Document:

ex10-4.htm

 

Exhibit 10.4

 

PERFORMANCE UNIT AWARD AGREEMENT

 

 

THIS AGREEMENT is entered into and effective as of _________ __, 20__ (the “Date of Grant”), by and between Marten Transport, Ltd. (the “Company”) and ______________ (the “Grantee”).

 

A.     The Company has adopted the Marten Transport, Ltd. 2015 Equity Incentive Plan (the “Plan”), authorizing the Board of Directors of the Company, or a committee as provided for in the Plan (the Board or such a committee to be referred to as the “Committee”), to grant Performance Unit Awards to employees, consultants, advisors and independent contractors of the Company and its Subsidiaries.

 

B.     The Company desires to give the Grantee an inducement to acquire a proprietary interest in the Company and an added incentive to advance the interests of the Company by granting to the Grantee a Performance Unit Award of the Company pursuant to the Plan.

 

C.     The goal of this Performance Unit Award is to incentivize the Grantee to increase diluted net income per share an average of fifteen percent per year over five years, which in conjunction with the five percent per year service-based component of this Performance Unit Award would result in full vesting over five years.

 

Accordingly, the parties agree as follows:

 

	
ARTICLE 1.
	
GRANT OF AWARD.

 

The Company hereby grants to the Grantee a Performance Unit Award (the “Award”) consisting of ________ units (the “Award Units”), each of which is a bookkeeping entry representing the equivalent in value of one share of the Company’s common stock, $0.01 par value (the “Common Stock”), according to the terms and subject to the restrictions and conditions set forth herein and as set forth in the Plan.

 

	
ARTICLE 2.
	
VESTING OF AWARD UNITS.

 

2.1     Vesting. As of December 31, ______, ______, ______, ______ and ______ (each, a “Measurement Date”), this Award will vest and become the right to receive a number of shares of Common Stock equal to the Total Vesting Percentage (as defined below) multiplied by the number of Award Units subject to this Award; provided that the Grantee remains in the continuous employ or service with the Company or any subsidiary from the date hereof through each such Measurement Date. The “Total Vesting Percentage” is equal to the sum of (a) the percentage increase, if any, in Company’s diluted net income per share for the year being measured over the prior year, as reflected on Company’s audited financial statements for each such year, rounded to the nearest tenth of a percentage (the “Performance Vesting Percentage”), plus (b) five percentage points (the “Service Vesting Percentage”). The Award Units may vest until 5:00 p.m. (Mondovi, Wisconsin time) on December 31, 20__ (the “Final Measurement Date”). To the extent not vested as of the Final Measurement Date, the Grantee shall forfeit any non-vested Award Units. The Performance Vesting Percentage shall not exceed a cumulative total of 75%, and the Service Vesting Percentage shall not exceed a cumulative total of 25%. An example calculation has been provided as Exhibit A for illustrative purposes only.

 

 

 

 

 

2.2     Committee Adjustments to Vesting. The Committee may adjust the calculation of the Performance Vesting Percentage applicable to the Award Units to reflect any unusual or non-recurring events and other extraordinary items, the impact of charges for restructurings, discontinued operations and the cumulative effects of accounting or tax changes, each as defined by generally accepted accounting principles and as identified in the Company’s financial statements, notes to the financial statements, management’s discussion and analysis or other filings with the Securities and Exchange Commission by the Company. 

 

2.3     Termination of Employment or Other Service. In the event that the Grantee’s employment or other service with the Company and all Subsidiaries is terminated for any reason, the Award Units that have not vested on or by such date will be terminated and forfeited.

 

2.4     Change in Control. 

 

(a)     Impact of Change in Control. If any events constituting a Change in Control (as defined in the Plan) of the Company occur, and (i) the Company terminates the Grantee’s employment for any reason other than the Grantee’s death or Cause, or the Grantee terminates his or her employment with the Company for Good Reason, and (ii) such termination occurs either within the period beginning on the date of a Change in Control and ending on the last day of the 24th month that begins after the month during which the Change in Control occurs or prior to a Change in Control if the Grantee’s termination was either a condition of the Change in Control or was at the request or insistence of a person related to the Change in Control, then this Award will become immediately vested in full and the Grantee will automatically receive settlement or credit under Article 3 in cash for each Award Unit in an amount equal to the Fair Market Value (as defined in the Plan) of the Company’s Common Shares immediately prior to the effective date of such Change in Control of the Company. 

 

(b)     Definition of Cause. If the Grantee is party to a Change in Control Severance Agreement with the Company, the term “Cause” shall be as defined in such Change in Control Severance Agreement. If the Grantee is not a party to a Change in Control Severance Agreement with the Company, the term “Cause” shall be as defined in the Plan. 

