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MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "MANAGEMENT AGREEMENT") is dated as
of July 14, 1999 and entered into by and between Lexington Acquiport Company,
LLC, a Delaware limited liability company (the "COMPANY"), and Lexington Realty
Advisors, Inc., a Delaware corporation (the "ASSET MANAGER").
WHEREAS, the Company owns or will own net-leased real estate
properties in the United States of America (collectively, the "PROPERTIES") and
owns or will own loans ("LSL LOANS") made to one or more limited liability
companies (each, an "LXP LLC") to finance a part of the purchase price for
net-leased real estate properties (each an "LSL PROPERTY") in the United States
of America being acquired by limited liability companies (each, a "SPECIAL
PURPOSE LLC") the sole member of which is a LXP LLC; and
WHEREAS, the Company desires to have the Asset Manager undertake the
duties and responsibilities hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Company and the Asset Manager
agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, capitalized terms
used in this Management Agreement shall have the meanings ascribed to such terms
in that certain Operating Agreement of Lexington Acquiport Company, LLC dated as
of even date herewith between Lexington Corporate Properties Trust, a Maryland
real estate investment trust, as a managing member ("LXP"), and The Comptroller
of the State of New York, as Trustee of the Common Retirement Fund, as a
non-managing member (the "FUND") (as such Operating Agreement may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof, the "OPERATING AGREEMENT").
2. OBLIGATIONS OF THE ASSET MANAGER. The Asset Manager shall perform
on behalf of the Company those duties and responsibilities of the Manager in
respect of the evaluation of Proposed Properties and the acquisition of Approved
Properties, and the evaluation of LSL Properties and the making of LSL Loans, as
contemplated by Section 3.6 of the Operating Agreement, and in respect of the
management of the Properties and LSL Loans, that may be delegated to the Asset
Manager pursuant to Section 3.1(b) of the Operating Agreement. With respect to
the management of the Properties, the Asset manager shall perform the duties and
responsibilities described in Appendix 1 attached hereto and made a part hereof.
With respect to the management of the LSL Loans, the Asset Manager shall perform
the duties and responsibilities described in Appendix 1 attached hereto and made
a part hereof. Additionally, the Asset Manager shall prepare or cause to be
prepared reports and statements as is, and in the manner, required by the
Operating Agreement. The Asset Manager shall maintain appropriate books of
account and records relating to services performed pursuant hereto, which books
of account and records shall be available for inspection by representatives of
the Company upon reasonable notice during normal business hours, and from time
to time or at any time requested by the Company, make reports to the Company of
the Asset Manager's performance of the foregoing services. In performing the
foregoing services, the Asset Manager shall not, and shall
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have no power or authority to, (i) bind the Company, or to enter into any
contract or other agreement in the name of or on behalf of the Company, unless
specifically authorized in writing to do so by the Company, (ii) amend, cancel
or alter any of the organizational documents of the Company, or (iii) do any act
not authorized pursuant to this Management Agreement, unless specifically
authorized to do so in writing by the Company or specifically authorized to do
so by the Operating Agreement. Any and all approvals required from the Company
pursuant to this Management Agreement may be given or withheld by the Company in
its absolute and sole discretion.
3. NO PARTNERSHIP OR JOINT VENTURE. The Company and the Asset
Manager are not partners or joint venturers with each other and the terms of
this Management Agreement shall not be construed so as to make them such
partners or joint venturers or impose any liability as such on either of them.
4. EMPLOYEES OF ASSET MANAGER. All persons engaged in the
performance of the services to be performed by the Asset Manager hereunder shall
be employees of LXP; provided, however, that, employees and officers of LXP may
also be employees and officers of the Company. All of the Asset Manager's
employees shall be covered by workers' compensation insurance in the manner
required by law.
5. LIMITATION ON THE ASSET MANAGER'S LIABILITY.
(a) Except as provided in Section 5(b) below, the Asset
Manager and its directors, officers and employees shall not be liable,
responsible or accountable in damages or otherwise to the Company or
either Member for (a) any loss or liability arising out of any act or
omission by the Asset Manager so long as any such act or omission did not
constitute (i) a breach of this Management Agreement or of the Operating
Agreement which breach had or has a material adverse effect on the Company
and, if capable of cure, is not cured within fifteen (15) days after
notice thereof is delivered to the Asset Manager by the Company, (ii)
gross negligence or willful misconduct or (iii) fraud or bad faith on the
part of the Asset Manager or (b) any acts or omissions by third parties
selected by the Asset Manager in good faith and with reasonable care to
perform services for the Company.
(b) Notwithstanding the limitation contained in Section 5(a)
above, the Asset Manager shall be liable, responsible and accountable in
damages or otherwise to the Company and the Fund for any act or omission
on behalf of the Company and within the scope of authority conferred on
the Asset Manager (i) which act or omission was negligent (including any
negligent misrepresentation) and violated any law, statute, regulation or
rule relating to Shares or any other security of LXP or (ii) to the extent
the Company or the Fund is charged with liability for, or suffers or
incurs loss, liability, cost or expense (including reasonable attorneys'
fees) as a result of, such act or omission and such act or omission was
negligent and related to Shares or such other security of LXP.
