EXHIBIT 10.2
PROPERTY AND PARTNERSHIP MANAGEMENT AGREEMENT
THIS PROPERTY MANAGEMENT AGREEMENT is entered into effective as of the
28th day of January, 1999, by and between HARTMAN REIT OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (hereinafter called "Owner"), and HARTMAN
MANAGEMENT, INC., (hereinafter called "Manager"),
WITNESSETH
WHEREAS, Owner is the owner of the properties described in Schedule A
attached hereto (collectively, the "Properties"); and
WHEREAS, Owner wishes to obtain the benefits of Manager's expertise in
the field of real estate management by relinquishing to Manager control in the
operation, direction, management and supervision of the Properties, subject to
the terms and provisions of this Agreement, and Manager for a fee agrees to
assume said control and discretion in the operation, direction, management and
supervision of the Properties on behalf of Owner.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and of other good and valuable consideration, the parties hereto agree
as follows:
ARTICLE 1
APPOINTMENT
Owner contracts with Manager to manage, operate, direct and supervise
the Properties, as well as all other properties acquired by Owner from time to
time, on behalf of Owner and to provide services as required under this
Agreement.
ARTICLE 2
TERM
Subject to and upon the terms and conditions set forth in this Agreement
(including without limitation Article 12), the term of this Agreement shall
commence on February 1, 1999, and shall automatically renew for successive one
year terms unless terminated in writing by either party at least thirty (30)
days prior to the expiration of a previous term.
ARTICLE 3
RELATIONSHIP
Manager shall at all times be the independent contractor of Owner and
not the employee or agent of Owner. Manager shall have no right or power to
contract with third parties for, on behalf of, or in the name of Owner or
otherwise to bind Owner. Except as expressly provided herein to the contrary,
Owner agrees to be responsible for and shall reimburse Manager for all costs,
expenses and disbursements reasonably and properly incurred by Manager in
accordance with the provisions of this Agreement in providing management and
operational services hereunder, such as, but not limited to, contracts for
cleaning services, contracts for landscaping or maintenance services and orders
for supplies and equipment, and Owner agrees to indemnify and hold Manager
harmless from and against the same. Owner agrees to name Manager as an
additional insured on all comprehensive general liability insurance maintained
by Owner and relating to the Properties, and Owner shall pay the cost of any
comprehensive general liability insurance policy maintained by Manager and
relating to the Properties, but only to the extent that such is reasonable, is
not duplicate of insurance maintained by Owner (but only if such insurance of
Owner names Manager as an additional insured), and is approved by Owner.
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ARTICLE 4
ASSIGNABILITY
Manager shall not assign this Agreement or any rights hereunder, nor
shall Manager delegate its duties hereunder, without the prior written consent
of Owner; provided, however, Manager may assign this Agreement and delegate its
duties to any entity which succeeds to all or substantially all of the assets of
Manager and/or to any entity which is owned or controlled by Allen R. Hartman,
and Manager may delegate certain of its duties to its employees, agents and
contractors as contemplated by the provisions of this Agreement.
ARTICLE 5
SERVICES OF MANAGER
5.1 Manager shall manage, operate and maintain the Properties in a
manner normally associated with the management and operation of properties that
are similar in size, scope and use as the Properties. Manager shall at all times
deal with third parties (whether or not affiliated with Manager) at arms' length
and in Owner's interest at all times.
5.2 Manager shall have in its employ at all times a sufficient
number of capable employees to enable it to properly, adequately, safely and
economically manage, operate and maintain the Properties. All matters pertaining
to the employment, supervision, compensation, promotion and discharge of such
employees are the responsibility of Manager. Manager is in all respects the
employer of such employees, but Owner may require that any particular employee
or employees be removed from duty with respect to the Properties, if Owner
reasonably deems such employee or employees to be incompetent, careless,
insubordinate or otherwise objectionable. Manager shall fully comply with all
applicable laws and regulations
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having to do with workman's compensation, social security, unemployment
insurance, hours of labor, wages, working conditions, and other
employer-employee related subjects. All employees engaged by Manager shall be
the employees of Manager and not of Owner.
5.3 Manager shall prepare and submit to Owner a proposed operating
budget for the Properties for the management and operation of the Properties for
the forthcoming calendar year (or in the case of the first calendar year in
which the term hereof commences, the remainder of such year if it is not a full
calendar year). The first such budget shall be submitted to Owner within thirty
(30) days after the commencement of the term of this Agreement and in the future
a subsequent proposed budget shall be delivered to Owner no later than November
1 of each calendar year. By November 1 of each calendar year, Manager will
submit to Owner a summary of the actual (through September 30) and projected
(for the full year) results of management and operation of the Properties for
such calendar year. Owner will consider the proposed budgets and then will
consult with Manager within thirty (30) days after they are submitted in order
to agree on an "Approved Operating Budget". Manager shall have the right from
time to time during each calendar year to submit revised budgets to Owner, and
Owner shall endeavor to approve the same or revisions thereto as Owner and
Manager may deem proper and as promptly as practicable.