 

(c)     Definition of Good Reason. If the Grantee is party to a Change in Control Severance Agreement with the Company, the term “Good Reason” shall be as defined in such Change in Control Severance Agreement. If the Grantee is not a party to a Change in Control Severance Agreement with the Company, the term “Reason” shall mean: 

 

(i)     a material diminution in the Grantee’s authority, duties or responsibilities as an executive of the Company as in effect immediately prior to the Change in Control (other than, if applicable, any such change directly attributable to the fact that the Company is no longer publicly owned); 

 

(ii)     a material diminution in the Grantee’s base compensation;

 

 

2

 

 

(iii)     a material diminution in the authority, duties, or responsibilities of the supervisor to whom the Grantee reports as in effect immediately prior to the Change in Control, including any requirement that the Grantee report to a corporate officer or employee instead of reporting directly to the Board if the Grantee reported directly to the Board immediately prior to the Change in Control;

 

(iv)     a material diminution in the budget over which the Grantee retains authority;

 

(v)     a material change in the geographic location at which the Company requires the Grantee to be based as compared to the location where the Grantee was based immediately prior to the Change in Control; or

 

(vi)     any other action or inaction by the Company that constitutes a material breach of any employment agreement between the Company and the Grantee.

 

(vii)     An act or omission will not constitute a “good reason” unless the Grantee gives written notice to the Company of the existence of such act or omission within 90 days of its initial existence and the Company fails to cure the act or omission within 30 days after the notification. 

 

2.5     Effects of Actions Constituting Cause. Notwithstanding anything in this Agreement to the contrary, in the event that the Grantee is determined by the Committee, acting in its sole discretion, to have committed any action which would constitute Cause, irrespective of whether such action or the Committee’s determination occurs before or after termination of the Grantee’s employment with the Company or any Subsidiary, all rights of the Grantee under the Plan and this Agreement shall terminate and be forfeited without notice of any kind, including rights to vested Award Units. 

 

	
ARTICLE 3.
	
SETTLEMENT OF VESTED AWARD UNITS; issuance of shares of common stock.

 

3.1     Settlement. Except as may otherwise be provided in this Agreement, half of the vested Award Units will be paid to the Grantee by the March 15 immediately following a Measurement Date and half of the vested Award Units will be credited to the Grantee’s Discretionary Account under the Marten Transport, Ltd. Deferred Compensation Plan, as such plan may be amended from time to time, or any similar successor plan. Such Award Units will be paid to the Grantee in shares of Common Stock (such that one Award Unit equals one share of Common Stock), provided that any applicable tax obligation pursuant to Article 7 below and such issuance otherwise complies with all applicable law. Prior to the time the vested Award Units are settled, the Grantee will have no rights other than those of a general creditor of the Company. The Award Units represent an unfunded and unsecured obligation of the Company.

 

3.2     Deferral. Notwithstanding any of the foregoing or any other provision of this Agreement, in the event Grantee has properly elected to defer receipt of any shares of Common Stock in settlement of his or her vested Award Units under the Marten Transport, Ltd. Deferred Compensation Plan, as such plan may be amended from time to time, or any similar successor plan, Grantee will receive shares of Common Stock in accordance with the Grantee’s deferral election.

 

 

3

 

 

	
ARTICLE 4.
	
RIGHTS AS A STOCKHOLDER.

 

The Grantee will have no rights as a stockholder, including the right to receive dividends, with respect to any of the Award Units until the Award Units are settled in shares of Common Stock after vesting, and such shares of Common Stock are issued to the Grantee or credited to the Marten Transport, Ltd. Deferred Compensation Plan.

 

	
ARTICLE 5.
	
NONTRANSFERABILITY.

 

Neither this Award nor the Award Units acquired upon vesting may be transferred by the Grantee, either voluntarily or involuntarily, or subjected to any lien, directly or indirectly, by operation of law or otherwise, except as provided in the Plan. Any attempt to transfer or encumber this Award or the Award Units acquired upon vesting other than in accordance with this Agreement and the Plan will be null and void and will void this Award.

 

	
ARTICLE 6.
	
EMPLOYMENT OR OTHER SERVICE.

 

Nothing in this Agreement will be construed to (a) limit in any way the right of the Company to terminate the employment or service of the Grantee at any time, or (b) be evidence of any agreement or understanding, express or implied, that the Company will retain the Grantee in any particular position at any particular rate of compensation or for any particular period of time.