6. COMPANY'S PROFESSIONAL SERVICES. The Company may independently
retain legal counsel and accountants to provide such legal and accounting advice
and services as the Company shall deem necessary or appropriate.
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7. EXPENSES OF THE ASSET MANAGER AND THE COMPANY.
(a) The Asset Manager shall pay, without reimbursement by the
Company (i) the salaries of all of its officers and regular employees and
all employment expenses related thereto, (ii) general overhead expenses,
(iii) record-keeping expenses, (iv) the costs of the office space and
facilities which it requires, (v) the costs of such office space and
facilities as the Company reasonably requires, (vi) all out of pocket
costs and expenses incurred in connection with the management of the
Properties and the Company (other than reasonable and customary costs and
expenses of Third Parties retained in connection with the management of
the Properties and the Company) and (vii) costs and expenses relating to
Acquisition Activities as set forth in and limited by Section 3.6(f) of
the Agreement.
(b) The Asset Manager shall either pay directly from a Company
account or pay from its own account and be reimbursed by the Company for
the following Company costs and expenses that are incurred by the Company
or by the Asset Manager in the performance of its duties under this
Management Agreement or the Operating Agreement:
(i) Permitted Expenses;
(ii) all reasonable and customary costs and expenses
relating to Third Parties retained in connection with a Proposed
Property or an Approved Property or a LSL Loan as provided in
Section 3.6(f) of the Operating Agreement provided, that if for any
reason the Asset Manager, or any Affiliate of LXP or the Asset
Manager (instead of the Company or an SP Subsidiary) acquires title
to any Proposed Property or Approved Property, the Asset Manager
shall pay all of the costs and expenses incurred or to be incurred
in connection with such Proposed Property or Approved Property.
The Asset Manager shall not pay or be reimbursed by the Company for any
other cost or expense.
(c) Except as expressly otherwise provided in this Management
Agreement or the Operating Agreement, the Company shall directly pay all
of its own expenses, and without limiting the generality of the foregoing,
it is specifically agreed that the following expenses shall be borne
directly by the Company and not be paid by the Asset Manager:
(i) interest, principal or any other cost of money
borrowed by the Company;
(ii) fees and expenses paid to independent contractors,
appraisers, consultants and other agents retained by or on behalf of
the Company and expenses directly connected with the financing,
refinancing and disposition of real estate interests or other
property (including insurance premiums, legal services, brokerage
and sales commissions,
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maintenance, repair and improvement costs and expenses related to
the Properties); and
(iii) insurance as required by the Company.
8. INDEMNIFICATION BY THE COMPANY. The Company shall indemnify,
defend and hold harmless the Asset Manager by reason of any act or omission or
alleged act or omission arising out of the Asset Manager's activities as the
Asset Manager on behalf of the Company, against personal liability, claims,
losses, damages and expenses for which the Asset Manager has not otherwise been
reimbursed by insurance proceeds or otherwise (including attorneys' fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred by the Asset Manager in connection with such action, suit or proceeding
and any appeal therefrom, unless the Asset Manager (A) acted fraudulently, in
bad faith or with gross negligence or willful misconduct or (B) by such act or
failure to act breached any covenant contained in this Management Agreement,
which breach had or has a material adverse effect on the Company or either
Member and, if capable of cure, is not cured within fifteen (15) days after
notice thereof from the Company. Any indemnity by the Company under this
Management Agreement shall be provided out of, and to the extent of, Company
revenues and assets only, and no Member shall have any personal liability on
account thereof. The indemnification provided under this Section 8 shall (x) be
in addition to, and shall not limit or diminish, the coverage of the Asset
Manager under any insurance maintained by the Company and (y) apply to any legal
action, suit or proceeding commenced by a Member or in the right of a Member or
the Company. The indemnification provided under this Section 8 shall be a
contract right and shall include the right to be reimbursed for reasonable
expenses incurred by the Asset Manager within thirty (30) days after such
expenses are incurred.
9. TERMS AND TERMINATION. This Management Agreement shall remain in
force until terminated in accordance herewith. At the sole option of the
Company, exercisable in the Company's sole and arbitrary discretion, this
Management Agreement may be terminated at any time and for any reason
immediately upon notice of termination from the Company to the Asset Manager.
This Management Agreement shall automatically expire upon the completion of
dissolution or winding up of the Company pursuant to Section 9.2 of the
Operating Agreement or the removal or resignation of LXP as Manager. This
Management Agreement shall also terminate upon any of the following:
(a) The Asset Manager shall be adjudged bankrupt or insolvent
by a court of competent jurisdiction or an order shall be made by a court
of competent jurisdiction for the appointment of a receiver, liquidator or
trustee of the Asset Manager or of all or substantially all of its
property by reason of the foregoing, or approving any petition filed
against the Asset Manager for reorganization, and such adjudication or
order shall remain in force and unstayed for a period of 30 days.
