MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT, dated as of the 23rd day of January, 1987, is
entered into by and between Colonial Storage Management 86, Inc., a Texas
corporation ("CSM") and Balcor/Colonial Storage Income Fund - 86, an Illinois
limited partnership (the "Partnership").
RECITALS:
A. The Partnership intends to acquire and/or construct and operate certain
mini-warehouse and office/warehouse facilities identified in Schedule I
attached hereto and incorporated herein by this reference, as from time to time
amended or supplemented (each such mini-warehouse or office/warehouse facility
being referred to as a "Property" and, collectively, as the "Properties"); and
B. It is the intention of the Partnership that the Properties be rented on a
rental unit by rental unit basis to corporations, partnerships, individuals or
other entities for use primarily as storage facilities for personal and
business use or facilities offering a combination of office and commercial
warehouse space.
C. The Partnership desires to employ CSM to manage the Properties and CSM
desires to accept said employment, all in accordance with the terms and
conditions of this Agreement as hereinafter set forth.
AGREEMENT:
In consideration of the mutual covenants, promises, representations and
warranties contained herein, the adequacy and accuracy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
EMPLOYMENT
Section 1.1. Employment and Term. The Partnership hereby employs CSM and CSM
hereby accepts such employment as manager of the Properties for a period of
twenty (20) years from the date hereof (or until such Properties are sold) upon
the terms and conditions hereinafter set forth.
Section 1.2. Other Business. The Partnership acknowledges and expressly agrees
that CSM and its affiliates intend to engage in the business of managing
mini-warehouse, office/warehouse and other facilities both for their own
account and for others (whether or not such other facilities may be in direct
or indirect competition with the Partnership). It is further expressly agreed
that CSM and its affiliates may in the future engage in other businesses which
may compete directly or indirectly with the activities of the Partnership.
Section 1.3. Independent Contractor. In the performance of its duties under
this Agreement, CSM shall occupy the position of an independent contractor with
respect to the Partnership. Nothing contained herein shall be construed as
making the parties hereto partners or joint venturers nor, except as expressly
otherwise provided for herein, construed as making CSM an agent or employee of
the Partnership.
ARTICLE II
DUTIES AND AUTHORITY OF CSM
Section 2.1. General Duties and Authority. Subject only to the restrictions,
limitations and covenants provided in Sections 2.2, 2.3 and 2.4 of this Article
II and the right of the Partnership to terminate this Agreement as provided in
Article VI hereof, CSM shall have the sole and exclusive authority to fully and
completely supervise the Properties and supervise and direct the business and
affairs associated with or related to the daily operations thereof and, to that
end, to cause or direct the Partnership to execute such documents or
instruments and hire or discharge such employees as, in the reasonable judgment
of CSM, may be deemed necessary or advisable. Such duties and authorities shall
include, but not be limited to, the following:
(a) Renting of the Properties. CSM shall establish policies and procedures
for directing the marketing activities of Partnership employees. CSM shall
have the sole discretion, which discretion shall be exercised in good
faith and consistent with reasonable business practices in the locality
where each Property is situated, to establish the terms and conditions of
occupancy by the lessees of rental units in Properties. CSM is hereby
authorized to direct and control Partnership employees in entering into
rental agreements on behalf of, in the name of and for the account of the
Partnership with such lessees and in collecting rent from such lessees.
CSM shall cause the Partnership to advertise in such media and to the
extent CSM deems necessary and appropriate.
(b) Repair, Maintenance and Improvements. CSM shall make and execute, or
supervise and have control over the making and executing of, all decisions
concerning the acquisition of furniture, fixtures and supplies for the
Properties, and the purchase, lease or other acquisition of the same on
behalf of, in the name of and for the account of the Partnership. CSM
shall make and execute, or supervise and have control over the making and
executing of, all decisions concerning the maintenance, repair and
landscaping of the Properties; provided, however, that nothing contained
herein shall preclude the Partnership from requiring maintenance and/or
repairs in addition to those recommended by CSM. All costs incurred in
connection therewith shall be on behalf of, in the name of and for the
account of the Partnership. With the prior written approval of the
Partnership, CSM or Partnership employees acting pursuant to CSM's
direction shall, on behalf of, in the name of and for the account of the
Partnership, negotiate and contract for, and supervise the installation
of, all capital improvements relating to the Properties.
(c) Personnel. CSM or Partnership employees acting pursuant to CSM's
direction shall select all vendors, suppliers, contractors, subcontractors
and employees with respect to the Properties and shall hire, discharge and
supervise all labor and employees required for the operation (including
xxxxxxxx and collections) and maintenance of the Properties, including
attorneys, accountants, consultants and clerical employees. All such acts
shall be on behalf of, in the name of and for the account of the
Partnership and any employee so hired shall be carried on the payroll of
the Partnership and shall not be deemed to be an employee of CSM.
