MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") is made and entered into as of
_____________, 1997, by and between Philips International Realty, L.P. (the
"Partnership") and Philips International Realty Corp. (the "Company" and
together with the Partnership, the "Owner") and Philips International Holding
Corp. (the "Manager").
1. ENGAGEMENT: Owner hereby engages Manager, and Manager hereby accepts
such engagement from Owner, for the term, at the compensation, and upon all of
the other terms and conditions set forth herein as sole and exclusive manager of
its properties whether now owned or in the future owned (collectively, the
"Properties" and each a "Property").
2. TERM: The initial term of this Agreement ("Initial Term") shall commence
as of the date hereof and shall continue for three (3) years, provided, however,
that the term shall continue for consecutive periods of one (1) year each unless
terminated by any party to this Agreement within thirty (30) days prior to the
expiration of the Initial Term or any subsequent annual period.
3. MANAGEMENT FEES: During the term hereof, Manager shall receive, as
compensation for the performance of its services required hereunder ("Management
Fees"), a sum equal to 3% of gross rental income derived from the Properties for
the calendar year. Management Fees shall be payable on the first day of each
month, except that Management Fees for the first month of the Initial Term shall
be payable on the last day of the first calendar month in which this Agreement
is executed and shall be based upon actual receipts obtained during such
calendar month with an adjustment being made if such calendar month is less that
thirty (30) days. Actual receipts for the first calendar month shall be utilized
for purposes of fixing monthly
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installments for the first quarterly period of the Initial Term, which monthly
installments shall be reconciled quarterly thereafter based upon actual receipts
for the prior quarterly period. In addition, Manager shall be entitled to
reimbursement of all reasonable out-of-pocket expenses. The monthly installments
may be deducted by Manager from receipts.
3A. LEASING COMMISSIONS: Manager shall also be entitled to customary
market level leasing commissions ("Leasing Commissions") for space that it
leases at the Properties whether or not Manager is the procuring broker, it
being understood that Manager shall be the exclusive agent for the
Property. Manager shall also be entitled to Leasing Commissions on all
renewal leases, including but not limited to, a tenant's exercise of a
renewal option at customary market level commissions.
3B. CONSTRUCTION SUPERVISORY FEE: Manager shall also be entitled to a
construction supervisory fee at the customary market level with regard to
any tenant improvements and construction matters relating to the
Properties.
4. MANAGEMENT SERVICES AND POWERS: In consideration of the Management Fees
to be paid by Owner hereunder, Manager agrees as follows:
4.1 Under the supervision of the executive officers of the Owner, Manager
shall manage the business and affairs of the Owner and shall be responsible for
the day-to-day operations of the Properties. Manager shall furnish the services
of its organization and exert its reasonable efforts in operating, maintaining
and managing the Properties. Everything done by Manager in the performance of
its obligations hereunder and all expenses incurred shall be for and on behalf
of Owner and for Owner's account, except as expressly otherwise provided herein,
and Owner agrees to reimburse Manager for all such expenses which are properly
incurred hereunder in the performance of Manager's duties.
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4.2 Notwithstanding the authority granted herein, Manager shall confer
fully and freely with Owner in the performance of its duties, and shall keep
Owner informed regarding the Properties. After consultation with and approval by
Owner, Manager shall use its reasonable efforts to enforce the collection of all
rentals and receipts and shall give receipts for all services or income of any
nature from the operation of the Properties.
4.3 Manager shall, after consultation with and approval by Owner, construct
improvements and additions to the Properties.
4.4 Manager shall market the space at the Properties, including vacant
space, and after consultation and approval by Owner, shall make all decisions
regarding leasing such spaces, including renewing and terminating leases for
such spaces.
4.5 Manager shall enforce all warranties, if any, on the Properties and/or
the manufactured items thereon.