(b) The Asset Manager shall institute proceedings for
voluntary bankruptcy or shall file a petition seeking reorganization under
the Federal Bankruptcy Code, for relief under any law for relief of
debtors, or shall consent to the appointment of a receiver for itself or
for all or substantially all of its property, or shall make a general
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assignment for the benefit of its creditors, or shall admit in writing its
inability to pay its debts generally as they become due.
10. ACTION UPON TERMINATION. After the expiration or termination of
this Management Agreement, the Asset Manager shall:
(a) Promptly pay to the Company or any person legally entitled
thereto all monies collected and held for the account of the Company
pursuant to this Management Agreement, after deducting any compensation
and reimbursement for its expenses which it is then entitled to receive
pursuant to the terms of this Management Agreement.
(b) Within 90 days deliver to the Company a full account,
including a statement showing all amounts collected by the Asset Manager
and a statement of all monies disbursed by it, covering the period
following the date of the last accounting furnished to the Company.
(c) Within ten (10) days deliver to the Company all property
and documents of the Company then in the custody of the Asset Manager.
Upon termination of this Management Agreement, the Asset Manager shall be
entitled to receive payment for any expenses and fees (including without
limitation the management fee which shall be prorated on a daily basis and
acquisition fees) as to which at the time of termination it has not yet received
payment or reimbursement, as applicable, pursuant to Section 7 and Section 11
hereof, less any damages to the Company caused by the Asset Manager.
11. ACQUISITION FEE AND MANAGEMENT FEE.
(a) Upon the acquisition of any Approved Property acquired by
the Company or by an SP Subsidiary pursuant to Section 3.6 of the
Operating Agreement (including any Approved Property acquired by the
Company or by an SP Subsidiary contributed in whole or in part by LXP as
contemplated by the last two sentences of Section 5.1(b) of the Operating
Agreement), or upon the making by the Company of an LSL Loan to an LXP LLC
pursuant to Section 3.6 of the Operating Agreement (including any LSL Loan
related to an LSL Property acquired by a Special Purpose LLC from LXP),
the Company shall pay the Asset Manager an acquisition fee equal to (x)
the purchase price of such acquired Approved Property multiplied by (y)
three quarters of one percent (0.75%).
(b) The Company shall pay to the Asset Manager an annual
management fee equal to two percent (2%) of Net Rents, payable monthly.
Such fee shall be calculated monthly, based on Net Rents received by the
Company for such month, and adjusted as provided in this Section 11(b).
Within thirty (30) days of the Company's receipt of the annual reports
described in Section 4.3 of the Operating Agreement for a fiscal year, the
Asset Manager shall provide to the Company a written statement of
reconciliation setting forth (a) the Net Rents for such fiscal year and
the management fee payable to the Asset Manager in connection therewith,
pursuant to this Management Agreement, (b) the management fee already paid
by the Company to the Asset Manager during such fiscal year, and (c)
either the amount owed to the Asset Manager by the Company (which shall
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be the excess, if any, of the management fee payable to the Asset Manager
for such fiscal year pursuant to this Agreement over the management fee
actually paid by the Company to the Asset Manager for such fiscal year) or
the amount owed to the Company by the Asset Manager (which shall be the
excess, if any, of the management fee actually paid by the Company to the
Asset Manager for such fiscal year over the management fee payable to the
Asset Manager for such fiscal year pursuant to this Agreement). The Asset
Manager or the Company, as the case may be, shall pay to the other the
amount owed pursuant to clause (c) above within five (5) Business Days of
the receipt by the Advisor and the Fund of the written statement of
reconciliation described in this Section 11.
12. ASSIGNMENT. The Asset Manager may not assign or delegate any of
its rights or obligations hereunder.
13. NOTICES. Unless otherwise specifically provided herein, any
notice or other communication required herein shall be given in accordance with
the Operating Agreement.
14. AMENDMENTS AND WAIVERS. No amendment, modification, termination
or waiver of any provision of this Management Agreement shall in any event be
effective without the written concurrence of the Company. Any waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given.
15. GOVERNING LAW. THIS MANAGEMENT AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
16. ENTIRE AGREEMENT. This Management Agreement embodies the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements, written and oral, relating to the subject
matter hereof.
17. SEVERABILITY. In case any provision in or obligation under this
Management Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
18. NO WAIVER, ETC. No waiver by the Company of any default
hereunder shall be effective unless such waiver is in writing and executed by
the Company nor shall any such written waiver operate as a waiver of any other
default or of the same default on a subsequent occasion. Furthermore, the
Company shall not, by any act, delay, omission or otherwise, be deemed to have
waived any of its rights, privileges and/or remedies hereunder, and the failure
or forbearance of the Company on one occasion shall not prejudice or be deemed
or considered to have prejudiced its right to demand such compliance on any
other occasion.