Employees of the Partnership may include, but shall not be limited to,
regional managers, resident managers, assistant managers, relief managers
and administrative and clerical personnel. Where appropriate, CSM may
cause the Partnership to hire employees of CSM (other than CSM's executive
officers and directors) on a reasonable hourly rate basis (not to exceed
the rate otherwise payable to such employees by CSM) to perform the
necessary management, administrative and clerical services. In such event,
salaries of such personnel payable by CSM may be reduced correspondingly.
All personnel employed by the Partnership in connection with the foregoing
shall be supervised by CSM.
CSM and its employees shall be responsible for the disbursement of
Partnership funds in payment of all expenses incurred in connection with
the operation of the Properties. CSM shall be separately reimbursed for
the direct cost of furnishing such services, but shall not be reimbursed
for the time of its executive officers and directors devoted to
Partnership affairs.
(d) Agreements. CSM and Partnership employees acting pursuant to CSM's
direction shall negotiate and execute on behalf of, in the name of and for
the account of the Partnership such agreements as CSM deems necessary or
advisable for the furnishing of utilities, services, concessions and
supplies and for the maintenance, repair and operation of the Properties
and such other agreements as may benefit the Properties or be incidental
to the matters for which CSM is responsible hereunder.
(e) Other Decisions. CSM shall have control over the daily operation of
the Properties.
(f) Regulations and Permits. CSM shall use its best efforts to cause all
things to be done on behalf of, in the name of and for the account of the
Partnership on the Properties necessary to comply with any statute,
ordinance, law, rule, regulation or order of any governmental or
regulatory body having jurisdiction over the Properties with respect to
the use of the Properties or the construction, maintenance, or operation
thereof, and with all orders and requirements of the local Board of Fire
Underwriters or any other body which may hereafter exercise similar
functions. CSM shall cause the Partnership to apply for and attempt to
obtain and maintain on behalf of, in the name of and for the account of
the Partnership all licenses and permits required or advisable (in CSM's
sole judgment) in connection with the management and operation of the
Properties.
(g) Accounting. CSM shall establish, supervise, direct and maintain the
operation of an accounting system and shall cause to be prepared and
delivered to the Partnership, at the Partnership's expense, financial
statements as follows:
(i) On or before thirty (30) days after the close of each calendar
month, a statement of operations showing the results of operation of
each of the Properties for such month and of the fiscal year to date
having annexed thereto a computation of the Property Management Fee,
as such fee is defined in Article IV of this Agreement, for such
month and for the fiscal year to date.
(ii) On or before sixty (60) days after the close of the fiscal year,
a balance sheet and related statement of operations showing the
result of the operations of the Properties during the fiscal year,
both audited and reported on by an independent certified public
accounting firm approved by and retained on behalf of, in the name of
and for the account of the Partnership by CSM and having annexed
thereto a computation of the Property Management Fee for such fiscal
year. Fees for the independent certified public accounting firm shall
be borne by the Partnership.
(h) Deposits and Disbursements. CSM shall cause the establishment of bank
accounts insured by the Federal Deposit Insurance Corporation in the name
of the Partnership and shall deposit therein all receipts and monies
arising from the operation of the Properties or otherwise received for and
on behalf of the Partnership. CSM shall disburse Partnership funds from
said accounts on behalf of, in the name of and for the account of the
Partnership in such amounts and at such time as disbursement of such
revenues for payment of payroll and other obligations of the Partnership
is required. CSM shall establish and be responsible for administering a
policy for specifying the identity of signatories to the Partnership's
bank accounts and establishing the number of signatures required for
checks of various amounts. Expenses for deposits and disbursements shall
be borne by the Partnership.
(i) Collections. CSM shall supervise and direct personnel in the
collection and billing of all accounts payable and due to the Partnership
with respect to the Properties and shall be responsible for establishing
policies and procedures to minimize the amount of bad debts. Expenses of
collections shall be borne by the Partnership.
(j) Legal Actions. CSM shall cause to be instituted on behalf of, in the
name of and for the account of the Partnership any and all legal actions
or proceedings CSM deems necessary or advisable to collect charges, rents
or other income due to the Partnership with respect to the Properties or
to oust or dispossess lessees or other persons unlawfully in possession
under any lease or otherwise, and to collect damages for breach thereof,
or default thereunder by such lessee or other occupant. The cost of all
such legal actions or proceedings shall be borne by the Partnership.
