FORM OF PROPERTY MANAGEMENT AND LEASING AGREEMENT
EXHIBIT
10.3
FORM
OF PROPERTY MANAGEMENT AND LEASING AGREEMENT
This
PROPERTY MANAGEMENT AND LEASING AGREEMENT (this “Management Agreement”) is made
and entered into as of the ___ day of _________, 2005, by and among BEHRINGER
HARVARD OPPORTUNITY REIT I, INC., a Maryland corporation (“BH OPPORTUNITY
REIT”), BEHRINGER HARVARD OPPORTUNITY OP I, LP, a Texas limited partnership (“BH
OPPORTUNITY LP”), and HPT MANAGEMENT SERVICES LP, Texas limited partnership (the
“Manager”).
WHEREAS,
BH OPPORTUNITY LP was organized to acquire, own, operate, lease and manage real
estate properties on behalf of BH OPPORTUNITY REIT;
WHEREAS,
BH OPPORTUNITY REIT intends to raise money from the sale of its common stock to
be used, net of payment of certain offering costs and expenses, for investment
in the acquisition or construction of income-producing real estate and other
real estate-related investments (including the making or purchase of mortgage
loans), some or all of which are to be acquired and held by Owner (as
hereinafter defined) on behalf of BH OPPORTUNITY REIT; and
WHEREAS,
Owner intends to continue to retain Manager to manage and coordinate the leasing
of certain of the real estate properties acquired by Owner under the terms and
conditions set forth in this Management Agreement;
NOW,
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, do hereby agree, as
follows:
ARTICLE
I
DEFINITIONS
Except as
otherwise specified or as the context may otherwise require, the following terms
have the respective meanings set forth below for all purposes of this Management
Agreement, and the definitions of such terms are equally applicable both to the
singular and plural forms thereof:
1.1
“Affiliate”
means, with respect to any Person, (i) any Person directly or indirectly owning,
controlling or holding, with the power to vote, 10% or more of the outstanding
voting securities of such other Person; (ii) any Person 10% or more of whose
outstanding voting securities are directly or indirectly owned, controlled or
held, with the power to vote, by such other Person; (iii) any Person directly or
indirectly controlling, controlled by or under common control with such other
Person; (iv) any executive officer, director, trustee or general partner of such
other Person; and (v) any legal entity for which such Person acts as an
executive officer, director, trustee or general partner.
1.2
“Gross
Revenues” means all amounts actually collected as rents or other charges for the
use and occupancy of the Properties, but shall exclude interest and other
investment income of Owner and proceeds received by Owner for a sale, exchange,
condemnation, eminent domain taking, casualty or other disposition of assets of
Owner.
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1.3
“Improvements”
means buildings, structures, equipment from time to time located on the
Properties and all parking and common areas located on the Properties.
1.4
“Intellectual
Property Rights” means all rights, titles and interests, whether foreign or
domestic, in and to any and all trade secrets, confidential information rights,
patents, invention rights, copyrights, service marks, trademarks, know-how, or
similar intellectual property rights and all applications and rights to apply
for such rights, as well as any and all moral rights, rights of privacy,
publicity and similar rights and license rights of any type under the laws or
regulations of any governmental, regulatory, or judicial authority, foreign or
domestic and all renewals and extensions thereof.
1.5
“Lease”
means, unless the context otherwise requires, any lease or sublease made by
Owner as landlord or by its predecessor.
1.6
“Management
Fees” has the meaning set forth in Section 5.1 hereof.
1.7
“Owner”
means BH OPPORTUNITY REIT, BH OPPORTUNITY LP and any joint venture, limited
liability company or other Affiliate of BH OPPORTUNITY REIT or BH OPPORTUNITY LP
that owns, in whole or in part, on behalf of BH OPPORTUNITY REIT, any
Properties.
1.8
“Person”
means an individual, corporation, association, business trust, estate, trust,
partnership, limited liability company or other legal entity.
1.9
“Properties”
means all real estate properties owned by Owner and all tracts as yet
unspecified but to be acquired by Owner containing income-producing improvements
or on which Owner will construct income-producing improvements.
1.10
“Proprietary
Properties” means all modeling algorithms, tools, computer programs, know-how,
methodologies, processes, technologies, ideas, concepts, skills, routines,
subroutines, operating instructions and other materials and aides used in
performing the duties set forth in Article 2 that relate to management advice,
services and techniques regarding current and potential Properties, and all
modifications, enhancements and derivative works of the foregoing.
ARTICLE
II
APPOINTMENT
OF MANAGER; SERVICES TO BE PERFORMED
2.1
Appointment
of Manager. Owner
hereby engages and retains Manager as the manager and as tenant coordinating
agent of the Properties, and Manager hereby accepts such appointment on the
terms and conditions hereinafter set forth; it being understood that this
Management Agreement shall cause Manager to be, at law, Owner’s agent upon the
terms contained herein.
2.2
General
Duties. Manager
shall devote its best efforts to performing its duties hereunder to manage,
operate, maintain and lease the Properties in a diligent, careful and vigilant
manner. The services of Manager are to be of scope and quality not less than
those generally performed by professional property managers of other similar
properties in the area. Manager shall make available to Owner the full benefit
of the judgment, experience and advice of the members of Manager’s organization
and staff with respect to the policies to be pursued by Owner relating to the
operation and leasing of the Properties.
2.3
Specific
Duties.