Manager agrees to use diligence and to employ all reasonable efforts to ensure
that the actual costs (net of amounts, if any, recovered from third parties) of
maintaining and operating the Properties shall not exceed the approved budget
pertaining thereto.
5.4 Manager shall use diligent efforts to collect all rents
(including billings resulting from tenant participation in operating expenses,
taxes and common area maintenance
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charges) and other charges which may become due at any time from any tenant or
from others for services provided in connection with or for the use of the
Properties or any portion thereof. Manager shall identify any amounts due to
Owner from miscellaneous services provided to tenants or the public including,
but not limited to, parking income, tenant storage, and retail income. All
monies so collected shall be deposited in the Receipts Account. Manager cannot
and may not terminate any lease, lock out a tenant, institute a suit for rent or
for use and occupancy, or institute proceedings for recovery of possession of
any properties, without the prior written approval of Owner. In connection with
such suits or proceedings only legal counsel designated by Owner shall be
retained. The estimated costs of legal services to be incurred in bringing such
approved suit or proceeding shall be submitted to Owner for its approval.
Manager shall not write off any rental income of more than $1,000 for any single
tenant without the prior written approval of Owner.
5.5 Manager shall act as leasing manager for the Properties and be
responsible for the leasing activities of the Properties, including the
development of a marketing program and leasing guidelines (including rental
rates, lease terms, and similar items). It is understood that a marketing
program and leasing guidelines will be submitted to Owner prior to November 1 of
each year, and Owner shall endeavor to approve a marketing program and leasing
guidelines within thirty (30) days after a submission is made by Manager. Once
the marketing program and leasing guidelines are approved by Owner, Manager may
act without further approvals as long as Manager acts within the approved
guidelines of the marketing program and leasing guidelines. It is understood
that Owner is the only signatory authority for the execution of all lease and
related
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leasing documents and Manager shall not represent to the contrary to prospective
tenants and other parties.
5.6 Manager shall institute and supervise all ordinary and
extraordinary repairs, decorations and alterations, including the administration
of a preventative maintenance program for all mechanical, electrical and
plumbing systems and equipment, provided that such (unless the same relate to
emergencies) are included in an Approved Operating Budget.
5.7 Manager shall institute and supervise all operational activities
of the Properties (such as the following, but not limited to this listing):
(a) Supervision of the cleaning;
(b) Supervision of the security on behalf of Owner;
(c) Supervision of any landscaping;
(d) Supervision of the window washing;
(e) Responsibility for and supervision of the central plant and
other H.V.A.C. equipment;
(f) Responsibility for and supervision of a preventative maintenance
program;
(g) Responsibility for and supervision for any necessary repairs to
the Properties;
(h) Supervision for the maintenance of the elevators serving the
Properties;
(i) Responsibility for making arrangements for and administering
account for utilities; and
(j) Any other activity expedient to the normal operation of
properties similar to the Properties.
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As used herein, "supervise" and "supervision" shall also include
responsibility for the particular task to the extent the Owner so directs and
provides the funds therefor.
5.8 Manager shall obtain and verify bills for real estate and
personal property taxes, improvement assessments and other like charges which
are or may become liens against any portion of the Properties and recommend
payment or appeal as its best judgment may decide. If and when received by
Manager, Manager shall forward such bills to Owner in such time to permit Owner
to avoid penalty for late payment or to permit Owner to take advantage of
discounts and upon the written direction of Owner, Manager shall pay such bills
from the Disbursement Account. Manager shall not make any payments on account of
any ground lease, mortgage, deed of trust or other security instrument, if any,
affecting any Properties unless such payments are included in the Approved
Operating Budget.
5.9 Manager shall operate the Properties in compliance with any
ground lease, space lease, mortgage, deed of trust or other security instruments
affecting the Properties and of which Manager has knowledge, but Manager shall
not be required to make any payment or incur any liability on account thereof.
5.10 Manager shall pay all leasing and operating expenses from the
account for authorized expenditures.
5.11 Manager shall prepare or cause to be prepared all payrolls and
maintain comprehensive payroll records.
5.12 Manager shall handle all banking matters related to its
contractual responsibility.
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5.13 Manager shall conduct, from time to time as Manager deems
necessary or as Owner requests, inspections of the Properties and provide Owner
with a written report on its findings to the extent requested by Owner.
5.14 Manager shall, on behalf of Owner, maintain complete and
identifiable records and files on all matters pertaining to the Properties,
including, without limitation, all revenues and expenditures, service contracts
and leases, all of which records and files shall be the property of Owner.
5.15 Manager shall have competent personnel available at all times
for emergencies.
5.16 Manager shall administer a tenant relations program which
maintains a high visibility of management presence and service to tenants.
5.17 Manager shall be available for communications with Owner and
will keep Owner advised of items affecting the Properties.
