Exhibit 10.18
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made and entered
into as of the 9th day of April, 1998, between OLY/▇▇ ▇▇▇▇▇▇, L.P., a Texas
limited partnership (the "Operating Partner"), and STRATUS MANAGEMENT,
L.L.C., a Delaware limited liability company ("Manager").
W I T N E S S E T H
WHEREAS, the Operating Partner is the operating partner of ▇▇▇
▇▇▇▇▇▇ General Partnership, a Texas general partnership ("Owner"), and
Owner is engaged in the acquisition, ownership, development and sale of
certain tracts of land, more particularly described on Exhibit A attached
hereto, together with all improvements located thereon (collectively, the
"Property").
WHEREAS, the Operating Partner desires to appoint Manager to
manage and oversee the day to day operations and responsibilities of the
Operating Partner with respect to the management of the Property subject to
the terms and conditions herein.
NOW, THEREFORE, for and in consideration of the premises and
mutual covenants and agreements contained in this Agreement and the
compensation to be paid hereunder, the Operating Partner and Manager hereby
agree as follows:
ARTICLE I
ESTABLISHMENT OF AGENCY
The Operating Partner hereby appoints Manager and Manager hereby
accepts appointment on the terms and conditions hereinafter provided as
agent for Owner. Manager shall oversee and manage the day to day
operations of Owner pursuant to that certain Business Plan (as amended from
time to time and as attached as Exhibit B to the Partnership Agreement of
Owner) in an efficient and first class manner and shall exercise due
diligence in all of its endeavors.
ARTICLE II
SERVICES TO BE PERFORMED BY MANAGER
2.1 Expenses. Everything done by Manager under the provisions
of this Agreement shall be done as the agent of the Operating Partner and
Owner, and all obligations or expenses incurred by Manager in the
performance of its duties hereunder in accordance with the provisions
hereof shall be at the expense of Owner consistent with the Operating
Budget (as defined in Section 2.5 hereof), except as otherwise specifically
provided in this Agreement.
2.2 Contracts. To the extent necessary to fulfill its
obligations under this Agreement, Manager shall (i) identify contracts with
independent contractors to perform services necessary or advisable for the
oversight or management of the Property, and (ii) with the prior written
approval of Owner, place orders in Owner's name for such materials and
supplies as are reasonable and necessary to properly oversee, maintain,
manage, or operate the Property, in each case, consistent with the
Operating Budget. Any contracts or other agreements shall be entered into
in Owner's name and be executed by Owner. Except with the prior written
consent of Owner, every contract entered into by Manager for or in
connection with Owner shall include as a condition thereof the right by
Owner to terminate, with or without cause, on thirty (30) days prior
written notice, without the payment of a cancellation fee. Owner shall be
obligated to pay the cost of any contract or agreement described in this
section only if such cost is provided for in the Operating Budget or if
Owner otherwise approves such cost in writing.
2.3 Oversight and Management. Manager shall oversee and manage
the day to day operations of the Property and shall do so in accordance
with the "Management Standard" (as defined in Section 4.1 hereof),
including within such oversight and management without limitation thereof,
such normal business activities as may be necessary or, with Owner's prior
written consent, desirable.
2.4 Insurance. Upon the request of Owner, Manager shall
cause to be placed and kept in force, at Owner's sole cost and expense, all
forms of insurance requested by Owner. All insurance coverage to be placed
by Manager shall be placed with such companies, in such amounts, and with
such beneficial interests appearing therein as shall be requested by Owner.
2.5 Approved Operating Budgets: Projections. On or before
November 15th of each year, Manager shall submit to Owner, for Owner's
approval, proposed operating budgets for the Property for the immediately
succeeding calendar year, which proposed budgets shall reflect thereon
projections of all receipts (if any) and operating costs and expenses,
capital expenditures and reserves that Manager, in the exercise of good
business judgment, believes will be received or necessary to be incurred,
as the case may be, implement the Business Plan during such year. Owner
shall give Manager Owner's written approval or disapproval of the proposed
operating budget within thirty (30) days after receipt thereof by Owner.
In the event that Owner disapproves the proposed operating budget, it will
advise Manager of the items therein that are disapproved and the line items
and amounts, if any, that will replace the disapproved items. Thereafter,
the portions of the proposed operating budget approved by Owner, together
with the line items and amounts required by Owner to replace any
disapproved items, shall constitute the Operating Budget (herein so called)
for the following year. Exhibit B attached hereto contains the Operating
Budget (herein so called) for the remainder of calendar year 1998.