Manager’s duties include the following:
(a)
Lease
Obligations. Manager
shall perform all duties of the landlord under all Leases insofar as such duties
relate to operation, maintenance, and day-to-day management. Manager shall also
provide or cause to be provided, at Owner’s expense, all services normally
provided to tenants of like premises, including where applicable and without
limitation, gas,
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electricity
or other utilities required to be furnished to tenants under Leases, normal
repairs and maintenance, and cleaning, and janitorial service. Manager shall
arrange for and supervise the performance of all installations and improvements
in space leased to any tenant that are either expressly required under the terms
of the lease of such space or that are customarily provided to tenants.
(b)
Maintenance. Manager
shall cause the Properties to be maintained in the same manner as similar
properties in the area. Manager’s duties and supervision in this respect shall
include, without limitation, cleaning of the interior and the exterior of the
Improvements and the public common areas on the Properties and the making and
supervision of repair, alterations, and decoration of the Improvements, subject
to and in strict compliance with this Management Agreement and the Leases.
Construction activities undertaken by Manager, if any, will be limited to
activities related to the management, operation, maintenance, and leasing of the
Property (e.g., repairs, renovations, and leasehold improvements).
(c)
Leasing
Functions. Manager
shall coordinate the leasing of the Properties and shall negotiate and use its
best efforts to secure executed Leases from qualified tenants, and to execute
same on behalf of Owner, if requested, for available space in the Properties,
such Leases to be in form and on terms approved by Owner and Manager, and to
bring about complete leasing of the Properties. Manager shall be responsible for
the hiring of all leasing agents, as necessary for the leasing of the
Properties, and to otherwise oversee and manage the leasing process on behalf of
Owner.
(d)
Notice
of Violations. Manager
shall forward to Owner promptly upon receipt all notices of violation or other
notices from any governmental authority, and board of fire underwriters or any
insurance company, and shall make such recommendations regarding compliance with
such notice as shall be appropriate.
(e)
Personnel. Any
personnel hired by Manager to maintain, operate and lease the Property shall be
the employees or independent contractors of Manager and not of Owner of such
Property, BH OPPORTUNITY LP or BH OPPORTUNITY REIT. Manager shall use due care
in the selection and supervision of such employees or independent contractors.
Manager shall be responsible for the preparation of and shall timely file all
payroll tax reports and timely make payments of all withholding and other
payroll taxes with respect to each employee.
(f)
Utilities
and Supplies. Manager
shall enter into or renew contracts for electricity, gas, steam, landscaping,
fuel, oil, maintenance and other services as are customarily furnished or
rendered in connection with the operation of similar rental property in the
area.
(g)
Expenses. Manager
shall analyze all bills received for services, work and supplies in connection
with maintaining and operating the Properties, pay all such bills when due, and,
if requested by Owner, pay, when due, utility and water charges, sewer rent and
assessments, and any other amount payable in respect to the Properties. All
bills shall be paid by Manager within the time required to obtain discounts, if
any. Owner may from time to time request that Manager forward certain bills to
Owner promptly after receipt, and Manager shall comply with any such request.
Manager shall pay all bills, assessments, real property taxes, insurance
premiums and any other amount payable in respect to the Properties out of the
Account (as hereinafter defined). All expenses shall be billed at net cost
(i.e., less
all rebates, commissions, discounts and allowances, however designed).
(h)
Monies
Collected. Manager
shall timely collect all rent and other monies, in the form of a check or money
order, from tenants and any sums otherwise due Owner with respect to the
Properties in the ordinary course of business. Owner authorizes Manager to
request, demand,
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collect
and provide receipt for all such rent and other monies and to institute legal
proceedings in the name of Owner for the collection thereof and for the
dispossession of any tenant in default under its Lease.
(i)
Banking
Accommodations. Manager
shall establish and maintain a separate checking account (the “Account”) for
funds relating to the Properties. All monies deposited from time to time in the
Account shall be deemed to be trust funds and shall be and remain the property
of Owner and shall be withdrawn and disbursed by Manager for the account of
Owner only as expressly permitted by this Management Agreement for the purposes
of performing the obligations of Manager hereunder. No monies collected by
Manager on Owner’s behalf shall be commingled with funds of Manager. The Account
shall be maintained, and monies shall be deposited therein and withdrawn
therefrom, in accordance with the following:
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(i) |
All
sums received from rents and other income from the Properties shall be
promptly deposited by Manager in the Account. Manager shall have the right
to designate two or more persons who shall be authorized to draw against
the Account, but only for purposes authorized by this Management
Agreement. |
|
(ii) |
All
sums due to Manager hereunder, whether for compensation, reimbursement for
expenditures, or otherwise, as herein provided, shall be a charge against
the operating revenues of the Properties and shall be paid and/or
withdrawn by Manager from the Account prior to the making of any other
disbursements therefrom. |
|
(iii) |
By
the 15th
day after the end of each month, Manager shall forward to Owner all monies
contained in the Account other than a reserve of $5,000 and any other
amounts otherwise provided in the budget, which shall remain in the
Account. |
(j)
Ownership
Agreements. Manager
has received copies of (and will be provided with copies of future) Articles of
Incorporation, Agreements of Limited Partnership, Joint Venture Partnership
Agreements and Operating Agreements, each as may be amended from time to time,
of Owner, as applicable (the “Ownership Agreements”) and is familiar with the
terms thereof. Manager shall use reasonable care to avoid any act or omission
that, in the performance of its duties hereunder, shall in any way conflict with
the terms of Ownership Agreements.
(k)
Signs. Manager
shall place and remove, or cause to be placed and removed, such signs upon the
Properties as Manager deems appropriate, subject, however, to the terms and
conditions of the Leases and to any applicable ordinances and regulations.
2.4
Approval
of Leases, Contracts, Etc. In
fulfilling its duties to Owner, Manager may and hereby is authorized to enter
into any leases, contracts or agreements on behalf of Owner in the ordinary
course of the management, operation, maintenance and leasing of the Property.
