EXHIBIT 10.3
PROPERTY MANAGEMENT AND LEASING AGREEMENT
This PROPERTY MANAGEMENT AND LEASING AGREEMENT (this "Management Agreement") is
made and entered into as of the ____ day of June, 2002, by and among BEHRINGER
HARVARD REAL ESTATE INVESTMENT TRUST I, INC., a Maryland corporation ("XX
XXXX"), BEHRINGER HARVARD OPERATING PARTNERSHIP I LP, a Texas limited
partnership ("BH OP"), and HPT MANAGEMENT SERVICES LP, Texas limited partnership
(the "Manager").
WHEREAS, BH OP was organized to acquire, own, operate, lease and manage real
estate properties on behalf of XX XXXX; and
WHEREAS, XX XXXX 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 to be acquired
and held by Owner (as hereinafter defined) on behalf of XX XXXX; and
WHEREAS, Owner intends to retain Manager to manage and coordinate the leasing 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 a person who is (i) in the case of an individual, any
relative of such person, (ii) any officer, director, trustee, partner, manager,
employee or holder of ten percent (10%) or more of any class of the voting
securities of or equity interest in such person; (iii) any corporation,
partnership, limited liability company, trust or other entity controlling,
controlled by or under common control with such person; or (iv) any officer,
director, trustee, partner, manager, employee or holder of ten percent (10%) or
more of the outstanding voting securities of any corporation, partnership,
limited liability company, trust or other entity controlling, controlled by or
under common control with such person. For purposes of this definition, the term
"controls," "is controlled by," or "is under common control with" shall mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of an entity, whether through ownership of voting
rights, by contract or otherwise.
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.
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 "Lease" means, unless the context otherwise requires, any lease or sublease
made by Owner as landlord or by its predecessor.
1.5 "Management Fees" has the meaning set forth in Section 5.1 hereof.
1.6 "Owner" means XX XXXX, BH OP and any joint venture, limited liability
company or other Affiliate of XX XXXX or BH OP that owns, in whole or in part,
on behalf of XX XXXX, any Properties.
1.7 "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.
ARTICLE II
APPOINTMENT OF MANAGER; SERVICES TO BE PERFORMED
2.1 Appointment of Manager. Owner hereby engages and retains Manager as the sole
and exclusive 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, 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 which are either expressly required under the terms of the lease
of such space or which 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
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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. 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 the maintaining and operating the
Properties, pay all such bills, 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. It is understood that the payment of
real property taxes and assessment and insurance premiums will be paid out of
the Account (as hereinafter defined) by Manager. All expenses shall be billed at
net cost (i.e., less all rebates, commissions, discounts and allowances, however
designed).
(h) Monies Collected. Manager shall collect all rent and other monies
from tenants and any sums otherwise due Owner with respect to the Properties in
the ordinary course of business. In collecting such monies, Manager shall inform
tenants of the Properties that all remittances are to be in the form of a check
or money order. Owner authorizes Manager to request, demand, collect and 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:
(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.
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(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 net operating proceeds from the
preceding month, retaining at all times, however a reserve of
$5,000, in addition to any amounts otherwise provided in the
budget.
(j) Ownership Agreements. Manager has received copies of (and will be
provide with copies of future) Articles of Incorporation, Agreements of Limited
Partnership, Joint Venture Partnership Agreements and Operating Agreements 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 which,
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 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 and 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
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(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. 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;
(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.
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 is or 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 shareholders, officers,
directors, employees, Managers, successors and assigns ( collectively,
"Indemnified Parties") harmless of and from any and all Losses which 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.
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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 and renewals and
cancellations of existing leases which 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;
(a) to institute and prosecute actions to evict tenants and to
recover possession of the Property or portions thereof;
(b) with Owner's authorization, to xxx for in the name of
Owner of the Property 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 which 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
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charged on a pro rata basis) at the Property (all of whom shall be deemed
employees of the Property, not of Manager). 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 do decorating on the Property;
(c) to negotiate and enter into, as Manager of Owner 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 3 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 at the
most economical costs and terms available to Manager. Owner hereby appoints
Manager as Owner's authorized Manager for the purpose of executing, as managing
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 claims, causes of action, demands, suits, proceedings, loss, judgments,
damage, awards, liens, fines, costs, attorneys' fees and expenses, of every kind
and nature whatsoever, resulting from, arising out of or in any way related to
such contracts and which 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 subsidiaries and
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
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) 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
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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, to handle all steps necessary regarding any such claim; provided that
Manager will not make any adjustments or settlements in excess of $10,000.00
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.
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"), which 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 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") 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 which
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 has been nor is nor will any
Property be upon acquisition by Owner, nor any part thereof, 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,
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protect, defend, save and hold Manager and all of the other Indemnified Parties
from any and all claims, causes of action, demands, suits, proceedings, loss,
judgments, damage, awards, liens, fines, costs, attorneys' fees and expenses, of
every kind and nature whatsoever, 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 comply or when acquired by
Owner will comply with all such requirements and authorizes Manager to disclose
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 which 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 building on the Property or any equipment therein 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.
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 which 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 said 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.
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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 percent (4.0%)
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 which 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 5% 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.
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 payment sin respect of deductibles shall be Owner expenses
under Section 6.1.
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
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insurance which 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 days after the
occurrence of any such accident, claim, damage or destruction shall be noted in
the monthly report 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.
ARTICLE VII
TERM AND TERMINATION
7.1 Term. This Agreement shall commence on the date first above written and
shall continue until the third anniversary of such date and thereafter for
successive three 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
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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 Management Fees
claimed to be due 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 advances
prior to termination of this Agreement. All 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 OPERATING PARTNERSHIP I LP
0000 Xxxxx Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Chief Executive Officer and Chief Operating Officer
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Manager: HPT MANAGEMENT SERVICES LP
0000 Xxxxx Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Chief Executive Officer and Chief Operating 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 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 loss,
damage or claims incurred by Owner as a result of the willful misconduct, gross
negligence and/or unlawful acts of the Submanager. Owner further acknowledges
and agrees that Manager may assign this Agreement and all of Manager's rights
and obligations hereunder, to another management entity that is then managing
other property for Owner ("Successor Manager"). Owner specifically grants
Manager the authority to make such an assignment to a Successor Manager. Except
as provided in the immediately preceding sentence, 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 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.
8.5 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.
8.6 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.
8.7 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.
8.8 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.
8.9 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.
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8.10 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.
8.11 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.
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IN WITNESS WHEREOF, the parties have executed this Property Management
and Leasing Agreement as of the date first above written.
BEHRINGER HARVARD REAL ESTATE INVESTMENT TRUST I, INC.
By:
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Xxxxxx X. Xxxxxxxxx
President
BEHRINGER HARVARD OPERATING PARTNERSHIP I LP
By: Behringer Harvard Real Estate Investment Trust I, Inc.
General Partner
By:
----------------------------------------------------------
Xxxxxx X. Xxxxxxxxx
President
HPT MANAGEMENT SERVICES LP
By: IMS, LLC, General Partner
By:
----------------------------------------------------------
Xxxx X. Xxxxxx
Chief Operating Officer
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