management functions necessary for the orderly, safe and efficient
management/operation of each the Properties, (ii) perform or cause to be
performed all necessary repairs, maintenance and services for the Properties,
including but not limited to the common areas, and improvements thereon, (iii)
obtain and maintain adequate insurance coverage for the Properties, (iv) perform
all management obligations of Owner as landlord under all leases by and between
Owner and tenants within the Properties, (v) perform all obligations of Owner as
a tenant or landlord under any ground lease affecting the Properties, (vi)
perform all obligations of Owner as a mortgagor under any mortgages encumbering
all or a part of the Properties, and (vii) perform all obligations of Owner as a
party to easements and other agreements affecting the Properties, including, but
not limited to, assuming Owners's obligations as successor in interest to
developer under Reciprocal Easement Agreements ("REAs"), which shall mean any
reciprocal easement agreement to which the Owner is a party, or has become party
by operation of law as a result of succeeding to the interest of the developer
of the Property.
C. Manager desires to assume such responsibility and to perform such
services, pursuant to the terms and conditions of this Agreement, as hereinafter
set forth.
D. Concurrently herewith Owner has entered into that certain Indenture of
Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing
and Assignment of Leases, Rents and Security Deposits dated as of January ___,
1997, between Xxxxxx Guaranty Trust Company of New York ("Lender") and Owner
(herein, together with all amendments and supplements thereto, the "Mortgage").
E. All capitalized terms used in this Agreement and not defined in this
Agreement shall have the meanings ascribed to them in the Partnership Agreement.
2
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I.
DUTIES OF MANAGER
Subject to the provisions and during the effective term of this Agreement,
Owner hereby appoints Manager and Manager hereby accepts appointment as Owner's
manager for the Properties to perform all of Manager's Obligations. Manager
agrees to perform Manager's Obligations so as to cause the Properties to be
operated, maintained, leased and renovated in an orderly and efficient first-
class manner as applicable to properties of a nature similar to the Properties
in the market where the Properties are located. Manager shall perform Manager's
Obligations not as an agent of Owner but as an independent contractor. Manager
at all times during the performance of its duties hereunder shall act in Owner's
best interest with respect to the proper protection of Owner's assets,
including, without limitation, the Properties. In this capacity, except as
disclosed to and approved by Owner in writing, Manager shall deal at arm's
length with all third parties and Manager shall serve Owner's interest at all
times. Manager shall act in a fiduciary capacity with respect to the proper
protection of and accounting for Owner's assets.
Without limiting the generality of the foregoing, Manager agrees to, and
is hereby granted the authority to, do the following:
A. Notification
Immediately upon execution of this Agreement, Manager shall:
(i) Notify all tenants or occupants of the Properties of the change
in management of said Property. Pursuant to such notification requirement,
Manager shall send out "Tenant's Notice Letter" in the form attached hereto as
Exhibit "D".
(ii) Notify all service entities that currently provide services of
the nature described in Section I.K. to the Properties of the change in
management and enter into new service agreements with said entities in
accordance with Section I.K.
B. Employ Personnel.
(i) Manager agrees to hire, pay, supervise and discharge all employees
and personnel necessary for the performance of Manager's Obligations as required
hereunder. Unless otherwise agreed to by Owner, such personnel shall in every
instance be the employees or independent contractors of Manager and not of
Owner, and Manager shall be responsible for all matters relating to such
personnel, including compliance with the requirements of all applicable laws
relating to such employees. Subject to reimbursements as hereafter set forth,
the salaries, wages and other compensation and fringe benefits, union dues,
insurance, employer's and employees' taxes, and vacation (collectively, "WAGES")
of such employees and personnel shall be negotiated and paid by Manager.
Additionally, at the expense of Manager, executive personnel of Manager shall be
charged
3
with the performance of Manager's Obligations under this Agreement and with the
general supervision, direction and control of on-site personnel at the
Properties.
(ii) In no event shall Manager enter into an employment contract for
"ON-SITE" employees at the Properties relating to services to be performed at or
for the Properties except in accordance with the approved operating budget.
Employees of Manager who are responsible for or have access to funds of Owner
shall be subject to Owner's approval, not to be unreasonably withheld.
C. Books and Records.
(i) Manager agrees to maintain separate and complete books and
records in connection with its management and operation of the Properties (which
shall be supported by sufficient documentation to ascertain that said entries
are properly and accurately recorded), including all Leases (hereinafter
defined), amendments, contracts, agreements and other documents relating to the
Properties. Such books and records shall be kept in a safe and secure manner,
and shall be sufficient to respond to Owner's requirements for financial
information, including, without limitation, financial requirements (a) set forth
in Owner's partnership agreement and (b) of Owner's lender(s). All such books
and records shall be maintained at Manager's address set forth herein. 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 employees or agents including losses arising
from theft of assets by Manager's employees or other agents, or penalties and/or
interest of a material nature. Manager shall preserve all such books and records
for at least six (6) years after the close of the calendar year to which they
relate. Manager shall make the books of account and all other records relating
to or reflecting the operation of the Properties available to Owner and its
representatives at Manager's principal office at all reasonable times upon
reasonable Notice for examination, audit, copying, inspection and transcription.
Upon Owner's reasonable request and expense, Manager shall deliver to Owner
copies of any source materials utilized by Manager in preparing the records,
books and accounts. All books and records at all times shall be the property of
Owner. Upon termination of this Agreement, Manager, at Owner's request and
expense, shall deliver copies of all such books and records to Owner.
(ii) Manager agrees to render to Owner on or before the fifteenth
(15th) day of each calendar month a detailed financial report as specified in
Article IV. Manager shall, within ninety (90) days after the end of each
calendar year, have an audit of the books and records of the Properties made by
Deloitte & Touche L.L.P. or another firm of certified public accountants or
other auditors approved by Owner, which audit shall be certified as to the
fairness of the presentation of such financial statements and notes and the
preparation thereof in accordance with generally accepted accounting principles
applied on a consistent basis. While the foregoing shall in no event include
any tax return preparation relating to the Properties, Manager shall assist
Owner, at Owner's request and expense, in obtaining information necessary to
prepare such returns. In addition, Manager shall furnish Owner with a report
setting forth in sufficient detail all data and information regarding the
business of the Properties as shall be required to enable Owner to prepare its
federal, state and local income tax returns. The expense of the annual audit
shall be an expense of Owner.
D. Manager's Enforcement of and Compliance with Lease Terms.
Manager shall consult with Owner regarding the breach of any tenant's
material obligations as required by leases and all other occupancy agreements
(collectively, "LEASES"). Unless advised by Owner to the contrary, Manager
shall require compliance with the requirements of Leases on the part
4
of the tenants and occupants thereunder (collectively, "TENANTS") and, at the
direction of Owner, otherwise take such actions as may be necessary to exercise
Owner's rights under any such Lease. In addition, if a Tenant's Lease requires
that such Tenant maintain any insurance coverage, Manager shall use its
reasonable best efforts to obtain such certificates of insurance annually from
each such Tenant and review same for compliance with the Lease.
E. Collection.
Manager shall calculate and collect: (a) the rents and all other charges
payable by Tenants under the terms of their Leases (collectively, "RENTS"),
including the timely billing for such rents and other charges, including the
calculation and timely billing of all escalations, pass-throughs, percentage
rent, electricity charges, charges for work or services, and any and all other
sums payable by Tenants; and (b) any and all other charges that may from time to
time be due and payable to Owner from Tenants, licensees, or the public with
respect to the Properties, including parking income, storage income, income from
coin-operated machines, and so on. All Rents and other charges collected
pursuant to this Section I.E. shall be deposited in the Capital Account.
F. Defaults.
Manager shall notify Owner in the management reports delivered pursuant to
Paragraph IV.B of any defaults by Tenants under their Leases. Manager may, at
Owner's expense, with Owner's prior approval, engage counsel and cause such
legal proceeding to be initiated and prosecuted as may be necessary to enforce
Leases and Tenant obligations in connection with a Tenant's failure to pay rent
or other material Tenant defaults as is standard in the ordinary course of
business of property managers similarly situated. In this regard, with respect
to a Tenant's failure to pay rent, Manager, with the approval of Owner, shall
have the authority to, and shall, cancel Leases, terminate tenancies and
occupancies, serve in the name of Owner such notices as are appropriate to
institute and prosecute causes of action, evict Tenants and recover Rents and
other sums due, and compromise disputes with Tenants involving set-offs or
damage claims and Manager shall promptly notify Owner of same; provided,
however, Manager shall not compromise or settle any single dispute involving in
excess of $______ or disputes that in the aggregate in any year total more than
$______ in each case without Owner's prior approval.