2.5
Accounting,
Records and Reports.
(a)
Records. Manager
shall maintain all office records and books of account and shall record therein,
and keep copies of, each invoice received from services, work and supplies
ordered in connection with the maintenance and operation of the Properties. Such
records shall be maintained on a double entry basis. Owner and persons
designated by Owner shall at all reasonable time have access to and the right to
audit and make independent examinations of such records, books and accounts and
all vouchers, files and all other material pertaining to the Properties and this
Management Agreement, all of which Manager agrees to keep safe, available
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and
separate from any records not pertaining to the Properties, at a place
recommended by Manager and approved by Owner.
(b)
Monthly
Reports. On or
before the 15th day
after the end of each month during the term of this Management Agreement,
Manager shall prepare and submit to Owner the following reports and statements:
|
(i) |
rental
collection record; |
|
(ii) |
monthly
operating statement; |
|
(iii) |
copy
of cash disbursements ledger entries for such period, if requested;
|
|
(iv) |
copy
of cash receipts ledger entries for such period, if requested;
|
|
(v) |
the
original copies of all contracts entered into by Manager on behalf of
Owner during such period, if requested; and
|
|
(vi) |
copy
of ledger entries for such period relating to security deposits maintained
by Manager, if requested. |
(c)
Budgets
and Leasing Plans. Not
later than November 15 of each calendar year, Manager shall prepare and submit
to Owner for its approval an operating budget and a marketing and leasing plan
on each Property for the calendar year immediately following such submission. In
connection with any acquisition of a Property by Owner, Manager shall prepare a
budget and marketing and leasing plan for the remainder of the calendar year.
The budget and marketing and leasing plan shall be in the form of the budget and
plan approved by Owner prior to the date thereof. As often as reasonably
necessary during the period covered by any such budget, Manager may submit to
Owner for its approval an updated budget or plan incorporating such changes as
shall be necessary to reflect cost over-runs and the like during such period. If
Owner does not disapprove any such budget within 30 days after receipt thereof
by Owner, such budget shall be deemed approved. If Owner shall disapprove any
such budget or plan, it shall so notify Manager within said 30-day period and
explain the reasons therefor. If Owner disapproves of any budget or plan,
Manager shall submit a revised budget or plan, as applicable, within 10 (ten)
days of receipt of the notice of disapproval, and Owner shall have 10 (ten) days
to provide notice to Manager if it disapproves of any such revised budget or
plan. Manager will not incur any costs other than those estimated in any budget
except for:
|
(i) |
tenant
improvements and real estate commissions required under a Lease;
|
|
(ii) |
maintenance
or repair costs under $5,000 per Property; |
|
(iii) |
costs
incurred in emergency situations in which action is immediately necessary
for the preservation or safety of the Property, or for the safety of
occupants or other persons (or to avoid the suspension of any necessary
service of the Property); |
|
(iv) |
expenditures
for real estate taxes and assessment; and |
|
(v) |
maintenance
supplies calling for an aggregate purchase price less than $25,000 per
annum for all Properties. |
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Budgets
prepared by Manager shall be for planning and informational purposes only, and
Manager shall have no liability to Owner for any failure to meet any such
budget. However, Manager will use its best efforts to operate within the
approved budget.
(d)
Legal
Requirements. Manager
shall execute and file when due all forms, reports, and returns required by law
relating to the employment of its personnel. Manager shall be responsible for
notifying Owner in the event it receives notice that any Improvement on a
Property or any equipment therein does not comply with the requirements of any
statute, ordinance, law or regulation of any governmental body or of any public
authority or official thereof having or claiming to have jurisdiction thereover.
Manager shall promptly forward to Owner any complaints, warnings, notices or
summonses received by it relating to such matters. Owner represents that to the
best of its knowledge each of its Properties and any equipment thereon will upon
acquisition by Owner comply with all such requirements. Owner authorizes Manager
to disclose the ownership of the Property by Owner to any such officials. Owner
agrees to indemnify, protect, defend, save and hold Manager and its
stockholders, officers, directors, employees, managers, successors and assigns
(collectively, the “Indemnified Parties”) harmless of and from any and all
Losses (as defined in Section 3.5(a) hereof) that may be imposed on them or
any or all of them by reason of the failure of Owner to correct any present or
future violation or alleged violation of any and all present or future laws,
ordinances, statutes, or regulations of any public authority or official
thereof, having or claiming to have jurisdiction thereover, of which it has
actual notice.
2.6 Guaranty
of Deposits. Should
Owner acquire real property from Behringer Development Company LP, a Texas
limited partnership (“Behringer Development”), Manager hereby guarantees the
full, prompt and unconditional refund of any xxxxxxx money deposit paid by Owner
to Behringer Development should Owner be entitled to such refund as a result of
(i) the failure of Behringer Development to develop the property, (ii) the
failure of all or a specified portion of the pre-leased tenants to take
possession under their leases for any reason, or (iii) the inability of Owner to
pay the full purchase price at closing.
