Exhibit 10.1
PROPERTY MANAGEMENT AGREEMENT
FOR
PRESTON AT WILLOW BEND APARTMENTS
PLANO, TEXAS
TABLE OF CONTENTS
PAGE
ARTICLE 1. RETENTION OF MANAGER; GENERAL DEFINITIONS 3
1.1 Retention of Manager. 3
1.2 General Definitions. 3
ARTICLE 2. MANAGER'S RESPONSIBILITIES 6
2.1 General Responsibilities. 6
2.2 Manager's Personnel; Independent Contractor 6
2.3 Executive Personnel; Property Manager. 7
2.4 Schedule of Employees. 7
2.5 Compliance with Laws, Licenses, Mortgages, Etc. 8
2.6 Security. 9
2.7 Energy Management. 10
2.8 Annual Business Plan. 10
2.9 Service Contracts. 11
2.10 Collection of Rents and Other Income. 12
2.11 Competitive Bidding. 12
2.12 Repairs. 12
2.13 Leases 14
2.14 Notices to Owner. 16
2.15 Property Tax Appeals. 17
2.16 No Other Fees. 17
2.17 REIT Status. 17
ARTICLE 3. INSURANCE AND CLAIMS 17
3.1 Owner's Insurance and Rights. 17
3.2 Manager's Insurance. 18
3.3 Indemnification. 19
3.4 Contractors' and Subcontractors' Insurance. 20
3.5 Waiver of Subrogation. 21
3.6 Service Contracts. 21
3.7 Claims. 21
ARTICLE 4. FINANCIAL REPORTING AND RECORD KEEPING 21
4.1 Financial Controls. 21
4.2 Financial Reports: General Requirements. 21
4.3 Periodic Statements 22
4.4 Supporting Documentation. 23
4.5 Annual Financial Reports. 24
4.6 Transfer of Funds. 24
4.7 Owner's Property. 24
4.8 Books and Records. 25
ARTICLE 5. OWNER'S RIGHT TO AUDIT 25
5.1 Right to Audit. 25
ARTICLE 6. BANK ACCOUNTS 26
6.1 Operating Account. 26
6.2 Security Deposit Account. 26
6.3 Change of Banks. 26
6.4 Access to Account. 26
ARTICLE 7. PAYMENT OF EXPENSES 27
7.1 Costs Eligible for Payment from Operating Account. 27
7.2 Non-Reimbursable Costs. 28
ARTICLE 8. INSUFFICIENT GROSS INCOME 29
8.1 Priorities. 29
8.2 Statement of Unpaid Items. 30
8.3 Segregation of Accounts. 30
8.4 Cash Flow Forecasting. 30
8.5 Manager Not Obligated to Fund. 30
ARTICLE 9. SALE OR FINANCING OF PROPERTY 30
9.1 Cooperation with Broker. 30
9.2 No Sales/Brokerage Commissions. 31
ARTICLE 10. COOPERATION 31
10.1 Cooperation. 31
ARTICLE 11. COMPENSATION 31
11.1 Compensation. 31
ARTICLE 12. TERMINATION 32
12.1 Termination. 32
12.2 Termination Without Notice. 33
12.3 Final Accounting. 33
12.4 Obligation to Vacate: Orderly Transition. 34
ARTICLE 13. SUBSIDIARIES AND AFFILIATES 34
13.1 Subsidiaries and Affiliates. 34
ARTICLE 14. NOTICES 34
14.1 Notices. 34
ARTICLE 15. CERTAIN REPRESENTATIONS AND COVENANTS 35
15.1 Manager Representations. 35
ARTICLE 16. MISCELLANEOUS 35
16.1 Word Meanings. 35
16.2 Assignment. 35
16.3 Binding Provisions. 35
16.4 Nondiscrimination. 35
16.5 Applicable Law. 36
16.6 Severability of Provisions. 36
16.7 Section Titles. 36
16.8 Further Assurances. 36
16.9 Entire Agreement. 36
16.10 Waiver. 37
16.11 Agreement in Counterparts. 37
16.12 Attorneys' Fees. 37
16.13 Time Periods. 37
16.14 Modification of Agreement. 37
16.15 Time of the Essence. 37
16.16 Construction of Agreement. 37
16.17 Consent and Approvals. 37
16.18 Use of Owner's Name Prohibited. 38
16.19 Exculpation. 38
16.20 Confidentiality. 38
16.21 No Joint Venture. 38
Exhibits
A Reporting Package
B Executive Personnel and Property Manager
C Reimbursable Employee Expense Schedule
D Annual Business Plan
E List of Service Contracts
H Periodic Statements
I Capitalization Policy
J Chart of Accounts
PROPERTY MANAGEMENT AGREEMENT
This
Property Management Agreement is made and entered into as of this
_______ day of September, 2005, by and between ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇, a
Delaware limited partnership ("OWNER") and Alliance Residential, LLC, an Arizona
limited liability company ("MANAGER").
BACKGROUND
A. Owner owns the Property (defined herein).
B. Manager is skilled and experienced in the management,
operation, leasing and supervision in properties similar to the Property in the
geographic area where the Property is located.
C. Owner desires to engage Manager as an independent contractor
on the terms and conditions set forth below and Manager desires to accept such
engagement.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Owner and Manager agree as
follows:
THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
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PART I - BASIC DATA
The following defined terms shall have the meaning set forth below:
"COMMENCEMENT DATE" - September ____, 2005.
"EXCESS MANAGEMENT FEE PERCENTAGE" - 0.5%
"MANAGEMENT FEE PERCENTAGE" - 3.0%
"MANAGER'S NOTICE ADDRESS" -
Alliance Residential, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: V. ▇▇▇ ▇▇▇▇▇▇▇
With copies to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
"OWNER'S NOTICE ADDRESS"
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇
c/o Alliance Residential Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: V. ▇▇▇ ▇▇▇▇▇▇▇
with copies to:
ALLTX, LLC
c/o Boston Capital Corporation
One Boston Place - Suite 2100
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
and
▇▇▇▇▇▇▇ Procter LLP
Exchange Place
Boston,
Massachusetts 02109-2881
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Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
"PROPERTY" - that certain property consisting of the multi-family
apartment complex known as Preston at Willow Bend Apartments (to be renamed
"▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at Willow Bend Apartments" within a reasonable period of
time following the Property Closing Date) located in the City of Plano, County
of Collin, State of Texas, together with all personal property of Owner attached
thereto, located thereon or used in connection therewith.
THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
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PART II - STANDARD TERMS
ARTICLE 1. RETENTION OF MANAGER; GENERAL DEFINITIONS
1.1 RETENTION OF MANAGER. Owner hereby retains Manager to perform
the services described below in accordance with the terms and conditions of this
Agreement, utilizing trained, experienced personnel and employing professional
real estate management practices and techniques. Manager accepts the appointment
of Manager and covenants to use its best skill and prudent business judgment in
furthering the interests of Owner, and to act in a fiduciary manner for the
benefit of Owner with respect to the collection of rents and the accounting for
the Property. Manager's duties and responsibilities will commence on the
Commencement Date and shall continue until the expiration or earlier termination
of this Agreement in accordance with ARTICLE 12.
1.2 GENERAL DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"AFFILIATE OF MANAGER" shall mean any person or entity which (i) is a
director, officer, partner, member or trustee of Manager, or in which Manager or
any Manager Owner is a director, officer, partner, member or trustee, (ii) has
any direct or indirect legal or beneficial interest in Manager, or in which
Manager or any Manager Owner has any direct or indirect legal or beneficial
interest, or (iii) directly or indirectly controls, is controlled by or is under
common control with Manager.
"AGREEMENT" shall mean this
Property Management Agreement, which
consists of Part I and Part II and such other Parts as may be attached hereto
and executed by Owner and Manager, including all Schedules and Exhibits hereto,
all as amended from time to time in accordance with the terms hereof.
"ALTERATIONS" shall have the meaning set forth in SECTION 2.12.
"ANNUAL BUSINESS PLAN" shall mean the annual business plan to be
prepared by Manager and approved by Owner in accordance with SECTION 2.8.
"APPROVED ANNUAL BUSINESS PLAN" shall mean, at any time, the Annual
Business Plan as then approved by Owner in accordance with SECTION 2.8.
"BOOKS AND RECORDS" shall have the meaning set forth in SECTION 4.8.
"BUSINESS DAY" shall mean every day that is not a Saturday, Sunday or
day on which banks in
Massachusetts or the state in which the Property is
located are required by law or executive action to be closed for the transaction
of normal banking business.
"CHART OF ACCOUNTS" shall mean the form of chart of accounts approved
by Owner, a copy of which is included in the Reporting Package, as the same may
be modified or replaced as required by Owner from time to time.
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"CONSTRUCTION MANAGEMENT FEE" shall have the meaning set forth in
SECTION 2.12.
"DAMAGES" shall mean all claims, actions, suits, proceedings,
judgments, damages, fines, penalties, losses and expenses, including reasonable
attorneys' fees, consultants' and expert witness fees and court costs, including
any such costs incurred in any bankruptcy or other legal or administrative
proceeding.
"ENVIRONMENTAL LAWS" herein shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601, et seq., Hazardous Materials Transportation Act, 49 U.S.C. Section 1801,
et seq., Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901
et seq., Clean Air Act, 42 U.S.C. Section 7401 et seq., Clean Water Act, 33
U.S.C. Section 1251, et seq., Safe Drinking Water Act, 14 U.S.C. Section 300f,
et seq., Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq., Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C, Section 136 et seq., Atomic
Energy Act of 1954, 42 U.S.C. Section 2014 et seq., and any similar federal,
state or local Laws, and all regulations, guidelines, directives and other
requirements thereunder, all as may be amended or supplemented from time to
time.
"ENVIRONMENTAL LIABILITIES" herein shall mean conditions that involve
the presence (whether actual or alleged) of any Hazardous Materials, conditions
that are subject to any Environmental Laws, and all claims relating thereto.
"EXECUTIVE PERSONNEL" shall have the meaning set forth in SECTION 2.3.
"EXCESS MANAGEMENT FEE" shall mean the product of (x) the Excess
Management Fee Percentage times (y) all Rents actually collected for each month
during the term of this Agreement. Manager shall not be entitled to receive any
Excess Management Fee for the period following the date Manager acquires actual
knowledge or receives notice of a default by Owner under any first mortgage loan
for the Property, and any Excess Management Fee received by Manager for any
period following the date Manager acquired knowledge or received notice of such
default, shall be held in trust for such first mortgage lender.
"EXCESS MANAGEMENT FEE PERCENTAGE" shall have the meaning set forth in
Part I.