 

	
ARTICLE 7.
	
WITHHOLDING TAXES.

 

7.1     General Rules. The Company is entitled to (a) withhold and deduct from future wages of the Grantee (or from other amounts which may be due and owing to the Grantee from the Company), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any federal, state or local withholding and employment-related tax requirements attributable to the granting, vesting, and settlement of this Award or otherwise incurred with respect to this Award, (b) withhold shares of Common Stock from the shares issued or otherwise issuable to the Grantee in connection with this Award, provided such action does not cause the Incentive Award to become subject to the requirements of Section 409A of the Code or (c) require the Grantee promptly to remit the amount of such withholding to the Company before the Settlement Date. In the event that the Company is unable to withhold such amounts, for whatever reason, the Grantee must promptly pay the Company an amount equal to the amount the Company would otherwise be required to withhold under federal, state or local law.

 

7.2     Special Rules. The Committee may, in its sole discretion and upon terms and conditions established by the Committee, permit or require the Grantee to satisfy, in whole or in part, any withholding or tax obligation as described in Section 7.1 above by electing to tender, or by attestation as to ownership of, Previously Acquired Shares that have been held for the period of time necessary to avoid a charge to the Company’s earnings for financial reporting purposes and that are otherwise acceptable to the Committee. For purposes of satisfying a Participant’s withholding or employment-related tax obligation, Previously Acquired Shares tendered or covered by an attestation will be valued at their Fair Market Value.

 

 

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ARTICLE 8.
	
performance-based compensation.

 

Any payment of Common Stock received for the vested Award Units is intended to be exempt from the provisions of 162(m) of the Internal Revenue Code as “performance-based” compensation, and no action will be taken which would cause such payment to fail to satisfy the requirements of such exemption.

 

	
ARTICLE 9.
	
SUBJECT TO PLAN.

 

9.1     Terms of Plan Prevail. The Award and the Award Units granted pursuant to this Agreement have been granted under, and are subject to the terms of, the Plan. The terms of the Plan are incorporated by reference in this Agreement in their entirety, and the Grantee acknowledges having received a copy of the Plan. The provisions of this Agreement will be interpreted as to be consistent with the Plan, and any ambiguities in this Agreement will be interpreted by reference to the Plan. In the event that any provision in this Agreement is inconsistent with the terms of the Plan, the terms of the Plan will prevail.

 

9.2     Definitions. Unless otherwise defined in this Agreement, the terms capitalized in this Agreement have the same meanings as given to such terms in the Plan.

 

	
ARTICLE 10.
	
MISCELLANEOUS.

 

10.1     Binding Effect. This Agreement will be binding upon the heirs, executors, administrators and successors of the parties hereto.

 

10.2     Governing Law. This Agreement and all rights and obligations under this Agreement will be construed in accordance with the Plan and governed by the laws of the State of Wisconsin without regard to conflicts of law provisions. 

 

10.3     Entire Agreement. This Agreement and the Plan set forth the entire agreement and understanding of the parties hereto with respect to the granting, vesting, and settlement of this Award and the administration of the Plan and supersede all prior agreements, arrangements, plans and understandings relating to the granting, vesting, and settlement of this Award and the administration of the Plan.

 

10.4     Amendment and Waiver. Other than as provided in the Plan, this Agreement may be amended, waived, modified or canceled only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance.

 

10.5     Captions. The Article, Section and paragraph captions in this Agreement are for convenience of reference only, do not constitute part of this Agreement and are not to be deemed to limit or otherwise affect any of the provisions of this Agreement.

 

 

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10.6     Counterparts. For the convenience of the parties hereto, this Agreement may be executed in any number of counterparts, each such counterpart to be deemed an original instrument, and all such counterparts together to constitute the same agreement.

 

The parties to this Agreement have executed this Performance Unit Award Agreement effective the day and year first above written.

 

 

	
Marten Transport, Ltd.

	 
	By	
 

	 	  
	Its 	
 

 

	
GRANTEE

	
 

 

 

6

 

 

EXHIBIT A

 

Example (for illustrative purposes only): For this example, please make the following assumptions: the first Measurement Date begins on December 31, 2015, the Award grant was for 1,000 Award Units, and the Grantee was continuously employed by the Company. In this example, the Company will provide the Grantee directly with 450 shares of Common Stock and will credit 450 shares of Common Stock to the Grantee’s Discretionary Account under the Marten Transport, Ltd. Deferred Compensation Plan for a total of 900 shares of Common Stock. Vested Award Units will be paid in shares of Common Stock or credited to the Deferred Compensation Plan by the March 15 immediately following the Measurement Date.