4.6 Except as may be designated by the Owner in writing from time to time,
Manager shall hire, train, discharge, and supervise all labor and employees
necessary to properly maintain and operate the Properties. The selection, terms
of employment and termination thereof, including rates of employment, and the
supervision, direction, training and assignment of duties of all such employees
shall be the duty and responsibility of and shall be determined by Manager after
consultation with Owner. Subject to Paragraph 5 herein, all costs and expenses
of any persons who are part-time or full-time employees of Manager shall be paid
for solely by Manager.
4.7 Manager, at the expense of Owner, shall cause the Properties, and their
respective appurtenances and grounds, to be operated, maintained and repaired
according to reasonable standards acceptable to Owner, including, but not
limited to, interior and exterior
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cleaning, painting, plumbing, heating and ventilating systems, carpentry,
masonry, decorating and such other normal maintenance and repair work as may be
necessary and proper. Furthermore, for an additional charge as agreed upon
between Owner and Manager, Manager shall supervise any extraordinary services
with respect to the improvement of the Properties which Owner may request from
time to time.
4.8 In fulfillment of its duties hereunder, Manager, at the expense of
Owner, shall purchase such supplies, equipment and services as are necessary for
the proper operation, maintenance, and repair of the Properties, and any
discounts or rebates received by Manager shall be returned to Owner; provided,
however, that no contract or agreement for this purpose shall be made in excess
of $25,000 for any one item without the consent of Owner, except monthly or
recurring operating charges or as set forth in the budget referred to in Section
4.21 hereof. Emergency repairs, involving manifest danger to life or property,
or immediately necessary for the preservation and safety of the Properties, or
for the safety of it tenants or occupants, or required to avoid the suspension
of any necessary service of the Properties, may be made by Manager irrespective
of the cost limitation imposed by this subparagraph. Notwithstanding this
authority as to emergency repairs, it is understood and agreed that Manager
will, if at all possible, confer with Owner regarding such expenditure before
proceeding and in any event, promptly notify Owner of such emergency repair.
4.9 Pursuant to the budget approved by Owner, Manager, on behalf of Owner,
shall contract on favorable terms, quality and service considered, in the name
of Owner, for all services and utilities necessary for the efficient operation
and maintenance of the Properties, including, but not limited to, security,
water, electricity, gas, fuel, telephone, vermin extermination, rubbish hauling,
parking lot sweeping and maintenance, roof maintenance,
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landscape maintenance and lighting maintenance. However, any such contract which
is non-cancellable having a term longer than 5 years or requiring payments in
excess of $50,000 per annum must be authorized by Owner.
4.10 Manager shall take such action as may be necessary or desirable to
comply promptly with any and all orders or requirements affecting the Properties
placed thereon by any federal, state, county, or municipal authority having
jurisdiction thereover, subject to the same limitation contained in Subparagraph
4.8 regarding maximum amounts which may be disbursed without Owner's written
consent. Owner shall execute any and all applications and other documents
necessary for Manager to obtain and maintain in the name of Owner all licenses
and permits required of Owner or Manager in connection with the operation and/or
management of the Properties. Manager, however, so long as Manager is not
subject to civil or criminal penalty or liability, shall not take any action
under this Section so long as Owner is contesting, or has, after prompt
notification of the facts by Manager, affirmed its intention to contest any such
order or requirement. In such event, the Owner agrees to indemnify the Manager
from any claims, liability and expenses, including reasonable legal fees and
disbursements, resulting from such failure to comply. Manager shall promptly
notify Owner of all such orders and notices or requirement.
4.11 Manager shall, after consultation with and approval by Owner and at
the expense of Owner, cause to be placed and kept in force all forms of
insurance needed to adequately protect Owner and as required by law and the
underlying mortgages affecting the Properties, including, where appropriate, but
not limited to, worker's compensation insurance, public liability insurance,
auto, flood, plate glass, office equipment and personal property insurance,
boiler insurance, fire and extended coverage insurance, and burglary and theft
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insurance. All of the various types of insurance coverages required for the
benefit of Owner shall be placed in such amounts, with such companies and with
such beneficial interests appearing therein as shall be acceptable to Owner;
provided, however, that Manager shall be named as a named insured in all
policies related to public liability insurance. Proof of all such insurance
shall be delivered to Owner in a form acceptable to Owner. Manager agrees to
cooperate with any independent insurance broker or consultant that Owner may
designate or approve and engage for the purposes of effecting insurance. Manager
shall promptly investigate and make a full written report as to all accidents or
claims for damage relating to the ownership, operation, and maintenance of the
Properties, including any damage or destruction to the Properties, the estimated
cost of repair, and shall cooperate and make any and all reports required by any
insurance company in connection therewith.
