MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (the "AGREEMENT") is made as of the 8th day of
April, 1986, between MISSION VALLEY PARTNERSHIP ("OWNER"), a California limited
partnership, and MAY CENTERS, INC. ("MANAGER"), a Missouri corporation.
RECITALS
A. Owner is the owner of certain lands situated in the City of San
Diego, County of San Diego and State of California (the "SHOPPING CENTER
PARCEL"), more particularly described in Exhibit "A", attached hereto and made a
part hereof, which have been developed as a regional shopping center (the
"SHOPPING CENTER") presently operating under the name "Mission Valley Center".
B. Owner is a California limited partnership composed of Endowment and
Foundation Realty, Ltd. -- JMB-III, a Delaware corporation ("ENDOWMENT"), May
Centers, Inc., a Missouri corporation, Somerset Ltd., a California limited
partnership ("SOMERSET"), Xxxxxxxx Xxxxxxxxx, an individual ("XXXXXXXXX"), and
Xxxxxxx X. Xxxxxx, as Trustee of the Xxxxxxx X. Xxxxxx Trust ("XXXXXX TRUST").
C. Manager is experienced in the operation and management of shopping
centers.
D. Owner and Manager are entering into this Agreement to establish the
terms and conditions under which Manager shall operate and manage the Shopping
Center on behalf of Owner.
AGREEMENTS
In consideration of the mutual promises contained herein, Owner and Manager
covenant and agree as follows:
ARTICLE I
EMPLOYMENT OF MANAGER; DEFINITIONS
SECTION 1.1 Owner employs Manager as its sole and exclusive agent to
perform the services described in this Agreement. Manager accepts such
employment and agrees to perform such services as an independent contractor.
Owner authorizes Manager to exercise all powers with respect to the Shopping
Center as may be reasonably necessary or proper for the performance of Manager's
duties under the terms of this Agreement.
SECTION 1.2 As used in this Agreement, the following capitalized terms
shall have the meanings indicated below:
(a) "AFFILIATE" shall have the meaning set forth in Section 7.1 hereof.
(b) "AGREEMENT" shall have the meaning set forth in the Preamble hereto;
(c) "ANNUAL PERIOD" shall have the meaning set forth in Section 5.1
hereof.
(d) "APPROVED BUDGET" shall have the meaning set forth in Section 2.1(c)
hereof.
(e) "APPROVED LEASING PLAN" shall have the meaning set forth in Section
2.1(c) hereof.
(f) "CO-PARTNER" shall have the meaning set forth in Section 1.1E of the
General Partners Agreement.
(g) "DIRECT PAYROLL COSTS" shall have the meaning set forth in Section
17.1(a) hereof.
1.
(h) "ENDOWMENT" shall have the meaning set forth in Recital Paragraph B.
(i) "EXCESS MANAGEMENT EXPENSES" shall have the meaning set forth in
Section 17.1 hereof.
(j) "EXISTING NOTE" shall have the meaning set forth in Section 1.1F of
the General Partners Agreement.
(k) "GENERAL PARTNERS" shall have the meaning set forth in Section 1.1G of
the General Partners Agreement.
(l) "GENERAL PARTNERS AGREEMENT" shall have the meaning set forth in
Section 1.1H of the General Partners Agreement.
(m) "INDIRECT PAYROLL COSTS" shall have the meaning set forth in Section
17.1(b) hereof.
(n) "INVESTOR" shall have the meaning set forth in Section 1.1I of the
General Partners Agreement.
(o) "MANAGEMENT EXPENSES" shall have the meaning set forth in Section 17.1
hereof.
(p) "MANAGER" shall have the meaning set forth in the Preamble hereto.
(q) "MAY AFFILIATE" shall have the meaning set forth in Section 1.1M of
the General Partners Agreement.
(r) "NON-DISCRETIONARY EXPENDITURE" shall have the meaning set forth in
Section 5.5A(4)(2) of the General Partners Agreement.
(s) "NON-REQUESTING PARTY" shall have the meaning set forth in Section
16.3 hereof.
(t) "NOTICE" shall have the meaning set forth in Section 8.1 hereof.
(u) "OWNER" shall have the meaning set forth in the Preamble.
(v) "OWNER'S ALLOCABLE SHARE" shall have the meaning set forth in Section
17.1(b) hereof.
(w) "OWNER'S OVERHEAD SHARE" shall have the meaning set forth in Section
17.1(c) hereof.
(x) "REQUESTING PARTY" shall have the meaning set forth in Section 16.3
hereof.
(y) "SHOPPING CENTER" shall have the meaning set forth in Recital
Paragraph A.
(z) "SHOPPING CENTER BUDGET" shall have the meaning set forth in Section
2.1 hereof.
(aa) "SHOPPING CENTER PARCEL" shall have the meaning set forth in Recital
Paragraph A.
(bb) "TERM" shall have the meaning set forth in Section 3.1 hereof.
ARTICLE II
MANAGER'S OBLIGATIONS
SECTION 2.1 Manager shall perform the following services with respect to
the Shopping Center:
(a) Manager shall maintain liaison with the design, engineering,
construction staffs and other special consultants engaged by Owner.
(b) Manager shall submit to Owner from time to time and, when required
under the terms of this Agreement, request Owner's approval of
2.
Manager's recommendations for the operation of the Shopping Center, including,
but not limited to:
(i) the number and type of employees to be employed;
(ii) procedures for the collection of rents and other charges;
(iii) maintenance, repair and expansion of the Shopping Center;
(iv) an insurance program for the Shopping Center; and
(v) marketing and promotion of the Shopping Center and the
establishment of such merchants' association or promotion and marketing funds as
Manager shall deem appropriate.