 

 

 

	
Year
	 	
Diluted EPS
	 	 	
Diluted EPS

Change Year

over Year
	 	 	
Performance

Vesting

Percentage
	 	 	
Service

Vesting

Percentage
	 	 	

Total Vesting

Percentage
	 	 	
Vested

Award Units
	 
	
Base Year
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
December 31, 2014
	 	$	1.00	 	 	
N/A
	 	 	
N/A
	 	 	
N/A
	 	 	
N/A
	 	 	
N/A
	 
	
Vesting Years
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
December 31, 2015
	 	$	1.20	 	 	 	20	%	 	 	20	%	 	 	5	%	 	 	25	%	 	 	250	 
	
December 31, 2016
	 	$	1.20	 	 	 	0	%	 	 	0	%	 	 	5	%	 	 	5	%	 	 	50	 
	
December 31, 2017
	 	$	1.00	 	 	 	(16	%)	 	 	0	%	 	 	5	%	 	 	5	%	 	 	50	 
	
December 31, 2018
	 	$	1.20	 	 	 	20	%	 	 	20	%	 	 	5	%	 	 	25	%	 	 	250	 
	
December 31, 2019
	 	$	1.50	 	 	 	25	%	 	 	25	%	 	 	5	%	 	 	30	%	 	 	300	 
	 	 	
Total:
	 	 	 	49	%*	 	 	65	%	 	 	25	%	 	 	90	%	 	 	900	 

 

*Cumulative change from Base Year.

 

 

7Hartman XX

  REAL PROPERTY MANAGEMENT AGREEMENT
 

 

               THIS REAL PROPERTY MANAGEMENT AGREEMENT (“Agreement”) is effective as of the 21st day of April, 2015, by and between Hartman 400 North Belt, LLC, a Texas limited liability company (“Company”), and Hartman Income REIT Management, Inc., a Texas corporation (“Manager”).
 

 ARTICLE 
 AGENCY; TERM
 

 .
 Appointment/Acceptance.  Company hereby appoints Manager, and Manager hereby accepts appointment, on the terms and conditions hereinafter provided, as exclusive managing and leasing agent for all properties acquired by Company.  All properties acquired by Company which from time to time are subject to this Agreement are hereinafter referred to collectively as the “Properties” and individually as the “Property.”
 

 .
 Term.  Subject to Article IV below, the term of this Agreement (the "Term") shall be a period of one (1) year from the date first set forth above and thereafter shall be automatically extended on an annual basis unless terminated in writing by either Company or Manager at least thirty (30) days prior to the expiration of the Term or extension thereof.
 

 ARTICLE 
 MANAGER’S DUTIES
 

 .
   Power and Authority.  Manager shall have, and is hereby granted, full power and authority to exercise all functions and perform all duties in connection with the operation and management of the Properties, subject to the right retained by Company to supervise the activities of Manager pursuant to this Agreement.  The power and authority of Manager shall include but not be limited to:
 

 1.
 Investigating, hiring, paying, supervising and discharging all personnel necessary or desirable, in Manager’s good faith judgment, to be employed in connection with the maintenance and operation of the Properties.  Compensation for the service of all such employees and the cost of worker’s compensation insurance and any benefits with respect to such employees shall be an operating expense of the Properties.  Manager, on behalf of Company, may employ affiliated persons or entities of Manager or Company (hereinafter “Affiliates”) as long as such employment is at rates that do not exceed commercially reasonable rates that would be paid to an unaffiliated person or entity for similar services, supplies, materials or other such dealings.  Manager is authorized to engage, on behalf of and at the expense of Company, professional persons (such as lawyers and accountants) and consultants (such as tax and energy consultants) to render services for the Properties.
 

 2.
 Maintaining business-like relations with tenants.
 

 3.
 Using good faith efforts to lease vacant space in the Properties and renew existing leases with tenants in accordance with the current rental schedule from time to time submitted by Manager and approved by Company (or in the absence of such current rental schedule approved by Company, at rents reasonably determined by Manager taking into consideration market factors then prevailing) and on such other terms and conditions as Manager in its sole discretion shall determine.  Manager shall execute leases and rental agreements with tenants and agreements with concessionaires in Manager’s name as agent for Company on such terms and conditions as Manager, in its sole discretion, shall determine.  Manager shall have the right to reduce the rental rate by an amount up to ten percent (10%) of the rental rate stipulated on the then current rental schedule approved by Company (if any) if, in Manager’s sole discretion, such reduction is necessary to expedite rental of such space under the competitive rental and economic conditions then prevailing.
 