(k) Insurance. CSM shall use its best efforts to assure that there is
obtained and kept in force fire, comprehensive, liability and other
insurance policies in amounts and from carriers approved by the
Partnership and in amounts generally carried with respect to similar
facilities. CSM shall also obtain and maintain in force on behalf of the
Partnership such additional insurance with respect to the Properties as
the Partnership shall from time to time instruct. All insurance expenses
shall be borne by the Partnership.
(l) Taxes. CSM shall disburse from Partnership funds when due or in
installments (where allowed) all taxes, personal and real, and assessments
properly levied on the Partnership with respect to the Properties on
behalf of, in the name of and for the account of the Partnership. CSM
shall use its best efforts to assure that the Partnership maintains and
implements a procedure for review by Partnership employees of all amounts
assessed on the Properties. All expenses for the disbursement of taxes
shall be borne by the Partnership.
(m) Budget and Reports. CSM shall submit to the Partnership on or before
December 31 of each calendar year during the term hereof an annual budget
containing an estimate of the projected income (including rent increases
and when same, if any, are scheduled) and necessary expenditures during
the forthcoming calendar year in connection with the management and
operation of the Properties by CSM on behalf of the Partnership. CSM shall
also provide to the Partnership such periodic reports concerning the
management and operation of the Properties by CSM as the Partnership may
reasonably request.
Section 2.2. Restrictions. Notwithstanding anything to the contrary set forth
in this Article II, CSM shall not be required to do, or cause to be done,
anything for the account of the Partnership (i) which may make CSM liable to
third parties, (ii) which may not be commenced, undertaken or pleaded because
of insufficient funds available on the accounts of the Partnership established
pursuant to this Article II after reasonable request from CSM to the
Partnership, (iii) which may, under applicable law, constitute an impermissible
delegation of duties and responsibilities, including but not limited to the
purchase or construction of capital improvements, the sale or disposition of
all or substantially all of the Partnership's assets, and any action which may
result in a change in the Partnership's primary business, (iv) which cannot be
done because of acts of God, strikes, governmental regulations or laws, acts of
war or other types of events beyond CSM's control, whether similar or
dissimilar to the foregoing, or (v) which would violate the terms of the
Agreement and Certificate of Limited Partnership, any other agreement known to
CSM by which the Partnership may be bound, or that certain Registration
Statement No. 33-6669 on Form S-11, as amended from time to time, filed with
the Securities and Exchange Commissions and declared effective on _______, 1986
(the "Registration Statement").
Section 2.3. Limitations on CSM's Authority. Notwithstanding anything to the
contrary set forth in this Article II, CSM shall not, without obtaining the
prior written consent of the Partnership, (i) alter the buildings or other
structures on the Properties in any material manner, (ii) make any arrangements
for a term exceeding one (1) year which are not terminable on thirty (30) days
notice at the will of the Partnership, without penalty, payment or surcharge,
or (iii) incur any unbudgeted expenditure of Partnership funds in excess of
Five Thousand Dollars ($5,000) on any Property without the prior approval of
the Partnership.
2.4. Covenants. CSM covenants that it will operate the Properties in a manner
similar to that in which affiliates of CSM have typically operated other
mini-warehouse and office/warehouse facilities and that the services to be
provided to lessees of rental units in the Properties will not exceed those
customarily rendered in connection with the rental of mini-warehouse and
office/warehouse facilities.
ARTICLE III
DUTIES OF THE PARTNERSHIP
The Partnership hereby agrees to cooperate with CSM in the performance of its
duties under this Agreement and, to that end, upon the request of CSM, to
provide reasonable temporary office space for CSM's employees on the premises
of the Properties, to give CSM access to all files, books and records of the
Partnership relevant to the Properties and to execute all documents or
instruments and hire and discharge such employees as CSM in its good faith
judgment deems reasonably necessary or advisable to enable it to fulfill its
duties under this Agreement. Such employees shall include, but not be limited
to, regional managers, resident managers, assistant managers, relief managers
and administrative and clerical personnel. It is understood and acknowledged
that some or all of such employees may be employed part-time by the Partnership
and part-time by CSM or its affiliates and/or by owners of other
mini-warehouse, office warehouse or other facilities managed by CSM, some of
which may compete with the Properties.