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19. NO THIRD PARTY BENEFICIARY. The Asset Manager is not a third
party beneficiary of the Operating Agreement and shall have no rights or
remedies thereunder, and the parties to the Operating Agreement can amend,
modify or terminate the Operating Agreement at any time without the Asset
Manager's consent and without any liability to the Asset Manager.
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IN WITNESS WHEREOF, the parties hereto have caused this Management
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
COMPANY LEXINGTON ACQUIPORT COMPANY,
LLC, a Delaware limited liability company
By: LEXINGTON PROPERTIES CORPORATE
TRUST, a Maryland real estate investment trust,
the managing member
By: /s/ T. Wilson Eglin
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Name: T. Wilson Eglin
Its: President
ASSET MANAGER LEXINGTON REALTY ADVISORS, INC.
By: /s/ Patrick Carroll
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Name: Patrick Carroll
Its: Executive Vice President
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APPENDIX 1
PROPERTY MANAGEMENT RESPONSIBILITIES
A. The Asset Manager shall perform its duties and obligations under
Section 2 of the Management Agreement with respect to the management of the
Properties in accordance with the following standards:
1. MANAGEMENT OF THE PROPERTIES. Asset Manager shall devote its
commercially reasonable efforts, consistent with first class professional
management, to manage the Properties, and shall perform its duties with respect
thereto under the Management Agreement in accordance with the Operating
Agreement and Annual Plan and in a reasonable, diligent and careful manner so as
to manage and supervise the operation, maintenance, leasing and servicing of
each Property in a manner that is comparable to similar properties in the market
area in which such Property is located. The services of Asset Manager hereunder
are to be of a scope and quality not less than those generally performed by
professional managers of other similarly situated properties in the market area
in which each Property is located. Asset Manager shall make available to the
Company the full benefit of the judgment, experience and advice of the members
of Asset Manager's organization and staff with respect to the policies to be
pursued by the Company in operating the Properties, and will perform such
services as may be requested by the Company within the scope of the Management
Agreement in operating, maintaining, leasing, and servicing each Property.
2. SPECIFIC DUTIES OF ASSET MANAGER. Without limiting the duties and
obligations of Asset Manager under any other provisions of the Management
Agreement, Asset Manager shall have the following duties and perform the
following services with respect to management of the Properties:
2.1 REPAIRS AND MAINTENANCE. In accordance with and subject to the
Operating Agreement and the Annual Plan, Asset Manager shall cause to be made,
or ensure that the tenant makes, all repairs and shall cause to be performed, or
ensure that the tenant performs, all maintenance on the buildings, appurtenances
and grounds of each Property as are required to maintain each Property in such
condition and repair (and in compliance with applicable codes) that is
comparable to similarly situated properties in the market area in which such
Property is located, and such other repairs as may be required to be made under
the leases governing each Property. Asset Manager shall to the extent it deems
necessary arrange for periodic inspections of the Properties by independent
contractors.
2.2 LEASING SUPERVISION ACTIVITIES.
(a) LEASING SUPERVISION. Asset Manager shall supervise all leasing
activities, for the purpose of leasing the available space in the Properties to
tenants upon such terms and conditions as shall be consistent with the Operating
Agreement and the Annual Plan.
Appendix A-2-1
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(b) GENERALLY. In the performance of Asset Manager's duties under
this Section 2.2, Asset Manager shall (i) develop and coordinate advertising,
marketing and leasing plans for space at each Property that is vacant or
anticipated to become vacant; (ii) cooperate and communicate with leasing
specialists, consultants and third-party brokers in the market, and solicit
their assistance with respect to new tenant procurement; and (iii) notify the
Company in writing of all offers for tenancy at each Property which Asset
Manager believes are made in good faith, including the identification and fee
schedules of procuring brokers, if any.
(c) NEGOTIATION OF LEASES. Asset Manager shall negotiate all tenant
leases, extensions, expansions and other amendments and related documentation on
the Company's behalf in accordance with the Operating Agreement and the Annual
Plan. All such documentation shall be prepared at the Company's expense by
counsel acceptable to or designated by the Company, and shall be executed by the
Company. The terms of all such documentation are to be approved by the Company
pursuant to such reasonable procedures as may be requested by the Company from
time to time. Notwithstanding the foregoing, (x) Asset Manager shall not, for
any reason, have the power or authority to execute any such documentation on
behalf of the Company or otherwise bind the Company without the Company's prior
written consent, and (y) the Company reserves the right to deal with any
prospective tenant to procure any such lease, extension, expansion or other
amendment or related documentation.
(d) THIRD PARTY BROKERS. Asset Manager shall encourage third-party
real estate brokers to secure tenants for the Properties, and periodically
notify such brokers of the spaces within the Properties that are available for
lease.
(e) COMPENSATION FOR THIRD-PARTY BROKERS. Asset Manager shall
negotiate and enter into on behalf of the Company a commission agreement with
third party brokers providing for a leasing commission to be paid at prevailing
market rates, subject to prevailing market terms and conditions.