5.18 (a) Manager, in the conduct of its responsibilities to
Owner, shall maintain adequate and separate books and records for the Properties
in accordance with acceptable accounting standards for a modified cash basis
accounting method, which shall be supported by sufficient documentation to
ascertain that said entries are properly and accurately recorded, which books
and records shall be the property of Owner. However, any computer software or
other systems of Manager which are used to generate or keep such books and
records shall remain the property of Manager. Such books and records shall
include all information necessary to calculate and to audit amounts contained
therein and shall otherwise comply with the requirements of the documents
referred to in Section 5.9 hereof. Such books and records
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shall be maintained by Manager at the Properties or at such other location as
may be mutually agreed upon in writing. Manager shall utilize procedures to
attempt to ensure such control over accounting and financial transactions as is
reasonably required to protect Owner's assets from theft, error or fraudulent
activity.
5.18 (b) Manager shall maintain records of, and furnish customary
(as requested) reports summarizing, all transactions occurring from the first
day of the prior calendar quarter to the last day of the prior calendar quarter.
These reports are to be received by Owner no later than thirty (30) calendar
days after the end of the above described accounting period (or sooner if
necessary for Owner or any partner of Owner to comply with governmental
requirements of which Manager is given reasonable advance notice) and must
report financial details which Owner may request. Reports on vacancies and other
matters pertaining to the management, operation, and maintenance of the
Properties will be provided on an annual basis. The reports shall include a
comparison of quarterly and year-to-date actual income and expense with the
Approved Operating Budget for the Properties.
5.18 (c) As additional support to the quarterly financial
statement, Manager shall provide, upon Owner's request, copies of the following:
(i) All bank statements, bank deposit slips and bank
reconciliations;
(ii) Detailed cash receipts and disbursements records;
(iii) Detailed trial balance;
(iv) Paid invoices;
(e) Summaries of adjusting journal entries; and
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(f) Supporting documentation for payroll, payroll taxes and employee
benefits.
5.18 (d) All financial statements and reports required by Owner
will be prepared on an accrual basis in accordance with acceptable accounting
standards for a modified cash basis accounting method.
5.18 (e) Manager shall maintain necessary liaison with Owner's
accountant.
5.19 Manager shall use its reasonable efforts to assure full
compliance with Federal, State and Municipal laws, ordinances, regulations and
orders relative to the leasing, use, operation, repair and maintenance of the
Properties and with the rules, regulations or orders of the local Board of Fire
Underwriters or other similar body. Manager shall promptly remedy any violation
of any such law, ordinance, rules, regulation or order which comes to its
attention, all at Owner's expense. Expenses incurred in remedying violations may
be paid by Manager provided such expenses do not exceed $1,000 in any one
instance. When more than such amount is required or if the violation is one for
which the Property's title holder might be subject to penalty, Manager shall
notify Owner by the end of the next business day to assure that prompt
arrangements may be made to remedy the violation.
5.20 Notwithstanding anything contained herein to the contrary, in
case of emergency, Manager may make expenditures for repairs and other items
which exceed approved budgets or prior approvals from Owner without prior
written approval if in the reasonable judgment of Manager it is necessary to
prevent damage or injury. Owner must be informed of any such expenditures before
the end of the next business day.
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5.21 Partnership and Company Management. Manager shall perform the
following administrative services for Owner:
(a) Forwarding to the partners of Owner, within a reasonable time
after receipt thereof, all statements, reports and other information to be
sent to them pursuant to the Limited Partnership Agreement of Owner (the
"Limited Partnership Agreement") or as required by law; and
(b) Forwarding to the partners of Owner, within a reasonable time
after receipt thereof, checks of Owner, payable to the order of the partners
of Owner representing cash distributions to be made pursuant to the Limited
Partnership Agreement. All statements, reports, other information and checks
that are to be forwarded to the partners of Owner, as aforesaid, shall be
deemed to have been so forwarded when the same are deposited in the United
States mail addressed to the addresses set forth in the Owner's records, or
at such other addresses of which Manager has been notified in writing.
ARTICLE 6
MANAGEMENT AUTHORITY
6.1 Manager's authority is expressly limited to the provisions
provided herein or as may be amended in writing from time to time by Owner and
mutually agreed to and accepted by Manager in writing.
6.2 The Approved Operating Budget shall constitute an authorization
for Manager to expend money to operate and manage the Properties and Manager may
do so without further approval as long as Manager does not exceed the total
budgeted amount for all budget
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categories. Whenever the total budgeted amount is (or appears likely to be)
exceeded, a cumulative budget variance and a revised operating budget shall be
presented to Owner for its consideration. Except as expressly permitted in this
Agreement, Manager may not act outside of the Approved Operating Budget until
the revised budget is approved in writing by Owner, which approval Owner will
endeavor to give in a timely manner. Once approved, Manager's authority with the
revised or any additionally revised budgets is the same as that authorized for
the original budget.