G. Service and Labor.
Manager agrees to review, evaluate, negotiate and enter into service
contracts and any other contracts in the name of Owner that are required in the
ordinary course of business of operating the Properties in a first-class manner
as applicable to properties of a similar nature to the Properties and which,
except as provided in Section I.I, provide for services that are included in an
approved budget, including, without limitation, contracts for electricity, gas,
telephone, cleaning, security, vermin extermination and other services which are
required under any of the Leases or to comply with any Requirements (hereinafter
defined). Manager shall not enter into any contract (not covered by the
provisions of Sections I.A and I.R) having a term of more than one (1) year or
requiring payments in excess of $______ for any one year period or contracts
requiring payments in excess of $______ in the aggregate for any one-year
period, without Owner's prior approval. Manager shall submit any prospective
services required for the Properties involving in excess of $______ during any
twelve (12) month period to a competitive bidding process, accepting bids, if
any, from unrelated third parties.
5
H. Repairs and Maintenance.
At the expense of Owner, and in accordance with the budgets, Manager
agrees to keep the Properties, including all equipment and systems, in good
order and repair, in a first-class manner as applicable to properties of a
similar nature to the Properties, in clean and sightly condition, and in
compliance with all Requirements, and to make, and supervise the making of, all
repairs that are the obligations of Owner to Tenants of the Properties (unless
the same is required to be performed by Tenants under their Leases, in which
event, Manager shall use diligent efforts to enforce compliance by such Tenants)
and all repairs, maintenance, decorations, replacements, substitutions,
improvements and additions to the Properties necessary or desirable for keeping
the Properties in such condition. Where appropriate for the work required, or as
otherwise required hereunder, Manager shall submit proposed expenditures to a
competitive bidding process. The applicable provisions of Section I.R shall
apply to all repairs, maintenance, decorations, replacements, substitutions,
improvements and additions to the Properties. Manager agrees to make payments on
account of all repairs, replacements, renovations, additions and other payments
directed by Owner whether or not such items have been included i the approved
budgets, provided that Owner makes adequate provisions for the repayment of all
costs connected with such items.
I. Emergency Expenditures.
Manager agrees to give prompt Notice to Owner of any emergency requiring
repairs or expenditures and to make reasonable efforts to secure Owner's prior
approval before making same. If, after Manager's unsuccessful attempts to
notify or contact Owner, in the reasonable good faith judgment of Manager, any
capital improvement must be undertaken immediately, or any operating expense
must be incurred immediately that are required (a) to correct a condition that
if not corrected would endanger imminently the preservation or safety of the
Premises (or any portion thereof) or the safety of Tenants or other persons, (b)
to avoid the imminent suspension of any necessary service in or to the Premises,
or (c) to prevent Owner or any of the partners of Owner from being subjected
imminently to criminal or substantial civil penalties or damages, then Manager
shall be permitted to make such capital improvement or to incur such operating
expense, not in excess of $______, without regard to the approved operating
budget and without first obtaining the approval of Owner, provided Owner is
informed of any such expenditure before the end of the business day on which the
same is incurred.
J. Maintenance, Taxes and Assessments; Business License.
(i) Unless bills are sent directly to a mortgagee, Manager shall
obtain and verify bills for real estate and personal property taxes, improvement
assessments and other similar charges that are or may become liens against the
Premises and shall recommend payment (or, if reasonable, appeal as in its best
judgment it may decide). Unless a mortgagee is required to make payment,
Manager shall forward such bills to Owner for payment by Owner in such time to
permit Owner to avoid penalty for late payment or to permit Owner to take
advantage of discounts. If Owner directs Manager to make payment, Manager shall
pay, at the expense of Owner, all real estate and personal property taxes and
assessments levied or assessed against the Premises or personal property used in
connection therewith, such payments to be made in each case so as to avoid the
imposition of additional interest, penalties or other charges for the late
payment thereof (or if Owner directs, so as to obtain any available discount),
and shall furnish Owner with receipted bills therefor.
6
(ii) Manager agrees to annually review, and, at Owner's request,
submit a report on all real estate and personal property taxes and assessments
affecting the Premises (and if so requested, Manager may engage outside
consultants, at Owner's expense, with Owner's prior approval) and to initiate
and pursue appeals of same, if so directed by Owner.
(iii) Manager shall promptly notify Owner of, and at Owner's expense,
cause the issuance of, any necessary business licenses and permits in the name
of Owner or the Premises.
K. Inventories and Supplies.
Manager agrees to supervise and purchase, or arrange for the purchase, at
Owner's expense (subject to the budget as described in Section IV), in an
economical manner, of all inventories, provisions, supplies and operating
equipment that, in the normal course of business, are necessary and proper to
maintain and operate the Premises in a first-class manner as applicable to
properties of a nature similar to the Premises. Manager shall pass through to
Owner all "bulk" discounts (or Owner's pro rata share, if applicable) received
by Manager in connection with such purchases.
L. Signs.
Subject to approval of Owner, Manager agrees to promulgate and maintain
from time to time a policy with respect to the erection and maintenance of signs
at the Premises. All required temporary or permanent exterior/interior signage
to properly identify and market the Premises, as approved by Owner, shall be
considered an expense of the Premises.
M. Hours.
At all times during normal business hours, and with respect to
emergencies, during all other hours, Manager agrees to be available to, or cause
a representative of Manager to be available to, Tenants in the Premises.
N. General Operations.
Manager, at the expense of Owner, agrees to operate the Premises and all
facilities and services in the Properties in a first-class manner as applicable
to properties of a nature similar to the Properties and in compliance with all
Requirements and to provide such services at the Properties as are normally
provided by operators of properties of comparable class and size; subject,
however, to the budget constraints described in Section I.V.A. Manager shall
draft, upon Owner's written request, and implement, upon receipt of Owner's
approval thereof, all operating procedures and emergency, contingency and
security plans for the Properties.
O. Tenant Complaints.
Manager shall submit to Owner promptly upon receipt any notice of any
alleged default of Owner received from any Tenant at the Properties. Manager
agrees to handle complaints and requests from Tenants and to notify Owner of any
significant complaint made by a Tenant at the Properties.
7
P. Notices of Claim of Injury or Damage.
Manager agrees to notify (i) Owner and any insurance carrier of insurance
required under Section VII.B of any personal injury or property damage occurring
to or claimed by any Tenant or third party with respect to the Properties and
(ii) Owner of any disclaimer of coverage by any insurance carrier, and to
promptly forward to Owner any summons, subpoena, or legal document served upon
Manager relating to actual or alleged potential liability of Owner, Manager or
the Properties promptly upon Manager's knowledge thereof.
Q. Hazardous Substances.
If during the term of this Agreement, Manager becomes aware of the
existence or the likely existence at the Properties of hazardous materials,
toxic wastes, asbestos or asbestos-containing materials or any other substance,
now or in the future defined as a "hazardous substance" under U.S.C. (S) 9601 et
seq., as amended or under any similar rule, regulation or law now existing or
hereafter enacted or adopted (collectively, "HAZARDOUS SUBSTANCES"), then
Manager shall immediately notify Owner of the condition and recommend a course
of action to be taken in connec tion therewith. Owner shall determine such
further course of action. Manager shall always use due diligence in detecting
and preventing hazardous conditions. Manager shall not take any action or fail
to take any action with respect to Hazardous Substances without the
authorization of Owner.
