EXHIBIT 10.23
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MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "AGREEMENT") is made and entered into as of
February 17, 1994, by and between SANTA ANITA REALTY ENTERPRISES, INC., a
Delaware corporation ("OWNER"), and PACIFIC GULF PROPERTIES INC., a Maryland
corporation ("MANAGER").
RECITALS
A. Owner is the owner of the real properties, together with all
improvements now or hereafter constructed thereon, described on EXHIBIT A
attached hereto (individually, a "PROPERTY" and, collectively, the
"PROPERTIES").
B. Immediately prior to the formation of Manager and the transfer by
Owner to Manager of ownership of certain properties, certain of the executive
and other staff of Manager were employed by Owner and, in such capacity, were
engaged in the management and operation of the Properties.
C. Certain personnel in the employ of Owner engaged in the management of
the Properties will remain in Owner's employ.
D. Certain of the Properties are managed by unrelated joint venture
partners of Owner pursuant to the terms of the partnership or joint venture
agreements with such parties.
E. To assist Owner in the transition of management and operation of the
Properties, Manager has agreed to provide certain interim management functions
in connection with the Properties on behalf of Owner, including maintaining the
books and records of Owner and supervising Owner's Employees in connection with
management and operation of the Properties, upon the terms and conditions set
forth herein.
NOW THEREFORE, Owner and Manager agree as follows:
ARTICLE 1
AGENCY
Owner hereby appoints Manager as the manager of the Properties, and Manager
hereby accepts such appointment, upon the terms set forth herein. This
appointment is subject and subordinate to any existing management agreements
with any unrelated third party for any of the Properties (an "EXISTING
MANAGER"). The parties agree that certain employees of Owner currently engaged
in management of the Properties shall remain employees of Owner, and shall
remain engaged in their respective capacities, but shall be subject to the
supervision and direction of Manager. These employees are identified on EXHIBIT
C attached hereto (the "OWNER'S EMPLOYEES").
ARTICLE 2
TERM OF AGREEMENT
The term of this Agreement (the "TERM") shall commence on February 18, 1994
(the "COMMENCEMENT DATE") and shall continue for a period of one (1) year
thereafter, unless sooner terminated as provided in Article 3 below.
ARTICLE 3
TERMINATION
3.1 TERMINATION FOLLOWING SALE OF A PROPERTY. In the event Owner
sells, conveys, exchanges or otherwise transfers a Property, Owner may elect to
terminate this Agreement as to such
Property by written notice to Manager, with such termination to be effective
concurrently with such transfer. The termination of this Agreement pursuant to
this Section 3.1 with respect to any Property shall not alter the effectiveness
of this Agreement with respect to any other Property.
3.2 TERMINATION WITH NOTICE. Owner shall have the right to terminate
this Agreement for any reason during the term hereof upon thirty (30) days prior
written notice to Manager.
3.3 TERMINATION OF PARTICULAR DUTIES. Owner shall have the right to
terminate this Agreement as to any of the particular duties of Manager set forth
herein upon ten (10) days prior written notice to Manager. The termination of
any particular duties of Manager under this Agreement pursuant to this Section
3.3 shall not alter the effectiveness of this Agreement with respect to any
other duties of Manager set forth herein.
3.4 FINAL ACCOUNTING. Upon termination of this Agreement with
respect to any Property, Manager shall deliver to Owner:
(a) a final accounting, setting forth the balance of income and
expenses of such Property as of the date of termination, to be delivered within
thirty (30) days after such termination;
(b) any balance of funds of Owner or tenants applicable to such
Property which are in the possession or control of Manager, to be delivered upon
the effective date of such termination; and
(c) all records, contracts, leases, receipts for deposits, unpaid
bills, keys, paid invoices, tenant correspondence files and other papers or
documents which pertain to such Property which are in the possession or control
of Manager, to be delivered no later than the date of such termination. Manager
may, at its expense, retain copies of any of the foregoing documents (excluding
keys) for its records.
3.5 CONTINUED OBLIGATIONS OF OWNER. Upon the termination of this
Agreement with respect to any Property for any reason, Owner shall remain
obligated to Manager for any unpaid Fees earned by Manager pursuant to Section
10.1 through the date of termination, which Fees shall be paid to Manager within
twenty (20) days after the effective date of such termination.
ARTICLE 4
BUDGETS, ACCOUNTING AND REPORTING
4.1 BUDGET. A budget for each Property and for all combined
operations of Owner for the period commencing on the Commencement Date and
ending on December 31, 1994, has been previously prepared by Manager and
approved by Owner. With respect to the calendar year beginning on January 1,
1995, Manager shall assist Owner in the preparation of a proposed budget for
each Property for the promotion, operation, repair and maintenance of such
Property and for all combined operations of Owner for the forthcoming year
commencing on January 1 and ending on December 31 (the "APPROVED BUDGET"). Each
proposed budget shall include a current year forecast of operating revenues and
expenses for each applicable Property and for all combined operations of Owner.
Owner may, from time to time, upon written notice to Manager, modify the
discretionary components of any Approved Budget.
4.2 OPERATION IN ACCORDANCE WITH BUDGET. Manager shall use its best
efforts to assist Owner in the operation of the Properties so that the actual
costs of maintaining and operating each Property do not exceed the amounts
agreed upon in the Approved Budget. Any material change to an Approved Budget
which are within Manager's reasonable control shall be subject to the prior
written approval of Owner in its sole discretion. All expenses must be charged
to the proper account on an
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Approved Budget and no expense may be classified or reclassified for the purpose
of avoiding an excess in the annual budgeted amount of any accounting category.
Manager shall not, without the prior written approval of Owner (a) disburse any
amounts attributable to items not reflected in an Approved Budget, except in the
case of an emergency situation threatening imminent injury to persons, damage to
property or interruption of essential services to tenants, or (b) make any
expenditure which will cause either a total Approved Budget to be exceeded or
the amounts allocated to the any individual category in such Approved Budget to
be exceeded.
4.3 BOOKS OF ACCOUNT. Manager shall establish and maintain adequate
and separate books and records for each Property with entries supported by
supporting documentation sufficient to allow Owner to ascertain their accuracy.
Unless otherwise directed by Owner, such books and records shall be maintained
by Manager and made available to Owner at any time upon request of Owner.
Manager shall maintain and safeguard such books and records at Manager's office
or at such other location as may be approved by Owner.
4.4 FINANCIAL REPORTS.
(a) MONTHLY PROPERTY REPORTS. Manager shall prepare and deliver to
Owner no later than the thirtieth (30th) day following each calendar month, in
customary form, a statement of income and expenses for each Property for the
preceding month, prepared on a cash basis and accompanied by supporting
summaries of adjusting journal entities, bank reconciliations applicable to the
most recent statements prepared by the banks handling the funds of such
Property, an analysis of prepaid rent, if any, for such Property and such other
financial statements or reports as Owner may reasonably require. Manager shall
notify Owner, on a monthly basis, of all rental arrearages that in its judgment
are properly written off as uncollectible.
(b) MONTHLY CORPORATE REPORTS. Manager shall prepare and deliver to
Owner no later than the thirtieth (30th) day following each calendar month, in
customary form, a statement of profit and loss and a balance sheet for all
Owner's operations for the preceding month, prepared on an accrual basis in
accordance with generally accepted accounting principles.
(c) ANNUAL REPORTS. Manager shall prepare and deliver to Owner no
later than May 1, 1994, in customary form, a statement of profit and loss and a
balance sheet for all Owner's operations for the preceding year, prepared on an
accrual basis in accordance with generally accepted accounting principles. In
addition, no later than April 1, 1994, Manager shall prepare customary work
sheets and schedules for use by Owner's independent auditors in the preparation
of the annual audited financial statements of Owner.
(d) CORPORATE FILINGS. Manager shall assist Owner in the preparation
of all filings required under applicable federal and state securities laws in
connection with Owner's operations, including Owner's annual 10-K and quarterly
10-Q reports, in such time as to ensure the timely and complete filing of such
reports and information.
(e) EXTENSION OF TIME. The time for performance by Manager of any
duty imposed by this Section 4.4 shall be extended for any period of time
attributable to delay in obtaining required information or reports from any of
the Existing Managers.
4.5 SUPPORTING DOCUMENTATION. As additional supporting documentation
for the financial statements and reports required under Section 4.4, to the
extent maintained by Manager at Owner's request, if requested by Owner, Manager
shall make available to Owner with respect to each Property, (a) all bank
statements and bank deposit slips; (b) detailed cash receipts and disbursement
records; (c) detailed trial balance for receivables and payables and billed and
unbilled revenue items; (d) paid
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invoices; (e) appropriate details of accrued expenses and property records; and
(f) information necessary for preparation of Owner's tax returns, including a
description and statement of amounts expended in connection with repairs,
capital improvements, taxes, leases and professional fees. In all events,
Manager shall provide to Owner supporting documentation for time charges of
Manager's employees engaged in providing services under this Agreement.
4.6 TAX RETURNS OF OWNER. Manager shall assist Owner in the
preparation of all federal and state income tax returns required in connection
with Owner's operations.
ARTICLE 5
OWNER'S RIGHT TO AUDIT
5.1 RIGHT TO AUDIT. Owner, or its designees, may examine all books,
records and files maintained by Manager in connection with the Properties, if
any. Owner may perform any audit or investigation relating to Manager's
activities in connection with the Properties.
ARTICLE 6
LEASING AND SALES ACTIVITIES
6.1 MANAGER'S LEASING AND SALES OBLIGATIONS. To the extent such
activities are not properly within the purview and responsibility of an Existing
Manager for a Property, Manager shall supervise the efforts of Owner's Employees
to lease or, as Owner may from time to time direct, sell each of the Properties.
Except for the Fee set forth in Section 10.1, Manager shall receive no leasing
or sales fee or commission. Manager's obligations in connection with leasing
and sales of the Properties, to the extent such activities are not properly
within the purview and responsibility of an Existing Manager for a Property,
shall include the following:
(a) Manager shall assist Owner in the hiring of third party brokers
or leasing agents to undertake the rental of all rental space within the
Properties which are vacant during the term of this Agreement.
(b) Manager shall supervise and assist Owner's Employees in
connection with negotiation of renewals of leases with existing tenants in any
of the Properties.
(c) In leasing any portion of any Property, Manager shall utilize
only a standard lease form approved by Owner for such type of property, with no
material modifications thereto, and shall submit recommended leases to Owner for
execution, accompanied by a summary of all material deviations from the approved
standard form of lease for the Property. Manager shall require each prospective
tenant to submit financial information sufficient to allow Manager to verify the
ability of such prospective tenant to perform its obligations under its lease.
(d) Manager shall from time to time, but not less often than once per
calendar quarter, submit to Owner, for its approval, recommended rental rates
for each Property. Owner shall, at its option, give written notice of its
approval of such recommendations or of such other rental rates which Owner
desires to establish for any Property or Properties. The failure by Owner to
notify Manager, in writing, of its approval or disapproval of such recommended
rental rates shall be deemed to be Owner's approval thereof. In no event shall
Manager deviate from the rental rates established by Owner for the Properties,
unless approved by Owner.
(e) Manager shall assist Owner in selling all or any portion of any
Property as directed by Owner, including the hiring of third party brokers or
sales agents in connection with such proposed sales. Manager shall assist or,
if requested by Owner, act as Owner's representative, in
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negotiating the terms of such sale; provided, however, that the final terms of
any such sale, and the form of the purchase agreement, shall be subject to
Owner's approval and execution.
ARTICLE 7
MANAGEMENT OF PROPERTIES
7.1 DUTIES OF MANAGER; STANDARDS. To the extent such activities are
not properly within the purview and responsibility of an Existing Manager for a
Property, Manager shall supervise Owner's Employees in the management and
maintenance of the Properties in an efficient and professional manner consistent
with the standards currently in effect for such Property and in accordance with
recognized standards of the property management industry and in compliance with
such standards and practices as are prevalent in the geographic area where the
applicable Property is located, having due regard for the age and physical
condition of such Property. In addition, Manager shall review and advise Owner
in respect of management, leasing and operation of each Property managed by an
Existing Manager, including review and analysis of reports prepared by such
Existing Manager.
7.2 COLLECTION OF INCOME. Manager shall collect and identify, or
assist Owner's Employees in the collection and identification of, all rental
income and other income due Owner from services provided to tenants or the
public, including the use of parking, storage, and vending or any other
machines. All funds received by Manager for or on behalf of Owner shall be
deposited in a bank designated by Owner in the applicable Revenue Account.
7.3 PROPERTY MAINTENANCE. Manager shall supervise Owner's Employees
to ensure the making of all ordinary repairs and alterations of the Properties,
subject to and within the limitations of the Approved Budget for the applicable
Property.
7.4 CAPITAL IMPROVEMENTS. Manager shall supervise Owner's Employees
in connection with all capital improvements to the Properties pursuant to plans
and specifications approved by Owner, as are included in the applicable Approved
Budget or are otherwise approved by Owner, as well as all remodeling and
refurbishing of tenant premises as approved by Owner in connection with the
requirements of tenant leases. Manager shall make recommendations, select
contractors and follow such bid procedures as are required by Owner in writing
from time to time and shall supervise all such work to obtain compliance with
contract requirements and applicable law.
7.5 MAINTENANCE. Manager shall supervise Owner's Employees to ensure
that all required utility services and other operation, landscaping and
maintenance services are provided to the Properties. Manager shall supervise
Owner's Employees to ensure the purchase and maintenance at or for each Property
of all necessary supplies. Owner shall be credited with any rebates, refunds,
allowances and discounts allowed to Manager in connection with the purchase of
such supplies and services.
7.6 SERVICE CONTRACTS. All contracts for services or supplies in
connection with any of the Properties shall be reviewed and recommended for
execution by Manager, and shall include a provision for early termination in the
event of a sale or exchange of a Property by Owner. Manager shall advise Owner
if any recommended contract which would cause the total Approved Budget or the
amounts allocated to major categories to exceed the limits set forth in the
Approved Budget. If directed by Owner, Manager shall execute such contracts on
behalf of Owner as its attorney-in-fact.
7.7 PAYMENT OF EXPENSES. If requested by Owner, Manager shall pay
from the applicable Operating Account all operating expenses of the Properties,
and all bills for payments due under mortgages and ground leases with respect to
each Property, all real estate, personal property and improvement taxes and
assessments due with respect to each Property and insurance premiums for
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insurance coverage carried by Owner with respect to each Property. Owner shall
be responsible for prosecuting the appeal of any property tax assessment for any
Property and the payment of all costs incurred in connection therewith;
provided, however, that if requested by Owner, Manager shall assist Owner in
connection with any such appeal. Notwithstanding the foregoing, Manager's
responsibilities under this Section 7.7 shall not extend to matters requiring
any expenditure of funds unless such funds are provided by Owner.
7.8 NOTICES. Subject to the other provisions of this Agreement, at
Owner's expense, Manager shall use its best efforts to advise Owner of all
actions required to comply with all Federal, State and municipal laws,
ordinances, regulations and orders related to the leasing, use, operation,
repair and maintenance of the Properties, including state or federal fair
housing laws, rules and regulations, and the rules, regulations or orders of the
applicable local Board of Fire Underwriters or other similar body. Manager
shall, if requested by Owner, direct and supervise the prompt cure of any
violation of any such law, ordinance, rule, regulation or order, at Owner's
expense. Manager shall furnish to Owner, upon receipt by Manager, each notice
or order affecting a Property, including any notice from any taxing or other
governmental authority and notice of violation of any requirement or order
issued by any Board of Fire Underwriters or other similar body against a
Property or Owner, any notice of default or otherwise from the holder of any
mortgage or deed of trust on, or any notice of renewal, termination or
cancellation of any insurance policy for, a Property. Notwithstanding the
foregoing, Manager's responsibilities under this Section 7.8 shall not extend to
matters requiring the expenditure of funds unless such funds are provided by
Owner.
7.9 PERMITS AND LICENSES. Manager shall, at Owner's expense, arrange
for the obtaining and renewal of all business licenses affecting the Properties.
7.10 CONSULTANTS. Manager shall, at Owner's expense, engage counsel
and cause such legal proceedings to be instituted and prosecuted in an
expeditious manner as may be necessary to enforce payment of rent and compliance
with leases with respect to, or to dispossess tenants from, any Property.
Manager shall use legal counsel approved by Owner to institute such actions and
all settlement negotiations.
7.11 FINANCING OF PROPERTIES. Manager hereby agrees, as directed by
Owner, to act as Owner's representative in negotiations with financial
institutions and other lenders in connection with the acquisition, negotiation
and administration of financing for any Property. Manager agrees that, with
respect to the Medical Office Building identified on EXHIBIT A, the foregoing
activities by Manager shall be at no cost to Owner. Manager further agrees to
assist Owner in any negotiation of renewals, extensions or new bank lines of
credit for Owner's operations.
7.12 ARCADIA PROPERTY. If requested by Owner, Manager shall assist
Owner in the preparation and analysis of a plan of development for the Property
(the "Arcadia Property") set forth on EXHIBIT B hereto.
ARTICLE 8
BANK ACCOUNTS
8.1 REVENUE ACCOUNT. Manager shall deposit all income and other
funds collected by Manager, if any, from the operation of the Properties in a
special bank account established by Owner (the "REVENUE ACCOUNT") in the name of
Owner or as Owner may designate. Manager shall have no authority to withdraw
funds from the Revenue Account.
8.2 OPERATING ACCOUNT. Owner shall establish a bank account with
respect to each or all of the Properties, which account (the "OPERATING
ACCOUNT") shall be used for the payment of all costs and
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expenses of Owner in connection with the Properties. Manager shall have the
authority to withdraw funds from the Operating Account to fulfill its
obligations under this Agreement, but shall otherwise have no right, title or
interest in such funds. Following written notification from Manager of projected
cash requirements for the respective Property, Owner shall maintain in the
Operating Account an amount sufficient to pay all budgeted expenses for each
month in a timely manner. Manager shall pay from the Operating Account the
operating expenses of the respective Property and any other required payments
applicable to such Property, as set forth in this Agreement.
8.4 SECURITY DEPOSIT ACCOUNT. If applicable law requires a
segregated account for tenant security deposits, Manager shall advise Owner who
shall open with respect to the Properties a separate interest bearing account
(the "DEPOSIT ACCOUNT") in Owner's name at a bank selected by Owner. Manager
shall deposit all security deposits which it receives on behalf of Owner, if
any, in such Deposit Account in accordance with applicable law. Manager shall
maintain for Owner detailed records of all security deposits for each Property.
8.5 CHANGE OF BANKS. Owner may change a depository bank or any
depository arrangements.
ARTICLE 9
INSURANCE
9.1 INSURANCE. Manager shall assist and advise Owner with respect to
obtaining all insurance required hereunder. All insurance described under this
Article 9 shall be maintained with insurance carriers licensed and approved to
do business in the state in which the applicable Property is located, having a
general policyholders' rating of not less than an "A" and financial rating of
not less than "X" in the most current Best's Insurance Report. In no event
shall such insurance be terminated or allowed to lapse prior to termination of
this Agreement or such longer period as may be specified herein, unless such
terminated or lapsed insurance is immediately replaced by substitute insurance
meeting the requirements of this Article 9. Each policy shall be subject to
approval by Owner.
9.2 REQUIRED POLICIES.
(a) WORKERS' COMPENSATION INSURANCE. Workers' Compensation
Insurance, including Employer's Liability, at a minimum limit approved by Owner,
for all Owner's Employees. Such insurance shall be in accordance with the
requirements of the applicable State Workers' Compensation Insurance Laws in
effect from time to time.
(b) COMPREHENSIVE GENERAL LIABILITY INSURANCE. Comprehensive General
Liability Insurance on an "occurrence" basis, with acceptable deductibles, with
a combined single limit for bodily injury and property damage approved by Owner,
covering Operations, Independent Contractors, Products and Completed Operations,
Contractual Liability, Broad Form Property Damage, Severability of Interest and
Cross Liability clauses, Personal Injury for Groups of Offenses A, B, and C with
exclusion (c) deleted, and Explosion, Collapse and Underground hazards (X,C,U).
The limits of liability of the insurance coverage specified in this Section
9.2(b) may be provided by any combination of primary and excess liability
insurance policies. The Comprehensive General Liability Insurance shall, on a
primary basis, name Manager as an additional insured for claims.
(c) AUTOMOBILE LIABILITY INSURANCE. Owned, hired and non-owned
automobile liability insurance covering all use of all automobiles, trucks and
other motor vehicles utilized by Owner, with a combined single limit for bodily
injury and property damage approved by Owner in each such policy.
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(d) COMPREHENSIVE CRIME INSURANCE. If requested by Owner, either a
policy of comprehensive crime insurance or a fidelity bond in an amount not less
than Fifty Thousand Dollars ($50,000) per occurrence for any of Manager's
employees and Owner's Employees who may handle funds or property in connection
with any of the Properties to provide coverage to protect Owner.
(e) ALL RISK INSURANCE. "All Risk" Insurance covering loss or damage
to the Properties, with such deductibles as Owner shall determine in its sole
discretion. arising out of Owner's negligence.
9.3 COMPLIANCE WITH REPORTING PROCEDURES. Manager shall comply with
Owner's accident reporting procedures, which may be modified from time to time
upon written notice to Manager; shall notify Owner immediately upon learning of
any loss, damage or injury occurring on any Property; and shall not take any
action (such as an admission of liability) which might bar Owner from obtaining
any protection afforded by any insurance policy of Owner or which might
prejudice Owner in defending a claim based on any loss, damage or injury.
Manager shall cooperate with Owner in the disposition of claims, including
furnishing all available information to Owner and Owner's insurers.
9.4 WAIVER OF SUBROGATION. Owner and Manager hereby waive all rights
against each other for damages caused by fire and other perils and risks to the
extent covered by policies of insurance required to be maintained hereunder.
9.5 INSURED. Each policy of insurance required hereunder shall
include the following definition of the named insured: "Santa Anita Realty
Enterprises, Inc., a Delaware corporation, and its officers, directors, agents,
servants, employees, divisions, subsidiaries, partners, shareholders and
affiliated companies, as named insureds." In addition, each policy of insurance
required hereunder shall include as a co-insured party Manager and its officers,
directors, agents, servants, employees, divisions, subsidiaries, partners,
shareholders and affiliated companies.
9.6 COSTS OF INSURANCE. The cost of all insurance required to be
carried by this Agreement shall be borne by Owner and any premiums for such
insurance paid by Manager, if any, shall be reimbursed by Owner to Manager
promptly upon demand. The premiums for Worker's Compensation Insurance
attributable to and covering Manager's officers, directors or personnel shall be
borne by Manager.
9.7 CLAIMS PROCEDURES. In the event an incident occurs or any legal
action or other claim (a "THIRD PARTY CLAIM") is asserted by a third party
against Owner as the result of an alleged injury or loss sustained on the
Properties during the term hereof, Manager shall, promptly after receipt of
actual knowledge of such Third Party Claim, investigate same and submit a report
to Owner in accordance with Owner's accident reporting procedures. All costs of
the investigation, settlement and defense of any claim, and any judgments and
other costs related to any such claim shall be borne by Owner, to the extent not
borne by the insurer.
9.8 INSURANCE AUDIT; REFUNDS. Any insurance dividends earned or
returned premiums applicable to the policies required to be carried hereunder at
Owner's expense shall be refunded by Manager to Owner immediately upon receipt
thereof.
ARTICLE 10
COMPENSATION OF MANAGER
10.1 FEES. Manager shall be paid monthly during the term hereof a
fee (the "Management Fee") equal to the hourly rate of each of Manager's
employees multiplied by the number of hours spent by such employees in
connection with the performance of Manager's duties hereunder during said month,
except to the extent expressly provided otherwise in this Agreement. The
applicable hourly rates are
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set forth on EXHIBIT D attached hereto. Manager's monthly reports shall identify
by Property the time spent by each of Manager's employees in performing its
duties under this Agreement.
10.2 PAYMENT. The Fee payable pursuant to Section 10.1 shall be
calculated and paid monthly and such amounts shall be shown in Manager's
submission of its monthly accounting to Owner. Manager is hereby authorized to
debit the Fee directly from the Operating Account. In the event there shall not
be sufficient funds in a respective Operating Account to pay the Fee, Owner
shall promptly pay to Manager, upon submission of Manager's monthly accounting,
any such amounts due to Manager.
10.3 FEE LIMITATION. Notwithstanding any provision to the contrary
contained in this Agreement, in the event that the loss incurred by Owner in
connection with the sale of certain real properties to Manager pursuant to the
terms of that certain Purchase and Sale Agreement dated as of November 15, 1993
(the "Purchase and Sale Agreement"), including the Baldwin Loss, exceeds Eleven
Million Dollars ($11,000,000), Manager shall have no right to receive any
compensation under the terms of this Agreement until such time as the Management
Fees due hereunder equal the amount by which the loss exceeds Eleven Million
Dollars (the "EXCESS LOSS"), and the Management Fees shall be payable only to
the extent that they exceed the amount of the Excess Loss. If Management Fees
are paid pursuant to this Article 10 prior to the time that the Excess Loss is
finally determined, Manager shall return any such Management Fees to the extent
the Excess Loss as determined exceeds the amount of any unpaid Management Fees.
For purposes of this Section 10.3, Baldwin Loss means a loss incurred by Owner
in connection with the sale of certain real properties to Manager pursuant to
the Purchase and Sale Agreement resulting from the failure of the Baldwin
Closing Date (as such term is defined in the Purchase and Sale Agreement) to
occur, but only if the conditions to such Baldwin Closing Date have been
satisfied, or, if they have not been satisfied, the failure to satisfy any such
condition is due to a material breach of a representation, warranty or covenant
under the Purchase and Sale Agreement by Manager.
ARTICLE 11
PAYMENT OF EXPENSES
11.1 NON-REIMBURSABLE COSTS. The following expenses or costs
incurred by or on behalf of Manager in connection with the management and
leasing of any Property shall be at the sole cost and expense of Manager and
shall not be reimbursed by Owner:
(a) cost of electronic data processing hardware and software,
including repair and maintenance expenses related thereto, located at Manager's
office and used for preparation of reports, information and returns to be
prepared by Manager under the terms of this Agreement; and
(b) cost of electronic data processing provided by computer service
companies for preparation of reports, information and returns to be prepared by
Manager under the terms of this Agreement.
ARTICLE 12
GENERAL PROVISIONS
12.1 INDEPENDENT CONTRACTOR. It is expressly understood and agreed
that Manager will act as an independent contractor in the performance of its
duties and responsibilities set forth in this Agreement. No provisions
hereunder shall be intended to create a partnership or a joint venture between
Owner and Manager with respect to any Property or otherwise, and neither party
shall have the power to bind or obligate the other party, except as expressly
set forth in this Agreement.
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12.2 INDEMNIFICATION. Owner hereby agrees to indemnify, defend and
hold Manager and its officers, directors, agents, servants, employees,
divisions, subsidiaries, partners, shareholders and affiliated companies
(collectively, the "INDEMNIFIED PARTIES") harmless from and against all damage,
loss, liability, claim or expense incurred by reason of the performance of
Manager's obligations and duties under and in accordance with the terms and
conditions of this Agreement.
Owner further agrees to indemnify, defend and hold the Indemnified
Parties harmless from and against all damage, loss, liability, claim or expense
arising out of or incurred by the Indemnified Parties as a result of (i) the
past, present or future presence of any Hazardous Substance on, under or above
the Property, whether by means of a release of Hazardous Substance upon the
Property or the migration of Hazardous Substances from adjacent properties, and
(ii) any violation of any law, rule or regulation, whether now existing or
hereafter established relating to Hazardous Substances or the environment, and
relating to the Property or the activities carried out upon the Property.
"HAZARDOUS SUBSTANCES" shall mean any chemical, substance, material, object,
condition, waste, living organism, or combination thereof which is or may be
hazardous to human health or safety or to the environment due to its
ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity,
radioactivity, mutagenicity, infectiousness, reproductive toxicity, or other
harmful or potentially harmful properties or effects, including, without
limitation, petroleum and petroleum products, asbestos, radon, polychlorinated
biphenyls, and all other chemicals, substances, materials, objects, conditions,
wastes, living organisms, or combinations thereof which are now listed, defined
or regulated in any manner by any law, rule or regulation protecting health or
the environment and based upon, directly or indirectly, such properties or
effects.
12.3 NOTICES. All notices, demands and reports provided for in this
Agreement shall be in writing and shall be personally served or sent by
certified mail, postage prepaid and return receipt requested, to the parties at
their respective addresses for notice set forth following their signatures to
this Agreement or to such other address as either may provide to the other by
written notice. For purposes of this Agreement, notices will be deemed to have
been "given" upon personal delivery thereof or three (3) business days after
having been deposited in the United States mail, postage prepaid and properly
addressed.
12.4 BROKERS. Manager shall cooperate with any leasing or sales
broker retained by Owner to permit the broker to exhibit the subject Property
during reasonable business hours. At Owner's request, Manager's duties shall
also include, but shall not be limited to, using diligent efforts to obtain, at
Owner's expense, tenant estoppel certificates from tenants within such Property.
12.5 ATTORNEYS' FEES. In any judicial action between the parties to
enforce any of the provisions of this Agreement or any right of any party under
this Agreement, regardless of whether such action or proceeding is prosecuted to
judgment and in addition to any other remedy, the unsuccessful party shall pay
to the prevailing party all costs and expenses, including reasonable attorneys'
fees (including fees and charges attributable to legal assistants or other non-
attorney personnel performing services under the supervision of an attorney),
incurred by the prevailing party.
12.6 ASSIGNMENT. Manager may not voluntarily or involuntarily,
directly or indirectly, sell, assign, hypothecate, pledge or otherwise transfer
or dispose of all or any portion of its interest in this Agreement to any third
party without the prior written consent of Owner, which may be withheld in
Owner's sole and absolute discretion. Any such attempted sale, assignment,
hypothecation, pledge or other transfer without such consent shall be void.
12.7 AMENDMENTS. All amendments to this Agreement shall be in writing
and executed by Owner and Manager.
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12.8 ENTIRE AGREEMENT. This Agreement and the Exhibits attached
hereto and made a part hereof comprise the entire agreement of the parties with
respect to the transaction described herein.
12.9 GOVERNING LAW. This Agreement is executed and shall be governed
by and construed in accordance with the laws of the State of California.
12.10 THIRD-PARTY DISPUTES. Should any claim, demand, action or
other legal proceeding arising out of matters covered by this Agreement be made
or instituted by any third party against a party to this Agreement, the other
party to this Agreement shall furnish such information and reasonable assistance
in defending such proceeding as may be reasonably requested by the party against
whom such proceeding is brought. The requesting party shall pay the reasonable
and customary expenses incurred by the other party in complying with any such
request.
12.11 CONFLICTS. Manager shall at all times disclose to Owner
conflicts of interest relating to the performance by Manager of its duties,
responsibilities and actions pursuant to this Agreement. Without limiting the
generality of the foregoing, Manager shall disclose any affiliation of Manager
with any vendor rendering services or supplying materials to any Property. Any
contract with such a vendor shall be entered into on an arms-length basis and
for fair market value. Manager shall disclose to Owner any conflict-of-interest
in connection with Manager's negotiations with prospective tenants or vendors of
any Property.
12.12 GIFTS. Manager agrees not to accept any "gift" from vendors
employed in connection with any Property, other than gratuities of nominal value
received in the ordinary course of business. Manager shall not, on Owner's
behalf or in connection with the services being rendered under this Agreement,
provide any "gift" to or otherwise entertain any "public official" or any other
person required under California law to file a Statement of Economic Interest.
The term "public official" means every member, officer, employee or consultant
of a state or local agency. The term "gift", as used herein, includes any
service or merchandise of any kind, discounts on merchandise or services, meals
and other entertainment expenses and all other transfers of cash or any other
item of value. Under no circumstances shall Owner be deemed to have waived the
provisions of this Section as to a specific gift unless the waiver is in writing
and signed by two (2) authorized officers of Owner.
12.13 CONFIDENTIALITY. Manager shall hold confidential any
information which Manager receives in connection with the performance of its
obligations hereunder and which concerns Owner or its operations or business and
shall not disclose all or any portion of such information to any third party,
except for such disclosures as are necessary to perform Manager's obligations
hereunder or are required by law, any governmental agency or by any proposed
lender or mortgagee of any Property.
12.14 SUBORDINATION TO MORTGAGES. Manager acknowledges and agrees that
it has no right, title or interest in any Property, and its rights hereunder are
expressly subordinate to the right, title and interest of the holder of any
mortgage or deed of trust encumbering any such Property, whether the lien of
such mortgage or deed of trust attaches to such Property before or after the
execution or effectiveness of this Agreement. Manager agrees to acknowledge any
assignment by Owner of the Property Income to any lender as security for a loan
by such lender to Owner. In the event that any Property is transferred as a
result of a foreclosure of any mortgage or deed of trust covering such Property
or pursuant to a deed in lieu of foreclosure, Manager may, at its sole option,
at any time thereafter, terminate this Agreement by written notice of
termination to the then owner of such Property.
12.15 HAZARDOUS SUBSTANCES.
(a) To the extent such activities are not properly within the purview
and responsibility of an Existing Manager for a Property, Manager shall take all
steps necessary or appropriate to supervise
11
Owner's Employees to: (i) ensure that spills or dumping of Hazardous Substances
that occur on any Property are reported to agencies and cleaned up in accordance
with applicable regulatory requirements; (ii) inform Owner immediately of any
spills or dumping of Hazardous Substances that occur on any Property; and (iii)
establish and maintain a recordkeeping system for information concerning
Hazardous Substances on any Property.
(b) In the event Manager discovers the existence of any Hazardous
Substances on any Property, Manager shall immediately notify Owner. Manager
shall immediately notify Owner of any notice received by Manager from any
governmental authority of any actual or threatened violation of any applicable
laws, regulations or ordinances governing the use, storage or disposal of any
Hazardous Substances and shall assist with Owner in responding to such notice
and correcting or contesting any alleged violation.
(c) If the presence, use or on-site or off-site disposal or transport
of Hazardous Waste on, to, under, from or about such Property results in any
spills or releases any injury to any person, or any injury or damage to such
Property, or if Manager, Owner, or any governmental entity reasonably suspects
that any such spills, injury or damage has occurred or is likely to occur,
Manager shall promptly: (i) notify Owner; (ii) if such spill, injury or damage
has occurred, assist Owner to obtain all permits and approvals necessary to
remove such Hazardous Waste or otherwise remedy any suspected problem; (iii) if
such spill, injury or damage has occurred, assist Owner in supervising the
removal of such Hazardous Substances and remedy any associated problems by
appropriate consultants or contractors, in accordance with applicable legal
requirements and good business practices; and (iv) if such spill, injury or
damage is likely to occur, assist Owner in taking all measures reasonably
necessary to prevent such spill, injury or damage.
(d) Manager shall have no authority or control to make decisions on
behalf of Owner concerning (i) the use of Hazardous Substances upon the
Property, (ii) the disposal of Hazardous Substances generated upon the Property
or that become located upon the Property, or (iii) the clean-up and abatement of
Hazardous Substances from the Property. All decisions concerning the foregoing
activities shall be made by Owner and any assistance that Manager provides to
Owner in implementing such decisions shall be solely administrative in nature.
12.16 PROPOSITION 65 COMPLIANCE. Manager shall supervise Owner's
Employees to assist Owner in complying with the terms of Section 25249.5 et seq.
of the California Health and Safety Code and all rules and regulations
promulgated pursuant thereto, as such statute, rules and regulations may
hereafter be amended ( "PROPOSITION 65"). Manager shall, promptly upon receipt
of knowledge thereof, notify Owner of the existence on the site of any Property
of any "hazardous substance" (as defined under Proposition 65), notice of the
existence of which has not been given to tenants of such Property.
12
IN WITNESS WHEREOF, Owner and Manager have executed this Management
Agreement as of the day and year first above written.
MANAGER:
PACIFIC GULF PROPERTIES INC.,
a Maryland corporation
By: /s/ GLENN L. CARPENTER
------------------------
Glenn L. Carpenter
President
Address for Notice:
363 San Miguel Drive
Suite 100
Newport Beach, CA 92660-7805
Attn: Glenn L. Carpenter
OWNER:
SANTA ANITA REALTY ENTERPRISES, INC., a Delaware corporation
By: /s/ GLENN L. CARPENTER
----------------------------
Glenn L. Carpenter
Its: President
Address for Notice:
285 West Huntington Drive
Post Office Box 808
Arcadia, CA 91066-0808
Attn: Stephen F. Keller
13
EXHIBIT A
DESCRIPTION OF THE PROPERTIES
REGIONAL SHOPPING CENTERS:
Santa Anita Fashion Park Property (approximately 73 acres) is leased to a
Acadia, California partnership (Anita Associates) in which Owner
holds a fifty percent (50%) limited partnership
interest. A 1,200,000 sq. ft. regional shopping
center was developed by and is managed by The
Hahn Company, on behalf of Hahn-UPI, the managing
partner of the partnership. The landlord's
interest in the ground lease is held by Owner.
Towson Town Center Property consists of a 950,000 sq. ft. regional
Towson, Maryland shopping center developed by a partnership (H-T
Associates) with The Hahn Company, in which Owner
holds a thirty-two and one-half percent (32.5%)
interest. The shopping center is managed by The
Hahn Company, as managing partner of the
partnership.
Joppa Associates Property is a 240,000 sq. ft. retail building
adjacent to the Towson Town Center. The Property
is owned by a partnership (Joppa Associates) with
The Hahn Company in which Owner holds a one-third
(33.33%) interest. The property is managed by The
Hahn Company, as managing partner of the
partnership.
SHOPPING CENTERS:
Yorba Linda, California Property consists of a 66,000 sq. ft.
neighborhood shopping center owned and managed by
Owner.
Orange, California Property consists of a 21,000 sq. ft.
neighborhood shopping center owned and managed by
Owner.
Encinitas, California Property consists of a 79,000 sq. ft.
neighborhood shopping center owned and managed by
Owner.
Phoenix, Arizona Property consists of a 25,000 sq. ft.
Tatum and Thunderbird neighborhood shopping center owned and managed
by Owner.
Phoenix, Arizona Property consists of a 31,000 sq. ft.
28th and Indian School neighborhood shopping center owned and managed
by Owner.
Phoenix, Arizona Property consists of a 74,000 sq. ft.
67th and Indian School neighborhood shopping center owned and managed
by Owner.
OFFICE BUILDINGS:
Santa Ana, California Property consists of a 166,000 sq. ft. office
Civic Center Plaza building owned by Owner.
Towers
A-1
Upland, California Property consists of a 37,000 sq. ft. office
building owned by Owner.
Medical Office Building Property consists of a 72,000 sq. ft. medical
office building owned by Owner.
INDUSTRIAL PARK:
Baldwin Industrial Park Property consists of 623,000 sq. ft. of leasable
Baldwin Park, California industrial space owned by Baldwin Industrial
Properties, Ltd., a limited partnership in which
Owner has a 50% interest. (Which property is
currently managed by William T. Grant
Corporation, the managing general partner of the
limited partnership.)
A-2
EXHIBIT B
ARCADIA PROPERTY
Those portions of Lots 1 and 5 of Tract 949 in the City of Arcadia, County of
Los Angeles, State of California as shown on map recorded in Book 17, Page 13 of
Maps, in the Office of the County Recorder of said County described as follows:
Beginning at the Southeast corner of Parcel Map No. 4625, as shown on map
recorded in Book 51, Page 50 of Parcel Maps in the Office of said County
Recorder, being a point on the North line of Huntington Drive, 195.00 feet in
width; thence along the Easterly and Northeasterly Boundary of said Parcel Map
as follows: North 3 degrees 53 minutes 00 seconds East 475.68 feet to the
beginning of a tangent curve concave to the East through a central angle of 15
degrees 31 minutes 48 seconds an arc distance of 325.26 feet; thence tangent to
said curve North 19 degrees 24 minutes 48 seconds East 534.43 feet to the
beginning of a tangent curve concave to the West and having a radius of 350.00
feet; thence Northerly and Northwesterly along said curve through a central
angle of 71 degrees 22 minutes 48 seconds an arc distance of 436.03 feet; thence
tangent to said curve North 51 degrees 58 minutes 00 seconds West 873.36 feet;
thence continuing along said boundary of Parcel Map No. 4626 North 66 degrees 58
minutes 00 seconds West 154.55 feet and North 51 degrees 58 minutes 00 seconds
West 437.83 feet to the most Northerly corner of said Parcel Map, being a point
on the Southeasterly line of Baldwin Avenue, 100.00 feet in width; thence
Northeasterly along said Southeasterly line of Baldwin Avenue, as it now exists,
to the intersection with the Westerly prolongation of the Southerly boundary
line of Tract No. 15318 as shown on map recorded in Book 427 pages 34 and 35 of
said maps, shown thereon as having a bearing of North 88 degrees 57 minutes 33
seconds: East; thence North 88 degrees 57 minutes 33 seconds East along said
Southerly boundary line to the angle point in the Southerly line of Lot 38 of
said Tract No. 15318; thence continuing along the boundary line of said Tract
No. 15318, and the Southerly boundary line of Tract No. 14940 as shown on map
recorded in Book 350, Pages 48 to 50 inclusive of said maps North 68 degrees 46
minutes 53" East 2265.62 feet to the most Easterly corner of Lot 81 of said
Tract No. 14940, being a point on the Southwesterly line of COLORADO PLACE;
thence South 30 degrees 33 minutes 16 seconds East 2171.20 feet along said
Southwest line of COLORADO PLACE, 80.00 feet in width, as it now exists, to the
beginning of a tangent curve therein, concave to the Northeast and having a
radius of 756.78 feet; thence Southeasterly along said curve 554.82 feet to the
intersection with the curved Northwesterly line of Huntington Drive, 80.00 feet
in width, said curve being concave to the Southeast having a radius of 995.37
feet; thence Southwesterly along said curve 607.48 feet, thence Southwesterly
along the Northwesterly line of said Huntington Drive, as it now exists, 2843.30
feet to the beginning of a tangent curve therein concave to the Northwest and
having a radius of 925.20 feet; thence Southwesterly and Westerly along said
curve 883.99 feet; thence Westerly along the Northerly line of said Huntington
Drive, as it now exists to the point of beginning.
Excepting therefrom Parcel 1 of Parcel Map No. 15852 as per map filed in Book
179, Pages 93 and 94 of Parcel Maps, records of said County.
ALSO EXCEPTING THEREFROM THE FOLLOWING PROPERTY (THE "DELETED PARCEL"):
ALL THAT PORTION OF LOT 5 OF TRACT NO. 949, IN THE CITY OF ARCADIA, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 17, PAGE 13 OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEASTERLY CORNER OF PARCEL 4 OF PARCEL MAP NO. 6374, AS
PER MAP FILED IN BOOK 89 PAGE 77 OF PARCEL MAPS, SAID CORNER ALSO LYING ON THE
NORTHERLY RIGHT-OF-WAY LINE OF HUNTINGTON DRIVE, 195.00 FEET IN WIDTH; THENCE
NORTHERLY ALONG THE EASTERLY LINE OF SAID PARCEL 4 OF PARCEL MAP 6374, NORTH 03
DEGREES 53 MINUTES 00 SECONDS EAST 150.00 FEET TO THE TRUE POINT OF BEGINNING.
B-1
THENCE CONTINUING NORTHERLY ALONG SAID EASTERLY LINE, NORTH 03 DEGREES 53
MINUTES 00 SECONDS EAST 242.38 FEET; THENCE DEPARTING FROM SAID EASTERLY LINE
NORTH 41 DEGREES 26 MINUTES 00 SECONDS EAST 40.33 FEET; THENCE NORTH 11 DEGREES
26 MINUTES 00 SECONDS EAST 355.84 FEET; THENCE NORTH 78 DEGREES 34 MINUTES 00
SECONDS WEST 32.04 FEET TO A POINT ON THE EASTERLY LINE OF SAID PARCEL 4 AND THE
BEGINNING OF A NON-TANGENT CURVE CONCAVE EASTERLY, HAVING A RADIUS OF 1200.00
FEET, FROM WHICH THE RADIAL LINE AT THE BEGINNING POINT BEARS NORTH 71 DEGREES
21 MINUTES 40 SECONDS WEST; THENCE NORTHERLY ALONG THE EASTERLY BOUNDARY OF
PARCELS 3 AND 4 OF SAID PARCEL MAP NO. 6374, THE FOLLOWING COURSES: ALONG THE
ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 00 DEGREES 46 MINUTES 28 SECONDS,
AN ARC DISTANCE OF 16.22 FEET TO A TANGENT LINE, NORTH 19 DEGREES 24 MINUTES 48
SECONDS EAST 534.43 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE
SOUTHWESTERLY, HAVING A RADIUS OF 350.00 FEET, NORTHWESTERLY ALONG SAID CURVE,
THROUGH A CENTRAL ANGLE OF 71 DEGREES 22 MINUTES 48 SECONDS, AN ARC DISTANCE OF
436.04 FEET TO A TANGENT LINE, AND NORTH 51 DEGREES 58 MINUTES 00 SECONDS WEST
106.76 FEET; THENCE LEAVING SAID EASTERLY LINE OF PARCEL 3 OF PARCEL MAP 6374,
SOUTH 78 DEGREES 34 MINUTES 00 SECONDS EAST 104.85 FEET TO THE BEGINNING OF A
TANGENT CURVE CONCAVE SOUTHWESTERLY, HAVING A RADIUS OF 350.00 FEET; THENCE
SOUTHEASTERLY ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 90 DEGREES 00 MINUTES
00 SECONDS, AN ARC DISTANCE OF 549.78 FEET TO A TANGENT LINE; THENCE SOUTH 11
DEGREES 26 NORTH 00 SECONDS WEST 1186.97 FEET TO THE BEGINNING OF A TANGENT
CURVE CONCAVE NORTHWESTERLY, HAVING A RADIUS OF 25.00 FEET; THENCE SOUTHWESTERLY
ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 82 DEGREES 26 MINUTES 00 SECONDS,
AN ARC DISTANCE OF 35.97 FEET TO A TANGENT LINE; THENCE NORTH 86 DEGREES 08
MINUTES 00 SECONDS WEST 181.99 FEET TO THE TRUE POINT OF BEGINNING. AN AREA
CONSISTING OF APPROXIMATELY 7.2 ACRES, MORE OR LESS.
UPON RECORDATION OF P.M. 23862, THE DELETED PARCEL WILL BE KNOWN AS:
PARCEL 4 OF PARCEL MAP 23862, IN THE CITY OF ARCADIA, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA.
Subject to Easements of Record.
B-2
EXHIBIT C
OWNER'S EMPLOYEES
John Goodwin - Property Manager - Shopping Centers
Julie Jones - Clerk Administration - Shopping Centers
Kyle McDonald - Property Manager - Office Buildings
Lina Wu - Property Accountant
Stan Pearson - Head Building Engineer - Office Buildings
Robert Ritchie - Building Engineer - Office Buildings
C-1
EXHIBIT D
MANAGER'S EMPLOYEES AND HOURLY RATES
Glenn L. Carpenter........ $175.00
Donald G. Herrman......... 87.00
Robert A. Dewey........... 61.00
Cecelia A. Consiglio...... 42.00
Wynne M. Fox.............. 28.00
Pamela L. Laipple......... 42.00
Jason J. Saito............ 37.00
Deborah D. Scott.......... 23.00
Cindy L. Smith............ 36.00
Mary Ann Spurbeck......... 29.00
D-1