"FINAL ACCOUNTING" shall have the meaning set forth in SECTION 12.3.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous
substance, material, or waste as defined for purposes of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. 9601, ET SEQ., or any other federal, state or local law, ordinance, or
regulation applicable to the Property and establishing standards and/or
requirements for liability, storage, uncontrolled loss, seepage, filtration,
disposal, removal, use or existence of a hazardous, toxic or dangerous
substance, material or waste, including, without limitation, petroleum or
petroleum products, asbestos, radon, polychlorinated biphenyls and all of those
chemicals, substances, materials, controlled substances, objects, conditions,
wastes,
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living organisms or combinations thereof which are now or become in the future
listed, defined or regulated in any manner by any federal, state or local law
based upon its being, directly or indirectly, hazardous to human health or
safety or to the environment due to its radioactivity, ignitability,
corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity,
phytoxicity, infectiousness or other harmful or potentially harmful properties
or effects, but excluding such substances or materials in amounts customarily
used by the tenants of, or in connection with the operation, of residential
apartment building.
"INSURANCE REQUIREMENTS" shall mean all requirements of any insurance
policy covering the Property or the use thereof, all requirements of the issuer
of any such policy, and all requirements, orders, rules or regulations of the
National Board of Fire Underwriters (or similar agencies) applicable to the
Property.
"INVESTOR" shall have the meaning set forth in that certain Limited
Partnership Agreement of ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ of even date herewith.
"LEGAL REQUIREMENTS" shall mean all federal, state and municipal laws,
rules or regulations applicable to the Property or the operation, occupancy,
leasing, maintenance and repair thereof.
"LICENSES" shall mean all permits, licenses, certificates, approvals,
consents and other entitlements required for the operation, occupancy, leasing,
maintenance and repair of the Property.
"MANAGER" shall have the meaning set forth in the introductory
paragraph.
"MANAGEMENT FEE" shall mean the product of (x) the Management Fee
Percentage times (y) all Rents actually collected for each month during the term
of this Agreement.
"MANAGEMENT FEE PERCENTAGE" shall have the meaning set forth in Part I.
"MANAGER OWNER" shall mean any person or entity that owns, directly or
indirectly, 25% or more of the legal or beneficial ownership interests in
Manager.
"MONTHLY STATEMENT" shall have the meaning set forth in SECTION 4.3.
"OPERATING ACCOUNT" shall have the meaning set forth in SECTION 6.1.
"OWNER" shall have the meaning set forth in the introductory paragraph.
"OWNER RELATED ENTITIES" shall mean Owner, its direct and indirect
legal and beneficial owners, and all officers, directors, trustees, employees,
advisors and agents of Owner and all of Owner's direct and indirect legal and
beneficial owners.
"PROPERTY" shall have the meaning set forth in Part I.
"PROPERTY BUDGET" shall have the meaning set forth in SECTION 2.8(b).
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"PROPERTY MANAGER" shall have the meaning set forth in SECTION 2.3.
"REIMBURSABLE EMPLOYEE EXPENSE SCHEDULE" shall have the meaning set
forth in SECTION 2.4.
"REIT" shall have the meaning set forth in SECTION 2.17.
"RENTS" shall have the meaning set forth in SECTION 11.1.
"REPORTING PACKAGE" shall mean the sample reports prepared by Manager
and attached hereto as EXHIBIT A, as modified or supplemented as required by
Owner from time to time in accordance with ARTICLE 4.
"SECURITY COMPANY" shall have the meaning set forth in SECTION 2.6.
"SECURITY SERVICES" shall have the meaning set forth in SECTION 2.6(b).
"SERVICE CONTRACTS" shall have the meaning set forth in SECTION 2.9.
ARTICLE 2. MANAGER'S RESPONSIBILITIES
2.1 GENERAL RESPONSIBILITIES. Subject to the provisions of this
Agreement, Manager shall manage, operate and maintain the Property in accordance
with the Approved Annual Business Plan. Manager shall perform its duties
hereunder: (a) in all material respects in accordance with the terms of this
Agreement; (b) in compliance with all Legal Requirements; and (c) in accordance
with the standards and practices of prudent and qualified managers that manage
properties similar to the Property on behalf of institutional owners or
investors.
2.2 MANAGER'S PERSONNEL; INDEPENDENT CONTRACTOR.
(a) Manager shall use commercially reasonable efforts to
have in its employ at all times a sufficient number of employees to
enable it to manage, operate, maintain and account for the Property
and otherwise perform its obligations hereunder in accordance with
the terms of this Agreement and Approved Annual Business Plan.
(b) All matters relating to the employment, supervision,
compensation, promotion and discharge of such employees are the
responsibility of Manager (with respect to which Manager shall
exercise reasonable care); Manager is in all respects the employer
of such employees. Manager shall negotiate with any union lawfully
entitled to represent such employees and may execute in its own
name, and not as agent for Owner, collective bargaining agreements
or labor contracts resulting therefrom. Manager represents that it
is and will continue to be an equal opportunity employer and that it
shall advertise as such. This Agreement is not one of agency by
Manager for Owner, but one with Manager engaged independently in the
business of
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managing properties as an independent contractor. All employment
arrangements are therefore solely Manager's responsibility and Owner
shall not have any liability with respect thereto. Except as set
forth in SECTION 2.4 below, nothing contained herein shall be deemed
to permit Manager to charge Owner, or to use the income of the
Property to pay, for the services of Manager's employees.
(c) Manager shall fully comply with all applicable laws,
rules, regulations and orders relating to worker's compensation,
social security, unemployment insurance, wages, hours, working
conditions and other matters pertaining to Manager's personnel.
Manager shall indemnify, defend and hold harmless Owner Related
Entities from and against all Damages arising out of or relating to
Manager's failure to comply with this SECTION 2.2. Manager's
indemnification obligations under this SECTION 2.2(c) shall survive
the termination or expiration of this Agreement.
(d) Manager shall be solely responsible for its personnel
in the event of the termination of this Agreement.
2.3 EXECUTIVE PERSONNEL; PROPERTY MANAGER. EXHIBIT B sets forth
the name of: (a) the senior executive personnel of Manager who will be
responsible for the performance of Manager's duties under this Agreement (the
"EXECUTIVE PERSONNEL"); and (b) Manager's on-site Property Manager (the
"PROPERTY MANAGER"). Any change in the Property Manager shall be subject to
Owner's prior approval, which approval shall not be unreasonably withheld or
delayed.
2.4 SCHEDULE OF EMPLOYEES. Attached hereto as EXHIBIT C is a
schedule (the "REIMBURSABLE EMPLOYEE EXPENSE SCHEDULE") that sets forth: (a) a
list of job titles for Manager's employees (including the Property Manager) who
shall be employed on-site in the direct management and operation of the
Property; (b) the respective titles and salary of each such position; (c)
whether each such position is full or part-time (and if part-time, the number of
hours they work per week); (d) the cost of salary, wages, and bonus that may be
charged to the Property for each such position; and (f) whether each such
position is bonded or covered under Manager's comprehensive crime insurance
policy. The Reimbursable Employee Expense Schedule shall also identify the
position of any employees of Manager who are not located at the Property but
whose salaries may be charged to the Property pro rata based upon services
actually rendered by such employees directly to the Property (in which event the
Reimbursable Employee Expense Schedule shall set forth the salaries of such
offsite positions and the maximum percentage thereof that may be charged to the
Property). In no event shall Manager be entitled to charge to the Property any
employee-related expenses: (i) except as specifically set forth on the
Reimbursable Employee Expense Schedule, that relate to general or supervising
management personnel, accountants or auditors; (ii) for which a separate fee is
charged by Manager pursuant to this Agreement or otherwise; or (iii) that are
not specifically set forth on the approved Reimbursable Employee Expense
Schedule. The expenses chargeable to the Property pursuant to the Reimbursable
Employee Expense Schedule may be modified from time to time only as
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part of the Approved Annual Business Plan or as otherwise approved by Owner in
writing, with such approval not to be unreasonably withheld or delayed.
2.5 COMPLIANCE WITH LAWS, LICENSES, MORTGAGES, ETC.
(a) Manager will be responsible (at Owner's expense) for
compliance with the Legal Requirements and Insurance Requirements.
Manager, with the prior approval of Owner (and at Owner's expense),
will promptly remedy any violation of any such requirements,
provided that in the case of emergency, including imminent threat to
the health, safety or welfare of tenants or any other person, or if
so ordered by a governmental authority, Manager shall promptly
remedy such violation, and notify Owner as soon as practical, and in
any event no later than the end of the next Business Day. Manager
shall notify Owner and recommend any repairs or changes to the
Property or operation thereof which will be required under proposed
changes in laws, ordinances and regulations. Notwithstanding the
foregoing, Manager shall obtain Owner's prior written approval
before engaging any legal counsel or commencing or appearing in any
legal proceeding on behalf of Owner, other than with respect to
legal action that may be necessary or desirable to collect rent
and/or evict tenants delinquent in payment of monthly rental or
other charges.
(b) Manager shall, at Owner's expense, obtain and maintain
all Licenses. Manager shall provide Owner with copies of all
completed initial or renewal License applications for Owner's prior
approval and signature, if necessary, not less than thirty (30) days
prior to the date such applications are due. All Licenses shall be
obtained in Owner's name.
(c) Except as otherwise specifically directed by Owner,
Manager shall use commercially reasonable efforts (at Owner's
expense) to comply with all contracts and agreements relating to the
Property, including any ground lease, space lease, covenant,
condition and restriction, reciprocal easement agreement, and
mortgage, deed of trust or other security instruments affecting the
Property, provided that Manager has copies of such agreements.
(d) Manager shall, at Manager's individual,
non-reimbursable expense, maintain its legal existence and good
standing and obtain and maintain in effect all licenses and permits
necessary or desirable to carry out its duties hereunder.
(e) Manager, shall, at Owner's expense, make commercially
reasonable efforts to ensure that all employees and/or contractors
who perform work at or for the Property have all required Licenses
and comply with all Legal Requirements.
(f) Manager shall not knowingly permit the storage,
disposal, transportation, abatement, or removal of Hazardous
Materials under, at, on, about, to, from or
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affecting the Property except, in each case, in full compliance with
Environmental Laws. Manager shall ensure that all Hazardous
Materials, if any, used by Manager or permitted by Manager to be
used at the Property are only in an amount necessary and customarily
used by the tenants, or in connection with the operation, of
residential apartment buildings. To the extent actually known to
Manager, Manager shall give Owner prompt written notice of (i) any
presence of Hazardous Materials at the Property other than as
permitted in this SECTION 2.5(f), (ii) any release of Hazardous
Materials at the Property, other than as permitted in this SECTION
2.5(f), or (iii) any required or desirable clean-up or other
remediation or any other condition respecting the Property and shall
cooperate with and assist Owner in cleaning-up, remediating or
otherwise resolving the problem. Manager shall comply with all
Environmental Laws in managing the Property (and shall recommend to
Owner any actions necessary on the part of Owner or Manager to
ensure compliance with all Environmental Laws). Manager shall
implement any special programs respecting compliance with
Environmental Laws or respecting Environmental Liabilities
established by Manager in its performance of its obligations under
this Agreement and pursuant to reasonable and appropriate protocols
established by Manager from time to time, as approved in advance by
Owner, or as may be otherwise established by Owner or Owner's expert
consultants at Owner's expense in accordance with the Approved
Annual Business Plan. Owner shall have the right to attend all
meetings with regulatory agencies concerning Environmental
Liabilities affecting the Property, and Manager shall be responsible
for consulting with Owner in making all decisions concerning
responses to such regulatory agency activities.