(c) The following provisions shall apply to the budget and leasing plan
for the Shopping Center:
(i) Not later than November 30th of each year, Manager shall prepare
and submit for Owner's approval, which approval shall not be unreasonably
withheld or delayed, a shopping center budget ("SHOPPING CENTER BUDGET") for the
next calendar year provided, however, for the 1986 calendar year, the Shopping
Center Budget in the form of Exhibit "E" attached hereto and made a part hereof
is approved and in addition, up to $75,000 may be spent during 1986 for
predevelopment expenses of the type contemplated by Section 5.4E(2) of the
General Partners Agreement. The Shopping Center Budget shall set forth in
reasonable detail the estimated operating receipts and expenditures of Owner on
a month-to-month basis for the period covered by the Shopping Center Budget, and
shall show amounts reserved for on-going expenses, any anticipated extraordinary
expenses, contingencies and capital expenditures and source of funds with
respect thereto (including the amount and the approximate date funds will be
needed for such expenses). The Shopping Center Budget shall also contain, as a
separate line item for informational purposes only, an estimate of the
"Management Expenses" (as defined in Section 5.1 hereof) that will be payable to
Manager during the period covered by the Shopping Center Budget. Owner may not
disapprove the Shopping Center Budget on the basis of the estimate of Management
Expenses contained in the Shopping Center Budget, nor shall the amount of
Management Expenses payable during the period covered by the Shopping Center
Budget be limited by the estimate of such expenses contained in the Shopping
Center Budget. The Shopping Center Budget shall be substantially in the form of
budget attached hereto as Exhibit "B". If Owner does not approve the most
recently submitted Shopping Center Budget or proposed revision thereof, then
Manager shall continue to operate under the most-current "Approved Budget",
modified as necessary to (a) authorize "Non-Discretionary Expenditures" and (b)
to take into account expenditures which have already been made. The Shopping
Center Budget and amendments thereto as approved by Owner in accordance with the
terms hereof shall be herein called the "APPROVED BUDGET".
(ii) In connection with the budgeting process, but not later than
November 30th of each year, Manager shall submit for the reasonable approval of
Owner a comprehensive leasing plan and rent schedule, which shall include a
statement of the space Manager expects to be leased during such year, the
proposed tenant (if known) and the use proposed for the space to be leased, the
fixed or minimum rent and the method of calculation of percentage rent it
expects to obtain for such space, any tenant allowances and leasing
3.
commissions and all other material financial provisions of a tenant lease. The
leasing plan and rent schedule thereto, as approved by Owner in accordance with
the terms hereof, shall be herein called the "APPROVED LEASING PLAN".
(iii) Manager shall have the right and authority to implement the
Approved Budget and Approved Leasing Plan, provided that Manager operates within
the parameters of the same. Manager shall be required to obtain the Owner's
prior written approval for actions to be taken by Manager which deviate from the
terms of the Approved Budget or Approved Leasing Plan, provided, however, if a
given action is of such a nature that Co-Partner (as a May Affiliate) is
authorized to take such action pursuant to Section 5.5A(3) or Section 5.5B(3),
respectively, but subject to Section 5.6 of the General Partners Agreement
without the prior approval of Investor, such approval may be given by Co-Partner
on behalf of Owner, and such approval may be oral.
(d) Manager shall negotiate all leases with tenants for space within
the Shopping Center and all extensions, renewals, modifications, amendments or
terminations thereof and shall submit all such agreements to Owner for
execution. All such leases, unless otherwise approved by Owner, shall be
negotiated substantially in accordance with:
(i) the Approved Leasing Plan as amended from time to time;
(ii) the standard form of lease approved by Owner and its counsel, from
time to time, subject to reasonable negotiation; and
(iii) administrative procedures established or approved by Owner for
securing Owner's approval of the business and legal terms of each lease,
processing lease data forms, and processing the final draft for tenant's and
Owner's approval, execution and delivery.
(e) Manager shall maintain a central control file of all leases
relating to the Shopping Center and shall, upon request, furnish copies of such
leases to Owner. Manager shall: (i) review plans and specifications for tenant
improvements; (ii) consult with tenants and their respective architects,
engineers, contractors and other representatives regarding tenants' plans and
specifications; and (iii) coordinate, to the extent necessary, the construction
of tenant improvements.
(f) Manager shall xxxx tenants and other occupants in the Shopping
Center for, and shall use diligent efforts to collect, all fixed rents,
percentage rents and other sums, whether payable as additional rent or
otherwise, payable by such tenants and occupants under their respective leases
and other agreements, or by other parties under license, service or other
agreements. Manager shall obtain and review statements of sales furnished by
tenants to support their payment of percentage rentals or other sums and
deductions, and shall furnish a summary of such statements to Owner on a
quarterly basis. Manager may not institute, prosecute or settle on behalf of
Owner any legal or arbitration proceedings in connection with the tenant leases
without the prior written approval by Owner, provided, however, if Co-Partner
(as a May Affiliate) is authorized to take any such action pursuant to Section
5.5B(3) of the General Partners Agreement without the prior approval of
Investor, Co-Partner may give such consent on behalf of Owner, and such consent
may be oral. Manager shall keep Owner advised of Manager's
4.
collection activities from time to time and shall notify Owner of any claims
which Manager deems to be uncollectable.
(g) Manager shall use diligent efforts to enforce the performance by
tenants of all requirements of their respective leases.
(h) Manager shall cause the Shopping Center to be maintained in good
sanitary, orderly and safe operating condition and repair at Owner's cost,
subject to the terms of the Approved Budget, and shall supervise the maintenance
thereof. Manager shall, subject to the terms of the Approved Budget, (i) hire
such persons, firms or corporations and purchase or lease such equipment and
supplies at reasonable rates and costs as may be necessary or desirable to
accomplish such purposes, and (ii) negotiate and administer contracts with third
parties for electricity, gas, fuel supply, water, telephone, window washing,
exterminating, equipment maintenance, trash handling and other contracts
relating to the operation or maintenance of the Shopping Center to the extent
that such services are not provided by Manager; however, Manager shall not enter
into any agreement with an "Affiliate" of Manager or of Investor or
Co-Partner without the prior written consent of Owner, provided, however,
that if Co-Partner (as a May Affiliate) is authorized to do so pursuant to
Section 5.6B(2) of the General Partners Agreement without the prior consent
of Investor, then Co-Partner may give such approval and such approval may be
oral.
