EXHIBIT 10.2


 


AMENDED AND
RESTATED PROPERTY MANAGEMENT AGREEMENT


 


This AMENDED AND RESTATED PROPERTY MANAGEMENT
AGREEMENT (this “Management Agreement”) is made and entered into as of the 1 day
of Sept., 2004, by and among HARTMAN COMMERCIAL PROPERTIES REIT, a Maryland
real estate investment trust (“Hartman REIT”), HARTMAN REIT OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (sometimes referred to herein
as “Hartman OP” or “Owner”), and HARTMAN MANAGEMENT, L.P., Texas limited
partnership (the “Manager”).


 


WHEREAS, Hartman OP was
organized to acquire, own, operate, lease and manage real estate properties on
behalf of Hartman REIT; and


 


WHEREAS, Hartman OP and
Manager previously entered into that certain Property and Partnership
Management Agreement dated as of January 28, 1999 (the “Original
Management Agreement”); and


 


WHEREAS, Hartman REIT intends to raise money from the
sale of its common shares of beneficial interest to be used, net of payment of
certain offering costs and expenses, for investment in the acquisition or
construction of income-producing real estate and other real estate-related
investments (including the making or purchase of mortgage loans), some or all
of which are to be acquired and held by Owner (as hereinafter defined) on behalf
of Hartman REIT; and


 


WHEREAS, Owner intends to continue to retain Manager
to manage and coordinate the leasing of certain of the real estate properties
acquired by Owner under the terms and conditions set forth in this Management
Agreement; and


 


WHEREAS, the parties desire to amend and restate the
Original Management Agreement in its entirety in accordance with the terms and
provisions hereof;


 


NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound hereby,
do hereby agree, as follows:


 


ARTICLE I


 


DEFINITIONS


 


Except as otherwise specified or as the context may
otherwise require, the following terms have the respective meanings set forth
below for all purposes of this Management Agreement, and the definitions of
such terms are equally applicable both to the singular and plural forms
thereof:


 


1.1                                 “Affiliate”
means, with respect to any Person, (i)
any Person directly or indirectly owning, controlling or holding, with the
power to vote, 10% or more of the outstanding voting securities of such other
Person; (ii) any Person 10% or more of whose outstanding voting securities are
directly or indirectly owned, controlled or held, with the power to vote, by
such other Person; (iii) any Person directly or indirectly controlling,
controlled by or under common control with such other Person; (iv) any
executive officer, director, trustee, trust manager, or general partner of such
other Person; and (v) any legal entity for which such Person acts as an
executive officer, director, trustee, trust manager, or general partner.


 





















 


1.2                                 “Gross Revenues” means all amounts actually
collected as rents or other charges for the use and occupancy of the
Properties, but shall exclude interest and other investment income of Owner and
proceeds received by Owner for a sale, exchange, condemnation, eminent domain
taking, casualty or other disposition of assets of Owner.


 


1.3                                 “Improvements” means buildings, structures,
equipment from time to time located on the Properties and all parking and
common areas located on the Properties.


 


1.4                                 “Intellectual Property Rights” means all
rights, titles and interests, whether foreign or domestic, in and to any and
all trade secrets, confidential information rights, patents, invention rights,
copyrights, service marks, trademarks, know-how, or similar intellectual
property rights and all applications and rights to apply for such rights, as
well as any and all moral rights, rights of privacy, publicity and similar
rights and license rights of any type under the laws or regulations of any
governmental, regulatory, or judicial authority, foreign or domestic and all
renewals and extensions thereof.


 


1.5                                 “Lease” means, unless the context otherwise
requires, any lease or sublease made by Owner as landlord or by its
predecessor.


 


1.6                                 “Management Fees” has the meaning set forth
in Section 5.1 hereof.


 


1.7                                 “Owner” means Hartman REIT, Hartman OP
and any joint venture, limited liability company or
other Affiliate of Hartman REIT or Hartman OP that owns, in whole or in
part, on behalf of Hartman REIT, any Properties.


 


1.8                                 “Person” means an individual, corporation,
association, business trust, estate, trust, partnership, limited
liability company or other legal entity.


 


1.9                                 “Properties” means all real estate properties
owned by Owner and all tracts as yet unspecified but to be acquired by Owner
containing income-producing improvements or on which Owner will construct
income-producing improvements.


 


1.10                           “Proprietary Property” means all modeling algorithms, tools,
computer programs, know-how, methodologies, processes, technologies, ideas,
concepts, skills, routines, subroutines, operating instructions and other
materials and aides used in performing the duties set forth in Article 2
that relate to management advice, services and techniques regarding current and
potential Properties, and all modifications, enhancements and derivative works
of the foregoing.


 


ARTICLE II


 


APPOINTMENT OF MANAGER; SERVICES TO BE PERFORMED


 


2.1                                 Appointment of Manager. 
Owner hereby engages and retains Manager as the manager and as tenant
coordinating agent of the Properties, and Manager hereby accepts such
appointment on the terms and conditions hereinafter set forth; it being
understood that this Management Agreement shall cause Manager to be, at law,
Owner’s agent upon the terms contained herein.


 


2.2                                 General Duties. 
Manager shall devote its best efforts to performing its duties hereunder
to manage, operate, maintain and lease the Properties in a diligent, careful
and vigilant manner.  The services of
Manager are to be of scope and quality not less than those generally performed
by professional property managers of other similar properties in the area.  Manager shall make available to Owner the
full


 





















 


benefit of the judgment, experience and advice of
the members of Manager’s organization and staff with respect to the policies to
be pursued by Owner relating to the operation and leasing of the Properties.