Such leasing commission shall be paid by the Company.
2.3 RENTS, BILLINGS AND COLLECTIONS. Asset Manager shall be
responsible for the monthly billing of rents and all other charges due from
tenants to the Company with respect to each Property. Asset Manager shall use
its commercially reasonable efforts to collect all such rents and other charges
when due. Asset Manager shall notify the Company and the Advisor of all tenant
defaults as soon as reasonably practicable after occurrence, and shall provide
the Company and the Advisor with Asset Manager's best judgment of the
appropriate course of action in remedying such tenant defaults.
2.4 OBLIGATIONS UNDER LEASES. Asset Manager shall supervise and use
its commercially reasonable efforts to cause the Company to perform and comply,
duly and punctually, with all of the obligations required to be performed or
complied with by the Company under all leases and all laws, statutes,
ordinances, rules, permits and certificates of occupancy relating to the
operation, leasing, maintenance and servicing of the Properties, including,
without limitation, the timely payment by the Company of all sums required to be
paid thereunder.
Appendix A-1-2
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2.5 THE COMPANY'S INSURANCE. If requested by the Company, the Asset
Manager shall cause to be placed and kept in force all forms of insurance
required by the Operating Agreement and the Annual Plan or required by any
mortgage, deed of trust or other security agreement covering all or any part of
any Property. The Asset Manager is to be named as an additional insured on the
general liability policies in its capacity as managing agent. All such insurance
coverage shall be placed through insurance companies and brokers selected or
approved by the Company, with limits, values and deductibles established by the
Company and with such beneficial interests appearing therein as shall be
acceptable to the Company and otherwise be in conformity with the requirements
of the Operating Agreement and the Annual Plan. Should the Company elect to
place such insurance coverage directly, the Asset Manager shall be named as an
additional insured on the general liability policies in its capacity as managing
agent and the Company will provide the Asset Manager with a certificate of
insurance evidencing such coverage. If requested to do so by the Company, the
Asset Manager shall duly and punctually pay on behalf of the Company with funds
provided by the Company all premiums with respect thereto, prior to the time the
policy would lapse due to nonpayment. If any lease requires that a tenant
maintain any insurance coverage, the Asset Manager shall use its commercially
reasonable efforts to obtain insurance certificates annually, or more
frequently, as required pursuant to the applicable leases, from each such tenant
and review the certificates for compliance with the lease terms. If any lease
requires the Company to provide insurance certificates to tenants thereunder,
the Asset Manager shall obtain such insurance certificates from the Company,
review the certificates for compliance with the lease terms, and provide a copy
thereof to tenants in accordance with their respective leases. The Asset Manager
shall promptly investigate and make a full and timely written report to the
insurance broker, with a copy to the Company, as to all accidents, claims or
damage of which the Asset Manager has knowledge relating to the operation and
maintenance of each Property, any damage or destruction to each Property, and
the estimated cost of repair thereof, and shall prepare any and all reports
required by any insurance company in connection therewith. All such reports
shall be filed timely with the insurance broker as required under the terms of
the insurance policy involved. The Asset Manager shall have no right to settle,
compromise or otherwise dispose of any claims, demands or liabilities, whether
or not covered by insurance, without the prior written consent of the Company,
which consent may be withheld by the Company in its sole discretion.
2.6 ASSET MANAGER'S INSURANCE. The Asset Manager or the Manager or
LXP will obtain and maintain on the Asset Manager's behalf, at the Asset
Manager's or the Manager's expense, the following insurance:
(a) Commercial general liability on an occurrence form for bodily
injury and property damage with limits of One Million Dollars ($1,000,000)
combined single limit each occurrence and Two Million Dollars ($2,000,000) from
the aggregate of all occurrences within each policy year, including but not
limited to Premises-Operation, Products/Completed Operations, Hazard and
Contractual Coverage (including coverage for the indemnity clause provided under
the Management Agreement) for claims arising out of actions beyond the scope of
Asset Manager's duties or authority under the Management Agreement.
(b) Comprehensive form automobile liability covering hired and
non-owned vehicles with limits of One Million Dollars ($1,000,000) combined
single limit per occurrence.
Appendix A-1-3
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(c) Employer's liability insurance in an amount not less than Five
Hundred Thousand Dollars ($500,000).
(d) Excess liability (umbrella) insurance on the above with limits
of Two Million Dollars ($2,000,000).
(e) Workers' compensation insurance in accordance with the laws of
the state with jurisdiction.
(f) Either (x) blanket crime coverage protecting the Asset Manager
against fraudulent or dishonest acts of its employees, whether acting alone or
with others, with limits of liability of not less than One Million Dollars
($1,000,000) per occurrence (any loss within any deductible shall be borne by
the Asset Manager) or (y) a fidelity or financial institution bond in an amount
no less than One Million Dollars ($1,000,000.00) bonding the employees of the
Asset Manager who handle or who are responsible for funds belonging to the
Company.