Except as otherwise expressly provided in this Agreement, Manager shall not
be reimbursed by Owner for, and Manager hereby expressly indemnifies Owner
against, any loss, expense or claim in connection with any expenditure,
liability or obligation incurred by Manager (without Owner's approval) not
reflected in the Operating Budget.
2.6 Manager Disbursement. Manager shall, from the available
good funds collected and deposited in the Operating Account (as defined in
Section 4.2 hereof), cause to be disbursed regularly and punctually (1) the
amounts from time to time payable to Manager pursuant to this Agreement;
and (2) amounts otherwise due and payable as operating expenses of the
Property authorized to be incurred under the terms of this Agreement.
Manager shall at all times use Manager's reasonable efforts to
obtain for Owner, and shall credit to the account of Owner in each case,
all discounts, rebates and other favorable financial terms which may be
available in connection with any costs or expenses Manager shall incur
under this Agreement. Any funds remaining at the end of each calendar
month during the term of this Agreement in the Operating Account (in excess
of the balance required to be maintained in such account) shall be
disbursed or transferred as generally or specifically directed from time to
time by Owner. Within fifteen (15) days after the end of each calendar
month, Manager shall provide Owner with a list of the disbursements made by
Manager during such month and, at the request of Owner, invoices supporting
the disbursements.
2.7 Records; Reporting.
(a) Records. All statements, receipts, invoices, checks,
leases, contracts, worksheets, financial statements, books and
records, and all other instruments and documents relating to or
arising from the operation or management of the Property shall be the
property of Owner; provided that, throughout the term of this
Agreement, all of such items shall be maintained by Manager in a
manner consistent with the terms of this Agreement and with books and
records customarily maintained by managing agents of businesses
similar in location, size and revenue to Owner. Owner and Manager
shall have the right to inspect and to copy all such items, at such
party's expense, at all reasonable times, and from time to time,
during the term of this Agreement. Upon the termination of this
Agreement, all of such books, records and all other information
relating to Owner promptly shall be delivered to Owner; provided,
however, that at Manager's sole expense, Manager or its
representatives shall have the right, for a reasonable period of time
not to exceed three (3) years following such termination, to inspect
such books, records and other information for data that directly
relates to the period during which Manager managed the Property and to
make copies thereof, at reasonable times at the offices of the
Operating Partner upon reasonable advance notice to the Operating
Partner.
(b) Monthly Statements. Manager shall prepare and deliver
to Owner on a calendar monthly basis, Manager's written estimates of
the amounts, if any, by which any categories of the Operating Budget
must be adjusted to adequately fund the day to day management and
oversight of the Property for the then current month, although the
Operating Partner and Owner shall be under no obligation to change the
Operating Budget. Such monthly reports shall include the following
information: (i) a statement of operations of the Property during such
month, and the cost thereof, (ii) a statement of year-to-date
operations on the Property, and the cost thereof, (iii) a statement of
the actual cost of operations of the Property during such month
compared to the Operating Budget which identifies any variance between
such costs and the Operating Budget, and (iv) a description and
explanation of such variances. Manager also shall furnish the
Operating Partner, within ten (10) days after the Operating Partner's
request, such further information covering the day to day oversight
and management of the Property as the Operating Partner may reasonably
require.
(c) Annual Accounting Report. Manager agrees (i) to
deliver to owner, within twenty (20) days after the end of each fiscal
year, an annual accounting report (including balance sheet, income
statement and other financial statements), showing the results of
gross receipts, gross operating expenses, net operating income, net
cash flow and the Management Fee which would be payable if the
Agreement were terminated as of the end of such Fiscal Year and any
other information necessary to make the computations required hereby
or which may be requested by Owner, all for such fiscal year and (ii)
to cooperate fully with Owner, at no additional expense to Manager,
but without limiting Manager's obligations under Section 2.7(e), in
supplying all of the information and documentation necessary for a
nationally recognized firm of certified public accountants selected by
Owner (the "Auditor") to prepare and deliver to Owner an audit of the
annual accounting report provided by Manager to Owner pursuant to this
Section 2.7(d) within forty-five (45) days after the end of each
fiscal year.
(d) Additional Fiscal Reports. Manager shall, upon the
request of Owner, prepare for Owner or assist Owner in the preparation
of such additional financial reports with respect to the Owner or te
Property as Owner may reasonably request or may be required in the
preparation of the audited annual accounting to be prepared pursuant
to this Section 2.7. Manager acknowledges and agrees that the
Management Fee to be paid under this Agreement includes compensation
to Manager for the preparation of papers and schedules reasonably
necessary for the Auditor to conduct its review of the Property's
books and records. To the extent such papers and schedules are not
properly prepared, Manager agrees to reimburse Owner for the
reasonable additional cost and expense incurred by Owner for the
Auditor to prepare such papers or schedules.