(i) Manager shall maintain the books, records and accounts of Owner and
shall prepare and submit to Owner, within 45 days after the end of the
just-concluded quarter, financial reports on the operation of the Shopping
Center relating to such quarter. Such reports shall include, without
limitation: income and expense statements, containing monthly and year-to-date
information; statements listing rent delinquencies; leasing status report;
statements reconciling material variances between the actual receipts and
expenditures and the amount projected for such items as set forth in the
applicable Approved Budget; and such other statements and reports as may be
reasonably requested by Owner. Such financial reports shall be substantially in
the form attached hereto as Exhibit "C". In addition, Manager shall assist
Owner and Owner's accountants in preparing such annual financial reports and tax
returns as may be required by Owner. Owner shall have the right to examine such
books and records at any time during normal business hours at Manager's place of
business and make copies thereof.
(j) Manager shall advise Owner as to insurance coverage and shall
procure insurance coverage for the Shopping Center in accordance with Article 15
hereof.
(k) Manager shall organize and administer periodic meetings with Owner
in order to review the status of the Shopping Center and establish direction as
necessary.
(l) If directed by Owner, Manager shall explore, from time to time, the
feasibility of expanding the Shopping Center or of developing additional
improvements on the Shopping Center Parcel, and shall make such proposals to
Owner as Manager shall deem appropriate in connection therewith. Co-Partner (as
a May Affiliate) shall be entitled to give such authorization to Manager without
the consent of Investor to the extent permitted in Section 5.4E(2) but
5.
subject to Section 5.6 of the General Partners Agreement. Manager shall
implement all decisions of Owner in connection with the exploration of the
expansion of the Shopping Center.
(m) Manager shall assist, if requested by Owner in a writing signed by
both General Partners, in any application by Owner for a zoning change or other
application made by Owner to any governmental authority relating to the Shopping
Center.
(n) Manager shall establish, supervise and assist the advertising and
promotional program for the Shopping Center, subject to the then-Approved Budget
and Owner's recommendations in connection therewith.
(o) Manager shall establish, supervise and assist in the formation of
such merchants' associations or promotion and marketing funds, as deemed
appropriate by Manager, and shall assist in the administration thereof, subject
to the then-Approved Budget and Owner's recommendations in connection therewith.
(p) Manager shall review, from time to time, the tax assessments levied
upon the Shopping Center and shall recommend to Owner, when deemed appropriate
by Manager in the exercise of Manager's reasonable business judgment, that
proceedings be instituted by Owner to contest or appeal such assessments.
(q) Manager shall deposit all funds received by Manager for Owner
pursuant to this Agreement in the central bank account maintained by Co-Partner
(as a May Affiliate) pursuant to Section 4.4B of the General Partners Agreement.
Manager shall keep Owner informed at all times with respect to the bank in which
such account is maintained, the name in which such account is kept, the number
of such account and the names and titles of officers or employees of Manager who
may draw upon such account. Officers or employees of Manager approved by Owner
shall disburse from such account funds necessary for the operation and
maintenance of the Shopping Center, including all Management Expenses in
accordance with the terms of the then-Approved Budget and Section 2.1(c) hereof.
Employees of Manager who handle or are responsible for the handling of Owner's
funds shall be bonded by a fidelity bond acceptable both to Manager and Owner,
provided, however, Manager may elect, in lieu of such bond, to indemnify Owner
and the General Partners thereof against loss, theft, embezzlement or other
fraudulent acts on the part of Manager's employees, subject to Owner's prior
written approval of the form and substance of the indemnity agreement.
(r) Manager shall use its reasonable efforts which it believes
necessary in the exercise of its reasonable business judgement to comply with
and perform all covenants, obligations and limitations, and to make the
payment of all amounts, subject to the terms of the then-Approved Budget,
imposed by law or by any contract, instrument or encumbrance to which the
Shopping Center or Owner and Manager shall be subject during the "Term",
including, but not limited to, the tenant leases executed in compliance with
the then-Approved Leasing Plan or Section 2.1(c)(iii) or (d) hereof or as
otherwise approved in writing by Owner and all mortgages and deeds of trust
(including, but not limited to, the Existing Note and other loan documents
related thereto).
6.
(s) Manager shall pay and discharge to the extent permitted by the
then-Approved Budget or pursuant to Section 2.1(c)(iii) hereof, out of the
funds relating to the Shopping Center which are deposited in the account
referred to in Section 2.1(q) hereof, all costs, expenses, liabilities and
obligations of or relating to the Shopping Center or any part thereof at or
before the time or times the same shall be due, including, but not limited
to, the following:
(i) The payment of all business taxes, and all state and local
taxes based in whole or in part on gross income or adjusted gross income, and
all real and personal property taxes and assessments of every kind or
description whatsoever, whether general, special, ordinary or extraordinary,
which are assessed or levied against the Shopping Center or any part thereof,
or which become payable, during or with respect to the Term or any part
thereof.
(ii) The payment of all charges for or related to utilities.
(t) Manager shall perform such other services as may be necessary
or proper to operate the Shopping Center in the manner contemplated by this
Agreement.
ARTICLE 3
TERM
SECTION 3.1 The term ("TERM") of this Agreement shall begin as of
the date hereof and shall continue through October 8, 1997, and if the
Partnership has not terminated, thereafter shall continue on a year-to-year
basis, unless terminated by the parties in the manner provided in Article 4.
ARTICLE 4
TERMINATION
SECTION 4.1 This Agreement may be terminated, at the option of
Manager, by delivering to Owner written notice of such termination not less
than 45 days prior to the effective date of such termination. This Agreement
may also be terminated, at the sole option of Owner, and exercised by
Investor on behalf of Owner, giving Manager written notice of such
termination upon the occurrence of any of the following:
(a) Manager commits a material default hereunder, if such default
is not cured within 30 days after receipt by Manager of a written notice
setting forth and describing such default, or, if such default cannot be
cured within 30 days, the curing of such default is not commenced within said
30 days and thereafter diligently prosecuted to the curing thereof. If, after
receipt of such written notice of default, Manager shall dispute that it is
in material default of this Agreement, Manager may initiate arbitration
proceedings, in the manner set forth in Section 16.3 hereof, to resolve the
dispute. The time available to Manager to cure the default claimed in such
notice shall not begin to run until a final determination has been made in
such proceedings.