 


2.3                                 Specific Duties. 
Manager’s duties include the following:


 


(a)                                  Lease
Obligations.  Manager shall perform
all duties of the landlord under all Leases insofar as such duties relate to
operation, maintenance, and day-to-day management.  Manager shall also provide or cause to be
provided, at Owner’s expense, all services normally provided to tenants of like
premises, including where applicable and without limitation, gas, electricity
or other utilities required to be furnished to tenants under Leases, normal
repairs and maintenance, and cleaning, and janitorial service.  Manager shall arrange for and supervise the
performance of all installations and improvements in space leased to any tenant
that are either expressly required under the terms of the lease of such space
or that are customarily provided to tenants.


 


(b)                                 Maintenance.  Manager shall cause the Properties to be
maintained in the same manner as similar properties in the area.  Manager’s duties and supervision in this
respect shall include, without limitation, cleaning of the interior and the
exterior of the Improvements and the public common areas on the Properties and
the making and supervision of repair, alterations, and decoration of the
Improvements, subject to and in strict compliance with this Management
Agreement and the Leases.  Construction
activities undertaken by Manager, if any, will be limited to activities related
to the management, operation, maintenance, and leasing of the Property (e.g.,
repairs, renovations, and leasehold improvements).


 


(c)                                  Leasing
Functions.  Manager shall coordinate
the leasing of the Properties and shall negotiate and use its best efforts to
secure executed Leases from qualified tenants, and to execute same on behalf of
Owner, if requested, for available space in the Properties, such Leases to be
in form and on terms approved by Owner and Manager, and to bring about complete
leasing of the Properties.  Manager shall
be responsible for the hiring of all leasing agents, as necessary for the
leasing of the Properties, and to otherwise oversee and manage the leasing
process on behalf of Owner.


 


(d)                                 Notice
of Violations.  Manager shall forward
to Owner promptly upon receipt all notices of violation or other notices from
any governmental authority, and board of fire underwriters or any insurance
company, and shall make such recommendations regarding compliance with such
notice as shall be appropriate.


 


(e)                                  Personnel.  Any personnel hired by Manager to maintain,
operate and lease the Property shall be the employees or independent
contractors of Manager and not of Owner of such Property, Hartman OP or Hartman REIT.  Manager shall use due care in the selection
and supervision of such employees or independent contractors.  Manager shall be responsible for the
preparation of and shall timely file all payroll tax reports and timely make
payments of all withholding and other payroll taxes with respect to each
employee.


 


(f)                                    Utilities
and Supplies.  Manager shall enter
into or renew contracts for electricity, gas, steam, landscaping, fuel, oil,
maintenance and other services as are customarily furnished or rendered in
connection with the operation of similar rental property in the area.


 


(g)                                 Expenses.  Manager shall analyze all bills received for
services, work and supplies in connection with maintaining and operating the
Properties, pay all such bills when due, and, if requested by Owner, pay, when
due, utility and water charges, sewer rent and assessments,


 





















 


and
any other amount payable in respect to the Properties.  All bills shall be paid by Manager within the
time required to obtain discounts, if any. Owner may from time to time request
that Manager forward certain bills to Owner promptly after receipt, and Manager
shall comply with any such request. 
Manager shall pay all bills, assessments, real property taxes, insurance
premiums and any other amount payable in respect to the Properties out of the
Account (as hereinafter defined).  All
expenses shall be billed at net cost (i.e., less all rebates, commissions,
discounts and allowances, however designed).


 


(h)                                 Monies
Collected.  Manager shall timely
collect all rent and other monies, in the form of a check or money order, from
tenants and any sums otherwise due Owner with respect to the Properties in the
ordinary course of business.  Owner
authorizes Manager to request, demand, collect and provide receipt for all such
rent and other monies and to institute legal proceedings in the name of Owner
for the collection thereof and for the dispossession of any tenant in default
under its Lease.


 


(i)                                     Banking
Accommodations.  Manager shall
establish and maintain a separate checking account (the “Account”) for funds
relating to the Properties.  All monies
deposited from time to time in the Account shall be deemed to be trust funds
and shall be and remain the property of Owner and shall be withdrawn and
disbursed by Manager for the account of Owner only as expressly permitted by
this Management Agreement for the purposes of performing the obligations of
Manager hereunder.  No monies collected
by Manager on Owner’s behalf shall be commingled with funds of Manager.  The Account shall be maintained, and monies
shall be deposited therein and withdrawn therefrom, in accordance with the
following:


 


(i)             All sums received from rents
and other income from the Properties shall be promptly deposited by Manager in
the Account.  Manager shall have the
right to designate two or more persons who shall be authorized to draw against
the Account, but only for purposes authorized by this Management Agreement.


 


(ii)          All sums due to Manager
hereunder, whether for compensation, reimbursement for expenditures, or
otherwise, as herein provided, shall be a charge against the operating revenues
of the Properties and shall be paid and/or withdrawn by Manager from the Account
prior to the making of any other disbursements therefrom.


 


(iii)       By the 15th day
after the end of each month, Manager shall forward to Owner all monies
contained in the Account other than a reserve of $5,000 and any other amounts
otherwise provided in the budget, which shall remain in the Account.


 


(j)                                     Ownership
Agreements.  Manager has received
copies of (and will be provided with copies of future) the Declaration of
Trust, Agreements of Limited Partnership, Joint Venture Partnership Agreements
and Operating Agreements, each as may be amended from time to time, of Owner,
as applicable (the “Ownership Agreements”) and is familiar with the terms
thereof.  Manager shall use reasonable
care to avoid any act or omission that, in the performance of its duties
hereunder, shall in any way conflict with the terms of Ownership Agreements.


 


(k)                                  Signs.  Manager shall place and remove, or cause to
be placed and removed, such signs upon the Properties as Manager deems
appropriate, subject, however, to the terms and conditions of the Leases and to
any applicable ordinances and regulations.