(g) Professional liability insurance covering the activities of
Asset Manager written on a "claim made" basis with limits of at least One
Million Dollars ($1,000,000). Any loss within any deductible shall be borne by
Asset Manager. Coverage shall be maintained in effect during the period of the
Management Agreement and for not less than two (2) years after termination of
the Management Agreement.
Each of the above policies will contain provisions giving the
Company and the Advisor at least thirty (30) days' prior written notice of
cancellation of coverage. The policies referred to in items (a) and (d) above
will name the Company and the Advisor as additional insureds, and the policies
referred to in item (f) above will name the Company as loss payee. Asset Manager
will provide the Company and the Advisor with evidence of all required
coverages.
Such insurance shall be placed with reputable insurance companies
licensed or authorized to do business in the states in which the Properties are
located with a minimum Best's rating of AX.
The Company and the Asset Manager agree that the insurance policies
summarized on Appendix 2 to this Management Agreement are consistent with the
standards listed above with respect to the types and amounts of insurance the
Asset Manager is required to obtain.
2.7 COMPLIANCE WITH INSURANCE POLICIES; COMPLIANCE BY TENANTS WITH
TENANT LEASES. Asset Manager shall use its commercially reasonable efforts to
prevent the use of each Property for any purpose that might void any policy of
insurance held by the Company, or any tenant at each Property, that might render
any loss insured thereunder uncollectible or that would be in violation of any
governmental restriction or the provisions of any lease. Asset Manager shall use
its commercially reasonable efforts to secure full compliance by the tenants
with the terms and conditions of their respective leases, including, but not
limited to, periodic maintenance of all building systems, including individual
tenant's heating, ventilation and air conditioning systems.
Appendix A-1-4
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2.8 INTENTIONALLY OMITTED.
2.9 TENANT RELATIONS. Asset Manager will maintain reasonable contact
with the tenants of the Properties and keep the Company and the Advisor informed
of the tenants' concerns, expansion or contraction plans, changes in occupancy
or use, and other matters that could have a material bearing upon the leasing,
operation or ownership of each Property.
2.10 COMPLIANCE WITH LAWS. Asset Manager shall use its commercially
reasonable efforts to determine such action that may be necessary, inform the
Company of action as may be necessary and, when authorized by the Company, take
such action that may be necessary to cause the Properties to comply with all
current and future laws, rules, regulations, or ordinances affecting the
ownership, use or operation of each Property; provided, however, that Asset
Manager need not obtain the prior authorization of the Company to take action in
case of an emergency or any threat to life, safety or property, so long as Asset
Manager shall give the Company prompt notice of any such action taken.
2.11 COOPERATION. Should any claims, demands, suits, or other legal
proceedings be made or instituted by any third party against the Company that
arise out of any matters relating to a Property or the Management Agreement or
Asset Manager's performance hereunder, Asset Manager shall promptly give the
Company all pertinent information and assistance in the defense or other
disposition thereof; provided, however, in the event the foregoing requires
Asset Manager to incur any expenses beyond the ordinary cost of performing its
obligations under the Management Agreement, the Company shall pay for any such
out-of-pocket costs of which the Company has been advised in writing.
2.12 NOTICE OF COMPLAINTS, VIOLATIONS AND FIRE DAMAGE. Asset Manager
shall respond to complaints and requests from tenants within thirty (30) days of
Asset Manager's having received any material complaint made by a tenant or any
alleged landlord default under any lease. Additionally, Asset Manager shall
notify the Company and Advisor as soon as is reasonably practical (such notice
to be accompanied by copies of supporting documentation) of each of the
following: any notice of any governmental requirements received by Asset
Manager; upon becoming aware of any material defect in a Property; and upon
becoming aware of any fire or other material damage to any Property. In the case
of any fire or other material damage to a Property, Asset Manager shall also
notify the Company's insurance broker telephonically, so that an insurance
adjuster has an opportunity to view the damage before repairs are started, and
complete customary loss reports in connection with fire or other damage to a
Property.
2.13 NOTICE OF DAMAGES AND SUITS; SETTLEMENT OF CLAIMS. Asset
Manager shall notify the Company's general liability insurance broker and the
Company as soon as is reasonably practical of the occurrence of any bodily
injury or property damage occurring to or claimed by any tenant or third party
on or with respect to a Property, and promptly forward to the broker, with
copies to the Company and the Advisor, any summons, subpoena or other like legal
documents served upon Asset Manager relating to actual or alleged potential
liability of the Company, Asset Manager or a Property. Notwithstanding the
foregoing, Asset Manager shall not be authorized to accept service of process on
behalf of the Company, unless such authority is otherwise imputed by law. The
Asset Manager shall have no right to settle, compromise or otherwise dispose of
any claims, demands, or liabilities, whether or not covered by insurance,
Appendix A-1-5
14
without the prior written consent of the Company, which consent may be withheld
by the Company in its sole discretion.
2.14 ENFORCEMENT OF LEASES. The Asset Manager shall enforce
compliance by tenants with each and all of the terms and provisions of the
leases, provided, however, that Asset Manager shall not, without the prior
written consent of the Company in each instance, which consent may be withheld
by the Company in its sole discretion, institute legal proceedings in the name
of the Company to enforce leases, collect income and rent or dispossess tenants
or others occupying a Property or any portion thereof, or terminate any lease,
lock out a tenant, or engage counsel or institute any proceedings for recovery
of possession of a Property if any such action by the Asset Manager would
constitute a Major Decision.
2.15 ENVIRONMENTAL.
(a) NOTICE. The Asset Manager shall promptly advise the Company and
the Advisor in writing of any evidence of non-compliance with any Environmental
Laws, which Asset Manager is aware of, together with a written report of the
nature and of the non-compliance and the potential threat, if any, to the health
and safety of persons and/or damage to each Property or the property adjacent to
or surrounding each Property. The Company acknowledges that (A) Asset Manager is
not an environmental engineer and does not have any special expertise in the
Environmental Laws, (B) Asset Manager's duties under this Section 2.15 are
limited to the quality of reasonable commercial care and diligence customarily
applied to property managers of triple net leased properties.
(b) RIGHTS; LIMITATIONS. Without limiting any other provision
contained herein and subject to Section 2.14, Asset Manager shall use
commercially reasonable efforts to enforce the Company's rights under the leases
insofar as any tenant's compliance with Environmental Laws are concerned;
provided, however, Asset Manager shall hold in confidence all information
bearing on Environmental Laws and hazardous materials, except to the extent
expressly instructed otherwise in writing by the Company, or except to the
extent necessary to protect against the imminent threat to the life and safety
of persons and/or damage to a Property or damage to the property adjacent to or
surrounding such Property, or except to the extent such disclosure is required
by Environmental Laws, other laws, or court order.
2.16 MONITORING OF TENANT IMPROVEMENTS. The Asset Manager shall
monitor the construction and installation of material tenant improvements
undertaken by the tenant under any lease and act as the Company's liaison with
such tenant's construction managers and contractors (or other supervisors of a
tenant's build-out).
LSL LOAN MANAGEMENT RESPONSIBILITIES
B. The Asset Manager shall perform its duties and obligations under
Section 2 of the Management Agreement with respect to the management of the LSL
Loans in accordance with the following standards:
Appendix A-1-6
15
1. MANAGEMENT OF THE LSL LOANS. The Asset Manager shall devote its
commercially reasonable efforts, consistent with first class professional
management, to manage the LSL Loans, and shall perform its duties with respect
thereto under the Management Agreement in accordance with the Operating
Agreement and Annual Plan and in a reasonable, diligent and careful manner so as
to (i) monitor compliance by each borrower and its subsidiary Special Purpose
LLC with the requirements of the LSL Loan, including without limitation
compliance with and performance of their obligations under, the applicable LSL
Note, the Pledge and the Warrant (collectively, the "LSL LOAN DOCUMENTS"); (ii)
collect and account for all sums payable in respect of the LSL Loan; and (iii)
take such steps as may be necessary to enforce the provisions of the LSL Loan
Documents. The services of Asset Manager hereunder are to be of a scope and
quality not less than those generally performed by professional managers of
other similarly situated assets in the market area in which each LSL Property is
located. Asset Manager shall make available to the Company the full benefit of
the judgment, experience and advice of the members of Asset Manager's
organization and staff with respect to the policies to be pursued by the Company
in managing the LSL Loans, and will perform such services as may be requested by
the Company within the scope of the Management Agreement in managing each LSL
Loan.
2. COLLECTION AND ACCOUNTING OF FUNDS. The Asset Manager shall be
responsible for the monthly collection of interest, principal (if any) and other
sums due from LXP LLCs with respect to each LSL Loan. The Asset Manager shall
use its commercially reasonable efforts to collect all such amounts when due.
The Asset Manager shall notify the Company and the Advisor of all LXP LLC
defaults as soon as reasonably practicable after occurrence, and shall provide
the Company and the Advisor with the Asset Manager's best judgment of the
appropriate course of action in remedying such defaults.
3. OBLIGATIONS UNDER LOAN DOCUMENTS. The Asset Manager shall
supervise and use its commercially reasonable efforts to cause each LXP LLC and
each subsidiary Special Purpose LLC to perform and comply, duly and punctually,
with all of the obligations required to be performed or complied with by each
LXP LLC and each subsidiary Special Purpose LLC under all LSL Loan Documents.
4. PERSONNEL. The Asset Manager or the Manager or LXP will obtain
and maintain on the Asset Manager's behalf, at the Asset Manager's or the
Manager's expense, either (x) blanket crime coverage protecting Asset Manager
against fraudulent or dishonest acts of its employees, whether acting alone or
with others, with limits of liability of not less than One Million Dollars
($1,000,000) per occurrence (any loss within any deductible shall be borne by
Asset Manager) or (y) a fidelity or financial institution bond in an amount no
less than One Million Dollars ($1,000,000.00) bonding the employees of Asset
Manager who handle or who are responsible for funds belonging to the Company.
The Company and Asset Manager agree that the financial institution bond
summarized on Appendix 2 to the Management Agreement is consistent with the
standards contained in this Paragraph B.4. Satisfying the requirements of
Section A.2.6 of this Appendix 1 to the Management Agreement will satisfy the
requirements of this Section.
Appendix A-1-7
16
5. COOPERATION. Should any claims, demands, suits, or other legal
proceedings be made or instituted by any third party against the Company that
arise out of any matters relating to a LSL Loan or any LSL Property or the
Management Agreement or Asset Manager's performance hereunder, Asset Manager
shall promptly give the Company all pertinent information and assistance in the
defense or other disposition thereof; provided, however, in the event the
foregoing requires Asset Manager to incur any expenses beyond the ordinary cost
of performing its obligations under the Management Agreement, the Company shall
pay for any such out-of-pocket costs of which the Company has been advised in
writing.
6. NOTICE OF COMPLAINTS, VIOLATIONS AND FIRE DAMAGE. The Asset
Manager shall respond to complaints and requests from LXP LLCs within thirty
(30) days of Asset Manager's having received any material complaint made by a
LXP LLC under any LSL Loan Document. Additionally, Asset Manager shall notify
the Company and Advisor as soon as is reasonably practical (such notice to be
accompanied by copies of supporting documentation) of each of the following: any
notice of any governmental requirements received by Asset Manager; upon becoming
aware of any material defect in a LSL Property; and upon becoming aware of any
fire or other material damage to any LSL Property. In the case of any fire or
other material damage to a LSL Property, Asset Manager shall also notify the
Company's insurance broker telephonically, so that an insurance adjuster has an
opportunity to view the damage before repairs are started, and complete
customary loss reports in connection with fire or other damage to a Property.
7. NOTICE OF DAMAGES AND SUITS; SETTLEMENT OF CLAIMS. The Asset
Manager shall notify the Company's general liability insurance broker and the
Company as soon as is reasonably practical of the occurrence of any bodily
injury or property damage occurring to or claimed by any LXP LLC or Special
Purpose LLC or third party on or with respect to a LSL Property, and promptly
forward to the broker, with copies to the Company and the Advisor, any summons,
subpoena or other like legal documents served upon Asset Manager relating to
actual or alleged potential liability of the Company, Asset Manager or a LSL
Property. Notwithstanding the foregoing, Asset Manager shall not be authorized
to accept service of process on behalf of the Company, unless such authority is
otherwise imputed by law. Asset Manager shall have no right to settle,
compromise or otherwise dispose of any claims, demands, or liabilities, whether
or not covered by insurance, without the prior written consent of the Company,
which consent may be withheld by the Company in its sole discretion.
8. ENFORCEMENT OF LSL LOAN DOCUMENTS. The Asset Manager shall
enforce compliance by LXP LLCs and by Special Purpose LLCs with each and all of
the terms and provisions of the LSL Loan Documents, provided, however, that
Asset Manager shall not, without the prior written consent of the Company in
each instance, which consent may be withheld by the Company in its sole
discretion, institute legal proceedings in the name of the Company to enforce
the LSL Loan Documents, if such action by the Asset Manager would constitute a
Major Decision.
9. ENVIRONMENTAL.
(a) NOTICE. Asset Manager shall promptly advise the Company and the
Advisor in writing of any evidence of non-compliance with any Environmental
Laws, which
Appendix A-1-8
17
Asset Manager is aware of, together with a written report of the nature and of
the non-compliance and the potential threat, if any, to the health and safety of
persons and/or damage to each LSL Property or the property adjacent to or
surrounding each LSL Property. The Company acknowledges that (A) Asset Manager
is not an environmental engineer and does not have any special expertise in the
Environmental Laws, (B) Asset Manager's duties under this Section B.9 are
limited to the quality of reasonable commercial care and diligence customarily
applied to managers of loans made to owners of triple net leased properties.
(b) RIGHTS; LIMITATIONS. Without limiting any other provision
contained herein and subject to Section B.8, Asset Manager shall use
commercially reasonable efforts to enforce the Company's rights under the LSL
Loan Documents insofar as any LXP LLC's or any Special Purpose LLC's compliance
with Environmental Laws are concerned; provided, however, Asset Manager shall
hold in confidence all information bearing on Environmental Laws and hazardous
materials, except to the extent expressly instructed otherwise in writing by the
Company, or except to the extent such disclosure is required by Environmental
Laws, other laws, or court order.
Appendix A-1-9
18
APPENDIX 2
SUMMARY OF LXP INSURANCE POLICIES
[APPENDIX BEGINS ON THE FOLLOWING PAGE]
Appendix A-2-1