(b) Manager shall make an assignment for the benefit of creditors,
apply for the appointment of a trustee, liquidator or receiver of any
substantial part of its assets, or commence any proceeding relating to itself
under any bankruptcy, reorganization, arrangement or similar law; or any such
application is filed or proceeding is commenced against Manager and Manager
indicates its consent thereto, or an order is entered appointing any such
trustee, liquidator or receiver or approving a petition in any such
7.
proceedings and such order remains in effect for more than 90 days; or
Manager shall admit in writing its inability to pay its debts as they become
due.
(c) Co-Partner ceases to be a May Affiliate.
(d) Upon the sale of the Shopping Center by Owner.
(e) In the event that Manager has willfully and intentionally
overcharged Owner for Management Expenses during any fiscal year during the
Term.
(f) In the event Manager fails to cooperate with Owner as set
forth in Section 4.3 if such failure is not cured within 30-days after
receipt by Manager of a written notice stating such failure.
SECTION 4.2 Within 45 days following the termination of this
Agreement, Owner shall pay to Manager all compensation that may be due and
payable as of the effective date of such termination. Manager shall deliver
to Owner or Owner's designee, within 45 days after the effective date of such
termination:
(a) all property of Owner which Manager has in its possession;
(b) a final accounting showing the balances of income and expenses
as of the date of termination; and
(c) all other information reasonably necessary to terminate
Manager's duties under this Agreement in an orderly and systematic manner.
SECTION 4.3 If Endowment, on behalf of Owner, delivers a notice
("REIT CONCERN NOTICE") to Manager stating that, based on the sole opinion of
Endowment or its counsel, there is a risk that Manager may reasonably no
longer be an "independent contractor" from whom neither Endowment nor Owner
derives or receives income within the meaning of Section 856(d)(2)(c) of the
Internal Revenue Code, as amended, together with an opinion of competent tax
counsel that such may be the case, then and in such event, Manager shall,
promptly following its receipt of the REIT Concern Notice, cooperate with
Endowment (acting on behalf of Owner) to take such actions as may reasonably
be requested by Endowment in order to comply with the independent contractor
requirement, provided that (a) Endowment reimburses Manager for all costs and
expenses related to such actions, (b) there will be no material adverse
impact to Manager as a result of any change proposed by Endowment (on behalf
of Owner), and (c) the payments required under Article 5 and Article 17 would
not be decreased.
ARTICLE 5
COMPENSATION
SECTION 5.1 As compensation for the services provided by Manager
under this Agreement, Owner shall pay to Manager an amount equal to four
percent (4%) of the "Cash Income" of Owner during each "Annual Period" of the
term hereof. As used herein, "CASH INCOME" for the applicable annual period
means the gross cash revenues and funds received by the Owner for such
period, other than funds received as capital contributions, loans or proceeds
of casualty insurance (other than rental income insurance) or of any
refinancings or sales of assets of the Owner or from any condemnation award
or conveyance in lieu thereof (prepaid rents, prepaid payments and security
deposits being included in Cash Income as earned, applied or forfeited). As
used herein, "ANNUAL PERIOD" shall refer to each calendar year which occurs
during the term
8.
hereof except that such term shall also refer to (a) the period commencing on
the date hereof and ending on December 31, 1986 and (b) the partial calendar
year in which the term hereof ends if such term ends on a date other than
December 31 of the applicable year.
ARTICLE 6
MANAGER'S STAFF
SECTION 6.1 In order to perform the services required by this
Agreement, it will be necessary for Manager to employ certain key personnel.
Manager shall, at all times, employ a sufficient number of appropriately
trained, experienced and otherwise qualified personnel to enable it to
efficiently and effectively carry out its obligations pursuant to this
Agreement. Manager shall use sufficient time and effort of such personnel to
enable Manager to perform its obligations under this Agreement.
SECTION 6.2 With the prior consent of Owner, Manager shall have
the right from time to time to contract with such third parties as Manager
shall deem appropriate in performing its obligations under this Agreement,
and such consent may be given by Co-Partner without the consent of Investor
to the extent permitted by the General Partners Agreement. Whenever services
of third parties are used to perform any of the services described herein,
all costs and expenses for such services shall be paid by Owner, provided
that the incurrence of such costs and expenses is in accordance with the
Approved Budget and Section 2.1(c) hereof.
ARTICLE 7
ASSIGNMENT
SECTION 7.1 Manager shall not assign, all or any part of its
interest in or obligations arising out of this Agreement except to an
Affiliate. For purposes of this Agreement, the term "AFFILIATE" shall mean
any of the following: (a) The May Department Stores Company, a New York
corporation ("MDS"); (b) any wholly owned subsidiary of MDS or Manager; or
(c) any entity in which either MDS or Manager or their respective wholly
owned subsidiaries own at least 25% of the voting control thereof and over
which MDS or Manager or their subsidiaries, as the case may be, have
effective control. Any transfer of stock or of a partnership interest in an
Affiliate which reduces the interest of MDS, Manager or their respective
subsidiaries to less than 25% shall be deemed an assignment for purposes of
this Section 7.1.
ARTICLE 8
NOTICES
SECTION 8.1 Every notice, demand, direction, consent, approval,
request and other communication required or permitted hereunder ("NOTICE")
shall be in writing, and shall be personally delivered or sent by overnight
courier, registered or certified United States Mail, postage prepaid, return
receipt requested, to whomever the Notice is required or permitted to be
sent, and addressed as stated below:
TO MANAGER: May Centers, Inc.
000 Xxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Chairman
9.
TO OWNER: Mission Valley Partnership
c/o May Centers, Inc.
000 Xxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Chairman
with a copy to:
Endowment and Foundation Realty, Ltd. -- JMB-III
c/o JMB Realty Corporation
000 X. Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xx. Xxxxxx X. Xxxxxxx
and
Pircher, Xxxxxxx & Xxxxx
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Real Estate Notices
SECTION 8.2 Any party may change the address to which Notices served
upon it are to be sent by 10 days' prior Notice informing the other parties
of the change in address. All Notices given by United States mail as a
registered or certified matter or by overnight courier service shall be
deemed to have been given on the day the return receipt is signed and
received by the sending party, or, in the event that the addressee refuses
receipt, then on the third day after the same is either (1) deposited in the
United States mail as registered or certified matter, addressed as above
provided, with postage thereon fully prepaid or (2) delivered to a courier
service with instructions for prompt delivery of the same, provided a signed
receipt evidencing delivery is obtained by such courier service within such
three-day period. Any notice not given by registered or certified mail as
aforesaid shall be deemed to be given upon receipt of the same by the party
to whom the same is to be given.