(e) Returns Required by Law. Manager shall be responsible
for preparing and filing any forms, reports or returns (except Owner's
tax returns) that may be required by law relating to the Property.
Manager shall also be responsible for any forms, reports or returns
that may be required by law relating to any of Manager's employees.
2.8 Compliance with Legal Requirements. Manager shall take such
action as may be necessary to comply with any and all orders or
requirements affecting the Property by any federal, state, county or
municipal authority having jurisdiction thereover. Manager, however, shall
not take any such action as long as the Operating Partner is contesting, or
has affirmed the Operating Partner's intention to contest and institutes
proceedings contesting, any such order or requirement, except that if
failure to comply promptly with any such order or requirement would or
might expose Manager to criminal liability, Manager shall comply with same.
Manager shall promptly notify the Operating Partner in writing of all such
orders and notices or requirements. The Operating Partner agrees to pay
all reasonable expenses incurred by Manager, including, without limitation,
reasonable attorneys' fees for counsel employed to represent Manager or the
Operating Partner, with respect to any proceeding or suit involving an
alleged violation by Manager or the Operating Partner, or both, of any
orders or requirements of any federal, state, county or municipal authority
(unless Manager is finally adjudicated to have personally and not in a
representative capacity violated such order or requirement), but nothing
contained herein shall require Manager to employ counsel to represent the
Operating Partner in any such proceeding or suit.
2.9 Independent Contractor. The parties hereby acknowledge that
the Manager is and shall be an independent contractor for all purposes.
ARTICLE III
FEES TO MANAGER
In consideration for the performance of Manager's duties and
responsibilities under this Agreement, in exchange for its services
provided to Owner and the Property, Manager shall be paid a management fee
to be computed as follows: Manager shall receive an annual fee (the
"Management Fee") equal to one percent (1%) of the Acquisition and
Development Costs (as defined hereinbelow) computed as follows:
(i) the Management Fee shall commence on the first day of
the month following the initial acquisition of the Property;
(ii) the monthly balance subject to the Management Fee shall
be the arithmetic average of the Acquisition and Development
Costs of the Property owned by Owner on the first day of the
month and on the last day of the month; and
(iii) the Management Fee shall be payable monthly in
arrears and shall be equal to 0.000833 multiplied by the balance
computed in (ii) above.
As used herein, "Acquisition and Development Costs" means the sum of (a)
purchase price, whether cash or credit, paid, or for which Owner is
obligated to pay (if on credit), for the Property, together with all
closing costs paid by Owner, including title insurance, recordation
charges, registration and transfer taxes, if any, and similar expenses, and
to the extent reflected on the closing statement executed by Owner in
connection with the acquisition of the Property, all fees and expenses paid
or incurred by or on behalf of Owner in connection with the acquisition of
the Property, including legal, engineering and consulting fees, any real
estate commissions or brokerage fees paid by Owner, or on behalf of Owner,
to anyone in connection with such acquisition (the "Acquisition Costs") and
(b) all costs and expenses incurred by Owner in connection with development
and marketing of the Property, including, without limitation, engineering,
legal, land planning and related expenses (the "Development Costs") as of
the date of this Agreement the Property consists of two (2) undeveloped
tracts (the "Undeveloped Tracts") and approximately nine hundred forty one
(941) developed residential lots (the Finished Lots") which will be
marketed and sold in accordance with the Business Plan. For purposes of
the monthly computation in (ii) above, the Acquisition Costs shall be
reduced by Thirteen Thousand Three Hundred Seventy Eight and No/100 Dollars
($13,378.00) for each Finished Lot closed and funded.
ARTICLE IV
RELATIONSHIP OF MANAGER TO THE OPERATING PARTNER
4.1 Standard of Care. Manager shall employ Manager's best
efforts to oversee and manage the day to day operations of the Property in
a manner (referred to herein as the "Management Standard") consistent with
(i) first class standards (consistent with the expressed plan of Owner,
including the Business); (ii) prudent business and management practices
applicable to the oversight and management of the Property; and (iii) the
requirements of any deeds of trust, certificates of occupancy, permits,
licenses, consents or other recorded or unrecorded agreements now or
hereafter affecting the Property, or as required by the Limited Partnership
Agreement (collectively referred to herein as the "Documents"). Manager
shall use all contacts, discount programs and cost-savings measures at its
disposal to obtain services, products and tax and insurance rates for the
Property at the lowest cost, without sacrificing the quality of such
services or products. Manager shall perform such other acts and deeds as
are reasonable, necessary and proper in the discharge of its duties under
this Agreement. Manager may, with the prior written consent of the
Operating Partner, obtain goods or services for the Property from direct or
indirect affiliates of Manager, its officers, directors, shareholders or
employees, but only if such goods and services are of at least equal
quality and of no higher prices than comparable goods and services
obtainable from unaffiliated parties and such goods and services are
otherwise competitive with comparable goods and services.