(g) The Manager shall, at Owner's expense, if requested by
Owner and to the extent necessary to protect the Property, implement
and maintain an ongoing environmental auditing program reasonably
satisfactory to Owner and any lender to Owner pursuant to which it
shall conduct periodic investigations regarding the compliance of
activities at the Property with applicable environmental laws, and
the existence of and potential for contamination. The results of
such environmental audit shall be provided to Owner. Without
limiting the foregoing, Manager shall use commercially reasonable
efforts to maintain and ensure compliance with all operations and
maintenance manuals, programs and procedures with respect to all
customary environmental issues, including but not limited to, mold,
lead paint and asbestos, if any.
(h) Manager shall use commercially reasonable efforts to
develop, document and adhere to an effective system of internal
controls. Owner shall assist Manager in assessing the documentation
and effectiveness of Owner's internal controls.
2.6 SECURITY. Manager shall provide a written report to Owner, on
a monthly basis, documenting incidents which to the Manager's knowledge have
occurred on the Property (including, without limitation, calls to or visits by
local police and fire). Notwithstanding any other provision of this Agreement,
it is understood and agreed that Manager shall not, and does
9
not, provide security services to the Property. Should Owner choose to do so,
Owner may direct that Manager, on Owner's behalf, separately contract with a
company (a "SECURITY COMPANY") providing alarm systems, patrol and similar
services ("SECURITY SERVICES"). Manager shall have no duty to supervise or
control performance of Security Services for any Security Company. However,
Manager shall evaluate Security Services on an on-going basis and notify Owner,
on a monthly basis, of the effectiveness of Security Services. Manager shall
promptly notify Owner of any incidents or conditions of which it has knowledge
which reflect on or affect the adequacy of the security provisions for the
Property, and shall make recommendations to Owner with respect to security
matters. Without limiting the provisions of SECTION 3.3(b), Owner shall
indemnify, defend, protect and hold Manager harmless for, from and against any
loss, liability, cost, expense, damage claim or cause of action, including,
without limitation, attorneys' fees, court costs and other litigation expenses
and costs, arising from any personal injury, loss of property or other matter
occurring on or about the Property, relating to the acts or omissions of a
Security Company, any claimed inadequacy of Security Services (except if such
claimed inadequacy is known to Manager and Manager fails to notify Owner of such
claimed inadequacy), the failure to provide Security Services or any other
matter relating to the security of the Property. The indemnification obligations
of Owner in this SECTION 2.6 shall survive the expiration or earlier termination
of this Agreement.
2.7 ENERGY MANAGEMENT. Subject to the Approved Annual Business
Plan, Manager shall use commercially reasonable efforts to provide appropriate
energy management and shall utilize utility conservation techniques.
2.8 ANNUAL BUSINESS PLAN.
(a) At least sixty (60) days prior to the end of each
calendar year during the term of this Agreement, Manager shall
prepare and submit to Owner for Owner's prior approval an annual
business and leasing plan in accordance with the requirements of
EXHIBIT D hereto (as such EXHIBIT D may be modified by Owner from
time to time) (the "ANNUAL BUSINESS PLAN"). From the date of this
Agreement until an Annual Business Plan is first approved by Owner,
Manager shall operate under the Marketing Plan attached as Schedule
4.5B to that certain Limited Partnership Agreement of ▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ of even date herewith (the "JOINT VENTURE AGREEMENT").
Owner shall approve or disapprove each Annual Business Plan within
sixty (60) days after receipt. In the event that Owner disapproves
an Annual Business Plan, Owner and Manager, within ninety (90) days
of a notice of such disapproval to Manager, shall jointly prepare an
Annual Business Plan, during which time the last Approved Annual
Business Plan shall remain in effect. The Annual Business Plan shall
be a comprehensive plan for the management, operation, leasing,
repair, maintenance and promotion of the Property and for the other
matters set forth on EXHIBIT D. It will include a 5 year capital
plan. Manager shall consult Owner concerning the proposed Annual
Business Plan and shall promptly incorporate therein such changes as
Owner may direct. The Annual Business Plan, and all budgets
contained therein, shall be in a
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form substantially consistent with the Reporting Package.
Notwithstanding the foregoing, Manager shall use the Chart of
Accounts.
(b) Manager shall: (i) perform its duties hereunder in
accordance with the Approved Annual Business Plan; and (ii) use
commercially reasonable efforts to ensure that the actual costs of
maintaining and operating the Property do not exceed the operating
budget (the "PROPERTY BUDGET") which is a part of the Approved
Annual Business Plan either in total or in any one accounting
category. All actual expenses must be charged to the proper account
on a basis consistent with the Property Budget classifications and
Reporting Package. No expense may be reclassified except as needed
to correct an inadvertent error. Manager will secure Owner's prior
approval for any expenditure that will result in a variance of the
greater of $5,000 or 5% of the annual budgeted amount in any one
accounting line item of the Property Budget except with respect to
expenses relating to taxes, insurance or utilities or expenditures
required due to emergencies that threaten life or property or could
result in civil or criminal liability for Owner or Manager. Manager
makes no guaranty, warranty or representation whatsoever in
connection with the accuracy of any Property Budget or the other
contents of the Annual Business Plan, and Owner acknowledges that
they are intended as good faith estimates only. Owner shall have the
right to require changes in the Approved Annual Business Plan from
time to time; provided, however, that Owner shall provide Manager
with at least fifteen (15) days' notice of such changes.
2.9 SERVICE CONTRACTS.
(a) To the extent permitted by the Approved Annual Business
Plan (so that, among other things, the expense thereof does not
exceed the corresponding amount set forth in the Property Budget
other than as set forth in Section 2.8(b)), and subject to SECTION
2.11, Manager (without the prior consent of Owner) shall negotiate
and enter into bona fide contracts with parties that are not
Affiliates of Manager for terms no longer than one (1) year for
electricity, gas, fuel, water, telephone, window cleaning, ash or
rubbish hauling, vermin extermination, janitorial services,
landscape maintenance and such other maintenance services for the
Property as Manager shall reasonably determine to be advisable
("SERVICE CONTRACTS"). All Service Contracts: (i) shall be in the
name of Manager as agent for Owner, (ii) shall be freely assignable,
at Owner's option, to Owner's nominee, and (iii) shall be terminable
by Owner, at Owner's election, upon no more than thirty (30) days'
notice without penalty or premium. Each Service Contract shall
provide that the service provider thereunder must obtain the
insurance described in SECTION 3.4 hereof and must provide
satisfactory evidence of such insurance to Manager except as
approved by Owner. Unless Owner specifically waives such
requirement, all Service Contracts shall be subject to bid every
three (3) years or more frequently if deemed necessary by Owner.
Notwithstanding the foregoing, Manager shall not, without the prior
written consent of Owner, enter into any Service Contract unless
provided for in the Approved Annual Business Plan.
11
(b) EXHIBIT E lists all Service Contracts in existence as
of the date of this Agreement and, for each such contract,
accurately sets forth the contract date, the name of the service
provider, the nature of the service and the length and economic
terms of the contract. Manager shall promptly update EXHIBIT E so
that it at all times contains an accurate and complete description
of Service Contracts affecting the Property.
2.10 COLLECTION OF RENTS AND OTHER INCOME. Subject to SECTION
2.13(b), Manager will use commercially reasonable efforts to collect all rents
and other charges which may become due at any time from any tenant or from
others in connection with or for the use of the Property and will use
commercially reasonable efforts to ensure tenants' compliance with their
respective leases. Manager will commercially reasonable efforts to collect and
identify any income from miscellaneous services provided to tenants or the
public from parking income, furniture rental, cleaning services, tenant storage
and coin-operated machines of all types. All rents and other monies collected
will be deposited in the Operating Account. Manager will not write off any
income items in excess of $1,000 in the aggregate on an annual basis without
Owner's prior approval.
2.11 COMPETITIVE BIDDING. All contracts for repairs, capital
improvements, goods and services will be awarded at no higher than prevailing
market rates and, as to amounts exceeding $5,000, will (unless otherwise
required or permitted by Owner) be awarded on the basis of competitive bidding
conducted in a manner satisfactory to Owner and in accordance with the Approved
Annual Business Plan.
2.12 REPAIRS. Manager shall, at Owner's expense, make all ordinary
repairs, extraordinary repairs not exceeding $10,000, decorations and
alterations of the Property, subject to the limits of the Approved Annual
Business Plan. Manager shall not make expenditures for capital improvements
unless the same are specifically set forth in the Approved Annual Business Plan
or are otherwise approved by Owner. Manager may not make expenditures for any
repair which exceed $5,000 unless approved by Owner or specifically set forth in
the Approved Annual Business Plan; provided, however, Manager may make
expenditures for repairs without Owner's prior approval if it is necessary to
prevent imminent damage to the Property or the health or safety of any person on
or about the Property or if Owner or Manager is threatened with immediate
criminal or civil liability. Owner must be informed of any such expenditures as
quickly as possible, and in any event not later than the end of the next
Business Day.
Manager shall provide regular and systematic inspections of the
buildings, building systems, grounds and parking areas in order to comply with
any requirements concerning the management or maintenance of the Property
imposed upon the Property or Owner by law, ordinance, or regulation of
governmental authority and shall promptly notify Owner in writing of any manner
in which the Property is not in compliance. An annual report on the condition of
the property together with a five (5) year capital plan shall be included in the
Annual Business Plan.
At Owner's request, Manager shall coordinate any improvements,
alterations or building rehabilitation work approved by Owner in accordance with
the Capital Improvement Budget
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attached as Schedule 4.3B to the Joint Venture Agreement (the "ALTERATIONS").
Manager shall oversee, manage and be responsible for all independent
contractors, suppliers and entities engaged, with the approval of Owner, for any
Alterations. All obligations and expenses incurred by Manager pursuant to its
authority as the Alterations coordinator shall be for the benefit of and at the
expense of Owner and Owner shall assume and pay any and all such expenses and
obligations. Owner shall pay a construction management fee (the "CONSTRUCTION
MANAGEMENT FEE") to Manager in an amount equal to 7.5% of the cost of the
Alternations, which shall be payable as a percentage applied against the cost
incurred for the Alterations.
In regards to the Alterations, and in addition to the obligations set
forth in the preceding paragraph, Manager shall:
(a) Keep Owner advised generally as to developments
affecting the Property and the Alterations prior to the commencement
of the Alterations, such as local zoning, environmental and other
governmental activities, and the progress in obtaining all of the
permits, licenses and approvals required for the Alterations.
(b) Supervise the design and construction of the
Alterations. Such supervision will include review of design
alternatives, material selections, value engineering and the like.