ARTICLE 9
AMENDMENT
SECTION 9.1 This Agreement shall be subject to amendment only by a
writing signed by both General Partners and Manager.
ARTICLE 10
SEVERABILITY
SECTION 10.1 If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall to any extent be
held invalid or unenforceable by a court of competent jurisdiction, such
result shall not affect the other terms and provisions of this Agreement or
applications thereof which can be given effect without the relevant term,
provision or application. To this end, the parties agree that the provisions
of this Agreement are and shall be severable.
ARTICLE 11
REMEDIES CUMULATIVE
SECTION 11.1 Except as otherwise provided herein, all rights,
privileges and remedies afforded the parties by this Agreement shall be
deemed cumulative, and in addition to all rights and remedies available at
law or in equity.
10.
ARTICLE 12
SUCCESSORS AND ASSIGNS
SECTION 12.1 This Agreement shall be binding upon and inure to the
benefit of the parties and their permitted successors and assigns.
ARTICLE 13
LAW APPLICABLE
SECTION 13.1 The laws of the State of California shall govern the
enforcement and construction of this Agreement.
ARTICLE 14
CONSENT OR WAIVER
SECTION 14.1 No consent or waiver, express or implied, by either party
to this Agreement to, of or for any breach or default by the other party in
performance of its obligations hereunder shall be deemed or construed to be a
consent or waiver to or for any other breach or default in performance by
such other party of the same or any other obligation of such party hereunder.
Failure on the part of either party to complain of any act or failure of the
other party to this Agreement or to declare the other party in default,
irrespective of how long such failure continues, shall not constitute a
waiver by such party of its rights hereunder.
ARTICLE 15
INDEMNIFICATION AND INSURANCE
SECTION 15.1 Manager shall indemnify and save Owner harmless from and
against all damages, claims, losses, liabilities, costs and expenses
(including reasonable legal fees) arising out of (a) the gross negligence,
willful misconduct or intentional torts of Manager or Manager's agents,
servants, employees or subcontractors or (b) acts which are in breach of
Manager's duties under this Agreement or which are outside of the scope of
Manager's authority under this Agreement.
SECTION 15.2 Owner shall indemnify, defend and hold Manager harmless
from and against all damages, claims, losses, liabilities, costs and expenses
(including reasonable legal fees) incurred by Manager in connection with its
services under this Agreement, excepting only those matters within the scope
of indemnification made by Manager in Section 15.1 hereof.
SECTION 15.3
A. Manager shall procure and maintain, at Owner's expense, extended
coverage insurance as set forth in this Section. In the event that Manager is
unable to procure insurance which complies in all respects with this Section,
Manager shall promptly notify Owner of such failure, but in no event shall
Manager let the Shopping Center be uninsured. Owner shall be the primary
named insured under such policies. Manager and lenders providing financing
for the Shopping Center and certain tenants designated by Owner shall be
named as additional insureds under such policies. All such insurance shall be
coordinated with the insurance required to be carried by tenants and, where
economically feasible, shall be obtained under blanket policies covering
other properties in which Owner or Manager has an interest. The amounts of
coverage and the risks insured against in the policies obtained by Manager
shall be subject to the approval of Owner, but, without limiting the
foregoing, such policies shall, at a minimum, include the following:
11.
(a) PROPERTY INSURANCE. "All-risk" property damage insurance, covering
the Shopping Center in an amount equal to 100% of replacement value, with a
stipulated amount or agreed valuation endorsement, such insurance to include
fire and extended coverage with vandalism, malicious mischief and other
appropriate endorsements on the buildings, equipment and other improvements
on the Shopping Center, and protection against damage caused by earthquake
and flood, if available, in amounts directed by Owner;
(b) PUBLIC LIABILITY INSURANCE. Broad form general public liability
insurance and automobile liability insurance with combined single-limit
liability limits of not less than $10,000,000 for bodily and personal injury
and property damage;
(c) CONTRACTUAL LIABILITY INSURANCE. Insurance for the contractual
liabilities assumed by Owner;
(d) RENTAL INCOME INSURANCE. Rental income insurance in an amount not
less than 100% of the projected rental income from the Shopping Center for
one year when fully leased; and
(e) MANDATORY INSURANCE. Workers' compensation and all other insurance
required by any ordinance, law or governmental regulation. The policies shall
not be canceled nor shall the coverages thereunder be reduced without at
least 30 days' prior notice to each of the General Partners of Owner and
Manager; and, in any event, all parties insured thereunder shall receive
notice not less than 15 days prior to the expiration of such policies.
SECTION 15.4 The insurance policies required under Section 15.3 hereof
shall contain a provision, to the extent obtainable, to the effect that such
insurance shall not be invalidated or limited if any one or more of the
insureds thereunder waives any or all claims for recovery against the other
insureds thereunder; and so long as such provision is in effect, each of
Manager and Owner hereby waives all claims for recovery from the other for
any loss or damage insured under such policies. The foregoing, however, shall
not relieve Manager from its obligation to maintain the insurance required
hereunder.
ARTICLE 16
APPROVALS
SECTION 16.1 Manager shall be authorized to take all actions on behalf
of Owner as set forth in this Agreement; provided, however, that certain
actions shall require the prior written approval of both Co-Partner and
Endowment, in accordance with the terms of the General Partners Agreement,
including, but not limited to, Sections 5.4 and 5.6 thereof.
SECTION 16.2 Except as provided in Section 16.1 above or Section 16.3
below, any time a provision of this Agreement requires the approval of Owner
or any constituent partner of Owner, such approval shall not be unreasonably
withheld or delayed. Except in the case of an emergency, any such approval
shall be in writing. Such approval shall be deemed to have been given if no
response shall have been given within 30 days after receipt of a written
request therefor. Any denial of approval shall state with reasonable certainty
the reason or reasons for such denial, and, if reasonably practicable, shall
state the criteria for such approval.
12.
SECTION 16.3
A. REQUEST. In connection with an "Arbitrable Decision" (as
hereinafter defined) but no other decision or action hereunder, the party
("REQUESTING PARTY") who desires to make a particular decision (or any
related series thereof) which is an Arbitrable Decision, shall request in
writing for the approval of the other party ("NON-REQUESTING PARTY") of such
matter. (Whenever (a) a controversy has arisen between the parties with
respect to any claim by any party that consent or approval has been
unreasonably withheld or delayed and then only in those instances where this
Agreement or applicable law provides that consent or approval shall not be
unreasonably withheld or delayed, or (b) this Agreement expressly provides
that a particular decision may be subjected to arbitration, such decision
shall be herein referred to as an "ARBITRABLE DECISION".)
B. REPLY.
(1) NO RESPONSE. If Non-Requesting Party fails to respond (by request
for more information or otherwise) to Requesting Party's written request for
Non-Requesting Party's consent to a given Arbitrable Decision within 30 days
after delivery of such request, then Non-Requesting Party shall be deemed to
have approved or agreed with the matter set forth in such request.
(2) If Non-Requesting Party fails to approve such decision (or be
deemed to have approved it pursuant to subparagraph (1) above) within 30 days
after delivery of such request, then within seven days after the expiration
of the 30-day period, Requesting Party may request arbitration by notifying
Non-Requesting Party in writing of the following: (i) Requesting Party's
desire to arbitrate, (ii) the basis on which Requesting Party claims that the
arbitration should be decided in its favor, and (iii) Requesting Party's
arguments in support thereof briefly stated (Requesting Party will not be
foreclosed from advancing other and additional arguments at the time of the
arbitration hearing). Such notice shall be hereinafter referred to as the
"ARBITRATION NOTICE". Thereafter, the following provisions shall apply:
(1) Within seven days after receipt of the Arbitration Notice,
Non-Requesting Party shall deliver a notice ("REPLY NOTICE") to Requesting
Party stating Non-Requesting Party's position on the matters set forth in the
Arbitration Notice (but Non-Requesting Party will not be foreclosed from
advancing other and additional arguments at the arbitration hearing).
(2) If there is any difference between the parties concerning the issue
or issues, and if they are unable to resolve this difference within seven
days after Requesting Party receives the Reply Notice from Non-Requesting
Party, the dispute concerning the issue or issues shall be determined by the
arbitrator(s) who shall be selected as set forth in paragraph C below.
C. SELECTION OF ARBITRATOR; EXPENSES; LOCATION. The arbitrator shall
be a person selected from among a list obtained from the chief executive
officer of the International Council of Shopping Centers or any successor
body of comparable function, or if no such body is in existence, from the
Chief Executive Officer of the American Arbitration Association (California
Chapter) or any successor body of comparable function at the request of
either General Partner. Such list shall be obtained by Requesting Party and
shall contain
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the names of 10 persons who, in the opinion of said officer, are experienced
and qualified in the operation, management and leasing of space in large
Southern California shopping malls. The arbitrator shall be chosen from such
list by the Requesting Party and Non-Requesting Party, in the exercise of
each Party's sole discretion. If the Parties do not agree on a single
arbitrator, then the arbitration shall be conducted with a panel of three
arbitrators. The panel shall be chosen by Requesting Party's selecting one
arbitrator and Non-Requesting Party's selecting an arbitrator, each of whom
shall be experienced in the operation and management of regional shopping
centers; thereafter such arbitrators shall choose the third arbitrator, who
shall be a neutral arbitrator chosen from the list obtained by the Requesting
Party. If within 10 days after receipt of such list by the parties, a party
does not exercise its right to choose any arbitrator from such list, then the
arbitrator chosen from the list by the other party shall arbitrate the
dispute in question. If the two arbitrators are unable to select a neutral
arbitrator with 10 days from the day on which the second arbitrator was
selected by a party, either party may apply to the presiding judge of the Los
Angeles County Superior Court for designation of the neutral arbitrator.
The costs of arbitration, including, but not limited to, the fees and
expenses of the arbitrator(s) and the reasonable attorneys' fees and costs of
the prevailing party in the arbitration, shall be paid by the nonprevailing
party in the arbitration. The location of arbitration shall be Los Angeles,
California unless the parties select in writing another mutually satisfactory
location. The arbitrator(s) shall notify the parties as promptly as feasible,
but in no event later than five days after the selection of the final
arbitrator, as to the date, time, place of hearing, and any other matters
which the arbitrator(s) deems necessary.
D. RULES; PROCEDURE. The commercial rules of the American Arbitration
Association shall be applied in any arbitration under this Agreement, to the
extent such rules and procedures are not inconsistent with this Section 6.10.
E. AWARD. The arbitration award shall be rendered in writing as soon
after the conclusion of the arbitration hearing as may be feasible, and in no
event later than 10 days thereafter. The arbitrator shall not have the right
to add to, subtract from, change, or otherwise alter this Agreement or any
term thereof, and, particularly, the arbitrator shall not have the right to
include damages as part of the award, provided, however, that the arbitrator
shall award the prevailing party reasonable attorneys' fees and costs. The
sole effect of a finding by the arbitrator (1) of the question whether an
approval was unreasonably withheld shall be that such approval shall be
deemed to have been granted, or (2) as to any other matter in favor of a
particular General Partner shall be that the disagreement shall be deemed
resolved in favor of such General Partner as provided in this Agreement.
F. GENERAL. Whenever in this Agreement it is provided that a matter
shall be or may be subjected to arbitration, arbitration shall be the sole
method to be used in determining the matter so subjected to arbitration.
Subject to Section 1286.2 of the California Code of Civil Procedure, the
determination of the arbitrator(s) shall be final, conclusive and binding upon
14.
the parties hereto, and judgment in favor of a party in accordance with such
determination may be entered in any court having jurisdiction thereof. If an
Arbitrable Decision is arbitrated pursuant to the terms of the Agreement
Among General Partners, such Arbitrable Decision shall not be subject to
arbitration hereunder.