 





















 


2.4                                 Approval of Leases, Contracts, Etc.  In
fulfilling its duties to Owner, Manager may and hereby is authorized to enter
into any leases, contracts or agreements on behalf of Owner in the ordinary
course of the management, operation, maintenance and leasing of the Property.


 


2.5                                 Accounting, Records and Reports.


 


(a)                                  Records.  Manager shall maintain all office records and
books of account and shall record therein, and keep copies of, each invoice
received from services, work and supplies ordered in connection with the
maintenance and operation of the Properties. 
Such records shall be maintained on a double entry basis.  Owner and persons designated by Owner shall
at all reasonable time have access to and the right to audit and make
independent examinations of such records, books and accounts and all vouchers,
files and all other material pertaining to the Properties and this Management
Agreement, all of which Manager agrees to keep safe, available and separate
from any records not pertaining to the Properties, at a place recommended by
Manager and approved by Owner.


 


(b)                                 Monthly
Reports.  On or before the 15th
day after the end of each month during the term of this Management Agreement,
Manager shall prepare and submit to Owner the following reports and statements:


 


(i)             rental collection
record;


 


(ii)          monthly operating
statement;


 


(iii)       copy of cash
disbursements ledger entries for such period, if requested;


 


(iv)      copy of cash receipts
ledger entries for such period, if requested;


 


(v)         the original
copies of all contracts entered into by Manager on behalf of Owner during such
period, if requested; and


 


(vi)      copy of ledger
entries for such period relating to security deposits maintained by Manager, if
requested.


 


(c)                                  Budgets
and Leasing Plans.  Not later than November 15
of each calendar year, Manager shall prepare and submit to Owner for its
approval an operating budget and a marketing and leasing plan on each Property
for the calendar year immediately following such submission.  In connection with any acquisition of a
Property by Owner, Manager shall prepare a budget and marketing and leasing
plan for the remainder of the calendar year. 
The budget and marketing and leasing plan shall be in the form of the
budget and plan approved by Owner prior to the date thereof.  As often as reasonably necessary during the
period covered by any such budget, Manager may submit to Owner for its approval
an updated budget or plan incorporating such changes as shall be necessary to
reflect cost over-runs and the like during such period.  If Owner does not disapprove any such budget
within 30 days after receipt thereof by Owner, such budget shall be deemed
approved.  If Owner shall disapprove any
such budget or plan, it shall so notify Manager within said 30-day period and
explain the reasons therefor.  If Owner
disapproves of any budget or plan, Manager shall submit a revised budget or
plan, as applicable, within 10 (ten) days of receipt of the notice of
disapproval, and Owner shall have 10 (ten) days to provide notice to Manager if
it disapproves of any such revised budget or plan.  Manager will not incur any costs other than
those estimated in any budget except for:


 





















 


(i)             tenant improvements and real
estate commissions required under a Lease;


 


(ii)          maintenance or repair
costs under $5,000 per Property;


 


(iii)       costs incurred in
emergency situations in which action is immediately necessary for the
preservation or safety of the Property, or for the safety of occupants or other
persons (or to avoid the suspension of any necessary service of the Property);


 


(iv)      expenditures for real
estate taxes and assessment; and


 


(v)         maintenance supplies
calling for an aggregate purchase price less than $25,000 per annum for all
Properties.


 


Budgets prepared by Manager shall be for planning and
informational purposes only, and Manager shall have no liability to Owner for
any failure to meet any such budget. 
However, Manager will use its best efforts to operate within the
approved budget.


 


(d)                                 Legal
Requirements.  Manager shall execute
and file when due all forms, reports, and returns required by law relating to
the employment of its personnel.  Manager
shall be responsible for notifying Owner in the event it receives notice that
any Improvement on a Property or any equipment therein does not comply with the
requirements of any statute, ordinance, law or regulation of any governmental
body or of any public authority or official thereof having or claiming to have
jurisdiction thereover.  Manager shall
promptly forward to Owner any complaints, warnings, notices or summonses
received by it relating to such matters. 
Owner represents that to the best of its knowledge each of its
Properties and any equipment thereon will upon acquisition by Owner comply with
all such requirements.  Owner authorizes
Manager to disclose the ownership of the Property by Owner to any such
officials.  Owner agrees to indemnify,
protect, defend, save and hold Manager and its stockholders, officers, directors,
employees, managers, successors and assigns (collectively, the “Indemnified
Parties”) harmless of and from any and all Losses (as defined in Section 3.5(a)
hereof) that may be imposed on them or any or all of them by reason of the
failure of Owner to correct any present or future violation or alleged
violation of any and all present or future laws, ordinances, statutes, or
regulations of any public authority or official thereof, having or claiming to
have jurisdiction thereover, of which it has actual notice.


 


ARTICLE III


 


AUTHORITY GRANTED TO MANAGER AND CERTAIN OWNER
OBLIGATIONS


 


3.1                                 Authority As To
Tenants, Etc.  Owner agrees and does hereby give Manager the
following exclusive authority and powers (all of which shall be exercised
either in the name of Manager, as Manager for Owner, or in the name or Owner
entered into by Manager as Owner’s authorized agent, and Owner shall assume all
expenses in connection with such matters):


 


(a)                                  to advertise each Property or any part thereof and to
display signs thereon, as permitted by law;


 


(b)                                 to lease the Properties to tenants;


 





















 


(c)                                  to
pay all expenses of leasing such Property, including but not limited to,
newspaper and other advertising, signage, banners, brochures, referral
commissions, leasing commissions, finder’s fees and salaries, bonuses and other
compensation of leasing personnel responsible for the leasing of the Property;


 


(d)                                 to
cause references of prospective tenants to be investigated, it being understood
and agreed by the parties hereto that Manager does not guarantee the
creditworthiness or collectibility of accounts receivable from tenants, users
or lessees; and to negotiate new Leases and renewals and cancellations of
existing Leases that shall be subject to Manager obtaining Owner’s approval;