Without limiting the generality of the foregoing, Manager shall
perform the following duties:
(i) To the extent not completed as of the date
hereof, including renovation of the "clubhouse" on the
Property, develop with the project architect, if any (the
"ARCHITECT") and/or the project engineer, if any (the "PROJECT
ENGINEER") schematic designs for the Alterations to the end
that the preliminary drawings, specifications and cost
estimates approved by Owner will substantially conform to the
schematic design and cost concepts developed by Owner.
(ii) To the extent not completed as of the date
hereof, including renovation of the "clubhouse" on the
Property, supervise the Architect and/or Engineer in the
development of the working drawings and specifications to the
end that these documents reflect in detail the schematic
designs and preliminary plans, specifications and cost
estimates approved by Owner.
(iii) Review the plans and specifications with the
Architect, Engineer and contractors so as to (i) minimize
areas of possible conflict and overlapping jurisdictions among
the separate subcontractors on the job; and (ii) properly
assign and coordinate all phases of work for the Alterations.
13
(iv) Review the specifications of the Alterations for
adequate provisions for all of the temporary facilities
necessary to enable contractors to perform their work and for
all of the job site facilities necessary to enable the
contractors and Owner to perform their duties in the
management, inspection and supervision of construction of the
Alterations.
(v) Advise Owner whenever construction costs are
tending to exceed the estimated costs.
(vi) Coordinate the overall administration of the
Alterations which shall include furnishing management and
technical personnel to attend staff conferences with Owner,
the architect, the engineer, the contractor or contractors,
other consultants and municipal officials. Manager shall
designate a project manager who shall provide sufficient time
to coordinate with other members of the on-site and office
staff.
(vii) Administer all of Owner's contracts with the
Architect, Engineer, general contractor and suppliers and
materialmen, if any, and direct, together with the general
contractor, is any, administration of all the various
construction contracts for the Alterations.
(viii) Maintain a review function over the Architect
and general contractor, if any, with respect to approval and
revisions of working drawings, and technical and construction
inspections.
(ix) Make final inspections of the Alterations with
the Architect and general contractor, if any, and prepare or
cause to be prepared and issue an exception report and process
all exception report items, warranties, guarantees, bonds and
other matters required with respect thereto and procure all
necessary operating and occupancy certificates and permits for
the use of the Alterations.
(x) When requested by Owner, provide Owner, its
members, managers, consultants and representatives access to
any records, contracts, projections, schedules or other
information relating to Owner or the Alterations, arrange for
tours of the Alterations and keep such persons apprised as to
the progress of the Alterations and the performance by Manager
of its services hereunder as such persons may reasonably
request.
2.13 LEASES.
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(a) Manager shall use commercially reasonable efforts to
cause the Property to be fully leased to desirable tenants in
accordance with the Approved Annual Business Plan and, in
connection, therewith, shall:
(i) consult with Owner with respect to the rental
rates and renewal rates of space at the Property in
preparation of the Approved Annual Business Plan;
(ii) use commercially reasonable efforts to obtain
and keep desirable tenants for the Property in accordance with
the Approved Annual Business Plan;
(iii) ensure the property is staffed during customary
business hours by Manager's leasing representatives;
(iv) provide the full range of pro-active tenant
services customarily provided to tenants of first class
buildings similar to the Property, including: (1) regularly
scheduled tenant retention events with tenants using
designated tenant representatives as deemed necessary; (2)
prompt responses to all tenant complaints, inquiries and
requests; (3) periodic inspections of the Property; and (4)
maintenance of a tenant log that sets forth tenant complaints
and concerns and tracks the manner in which such complaints
and concerns are resolved;
(v) subject to SECTION 2.13(b) below, use
commercially reasonable efforts to duly and punctually observe
and perform on Owner's behalf and, subject to the Approved
Annual Business Plan, at Owner's expense, all of Owner's
obligations under all leases, and to preserve and keep
unimpaired the rights of Owner and the obligations of tenants
under such leases; and
(vi) subject to SECTION 2.13(b) below, promptly
enforce the obligations of tenants under leases and the
obligations of contractors, suppliers and similar third
parties providing services or goods to the Property.
(b) Without the consent of Owner, Manager: (i) shall not
receive or collect any rents for more than one month in advance;
(ii) shall not waive, excuse, condone, discount, set-off, compromise
or in any manner release or discharge any tenant (or any guarantor
under any guaranty of any lease) from its obligations under its
lease (or such guaranty); (iii) shall not cancel, terminate or
consent to the surrender of any lease; (iv) shall not commence any
action, suit or proceedings for the collection of rent, for
ejectment or for the dispossession of any tenant or exercise any
right of recapture provided in any lease; (v) shall not modify or in
any way alter the provisions of any lease; (vi) shall not relocate
any tenant within the Property; (vii) shall not consent to any
modification of the express purposes for which any tenant's premises
have been leased; (viii) shall not consent to any subletting of any
part of the Property, to any
15
assignment of any lease by any tenant thereunder, or to any
assignment or further subletting of any sublease; (ix) shall not
permit any person to occupy space at the Property without a lease
entered into in accordance with the terms of this Agreement; and (x)
shall not retain any legal counsel or collection agency to act on
behalf of Owner or Manager in connection with any lease of space at
the Property. Notwithstanding the foregoing, if the Property
consists of residential apartments, Manager may, without Owner's
prior consent, enter into, modify, terminate and enforce residential
leases, provided that all such actions shall be consistent with the
Approved Annual Business Plan.
(c) Unless otherwise approved by Owner, all leases shall
be: (i) on a standard form of lease approved by Owner; (ii) not be
for a term longer than fourteen (14) months, (iii) prepared in
accordance with leasing guidelines approved by Owner; and (iv)
executed by Manager, as agent for Owner.
(d) Notwithstanding anything to the contrary contained in
this Agreement, Manager shall not be entitled to any leasing
commission, fee or other form of compensation, other than the
Management Fee and Excess Management Fee, by reason of the leasing
services performed by Manager under this Agreement.
(e) Manager shall meet with Owner from time to time as may
be requested by Owner to advise Owner as to the status of the
leasing activities for the Building and to apprise Owner of its
marketing program and any alternative leasing. Manager shall assist
Owner in connection with all matters and questions pertaining to its
activities hereunder.
(f) In the performance of its obligations under this
Agreement, Manager will comply with the provisions of any federal,
state or local law prohibiting discrimination in housing on the
basis of race, color, creed, handicap or national origin, including
Title VI of the Civil Rights Act of 1964 (Public Law 88-352, 78
Stat. 241), all requirements imposed by or pursuant to the
Regulations of the Secretary (24 CFR, Subtitle A, Part I) issued
pursuant to said Title VI, regulations issued pursuant to Executive
Order 1063, and Title VIII of the Civil Rights Act. Manager shall
not discriminate against any tenant or applicant for tenancy at the
Property on the basis of race, creed, color, religion, sex, martial
status, sexual orientation, or national origin.
2.14 NOTICES TO OWNER. Manager shall promptly notify Owner in
writing if Manager becomes aware of any of the following:
(a) any default or alleged default by Owner under any
lease;
(b) any litigation or potential litigation affecting the
Property or Owner, or any litigation affecting Manager such that
Manager could not reasonably be expected to fully perform its
obligations under this Agreement;
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(c) any casualty, loss, injury, claim or other event
relating to the Property that might result in a claim under any
applicable insurance policies;
(d) any actual or threatened condemnation of the Property
or any portion thereof;
(e) any violation or alleged violation of any Legal
Requirements or Insurance Requirements;
(f) any involuntary lien filed against the Property; and
(g) any material increases or decreases in costs, expenses
or income not reflected in the Approved Annual Business Plan.
2.15 PROPERTY TAX APPEALS. At the direction of, and with the
approval of, Owner, Manager shall engage a tax appeal professional, the cost of
such professional to be at Owner's expense, to annually review the tax
assessment for the Property in order to determine whether to appeal such
assessment and request an abatement.
2.16 NO OTHER FEES. Notwithstanding anything to the contrary
contained in this Agreement, Manager shall not be entitled to any leasing
commission or other form of compensation, other than the Management Fee, the
Excess Management Fee and the Construction Management Fee, by reason of the
leasing, supervisory or other services performed by Manager under this
Agreement.
2.17 REIT STATUS. Manager acknowledges that Owner has informed
Manager that an affiliate of Owner intends to qualify as a "real estate
investment trust" within the meaning of Section 856 ET SEQ of the Internal
Revenue Code of 1986, as amended (a "REIT"), and that such entity's ability to
qualify as a REIT will depend principally upon the nature of Owner's operations.
Accordingly, Manager agrees to use commercially reasonable efforts to operate
the Property in compliance with written guidance provided from time to time by
Owner to Manager to enable Owner's affiliate to qualify as a REIT under Section
856 ET SEQ of the Internal Revenue Code of 1986, as amended. In addition,
Manager agrees to provide such information, reports, audits, certificates, and
questionnaires as may be reasonably requested by Owner in connection with
qualification as a REIT and in connection with any and all filings by the REIT
with the Securities and Exchange Commission ("SEC") relating in whole or in part
to the Property.
ARTICLE 3. INSURANCE AND CLAIMS
3.1 OWNER'S INSURANCE AND RIGHTS. Manager, as an operating expense
of the Property payable from the Operating Account, will obtain and keep in
force adequate property and commercial liability insurance covering Owner as
primary insured and, with respect to liability
17
insurance, Manager as additional insured, and otherwise in accordance with any
loan documents related to any financing to which Owner or the Property is
subject. Manager shall provide Owner with copies of policies or certificates of
insurance relating to the Property. Such insurance may be blanketed with other
insurance carried by Manager or any Affiliate of Manager, in which case a pro
rata share of the premiums will be chargeable to the Property as an operating
expense. Manager or Manager's insurer will have the exclusive right to conduct
the defense of any claim, demand or suit arising out of the ownership, operation
or management of the Property (chargeable as an operating expense of the
Property to the extent the insurance associated with such claim demand or suit
is chargeable to the Property). Nothing herein will be construed as indemnifying
Manager or its employees, contractors or agents against any act or omission for
which insurance protection is not available or is not required hereunder to be
carried by Owner and procured by Manager; neither is the foregoing intended to
affect the general requirement of this Agreement that the Property will be
managed, operated and maintained in a safe condition and in a proper and careful
manner. Owner will furnish whatever information is reasonably requested by
Manager for the purpose of placement of insurance coverages and will aid and
cooperate in every reasonable way with respect to such insurance and any claim
or loss thereunder. Owner will cooperate with Manager and Manager's insurance
carrier on loss control inspections, responding to recommendations and other
safety issues.