4.2 Separation of Owner's Moneys. Manager shall establish and
maintain in a banking or other financial institution identified by the
Operating Partner from time to time throughout the term of this Agreement,
a separate bank or similar account in the name of Owner for the deposit of
moneys of Owner received, if any, with respect to the Property (the
"Operating Account"). Manager shall also establish such other special bank
or similar accounts as may be required by the Operating Partner. Funds may
be withdrawn (i) from the Operating Account for the disbursement of any
individual item not exceeding $10,000 upon the sole signature of any duly
authorized representative of the Operating Partner on behalf of Owner; and
(ii) for all disbursements exceeding $10,000 or for the withdrawal of funds
from any account other than the Operating Account, upon the sole signature
of Oly/Houston ▇▇▇▇▇▇, ▇.▇., (the "Financial Partner"), on behalf of Owner.
The Operating Partner and Manager hereby acknowledge and agree that, if the
Operating Partner fails to deposit funds in the Operating Account in an
amount sufficient to fund the expenses authorized in the Operating Budget,
Manager shall not be required to incur any out of pocket costs in order to
perform Manager's obligations under this Agreement.
4.3 Term/Termination. This Agreement shall commence on the date
hereof and shall thereafter continue until the dissolution of Owner.
Notwithstanding the foregoing, this Agreement may be terminated at any time
(i) for Manager's fraud, malfeasance, misfeasance or abandonment of its
responsibilities under this Agreement by the Operating Partner upon written
notice thereof to Manager, (ii) upon written notice from Owner to Manager
after Manager's default under this Agreement (except for breach of the
Management Standard) by the Operating Partner which is not cured after
thirty (30) days notice and opportunity to cure provided that if such
default is not reasonably susceptible of cure within thirty (30) days then
such reasonable time so long as Manager is diligently prosecuting the cure
of the default but in no event longer than ninety (90) days, (iii) for the
Operating Partner's default under this Agreement by Manager upon written
notice thereof to the Operating Partner, (iv) upon thirty (30) days written
notice from Owner to Manager in the event Manager fails to perform its
duties consistent with the Management Standard as determined by the
management committee of Owner or (v) by either Manager or Owner in the
event Stratus fails to exercise its option under that certain Option
Agreement by and between Stratus, the Operating Partner and Oly Lender
▇▇▇▇▇▇, ▇.▇., of even date herewith.
4.4 Obligations Upon Termination.
(a) Upon termination of this Agreement, each party shall
continue to be fully liable for their respective obligations which
have accrued up to and including the termination date and shall
promptly pay to the other all amounts due to the other party under the
terms of this Agreement. Such payment shall be made as soon after the
effective date of termination as such amounts are determinable. Upon
such payment, neither party shall have any further claim or right
against the other, except as expressly provided herein.
(b) In the event of termination of this Agreement, upon the
effective date of such termination, Manager shall (i) surrender and
deliver to the Operating Partner all income of the Property, if any,
and other monies of the Operating Partner or Owner then held by
Manager and/or in any bank account (including, without limitation, the
Operating Account) in excess of the reimbursements due and payable to
Manager up to and including the effective date of such termination,
(ii) deliver to the Operating Partner as received by Manager any
monies or other property due the Operating Partner under this
Agreement but received after such termination, and (iii) deliver to
the Operating Partner everything then held by Manager pertaining to
the Property, including, without limitation copies of all books,
records, keys and all other materials, property, and supplies
pertaining to the Property and/or this Agreement.
4.5 No Partnership. Nothing contained in this Agreement shall
be deemed or construed to create a partnership or joint venture between the
Operating Partner or Owner and Manager, it being the intention of the
parties that the only relationship hereunder is that of agent and
principal.
4.6 Indemnification. Manager shall be liable for and shall
indemnify and hold harmless the Operating Partner and Owner (and each
partner, venturer, employee, agent, shareholder, director or officer of the
Operating Partner and Owner) from any loss, damage, liability, cost or
expense (including reasonable attorneys' fees) arising out of (i) any
actions of Manager not within the scope of Manager's duties hereunder or
(ii) the gross negligence or willful misconduct of Manager. The Operating
Partner shall indemnify and hold harmless Manager (and each employee,
agent, director, shareholder or officer of Manager) from any loss, damage,
liability, cost or expense (including reasonable attorneys' fees) arising
out of (x) a breach by the Operating Partner of the Operating Partner's
obligations hereunder, (y) the Operating Partner's gross negligence or
willful misconduct or (z) actions taken by Manager within the scope of
Manager's responsibilities under this Agreement.
ARTICLE V
MISCELLANEOUS
5.1 No Assignment by Manager, Etc. Without the prior written
consent of the Operating Partner, which consent may be granted or withheld
in the Operating Partner's sole discretion, Manager shall not have the
right to assign, transfer or convey any of Manager's right, title or
interest hereunder, nor shall Manager have the right to delegate any of the
obligations or duties required to be kept or performed by Manager
hereunder.
5.2 Notices. All notices, demands, consents, approvals and
requests given by either party to the other hereunder shall be in writing
and sent via the U.S. Postal Service by registered or certified mail,
return receipt requested, postage prepaid or via an overnight delivery
service (e.g., Federal Express) and addressed to the appropriate party at
the respective addresses shown below. All such notices shall be deemed
given on the earlier of actual receipt or refusal of receipt by the
addressee. The respective addresses and additional notice parties are as
follows:
If to Operating Partner: Oly/▇▇ ▇▇▇▇▇▇, L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇
with a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to Manager : Stratus Management, L.L.C.
c/o FM Properties Inc.
▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Armburst, ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇
Any party may at any time change its respective address by sending written
notice to the other party of the change in the manner hereinabove
prescribed.
5.3 GOVERNING LAW. THIS AGREEMENT IS BEING EXECUTED AND
DELIVERED AND IS INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND THE
TERMS AND PROVISIONS HEREOF SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
5.4 Not a Third Party Beneficiary Contract. Neither this
Agreement nor any part hereof nor any service, relationship or other matter
alluded to herein shall inure to the benefit of any third party
(specifically including any lender, tenants or contractors), to any trustee
in bankruptcy, to any assignee for the benefit of creditors, to any
receiver by reason of insolvency, to any other fiduciary or officer
representing a bankruptcy or insolvent estate of either party, or to the
creditors or claimants of such an estate. In addition, this Agreement
shall terminate and be of no further force or effect upon the filing of any
bankruptcy petition by or against Manager.
5.5 Validity. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be
valid and be enforced to the fullest extent permitted by law.
5.6 Entire Agreement. This Agreement contains the entire
agreement between the parties hereto with respect to the matters herein
contained and any agreement hereafter made shall be ineffective to effect
any change or modification, in whole or in part, unless such agreement is
in writing and signed by the party against whom enforcement of the change
or modification is sought. This Agreement shall bind, and inure to the
benefit of, the parties hereto and their respective successors, legal
representatives and assigns.
5.7 Attorneys' Fees. If either the Operating Partner or Manager
employs an attorney to enforce or defend its rights hereunder, the
prevailing party shall be entitled to recover its reasonable attorneys'
fees, costs and expenses incurred in connection with such enforcement or
defense.
5.8 Confidentiality. Manager shall hold all information
regarding the Property confidential and shall not disclose any such
information to third parties without the prior written consent of Owner
unless legally compelled to make such disclosure. Without limiting the
generality of the foregoing, Manager shall not make any news releases or
other public disclosures without Owner's prior written consent.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]OPERATING PARTNER:
OLY/▇▇ ▇▇▇▇▇▇, L.P.,
a Texas limited partnership
By: Oly Fund II GP Investments, L.P.,
a Texas limited partnership,
its general partner
By: Oly Real Estate Partners II, L.P.,
a Texas limited partnership,
its general partner
By: Oly REP II, L.P.,
a Texas limited partnership,
its general partner
By: Oly Fund II, LLC,
a Texas limited liability company,
its general partner
By:/s/ ▇▇▇ ▇. ▇▇▇▇
-------------------
Name:▇▇▇ ▇. ▇▇▇▇
Title:Vice President
MANAGER:
STRATUS MANAGEMENT, L.L.C.,
a Delaware limited liability company
By: FM Properties Inc.,
a Delaware corporation,
its sole member
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ III
----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, III,
President
EXHIBIT A
Property Description
The land referred to herein is situated in the State of Texas, County of
▇▇▇▇▇▇, and is described as follows:
[ATTACHED]
EXHIBIT B
Operating Budget for Remainder of 1998
Operating Partner and Manager will attach the Operating Budget on or
before June 8, 1998.