 


(e)                                  to
collect from tenants all or any of the following: a late rent administrative
charge, a non-negotiable check charge, credit report fee, a subleasing
administrative charge and/or broker’s commission; and Manager need not account
for such charges and/or commission to Owner;


 


(f)                                    to terminate tenancies and to sign and serve in the name of
Owner of each Property such notices as are deemed necessary by Manager;


 


(i)             to institute and
prosecute actions to evict tenants and to recover possession of the Property or
portions thereof;


 


(ii)          with Owner’s authorization,
to sue for and in the name of Owner and recover rent and other sums due; and to
settle, compromise, and release such actions or suits, or reinstate such
tenancies.  All expenses of litigation including,
but not limited to, attorneys’ fees, filing fees, and
court costs that Manager shall incur in connection with the collecting of rent
and other sums, or to recover possession of any Property or any portion
thereof, shall be deemed to be an operational expense of the Property.  Manager and Owner shall concur on the
selection of the attorneys to handle such litigation.


 


3.2                                 Operational
Authority.  Owner agrees and does
hereby give Manager the following exclusive authority and powers (all of which
shall be exercised either in the name of Manager, as Manager for Owner, or in
the name or Owner entered into by Manager as Owner’s authorized agent, and
Owner shall assume all expenses in connection with such matters):


 


(a)                                  to
hire, supervise, discharge, and pay all labor required for the operation and
maintenance of each Property including but not limited to on-site personnel,
managers, assistant managers, leasing consultants, engineers, janitors,
maintenance supervisors and other employees required for the operation and
maintenance of the Property, including personnel spending a portion of their
working hours (to be charged on a pro rata basis) at the Property.  All expenses of such employment shall be
deemed operational expenses of the Property.


 


(b)                                 to
make or cause to be made all ordinary repairs and replacements necessary to
preserve each Property in its present condition and for the operating
efficiency thereof and all alterations required to comply with lease
requirements, and to decorate the Property;


 


(c)                                  to
negotiate and enter into, as Manager of the Property, contracts for all items
on budgets that have been approved by Owner, any emergency services or repairs
for items not exceeding $5,000, appropriate service agreements and labor
agreements for normal operation of the Property, which have terms not to exceed
three years, and agreements for all budgeted


 





















 


maintenance, minor alterations, and utility services,
including, but not limited to, electricity, gas, fuel, water, telephone, window
washing, scavenger service, landscaping, snow removal, pest exterminating,
decorating and legal services in connection with the Leases and service
agreements relating to the Property, and other services or such of them as
Manager may consider appropriate; and


 


(d)                                 to purchase supplies and pay all bills.


 


Manager shall use its best efforts to obtain the foregoing services and
utilities for the Property under terms that are as cost-effective and otherwise
favorable to Manager as possible for the quality of services and utilities
required.  Owner hereby appoints Manager
as Owner’s authorized Manager for the purpose of executing, as Manager for said
Owner, all such contracts.  In addition,
Owner agrees to specifically assume in writing all obligations under all such
contracts so entered into by Manager, on behalf of Owner of the Property, upon
the termination of this Agreement, and Owner shall indemnify, protect, save,
defend and hold Manager and the other Indemnified Parties harmless from and
against any and all Losses resulting from, arising out of or in any way related
to such contracts and that relate to or concern matters occurring after
termination of this Agreement, but excluding matters arising out of Manager’s
willful misconduct, gross negligence and/or unlawful acts.  Manager shall secure the approval of, and
execution of appropriate contracts by, Owner for any non-budgeted and
non-emergency/contingency capital items, alterations or other expenditures in
excess of $5,000 for any one item, securing for each item at least three
written bids, if practicable, or providing evidence satisfactory to Owner that
the contract amount is lower than industry standard pricing, from responsible
contractors.  Manager shall have the
right from time to time during the term hereof, to contract with and make
purchases from Affiliates of Manager, provided that contract rates and prices
are competitive with other available sources. 
Manager may at any time and from time to time request and receive the
prior written authorization of Owner of the Property of any one or more
purchases or other expenditures, notwithstanding that Manager may otherwise be
authorized hereunder to make such purchases or expenditures.


 


3.3                                 Rent
and Other Collections.  Owner agrees
and does hereby give Manager the exclusive authority and powers (all of which
shall be exercised either in the name of Manager, as Manager for Owner, or in
the name or Owner entered into by Manager as Owner’s authorized agent, and
Owner shall assume all expenses in connection with such matters) to collect
rents and/or assessments and other items, including but not limited to tenant
payments for real estate taxes, property liability and other insurance, damages
and repairs, common area maintenance, tax reduction fees and all other tenant
reimbursements, administrative charges, proceeds of rental interruption
insurance, parking fees, income from coin operated machines and other
miscellaneous income, due or to become due and give receipts therefor and to
deposit all such Gross Revenue collected hereunder in the Account.  Manager may endorse any and all checks
received in connection with the operation of any Property and drawn to the
order of Owner, and Owner shall, upon request, furnish Manager’s depository
with an appropriate authorization for Manager to make such endorsement.  Manager shall also have the exclusive
authority to collect and handle tenants’ security deposits, including the right
to apply such security deposits to unpaid rent, and to comply, on behalf of
Owner of the Property, with applicable state or local laws concerning security
deposits and interest thereon, if any. 
Manager shall not be required to advance any monies for the care or
management of any Property.  Owner agrees
to advance all monies necessary therefor. 
If Manager shall elect to advance any money in connection with a
Property, Owner agrees to reimburse Manager forthwith and hereby authorizes
Manager to deduct such advances from any monies due Owner.  In connection with any insured losses or
damages relating to any Property, Manager shall have the exclusive authority to
handle all steps necessary regarding any such claim; provided that Manager will
not make any adjustments or settlements in excess of $10,000 without Owner’s
prior written consent.