ARTICLE IV
COMPENSATION TO CSM
Section 4.1. Property Management Fee. So long as the Partnership owns the
Properties, the Partnership shall pay CSM, as the full amount due for the
services herein provided which are actually rendered by CSM pursuant to this
Agreement, a Property Management Fee equal to six percent (6%) of the "Gross
Revenue" derived from or connected with the Properties operated as
mini-warehouse facilities and five percent (5%) of the "Gross Revenue" derived
from or connected with Properties operated as office/warehouse facilities, but
not exceeding that customary for similar property management and leasing
services in the relevant geographical area. In the event the Partnership
consents to a net lease for a term of ten (10) or more years on any Property,
the compensation otherwise payable to CSM shall be reduced to one percent (1%)
of the "Gross Revenue" derived from or connected with such Property, except for
a one time initial leasing fee of three percent (3%) of the "Gross Revenue" on
such lease payable over the first five (5) full years of the original term of
the lease. The term "Gross Revenue" shall mean all receipts (excluding security
deposits, unless and until the Partnership recognizes such security deposits as
income, and amounts received as payments for damages by lessees) of the
Partnership (whether or not received by CSM on behalf of, in the name of or for
the account of the Partnership) arising from the operation of the Properties in
the ordinary course of business including, but not limited to, rental payments
of lessees of rental units of the Properties and all other funds, whether or
not otherwise described herein, paid for the use of the Properties. Gross
Revenue shall be determined on a cash basis. The Property Management Fee for
each month shall be paid on or before 30 days after the close of such month and
shall be calculated on the basis of Gross Revenue for such month.
Section 4.2. Employees Compensated by Partnership. It is understood and agreed
that the Property Management Fee payable to CSM will be in addition to, and
shall not be reduced by, the cost to the Partnership of employing or engaging
those employees and independent contractors engaged by or for the Partnership,
including, but not limited to, the categories of personnel specifically
referred to in Section 2.1(c) hereof.
ARTICLE V
USE OF TRADEMARKS, SERVICE MARKS
AND RELATED ITEMS
It is understood and agreed that the names "Colonial Self Storage" and
"Colonial Storage Centers" and related trademarks, service marks, slogans,
caricatures, designs and other trade or service items may be utilized for the
non-exclusive benefit of the Partnership in the rental and operation of the
Properties, and in comparable operations elsewhere. It is further understood
and agreed that these names and all such trademarks, service marks, slogans,
caricatures, designs and other trade or service items shall remain and be at
all times the property of CSM or its affiliates, and that, except during the
term hereof, the Partnership shall have no right whatsoever therein. Upon
termination of this Agreement, at any time or for any reason, all such use by
and for the benefit of the Partnership of any such name, trademark, service
xxxx, slogan, caricature, design or other trade or service item in connection
with the Properties shall, in any event, be terminated and any signs bearing
any of the foregoing shall be removed from view and no longer used by the
Partnership. It is understood and agreed that CSM will use and shall be
unrestricted in its use of such names, trademarks, service marks, slogans,
caricatures, designs or other trade or service items in the management and
operation of mini-warehouse, office/warehouse and other facilities both during
and after the expiration of the term or the termination of this Agreement. CSM
represents and warrants that CSM has the right to the non-exclusive use of the
names and service marks "Colonial Self Storage" and "Colonial Storage Centers"
and hereby agrees to indemnify and defend the Partnership and its general
partners from any and all costs, expenses, attorneys' fees, suits, liabilities,
judgments, damages and claims arising in connection with any claim that the use
of the names and service marks "Colonial Self Storage" and "Colonial Storage
Centers" infringe the name, trademark or service xxxx of any other person.
ARTICLE VI
TERMINATION
Upon sixty (60) days written notice to CSM pursuant to Article XI hereof, the
Partnership may terminate this Agreement with or without cause. Upon two
hundred seventy (270) days written notice to the Partnership pursuant to
Article XI hereof, CSM may terminate this Agreement with or without cause. This
Agreement shall automatically terminate in the event Colonial Storage 86, Inc.,
an affiliate of CSM, shall voluntarily withdraw as a general partner of the
Partnership.
ARTICLE VII
INDEMNIFICATION
The Partnership hereby agrees to indemnify and hold CSM and its executive
officers, directors, employees and affiliates harmless from any and all costs,
expenses, attorneys' fees, suits, liabilities, judgments, damages and claims
arising from the Partnership's breach of this Agreement or in connection with
the management of the Properties (including the loss of the use thereof
following any damage, injury or destruction) arising from any cause except for
the willful misconduct, negligence or negligent omissions on the part of CSM or
its executive officers, directors, employees or affiliates. CSM and its
executive officers, directors, employees and affiliates also shall not be
liable for any error of judgment or for any mistake of fact or law, or for
anything which it may do or refrain from doing hereunder, except in cases of
willful misconduct or negligence. CSM and its affiliates hereby agree to
indemnify and hold the Partnership and its general partners harmless from any
and all costs, expenses, attorneys' fees, suits, liabilities, judgments,
damages and claims arising from CSM's breach of this Agreement or in connection
with the management of the Properties arising from the willful misconduct or
negligence of CSM or its executive officers, directors, employees or
affiliates.