4.12 Manager shall establish and maintain, in a bank of Owner's selection,
a bank account for each Property for the deposit of the monies collected from
the Properties ("Bank Account"). Manager shall have the authority to draw on the
Bank Account consistent with the requirements of Owner for any payments which
Manager must make to discharge any liabilities or obligations incurred pursuant
to this Agreement, all of which payments shall be subject to the limitations of
this Agreement.
4.13 From the funds collected and deposited in the Bank Account, Manager
shall cause to be disbursed regularly and punctually all expenses authorized in
this Agreement.
4.14 Manager shall keep accurate, complete and separate books and records
in accordance with accepted accounting standards and procedures, showing income
and expenditures in connection with the operation and maintenance of the
Properties and Owner's
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business, such that any accounts payable, other obligations, cash, accounts
receivable, and other assets pertaining thereto can be identified and the amount
determined at all times. Owner shall have the right at any time, through its
representatives, to inspect any books and records of Manager which in its
opinion may verify the financial or monthly reports, including, but not limited
to, all checks, bills, vouchers, statements, cash receipts, correspondence,
leases, subleases and all other books and records in connection with the
management of the Properties.
4.15 Manager shall prepare and deliver to Owner (i) such financial reports
and statements as Owner may reasonably require and (ii) data and information
reasonably necessary for compliance with the requirements and requests of the
Securities and Exchange Commission. Notwithstanding the foregoing, Manager may
designate third party professionals to assist in the preparation of the
foregoing items at Owner's cost and expense, as Manager may deem necessary.
4.16 Manager shall provide Owner with such general support services as are
reasonably requested by Owner, including without limitation, general accounting,
bookkeeping and back office support services.
4.17 Manager shall, to the extent necessary, refer all matters requiring
legal or accounting services to qualified professionals approved by Owner;
4.18 Manager shall ▇▇▇▇ or cause to be billed all Tenants and occupants for
all rent and other charges and when and if directed by Owner, serve notices upon
tenants to quit and surrender their premises.
4.19 Manager shall maintain and submit to the Owner, a record of all
complaints of tenants and consider, and when reasonable and/or when directed by
Owner attend to such complaints.
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4.20 Manager shall cause to be prepared and filed when necessary forms for
unemployment insurance, withholding and social security taxes and all other tax
and other forms relating to employment and the maintenance and operation of the
Properties and Owner's business required by and federal, state or municipal
authority.
4.21 Manager shall prepare and submit annually to Owner for its approval an
operating budget setting forth anticipated income and expenses for the ensuing
fiscal year.
4.22 Manager shall ascertain the assessed valuation for the Properties and
after consultation with and approval by Owner, institute and prosecute with
attorneys approved by Owner, tax certiorari proceedings.
4.23 Manager shall use its reasonable efforts to keep the space rented to
desirable tenants on such terms as may be approved by Owner. The Manager is
authorized to enlist the services of outside brokers on behalf of the Owner in
connection with the rental of such space; provided, however, that any fees due
such outside brokers shall be paid by Owner and the use of such outside brokers
shall not affect Manager's right to receive Leasing Commissions pursuant to
Section 3A of this Agreement.
4.24 Manager may generally do such other acts, not contrary to the intent
of the provisions hereof, as it deems necessary or desirable for the proper
performance of its duties hereunder.