 





















 


3.4                                 Payment of Expenses. 
Owner agrees and does hereby give Manager the exclusive authority and
power (all of which shall be exercised either in the name of Manager, as
Manager for Owner, or in the name or Owner entered into by Manager as Owner’s
authorized agent, and Owner shall assume all expenses in connection with such
matters) to pay all expenses of the Property from the Gross Revenue collected
in accordance with Section 3.3 above, from the Account.  It is understood that the Gross Revenue will
be used first to pay the compensation to Manager as contained in Article 5
below, then operational expenses and then any mortgage indebtedness, including
real estate tax and insurance impounds, but only as directed by Owner in
writing and only if sufficient Gross Revenue is available for such
payments.  Nothing in this Agreement
shall be interpreted in such a manner as to obligate Manager to pay from Gross
Revenue, any expenses incurred by Owner prior to the commencement of this
Agreement, except to the extent Owner advances additional funds to pay such
expenses.


 


3.5                                 Certain Owner Indemnification Obligations.


 


(a)                                  On
Termination.  In the event this
Agreement is terminated for any reason prior to the expiration of its original
term or any renewal term, Owner shall indemnify, protect, defend, save and hold
Manager and all of the other Indemnified Parties harmless from and against any
and all claims, causes of action, demands, suits, proceedings, loss, judgments,
damage, awards, liens, fines, costs, attorney’s fees and expenses, of every
kind and nature whatsoever (collectively, “Losses”), that may be imposed on or
incurred by Manager by reason of the willful misconduct, gross negligence
and/or unlawful acts (such unlawfulness having been adjudicated by a court of
proper jurisdiction) of Owner.


 


(b)                                 Property
Damage, Etc.  Owner agrees to
indemnify, defend, protect, save and hold Manager and all of the other
Indemnified Parties harmless from any and all Losses in connection with or in
any way related to the Property and from liability for damage to the Property
and injuries to or death of any person whomsoever, and damage to property;
provided, however, that such indemnification shall not extend to any such
Losses arising out of the willful misconduct, gross negligence and/or unlawful
acts (such unlawfulness having been adjudicated by a court of proper
jurisdiction) of Manager or any of the other Indemnified Parties.  Manager shall not be liable for any error of
judgment or for any mistake of fact or law, or for any thing that it may do or
refrain from doing, except in cases of willful misconduct, gross negligence
and/or unlawful acts (such unlawfulness having been adjudicated by a court of
proper jurisdiction).


 


3.6                                 Environmental Matters. 
Owner hereby warrants and represents to Manager that to the best of
Owner’s knowledge, no Property, upon acquisition by Owner, nor any part
thereof, will be used to treat, deposit, store, dispose of or place any
hazardous substance that may subject Manager to liability or claims under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C.A. Section 9607) or any constitutional provision, statute,
ordinance, law, or regulation of any governmental body or of any order or
ruling of any public authority or official thereof, having or claiming to have
jurisdiction thereover.  Furthermore,
Owner agrees to indemnify, protect, defend, save and hold Manager and all of
the other Indemnified Parties from any and all Losses involving, concerning or
in any way related to any past, current or future allegations regarding
treatment, depositing, storage, disposal or placement by any party other than
Manager of hazardous substances on the Property.


 


3.7                                 Legal Status of Properties. 
Owner represents that to the best of its knowledge each Property and any
equipment thereon, when acquired by Owner, will comply with all legal
requirements and authorizes Manager to disclose the identity of the Owner of
the Property to any such officials and agrees to indemnify, protect, defend,
save and hold Manager and the other Indemnified Parties harmless of and from
any and all Losses that may be imposed on them or any of them by reason of the
failure of Owner to correct any present or future violation or alleged
violation of any and all present or future laws,


 





















 


ordinances, statutes, or regulations of any public
authority or official thereof, having or claiming to have jurisdiction
thereover, of which it has actual notice. 
In the event it is alleged or charged that any Improvement or any
equipment on a Property or any act or failure to act by Owner with respect to
the Property or the sale, rental, or other disposition thereof fails to comply
with, or is in violation of, any of the requirements of any constitutional
provision, statute, ordinance, law, or regulation of any governmental body or
any order or ruling of any public authority or official thereof having or
claiming to have jurisdiction thereover, and Manager, in its sole and absolute
discretion, considers that the action or position of Owner, with respect
thereto may result in damage or liability to Manager, Manager shall have the
right to cancel this Agreement at any time by written notice to Owner of its
election so to do, which cancellation shall be effective upon the service of
such notice.  Such cancellation shall not
release the indemnities of Owner set forth in this Agreement and shall not
terminate any liability or obligation of Owner to Manager for any payment,
reimbursement, or other sum of money then due and payable to Manager hereunder.


 


3.8                                 Extraordinary Payments. 
Owner agrees to give adequate advance written notice to Manager if Owner
desires that Manager make any extraordinary payment, out of Gross Revenue, to
the extent funds are available after the payment of Manager’s compensation as
provided for herein and all operational expenses, of mortgage indebtedness,
general taxes, special assessments, or fire, boiler or any other insurance
premiums.


 


ARTICLE IV


 


EXPENSES


 


4.1                                 Owner’s Expenses.  Except as otherwise specifically provided, all costs and expenses
incurred hereunder by Manager in fulfilling its duties to Owner shall be for
the account of and on behalf of Owner. 
Such costs and expenses shall include the wages and salaries and other
employee-related expenses of all on-site and off-site employees of Manager who
are engaged in the operation, management, maintenance and leasing or access
control of the Properties, including taxes, insurance and benefits relating to
such employees, and legal, travel and other out-of-pocket expenses that are
directly related to the management of specific Properties.  All costs and expenses for which Owner is
responsible under this Management Agreement shall be paid by Manager out of the
Account.  In the event the Account does
not contain sufficient funds to pay all said expenses, Owner shall fund all
sums necessary to meet such additional costs and expenses.