ARTICLE
III
AUTHORITY
GRANTED TO MANAGER AND CERTAIN OWNER OBLIGATIONS
3.1
Authority
As To Tenants, Etc. Owner
agrees and does hereby give Manager the following exclusive authority and powers
(all of which shall be exercised either in the name of Manager, as Manager for
Owner, or in the name or Owner entered into by Manager as Owner’s authorized
agent, and Owner shall assume all expenses in connection with such
matters):
(a)
to
advertise each Property or any part thereof and to display signs thereon, as
permitted by law;
(b)
to lease
the Properties to tenants;
(c)
to pay
all expenses of leasing such Property, including but not limited to, newspaper
and other advertising, signage, banners, brochures, referral commissions,
leasing commissions, finder’s fees and salaries, bonuses and other compensation
of leasing personnel responsible for the leasing of the Property;
(d)
to cause
references of prospective tenants to be investigated, it being understood and
agreed by the parties hereto that Manager does not guarantee the
creditworthiness or collectibility of accounts receivable from tenants, users or
lessees; and to negotiate new Leases
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and
renewals and cancellations of existing Leases that shall be subject to Manager
obtaining Owner’s approval;
(e)
to
collect from tenants all or any of the following: a late rent administrative
charge, a non-negotiable check charge, credit report fee, a subleasing
administrative charge and/or broker’s commission; and Manager need not account
for such charges and/or commission to Owner;
(f)
to
terminate tenancies and to sign and serve in the name of Owner of each Property
such notices as are deemed necessary by Manager;
|
(i) |
to
institute and prosecute actions to evict tenants and to recover possession
of the Property or portions thereof; |
|
(ii) |
with
Owner’s authorization, to xxx for and in the name of Owner and recover
rent and other sums due; and to settle, compromise, and release such
actions or suits, or reinstate such tenancies. All expenses of litigation
including, but not limited to, attorneys’ fees, filing fees, and court
costs that Manager shall incur in connection with the collecting of rent
and other sums, or to recover possession of any Property or any portion
thereof, shall be deemed to be an operational expense of the Property.
Manager and Owner shall concur on the selection of the attorneys to handle
such litigation. |
3.2
Operational
Authority. Owner
agrees and does hereby give Manager the following exclusive authority and powers
(all of which shall be exercised either in the name of Manager, as Manager for
Owner, or in the name or Owner entered into by Manager as Owner’s authorized
agent, and Owner shall assume all expenses in connection with such
matters):
(a)
to hire,
supervise, discharge, and pay all labor required for the operation and
maintenance of each Property including but not limited to on-site personnel,
managers, assistant managers, leasing consultants, engineers, janitors,
maintenance supervisors and other employees required for the operation and
maintenance of the Property, including personnel spending a portion of their
working hours (to be charged on a pro rata basis) at the Property. All expenses
of such employment shall be deemed operational expenses of the
Property.
(b)
to make
or cause to be made all ordinary repairs and replacements necessary to preserve
each Property in its present condition and for the operating efficiency thereof
and all alterations required to comply with lease requirements, and to decorate
the Property;
(c)
to
negotiate and enter into, as Manager of the Property, contracts for all items on
budgets that have been approved by Owner, any emergency services or repairs for
items not exceeding $5,000, appropriate service agreements and labor agreements
for normal operation of the Property, which have terms not to exceed three
years, and agreements for all budgeted maintenance, minor alterations, and
utility services, including, but not limited to, electricity, gas, fuel, water,
telephone, window washing, scavenger service, landscaping, snow removal, pest
exterminating, decorating and legal services in connection with the Leases and
service agreements relating to the Property, and other services or such of them
as Manager may consider appropriate; and
(d)
to
purchase supplies and pay all bills.
Manager
shall use its best efforts to obtain the foregoing services and utilities for
the Property under terms that are as cost-effective and otherwise favorable to
Manager as possible for the quality of services and utilities required. Owner
hereby appoints Manager as Owner’s authorized Manager for the purpose
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of
executing, as Manager for said Owner, all such contracts. In addition, Owner
agrees to specifically assume in writing all obligations under all such
contracts so entered into by Manager, on behalf of Owner of the Property, upon
the termination of this Agreement, and Owner shall indemnify, protect, save,
defend and hold Manager and the other Indemnified Parties harmless from and
against any and all Losses resulting from, arising out of or in any way related
to such contracts and that relate to or concern matters occurring after
termination of this Agreement, but excluding matters arising out of Manager’s
willful misconduct, gross negligence and/or unlawful acts. Manager shall secure
the approval of, and execution of appropriate contracts by, Owner for any
non-budgeted and non-emergency/contingency capital items, alterations or other
expenditures in excess of $5,000 for any one item, securing for each item at
least three written bids, if practicable, or providing evidence satisfactory to
Owner that the contract amount is lower than industry standard pricing, from
responsible contractors. Manager shall have the right from time to time during
the term hereof, to contract with and make purchases from Affiliates of Manager,
provided that contract rates and prices are competitive with other available
sources. Manager may at any time and from time to time request and receive the
prior written authorization of Owner of the Property of any one or more
purchases or other expenditures, notwithstanding that Manager may otherwise be
authorized hereunder to make such purchases or expenditures.
3.3
Rent
and Other Collections. Owner
agrees and does hereby give Manager the exclusive authority and powers (all of
which shall be exercised either in the name of Manager, as Manager for Owner, or
in the name or Owner entered into by Manager as Owner’s authorized agent, and
Owner shall assume all expenses in connection with such matters) to collect
rents and/or assessments and other items, including but not limited to tenant
payments for real estate taxes, property liability and other insurance, damages
and repairs, common area maintenance, tax reduction fees and all other tenant
reimbursements, administrative charges, proceeds of rental interruption
insurance, parking fees, income from coin operated machines and other
miscellaneous income, due or to become due and give receipts therefor and to
deposit all such Gross Revenue collected hereunder in the Account. Manager may
endorse any and all checks received in connection with the operation of any
Property and drawn to the order of Owner, and Owner shall, upon request, furnish
Manager’s depository with an appropriate authorization for Manager to make such
endorsement. Manager shall also have the exclusive authority to collect and
handle tenants’ security deposits, including the right to apply such security
deposits to unpaid rent, and to comply, on behalf of Owner of the Property, with
applicable state or local laws concerning security deposits and interest
thereon, if any. Manager shall not be required to advance any monies for the
care or management of any Property. Owner agrees to advance all monies necessary
therefor. If Manager shall elect to advance any money in connection with a
Property, Owner agrees to reimburse Manager forthwith and hereby authorizes
Manager to deduct such advances from any monies due Owner. In connection with
any insured losses or damages relating to any Property, Manager shall have the
exclusive authority to handle all steps necessary regarding any such claim;
provided that Manager will not make any adjustments or settlements in excess of
$10,000 without Owner’s prior written consent.
3.4
Payment
of Expenses. Owner
agrees and does hereby give Manager the exclusive authority and power (all of
which shall be exercised either in the name of Manager, as Manager for Owner, or
in the name or Owner entered into by Manager as Owner’s authorized agent, and
Owner shall assume all expenses in connection with such matters) to pay all
expenses of the Property from the Gross Revenue collected in accordance with
Section 3.3 above, from the Account. It is understood that the Gross Revenue
will be used first to pay the compensation to Manager as contained in Article 5
below, then operational expenses and then any mortgage indebtedness, including
real estate tax and insurance impounds, but only as directed by Owner in writing
and only if sufficient Gross Revenue is available for such payments. Nothing in
this Agreement shall be interpreted in such a manner as to obligate Manager to
pay from Gross Revenue, any expenses incurred by Owner prior to the commencement
of this Agreement, except to the extent Owner advances additional funds to pay
such expenses.
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3.5
Certain
Owner Indemnification Obligations.
(a)
On
Termination. In the
event this Agreement is terminated for any reason prior to the expiration of its
original term or any renewal term, Owner shall indemnify, protect, defend, save
and hold Manager and all of the other Indemnified Parties harmless from and
against any and all claims, causes of action, demands, suits, proceedings, loss,
judgments, damage, awards, liens, fines, costs, attorney’s fees and expenses, of
every kind and nature whatsoever (collectively, “Losses”), that may be imposed
on or incurred by Manager by reason of the willful misconduct, gross negligence
and/or unlawful acts (such unlawfulness having been adjudicated by a court of
proper jurisdiction) of Owner.
(b)
Property
Damage, Etc. Owner
agrees to indemnify, defend, protect, save and hold Manager and all of the other
Indemnified Parties harmless from any and all Losses in connection with or in
any way related to the Property and from liability for damage to the Property
and injuries to or death of any person whomsoever, and damage to property;
provided, however, that such indemnification shall not extend to any such Losses
arising out of the willful misconduct, gross negligence and/or unlawful acts
(such unlawfulness having been adjudicated by a court of proper jurisdiction) of
Manager or any of the other Indemnified Parties. Manager shall not be liable for
any error of judgment or for any mistake of fact or law, or for any thing that
it may do or refrain from doing, except in cases of willful misconduct, gross
negligence and/or unlawful acts (such unlawfulness having been adjudicated by a
court of proper jurisdiction).
3.6
Environmental
Matters. Owner
hereby warrants and represents to Manager that to the best of Owner’s knowledge,
no Property, upon acquisition by Owner, nor any part thereof, will be used to
treat, deposit, store, dispose of or place any hazardous substance that may
subject Manager to liability or claims under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C.A. Section 9607) or
any constitutional provision, statute, ordinance, law, or regulation of any
governmental body or of any order or ruling of any public authority or official
thereof, having or claiming to have jurisdiction thereover. Furthermore, Owner
agrees to indemnify, protect, defend, save and hold Manager and all of the other
Indemnified Parties from any and all Losses involving, concerning or in any way
related to any past, current or future allegations regarding treatment,
depositing, storage, disposal or placement by any party other than Manager of
hazardous substances on the Property.
3.7
Legal
Status of Properties. Owner
represents that to the best of its knowledge each Property and any equipment
thereon, when acquired by Owner, will comply with all legal requirements and
authorizes Manager to disclose the identity of the Owner of the Property to any
such officials and agrees to indemnify, protect, defend, save and hold Manager
and the other Indemnified Parties harmless of and from any and all Losses that
may be imposed on them or any of them by reason of the failure of Owner to
correct any present or future violation or alleged violation of any and all
present or future laws, ordinances, statutes, or regulations of any public
authority or official thereof, having or claiming to have jurisdiction
thereover, of which it has actual notice. In the event it is alleged or charged
that any Improvement or any equipment on a Property or any act or failure to act
by Owner with respect to the Property or the sale, rental, or other disposition
thereof fails to comply with, or is in violation of, any of the requirements of
any constitutional provision, statute, ordinance, law, or regulation of any
governmental body or any order or ruling of any public authority or official
thereof having or claiming to have jurisdiction thereover, and Manager, in its
sole and absolute discretion, considers that the action or position of Owner,
with respect thereto may result in damage or liability to Manager, Manager shall
have the right to cancel this Agreement at any time by written notice to Owner
of its election so to do, which cancellation shall be effective upon the service
of such notice. Such cancellation shall not release the indemnities of Owner set
forth in this Agreement and shall not terminate any liability or obligation of
Owner to Manager for any payment, reimbursement, or other sum of money then due
and payable to Manager hereunder.
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3.8
Extraordinary
Payments. Owner
agrees to give adequate advance written notice to Manager if Owner desires that
Manager make any extraordinary payment, out of Gross Revenue, to the extent
funds are available after the payment of Manager’s compensation as provided for
herein and all operational expenses, of mortgage indebtedness, general taxes,
special assessments, or fire, boiler or any other insurance
premiums.
ARTICLE
IV
EXPENSES
4.1
Owner’s
Expenses. Except
as otherwise specifically provided, all costs and expenses incurred hereunder by
Manager in fulfilling its duties to Owner shall be for the account of and on
behalf of Owner. Such costs and expenses shall include the wages and salaries
and other employee-related expenses of all on-site and off-site employees of
Manager who are engaged in the operation, management, maintenance and leasing or
access control of the Properties, including taxes, insurance and benefits
relating to such employees, and legal, travel and other out-of-pocket expenses
that are directly related to the management of specific Properties. All costs
and expenses for which Owner is responsible under this Management Agreement
shall be paid by Manager out of the Account. In the event the Account does not
contain sufficient funds to pay all said expenses, Owner shall fund all sums
necessary to meet such additional costs and expenses.
4.2
Manager’s
Expenses. Manager
shall, out of its own funds, pay all of its general overhead and administrative
expenses.
ARTICLE
V
MANAGER’S
COMPENSATION
5.1
Management
Fees.
Commencing on the date hereof, Owner shall pay Manager property management and
leasing fees in an amount equal to four and one-half percent (4.5%) of Gross
Revenues (the “Management Fees”) on a monthly basis from the rental income
received from the Properties over the term of this Management Agreement.
Manager’s compensation under this Section 5.1 shall apply to all renewals,
extensions or expansions of Leases that Manager has originally negotiated. In
the event Manager assists with planning and coordinating the construction of any
tenant-paid finish-out or improvements, Manager shall be entitled to receive
from any such tenant an amount equal to not greater than five percent (5.0%) of
the cost of such tenant improvements.
5.2
Leasing
Fees. In
addition to the compensation paid to Manager under Section 5.1 above, Manager
shall be entitled to receive a separate fee for the Leases of new tenants and
renewals of Leases with existing tenants in an amount not to exceed the fee
customarily charged in arm’s length transactions by others rendering similar
services in the same geographic area for similar properties as determined by a
survey of brokers and agents in such area.
5.3
Audit
Adjustment. If any
audit of the records, books or accounts relating to the Properties discloses an
overpayment or underpayment of Management Fees, Owner or Manager shall promptly
pay to the other party the amount of such overpayment or underpayment, as the
case may be. If such audit discloses an overpayment of Management Fees for any
fiscal year of more than the correct Management Fees for such fiscal year,
Manager shall bear the cost of such audit.
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ARTICLE
VI
INSURANCE
AND INDEMNIFICATION
6.1
Insurance
to be Carried.
(a)
Manager
shall obtain and keep in full force and effect insurance on the Properties
against such hazards as Owner and Manager shall deem appropriate, but in any
event insurance sufficient to comply with the Leases and Ownership Agreements
shall be maintained. All liability policies shall provide sufficient insurance
satisfactory to both Owner and Manager and shall contain waivers of subrogation
for the benefit of Manager.
(b)
Manager
shall obtain and keep in full force and effect, in accordance with the laws of
the state in which each Property is located, employer’s liability insurance
applicable to and covering all employees of Manager at the Properties and all
persons engaged in the performance of any work required hereunder, and Manager
shall furnish Owner certificates of insurers naming Owner as a co-insured and
evidencing that such insurance is in effect. If any work under this Management
Agreement is subcontracted as permitted herein, Manager shall include in each
subcontract a provision that the subcontractor shall also furnish Owner with
such a certificate.
6.2
Insurance
Expenses.
Premiums and other expenses of such insurance, as well as any applicable
payments in respect of deductibles shall be borne by Owner.
6.3
Cooperation
with Insurers. Manager
shall cooperate with and provide reasonable access to the Properties to
representatives of insurance companies and insurance brokers or agents with
respect to insurance that is in effect or for which application has been made.
Manager shall use its best efforts to comply with all requirements of insurers.
6.4
Accidents
and Claims. Manager
shall promptly investigate and shall report in detail to Owner all accidents,
claims for damage relating to Ownership, operation or maintenance of the
Properties, and any damage or destruction to the Properties and the estimated
costs of repair thereof, and shall prepare for approval by Owner all reports
required by an insurance company in connection with any such accident, claim,
damage, or destruction. Such reports shall be given to Owner promptly, and any
report not so given within 10 (ten) days after the occurrence of any such
accident, claim, damage or destruction shall be noted in the monthly operating
statement delivered to Owner pursuant to Section 2.5(b). Manager is authorized
to settle any claim against an insurance company arising out of any policy and,
in connection with such claim, to execute proofs of loss and adjustments of loss
and to collect and receipt for loss proceeds.
6.5
Indemnification. Manager
shall hold Owner harmless from and indemnify and defend Owner against any and
all claims or liability for any injury or damage to any person or property
whatsoever for which Manager is responsible occurring in, on, or about the
Properties, including, without limitation, the Improvements when such injury or
damage shall be caused by the negligence of Manager, its agents, servants, or
employees, except to the extent that Owner recovers insurance proceeds with
respect to such matter. Owner will indemnify and hold Manager harmless against
all liability for injury to persons and damage to property caused by Owner’s
negligence and which did not result from the negligence of misconduct of
Manager, except to the extent Manager recovers insurance proceeds with respect
to such matter. Notwithstanding the foregoing, if the person seeking
indemnification under this Section 6.5 is an Affiliate, such person’s right to
indemnification is subject to any limitations imposed under the Company’s
Articles of Incorporation or any amendments thereto.
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ARTICLE
VII
TERM
AND TERMINATION
7.1
Term. This
Agreement shall commence on the date first above written and shall continue
until the seventh (7th)
anniversary of such date and thereafter for successive seven (7) year renewal
periods, unless on or before 30 days prior to the date last above mentioned or
on or before 30 days prior to the expiration of any such renewal period, Manager
shall notify Owner in writing that it elects to terminate this Agreement, in
which case this Agreement shall be thereby terminated on said last mentioned
date. In addition, and notwithstanding the foregoing, Owner may terminate this
Agreement at any time upon delivery of written notice to Manager not less than
thirty (30) days prior to the effective date of termination, in the event of
(and only in the event of) a showing by Owner of willful misconduct, gross
negligence, or deliberate malfeasance by Manager in the performance of Manager’s
duties hereunder. In addition, either party may terminate this Agreement
immediately upon the occurrence of any of the following:
(a)
A decree
or order is rendered by a court having jurisdiction (i) adjudging Manager as
bankrupt or insolvent, or (ii) approving as properly filed a petition seeking
reorganization, readjustment, arrangement, composition or similar relief for
Manager under the federal bankruptcy laws or any similar applicable law or
practice, or (iii) appointing a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of Manager or a substantial part of the property of
Manager, or for the winding up or liquidation of its affairs, or
(b)
Manager
(i) institutes proceedings to be adjudicated a voluntary bankrupt or an
insolvent, (ii) consents to the filing of a bankruptcy proceeding against it,
(iii) files a petition or answer or consent seeking reorganization,
readjustment, arrangement, composition or relief under any similar applicable
law or practice, (iv) consents to the filing of any such petition, or to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency for it or for a substantial part of its property, (v) makes an
assignment for the benefit of creditors, (vi) is unable to or admits in writing
its inability to pay its debts generally as they become due unless such
inability shall be the fault of the other party, or (iv) takes corporate or
other action in furtherance of any of the aforesaid purposes.
7.2
Manager’s
Obligations Upon Termination. Upon
the termination of this Management Agreement, Manager shall have the following
duties:
(a)
Manager
shall deliver to Owner or its designee, all books and records with respect to
the Properties.
(b)
Manager
shall transfer and assign to Owner, or its designee, all service contracts and
personal property relating to or used in the operation and maintenance of the
Properties, except personal property paid for and owned by Manager. Manager
shall also, for a period of sixty (60) days immediately following the date of
such termination, make itself available to consult with and advise Owner, or its
designee, regarding the operation, maintenance and leasing of the Properties.
(c)
Manager
shall render to Owner an accounting of all funds of Owner in its possession and
shall deliver to Owner a statement of all Management Fees claimed to be due to
Manager and shall cause funds of Owner held by Manager relating to the
Properties to be paid to Owner or its designee.
7.3
Owner’s
Obligations Upon Termination. Owner
shall pay or reimburse Manager for any sums of money due it under this Agreement
for services and expenses prior to termination of this Agreement. All
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provisions
of this Agreement that require Owner to have insured, or to protect, defend,
save, hold and indemnify or to reimburse Manager shall survive any expiration or
termination of this Agreement and, if Manager is or becomes involved in any
claim, proceeding or litigation by reason of having been Manager of Owner, such
provisions shall apply as if this Agreement were still in effect.
The
parties understand and agree that Manager may withhold funds for sixty (60) days
after the end of the month in which this Agreement is terminated to pay bills
previously incurred but not yet invoiced and to close accounts. Should the funds
withheld be insufficient to meet the obligation of Manager to pay bills
previously incurred, Owner will, upon demand, advance sufficient funds to
Manager to ensure fulfillment of Manager’s obligation to do so, within ten (10)
days of receipt of notice and an itemization of such unpaid bills.
ARTICLE
VIII
MISCELLANEOUS
8.1
Notices. All
notices, approvals, consents and other communications hereunder shall be in
writing, and, except when receipt is required to start the running of a period
of time, shall be deemed given when delivered in person or on the fifth day
after its mailing by either party by registered or certified United States mail,
postage prepaid and return receipt requested, to the other party, at the
addresses set forth after their respect name below or at such different
addresses as either party shall have theretofore advised the other party in
writing in accordance with this Section 8.1.
| Owner: |
BEHRINGER
HARVARD OPPORTUNITY OP I, LP
00000
Xxxxxx Xxxxxxx
Xxxxx
000
Xxxxxxx,
Xxxxx 00000
Attention:
Chief Legal Officer | |
| Manager: |
HPT
MANAGEMENT SERVICES LP
00000
Xxxxxx Xxxxxxx
Xxxxx
000
Xxxxxxx,
Xxxxx 00000
Attention:
Chief Legal Officer |
8.2
Governing
Law; Venue. This
Management Agreement shall be governed by and construed in accordance with the
laws of the State of Texas, and any action brought to enforce the agreements
made hereunder or any action which arises out of the relationship created
hereunder shall be brought exclusively in Dallas County, Texas.