6.3 Any capital expenditures must be specifically authorized by
Owner. With respect to the purchase and installation of capital items, Manager
shall recommend that Owner purchase these items when Manager believes such
purchase to be necessary or desirable. Owner may arrange to purchase and install
the same itself or may authorize Manager to do so subject to prescribed
supervision and specification requirements and conditions. Unless Owner
specifically waives such requirements, either by memorandum or as an amendment
to the contract, all new or replacement capital items exceeding Fifteen Thousand
and No/100 Dollars ($15,000.00) shall be awarded on the basis of competitive
bidding, solicited in the following manner:
(a) A minimum of two written bids will be obtained for each purchase
in excess of $15,000. A minimum of three written bids will be obtained for
each purchase in excess of $25,000;
(b) Each bid will be solicited in a form prescribed by Owner so that
uniformity will exist in the bid quotes;
(c) Manager shall provide Owner with all bid responses accompanied
by Manager's recommendations as to the most acceptable bid. If Manager
advises acceptance
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of other than the lowest bidder, Manager shall adequately support, in
writing, its recommendations; and
(d) Owner shall be free to accept or reject any and all bids. Owner
will communicate to Manager in writing its acceptance or rejection of bids.
Owner may pay for capital expenses from its own resources or may authorize
payment by Manager out of an appropriate account.
6.4 Manager shall not enter into any contract with a party
affiliated with or related to Manager for cleaning, maintaining, repairing or
servicing the Properties or any of the constituent parts of the Properties
without the prior written consent of Owner. As a condition to obtaining such
consent, Manager shall supply Owner with a copy of the proposed contract and
shall state to Owner the affiliation or relationship between Manager (or other
person or persons in control of Manager) and the party proposed to supply such
goods or services, or both. Prior to entering into any such contract, whether or
not with an affiliated or related party, Manager shall submit a proposal to
Owner and Owner may veto the same if Owner reasonably deems it to be
unnecessary, wasteful or inappropriate. Any such contract will include prudent
cancellation rights.
6.5 All leases and related lease documents, all contracts and all
purchases, and all legal documentation related thereto, are to be in the name of
Owner in the form prescribed by Owner and shall be executed by Owner, with the
exception of contracts permitted under Section 6.4 hereof and of purchase orders
related to the purchase of items within approved budgets, which may be executed
by Manager. Owner expressly withholds from Manager any power or authority to
make any structural change in the building or to make any other major
alterations or
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additions in or to the building or equipment therein, or to incur any expense
chargeable to Owner other than expenses related to exercising the express powers
herein vested in Manager, without the prior written direction of Owner.
ARTICLE 7
INSURANCE
7.1 Manager will upon written request, obtain in Owner's name and at
Owner's expense and keep in force, in an amount requested by Owner, insurance
against physical damage (e.g. fire and extended coverage endorsement, boiler and
machinery, etc.) and against liability for loss, damage or injury to property or
persons which might arise out of the occupancy, management, operation or
maintenance of the Properties covered by this Agreement. Manager will be covered
as an additional insured in all liability insurance maintained by Owner with
respect to the Properties. Owner shall save Manager harmless from any liability
on account of loss, damage or injury actually insured against by Owner provided
Manager:
(a) notifies Owner within twenty-four (24) hours after Manager
receives notice of any such loss, damage or injury;
(b) takes no action (such as admission of liability), and omits no
actions, which might bar Owner from obtaining any protection afforded by any
policy Owner may hold or which might prejudice Owner in its defense to a
claim based on such loss, damage or injury; and
(c) agrees that Owner shall have the exclusive right, at its option,
to conduct the defense to any claim, demand or suit within limits prescribed
by the policy or policies of insurance.
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Nothing herein shall be construed as indemnifying Manager against any
intentional tort of Manager or his employees or agents or to indemnify Manager
against any act or omission for which insurance protection is not available;
neither is the foregoing intended to affect the general requirement of this
Agreement that the Properties shall be managed, operated and maintained in a
safe condition and in a proper and careful manner.
7.2 Manager shall furnish whatever information is requested by Owner
for the purpose of establishing the placement of insurance coverages and shall
aid and cooperate in every reasonable way with respect to such insurance and any
loss thereunder. Owner shall include in its hazard policy covering the
Properties and the personal property, fixtures and equipment located thereon,
and Manager shall include in any fire policies for its furniture, furnishings or
fixtures situated in the Properties, appropriate clauses pursuant to which the
respective insurance carriers shall waive all rights of subrogation (and Owner
and Manager hereby waive all claims against the other) with respect to losses
arising from causes insured against under such policies, even if caused by the
negligence of a party, its agents or employees.
ARTICLE 8
OWNER'S RIGHT TO AUDIT
8.1 Owner reserves the right for Owner's employees or others
appointed by Owner, to conduct examinations, during normal business hours upon
written notice, of the books and records maintained for Owner by Manager no
matter where the books and records are located. Owner also reserves the right to
perform any and all additional audit tests relating to Manager's activities,
either at the Properties or at any office of Manager, provided such audit tests
are related to those activities performed by Manager for Owner.
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8.2 Should Owner's employees or appointees discover either
weaknesses in internal control or errors in record keeping, Manager shall
correct such discrepancies either upon discovery or within a reasonable period
of time thereafter. Manager shall inform Owner in writing of the action taken to
correct such audit discrepancies. Any and all such audits conducted either by
Owner's employees or appointees will be at the sole expense of Owner, unless
such audits indicate fraud or gross neglect.