 


4.2                                 Manager’s Expenses. 
Manager shall, out of its own funds, pay all of its general overhead and
administrative expenses.


 


ARTICLE V


 


MANAGER’S COMPENSATION


 


5.1                                 Management Fees. 
Commencing on the date hereof, Owner shall pay Manager property
management and leasing fees in an amount not to exceed the fees customarily
charged in arm’s length transactions by others rendering similar services in
the same geographic area for similar properties as determined by a survey of
brokers and agents in such area (the “Management Fees”).  The Management Fees shall be calculated on a
monthly basis from the rental income received from the Properties over the term
of this Management Agreement.  Generally,
Owner and Manager expect these fees to be between approximately two and four
percent (2.0%-4.0%) of Gross Revenues for the management of commercial office
buildings and approximately five percent (5.0%) of Gross Revenues for the
management of retail and industrial properties. 
Manager’s compensation under this Section 5.1 shall apply to all
renewals,


 





















 


extensions or expansions of Leases that Manager has
originally negotiated.  In the event
Manager assists with planning and coordinating the construction of any
tenant-paid finish-out or improvements, Manager shall be entitled to receive
from any such tenant an amount equal to not greater than five percent (5.0%) of
the cost of such tenant improvements.


 


5.2                                 Leasing Fees.  In
addition to the compensation paid to Manager under Section 5.1 above, for
the leasing of the properties, Manager shall be entitled to receive a separate
fee for the Leases of new tenants and renewals of Leases with existing tenants
in an amount not to exceed the fee customarily charged in arm’s length
transactions by others rendering similar services in the same geographic area
for similar properties as determined by a survey of brokers and agents in such
area.


 


5.3                                 Audit Adjustment.  If
any audit of the records, books or accounts relating to the Properties
discloses an overpayment or underpayment of Management Fees, Owner or Manager
shall promptly pay to the other party the amount of such overpayment or
underpayment, as the case may be.  If
such audit discloses an overpayment of Management Fees for any fiscal year of
more than the correct Management Fees for such fiscal year, Manager shall bear
the cost of such audit.


 


ARTICLE VI


 


INSURANCE AND INDEMNIFICATION


 


6.1                                 Insurance to be Carried.


 


(a)                                  Manager
shall obtain and keep in full force and effect insurance on the Properties
against such hazards as Owner and Manager shall deem appropriate, but in any
event insurance sufficient to comply with the Leases and Ownership Agreements
shall be maintained. All liability policies shall provide sufficient insurance
satisfactory to both Owner and Manager and shall contain waivers of subrogation
for the benefit of Manager.


 


(b)                                 Manager
shall obtain and keep in full force and effect, in accordance with the laws of
the state in which each Property is located, employer’s liability insurance
applicable to and covering all employees of Manager at the Properties and all
persons engaged in the performance of any work required hereunder, and Manager
shall furnish Owner certificates of insurers naming Owner as a co-insured and
evidencing that such insurance is in effect. 
If any work under this Management Agreement is subcontracted as
permitted herein, Manager shall include in each subcontract a provision that
the subcontractor shall also furnish Owner with such a certificate.


 


6.2                                 Insurance Expenses. 
Premiums and other expenses of such insurance, as well as any applicable
payments in respect of deductibles shall be borne by Owner.


 


6.3                                 Cooperation with Insurers. 
Manager shall cooperate with and provide reasonable access to the
Properties to representatives of insurance companies and insurance brokers or
agents with respect to insurance that is in effect or for which application has
been made.  Manager shall use its best
efforts to comply with all requirements of insurers.


 


6.4                                 Accidents and Claims. 
Manager shall promptly investigate and shall report in detail to Owner
all accidents, claims for damage relating to Ownership, operation or
maintenance of the Properties, and any damage or destruction to the Properties
and the estimated costs of repair thereof, and shall prepare for approval by
Owner all reports required by an insurance company in connection with any such
accident, claim, damage, or destruction. 
Such reports shall be given to Owner promptly, and any report not so


 





















 


given within 10 (ten) days after the occurrence of
any such accident, claim, damage or destruction shall be noted in the monthly
operating statement delivered to Owner pursuant to Section 2.5(b).  Manager is authorized to settle any claim
against an insurance company arising out of any policy and, in connection with
such claim, to execute proofs of loss and adjustments of loss and to collect
and receipt for loss proceeds.


 


6.5                                 Indemnification. 
Manager shall hold Owner harmless from and indemnify and defend Owner
against any and all claims or liability for any injury or damage to any person
or property whatsoever for which Manager is responsible occurring in, on, or
about the Properties, including, without limitation, the Improvements when such
injury or damage shall be caused by the negligence of Manager, its agents,
servants, or employees, except to the extent that Owner recovers insurance
proceeds with respect to such matter. 
Owner will indemnify and hold Manager harmless against all liability for
injury to persons and damage to property caused by Owner’s negligence and which
did not result from the negligence of misconduct of Manager, except to the
extent Manager recovers insurance proceeds with respect to such matter.