ARTICLE 17
COSTS
SECTION 17.1 If the compensation paid to Manager by Owner pursuant to
Article 5 hereof for a particular Annual Period is less than the "Management
Expenses" of Manager, incurred during such Annual Period, Owner shall
reimburse Manager, pursuant to this Article 17 but subject to the terms of
Section 17.4 hereof, for an amount ("EXCESS MANAGEMENT EXPENSES") equal to
the excess of the Management Expenses of Manager for the particular Annual
Period over the compensation payable to Manager pursuant to Article 5 hereof
for such Annual Period but in no event shall the Excess Management Expenses
exceed two percent of the Cash Income of Owner for such Annual Period. As
used herein, "MANAGEMENT EXPENSES" shall mean, for a particular Annual
Period, all "Direct Payroll Costs" (as defined in Section 17.1(a) hereof),
plus all "Indirect Payroll Costs" (as defined in section 17.1(b) hereof),
plus the "Owner's Share" (as defined in Section 17.1(c) hereof) of the
general overhead expenses of Manager and its Affiliates incurred by Manager
or its Affiliates in performing Manager's obligations under this Agreement,
including, but not limited to, the cost of "Extraordinary Services", the
costs and expenses incurred by MCI in collection of cash on the "RECEIVABLES"
(as such term is defined in the Escrow and Distribution Agreement dated as of
the date hereof, by and among Bond Ranch, Xxxxx Xxxx, Endowment and Manager).
Manager shall only be entitled to compensation as and to the extent set forth
in Article 5 and Sections 17.1, 17.2, and 17.4 hereof. Manager shall not
enter into a general brokerage or leasing agreement with respect to the
leasing of the Shopping Center. As used herein the following terms have the
following meanings:
(a) "DIRECT PAYROLL COSTS" shall mean the wages or salaries (including
taxes and employee benefits, but excluding therefrom expenses of the computer
information service group and expenses of other support groups, if and to the
extent such expenses are included as general overhead expenses pursuant to
subparagraph (c) below) paid by Manager or its Affiliates to their off-site
personnel computed on the basis of the hours of service provided by such
personnel in performing Manager's obligations under this Agreement as
indicated by written records of such time kept on a regular and consistent
basis.
(b) "INDIRECT PAYROLL COSTS" shall mean the "Owner's Allocable Share"
of the wages or salaries (including taxes and employee benefits) paid by
Manager or its Affiliates to personnel for services which are not allocated
by Manager or its Affiliates to any specific projects or properties as set
forth in subparagraph (a) above (excluding therefrom expenses of the computer
information service group and expenses of other support groups, if and to the
extent such expenses are included as general overhead expenses pursuant to
subparagraph (c) below). The "OWNER'S ALLOCABLE SHARE" of such costs for a
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particular Annual Period shall be calculated by multiplying the amount of
such costs by a fraction, the numerator of which shall be the Direct Payroll
Costs charged by Manager or its Affiliates during such Annual Period, and the
denominator of which shall be the total of all direct payroll costs which
were incurred by Manager and its Affiliates during such Annual Period with
respect to all shopping centers and properties which are managed by Manager.
(c) The "OWNER'S OVERHEAD SHARE" of general overhead expenses (including
therein expenses of the computer information service group and other support
groups [except to the extent included as Direct Payroll Costs or Indirect
Payroll Costs], which shall be calculated in accordance with the accounting
procedures uniformly used by Manager in connection with all the shopping centers
and properties owned and managed by Manager) shall be determined in compliance
with the applicable terms of this Section 17.1(c). Owner acknowledges that
Manager owns and manages other properties and shopping centers in addition to
the Shopping Center and that Manager will allocate various general overhead
expenses between the Shopping Center and such other properties and to any
other businesses engaged in by Manager. So long as Manager manages at least
10 shopping centers, the Owner's Overhead Share of such general overhead
expenses shall be computed on the basis of an overhead factor, expressed as a
multiple of Direct Payroll Costs and Indirect Payroll Costs, which is
reasonably determined by Manager to uniformly and equitably distribute 100%
(but not more than 100%) of such general overhead expenses to all shopping
centers and other properties managed by Manager and to any other businesses
engaged in by Manager. If, at any time during the term of this Agreement,
Manager shall no longer mange at least 10 shopping centers, the Owner's
Overhead Share of such general overhead expenses for the applicable Annual
Period shall not exceed, in any event, an amount which is reasonably
necessary for the operation of the Shopping Center in the manner contemplated
by this Agreement for such Annual Period.
(d) Owner acknowledges and agrees that Manager may use the corporate
legal staff of Manager or its Affiliates to provide services on behalf of
the Owner. Notwithstanding the provisions to the contrary set forth in this
Section 17.1, Owner shall pay to Manager for such legal services the billing
rate which is uniformly charged by Manager for such services (which rate, as
of the date hereof, is $50.00 per hour).
(e) Manager acknowledges that the provisions of this Section 17.1
reflect the method of computing management fees used by Manager in managing
the Shopping Center during 1985. Manager shall have the right, from time to
time, to modify the methods of allocating and determining Management Expenses,
provided that the method of allocation, as modified, shall uniformly and
equitably allocate its total costs, expenses and overhead attributable to the
various properties managed by Manager and the other businesses engaged in by
Manager; but before making any such modification, Manager shall submit the
same to Investor for approval, but Investor shall not have the right to
object to such modification unless the same results in a disproportionate
allocation of costs, expenses and overhead to the Shopping Center.
(f) Manager shall furnish Owner with an accounting of all reimbursable
costs and expenses no later than 90 days after the end of the
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fiscal year of Owner. Such an accounting shall be made in compliance with
Manager's standard practices for calculating the costs of its management
services and shall otherwise be reasonably satisfactory in form and substance
to Owner.
SECTION 17.2 REIMBURSEMENT OF OUT-OF-POCKET COSTS. Except to the extent
separately paid to Manager pursuant to Section 17.1 or 17.4, if Manager pays
any amounts to third parties on behalf of the Partnership or pays the salary
and benefits of other payroll costs of on-site personnel in the performance
of its duties hereunder, from its own funds rather than from the Owner's
funds, Manager shall be entitled to reimbursement from the income of the
Shopping Center for the amount so advanced. If on-site personnel devote time
to more than one center or property managed by Manager, Owner shall not be
required to reimburse Manager for more than Owner's fair and equitable share
of such costs and expenses, fairly determined. In no event shall Manager be
entitled to reimbursement under this Section 17.2 for any Management Expenses
for which Manager is paid.