ARTICLE 9
BANK ACCOUNTS
9.1 Manager shall deposit all rents and other funds collected from
the operation of the Properties, including any and all advance funds, in a bank
account designated by Owner (the "Receipt Accounts") for the Properties in the
name of Owner. The bank shall be informed in writing that the funds are held in
trust for Owner and of the designated representatives of Manager that Owner has
approved as having access to such accounts. If requested by Owner, Manager shall
establish a second account (the "Disbursement Account"). It established, Manager
shall pay the operating expenses of the Properties and any other payments
relative to the Properties as required by the terms of this Agreement (including
Manager's fee under Article 20 hereof) out of the Disbursement Account. Money
shall be transferred from the Receipts Account to the Disbursement Account as
deemed necessary by Manager.
9.2 Manager shall, on behalf of Owner, maintain detailed records of
all security deposits and such records will be open for inspection by Owner's
employees or appointees.
9.3 Owner may direct the Manager to change a depository bank or the
depository arrangements.
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9.4 Through the use of signature cards, authorized representatives
of Owner shall be permitted access to any and all funds in the bank account
described in Section 9.1. However, Owner and Owner's representative may not draw
against said bank accounts without written communication to Manager. Manager's
authority, and the authority of any designated representative of Manager, to
draw against such accounts may be terminated at any time by Owner upon written
notice to Manager.
9.5 All bank records pertaining to Owner's accounts shall be the
property of Owner.
ARTICLE 10
PAYMENT OF EXPENSES
10.1 The following costs (except as excluded by Section 10.3) are to
be paid directly (unless disbursed under Section 10.2) from an appropriate
account described in Section 9.1:
(a) Costs of the gross salary and compensation or pro rata share
thereof, to include, payroll taxes, insurance, workmen's compensation and
other benefits, of on-site manager and approved staff, to the extent
included in an approved budget; and
(b) Any and all costs necessary to the management, operation and
maintenance of the Properties which are covered within the approved
budgetary guidelines as outlined in Articles 5 and 6 or which may exceed
approved budgetary guidelines but which result from emergencies, and also
including any items listed in Section 10.2.
10.2 The following costs (except as excluded under Section 10.3), to
the extent included in approved budgets, are to be reimbursed to Manager by
Owner or paid directly by
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Manager from the Disbursement Account upon submittal by Manager to Owner of a
regular billing accompanied by documentation which reasonably supports said
billing.
(a) General accounting and reporting services which are considered
to be within the reasonable scope of the Manager's responsibility to Owner
consistent with the applicable budget;
(b) Cost of forms, papers, ledgers, and other supplies and equipment
used in the on-site Manager's office;
(c) The cost of insurance permitted or required to be maintained by
Manager pursuant to the provisions of this Agreement;
(d) Cost of all bonuses paid to on-site employees;
(e) Costs to correct any violation of federal, state and municipal
laws, ordinances, regulations and orders relative to the leasing, use,
repair and maintenance of the Properties, or relative to the rules,
regulations or orders of the local board of fire underwriters or other
similar body, provided that such cost is not a result of the gross
negligence or willful misconduct of Manager or its agents or employees;
(f) Actual costs of making all repairs, decorations and alterations
to the Properties;
(g) Costs incurred by Manager in connection with all service
agreements entered into by Manager in accordance with authorizations in this
Agreement or approved by Owner;
(h) Costs of collection of delinquent rentals;
(i) Costs of printed forms and supplies required for use at the
Properties;
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(j) Costs of capital expenditures;
(k) Costs of printed checks for each bank account required by Owner;
(l) Costs of adding machines, personal computers, and other
equipment of such type used for managing the Properties;
(m) Leasing commissions payable to third parties;
(n) Costs of Owner approved advertising, business expenses,
professional dues, professional development, employee relocation expenses
and travel for on-site supervision;
(o) Legal fees of attorneys, provided such attorneys have been
approved by Owner in writing in advance of retention;
(p) Costs of outside audits as required by leases and other outside
audits as may be requested by Owner in writing;
(q) Costs of a management office, including necessary furnishings
and equipment, as provided for in Section 10.4 hereof;
(r) All other costs and expenses reasonably incurred by Manager in
performing its duties hereunder;
(s) A reasonable charge for the services rendered by Manager's home
office groups; and
(t) All other costs and expenses for which Owner is obligated to
reimburse Manager as provided for in this Agreement.
10.3 The following expenses or costs incurred by or on behalf of
Manager shall be at the sole cost and expense of Manager and shall not be
reimbursed by Owner:
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(a) Costs of gross salary and wages, payroll taxes, insurance,
worker's compensation, and other benefits of Manager's executive personnel;
provided, however, a pro-rata portion of said costs and expenses and the
costs of travel related thereto for Manager's supervisory personnel will be
allocated to the Properties, based upon the amount of time spent by such
personnel in supervising the Properties compared to supervising other
properties;
(b) All costs incurred as a result of Manager's breach of this
Agreement, or in connection with Manager's gross negligence or willful
misconduct; and
(c) To the extent only that the same are not passed through to and
paid by the tenants of the Properties as additional rental, costs of forms,
papers, ledgers, and other supplies and equipment used in Manager's general
accounting office, costs of electronic data processing equipment, or a
pro-rata charge thereon, located at Manager's general accounting office,
costs of electronic data processing, or any pro-rata charge thereof, for
data processing provided by computer service companies to Manager's home
office or general accounting office, or any other item of Manager's overhead
at its home office or general accounting office.