3.2 Manager's Insurance. Manager will maintain (as an operating
expense of the Property with respect to on-site employees only) Workers'
Compensation and similar insurance as required by law. Manager shall maintain,
at Manager's expense, Commercial General Liability Insurance in favor of Owner,
in an amount not less than $2,000,000 in the general aggregate (per project),
$1,000,000 products and completed operations aggregate, $1,000,000 each
occurrence (combined single limit), $50,000 fire damage, and $5,000 medical
expenses, such insurance to cover hostile fire with no points of exclusion. In
addition, Manager shall maintain the following insurance at its own expense (not
chargeable to the Property):
(a) Employer's Liability - $500,000 each accident; $500,000
disease - policy limit; $500,000 disease - each employee.
(b) Automobile Liability - As to any vehicle owned,
non-owned or hired by Manager, $1,000,000 covering losses due to the
insurer's liability for bodily injury or property damage.
(c) Medical Expenses - $5,000 per person per accident.
(d) Uninsured/Underinsured Motorists' Coverage for any
owned car - $1,000,000.
(e) Comprehensive crime (including Employee Dishonesty)
insurance with limits and terms acceptable to Owner or a fidelity
bond acceptable to Owner.
18
(f) Excess Liability Coverage - $1,000,000 combined single
limited for bodily injury and property damage each
occurrence/$4,000,000 general aggregate.
The minimum A.M. Best's rating of each insurer shall be A-VII. Manager
will furnish Owner with certificates of insurance simultaneously with the
execution of this Agreement and whenever coverage is renewed or replaced,
evidencing the aforesaid coverages, which will include provisions to the effect
that Owner will be given at least 30 days' prior written notice of cancellation
or non-renewal of or any material change in any of the aforesaid policies.
Owner, and any lender of Owner, if applicable, will be named as an additional
insured with respect to all insurance policies required under (b) and (d) above
and as loss payee as respects (c) above. All liability policies shall contain
endorsements that (i) delete any employee exclusion on personal injury coverage,
(ii) include employees as additional insureds and (iii) contain cross-liability,
waiver of subrogation and such other provisions as Owner may reasonably require.
Such insurance shall also include broad form contractual liability insurance
covering all of Manager's indemnification obligations under this Agreement.
3.3 INDEMNIFICATION.
(a) Manager shall indemnify, hold harmless, protect and
defend (with counsel approved by Owner) Owner Related Entities from
and against all Damages in any manner related to, arising out of or
resulting from:
(i) any failure of Manager or Manager's agents,
servants or employees to perform their obligations under this
Agreement;
(ii) any acts of Manager or Manager's agents,
servants or employees beyond the scope of its authority under
this Agreement; or
(iii) any gross negligence or willful misconduct of
Manager or Manager's agents, servants or employees.
If the circumstances or events described in clauses (i) through (iii)
above are covered by Owner's commercial general liability insurance, then
Manager's obligations under this SECTION 3.3 shall apply only to the extent
Owner's Damages are not fully paid by Owner's commercial general liability
insurance. Notwithstanding any other provisions of this Agreement to the
contrary, Manager's obligations under this SECTION 3.3 shall survive the
expiration, termination or cancellation of this Agreement.
(b) Subject to SECTION 16.19, Owner shall protect, defend,
indemnify and hold harmless Manager from and against any and all
Damages arising out of the performance by Manager of its obligations
and duties hereunder in accordance with the terms hereof with
respect to the Property; provided, however, that Owner does not
hereby agree, and shall not be obligated, to so indemnify Manager
from any Damages arising out of any act or omission of Manager or
any of its agents, officers, employees
19
or representatives, which act or omission constitutes gross
negligence, willful misconduct, is in breach of this Agreement or is
outside the scope of Manager's authority as provided herein or any
Damages for which Manager is covered by insurance, or for which
Manager would be covered by insurance if it maintained the insurance
required by this Agreement. The indemnification by Owner contained
in this Section 3.3(b) is in addition to any other indemnification
obligations of Owner contained in this Agreement and shall survive
the expiration or termination of this Agreement.
3.4 CONTRACTORS' AND SUBCONTRACTORS' INSURANCE. Manager will
require that all parties performing work on or with respect to the Property,
including, contractors, subcontractors and service vendors, maintain insurance
coverage at such parties' expense, in the following minimum amounts:
(a) Workers' Compensation - Statutory amount.
(b) Employer's Liability - $500,000 each accident; $500,000
disease-policy limit; $500,000 disease - each employee.
(c) Automobile Liability - $1,000,000 covering losses due
to the insurer's liability for bodily injury or property damage.
(d) Medical Expenses - $5,000 per person per accident.
(e) Uninsured/Underinsured Motorists' Coverage- $1,000,000.
(f) Commercial General Liability: general aggregate -
$2,000,000; products and comp/op aggregate - $1,000,000; each
occurrence - $1,000,000; and fire damage - $50,000.
(g) Excess Liability Coverage - $5,000,000 or such greater
amount as is needed for the specific job.
(h) Transit Coverage - As needed for the specific job.
The minimum A.M. Best's rating of each insurer shall be A-VII. Manager
must obtain Owner's written permission to waive any of the above requirements.
Higher amounts may be required by Owner if the work to be performed is deemed by
Owner to be hazardous. Manager will obtain and keep on file a certificate of
insurance which shows that each such party is so insured. Owner, and any lender
of Owner, if applicable, will be named as an additional insured with respect to
Contractors' and Subcontractors' Auto Liability, Commercial General Liability
and Excess Liability policies. Manager must obtain indemnification and hold
harmless
20
provisions in favor of Owner and Manager from any vendor which provides or is
expected to provide more than $30,000 of services to the Property in the
aggregate on an annual basis.
3.5 WAIVER OF SUBROGATION. Insofar as, and to the extent that, the
following provision may be effective without invalidating or making it
impossible to obtain insurance, Manager and Owner agree that with respect to any
hazard, liability, casualty or other loss or claim which is covered by insurance
then being carried by either Owner or Manager: (a) the party carrying such
insurance and suffering such loss releases the other party of and from any and
all claims with respect to such loss to the extent of the insurance proceeds
paid with respect thereto and specifically excepting from such release any
deductible required to be paid therewith; and (b) their respective insurance
companies shall have no right of subrogation against the other or their
respective agents, contractors, employees, licensees or invitees on account
thereof.
3.6 SERVICE CONTRACTS. Manager shall use commercially reasonable
efforts to include in all Service Contracts provisions requiring the service
provider to indemnify, defend (with counsel approved by Owner), protect and hold
harmless Owner Related Entities from all Damages in any manner arising from or
related to the acts or omissions of such service provider or its employees,
agents or contractors.
3.7 CLAIMS. Manager shall promptly investigate and make a full and
timely report to Owner of any casualty, accident, injury or other similar matter
affecting the Property. Manager shall also file such reports in a timely manner
to the applicable insurance carriers in accordance with the terms and conditions
of the relevant policies. Manager shall cooperate with and assist Owner and the
applicable insurance carrier in connection with the investigation and processing
of insurance claims affecting the Property.
ARTICLE 4. FINANCIAL REPORTING AND RECORD KEEPING
4.1 FINANCIAL CONTROLS. Manager shall use commercially reasonable
efforts to ensure such control over accounting and financial transactions as is
reasonably required to protect Owner's assets from theft, negligence or
fraudulent activity on the part of Manager's employees or other agents.
Uninsured losses arising from theft, negligence or fraud of Manager, its
employees or agents shall not be an operating expense of the Property.
4.2 FINANCIAL REPORTS: GENERAL REQUIREMENTS. All financial reports
provided by Manager shall be subject to the following requirements:
(a) All reports shall be on Yardi and use the chart of
accounts provided by Owner.
21
(b) All such reports shall comply with the terms of this
Agreement, the Reporting Package and the Approved Annual Business
Plan and shall be in such medium (e.g., computer disks or hard copy)
as Owner may reasonably require;
(c) Manager will maintain, on Yardi, current data on rent
rolls and financial and operating information;
(d) Monthly financial statements for the Property shall be
closed or "cut-off" on the 20th day of each month;
(e) Unless Owner otherwise agrees, all reports shall be
prepared in accordance with GAAP; Manager will ensure that books and
records are prepared timely and accurately on an accrual basis in
accordance with GAAP and presented in the format(s) required by
Owner AS OF THE DATE SUCH REPORTS ARE DUE UNDER THIS AGREEMENT.
(f) All such reports shall be certified by Manager's
property accountant; and
(g) Manager will ensure that depreciation and amortization
have been recorded in accordance with Owner's capitalization policy
attached hereto as EXHIBIT I.
(h) In the event of any conflict between the reporting
requirements set forth in this Agreement and those required by the
Reporting Package or the Approved Annual Business Plan, the
Reporting Package or Approved Annual Business Plan, as applicable,
shall control, except with respect to reports required by SECTION
4.3. Owner may, upon not less than sixty (60) days' notice to
Manager, make changes in or additions to the Reporting Package.
Owner retains the right to modify such exhibits at any time
immediately upon reasonable notice to the extent required to enable
Owner and its affiliates to meet the reporting requirements of all
regulatory authorities to which Owner and its affiliates may be
subject.
(i) Manager will utilize Owner's Chart of Accounts attached
hereto as EXHIBIT J.
4.3 PERIODIC STATEMENTS.
(a) Weekly reports - No later than Tuesday of each week,
Manager shall provide Owner with a weekly leasing report setting
forth the information required by EXHIBIT H.
(b) Monthly reports - On or before the last business day of
each month, for the current month, Manager shall provide Owner with
a monthly statement setting forth the information required by
EXHIBIT H as well as any additional information that
22
may be required by the Reporting Package or the Approved Annual
Business Plan (the "MONTHLY STATEMENT").
(c) Quarterly Statements - No later than the last business
day of each quarter, for the current quarter, Manager will provide
to Owner, quarterly financial statements for the previous quarter as
required by EXHIBIT H in the format requested by Owner.
(d) If requested by Owner, Manager shall submit quarterly
re-projections of the budget no later than 15 days after the end of
the quarter.
Unless Owner otherwise agrees, Manager will ensure that books and
records are prepared timely and accurately on an accrual basis in
accordance with GAAP.
4.4 SUPPORTING DOCUMENTATION. As additional support to the Monthly
Statements, Manager will, at Owner's request, provide copies of the following:
(a) A current leasing summary and detailed leasing activity
report;
(b) An occupancy/leasing recap, including occupancy by unit
type, actual versus budget occupancy, and economic occupancy;
(c) Detailed cash receipts and disbursements journals;
(d) General ledgers;
(e) Invoices for capital expenditures and nonrecurring
items;
(f) Journal entries;
(g) Paid bills;
(h) Detailed trial balance (if available);
(i) Supporting documentation for payroll, payroll taxes and
employee benefits;
(j) Supporting schedules for balance sheet accounts;
(k) A review and analysis of all recovery income accruals;
(l) All bank statements and reconciliations;
23
(m) An aged accounts receivable listing and detailed
allowance for doubtful accounts, with an explanation of all
significant delinquencies and status of collection efforts and
recommendations for write-off or reserves where appropriate;
(n) An accounts payable listing;
(o) A rent roll;
(p) A summary of any comparable projects within a three (3)
mile radius of the Property for which Manager or any Affiliate of
Manager provides leasing or management services or in which Manager
or any Affiliate of Manager has a direct or indirect legal, economic
or beneficial interest; and
(q) An annual inventory of personal property owned or
leased in connection with the Property.
4.5 ANNUAL FINANCIAL REPORTS. Manager shall cooperate with Owner's
accountants in the preparation of financial statements, state and federal tax
returns, and any related management or audit letters or similar reporting or
regulatory requirements applicable to Owner and its affiliates, including,
without limitation, in connection with qualifying as a REIT and as set forth in
EXHIBIT H. Such materials are to be issued no later than December 31st of each
calendar year or on such other schedule as Owner may reasonably require. At
Owner's request, Manager will engage an independent third party firm to audit
the annual records, as well as prepare partnership tax returns at Owner's
expense.
4.6 TRANSFER OF FUNDS. On or before the fifth (5th) day of every
month, Manager will remit to Owner all cash balances derived from the rents or
otherwise arising from ownership, use or operation of the Property or the
provision of services at the Property, after deducting (a) an amount agreed to
by Owner for the Property's working capital, and (b) known expenditures that
will be paid between that date and the fifteenth (15th) day of the same month,
provided that the same are consistent with the approved Property Budget. The
amount so remitted will be delivered to Owner, independent of required financial
reports, in the most expeditious manner possible as directed by Owner. The
schedule for the transfer of funds and the balance permitted to remain in the
Operating Account may be changed from time to time by written instructions from
Owner. At Owner's option, the final monthly remittance will be net of the
Management Fee and Excess Management Fee.
4.7 OWNER'S PROPERTY. All books, records, computer disks
containing Property information, invoices and other documents received and/or
maintained by Manager pursuant to this Agreement are and will remain the
property of Owner, and shall be made available to Owner at any time with
reasonable notice. Manager may retain a copy of such information but it shall be
kept confidential.
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4.8 BOOKS AND RECORDS. Manager shall maintain separate and
accurate books, records, files and accounts for the Property (collectively, the
"BOOKS AND RECORDS") in a good and orderly fashion. The Books and Records shall
be the exclusive property of Owner, shall be kept at the Property or at
Manager's Notice Address (or such other location as Owner may approve) and shall
include the following:
(a) Tenant files, including executed leases, lease
abstracts, lease amendments, original insurance certificates,
correspondence, and current rent rolls;
(b) Maintenance and repair files;
(c) Accounting books and records and supporting
documentation;
(d) Construction files, competitive bid records, including
site plans, as-built drawings, tenant space plans, construction
specifications, and capital improvements schedules and information;
(e) Operation files, including HVAC maintenance schedules,
warranties, and operation manuals;
(f) Service contracts, including cleaning, maintenance,
landscaping, snow removal, trash removal, etc.;
(g) Permits and licenses ( including certificates of
occupancy for all tenant spaces);
(h) Copies of insurance policies or certificates; and
(i) Such other information relating to the Property as
Owner requests from time to time.
ARTICLE 5. OWNER'S RIGHT TO AUDIT
5.1 RIGHT TO AUDIT. Owner will at all times during normal business
hours and with 24 hours prior written notice have the right to conduct audits
and examinations of, and to make copies of, the Books and Records, no matter
where such Books and Records are located. Such right may be exercised through
any agent or employee of Owner, or any certified public accountant designated by
Owner. Owner will also have the right to perform any and all additional audit
tests relating to Manager's activities either at the Property or at any office
of the Manager. Should Owner discover either weaknesses in internal control or
errors in record keeping, Manager will correct such discrepancies promptly upon
Owner's request and will
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inform Owner, in writing, of the action taken to correct such audit
discrepancies. All audits conducted by Owner will be at the sole expense of
Owner.
ARTICLE 6. BANK ACCOUNTS
6.1 OPERATING ACCOUNT. Manager will deposit all rents and other
funds collected from the operation of the Property in an interest-bearing
account established for the Property (the "OPERATING ACCOUNT") in a financial
institution approved by Owner. Manager shall take commercially reasonable
efforts to ensure that any such rents and other funds received by Manager on or
before 2:00 p.m. on a Business Day shall be deposited on that same day, and any
such rents or other funds received after 2:00 p.m. or on a day that is not a
Business Day shall be deposited on the next Business Day. Such account shall be
in the name of Owner and shall have such withdrawal restrictions as Owner's may
require. Owner will be given written notice of the account number and location
of the Operating Account. In accordance with ARTICLE 7, Manager will pay out of
the Operating Account the operating expenses of the Property and any other
payments relating to the Property required by the terms of this Agreement or set
forth in the Approved Annual Business Plan. If more than one account is required
to operate the Property, each account will have a distinct name.
6.2 SECURITY DEPOSIT ACCOUNT. If required by Owner or law, tenant
security deposits will be deposited by Manager in a separate interest-bearing
account established in the name of Owner and at a financial institution approved
by Owner. Except to the extent prohibited by law or tenants' leases, all
interest earned on this account will be distributed to Owner on a monthly basis
as specified by SECTION 4.6. Manager agrees to handle all tenant security
deposits in accordance with all applicable laws and regulations and in
compliance with the leases of the Property.
6.3 CHANGE OF BANKS. Owner may direct Manager to change any
depository bank or depository arrangement. Except with the prior written
approval of Owner, Manager shall not change any depository bank or arrangement
or other banking relationship or procedure.
6.4 ACCESS TO ACCOUNT. Owner will have access to any and all funds
in the accounts described in SECTIONS 6.1 and 6.2. Upon notice of termination of
this Agreement, Manager's authority to draw against such accounts may be
terminated at any time by Owner without notice to Manager. No borrowing
authority shall be permitted on any accounts established on behalf of Owner. All
funds in such accounts shall be the exclusive property of Owner. Only such
personnel specifically designated by Manager and approved by Owner shall have
access to such accounts. All of Manager's personnel who have access to such
accounts shall be bonded and insured to the benefit of Owner against theft or
fraud. No accounts maintained pursuant to this Agreement shall contain funds
from any source other than the Property, and no such accounts shall be
commingled with the funds of Manager or any other person.
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ARTICLE 7. PAYMENT OF EXPENSES
7.1 COSTS ELIGIBLE FOR PAYMENT FROM OPERATING ACCOUNT. Subject to
the limitations of ARTICLE 2 (including SECTIONS 2.8(b) AND 2.12), SECTION 7.2
and the Approved Annual Business Plan, and except as otherwise directed by
Owner, the following expenses, to the extent incurred in accordance with this
Agreement and the Approved Annual Business Plan, shall be paid by Manager
directly from the Operating Account:
(a) Third-party debt service, payments due under any ground
lease, real estate taxes, personal property taxes, betterment
assessments and similar governmental charges properly due with
respect to the Property;
(b) Costs of insurance maintained in accordance with
SECTION 3.1;
(c) Costs to correct any violation of any Legal
Requirements or Insurance Requirements;
(d) Actual costs of making all repairs, decorations and
alterations and performing all maintenance and preventive
maintenance with respect to the Property;
(e) Cost of collection of delinquent rentals collected
through a collection agency in the ordinary course of business
without the prior approval of Owner, so long as Manager and/or its
affiliates are not the collection agency;
(f) Reasonable legal fees and expenses of attorneys
incurred in the ordinary course of business in collecting delinquent
receivables;
(g) Cost of capital expenditures;
(h) Leasing commissions and consultant fees payable to
third parties approved by Owner;
(i) Amounts due under Service Contracts and cost of
utilities (other than costs for which any tenant is directly
responsible to the utility company);
(j) Cost of advertising;
(k) Cost of printed forms and supplies required for use at
the Property;
(l) Cost of printed checks for each account required by
Owner;
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(m) Cost of salary and wages (including bonus payments,
incentive compensation or other additional payments unless approved
by Owner as set forth in the Approved Annual Business Plan), payroll
taxes, insurance, worker's compensation and other benefits, all only
as specifically set forth on the approved Reimbursable Employee
Expense Schedule, but only to the extent that such costs relate to
the period of such employees' employment in connection with the
Property;
(n) The Management Fee, the Excess Management Fee and the
Construction Management Fee (to the extent not paid through any
capital reserve escrow established by the first mortgage lender of
the Property); and
(o) Any other expenses included in the Approved Annual
Business Plan.
7.2 NON-REIMBURSABLE COSTS. Notwithstanding anything to the
contrary in this Agreement, the following expenses or costs incurred by or on
behalf of Manager in connection with the Property will, except as included in
the Approved Annual Business Plan, be at the sole cost and expense of Manager
and will not be reimbursed by Owner from the Operating Account or otherwise, and
Manager will indemnify and hold harmless Owner Related Entities from all
liability for the same:
(a) Cost of salary and wages, payroll taxes, insurance,
worker's compensation and other benefits of Manager's management,
accounting and office personnel not reimbursable under SECTION
7.1(m);
(b) General accounting and reporting services which are
within the scope of Manager's responsibilities to Owner under this
Agreement;
(c) Cost of forms, papers, ledgers and other supplies,
equipment, copying and telephone of any kind used in Manager's
office at any location other than the Property;
(d) Cost of electronic data processing equipment, or any
pro rata charge therefor, whether or not located at the Property, or
for data processing provided by computer service companies;
(e) Political or charitable contributions;
(f) Cost of advances made to employees and cost of travel
by Manager's employees or agents to and from the Property;
(g) Costs attributable to gross negligence, willful
misconduct or fraud on the part of Manager, Manager's associates or
Manager's employees or agents, or arising from Manager's breach
under this Agreement;
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(h) Cost of comprehensive crime insurance or fidelity bonds
purchased by Manager for its own account;
(i) Training expenses except for on-site employees;
(j) Employment and employment agency fees except for
on-site employees;
(k) Advertising expenses of Manager not directly related to
the Property; and
(l) Dues of Manager or any of its employees in professional
organizations or the cost of any of Manager's employees
participating in industry conventions, meetings or other functions
unless attendance at such conventions is requested by Owner.
ARTICLE 8. INSUFFICIENT GROSS INCOME
8.1 PRIORITIES. Manager shall promptly notify Owner if at any time
the gross income from the Property is or is expected to be insufficient to pay
the bills, charges and liabilities which may be incurred with respect to the
Property. In such event, unless Owner otherwise notifies Manager in writing,
expenses will be paid out of the Operating Account in the following order of
priority:
(a) FIRST: third-party debt service payments, ground lease
payments, real estate taxes, personal property taxes, betterment
assessments and any other charges and liabilities which could become
a lien against or result in a forfeiture of the Property;
(b) SECOND: cost of salary and wages, payroll taxes,
insurance, worker's compensation and other benefits of Manager's
management, accounting and office personnel reimbursable under
SECTION 7.1(m) as specifically set forth on the approved
Reimbursable Employee Expense Schedule;
(c) THIRD: insurance premiums due in connection with
insurance maintained in accordance with SECTION 3.1;
(d) FOURTH: bills and charges for utilities;
(e) FIFTH: other bills and charges of third parties, and
any and all claims and demands of third parties and liabilities to
third parties relating to the Property or the operation thereof
which Owner in its discretion determines to pay from the Operating
Account;
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(f) SIXTH: bills and charges, if any, incurred by Manager
for Manager's services provided to Owner exclusive of the Management
Fee, the Excess Management Fee and any other fees due to Manager
hereunder (if any); and
(g) SEVENTH: the Management Fee, the Excess Management Fee
and other fees due Manager hereunder (if any).