SECTION 17.3 It is expressly understood and agreed that the manner in
which the Management Expenses are calculated is designed solely to equal the
expenses Manager incurs in managing and operating the Shopping Center in
accordance with the terms of this Agreement and, accordingly, if Manager were
to be paid an amount equal to the aggregate Management Expenses, Manager
would not receive any profit or incur any loss in the performance of its
obligations hereunder. Manager shall act in good faith in fairly allocating
its total costs among the Shopping Center, and other properties and shopping
centers managed by Manager and the other businesses (if any) of Manager.
Management Expenses shall not be increased or otherwise affected by reason
of Manager's failure to be reimbursed for direct payroll costs, indirect
payroll costs or general overhead expenses associated with any other
shopping centers and other properties managed by or other businesses engaged
in by Manager.
SECTION 17.4 If the Management Expenses for a particular Annual Period
are greater than 6% of the Cash Income for such Annual Period, then Owner
shall reimburse Manager in an amount equal to the lesser of (a) such excess
or (b) the costs and expenses incurred by Manager in connection with the
performance of "Extraordinary Services" as that term is defined in Exhibit
"D" attached hereto and made a part hereof for such Annual Period.
SECTION 17.5 If Owner reimburses Manager for Excess Management Expenses
or Extraordinary Costs for a particular Annual Period, Endowment, acting on
behalf of Owner, shall have the right to cause an audit to be made of the
Management Expenses and Extraordinary Costs for such Annual Period. No such
audit shall be conducted more frequently than one time in any single calendar
year. Such an audit shall be conducted not later than one year following the
end of the year during which such Excess Management Expenses or Extraordinary
Costs were incurred. The audit shall be conducted by Peat, Xxxxxxx, Xxxxxxxx
& Co. or another independent, certified public accounting firm selected by
Endowment on behalf of Owner and reasonably approved by Manager. Manager
shall provide the accountant with such supporting data concerning the
Management Expenses or Extraordinary Costs under audit as may be reasonably
requested by such accountant within 30 days after receipt of
17.
written request therefor. If, as a result of such an audit, Endowment claims
that the Excess Management Expenses or Extraordinary Costs paid to Manager
were greater than those permitted hereunder, Endowment shall deliver written
notice thereof to Manager, setting forth in reasonable detail the basis of the
dispute. Manager shall then have a period of 30 days following receipt of such
notice in which to either reimburse Owner for the portion of Excess
Management Expenses or Extraordinary Costs in dispute or submit the dispute
to arbitration pursuant to Section 16.3. If the arbitrator finds that any of
the Excess Management Expenses or Extraordinary Costs in dispute were paid in
violation of the terms hereof, then Manager shall refund to Owner, within 30
days following receipt by Manager of the arbitrator's decision, the amount of
Excess Management Expenses or Extraordinary Costs which were found by the
arbitrator to be improper, plus interest thereon at the rate of 10% per annum
from the date such Excess Management Expenses or Extraordinary Costs were
improperly paid to Manager until the date of such refund. If the amount of any
refund required under this Section 17.5 exceeds the total amount of the sum
(the "SUM") of (a) the compensation paid to Manager pursuant to Section 5.1,
(b) Excess Management Expenses, and (c) Extraordinary Costs paid during the
particular Annual Period under audit by more than 5% of the total amount of
the Sum for such Annual Period, then Manager shall reimburse to Endowment all
of Endowment's reasonable costs and expenses incurred in such audit; such
reimbursement shall be made concurrently with the refund of the applicable
Excess Management Expenses or Extraordinary Costs.
ARTICLE 18
MISCELLANEOUS
SECTION 18.1 All services performed by Manager at the Shopping Center
site under the provisions of this Agreement shall be deemed to be performed
for Owner and all reasonable expenses properly incurred in connection with the
performance of such services shall be the obligation of Owner.
SECTION 18.2 The following exhibits are attached to and made a part of this
Agreement:
Exhibit A - Legal Description of Shopping Center Parcel
Exhibit B - Form of Budget
Exhibit C - Form of Monthly Reports
Exhibit D - Description of Extraordinary Costs
Exhibit E - 1986 Budget
SECTION 18.3 No present or future partner of Owner or of any partnership
which is now or hereafter a partner of Owner nor any present or future
advisor, trustee, director, officer, partner, employee, beneficiary,
shareholder, participant or agent of or in Endowment (including, but not
limited to, JMB Endowment Advisors and JMB Institutional Realty Corporation),
JMB Endowment Advisors, or JMB Institutional Realty Corporation shall have
any personal liability for or by reason of any matter or thing whatsoever,
under or in connection with this Agreement, and Manager hereby waives any and
all such personal liability of such general partners, provided, however, that
the foregoing shall not limit the recourse of Manager against Owner's
interest in the Shopping Center for claims under this Agreement. The
limitations of liability provided in this paragraph are in addition to, and
not limitation
18.
of, any limitation on liability applicable to Owner provided by law or in
this Agreement or by any other contract, agreement or instrument relating to
Owner.
IN WITNESS WHEREOF, the parties hereto have duly signed this Agreement
as of the day and year first above written.
OWNER:
MISSION VALLEY PARTNERSHIP,
a California limited partnership
By MAY CENTERS, INC.,
a Missouri corporation,
General Partner
By /s/ Authorized Officer
----------------------------------
Executive Vice President
By ENDOWMENT AND FOUNDATION
REALTY, LTD. -- JMB-III,
a Delaware corporation,
General Partner
By JMB ENDOWMENT ADVISORS,
an Illinois general partnership,
Its Investment Advisor
By JMB INSTITUTIONAL REALTY CORPORATION,
an Illinois corporation,
Managing General Partner
By /s/ Authorized Officer
----------------------------
Authorized Signatory
MANAGER:
MAY CENTERS, INC.,
a Missouri corporation
By /s/ Authorized Officer
----------------------------------
Executive Vice President
19.