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5. COSTS AND EXPENSES:
5.1 Owner shall pay for all ordinary and necessary expenses of the
Properties, including, without limitation, the following:
(i) all direct payroll and benefits for on-site Owner employees;
(ii) all maintenance repairs to the Properties;
(iii) all utilities;
(iv) all taxes, principal and interest on all loans secured by the
Properties,
(v) insurance, professional services; and
(vi) all independent contractors (e.g., carpenters, electricians,
landscaping etc.) who are employed to render services at the
Properties.
5.2 Subject to Section 10 hereof, Manager shall not be liable to any third
parties for debts, liabilities or obligations of the Properties or arising in
the course of business of the Properties or by virtue of its management,
supervision, control or operation of the Properties.
6. RELATIONSHIP OF THE PARTIES: All duties to be performed by the Manager
under this Agreement shall be for and on behalf of Owner, in the name of Owner
and for Owner's account. In taking any action pursuant to this Agreement,
Manager shall be acting as Owner's agent. This Agreement shall not be construed
to create a partnership, joint venture, employer-employee, or any other
relationship by and between Owner and Manager other than that of principal and
agent. Manager shall not bear any portion of the losses, costs or expenses from
the operation of the Properties nor shall it be entitled to any of the profits
therefrom.
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7. TERMINATION:
7.1 This Agreement shall immediately terminate, at Owner's option, upon
delivery of written notice thereof to Manager, at any time after: (a) all or
substantially all of the Properties are sold, condemned or the improvements
thereon are destroyed (if destroyed, the termination shall occur only if Owner
decides not to rebuild), (b) Manager is dissolved, becomes insolvent or is
adjudicated bankrupt or makes a general assignment of its assets for the benefit
of its creditors, or (c) Manager commits gross negligence or willful misconduct
in the performance or nonperformance of its duties hereunder. In addition, Owner
shall have the right to terminate this Agreement at any time upon thirty (30)
days written notice to the Manager in the event that Owner elects to have the
services performed by the Manager pursuant to this Agreement performed by the
Owner's own employees (i.e., to perform such management functions on an
"in-house" basis). In the alternative, Owner may elect to have certain services
performed by the Manager pursuant to this Agreement performed on an "in-house"
basis without termination of this Agreement but rather with an adjustment of the
Management Fees payable hereunder.
7.2 Upon termination of this Agreement, it is agreed that: (a) all of the
books and records in the possession of Manager pertaining to the operation of
the Properties, together with any other property of the Owner in Manager's
possession, shall be immediately delivered to Owner, and (b) the agency created
hereby shall immediately cease, and Manager shall have no further right to act
for Owner.
8. GRANT OF OPTIONS: In connection with the services to be provided
hereunder, the Company agrees to grant to the Manager or its designee or
designees options issued pursuant to the Company's 1997 Stock Option and
Long-Term Incentive Plan (the "Option Plan") to purchase 54,400 shares of the
Company's Common Stock, par value $.01 per
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share, at an exercise price of $50.00 per share, subject to re-pricing in the
event of a public offering or certain private offerings of the Company's Common
Stock at the per share offering price. The options will be granted pursuant to
the terms and conditions of the Option Plan and shall expire ten (10) years from
the date of the grant. The options shall vest and become immediately exercisable
over three (3) years with one-third (1/3) of the shares vesting on each of the
first, second and third anniversaries of the date of the grant. In the event
that any option or a portion thereof expires or terminates for any reason
without having been exercised or vested in full, the underlying shares covered
by such option shall be available for future grants under the Option Plan.
9. ASSIGNMENT: Except as herein provided, neither this Agreement nor any
right pursuant hereto or interest herein shall be assignable by Manager or
Owner.