R. Construction and Renovation.
In connection with all repairs, alterations, renovations, replacements and
construction work performed at the Properties, including, without limitation,
under Section I.H, whether by Owner or any Tenant (collectively, "WORK"),
Manager shall coordinate, monitor and supervise Work as provided herein so that
all Work shall be performed in an orderly manner, in a good and workerlike
manner, lien-free (subject to timely payment by Owner as required hereunder), in
compliance with all applicable laws, rules, regulations, ordinances and permits,
and so as to cause a minimum of interference with the Tenants' use of the
Properties and with the operation of the equipment and mechanical and other
systems of the Properties. Without limiting the generality of the foregoing,
Manager shall:
a. cause to be prepared, and review, plans and specifications (at Owner's
expense to the extent Manager incurs any out-of-pocket, third-party
expenses in connection with such plans and specifications) and a budget
(at Manager's expense) for any one item of Work that will cost in
excess of One Hundred Thousand Dollars ($100,000) ("MAJOR WORK"), and
advise Owner about, and obtain Owner's prior approval for, all such
Major Work;
b. obtain Owner's prior approval for all Work that affects the Properties'
exterior or landmark-designated (if applicable) elements or structural
elements or electrical, plumbing, mechanical and other systems;
c. review and advise Owner about all contracts and agreements to be
entered into in connection with the performance of Work;
d. if any contract for Work is to be performed by or on behalf of Owner,
the cost of that is expected to exceed Ten Thousand Dollars ($10,000),
then Manager shall require
8
competitive bidding for the performance of such Work (in a manner
consistent with bidding procedures approved by Owner), shall accept
third-party bids therefor, and shall review the bids with Owner and
advise Owner which bid to accept;
e. if requested, prepare loan disbursement requests with all requisite
back-up documentation in order to obtain payment for the Work;
f. be responsible for, and obtain Owner's approval for, all filings and
applications for permits, certificates and other similar approvals or
documentation with all authorities having jurisdiction over the
Properties or Work;
g. consult with and advise Owner about, and obtain Owner's approval with
respect to, the types and coverage limits of insurance to be required
of the general contractor, construction manager, architect, engineer,
sub-contractors and other professionals involved in any Work, which
coverage shall comply with the provisions of Section IV.D (the
"PROFESSIONALS");
h. act as construction manager (as such term is commonly understood in the
California construction industry, but in any case including the
following responsibilities: assist Owner in defining the scope of work;
assist in preparing and reviewing plans and specifications, including
attendance at meetings with architects and engineers; solicit bids;
coordinate schedule, ordering, and deliveries; supervise job; regularly
inspect work; review draw requests and make recommendations for
payment; keep Owner informed of the status of the job; and make
recommendations regarding payment) and supervise and monitor the
performance of the Professionals and the overall progress of such Work,
provided that Manager shall not be required to undertake the role of
construction manager for Work the estimated cost of which exceeds One
Million Dollars ($1,000,000);
i. during the performance of any Work, certify to Owner, when requested,
that, to the best of Manager's knowledge, such Work is being performed
in accordance with the provisions hereof and, if applicable, in
compliance with the plans and specifications therefor;
j. inform Owner of the commencement of any Work other than Major Work; and
k. use its best efforts to obtain waivers of lien from all contractors,
subcontractors, and materialmen involved in the performance of any Work
and the materials furnished in connection therewith, as soon as same
may be obtained under applicable Requirements.
S. Sufficient Funds; Expenditures To Be Approved.
Notwithstanding the imposition of Manager's Obligations upon Manager
hereunder, if the cost of performing any such Manager's Obligations is to be
borne by Owner as provided in the applicable approved budget or as otherwise
agreed to by Owner herein or elsewhere in writing, Manager shall not be
obligated to perform such Manager's Obligations unless Owner provides Manager
with sufficient funds therefor. In addition, notwithstanding the rights granted
to Manager under this Article I and elsewhere in this Agreement to incur
expenditures on behalf of Owner, unless such expenditures are included in a
budget previously approved by Owner, or are of an emergency
9
nature (and meet the dollar limitations as described in Section I.I), all such
expenditures must be approved by Owner prior to Manager incurring same.
T. Transactions. If Owner desires to sell or refinance any one or more
of the Properties, then Manager shall fully cooperate with Owner and/or Owner's
designated parties as Owner directs, including by providing detailed
information, exhibiting the Properties, and so on. Manager shall have no rights
or decision making authority in connection with any such sale or refinancing.
U. Information. Manager shall keep Owner apprised of, and shall promptly
notify Owner of, all matters that have or may have a material effect on the
ownership, operation, maintenance or repair of the Properties.
V. Mandatory Contract Provisions.
Any service, supply, maintenance, repair, construction or other contract
referred to in Article I shall, unless otherwise agreed to by Owner, (a) be in
the name of Owner or, if requested by Owner, Manager, including service
contracts in existence on the Commencement Date, (b) contain a provision by
which the contractor or subcontractor, as the case may be, indemnifies, defends
and holds Owner harmless from and against any and all claims, demands, causes of
action, losses, damages, fines, penalties, liabilities, costs and expenses,
including, without limitation, reasonable attorneys' fees and disbursements and
court costs, sustained or incurred by or asserted against Owner by reason of or
arising out of the contractor's, subcontractor's, its employees', agents' or
representatives' negligence, fraud, willful misconduct or criminal acts, (c) be
assignable, at Owner's or Manager's option, as applicable, to a new owner of the
Properties without the contractor's consent, (d) include a provision for
cancellation, without penalty, by Owner upon not more than thirty (30) days'
written Notice, and (E) require that the contractor or subcontractor provide
evidence of sufficient insurance acceptable to Owner or Manager, as the case may
be. In addition, Manager shall make Owner and each of its lenders an additional
beneficiary of any insurance or indemnity provision that is provided in any such
contract. If Owner shall sell or otherwise transfer the Properties and not
exercise its option set forth in Article X to terminate this Agreement in
connection therewith, then Manager shall, at Owner's option, assign to Owner or
Owner's successor-in-interest any or all service contracts pertaining to the
Properties that may be in the name of Manager.
ARTICLE II.
DUTIES OF OWNER
A. Management Materials in Possession of Owner.
At the Commencement Date and at any and all times thereafter that such
material becomes available to Owner, Owner shall promptly furnish Manager with
all documents and written information required for the management of the
Properties, such as all Leases, amendments, the status of rental payments,
copies of service contracts in effect, and all applicable insurance policies,
and other documents and information as Manager may reasonably request.
10
B. Hazardous Substances.
At commencement of this Agreement, and at any and all times thereafter
that any written knowledge is obtained by Owner relating to the continued
existence of any Hazardous Substances, underground storage tanks, and health,
fire and safety hazards with respect to the Properties, Owner shall promptly
furnish Manager with all documents, studies, tests, and reports that discuss or
mention any of the foregoing. Owner and Manager agree to make public all test
and inspection results required by law or Lender to be disclosed. Should
Manager reasonably disagree with Owner's instructions in regard to these
matters, Manager may, at its option, terminate this Agreement in accordance with
Section X.B. The fact that Manager may choose not to terminate this Agreement
shall not be taken as an agreement to or acquiescence in the action of Owner
taken in regard to these matters.
C. On-Site Office.
If the performance by Manager of Manager's Obligations requires facilities
or space at the Properties, Owner agrees to provide appropriate facilities or
space at the Properties suitable for the discharge of Manager's Obligations
under this Agreement.
D. Authorities Withheld by Owner.
Listed below are specific authorities that Owner is withholding from
Manager unless superseded by written permission from Owner, or as may be
approved by Owner in a budget:
a. Execution of Leases.
b. Other authorities or rights not expressly granted to Manager hereunder.
c. Other authorities or rights that expressly require Owner's approval
hereunder.
ARTICLE III.
EXPENSES BORNE BY OWNER
Except as otherwise expressly provided herein, all expenses, debts and
liabilities incurred to third parties in accordance with the terms hereof, or by
Owner directly, are and shall be obligations of and paid by Owner, and Manager
shall not be liable for any such obligations by reason of its management,
supervision or operation of the Properties for Owner. To the extent expenses of
the Properties can be passed on to Tenants, considering Lease terms, Manager
shall so pass on such expenses and the amounts so collected shall be treated as
Rents. Manager agrees to pay all Wages, which amounts shall, subject to the
exclusions hereinafter specifically set forth, be an expense of Owner. The
following expenses or costs incurred by Manager in connection with the
management of the Properties shall be at the sole cost and expense of Manager
and shall not be reimbursable or paid by Owner:
(a) Cost of gross salary and wages, payroll taxes, insurance, worker's
compensation, union dues, vacation and other benefits of Manager's
personnel not covered in the approved operating budget.
11
(b) General accounting, bookkeeping and reporting services required
hereunder to be provided by Manager in the normal course of its
business in connection with its management of properties.
(c) Political or charitable contributions.
(d) Cost of advances made to employees, which advances at any time
exceed repayments thereof theretofore made by employees.
(e) Cost of travel and meals of employees.
(f) Any expenses not specifically approved in the approved operating
budget or otherwise specifically approved by Owner as an expense of
Owner, either herein or elsewhere, in writing.
(g) Manager's overhead, general and administrative costs and expenses.
Owner shall not be responsible for any costs associated with the supervision and
coordination of any of the Manager's Obligations, except for the Management Fee
referred to in EXHIBIT "B."
ARTICLE IV.
BUDGETS AND BANK ACCOUNTS
A. Budgets.
(i) Manager agrees to prepare at least annually, and submit to Owner
for its approval on or before ______ of each calendar year, an operating budget
for the next ensuing calendar year, which operating budget shall include, among
other things, (a) the name and title of each employee "on-site" at the
Properties, (b) the responsibilities of, and duties performed by, such
employees, and (c) the Wages for each such employee, and updates or revisions to
the budgets for the current operating year, in each case in a manner reasonably
satisfactory to Owner. Manager agrees to prepare and submit to Owner for its
approval an operating budget for the remainder of the calendar year that
includes the Commencement Date within thirty days after the Commencement Date.