 4.
 Collecting all monthly rentals and other charges due from tenants, all rents and other charges due from concessionaires, users of parking spaces and from users or lessees of other facilities in the Properties.  Company hereby authorizes and directs Manager to request, demand, collect, receive and receipt for any and all charges or rents which may at any time be or become due to Company, and to take such legal action as necessary to evict tenants delinquent in payment of monthly rent and to take such legal action as necessary to collect any rentals owing from tenants.
 

 

 

 

 
 

 5.
 Causing the buildings, appurtenances and grounds on the Properties to be maintained according to customary industry standards including, but not limited to, landscaping, interior and exterior cleaning, painting and decorating, plumbing, steam fitting, carpentry and other normal maintenance and repair work or any extraordinary maintenance and repair work deemed necessary or desirable by Manager, in Manager’s good faith judgment.
 

 6.
 Making contracts for water, electricity, gas, fuel, oil, telephone, pest control, trash removal, insurance and other necessary services as Manager shall deem necessary or desirable, in Manager’s good faith judgment.  Additionally, Manager shall place purchase orders for such equipment, tools, appliances, materials and supplies as are necessary or desirable, in Manager’s good faith judgment, to properly maintain the Properties.  All such contracts and orders may at Manager’s choice be made in either the name of Manager or in the name of Company and shall be on such terms and conditions as Manager deems advisable.  Manager shall use good faith efforts to have such contracts provide that Manager (or Company, as applicable) can terminate on thirty (30) days’ notice.
 

 7.
 Taking such action as may be necessary or desirable, in Manager’s good faith judgment, to comply with any orders or requirements affecting the Properties issued by federal, state, county or municipal authority having jurisdiction over the Properties.  Manager shall promptly notify Company of the receipt and contents of any such governmental orders or requirements.
 

 8.
 Causing to be disbursed or paid, from the monies collected from the operation of the Properties and such other monies as may or shall be advanced by Company to Manager:  (1) salaries and any other compensation or fees due and payable to Manager and employees of the Properties in connection with the management of the Properties and the cost of workers’ compensation insurance with respect to such employees; (2) payments required to be made to the holders of any mortgages affecting the Properties; (3) current amounts due for premium charges under contracts of insurance for fire and other hazard insurance premiums and amounts due for ad valorem taxes or other assessments on the Properties; (4) sums otherwise due and payable in connection with the operation and management of the Properties, including but not limited to, utility bills, service bills, supply bills license fees and payroll taxes; (5) repair expenses, capital improvement costs and other sums retained for such reserves as Manager deems necessary or desirable, in Manager’s good faith judgment,  for the prudent management and operation of the Properties; and (6) the balance of funds, if any, shall be paid monthly to Company.  Unless otherwise agreed to in writing by Manager and Company, such payments and disbursements shall be made by Manager in any order it may determine.
 

 9.
 Verifying appraisals and bills for real estate and personal property taxes, improvement assessments and other like charges which are or may become liens against the Properties.  Manager may pay the bills or take such legal action as necessary to appeal such tax appraisals as Manager may decide, in its reasonable judgment, to be prudent.   
 

 B.
 Manager’s Right to Subcontract.  Manager reserves the right, in its sole discretion, to subcontract some or all of the property management and leasing functions described herein to property managers, leasing agents and certain other third parties.  However, except as expressly provided herein, the fees to be paid to Manager under this Agreement are inclusive of fees payable to such third parties and Manager will pay the third parties with whom it subcontracts for these services a portion of its property management or leasing fees.
 

 C.
 Company’s Right to Supervise.  Company at all times shall have the right to supervise Manager in its performance of any or all of these activities.  Company shall have the right, if it so elects, to direct Manager in the conduct of any of these activities.  Absent any such direction from Company, Manager shall be entitled to perform its duties hereunder in accordance with its own good faith judgment.
 

 D.
 Agency; Payments.  Except for the employment, supervision and discharge of personnel in connection with the maintenance and operation of the Properties, who shall be employees of Manager and not of Company (although all costs with respect to such employees shall, to the extent allocable to the Properties, be deemed costs of the Properties), all action taken by Manager pursuant to the provisions of this Agreement shall be done as agent of Company and obligations or expenses incurred thereunder shall be for the account, on behalf and at the expense of Company, but any such actions may be taken or made either in Company’s name or Manager’s name.  Any payments to be made by Manager hereunder shall be made out of such funds as are available from rentals and 
 

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 other collections from the Properties and such other monies as may be provided by Company.  In the event anticipated disbursements for Properties expenses and Company management shall in any month be in excess of the anticipated revenues, Company agrees to advance sufficient funds to meet the obligations (including all costs with respect to the employees of the Properties described in Article II(A)(1) hereof, including Affiliates, the Management Fee, reimbursement of expenses described in Article III(A) hereof,) within fifteen (15) days after Manager’s request.  Manager shall not be obligated to make any advance to or for the account of Company or to pay any sum contemplated by this Agreement except out of funds held by Manager on behalf of Company or out of funds provided by Company to Manager, nor shall Manager be obligated to incur any liability of or for the account of Company without assurance or proof from Company that the necessary funds for the discharge thereof will be provided promptly.
 