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ARTICLE 11
INSUFFICIENT INCOME
11.1 If at any time the gross income (or cash in the Receipts Account
and the Disbursement Account) from the Properties shall not be sufficient to pay
the bills and charges which may be incurred with respect to the Properties, or
if such gross income is insufficient to pay the combined sum of both bills and
charges, Manager shall not be obligated to pay said expenses and charges from
its own account. Manager shall notify Owner immediately upon first projection or
awareness of a cash shortage or pending cash shortage and Owner and Manager
shall jointly determine payment priority. After Manager has paid, to the extent
of available gross income, all bills and charges based upon the ordered
priorities set jointly by Owner and Manager, Manager shall submit to Owner a
statement of all remaining unpaid bills. Owner shall thereafter and without
undue delay provide sufficient monies to pay any unpaid expenses properly
payable by Owner.
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ARTICLE 12
TERMINATION
12.1 Owner may terminate this Agreement upon thirty (30) days advance
notice to Manager in the event Owner sells the Properties to a third party which
is unaffiliated with Owner in a bona fide transaction. Upon such termination,
Owner shall pay to Manager a sum equal to the average annual Management Fee that
was paid to Manager in the two calendar years preceding such sale (or, if less
than two prior calendar years exist, then the average for such calendar years
that do exist, or if no full calendar year exists, then such termination payment
shall be the average monthly management fee since the commencement of this
Agreement multiplied time twelve).
12.2 If Manager shall fail to perform its duties under this
Agreement, and if such failure shall continue for thirty (30) days after written
notice from Owner, then Owner, in addition to the other remedies it may have at
law or in equity, shall have the right to terminate this Agreement.
12.3 Upon termination of this Agreement for any reason, Manager shall
deliver to Owner the following with respect to the Properties:
(a) A final accounting, reflecting the balance of income and
expenses, as of the date of termination, to be delivered within thirty (30)
days after such termination;
(b) Any balance or monies of Owner or tenant security deposits, or
both, including, without limitation, all funds in any bank accounts under
Article 9 hereof, held by Manager to be delivered immediately upon such
termination or withdrawal;
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(c) All records, contracts, leases, receipts for deposits, unpaid
bills, other papers or documents, supplies, files, keys, and equipment,
which pertain to the Properties to be delivered immediately to Owner at the
Properties upon such termination; and
(d) All service contracts in the name of Manager pertaining to the
Properties shall be assigned to, and assumed by Owner.
12.4 Manager shall deliver to Owner upon receipt any monies to which
Owner is entitled that Manager receives after the termination of this Agreement.
ARTICLE 13
CONSTRUCTION MANAGEMENT SERVICES
13.1 Owner may, if it elects, engage Manager as construction manager
with respect to the construction of all leasehold improvements within the
Properties and with respect thereto Manager shall:
(a) Evaluate and report the existing conditions of the base
building;
(b) Prepare preliminary budgets and schedules;
(c) Review and assist in the coordination of leasehold improvements
design drawings;
(d) Conduct pre-bid and construction progress meetings;
(e) Evaluate bids and make recommendations of the award of
contracts;
(f) Evaluate ongoing schedules and the quality of workmanship and
adherence of work to contract documents, specifications and drawings;
(g) Evaluate and verify accuracy of monthly construction draw
requests;
(h) Assist architect in reviewing shop drawings;
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(i) Direct architect/engineers to create punch list; and
(j) Coordinate with building management the use of the service
elevator, the need for temporary utilities and loading docks.
13.2 Manager shall be reimbursed for all out-of-pocket direct
expenses incurred and paid to a third party while performing the
responsibilities listed in this Article 13.
ARTICLE 14
COOPERATION
Should any claims, demands, suits or other legal proceedings be made or
instituted by any person against Owner or title holder of the Properties which
arise out of any of the matters relating to this Agreement, Manager shall
promptly give Owner all pertinent information and reasonable assistance in the
defense or other disposition thereof, at the sole expense of Owner.
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ARTICLE 15
MANAGER'S LIABILITY
15.1 Manager shall not, in the performance of this Agreement, be
liable to Owner or to any other person for any act or omission (negligent,
tortious or otherwise) of any agent or employee of Owner or Manager, unless the
same results from gross negligence or willful misconduct of the Manager or its
officers, employees, or agents acting within the scope of their office,
employment or agency, or the breach of this Agreement by Manager, and Owner
agrees to indemnify and hold harmless Manager and its officers, agents and
employees from and against any and all causes of action, claims, losses, costs,
expenses, liabilities, damages or injuries (including legal fees and
disbursements) that Manager, and its officers, agents and employees may directly
or indirectly sustain, suffer or incur on account of any such act or omission of
any agent or employee of Owner or Manager, unless the same results from gross
negligence or willful misconduct of the Manager or its officers, employees, or
agents, acting within the scope of their office, employment or agency, or the
breach of this Agreement by Manager.