8.2 STATEMENT OF UNPAID ITEMS. Each month, after Manager has paid,
to the extent of available gross income, all bills and charges based upon the
ordered priorities set forth in SECTION 8.1, Manager will submit to Owner an
accounts payable listing that sets forth all remaining unpaid bills and their
due dates.
8.3 SEGREGATION OF ACCOUNTS. If, pursuant to this Agreement,
Manager will manage more than one property, Manager will segregate the income
and expenses of each property so that, unless Owner directs Manager otherwise in
writing, gross income from each property will be applied only to the bills and
charges from such property.
8.4 CASH FLOW FORECASTING. Manager will prepare a detailed cash
flow analysis sufficient to provide Owner with a forecast of account deficits.
Such forecasts will be updated monthly, or more frequently as dictated by field
conditions or as directed by Owner.
8.5 MANAGER NOT OBLIGATED TO FUND. In no event shall Manager have
any obligation to advance any of its own funds in connection with the
performance of its obligations hereunder unless expressly so provided herein.
Unless Owner otherwise agrees in writing, Owner shall not be responsible for any
interest on funds advanced by Manager on Owner's behalf.
ARTICLE 9. SALE OR FINANCING OF PROPERTY
9.1 COOPERATION WITH BROKER. If Owner executes a listing agreement
or other brokerage agreement with a broker (other than Manager) or an agreement
directly with a principal for the sale or financing of the Property, or any
other agreement relating to the transfer of ownership of the Property, Manager
will cooperate with such broker or principal to the end that the respective
activities of Manager and such broker or principal will be carried on without
friction and without interference with tenants and occupants. In connection with
any such sale, financing, or other transfer, Manager will:
(a) use commercially reasonable efforts to research and
confirm the accuracy of any representations and warranties regarding
the Property that are made by Owner without any representation or
warranty relating thereto by Manager. Notwithstanding the foregoing,
Manager shall certify that all rent rolls and/or financial
statements provided to Owner are accurate and complete in all
material respects;
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(b) execute such consents, assignments, manager estoppels,
back up certificates, and other documents as Owner may reasonably
request, provided that such documents are in a form reasonably
satisfactory to Manager and create no obligation of or liability to
Manager;
(c) provide such other services as Owner may reasonably
require; and
(d) permit the broker to show the Property (and any
principal to view same) during reasonable business hours.
9.2 NO SALES/BROKERAGE COMMISSIONS. Manager hereby acknowledges
and agrees that, unless it has been engaged by Owner pursuant to a separate
written agreement signed by Owner, Manager has not been engaged hereunder to
represent Owner in connection with any current or future sale, financing or
other transfer of the Property and has no authority to represent Owner in
connection therewith or right to any fee, commission or other form of
compensation in connection with sales, financings, or other transfers, provided
Manager, as part of its services hereunder, agrees to cooperate with Owner in
consummating such activities as set forth in SECTION 9.1.
ARTICLE 10. COOPERATION
10.1 COOPERATION. Should any claims, demands, suits or other legal
proceedings be made or instituted by any person against or affecting Owner which
arise out of any of the matters relating to this Agreement or otherwise, Manager
shall notify Owner immediately upon becoming aware of same and Manager shall
give Owner all pertinent information possessed by Manager and reasonable
assistance in the defense or other disposition thereof.
ARTICLE 11. COMPENSATION
11.1 COMPENSATION. Owner shall pay Manager, and Manager shall
accept as full compensation for Manager's service in managing the Property in
accordance with this Agreement, the Management Fee and the Excess Management
Fee. Manager will have no right to receive a Management Fee and the Excess
Management Fee after the expiration or earlier termination of this Agreement
except for fees earned through the termination date based on Rents received by
or on behalf of Owner before such expiration or earlier termination. Final
payment to Manager shall be due within three (3) Business Days of the date a
Final Accounting as set forth in SECTION 12.3 is received by Owner in a form
reasonably acceptable to Owner, and Manager's obligations under SECTION 12.4 are
satisfied. The Management Fee and Excess Management Fee for any partial month
shall be prorated based upon the number of days in such month.
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"RENTS" for the purpose of the Management Fee and the Excess Management
Fee computation will consist of all amounts actually received in cash for the
benefit of Owner from rental of space in the Property or provision of services
to tenants of the Property, including vending machine collections and other
forms of miscellaneous income relating to the leasing of the Property, except
that Rents shall NOT include:
(1) Security deposits (unless such deposits have been applied as
rental income upon termination of a lease), utility deposits
or other refundable sums;
(2) Funds received from tenants as reimbursement for utility
expenses paid by Owner;
(3) Rents paid in advance (including additional rent payments such
as real estate taxes and common area maintenance charges)
until the month in which such payments are applied as rental;
(4) Any interest or investment income;
(5) Any proceeds from a financing, refinancing, sale, exchange or
condemnation of all or any portion of the Property or any
other real or personal property associated therewith;
(6) The proceeds of any insurance, excluding rental loss or
business interruption insurance, and any other amounts paid to
Owner on account of fire or other casualty;
(7) Capital contributions or loans made to Owner; and
(8) Any trade discounts and/or rebates received in connection with
the operation and maintenance of the Property or purchase of
personal property associated therewith.
Rents shall be adjusted from time to time to reflect any amounts
received as income from tenants which are subsequently reimbursed or credited to
tenants due to adjustments, and the Management Fee and Excess Management Fee
collected on account of such amounts shall be adjusted accordingly. Subject to
SECTION 8.1, Manager will pay the Management Fee and Excess Management Fee
monthly from the Operating Account. The Management Fee and the Excess Management
Fee for each month will be paid on the tenth (10th) day of such month.
ARTICLE 12. TERMINATION
12.1 TERMINATION. The term of this Agreement will be for a period
of one (1) year and will be renewed automatically for successive periods of one
(1) year each, unless written notice of non-renewal is given by Owner to Manager
at least thirty (30) days prior to the end of the
32
then-existing term, or by Manager to Owner at least sixty (60) days prior to the
end of the then-existing term, provided that in the event of a breach by Owner
under this Agreement written notice may be given by Manager to Owner at least
thirty (30) days prior to the end of the then-existing term. Notwithstanding the
foregoing, and in addition to the provisions of SECTION 12.2, Owner may
terminate this Agreement: (a) for cause, immediately upon notice at any time, or
(b) without cause, by giving Manager at least thirty (30) days' prior notice in
writing, or (c) immediately upon payment by Owner to Manager of a termination
fee equal to one (1) month's Management Fee and Excess Management Fee (such
monthly fee to be determined by calculating the average monthly Management Fee
and Excess Management Fee over the prior 12-month period). Manager may terminate
this Agreement at any time with or without cause by giving Owner at least ninety
(90) days' prior notice in writing, and may terminate this Agreement upon sixty
(60) days' prior notice in writing in the event of a breach by Owner under this
Agreement; provided that if such breach is a failure to pay money, Manager may
terminate this Agreement upon thirty (30) days' prior notice in writing.
12.2 TERMINATION WITHOUT NOTICE.
(a) Without limitation of Owner's rights under SECTION
12.1, upon the occurrence of any one or more of the following
events, at the sole election of Owner and without further notice to
Manager, this Agreement will be deemed terminated: (i) dissolution
or termination of the legal existence of Manager, whether by merger,
consolidation or otherwise; (ii) termination or suspension of
Manager's real estate brokerage license, if such license is required
as a condition to the performance of Manager's duties hereunder;
(iii) cessation on Manager's part to do business; (iv) failure of
Manager to deal properly with and account for Owner's funds; or (v)
the filing of proceedings by or against Manager or any general
partner or parent corporation of Manager for bankruptcy, insolvency,
reorganization or other relief of debtors, or any assignment for the
benefit of the creditors of Manager.
(b) Without limiting Owner's rights under SECTION 12.1 or
SUBSECTION (a) above, at Owner's sole election and with no less than
thirty (30) days written notice by Owner to Manager, this Agreement
shall terminate upon the occurrence of the following events with
respect to the Property: (i) the sale or conveyance of the Property,
whether by foreclosure, sale by deed-in-lieu of foreclosure, the
assignment of Owner's ownership interest to any purchaser, lender or
its designee, or otherwise; (ii) condemnation of the Property or
such substantial portion of the Property that Owner determines that
the remainder cannot be operated in a commercially reasonable
manner; or (iii) the destruction of all of the improvements
comprising such Property or such a substantial portion thereof that
Owner determines that the remainder thereof cannot continue to be
operated in a commercially reasonable manner, and Owner determines
in its sole discretion not to rebuild the Property.
12.3 FINAL ACCOUNTING. Upon termination of this Agreement, Manager
will deliver to Owner the following with respect to the Property ("FINAL
ACCOUNTING"):
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(a) A final accounting, reflecting the balance of income
and expenses of the Property as of the date of termination or
withdrawal, to be delivered within thirty (30) days after such
termination;
(b) Any balance of any monies of Owner, prepaid rent or
tenant security deposits, or both, held by Manager with respect to
the Property, to be delivered immediately upon such termination; and
(c) The Books and Records and all other records, contracts,
leases, tenant correspondence, files, receipts for deposits, unpaid
bills and other papers, documents or computer disks or information
which pertain in any way to the Property, to be delivered
immediately upon such termination.
12.4 OBLIGATION TO VACATE: ORDERLY TRANSITION. Upon termination of
this Agreement, Manager promptly will vacate any office space provided by Owner
for the location of Manager's personnel. Upon termination of this Agreement,
Manager will reasonably cooperate in order to effect an orderly transition of
the management functions to a new manager. Manager's obligations under SECTION
12.3 and this SECTION 12.4 will survive termination of this Agreement.
ARTICLE 13. SUBSIDIARIES AND AFFILIATES
13.1 SUBSIDIARIES AND AFFILIATES. Any contract or lease of any kind
whatsoever between Manager and any Affiliate of Manager with respect to the
Property will be subject to the prior written approval of Owner, which approval
may be withheld at Owner's sole discretion.
ARTICLE 14. NOTICES
14.1 NOTICES.
(a) All notices given hereunder shall be in writing and
shall be delivered by hand, by nationally recognized overnight
express delivery service (all charges prepaid) for next day delivery
or by U.S. registered or certified mail, return receipt requested
(all postage prepaid), addressed to Owner or Manager at Owner's
Notice Address or Manager's Notice Address, respectively.