 E.
 Bank Account.  Manager shall establish and maintain, in a manner to indicate the custodial nature thereof, with a bank, whose deposits are insured by the Federal Deposit Insurance Corporation, a separate bank account as agent of Company for the deposit of rentals and collections from the Properties, which shall not be commingled by Manager with funds from other projects or other funds of Manager or its Affiliates.  Manager has authority to draw thereon (a) for any payments to be made by Manager pursuant to the terms of this Agreement, (b) to discharge any liabilities or obligations incurred pursuant to this Agreement, and (c) for the payment of the Management Fee described in Article III(A) hereof and the various expense reimbursements due Manager hereunder. 
 

 F.
 Operating Budget.  On or before December 1 of each year, Manager shall prepare and submit to Company for its consent an operating budget with respect to the Properties for the next ensuing calendar year (the “Budget”).  If Company does not consent to the Budget submitted By Manager then, pending such consent or the submission to Manager by Company of an alternative Budget, Manager shall be authorized to rely on the Budget for the prior year, but with a four percent (4%) increase in each line item.
 

 G.
 Discretion.  Manager shall have and is hereby granted sole and complete discretion to exercise the powers and functions granted herein and Manager shall not be required to consult with Company or obtain Company’s approval before taking any action permitted hereunder; provided, however, except in cases of emergency, Manager shall not incur any obligation in excess of $10,000.00 without the consent of Company.  The approval by Company of a Budget shall be deemed the consent of Company to the expenses indicated on such Budget.  For these purposes, an “emergency” shall be deemed to exist if in the good faith judgment of Manager, prompt maintenance or repairs are needed in order to prevent death, bodily injury or material property damage.
 

 H.
 Records.  Manager shall maintain, or cause to be maintained, books of account of all receipts and disbursements from the management of the Properties.  Manager shall provide monthly statements to Company containing occupancy information and collection and disbursement reports.  Manager shall allow Company’s accountant or other representatives to review the books and records of the Properties during reasonable business hours.  Manager also shall provide Company with an annual report for the Properties containing information about occupancy and receipts and disbursements for the immediately preceding calendar year.
 

 ARTICLE 
 COMPENSATION OF MANAGER
 

 .
 Property Management.
 

 1.
 Management Fee.  Company shall pay to Manager, as base compensation for Manager’s duties and obligations under this Agreement, a property management fee (the “Management Fee”) equal to five percent (5%) of the Effective Gross Revenues (as hereinafter defined) for the management of retail centers, office/warehouse buildings, industrial properties and flex properties and 3 to 4% of the Effective Gross Revenues for office buildings, based upon the square footage and gross property revenues of the buildings. Company will pay a 4% fee for the management of office buildings under 100,000 square feet in size or with gross annual revenues under $1,000,000 and a 3% fee for the management of office buildings of 100,000 square feet or more in size and gross annual revenues of $1,000,000 or more. Company shall pay the Management Fee to the Manager within ten (10) days after the end of each calendar month, based upon the Effective Gross Revenues during said calendar month.  For purposes of this Agreement, “Effective Gross Revenues” shall mean all payments actually collected from tenants and occupants of the Properties, exclusive of (a) security and deposits (unless and until such deposits 
 

 3
 

 

 
 have been applied to the payment of current or past due rent) and (b) payments received from tenants in reimbursement of expenses of repairing damage caused by tenants.
 

 2.
 Leasing Fee.  If Manager provides leasing services with respect to a Property, Company shall pay to Manager a leasing fee (the “Leasing Fee”) in an amount equal to the leasing fees charged by unaffiliated persons rendering comparable services in the same geographic location of the applicable property. The Leasing Fee shall be payable upon execution of each lease.
 

 3.
 Construction Management Fee.  In the event that Manager supervises the construction or installation of tenant improvements to the Properties, Company shall pay Manager a construction management fee equal to 5% of the costs of the construction or installation of the tenant improvements.
 