15.2 Notwithstanding any other provisions of this Agreement, in no
event shall Owner make any claim against Manager, or its affiliates or
subsidiaries, on account of any good faith interpretation by Manager of the
provisions of this Agreement (even if such interpretation is later determined to
be a breach of this Agreement) or any alleged errors in judgment made in good
faith and in accordance with this Agreement in connection with the operation of
the Properties hereunder by Manager or the performance of any advisory or
technical services provided by or arranged by the Manager.
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15.3 Owner shall not object to any expenditures made by Manager in
good faith in the course of its management of the Properties or in settlement of
any claim arising out of the operation of the Properties unless such expenditure
is specifically prohibited by this Agreement. Subject to Section 5.20 hereof,
all expenditures in excess of approved budget amounts are specifically
prohibited, without limitation on other expenditures that may also be so
prohibited.
ARTICLE 16
REPRESENTATION
Owner hereby represents that in entering into this Agreement Owner has
not relied on any projection of earnings, statements as to the possibility of
future success or other similar matter which may be prepared by Manager and
understands that no guaranty is made or implied by Manager as to the future
financial success of the Properties.
ARTICLE 17
CONSENT
Except as otherwise expressly provided herein, whenever in this
Agreement the consent or approval of Manager or Owner is required, such consent
or approval shall not be unreasonably withheld or unduly delayed. Such consent
shall also be in writing only and shall be duly executed by an authorized
officer or agent for the party granting such consent or approval.
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ARTICLE 18
SUBSIDIARIES AND AFFILIATES
Any contract or lease with respect to the Properties between Manager and
any persons, corporation or other entity controlled by, under common control
with or controlling Manager shall be subject to the prior written approval of
Owner, and at Owner's sole discretion such approval may be withheld.
ARTICLE 19
NOTICES
Any notice provided for in or permitted under this Agreement shall be
made in writing and may be given or served by (i) delivering the same in person
to the party to be notified, or (ii) depositing the same in the United States
mail, postage prepaid, registered or certified with return receipt requested,
and addressed to the party to be notified at the address herein specified. If
notice is deposited in the United States mail pursuant to (ii) of this Article
19, it will be effective from and after the date of receipt or delivery thereof
is refused. Notice given in any other manner shall be effective only if and when
received by the party to be notified. For the purpose of notice, the address of
the parties shall be, until changed as hereinafter provided for, as follows:
if to Owner:
Hartman Commercial Properties REIT
1450 West Sam Houston Parkway, Suite 100
Houston, Texas 77043
Attn: President
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if to Manager:
1450 West Sam Houston Parkway, Suite 100
Houston, Texas 77043
Attn: President
The parties shall have the right from time to time and at any time to change
their respective addresses and each shall have the right to specify as its
address any other address by at least fifteen (15) days' written notice to the
other party. Each party shall have the right from time to time to specify
additional parties to whom notice hereunder must be given by delivering to the
other party fifteen (15) days' written notice thereof setting forth the address
of such additional party or parties; provided, however, that neither party shall
have the right to designate more than six (6) such additional parties. Notice
required to be delivered hereunder to either party shall not be deemed to be
effective until the additional parties, if any, designated by such party have
been given notice in a manner deemed effective pursuant to the terms of this
Article 19.
ARTICLE 20
COMPENSATION
In addition to the sums Owner is obligated to pay Manager as described
in this Agreement, each calendar year Manager shall receive remuneration for its
services in managing and leasing the Properties as follows:
(a) A management fee (the "Management Fee") amounting to five
percent (5%) of the Effective Gross Revenues for the Properties, including but
not limited to revenues arising from rentals for such year payable by tenants
who lease space in the Properties, parking revenues, and all other revenues of
whatever nature. The term "Effective Gross Revenues" shall mean all payments
actually collected from tenants and occupants of the Properties, exclusive of
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(a) security and deposits (unless and until such deposits have been applied to
the payment of current or past due rent) and (b) payments received from tenants
in reimbursement of expenses of repairing damage caused by tenants. The
Management Fee shall be payable monthly based on interim results and projections
with annual reconciliations;
(b) For the leasing services described in Section 5.5, following
sums (the "Leasing Fees"):
(1) For any lease which is executed, (a) during the term of
this Agreement (i.e., prior to the termination of this Agreement), whether or
not Manager has any involvement in the same, a fee equal to six percent (6%) of
the Effective Gross Revenues which are payable pursuant to or on account of the
applicable documents (the foregoing are herein called the "Original Leasing
Fees"); and (b) within one hundred eighty (180) days after the termination of
this Agreement and with respect to which Manager has had active involvement, the
applicable fee described in clause (a) above.
(2) For any lease extension, renewal, expansion or other
similar right whereby a tenant extends its lease or leases additional space, (a)
during the term of this Agreement (i.e., prior to the termination of this
Agreement), whether or not Manager has any involvement in the same, a fee equal
to four percent (4%) of the Effective Gross Revenues which are payable pursuant
to or on account of the applicable documents, and (b) within one hundred eighty
(180) days after the termination of this Agreement and with respect to which
Manager has had active involvement, the applicable fee described in clause (a)
above.