10. INDEMNIFICATION: Owner agrees to indemnify, defend and save Manager
harmless from any loss, cost, damages, liability, penalties or expenses,
statutory or otherwise arising from third party claims (including reasonable
attorney fees and costs incurred by Manager in the defense or prosecution
thereof) in connection with or arising from this Agreement or with the operation
and management of the premises, and from liability for injuries suffered by
Owner's officers, directors, agents and employees or any other persons on or
about the premises, excluding Manager's employees or Manager,; provided,
however, that the indemnification provisions set forth in this Section 10 shall
not apply to any such loss, cost, damage, liability, penalty or expense to the
extent it is found in a final judgment by a court of competent jurisdiction to
have resulted directly from the gross negligence or willful misconduct of
Manager. Owner agrees that Manager shall not be liable for any error of judgment
or for any mistake of fact or of law, or for anything which it may do or refrain
from doing hereunder,
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except in cases of willful misconduct, gross negligence, or willful failure to
comply with the terms of this Agreement. Owner shall cause Manager to be named
as a named insured under all policies of liability insurance maintained by Owner
against claims arising at the Properties.
If any action, proceeding, or investigation is commenced, as to which
Manager proposes to demand such indemnification, it shall notify Owner with
reasonable promptness; provided, however, that any failure by Manager to notify
Owner shall not relieve Owner from its obligations hereunder except to the
extent that the Owner's ability to defend itself against such action,
proceeding, or investigation is actually, materially prejudiced as a result of
such lack of reasonably prompt notification. If Manager shall seek
indemnification under this Section 10, Owner, in the case of a third party claim
brought against Manager, shall be entitled to participate therein and, to the
extent that it wishes, to assume and direct the defense and settlement thereof
with counsel reasonably satisfactory to Manager. After notice from Owner to
Manager of its election to assume and direct the defense and settlement of a
third party claim brought against Manager, Owner shall not be liable to Manager
(or any of its affiliates) under this Section 10 for any legal or other expenses
subsequently incurred by Manager in connection with the defense thereof other
than reasonable costs of investigation; except that Manager shall have the right
to employ counsel to represent it if, in its reasonable judgment, it is
advisable for Manager to be represented by separate counsel, and in that event
the fees and expenses of such separate counsel shall be paid by Manager.
Notwithstanding the foregoing provisions of this Section 10, the Owner shall
not, without the prior written consent of Manager, effect any settlement of any
pending or threatened proceeding in respect of which Manager is, or with
reasonable foreseeability, could have been a party and indemnity could have been
sought hereunder by
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Manager for a third party claim brought against Manager, unless such settlement
includes an unconditional release of Manager from all liability arising out of
such proceeding.
11. NON-SOLICITATION: Manager agrees that during the Initial Term and for
an additional one (1) year commencing immediately thereafter, Manager shall not,
directly or indirectly, solicit any of the non-clerical employees, agents or
independent contractors of Owner, its subsidiaries or its affiliates to end
their relationship with Owner, its subsidiaries or its affiliates, it being
understood that Owner shall have the right to hire employees of Manager.
12. BINDING: This Agreement shall inure to and be binding on all the
parties, their estates, heirs, personal representatives and assigns.
13. HEADINGS: The article and section headings in no way define, limit,
extend or interpret the scope of this Agreement, or any particular article or
section.
14. NUMBER: When the context in which the words are used in this Agreement
indicates that such is the intent, word in singular number shall include the
plural and vice-versa.
15. VALIDITY: If any provision of this Agreement is held to be invalid, the
same shall not affect in any respect whatsoever the validity of the remainder of
this Agreement.
16. AMENDMENTS: This Agreement may be amended only by a written instrument
signed by all parties hereto.
17. ENTIRE AGREEMENT: This Agreement contains the entire agreement between
the parties hereto with respect to the matters covered hereby, and supersedes
all prior and contemporaneous oral and written arrangements and understandings
between the parties with respect to such matters. No other agreement, statement,
or promise made by either
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party hereto with respect to the matters covered hereby which is not contained
herein shall be binding or valid.
18. GOVERNING LAW: This Agreement shall be construed in accordance with the
laws of the State of New York without giving effect to the principles of
conflicts of laws thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
MANAGER: Philips International Holding Corp.
By: _____________________________
Name:
Title:
OWNER: Philips International Realty, L.P.
By: _____________________________
Name:
Title:
Philips International Realty Corp.
By: _____________________________
Name:
Title:
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