ARTICLE VIII
ASSIGNMENTS
Neither this Agreement nor any right hereunder shall be assignable by the
Partnership and any attempt to do so shall be void ab initio. CSM shall have
the right to assign this Agreement to an affiliate, provided, however, that any
such assignee must assume all obligations of CSM hereunder. The Partnership's
rights hereunder will be enforceable against any such assignee and CSM shall
not be released from its liabilities hereunder unless the Partnership shall
expressly agree thereto in writing.
ARTICLE IX
HEADINGS
The headings contained herein are for convenience of reference only and are not
intended to define, limit or describe the scope or intent of any provision of
this Agreement.
ARTICLE X
GOVERNING LAW
The validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties shall be governed by the
laws of the State of Texas. This Agreement shall be deemed performable and
venue for any action brought hereunder shall be in Tarrant County, Texas.
ARTICLE XI
NOTICES
Any notice required or permitted herein to be given shall be given in writing
and shall be personally delivered or mailed, first class postage prepaid, to
the respective addresses of the parties set forth below their signatures on the
signature page hereof, or to such other address as any party may give to the
others in writing.
ARTICLE XII
SEVERABILITY
Should any term or provision hereof be deemed invalid, void or unenforceable
either in its entirety or in a particular application, the remainder of this
Agreement shall nonetheless remain in full force and effect and, if the
subject, term or provision is deemed to be invalid, void or unenforceable only
with respect to a particular application, such term or provision shall remain
in full force and effect with respect to all other applications. The parties
recognize that broad discretionary authority has been granted by the
Partnership to CSM in the management and direction of the Partnership's
business and financial affairs and it is their intent that such authority be
fully exercised by CSM within the limitations imposed by applicable law. If,
however, any court of competent jurisdiction should render a final judgment
that the authority granted to CSM herein exceeds the bounds of permissible
delegation under applicable law, the parties agree that this Agreement shall be
deemed amended, modified and reformed to the extent necessary to reduce the
scope of authority delegated by the Partnership to CSM as to limit such
authority to that permissible under applicable law as evidenced by the written
legal opinion of counsel to CSM. The parties agree that no determination that
the discretion and authority granted to CSM hereunder exceeds permissible
bounds shall result in this Agreement being declared or adjudged invalid, void
or unenforceable in its entirety; rather, the parties request that any court
examining such issue employ great latitude in reforming this Agreement so as to
make the same, as reformed, valid and enforceable.
ARTICLE XIII
AFFILIATES
"Affiliate", with respect to CSM shall mean (i) any person directly or
indirectly owning, controlling, or holding with power to vote, 10% or more of
the outstanding voting securities or interests of CSM; (ii) any person, 10% or
more of whose outstanding voting securities or interests are directly or
indirectly owned, controlled, or held with power to vote, by CSM; (iii) any
person directly or indirectly controlling, controlled by or under common
control with CSM; (iv) any officer, director or partner directly or indirectly
controlling, controlled by or under common control with CSM; (iv) any officer,
director or partner of CSM; and (v) any company for which CSM acts as an
officer, director or partner.
ARTICLE XIV
SUCCESSORS
This Agreement shall be binding upon and inure to the benefit of the respective
parties hereto and their permitted assigns and successors in interest.
ARTICLE XV
ATTORNEYS' FEES
If it shall become necessary for either party hereto to engage attorneys to
institute legal action for the purpose of enforcing its rights hereunder or for
the purpose of defending legal action brought by the other party hereto, the
party or parties prevailing in such litigation shall be entitled to receive all
costs, expenses and fees (including reasonable attorneys' fees) incurred by it
in such litigation (including appeals).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
COLONIAL STORAGE MANAGEMENT 86, INC.
By: /s/Xxxxx X. Xxxxxx
----------------------
Xxxxx X. Xxxxxx,
Its President
0000 Xxxx Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxx 00000
BALCOR/COLONIAL STORAGE
INCOME FUND - 86
By: Balcor Storage
Partners - 86
By: Balcor Storage
Partners, Inc.
By: /s/Xxxxxxx X. Xxxxx
--------------------------
Xxxxxxx X. Xxxxx
--------------------------
Its First Vice President
----------------------
0000 Xxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
AND By: Colonial Storage 86, Inc.
By: /s/Xxxxx X. Xxxxxx
---------------------------
Xxxxx X. Xxxxxx, Its
President