The foregoing fees shall be payable in full upon the date the applicable
document is executed;
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(c) Owner will pay Manager a partnership management fee of one
percent (1%) of the Effective Gross Revenues from the Properties for managing
the day-to-day affairs of Owner, and providing the administrative services
described in Section 5.21. Such fee shall be payable monthly within ten (10)
days after the end of each calendar month, based upon the Effective Gross
Revenues during such calendar month. Owner will pay Manager a fee for
undertaking construction projects and making other repairs and improvements to
the Properties. The fee will be equal to the sum that would be charged by a
qualified third party contractor for similar services but will not exceed
twenty-five percent (25%) of the total cost of the improvements under any
circumstances. The construction fee due Manager will be payable when the
improvements are completed. The timing and amount of such fee will be determined
mutually by Owner and Manager; and
(d) Upon submission of the financial statements as required by
Article 5, Manager shall submit to Owner Manager's calculation of all fees,
which fees shall be retained by Manager as described in Section 5.18(c) hereof.
ARTICLE 21
MISCELLANEOUS
21.1 The pronouns used in this Agreement referring to Manager or
Owner shall be understood and construed to apply whether Manager or Owner be an
individual, co-partnership, corporation or an individual or individuals doing
business under a firm or trade name, and the masculine and neuter pronouns shall
each include the other and may be used interchangeably with the same meaning.
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21.2 Except as otherwise herein provided, any and all amendments,
additions or deletions of this Agreement shall be null and void unless approved
by the parties in writing.
21.3 All headings herein are inserted only for convenience and ease
of reference and are not to be considered in the construction or interpretation
of any provision of this Agreement.
21.4 The waiver of any of the terms and conditions of this Agreement
on any occasion or occasions shall not be deemed as waiver of such terms and
conditions on any future occasion. No waiver shall be implied by any isolated or
repeated action or non-action. To be effective, any waiver must be in writing
executed by the party to be bound thereby.
21.5 This Agreement shall be binding upon and inure to the benefit of
Owner, its successors and/or assigns, and shall be binding upon and inure to the
benefit of Manager, and its successors.
21.6 This Agreement shall be construed, interpreted and applied in
accordance with and shall be governed by, the laws applicable to the State of
Texas.
21.7 Owner represents that it is the fee owner of the Properties and
of the improvements and appurtenances and equipment installed therein, except
such equipment as may be leased or acquired by Owner on a hire-purchase basis or
as may be owned, leased or installed by tenants or other third parties.
21.8 Nothing contained in this Agreement shall be construed so as to
prohibit Manager from owning, operating, managing or investing in any real
estate development. Additionally, Manager may engage in or possess an interest
in other ventures of any nature and
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description independently or with others and Owner shall have no rights with
respect thereto by virtue of this Agreement.
21.9 Notwithstanding anything else herein to the contrary, in
performing its services hereunder, Manager shall not violate the terms of the
partnership agreement of Owner or of any ground lease, tenant lease, mortgage,
deed of trust, easement or other instrument or agreement binding on or affecting
the Properties of which Manager has knowledge.
21.10 Pursuant to Section 5.03 of the Rehabilitation Act of 1973, as
amended, as implemented by 41 C.F.R. 60-401, Section 4.02 of the Vietnam Era
Adjustment Assistance Act of 1964, as implemented by 41 C.F.R. 60-250, and
Executive Order 11246, as amended by Executive Order 11875, Manager agrees not
to discriminate against any employee or applicant for employment because of said
individual's race, religion, sex, national origin, physical or mental handicap
or status as a disabled veteran of the Vietnam Era, in regard to any position
for which the employee or applicant is otherwise qualified.
21.11 Notwithstanding any provision hereof to the contrary, in no
circumstances shall a shareholder, limited partner, director, officer, employee
or agent ("Special Party") of a party hereto or of a Special Party of a party
hereto be personally liable for any of the obligations of such party hereto
under this Agreement except to the extent, if any, provided in any separate
agreement now or hereafter executed and delivered by such Special Party nor
shall any Special Party of a party hereto be liable to the other party hereto
(the other party herein agreeing to indemnify such Special Party from and
against any such liability) for any act or omission, negligent, tortious or
otherwise, of such Special Party unless the same results from
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willful misconduct or gross negligence of, or (if such Special Party becomes a
party hereto) a breach of this Agreement by, such Special Party.
21.12 This Agreement may be executed in several counterparts, each of
which shall be an original of this Agreement but all of which, taken together,
shall constitute one and the same agreement.
21.13 The rights and obligations of Manager and Owner shall survive a
termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
HARTMAN REIT OPERATING PARTNERSHIP, L.P.
By: Hartman Commercial Properties REIT
Its: General Partner
By: /s/ Allen R. Hartman
--------------------------------
Name: Allen R. Hartman
Title: President
HARTMAN MANAGEMENT, INC.
By: /s/ Allen R. Hartman
--------------------------------
Name: Allen R. Hartman
Title: President
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