(b) Any notice or other communication sent or provided
above shall be deemed given (i) on the date of delivery, if by hand
or (ii) on the date mailed, if sent by overnight express delivery
service or U.S. registered or certified mail. Such notice shall be
deemed received on the date of receipt by the addressee or the date
receipt would have been effectuated if delivery were not refused.
Each party hereto may designate a new Notice Address by written
notice to the other parties in accordance
34
with this SECTION 14.1. The inability to deliver a notice because
of a change of address of which proper notice was not given shall be
deemed a refusal of such notice.
ARTICLE 15. CERTAIN REPRESENTATIONS AND COVENANTS
15.1 MANAGER REPRESENTATIONS. Manager hereby represents and
warrants to Owner as follows:
(a) Manager has all licenses, permits, authorizations and
approvals necessary to allow it to enter into this Agreement and
perform its duties hereunder; and
(b) Neither Manager nor, to the best of Manager's
knowledge, after reasonable inquiry, any of its employees, has been
convicted of robbery, extortion, embezzlement, fraud, grand larceny,
burglary, arson, a felony drug offense, murder, rape, kidnapping,
perjury, assault with intent to kill, a violation of the Employee
Retirement Income Security Act of 1974 or any other felonies.
ARTICLE 16. MISCELLANEOUS
16.1 WORD MEANINGS. Words such as "herein," "hereinafter," "hereof"
and "hereunder" when used in reference to this Agreement, refer to this
Agreement as a whole and not merely to a subdivision in which such words appear,
unless the context otherwise requires. The singular shall include the plural and
the masculine gender shall include the feminine and neuter, and vice versa,
unless the context otherwise requires. The word "including" shall not be
restrictive and shall be interpreted as if followed by the words "without
limitation."
16.2 ASSIGNMENT. Without Owner's prior consent, which Owner may
withhold in its absolute discretion, Manager shall not transfer, assign,
subcontract or delegate its duties under this Agreement, and any attempted
transfer, assignment, subcontract or delegation without such consent shall be of
no force or effect. The services of Manager hereunder are personal in nature.
16.3 BINDING PROVISIONS. Subject to SECTION 16.2, the covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the heirs, legal representatives, successors and assigns of the respective
parties hereto.
16.4 NONDISCRIMINATION. Manager will not discriminate against any
employee or applicant for employment by Manager on the basis of race, creed,
color, age, sex, martial status, sexual orientation, or national origin. Manager
will take affirmative action to insure that applicants are employed, and that
employees are treated during employment, without regard to their race, creed,
color, age, sex, martial status, sexual orientation, or national origin. Such
actions shall include, but not be limited to, the following: (i) employment,
upgrading, demotion or transfer; (ii) recruitment or recruitment advertising;
(iii) layoff or termination; (iv) rates of pay
35
or forms of compensation; and (v) selection for training, including
apprenticeship. Manager agrees to post in conspicuous places, available to
employees and applicants for employment, notices setting forth the provisions of
this SECTION 16.4.
16.5 APPLICABLE LAW. The interpretation, construction and
enforceability of this Agreement shall be governed in all respects by the laws
of the state in which the Property is located without regard to any choice of
law principles. Any legal proceedings arising out of any of the transactions or
obligations contemplated by this Agreement may be brought in the state courts of
The Commonwealth of
Massachusetts or the United States District Court for the
District of
Massachusetts. The parties hereto irrevocably and unconditionally:
(a) submit to the jurisdiction of such courts and agree to take any and all
future action necessary to submit to such jurisdiction; (b) waive any objection
which they may now or hereafter have to the venue of any suit, action or
proceeding brought in such courts; and (c) waive any claim that any such suit,
action or proceeding brought in such court has been brought in an inconvenient
forum.
16.6 SEVERABILITY OF PROVISIONS. The parties hereto intend and
believe that each provision in this Agreement comports with all applicable
local, state and federal laws and judicial decisions. If any provision in this
Agreement is, however, found by a court of law to be in violation of any
applicable local, state, or federal law, statute, ordinance, administrative or
judicial decision, or public policy, or if in any other respect such a court
declares any such provision to be illegal, invalid, unlawful, void or
unenforceable as written, then it is the intent of all parties hereto that,
consistent with and with a view towards preserving the economic and legal
arrangements among the parties hereto as expressed in this Agreement, such
provision shall be given force and effect to the fullest possible extent, and
that the remainder of this Agreement shall be construed as if such illegal,
invalid, unlawful, void, or unenforceable provision were not contained herein,
and that the rights, obligations, and interests of the parties under the
remainder of this Agreement shall continue in full force and effect. Each
provision of this Agreement shall be considered separable and if for any reason
any provision or provisions herein are determined to be invalid, unenforceable
or illegal under any existing or future law, such invalidity, unenforceability
or illegality shall not impair the operation of or affect those portions of this
Agreement which are valid, enforceable and legal.
16.7 SECTION TITLES. Section titles are for descriptive purposes
only and shall not control or alter the meaning of this Agreement as set forth
in the text.
16.8 FURTHER ASSURANCES. Manager and Owner shall execute and
deliver such further instruments and do such further acts and things as may
reasonably be required to carry out the intent and purposes of this Agreement.
16.9 ENTIRE AGREEMENT. This Agreement and the Schedules and
Exhibits attached hereto constitute the entire agreement between the parties
hereto with respect to the transactions contemplated herein, and supersede all
prior understandings or agreements between the parties. All Exhibits and
Schedules are incorporated herein by reference and constitute a part of this
Agreement.
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16.10 WAIVER. The failure by any party hereto to insist upon or to
enforce any of its rights shall not constitute a waiver thereof, and nothing
shall constitute a waiver of such party's right to insist upon strict compliance
with the provisions hereof. No delay in exercising any right, power or remedy
created hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or remedy by any such party preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. No waiver by any party hereto to any breach of or default in any term or
condition of this Agreement shall constitute a waiver of or assent to any
succeeding breach of or default in the same or any other term or condition
hereof. Each party hereto may waive the benefit of any provision or condition
for its benefit contained in this Agreement, but only if such waiver is
evidenced by a writing signed by such party.
16.11 AGREEMENT IN COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be considered an original and all
shall constitute one and the same Agreement, binding upon all of the parties
hereto, notwithstanding that all of the parties may not be signatories to the
same counterpart.
16.12 ATTORNEYS' FEES. In the event of a judicial or administrative
proceeding or action by one party against the other party with respect to the
interpretation or enforcement of this Agreement, the prevailing party shall be
entitled to recover reasonable costs and expenses including, without limitation,
reasonable attorneys' fees and expenses, whether at the investigative, pretrial,
trial or appellate level, and whether in any arbitration or bankruptcy
proceeding. The prevailing party shall be determined based upon an assessment of
which party's major arguments or positions prevailed.
16.13 TIME PERIODS. In the event the time for performance of any
obligation hereunder expires on a day other than a Business Day, the time for
performance shall be extended to the next day which is a Business Day.
16.14 MODIFICATION OF AGREEMENT. No modification of this Agreement
shall be deemed effective unless in writing and signed by all of the parties
hereto.
16.15 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
16.16 CONSTRUCTION OF AGREEMENT. This Agreement shall not be
construed more strictly against one party than against the other merely by
virtue of the fact that it may have been prepared primarily by counsel for one
of the parties. No provision of this Agreement shall run to the benefit of or be
enforceable by any party other than the parties hereto and their permitted
successors or assigns.
16.17 CONSENT AND APPROVALS. Owner's consents or approvals may be
given only in writing and only by representatives of Owner from time to time
designated in writing by Owner.
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16.18 USE OF OWNER'S NAME PROHIBITED. Without Owner's prior
approval, which Owner may withhold in its absolute discretion, Manager will not
use the name of Owner or any Owner Related Entity, or any derivation thereof, in
any manner whatsoever.
16.19 EXCULPATION. Manager, and all persons claiming by, through or
under Manager, shall look solely to Owner's interest in the Property for the
satisfaction of any claim now existing or hereafter arising or accruing against
Owner, and in no event shall (a) Owner be liable for any deficiency or (b) any
other Owner Related Entity ever have any liability hereunder.
16.20 CONFIDENTIALITY. Manager and its employees and agents agree to
keep all information related to the Property and Owner confidential, except to
the extent necessary to carry out Manager's obligations under this Agreement or
as may be required by law.
16.21 NO JOINT VENTURE. Nothing in this Agreement or in the
performance of any obligations hereunder shall be deemed to create any
partnership, joint venture or similar relationship between Owner and Manager.
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PART III - MANAGER AS LEASING AGENT
Owner and Manager further agree as follows, with the terms of this PART
III being deemed to supersede any inconsistent terms contained in PART II:
1. Owner hereby retains Manager as Owner's exclusive leasing
agent in connection with the Property. Manager represents and warrants to Owner
that Manager has all licenses and similar qualifications necessary to the
performance of its leasing services hereunder.
2. Manager will promptly provide Owner, upon a change in
personnel following the date of this Agreement, the names of the individuals who
shall have primary responsibility for Manager's leasing services hereunder,
which, when provided, shall be set forth on the schedule hereto entitled
"LEASING AGENT" (the "LEASING AGENTS").
3. In addition to its duties under PART II of this Agreement,
Manager shall use its reasonable commercial efforts to lease space at the
Property in accordance with the Approved Annual Business Plan. Manager shall
perform its leasing responsibilities hereunder in accordance with the standards
and practices of prudent and qualified leasing agents that act as leasing agents
for properties similar to the Property on behalf of institutional owners or
investors. Without limiting the generality of the foregoing, Manager's
responsibilities as leasing agent shall include the following: (a) subject to
the provisions of the Approved Annual Business Plan or as otherwise approved by
Owner, Manager shall, at Owner's expense, conduct such advertising, marketing
and promotion of the Property as is necessary for the successful leasing of the
Property as provided for in the Approved Annual Business Plan; (b) Manager shall
participate, at the direction of Owner, in lease negotiations; and (c) Manager
shall investigate the creditworthiness and desirability of all proposed tenants
and shall prepare a lease and tenant credit analysis for each proposed lease.
4. Manager shall always give priority to the leasing of space at
the Property that is at least equal to the priority given by Manager to any
property managed by Manager in the market that the Property is located. Manager
shall under no circumstances induce tenants of the Property to move to space at
any property managed by Manager.
5. Notwithstanding anything to the contrary in this Agreement,
unless otherwise approved by Owner, all leases of space at the Property shall be
on a standard form of lease approved by Owner.
6. Other than the Management Fee and Excess Management Fee,
Manager shall not receive any compensation for its leasing services.
7. If Owner is contacted directly by any prospective tenant of
the Property, Owner shall refer such tenant to Manager.
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Executed as an instrument under seal as of the day and year first
written above.
OWNER:
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇, a
Delaware limited partnership
By: Alliance ▇.▇. ▇▇, Inc., a Texas corporation,
its
Managing General Partner
By:
-------------------------------
Name:
Title:
MANAGER:
Alliance Residential, LLC, an
Arizona limited liability company
By:
-----------------------------------------
Name:
Title:
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