 4.
 Oversight Fee.  In the event that Company contracts directly with a third-party property manager in respect of a Property, Company shall pay Manager an oversight fee equal to 1% of the Effective Gross Revenues of the Property managed.  In no event will the Company pay both a property management fee and an oversight fee to Manager with respect to any particular property. The foregoing fee shall be payable only from net cash flow from the Property after payment of all sums then due to the holder of the mortgage on the Property.   
 

 5.
 Disposition Fee.  If Manager provides a substantial amount of services, as determined by Company’s independent directors, in connection with the sale of one or more assets, Manager will receive a disposition fee equal to (1) in the case of the sale of real property, the lesser of: (A) one-half of the aggregate brokerage commission paid (including the disposition fee) or, if none is paid, the amount that customarily would be paid, or (B) 3% of the sales price of each property sold, and (2) in the case of the sale of any asset other than real property, 3% of the sales price of such asset. 
 

 6.
 Reimbursement of Expenses.  Company, within fifteen (15) days of a request by Manager, shall reimburse Manager for all reasonable and necessary expenses incurred or monies advanced by Manager in connection with the management and operation of the Properties.  However, Manager shall not be reimbursed for its overhead, including the salaries and expenses of employees relating to the management of the Properties except as expressly provided in Article II(A)(1) hereof.  Manager shall have no obligation to advance any of its own funds for the management of the Properties.
 

 B.
 Miscellaneous.  The fees and reimbursements set forth in the Article III are cumulative; and the obligations of Company pursuant to Article III shall survive the termination of this Agreement.
 

 ARTICLE 
 TERMINATION
 

 .
 Termination.  Notwithstanding anything herein to the contrary, but subject to Article IV(B) below, Manager and Company shall each have the right, upon sixty (60) days prior written notice to the other party to terminate this Agreement in its entirety or as to a specific Property or Properties with the mutual consent of Company and Manager.
 

 .
 Default.  Notwithstanding anything herein to the contrary, either party shall have the right (without limitation of its other rights and remedies) to terminate this Agreement in the event of a default by the other party if such default is not cured within thirty (30) days after written notice is given to the other party (provided that if such default cannot reasonably be cured within such thirty (30) day period, the cure period shall be extended as may reasonably be required provided that the party obligated to cure such default endeavors with diligence to do so).  Additionally, Company shall have the right (without limitation of its other rights and remedies) to immediately terminate this Agreement at any time upon written notice to Manager in the event of Manager’s fraud, gross malfeasance, gross negligence or willful misconduct.
 

 .
 Termination Payments.  Upon termination in whole or as to any Properties, Company and Manager shall immediately account to each other with respect to all matters outstanding and all sums owing each other as of the effective date of termination.  Manager shall be entitled to retain copies of such books and records pertaining to such Properties as Manager deems appropriate, provided Manager shall bear the cost of such photocopying.
 

 

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 ARTICLE 
 INSURANCE; INDEMNIFICATION OF MANAGER
 

 .
 Insurance.  Except as otherwise agreed in writing between the parties hereto, Manager shall maintain (subject to reimbursement as an expense of the Properties) all risk casualty insurance, and public liability insurance for the Properties with a broad form comprehensive general liability endorsement, in such amounts as Manager may deem appropriate.  Any and all other insurance maintained for the Properties shall be the sole responsibility of Company.  Each party shall provide the other with copies of all insurance policies maintained by such party with respect to the Properties.
 

 .
 Indemnification.  Manager shall have no liability to Company for any loss suffered by Company which arises out of any action or inaction of Manager if Manager, in good faith, determined that such course of conduct was in the best interest of Company and such course of conduct did not constitute gross negligence or willful misconduct of Manager.  Company shall indemnify Manager against all claims, actions, damages, losses, judgments, liabilities, costs and expenses (including attorneys’ fees) and amounts paid in settlement of any claims sustained by Manager in connection with the management of the Properties and the management services provided pursuant to this Agreement, provided that the same were not the result of gross negligence or willful misconduct on the part of Manager (collectively, “Unauthorized Acts”).  Manager shall indemnify Company against all claims, actions, damages, losses, judgments, liabilities, costs and expenses (including attorneys’ fees) and amounts paid in settlement of any claims sustained by Company arising out of or in connection with Unauthorized Acts.  Indemnities herein contained shall not apply to any claim with respect to which the indemnified party is covered by insurance, provided that the foregoing exclusion does not invalidate the indemnified party’s insurance coverage.  The indemnification provisions set forth herein shall survive termination of this Agreement.
 