8.3
Assignment. Manager
may delegate partially or in full its duties and rights under this Management
Agreement but only with the prior written consent of Owner. Owner acknowledges
and agrees that any or all of the duties of Manager as contained herein may be
delegated by Manager and performed by a person or entity (“Submanager”) with
whom Manager contracts for the purpose of performing such duties. Owner
specifically grants Manager the authority to enter into such a contract with a
Submanager; provided that, unless Owner otherwise agrees in writing with such
Submanager, Owner shall have no liability or responsibility to any such
Submanager for the payment of the Submanager’s fee or for reimbursement to the
Submanager of its expenses or to indemnify the Submanager in any manner for any
matter; and provided further that Manager shall require such Submanager to
agree, in the written agreement setting forth the duties and obligations of such
Submanager, to indemnify Owner for all Losses incurred by Owner as a result of
the willful misconduct or gross negligence of the Submanager, except that such
indemnity shall not be required to the extent that
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Owner
recovers issuance proceeds with respect to such matter. Any contract entered
into between Manager and a Submanager pursuant to this Section 8.3 shall be
consistent with the provisions of this Agreement, except to the extent Owner
otherwise specifically agrees in writing. This Management Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
8.4
Third
Party Leasing Services. Manager
acknowledges that from time to time Owner may determine that it is in the best
interests of Owner to retain a third party to provide certain leasing services
with respect to certain Properties and to compensate such third party for such
leasing services. Upon the prior written consent of Manager, Owner shall have
the authority to enter into such a contract for leasing services with a third
party (a “Third Party Leasing Agreement”); provided that Manager shall have no
liability or responsibility to Owner for any of the duties and obligations
undertaken by such party, and Owner agrees to indemnify Manager for all Losses
incurred by Manager as a result of acts of such third party pursuant to the
Third Party Leasing Agreement. To the extent that leasing services are
specifically required to be performed by a third party pursuant to such Third
Party Leasing Agreement, Manager shall have no obligation to perform such
leasing services and Owner shall have no obligation to Manager for leasing fees
pursuant to Section 5.2 hereof.
8.5
Third
Party Management Services. Manager
acknowledges that from time to time Owner may acquire interests in Properties in
which Owner does not control the determination of the party that is engaged to
provide property management and other services to be provided by Manager with
respect to all Properties acquired by Owner hereunder. Upon the prior written
consent of Manager, Owner shall have the authority to acquire such
non-controlling interests in Properties for which a third party provides some or
all of the services otherwise required to be performed by Manager hereunder (a
“Third Party Management Agreement”); provided that Manager shall have no
liability or responsibility to Owner for any of the duties and obligations
undertaken by such third party, and Owner agrees to indemnify Manager for all
Losses incurred by Manager as a result of the acts of such third party pursuant
to the Third Party Management Agreement. To the extent that property management
and other services are specifically required to be performed by a third party
pursuant to such Third Party Management Agreement, Manager shall have no
obligation to perform such services and Owner shall have no obligation to
Manager for compensation for such services pursuant to Article V hereof.
8.6
No
Waiver. The
failure of Owner to seek redress for violation or to insist upon the strict
performance of any covenant or condition of this Management Agreement shall not
constitute a waiver thereof for the future.
8.7
Amendments. This
Management Agreement may be amended only by an instrument in writing signed by
the party against whom enforcement of the amendment is sought.
8.8
Headings. The
headings of the various subdivisions of this Management Agreement are for
reference only and shall not define or limit any of the terms or provisions
hereof.
8.9
Counterparts. This
Management Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, and it shall not be necessary in making proof of
this Management Agreement to produce or account for more than one such
counterpart.
8.10 Entire
Agreement. This
Management Agreement contains the entire understanding and all agreements
between Owner and Manager respecting the management of the Properties. There are
no representations, agreements, arrangements or understandings, oral or written,
between Owner and Manager relating to the management of the Properties that are
not fully expressed herein.
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8.11
Disputes. If
there shall be a dispute between Owner and Manager relating to this Management
Agreement resulting in litigation, the prevailing party in such litigation shall
be entitled to recover from the other party to such litigation such amount as
the court shall fix as reasonable attorneys’ fees.
8.12
Activities
of Manager. The
obligations of Manager pursuant to the terms and provisions of this Management
Agreement shall not be construed to preclude Manager from engaging in other
activities or business ventures, whether or not such other activities or
ventures are in competition with Owner or the business of Owner.
8.13
Independent
Contractor. Manager
and Owner shall not be construed as joint venturers or partners of each other
pursuant to this Management Agreement, and neither shall have the power to bind
or obligate the other except as set forth herein. In all respects, the status of
Manger to Owner under this Agreement is that of an independent contractor.
8.14
No
Third-Party Rights. Nothing
expressed or referred to in this Management Agreement will be construed to give
any Person other than the parties to this Management Agreement any legal or
equitable right, remedy or claim under or with respect to this Management
Agreement or any provision of this Management Agreement, except such rights as
shall inure to a successor or permitted assignee pursuant to Section
8.3.
8.15
Ownership
of Proprietary Property. The
Manager retains ownership of and reserves all Intellectual Property Rights in
the Proprietary Property. To the extent that Owner has or obtains any claim to
any right, title or interest in the Proprietary Property, including without
limitation in any suggestions, enhancements or contributions that Owner may
provide regarding the Proprietary Property, Owner hereby assigns and transfers
exclusively to the Manager all right, title and interest, including without
limitation all Intellectual Property Rights, free and clear of any liens,
encumbrances or licenses in favor of Owner or any other party, in and to the
Proprietary Property. In addition, at the Manager’s expense, Owner will perform
any acts that may be deemed desirable by the Manager to evidence more fully the
transfer of ownership of right, title and interest in the Proprietary Property
to the Manager, including but not limited to the execution of any instruments or
documents now or hereafter requested by the Manager to perfect, defend or
confirm the assignment described herein, in a form determined by the
Manager.
[THE
REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT
BLANK]
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IN
WITNESS WHEREOF, the
parties have executed this Property Management and Leasing Agreement as of the
date first above written.
|
By:
Xxxxxx X. Xxxxxxx, III
Executive Vice President
BEHRINGER
HARVARD OPPORTUNITY OP I, LP
General
Partner
By:
Xxxxxx
X. Xxxxxxx, III
Executive
Vice President
HPT
MANAGEMENT SERVICES LP
By:
Xxxxxx X. Xxxxxxx, III
Executive Vice President |
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