 


ARTICLE VII


 


TERM AND TERMINATION


 


7.1                                 Term.  This Agreement shall commence
on the date first above written and shall continue until the first (1st)
anniversary of such date and thereafter for successive one (1) year renewal
periods, unless on or before 30 days prior to the date last above mentioned or
on or before 30 days prior to the expiration of any such renewal period,
Manager shall notify Owner in writing that it elects to terminate this
Agreement, in which case this Agreement shall be thereby terminated on said
last mentioned date.  In addition, and
notwithstanding the foregoing, Owner may terminate this Agreement at any time
upon delivery of written notice to Manager not less than thirty (30) days prior
to the effective date of termination, in the event of (and only in the event
of) a showing by Owner of misconduct, negligence, or malfeasance by Manager in
the performance of Manager’s duties hereunder. 
In addition, either party may terminate this Agreement immediately upon
the occurrence of any of the following:


 


(a)                                  A
decree or order is rendered by a court having jurisdiction (i) adjudging
Manager as bankrupt or insolvent, or (ii) approving as properly filed a
petition seeking reorganization, readjustment, arrangement, composition or similar
relief for Manager under the federal bankruptcy laws or any similar applicable
law or practice, or (iii) appointing a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of Manager or a substantial part of the
property of Manager, or for the winding up or liquidation of its affairs, or


 


(b)                                 Manager
(i) institutes proceedings to be adjudicated a voluntary bankrupt or an
insolvent, (ii) consents to the filing of a bankruptcy proceeding against it,
(iii) files a petition or answer or consent seeking reorganization,
readjustment, arrangement, composition or relief under any similar applicable
law or practice, (iv) consents to the filing of any such petition, or to the
appointment of a receiver or liquidator or trustee or assignee in bankruptcy or
insolvency for it or for a substantial part of its property, (v) makes an
assignment for the benefit of creditors, (vi) is unable to or admits in writing
its inability to pay its debts generally as they become due unless such
inability shall be the fault of the other party, or (vii) takes corporate or
other action in furtherance of any of the aforesaid purposes.


 


7.2                                 Manager’s Obligations Upon
Termination.  Upon the termination of this Management
Agreement, Manager shall have the following duties:


 





















 


(a)                                  Manager
shall deliver to Owner or its designee, all books and records with respect to
the Properties.


 


(b)                                 Manager
shall transfer and assign to Owner, or its designee, all service contracts and
personal property relating to or used in the operation and maintenance of the
Properties, except personal property paid for and owned by Manager.  Manager shall also, for a period of sixty
(60) days immediately following the date of such termination, make itself available
to consult with and advise Owner, or its designee, regarding the operation,
maintenance and leasing of the Properties.


 


(c)                                  Manager
shall render to Owner an accounting of all funds of Owner in its possession and
shall deliver to Owner a statement of all Management Fees claimed to be due to
Manager and shall cause funds of Owner held by Manager relating to the
Properties to be paid to Owner or its designee.


 


7.3                                 Owner’s Obligations Upon
Termination.  Owner shall pay or reimburse Manager for any
sums of money due it under this Agreement for services and expenses prior to
termination of this Agreement.  All
provisions of this Agreement that require Owner to have insured, or to protect,
defend, save, hold and indemnify or to reimburse Manager shall survive any
expiration or termination of this Agreement and, if Manager is or becomes
involved in any claim, proceeding or litigation by reason of having been
Manager of Owner, such provisions shall apply as if this Agreement were still
in effect.


 


The parties understand and agree that Manager
may withhold funds for sixty (60) days after the end of the month in which this
Agreement is terminated to pay bills previously incurred but not yet invoiced
and to close accounts. Should the funds withheld be insufficient to meet the
obligation of Manager to pay bills previously incurred, Owner will, upon
demand, advance sufficient funds to Manager to ensure fulfillment of Manager’s
obligation to do so, within ten (10) days of receipt of notice and an
itemization of such unpaid bills.


 


ARTICLE VIII


 


MISCELLANEOUS


 


8.1                                 Notices.  All notices, approvals,
consents and other communications hereunder shall be in writing, and, except
when receipt is required to start the running of a period of time, shall be
deemed given when delivered in person or on the fifth day after its mailing by
either party by registered or certified United States mail, postage prepaid and
return receipt requested, to the other party, at the addresses set forth after
their respect name below or at such different addresses as either party shall have
theretofore advised the other party in writing in accordance with this Section 8.1.


 




	
  Owner:

  	
   

  	
  HARTMAN REIT
  OPERATING PARTNERSHIP, L.P.

  
	
   

  	
   

  	
  c/o Hartman
  Commercial Properties REIT

  
	
   

  	
   

  	
  1450 West
  Sam Houston Parkway, North, Suite 100

  
	
   

  	
   

  	
  Houston,
  Texas 77043

  
	
   

  	
   

  	
  Attention:
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  Manager:

  	
   

  	
  HARTMAN
  MANAGEMENT, L.P.

  
	
   

  	
   

  	
  1450 West
  Sam Houston Parkway, North, Suite 100

  
	
   

  	
   

  	
  Houston,
  Texas 77043

  
	
   

  	
   

  	
  Attention:
  Chief Financial Officer

  






 





















 


8.2                                 Governing Law; Venue.  This
Management Agreement shall be governed by and construed in accordance with the
laws of the State of Texas, and any action brought to enforce the agreements
made hereunder or any action which arises out of the relationship created
hereunder shall be brought exclusively in Harris County, Texas.


 


8.3                                 Assignment.  Manager may delegate partially
or in full its duties and rights under this Management Agreement but only with
the prior written consent of Owner. 
Owner acknowledges and agrees that any or all of the duties of Manager
as contained herein may be delegated by Manager and performed by a person or
entity (“Submanager”) with whom Manager contracts for the purpose of performing
such duties.  Owner specifically grants
Manager the authority to enter into such a contract with a Submanager; provided
that, unless Owner otherwise agrees in writing with such Submanager, Owner
shall have no liability or responsibility to any such Submanager for the
payment of the Submanager’s fee or for reimbursement to the Submanager of its
expenses or to indemnify the Submanager in any manner for any matter; and
provided further that Manager shall require such Submanager to agree, in the
written agreement setting forth the duties and obligations of such Submanager,
to indemnify Owner for all Losses incurred by Owner as a result of the willful
misconduct or gross negligence of the Submanager, except that such indemnity
shall not be required to the extent that Owner recovers issuance proceeds with
respect to such matter.  Any contract
entered into between Manager and a Submanager pursuant to this Section 8.3
shall be consistent with the provisions of this Agreement, except to the extent
Owner otherwise specifically agrees in writing. 
This Management Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.