 .
 Waiver.  Notwithstanding anything herein to the contrary, each party hereby waives any claim against the other to the extent recoverable by insurance carried or required to be carried by the claimant hereunder.
 

 ARTICLE 
 MISCELLANEOUS
 

 .
 Binding Obligation; Assignment.  This Agreement shall inure to the benefit of and constitute a binding obligation upon the parties hereto and their respective successors and assigns.  Subject to Article VI(G), no party may assign its rights or delegate its duties hereunder without the prior written consent of the other party, such consent not to be unreasonably withheld.
 

 .
 Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto with respect to the matters set forth herein, and shall not be changed, modified or amended, except by an instrument in writing after this date signed by both of the parties hereto with the same formalities as the execution of this Agreement.
 

 .
 Relief.  Company and Manager each shall be entitled to injunctive and other equitable relief to enforce the provisions of this Agreement.
 

 .
 Competitive Activities.  Manager (and any Affiliate) may acquire, own, promote, develop, operate and manage real property (or any one or more of the foregoing) on its own behalf or on behalf of any other person or entity.  Manager (and any Affiliate), notwithstanding the existence of this Agreement, may engage in any activity it so chooses, whether such activity is competitive with the Properties or Company or otherwise, without having or incurring any obligation to offer any interest in such activities to Company.  Neither this Agreement nor any activity undertaken pursuant hereto shall prevent Manager (and any Affiliate) from engaging in such activities or require Manager (and any Affiliate) to permit Company to participate in such activities, and, as a material part of the consideration for Manager’s execution hereof, Company hereby waives, relinquishes and reserves any such right or claim of participation.
 

 .
 Time Obligation.  Manager shall not be required to spend all of its time in the performance of its duties hereunder, but, rather, shall spend such time as it deems reasonably necessary for the business-like management of the Properties.
 

 

 5
 

 

 
 
 .
 Notices.  Notices or other communications required or permitted to be given hereunder shall be deemed duly made or given, as the case may be, if in writing, signed by or on behalf of the person making or giving the same, and shall be deemed completed upon the first to occur of receipt or two (2) days after deposit in the United States mail, first class, postage prepaid, addressed to the person or persons to whom such offer, acceptance, election, approval, consent, certification, request, waiver, or notice is to be made or given, at their respective addresses:
 

 If to Company:
 Hartman 400 North Belt, LLC
 2909 Hillcroft
 Suite 420
 Houston, Texas  77057
 Attention:  Allen R. Hartman
 

 If to Manager:
 Hartman Income REIT Management, Inc.
 2909 Hillcroft
 Suite 420
 Houston, Texas  77057
 Attention:  Allen R. Hartman
 

 or, in any case, at such other address as shall have been set forth in a notice sent pursuant to the provisions of this paragraph.
 

 .
 Consents; Approval.  Wherever in this Agreement the consent or approval of a party is required, such consent or approval shall not be withheld unreasonably (except as expressly set forth herein to the contrary) and shall be deemed to have been given if the party whose consent or approval is requested does not notify in writing the party requesting such consent or approval otherwise within ten (10) days after receipt of a written request for such consent or approval.
 

 .
 Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be an original, but all of which shall constitute one instrument.
 

 .
 Situs.  This Agreement and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of Texas, without regard to the conflict of laws provisions thereof.
 

 .
 Headings.  Article and section titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference and shall not be construed in any way to define, limit, extend or describe the scope of any of the provisions hereof.
 

 .
 Definitions.  The words such as “herein,” “hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.  The singular shall include the plural, and the masculine gender shall include the feminine and neuter, and vice versa, unless the context otherwise requires.
 

 .
 Severability; Invalidity.  Each provision of this Agreement shall be considered separable and if for any reason any provision or provisions herein are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement which are valid.
 

 .
 Additional Instruments, Acts.  Each of the parties hereto shall hereafter execute and deliver such further instruments and do such further acts and things as may be required or useful to carry out the intent and purpose of this Agreement and as are not inconsistent with the provisions hereof.
 

 .
 Time.  Time is of the essence with respect to the dates set forth in this Agreement.
 

 

 6
 

 

 
 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written pursuant to due authority.
 

 

 COMPANY:
 

 

 HARTMAN 400 NORTH BELT, LLC,
 a Texas limited liability company
 

 

 By: 
 ___________________________________
 Louis T. Fox, III, Vice President
 

 MANAGER:
 

 HARTMAN INCOME REIT MANAGEMENT, INC.,
 a Texas corporation
 

 

 By:
 ________________________________________
 Louis T. Fox, III, Vice President
 

 

 

 

 

 

 

 

 

 7

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