Pending such delivery and approval, Manager shall operate the Properties in a
manner substantially consistent with prior practice and all contracts and
expenditures shall be subject to Owner's approval not to be unreasonably
withheld.
(ii) Manager agrees not to make expenditures for the operation and
maintenance or improvement of, or otherwise relating to, the Properties in any
fiscal year except within the categories and amounts contained in the budgets
for that year previously approved by Owner, unless (a) such expenditure is
specifically authorized under any of the other provisions of this Agreement, or
(b) Manager first obtains Owner's approval of such expenditure. In addition,
during the calendar year, Manager shall inform Owner of any significant
increases or decreases in costs and expenses or revenues that were not foreseen
during the budget preparation period and thus were not reflected in the
operating budget.
B. Bank Accounts.
12
(i) All costs and expenses which, pursuant to the provisions hereof,
are agreed to be operating expenses of the Properties, shall be paid from the
Manager's Operating Account(s), as defined in subsection (ii) below, unless the
funds therein are insufficient for such purpose, in which event the same shall
be paid from funds provided by the Owner. Manager may, however, but shall not
be obligated so to do, make any advance of funds, subject to reimbursement
therefor (without interest) by Owner within five (5) days after written request
therefor, to cover any expenses which Manager reasonably believes are necessary
for the maintenance or operation of the Properties and are permitted by the
provisions hereof.
(ii) Manager's Operating Account(s) shall be in the form of a Money
Market account and/or checking account, as deemed reasonably necessary by
Manager, and shall be established into which the depositary for the Servicing
Agent shall make disbursements from the Deposit Account in accordance with the
terms and conditions of the Mortgage. All rent and other gross receipts from
the Properties shall be deposited directly by Tenant into the Deposit Account,
which shall be set up pursuant to the terms of the Mortgage. In the event that
the Manager receives any funds with respect to the Properties, Manager shall
immediately deposit such funds into the Deposit Account. Manager shall pay from
the Manager's Operating Account(s), as determined by Manager, all expenses
Manager reasonably believes, in its sole judgment and discretion, are necessary
for the operation and management of the Properties, including the compensation
to which Manager may be entitled as provided for in Article IX hereof and as
provided in the Loan Agreement. All funds on deposit in the Manager's Operating
Account shall be and remain the sole and exclusive property of Owner. No less
often than upon disbursement from the Deposit Account in accordance with the
Mortgage, Manager shall transfer to Owner, as Owner shall direct, from the
Manager's Operating Account(s), all funds which, in Manager's good-faith
estimate, are in excess of the Properties' current operating needs. Owner
shall, to the extent that the aggregate amount of funds in the Manager's
Operating Account(s) relating to the Properties are insufficient to pay current
operating needs, deposit sufficient funds into the Manager's Operating
Account(s) as instructed by Manager within ten (10) days after Manager's written
request (but no more than once per month, except in the case of an emergency).
(iii) Owner agrees that it shall not withdraw funds from the Manager's
Operating Account(s) unless Manager fails to perform under this Agreement.
Manager represents that all obligations shall be paid from the Manager's
Operating Account(s), as determined in the discretion of Manager, and further
agrees that all such obligations shall be paid by check or bank transfer from
such account directly to third-parties entitled thereto.
(iv) Manager shall cause to be furnished to Owner periodic statements,
no less often than monthly, of the revenue and disbursements relating to the
Properties and showing all deposits and withdrawals or distributions from the
Manager's Operating Account(s). Manager shall also prepare and deliver to Owner
any and all reports required to be delivered to Lender under the Loan Agreement.
(v) Notwithstanding the foregoing provisions of this Article IV,
Manager acknowledges that Owner, in connection with the Mortgage, has entered
into a Cash Collateral Account Security, Pledge and Assignment Agreement,
between Owner and Lender (the "Cash Collateral Account Agreement"), and Manager
agrees to comply with the provisions of the Cash Collateral Account Agreement,
and to the extent required by Lender, to execute such agreement, provided that
such compliance and execution by Manager shall not expose Manager to obligations
and liabilities greater than those to which Manager is exposed hereunder.
13
ARTICLE V.
COMPLIANCE
(i) Manager agrees, subject to the approved budget and to Manager's
rights in the event of an emergency as set forth in Section I.I, to operate the
Properties in such a manner as to comply with and abide by all laws, rules,
regulations, requirements, orders, notices, determinations and ordinances of (i)
any federal, state or municipal authority, and (ii) any insurance companies
covering any of the risks against which the Properties are insured
(individually, a "REQUIREMENT" and collectively, "REQUIREMENTS"). In addition,
Manager shall use its best efforts to comply, at Owner's cost and expense, with
all terms and conditions contained in all Leases, agreements, contracts, loan
documents and other binding obligations of Owner relating to the Properties, of
which Manager is aware.
(ii) Subject to the approved budget and to Manager's rights in the
event of an emergency as set forth in Section I.I, Manager shall promptly remedy
any violation of any Require ment (a "VIOLATION") that comes to its attention.
As and when directed by Owner, and at the expense of Owner, Manager shall
institute, in the name of Owner and using counsel approved by Owner, appropriate
actions or proceedings to contest any such Requirement. Expenses incurred in
remedying or contesting Violations may be paid by Manager without Owner's
approval provided such expenses do not exceed Ten Thousand Dollars ($10,000.00)
in any one instance. If, however, a Violation is one for which Owner might be
subject to criminal or civil penalty, Manager shall notify Owner by no later
than the end of the business day on which Manager becomes aware of the Violation
so that prompt arrangements may be made to remedy the Violation.
(iii) Neither Owner, Manager nor anyone authorized to act for any of
them, shall, in the leasing of space at the Properties, the provision of service
thereto, or in any other manner, discriminate against any person on the grounds
of race, color, creed, religion, disability, sex or national origin. Manager
shall comply with all laws, regulations and ordinances pertaining to the
foregoing.
(iv) Manager and Owner each mutually agree that there shall be no
discrimination against or segregation of any person or of a group of persons on
account of race, color, religion, creed, disability, sex or national origin in
the leasing, use or occupancy of, or the employment of Manager's personnel at,
the Properties, nor shall Owner or Manager permit any such practice or
discrimination or segregation with reference to the selection, location, number,
use or occupancy of Tenants.
14
ARTICLE VI.
INSURANCE AND INDEMNIFICATION
A. Insurance.
Owner shall, at its sole cost and expense, keep in full force and effect
insurance coverage of the types and minimum limits as follows during the term of
this Mortgage:
(i) Property Insurance. Insurance with respect to the Improvements and
------------------
the Building Equipment against any peril included within the classification
"All Risks of Physical Loss" with extended coverage in amounts at all times
sufficient to prevent Owner from becoming a co-insurer within the terms of
the applicable policies, but in any event such insurance shall be maintained
in an amount equal to the full insurable value of the Improvements and the
Building Equipment (and must provide coverage of any additional costs
associated with applicable Legal Requirements), and such policies shall be
subject only to exclusions that are standard and customary for properties
comparable to the applicable Property and acceptable to the Rating Agencies
and Lender. The term "full insurable value" means the actual replacement
cost of the Improvements and the Building Equipment (without taking into
account any depreciation, and exclusive of excavations, footings and
foundations, landscaping and paving) (but in no event less than 125% of the
applicable Allocated Loan Amount) determined annually by an insurer, a
recognized independent insurance broker or an Independent Appraiser selected
and paid by Owner and in no event less than the coverage required pursuant to
the terms of any Lease; provided, however, if the terms of the applicable
insurance policies expressly provide for insurance to be provided in the
amount of the actual replacement cost of the Improvements and the Building
Equipment or such policies contain a replacement cost endorsement, no such
annual determination will be necessary;
(ii) Liability Insurance. Comprehensive general liability insurance,
-------------------
including bodily injury, contractual injury, death and property damage
liability, and excess and/or umbrella liability insurance against any and all
claims, including all legal liability that could be imposed upon Lender, to
the extent insurable, and all court costs and attorneys' fees and expenses,
arising out of or connected with the possession, use, leasing, operation,
maintenance or condition of each Property in such amounts as are generally
required by institutional lenders for properties comparable to the Properties
written on a per occurrence basis with a per occurrence limit of not less
than $1,000,000 and with an aggregate limit of not less than $5,000,000 per
Property;
(iii) Workers' Compensation Insurance. Statutory workers' compensation
-------------------------------
insurance (to the extent the risks to be covered thereby are not already
covered by other policies of insurance maintained by Owner), with respect to
any work by or for Owner performed on or about any Property;
(iv) Loss of Rental Value. Loss of "rental value" or "business
--------------------
interruption" insurance in an amount sufficient to avoid any co-insurance
penalty and to provide Proceeds which will cover the loss of rents sustained
during the period of at least twelve (12) months following the date of
casualty (which casualty shall include damage by reason of earthquake). Such
policies of insurance shall be subject only to exclusions that are acceptable
to Lender and the Rating
15
Agencies. The term "rental value" means the sum of (A) the total then
ascertainable Rents payable under the Leases and (B) the total ascertainable
amount of all other amounts to be received by Owner from third parties which
are the legal obligation of Tenants, reduced to the extent such amounts would
not be received because of Operating Expenses not incurred during a period of
non-occupancy of that portion of such Property then not being occupied;
(v) Builder's All-Risk Insurance. During any period of repair or
----------------------------
restoration, builder's "all risk" insurance in an amount equal to not less
than the full insurable value of the applicable Property against such risks
(including fire and extended coverage and collapse of the Improvements to
agreed limits as Lender may request, in form and substance acceptable to
Lender.
(vi) Boiler and Machinery Insurance. To the extent applicable, broad
------------------------------
form boiler and machinery insurance (without exclusion for explosion)
covering all boilers or other pressure vessels, machinery and equipment, if
any, located in, on or about each Property and insurance against loss of
occupancy or use arising from any such breakdown in such amounts as are
generally available at commercially reasonable premiums and are generally
required by institutional lenders for properties comparable to each Property;
(vii) Flood Insurance. If any Improvement on any Property is located
---------------
within an area designated as "flood prone" or a "special flood hazard area"
(as defined under the regulations adopted under the National Flood Insurance
Act of 1968 and the Flood Disaster Protection Act of 1973), flood insurance
if available, in an amount equal to the lesser of the Allocated Loan Amount
for the applicable Property and the maximum limit of coverage available with
respect to the applicable Property, acceptable to Lender, provided, however,
that if flood insurance shall be unavailable from private carriers, flood
insurance provided by the federal or state government, if available;
(viii) Earthquake Insurance. Earthquake coverage with such limits and
--------------------
deductibles as are generally required by institutional lenders for similar
properties in the geographic area where the Properties are located, in any
event at least equal to the lesser of the Allocated Loan Amount for the
applicable Property and the maximum limit of coverage available with respect
to the applicable Property. Such coverage shall be placed with one or more
reputable insurers and may insure additional properties on a pooled risk
basis. Notwithstanding the foregoing, Owner shall not be required to carry
such earthquake coverage with respect to Properties as of the date hereof,
unless the same shall be required by any Lease of such Property. In addition,
if any Substitute Property is located in California, if Owner shall deliver
to Lender a seismic study with respect to such Substitute Property located in
California, quantifying the probable maximum loss with respect thereto in
connection with an earthquake, which report shall be acceptable to Lender,
Lender shall waive the requirements of this clause (viii) with respect to
such Substitute Property, provided that no Lease of such Substitute Property
shall require such coverage; and
(ix) Other Insurance. At Lender's reasonable request, such other
---------------
insurance, including but not limited to earthquake insurance, with respect to
the Trust Estate against loss or damage of the kinds from time to time
customarily insured against and in such amounts as are generally required by
institutional lenders on loans of similar amounts and secured by properties
compara ble to the Properties.
B. Ratings of Insurers.
16
Owner will maintain the insurance coverage described in Section ___ above,
in all cases, with one or more domestic primary insurers acceptable to Lender,
having both (i) a claims-paying-ability rating by Standard & Poor's Ratings
Services of not less than "AA" and its equivalent by any other Rating Agency,
and (ii) an Xxxxxx X. Best Company, Inc. ("Best") rating of "A" or better and a
----
financial size category of not less than IX. All insurers providing insurance
required by this Agreement shall be authorized to issue insurance in the state
where the Property insured is located.
For the purposes hereof, "Maximum Foreseeable Casualty Loss" shall mean
the estimate of a qualified fire protection engineer in connection with Owner's
existing insurance package of the maximum probable casualty loss which would be
suffered in respect of the Improvements and Building Equipment for any Property
as a result of damage caused by the perils covered by the insurance described in
Article VI.
The insurance coverage required under Section VI.A. may be effected under
a blanket policy or policies covering the Trust Estate and other properties and
assets not constituting a part of the Trust Estate; provided that any such
blanket policy shall specify, except in the case of public liability insurance,
the portion of the total coverage of such policy that is allocated to the Trust
Estate, and any sublimits in such blanket policy applicable to the Trust Estate,
which amounts shall not be less than the amounts required pursuant to Section
VI.A. and which shall in any case comply in all other respects with the
requirements of this Section VI.
C. Miscellaneous
Owner shall comply with all Insurance Requirements and shall not bring or
keep or permit to be brought or kept any article upon any of the Property or
cause or permit any condition to exist thereon which would be prohibited by any
Insurance Requirement, or would invalidate insurance coverage required hereunder
to be maintained by Owner on or with respect to any part of any Property
pursuant to this Section ___. Notwithstanding anything to the contrary, it is
expressly understood and agreed that any insurance which Owner shall cause any
Tenant to provide that shall otherwise be in compliance with all of the terms
and conditions of this Section VI shall satisfy Owner's obligations with respect
thereto hereunder.
Owner will not take out separate insurance contributing in the event of
loss with that required to be maintained pursuant to this Section VI unless such
insurance complies with this Section VI.
Except in the case of public liability insurance, upon Lender's request,
Owner shall deliver to Lender an Officer's Certificate setting forth (i) the
number of properties covered by such policy, (ii) the location by city (if
available, otherwise, county) and state of the properties, (iii) the average
square footage of the properties (or the aggregate square footage), (iv) a brief
description of the typical construction type included in the blanket policy and
(v) such other information as Lender may reasonably request.
D. Indemnification.
Manager agrees to indemnify and save Owner, and Owner's partners (direct
and indirect), and the officers, employees and partners of Owner and Owner's
partners (direct and indirect), harmless from and against all loss, cost,
liability and expense, including, but not limited to, reasonable counsel fees
and disbursements that may be occasioned by any acts constituting theft,
17
fraud, willful misconduct or gross negligence on the part of Manager, or
Manager's failure to take appropriate action for the theft, fraud, willful
misconduct or gross negligence of its employees, agents and/or representatives.
Except for Manager's theft, fraud, willful misconduct or gross negligence, Owner
shall indemnify, defend and hold harmless Manager from any loss, cost, liability
and expense, including, but not limited to, reasonable counsel fees, relating to
the Properties that results from Manager's performance of Manager's Obligations
hereunder in accordance with the terms hereof, provided Manager:
(1) notifies Owner and any insurance carrier (as required) promptly after
Manager receives notice of any such loss, damage or injury;
(2) takes no action (such as admission of liability) that bars Owner from
obtaining any protection afforded by any insurance policy Owner may
hold or that might prejudice Owner in its defense to a claim based on
such loss, damage or injury; and
(3) agrees that Owner shall have the exclusive right, at its option, to
conduct the defense to any claim, demand or suit.
Nothing contained herein shall be construed as indemnifying Manager against its
theft, fraud, willful misconduct or gross negligence, or against any losses,
claims, demands, liabilities, suits, damages, awards, judgments, charges,
penalties, fines costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements) which may be imposed upon, incurred, paid by
or asserted against Owner by reason of or in connection with the Manager's
obligations under this Agreement.
Manager agrees that the obligations of Owner under or with respect to this
Agreement, if any, do not constitute personal obligations of Owner and shall not
create or involve any claims against, or personal liability on the part of Owner
and that Manager and all Persons claiming by, through or under Manager will look
solely to Owner's interests in the Properties and not to any other assets of
Owner for satisfaction of any liability of Owner in respect of this Agreement
and will not seek recourse or undertake any collection or enforcement measures
against Owner or levy upon, attach, execute against, collect from or otherwise
attempt to enforce Owner's obligations or liabilities against any personal
assets or other assets of Owner.
E. Survival of Indemnifications.
The indemnifications set forth in this Article shall survive the
expiration or earlier termination of this Agreement.
F. Ownership of Materials; Confidentiality.
All estimates, projections, studies, reports, charts, recommendations,
surveys, plans, drawings, agreements and other data, information, documents and
work in any way relating to the Properties prepared and done by Manager pursuant
hereto or otherwise in the possession of Manager shall be and remain the
property of Owner. Throughout the term of this Agreement, Manager shall
promptly furnish Owner with accurate, current and complete copies of all such
data and materials with respect to the Properties. Immediately following any
termination of this Agreement, Manager shall turn over to Owner originals, and
where no originals are available, copies of all such data and
18
materials in Manager's possession, and Owner shall have the right to use the
same without further compensation to Manager. Manager agrees, for itself and
all Persons retained or employed by Manager in performing its services
hereunder, to hold in strict confidence and not to use or disclose to others any
confidential or proprietary information of Owner heretofore or hereafter
disclosed to Manager or to any such Persons (all information obtained or
provided relating to Owner or the Properties's financial condition or otherwise
designated as such by Owner conclusively being deemed confidential, including,
but not limited to, any data, information, plans, programs, processes, test
results, costs, operations or identities of tenants which may come within the
knowledge of Manager or any such Persons in the performance of, or as a result
of, its services), except where: (a) Owner specifically authorizes the
disclosure of any information to others or such disclosure reasonably results
from the performance of Manager's duties hereunder; or (b) such written data or
information previously and lawfully shall have been made publicly available by
parties other than Manager.
G. Nondiscrimination.
There shall be no discrimination against or segregation of, any person or
group of persons, on account of race, color, sex, marital status, creed,
religion, national origin or ancestry in the sale, lease, sublease, transfer,
use, occupancy, tenure or enjoyment of the Properties, nor shall the Manager,
its agents, employees or any other person claiming under or through Manager,
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 Properties.
H. Prohibited Inducements
Except as otherwise expressly provided in this Agreement, Manager, its
directors, employees or agents shall not give to or receive from any director,
employee or agent of any tenant of the Properties or any party or entity with
whom it contracts for the benefit of the Properties any gift, payment,
entertainment or other favor of significant value, or any commission, fee or
rebate.
ARTICLE VII.
LEASING
A. Appointment.
Owner hereby appoints Manager as the leasing agent for the Properties.
Manager hereby accepts such appointment in order to maximize the earnings of the
Properties. In connection with such appointment, Manager agrees to use its best
efforts to have the rentable space in the Properties continuously rented to
desirable Tenants satisfactory to Owner and, all subject to Owner's approval and
instructions:
(i) to prepare and submit to Owner for its approval, a form lease to
be used for all Tenants (the "FORM LEASE");
(ii) at the request of Owner and at Owner's expense, to advertise
space in the Properties for rent, by means of periodicals, signs, plans,
brochures and other means and media, including listing the rentable space
at such listing price(s) as Owner shall direct from
19
time to time (the "LISTING PRICE"); but all written materials and
advertisements shall be subject to Owner's approval;
(iii) to promptly advise Owner in writing of any and all offers
received for any rentable space, whether or not consistent with the
current Listing Price, if any;
(iv) at the request of Owner, to actively solicit and seek the
cooperation of other licensed real estate brokers ("OUTSIDE BROKERS"),
subject to such terms and conditions as Owner may require, and to
cooperate fully with such Outside Brokers and provide them with all
relevant information regarding the Properties and space therein available
for lease;
(v) to negotiate Leases and renewals of Leases at appropriate times,
it being understood that all inquiries with respect to leasing any portion
of the Properties shall be referred to Manager, and it also being
understood that (a) all leases shall be prepared using the Form Lease
except for variations approved by Owner or consistent with guidelines to
be recommended by Manager and agreed upon by Owner and Manager in writing
from time to time; (b) except for terms and conditions that are required
by applicable law, all terms and conditions of all Leases and renewals,
all amendments to Leases, and all Leases, renewals and amendments thereof,
and any changes in the Form Lease shall be approved by Owner; (c) all
Leases, renewals and amendments shall be executed by and in the name of
Owner; and (d) Owner shall be free, without any liability to Manager
whatsoever, to accept or reject any offer, to refuse to execute any Lease,
renewal or amendment, to withdraw all or any portion of space in the
Properties from the market and to otherwise refuse to enter into, pursue
or consummate any Lease, renewal or amendment for any reason or no reason;
(e) if Manager knows that it has a prospective Tenant reference from
another property in which Manager or any affiliate of Manager has a
beneficial interest or that Manager or any affiliate of Manager manages
or is a leasing agent, Manager shall declare its potential conflict of
interest to Owner, and Owner shall determine if negotiations shall be
undertaken by Manager, Owner, or an appointed third party, and (f)
references of prospective Tenants shall be investigated by Manager.
B. Representations and Warranties. Manager represents and warrants as
follows:
(i) Manager is or will hire duly licensed real estate brokers, and
any sales personnel employed by Manager are (to the extent required by
law, regulation, or any governmental authority) duly licensed real estate
brokers or salespersons, in the jurisdiction in which the Properties are
located. Manager shall maintain all such licenses in full force and effect
throughout the term of this Agreement.
(ii) Manager shall under no circumstances accept (whether before or
after execution or effectiveness of a Lease) any compensation,
consideration or other monetary benefits of any kind, directly or
indirectly, from any party other than Owner in connection with any Lease;
provided that, notwithstanding anything in the foregoing to the contrary,
if Owner shall approve Manager's use of a cleaning contractor affiliated
with Manager, such affiliated cleaning contractor is permitted to arrange
with Tenants to perform additional cleaning services for such Tenants and
to receive compensation therefor from such Tenants.
C. Indemnity. Manager shall and hereby does indemnify, protect, defend
and hold harmless Owner, Owner's partners, employees, agents, successors and
assigns from and against any
20
and all claims, demands, liabilities, causes of action, judgments, costs, liens,
damages, suits, losses, or expenses, including reasonable attorneys' fees, of
any nature, kind, or description, that may arise from any broker, finder or any
other person, corporation or other entity asserting any claim for a commission,
finder's fee or other compensation on account of having procured a Tenant under
any Lease, provided that such claim arises from or is due to the acts of Manager
and provided, further, that Owner has made all payments of the Commission due
pursuant to EXHIBIT "B" with respect to the Lease in question.
D. Safety Clause. On termination of this Agreement, Manager shall
provide Owner with a list of prospective tenants to whom Manager (with Owner's
prior written approval) has submitted written leasing proposals within the 90-
day period preceding termination, along with relevant co-broker agreements. If
a lease is executed by Owner with a tenant from the above list (excluding any
existing Tenants with whom Manager may have been negotiating), within 60 days
after termination, Owner shall pay Manager a commission in accordance with this
Agreement. Additionally, on termination, Manager (and relevant co-brokers)
fully release Owner from any obligation to pay any commissions in the event
tenants request additional space or extend lease terms after the date of
termination of this Agreement.
ARTICLE VIII.
COMPENSATION
Without limiting the provisions of Section I.S or Article III, as its sole
compensation, payment and commissions for the performance of Manager's
Obligations, Manager shall be entitled to receive the fees and commissions set
forth on the Management Fee Schedule attached as Exhibit "B".
-----------
ARTICLE IX.
TERM OF AGREEMENT
A. Term.
This Agreement shall become effective as of the Commencement Date, and
shall continue in full force and effect for a period of thirty-six (36) months
from the Commencement Date unless sooner terminated in accordance with its
terms. This Agreement shall be automatically renewed for additional terms of one
(1) year each unless one party notifies the other, in writing, at least sixty
(60) days prior to the renewal date, that it elects not to renew.
21
B. Termination.
(i) This Agreement shall terminate, in its entirety, at Owner's
option, five (5) days after the occurrence of any of the following events:
a. Any material breach by Manager in the performance or observance
of any of the provisions of this Agreement on its part to be observed and
performed and the failure of Manager, after written Notice thereof from Owner,
to cure such breach within ten (10) days, or in the case of a breach which is
susceptible of being cured but which cannot with due diligence be cured within
such period of ten (10) days, to commence to cure the same and thereafter to
prosecute the curing of such breach to completion with all due diligence;
provided, however, that the provisions of this subsection shall not apply to any
of the other events provided for in the following subsections of this Section
IX.B.; or
b. The repeated failure by Manager to perform any of its
obligations under this Agreement in a timely or satisfactory fashion (but only
if Owner previously shall have given Manager written Notice of one or more prior
failures to perform in a timely or satisfactory fashion and Manager shall have
failed or been unable to cure such prior failures); or
c. The assignment by Manager of all or any of its rights or
obligations under this Agreement or the delegation or subcontracting by Manager
of all or any of its duties or responsibilities hereunder, except, in either
case, as may be expressly permitted by the provisions of this Agreement or if
first consented to in writing by Owner; or
d. The termination of Manager as a legal entity; or
e. The commission of an Act of Insolvency (as hereinafter defined)
by Manager; or
f. If any of the representations or warranties of Manager contained
in this Agreement shall be or become false in any material respect.
(ii) This Agreement shall terminate with respect to a Property, at
Owner's option, five (5) days after the occurrence of any of the following
events:
a. The sale by Owner of the Applicable Property; or
b. The taking by condemnation, eminent domain or similar
proceeding, or by agreement in lieu thereof, of all or any substantial portion
of the Applicable Property or of access thereto or parking therefor; or
c. The damage or loss of or destruction to all or any substantial
portion of the Applicable Property by fire or other catastrophe and the
consequent determination by Owner not to proceed with the restoration thereof.
(iii) This Agreement shall terminate, in its entirety, at Manager's
option, five (5) days after the occurrence of any of the following events:
22
a. Any material breach by Owner in the due and punctual payment of
any material amount payable by Owner to Manager pursuant to Article 8 hereof
when and as the same shall have become due and payable, and the failure of
Owner, after written Notice thereof from Manager, to cure such breach within ten
(10) days; or
b. The commission of an Act of Insolvency by Owner.
(iv) For the purposes of this Article IX, a Person shall be deemed to
have committed an "Act of Insolvency" if: (a) such Person commences voluntary
proceedings under any chapter of the Federal Bankruptcy Code or files for relief
under any federal or state insolvency, composition, reorganization, arrangement,
recapitalization, readjustment, liquidation, dissolution or similar present or
future Law ("Bankruptcy Law"); or (b) such Person seeks or consents to or
acquiesces in the appointment of any trustee, sequestrator, conservator,
receiver, liquidator or similar entity for such Person or for all or any
substantial part of its properties or assets; or (c) such Person admits in
writing its inability to pay its debts generally as the same become due; or (e)
if, within sixty (60) days after the commencement of any proceedings against
such Person seeking any relief under any Bankruptcy Law, such proceedings shall
not have been dismissed; or (f) if, within sixty (60) days after the
appointment, without the consent or acquiescence of such Person, of any trustee,
sequestrator, conservator, receiver, liquidator or similar entity for such
Person or for all or any substantial part of its properties or assets, such
appointment shall not have been vacated or stayed on appeal or otherwise; or (g)
if, within sixty (60) days after the expiration of any such stay, such
appointment shall not have been vacated; or (h) if, within sixty (60) days after
the levying or fixing of any order or writ of execution, warrant, attachment or
garnishment against such Person or any of its assets or properties, such order
or writ shall not have been discharged, vacated or stayed on appeal; or (i) if,
within sixty (60) days after the expiration of any stay, such order or writ
shall not have been discharged.
(v) Notwithstanding the provisions of this Article IX, either Manager or
Owner shall have the right to terminate this Agreement with respect to all or
any portion of the Properties or any of their respective obligations hereunder
upon thirty (30) days prior written Notice.
(vi) Upon the expiration or earlier termination of this Agreement with
respect to a Property or Properties:
a. Owner shall have the right, but not the obligation, to replace
Manager with a new manager (the "New Manager") which shall be engaged for the
-----------
purpose of performing, at Owner's discretion, all or any portion of the
obligations of Manager hereunder which remain unperformed as of such termination
or expiration date with respect to such Property or Properties; and
b. Manager shall: (a) forthwith surrender and deliver or cause to
be surrendered and delivered to Owner or to Owner's designee all funds held by
Manager relating to the previous performance of the obligations as to which this
Agreement has been so terminated, together with a true and complete accounting
thereof; (b) forthwith surrender and deliver to Owner or to Owner's designee all
records, plans, specification, Permits, service and other contracts (all
contracts shall be specifically assignable to Owner and to the Lender as
collateral for the financing described in the Mortgage), Leases, REAs,
documents, receipts for deposits, unpaid bills, lease summaries, canceled
checks, bank statements, rent rolls, payroll and employment records, accounting
data, technical information, paid bills and all other records, papers and
documents which relate to such Property or Properties and are being held by
Manager in connection with the performance of the obligations
23
which have just been terminated; (c) promptly furnish such other information and
take such other actions as Owner shall reasonably require (including without
limitation, cooperating with the New Manager) to effectuate an orderly and
systematic transition of management and leasing responsibility for such Property
or Properties; and (d) within ten (10) days after the expiration or earlier
termination of this Agreement submit to Owner a written statement (the "Final
Status Statement") setting forth (i) the names of the prospective tenant(s) with
whom it has been actively negotiating for space, (ii) the Properties for which
such negotiations were pending, (iii) the terms of the proposed Leases, and (iv)
the status of the negotiations. For the purposes of this Agreement, the term
"actively negotiating" shall be deemed to mean only such negotiations wherein
(A) the prospective tenant or its agent has submitted a written proposal to rent
space which has been received by Manager; (B) actual discussions have transpired
between Manager and a prospective tenant or its agent; and (C) such prospective
tenant's or its agent's records indicate that such discussions were on such a
level so as to constitute negotiations rather than a mere inquiry or general
solicitation. The Final Status Statement shall be certified as accurate,
current and complete by Manager; and
c. Owner shall thereupon pay to Manager any installment of the fees
provided for in Article IX hereof.
C. Obligations Upon Termination.
Upon termination of this Agreement for any reason or the expiration of the
term of this Agreement according to its terms, the relationship created hereby
shall immediately cease and Manager shall have no further right to act for Owner
or draw checks on the Disbursement Account or pursue any of the activities
described in this Agreement. In the event of termination, Manager agrees to
fulfill all reporting, bookkeeping and related functions hereunder through the
period for which Owner agrees to pay Manager a management fee. Upon
termination, Manager shall also forthwith (i) surrender and deliver to Owner
possession of the Properties, (ii) deliver to Owner all rents and income,
including Tenant security deposits in connection with any Leases and other
monies of Owner on hand and in any bank account, provided, however, that funds
in the Disbursement Account sufficient to meet anticipated operating expenses
and liabilities shall remain for a period of thirty (30) days, (iii) deliver to
Owner, as received, any monies due Owner under this Agreement but received after
such termination, (iv) deliver to Owner (or in accordance with Owner's
reasonable instructions) all materials and supplies, keys, copies of contracts,
agreements and documents, and copies of such other accounting papers, books and
records pertaining to the operation of the Properties as Owner may request, (v)
assign any right Manager may have in and to any existing contracts and
guarantees relating to the operation and maintenance of the Properties as Owner
shall require, (vi) deliver to Owner or Owner's duly appointed agent all
records, contracts, Leases, receipts for deposits, unpaid bills, summary of all
Leases, in existence at the time of termination and all other papers or
documents that pertain to the Properties, and (vii) perform any other actions,
or deliver any other documents, reasonably required hereunder upon termination
of this Agreement, including facilitating an orderly transition of management to
a new manager of the Properties. This Section X.C shall survive the expiration
or earlier termination of this Agreement.
24
ARTICLE X.
NOTICES
Any Notice required or permitted to be delivered hereunder shall be deemed
to be delivered when deposited in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, or, if delivered by
hand, when received by an officer or principal of the party receiving same, or,
if transmitted by telecopy, when transmitted, in each case, addressed to the
parties at the following addresses:
If to Owner:
Xxxxxx Realty Finance Partnership, L.P.
0000 X. Xxxxxxxx Xxxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
If to Manager:
Xxxxxx Realty Finance Partnership, L.P.
0000 X. Xxxxxxxx Xxxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
Either party may change its address by giving Notice of such change in writing.
ARTICLE XI.
MISCELLANEOUS
A. Entire Agreement.
This Agreement and the Exhibits annexed hereto is the entire agreement
between the parties with respect to the subject matter hereof, and no
alteration, modification or interpretation hereof shall be binding unless in
writing and signed by both parties.
B. Severability.
If any provision of this Agreement or application to any party or
circumstances shall be determined by any court of competent jurisdiction to be
invalid or unenforceable to any extent, the remainder of this Agreement or the
application of such provision to such person or circumstances, other than those
as to which it is so determined invalid or unenforceable, shall not be affected
thereby, and each provision hereof shall be valid and shall be enforced to the
fullest extent permitted by law.
25
C. Applicable Law.
This Agreement shall be construed and enforced in accordance with the laws
of the State of California without giving effect to the conflict of law
provisions thereof.
D. Assignability.
This Agreement and all rights hereunder shall not be assigned by Owner or
Manager; provided, however, Owner may assign its rights under this Agreement to
an affiliate.
E. Limited Authority.
Manager's authority shall be derived wholly from this Agreement, and
Manager has no authority to act for, bind or represent Owner except as herein
specified.
F. Successors Bound.
Manager may neither assign, whether by operation of Law or otherwise, all
or any portion of its rights or obligations under this Agreement, except as
otherwise provided herein, without the prior written consent of Owner. Manager
understands and hereby acknowledges that the rights and duties created by this
Agreement are personal to Manager and that Owner has granted said rights and
duties in reliance on the character, experience, expertise, aptitude and
business and financial capacity of Manager. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, executors, personal representatives, successors and
assigns, but shall not inure to the benefit of or be enforceable by any other
Person.
G. Relationship; Conflicts.
Nothing contained in this Agreement shall be deemed or construed as
creating a partnership, joint venture, co-ownership, agency, or employee-
employer relationship between Owner and Manager or between Owner and any other
Person. The relationship of Manager to Owner is that of an independent
contractor. Manager and Owner agree not to represent to third parties a
contrary relationship nor to take any action from which third parties reasonably
could infer that Manager and Owner are partners, joint venturers, co-owners,
agents, or employee-employer. Any breach by Owner or Manager of this Provision
shall be considered a material breach of this Agreement. Owner shall under no
circumstances be liable for any actions or omissions of Manager of Manager's
employees, agents or independent contractors.
26
H. Time.
Owner and Manager agree that the other party's failure to meet any of its
obligations hereunder solely on account of the occurrence of Unavoidable Delays
which are beyond such other party's reasonable control shall not be deemed to be
a breach hereof and that the applicable time limit Provision with respect
thereto shall be extended for the same amount of time as that lost on account of
the Unavoidable Delays. Subject only to the foregoing, time is of the essence
in the performance of this Agreement.
Unavoidable Delays shall mean, with respect to the obligations of any
party, delays in the performance of such obligations directly resulting from
acts of God, war, national emergency, governmental restriction, civil commotion,
embargo, litigation, riots, strikes, picketing, lockouts, unavailability of
materials for which no substitute is readily available, fire, other unavoidable
catastrophe and all other causes or events (other than non-availability of
funds) which are beyond the applicable party's control, provided that
satisfactory evidence of the occurrence thereof has been furnished within ten
(10) days of the occurrence thereof by the party affected thereby to the Owner
or Manager (as the case may be).
27
I. Arbitration of Disputes.
All claims, disputes and other matters in question between the parties
arising out of or relating to this Agreement or the breach thereof may be
decided by arbitration in Los Angeles, California in accordance with rules of
the American Arbitration Association then applying if both parties agree as
hereinafter provided. Written Notice of the demand for arbitration shall be
filed in writing with the other party to this Agreement and the American
Arbitration Association within a reasonable time after the claim, dispute or
other matter in question has arisen, and in no event shall it be made after the
date when institution of legal or equitable proceedings based upon such claim,
dispute or other matter in question would be barred by the applicable statute of
limitations. Unless the other party, within ten (10) days of the receipt of
such written Notice, sends to the claimant a written objection to such
arbitration proceedings, then both parties shall be deemed to have elected to
arbitrate such dispute. In the absence of such agreement, either party may
resort to judicial proceedings.
In rendering any award, the arbitrator or arbitrators shall not deviate
from or add to the provisions of this Agreement. The award rendered in the
arbitration shall be final, and judgment may be entered upon it in accordance
with applicable Law in any court having jurisdiction thereof. Reasonable costs,
expenses and fees (including, without limitation, attorneys' fees) of the
prevailing party in such arbitration shall be assessed against the non-
prevailing party in the award.
Manager shall continue to carry on its obligations hereunder during any
arbitration proceedings, and Owner shall continue to make payments to Manager in
accordance with the terms of this Agreement (which payments may be made to an
escrow agent if Owner disputes its obligation to make the same), unless the
matter in dispute concerns the termination of this Agreement, in which event the
parties must expressly agree in writing that the parties shall continue to
perform pending an award in the arbitration proceedings.
J. Interpretation.
All headings are inserted in this Agreement only for convenience and ease
of reference and are not to be considered in the construction or interpretation
of this Agreement. Unless the context clearly requires otherwise: (a) words
such as "include," "including," or "such as" shall be interpreted as if followed
by the words "without limitation"; and (b) any reference to an Article, Section,
or other subdivision, or Exhibit or Schedule, is intended to refer to an
Article, Section, or other subdivision, or Exhibit or Schedule, of this
Agreement. In the event of any inconsistency between the text of this Agreement
and any Exhibit or Schedule attached hereto, the text shall govern.
This Agreement shall be so construed that whenever applicable the use of
the singular number shall include the plural number, and the use of the plural
number shall include the singular number, and the use of the feminine,
masculine, or neuter gender shall include the other genders.
K. Representations.
Manager represents and warrants that it is fully qualified and licensed,
to the extent required by law, to manage and lease real estate and interests
therein in the State of California and to perform all obligations of Manager
hereunder. Manager agrees to comply with all such laws now or hereafter in
effect.
28
L. Further Assurances.
Owner and Manager agree to execute such other documents and perform such
other acts as may be necessary or desirable to carry out the purposes of this
Agreement.
M. Third Parties.
Neither this Agreement nor any provision hereof nor any service,
relationship or other matter alluded to herein shall inure to the benefit of any
third party, to any trustee in bankruptcy, to any assignee for the benefit of
creditors, to any receiver by reason or insolvency, to any another fiduciary or
officer representing a bankrupt or insolvent estate of either party, or to the
creditors or claimants of such an estate.
N. No Interest or Lien.
This Agreement does not constitute an interest in or lien upon real
property. It shall not be recorded in the public records of where the
Properties is located and shall not constitute or establish any basis, for
claim, for filing of a lis pendens or notice of pendency or claim of lien.
O. No Sales Agreement.
Manager is not authorized to list the Properties for sale or to negotiate
with prospective purchasers of the Properties. If Owner should sell the
Properties or enter into an agreement with a prospective purchaser with respect
to a sale of the Properties, Manager shall not be entitled to any sales
brokerage commission, finder's fee or any other compensation unless Owner has
entered into a separate written listing agreement or sales broker agreement with
Manager.
P. Confidentiality.
Manager shall not make any public announcement concerning the negotiation
or consummation of this Agreement or any Lease, contract or other transaction
contemplated by this Agreement, or of any of the terms of this Agreement or any
such Lease, contract or other transaction, without Owner's prior consent, which
consent may be granted or denied in Owner's sole discretion. Manager shall keep
confidential all information pertaining to the leasing, operation and management
of the Properties and all financial information pertaining to the Properties and
to Owner and the partners of Owner (direct and indirect) and their affiliates.
Except as may be required by law, Manager shall not disclose any such
information without Owner's prior consent, which consent may be granted or
denied in Owner's sole discretion.
Q. No Waiver.
No consent or waiver, express or implied, by either party to any breach or
default by the other party in the performance of any of its obligations under
this Agreement shall be deemed or construed to be a consent or waiver to or of
any other breach or default in performance by such other party of such
obligation or of any party of such obligation or of any other obligation under
this Agreement. To be effective, any waiver must be in writing and be signed by
the party intended to be bound thereby.
29
R. Exculpation.
(i) No general or limited partner of Owner nor any partner, shareholder,
officer or director of Owner or any partner of Owner (direct or indirect) shall
be personally liable for the performance of any such party's obligations under
this Agreement, it being understood that the liability of Owner for Owner's
obligations under this Agreement shall be limited to its interest in the
Properties and the proceeds thereof and Manager shall not look to any of the
other assets of Owner or any assets of any of the aforesaid parties in seeking
either to enforce Owner's obligations under this Agreement or to satisfy a
judgment for Owner's failure to perform such obligations.
(ii) No general or limited partner of Manager nor any shareholder,
officer or director of any partner of Manager (direct or indirect) shall be
personally liable for the performance of any such party's obligations under this
Agreement, provided, however, nothing contained herein shall be deemed to
exculpate the aforesaid parties from liability arising out of theft, gross
negligence or fraud on the part of Manager.
S. Additional Remedies.
The rights and remedies of the parties under this Agreement shall not be
mutually exclusive. The exercise of one or more of the remedial provisions of
this Agreement shall not preclude the exercise of any other remedial provisions
hereof.
T. Owner's Approval, Consent, Direction and Authorization.
Any reference to Owner's approval, consent, direction or authorization in
this Agreement shall mean the written approval, consent, direction or
authorization of Owner, which may (unless expressly provided otherwise herein)
be granted or withheld in Owner's sole discretion.
U. Partial Invalidity.
If any term, covenant, condition or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent be
invalid, unenforceable or violate a party's legal rights, then such term,
covenant, condition or provision shall be deemed to be null and void and
unenforceable; however, all other provisions of this Agreement, or the
application of such term or provision to persons or circumstances other than
those to which are held invalid, unenforceable or violative of legal rights,
shall not be affected thereby, and each and every other term, condition,
covenant and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
30
IN WITNESS WHEREOF Owner and Manager have executed this Agreement as of
the Commencement Date.
"Owner" "Manager"
_______ XXXXXX REALTY, L.P.
By: XXXXXX REALTY CORPORATION,
By: ______________________ its: General Partner
By: ________________________
its:
31