 


8.4                                 Third Party Leasing Services. 
Manager acknowledges that from time to time Owner may determine that it
is in the best interests of Owner to retain a third party to provide certain
leasing services with respect to certain Properties and to compensate such
third party for such leasing services. 
Upon the prior written consent of Manager, Owner shall have the
authority to enter into such a contract for leasing services with a third party
(a “Third Party Leasing Agreement”); provided that Manager shall have no
liability or responsibility to Owner for any of the duties and obligations
undertaken by such party, and Owner agrees to indemnify Manager for all Losses
incurred by Manager as a result of acts of such third party pursuant to the
Third Party Leasing Agreement.  To the
extent that leasing services are specifically required to be performed by a
third party pursuant to such Third Party Leasing Agreement, Manager shall have
no obligation to perform such leasing services and Owner shall have no
obligation to Manager for leasing fees pursuant to Section 5.2 hereof.


 


8.5                                 Third Party Management Services. 
Manager acknowledges that from time to time Owner may acquire interests
in Properties in which Owner does not control the determination of the party
that is engaged to provide property management and other services to be
provided by Manager with respect to all Properties acquired by Owner
hereunder.  Upon the prior written
consent of Manager, Owner shall have the authority to acquire such
non-controlling interests in Properties for which a third party provides some
or all of the services otherwise required to be performed by Manager hereunder
(a “Third Party Management Agreement”); provided that Manager shall have no
liability or responsibility to Owner for any of the duties and obligations
undertaken by such third party, and Owner agrees to indemnify Manager for all
Losses incurred by Manager as a result of the acts of such third party pursuant
to the Third Party Management Agreement. 
To the extent that property management and other services are
specifically required to be performed by a third party pursuant to such Third
Party Management Agreement, Manager shall have no obligation to perform such services
and Owner shall have no obligation to Manager for compensation for such
services pursuant to Article V hereof.


 





















 


8.6                                 No Waiver.  The failure of Owner to seek
redress for violation or to insist upon the strict performance of any covenant
or condition of this Management Agreement shall not constitute a waiver thereof
for the future.


 


8.7                                 Amendments.  This Management Agreement may
be amended only by an instrument in writing signed by the party against whom
enforcement of the amendment is sought.


 


8.8                                 Headings.  The headings of the various
subdivisions of this Management Agreement are for reference only and shall not
define or limit any of the terms or provisions hereof.


 


8.9                                 Counterparts.  This
Management Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, and it shall not be necessary in making proof of
this Management Agreement to produce or account for more than one such
counterpart.


 


8.10                           Entire Agreement.  This Management Agreement contains the entire
understanding and all agreements between Owner and Manager respecting the
management of the Properties.  There are
no representations, agreements, arrangements or understandings, oral or
written, between Owner and Manager relating to the management of the Properties
that are not fully expressed herein.


 


8.11                           Disputes.  If there shall be a dispute between Owner and
Manager relating to this Management Agreement resulting in litigation, the
prevailing party in such litigation shall be entitled to recover from the other
party to such litigation such amount as the court shall fix as reasonable
attorneys’ fees.


 


8.12                           Activities of Manager.  The obligations of Manager pursuant to the
terms and provisions of this Management Agreement shall not be construed to
preclude Manager from engaging in other activities or business ventures,
whether or not such other activities or ventures are in competition with Owner
or the business of Owner.


 


8.13                           Independent Contractor.  Manager and Owner shall not be construed as
joint venturers or partners of each other pursuant to this Management Agreement, and neither shall have the power to bind or
obligate the other except as set forth herein. 
In all respects, the status of Manger to Owner under this Agreement is
that of an independent contractor.


 


8.14                           No
Third-Party Rights.  Nothing
expressed or referred to in this Management Agreement will be construed to give
any Person other than the parties to this Management Agreement any legal or
equitable right, remedy or claim under or with respect to this Management
Agreement or any provision of this Management Agreement, except such rights as
shall inure to a successor or permitted assignee pursuant to Section 8.3.


 


8.15                           Ownership of Proprietary Property.  The Manager retains ownership
of and reserves all Intellectual Property Rights in the Proprietary
Property.  To the extent that
Owner has or obtains any claim to any right, title or interest in the
Proprietary Property, including without limitation in any suggestions,
enhancements or contributions that Owner may provide regarding the Proprietary
Property, Owner hereby assigns and transfers exclusively to the Manager all
right, title and interest, including without limitation all Intellectual
Property Rights, free and clear of any liens, encumbrances or licenses in favor
of Owner or any other party, in and to the Proprietary Property.  In addition, at the Manager’s expense, Owner
will perform any acts that may be deemed desirable by the Manager to evidence
more fully the transfer of ownership of right, title and interest in the
Proprietary Property to the Manager, including but not limited to the execution
of any instruments or documents now or hereafter requested by the Manager to
perfect, defend or confirm the assignment described herein, in a form
determined by the Manager.


 





















 


IN WITNESS WHEREOF, the parties have executed this Property
Management Agreement as of the date first above written.


 


 


	
   

  	
  HARTMAN COMMERCIAL PROPERTIES

    REIT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Allen R. Hartman

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARTMAN REIT OPERATING

  
	
   

  	
    PARTNERSHIP, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Hartman Commercial Properties REIT

  
	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Allen R. Hartman

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HARTMAN MANAGEMENT, L.P .

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Allen R. Hartman

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title: