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EXHIBIT 10.18
MANAGEMENT AGREEMENT
BY AND BETWEEN
IRVINE APARTMENT COMMUNITIES, L.P.
A DELAWARE LIMITED PARTNERSHIP
AS "OWNER"
AND
IRVINE APARTMENT MANAGEMENT COMPANY,
A CALIFORNIA GENERAL PARTNERSHIP
AS "MANAGER"
DATED AS OF APRIL 1, 1998
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TABLE OF CONTENTS
Page
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ARTICLE 1. EXCLUSIVE AGENCY........................................................ 1
ARTICLE 2. TERM OF AGREEMENT....................................................... 1
ARTICLE 3. TERMINATION............................................................. 2
3.1 Termination With Notice For Cause................................. 2
3.2 Termination Without Notice For Cause.............................. 3
3.3 Termination Following Sale of the Project......................... 5
3.4 Final Accounting.................................................. 6
3.5 Continued Obligations of Owner.................................... 6
ARTICLE 4. BUDGETS, ACCOUNTING AND REPORTING....................................... 8
4.1 Budget............................................................ 8
4.2 Operation in Accordance With Budget............................... 9
4.3 Books of Account.................................................. 10
4.4 Financial Reports................................................. 10
4.5 Supporting Documentation.......................................... 11
4.6 Changes in Manager's Operations Manual............................ 11
4.7 Audit............................................................. 11
ARTICLE 5. OWNER'S RIGHT TO AUDIT.................................................. 12
5.1 Owner's Right to Audit............................................ 12
ARTICLE 6. LEASING ACTIVITIES...................................................... 12
6.1 Manager's Leasing Obligations..................................... 12
ARTICLE 7. MANAGEMENT OF PROJECT................................................... 13
7.1 Duties of Manager; Standards...................................... 13
.................................................................. 19
ARTICLE 8. BANK ACCOUNTS........................................................... 19
8.1 Revenue Account................................................... 19
8.2 Operating Account................................................. 19
8.3 Security Deposit Account.......................................... 19
8.4 Change of Banks................................................... 20
ARTICLE 9. INSURANCE AND INDEMNIFICATION........................................... 20
9.1 Insurance Types................................................... 20
9.2 Evidence of Insurance............................................. 21
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9.3 Damages........................................................... 21
9.4 Workers' Compensation Insurance................................... 21
9.5 Comprehensive or Commercial General Liability Insurance........... 22
9.6 Automobile Liability Insurance.................................... 22
9.7 Comprehensive Crime Insurance..................................... 22
9.8 Insurance to be Maintained by Owner............................... 22
9.9 Conditions to Owner's Insurance Being Primary..................... 23
9.10 Manager's Obligations............................................. 23
9.11 Waiver of Subrogation............................................. 24
9.12 Additional Insured................................................ 24
9.13 Claims Procedures................................................. 24
9.14 Insurance Audit; Refunds.......................................... 25
9.15 Owner's Election to Insure....................................... 25
ARTICLE 10. COMPENSATION OF MANAGER................................................ 25
10.1 Management Fee.................................................... 25
10.2 Project Income.................................................... 25
10.3 Intentionally Deleted............................................. 26
ARTICLE 11. PAYMENT OF EXPENSES.................................................... 26
11.1 Costs Eligible for Payment from Operating Account................. 26
11.2 Non-Reimbursable Costs............................................ 27
ARTICLE 12. GENERAL PROVISIONS..................................................... 29
12.1 Independent Contractor............................................ 29
12.2 Notices........................................................... 29
12.3 Brokers........................................................... 29
12.4 Attorneys' Fees................................................... 29
12.5 Assignment........................................................ 30
12.6 Amendments........................................................ 30
12.7 Licensing......................................................... 30
12.8 Entire Agreement.................................................. 30
12.9 Counterparts...................................................... 30
12.10 Governing Law..................................................... 30
12.11 Third-Party Disputes.............................................. 31
12.12 Fiduciary Relationship............................................ 31
12.13 Gifts............................................................. 31
12.14 Confidentiality................................................... 31
12.15 Subordination to Mortgages........................................ 32
12.16 Hazardous Wastes.................................................. 32
12.17 Regulatory Compliance............................................. 35
12.18 Approvals......................................................... 35
12.19 Proposition 65 Compliance......................................... 35
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12.20 Indemnifications.................................................. 36
EXHIBIT A - DESCRIPTION OF THE PROJECT
EXHIBIT B - MINIMUM INSURANCE REQUIREMENTS FOR OUTSIDE
CONTRACTORS NOT CLASSIFIED AS CLASS I
EXHIBIT C - MINIMUM INSURANCE REQUIREMENTS FOR CLASS I
OUTSIDE CONTRACTORS
EXHIBIT D - CLASS I CONTRACTORS
EXHIBIT E - OWNER'S AUTHORIZED REPRESENTATIVES
EXHIBIT F - MANAGEMENT FEE SCHEDULE
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SCHEDULE OF DEFINED TERMS
The terms listed below are defined in the Sections of this Agreement referenced
below.
"Affiliate".................................................................Section 3.1
"Anti-Discrimination Policy".............................................Section 7.1(n)
"Approved Budget"........................................................Section 4.1(c)
"Budget Year"............................................................Section 4.1(d)
"Claim"....................................................................Section 9.13
"Class I Contractors"....................................................Section 9.1(a)
"Class I Work"...........................................................Section 9.1(a)
"Commencement Date"...........................................................Article 2
"Contractors"............................................................Section 9.1(a)
"Contracts".........................................................Section 7.1(d)(iii)
"Control"...................................................................Section 3.1
"Covered Personnel"......................................................Section 7.1(n)
"Deposit Account"...........................................................Section 8.3
"Gift"....................................................................Section 12.13
"Hazardous Wastes"......................................................Section 12.16.2
"HMCP"..................................................................Section 12.16.1
"Income"...................................................................Section 10.2
"Losses".................................................................Section 7.1(m)
"Major Categories"..........................................................Section 4.2
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"Management Fee"...........................................................Section 10.1
"On Site Personnel".........................................................Section 9.4
"Operating Account".........................................................Section 8.2
"Original Management Agreement"...............................................Recital B
"Owner Indemnitees"........................................................Section 9.12
"Project".....................................................................Recital A
"Project Income"...........................................................Section 10.2
"Proposition 65"..........................................................Section 12.19
"Public Official".........................................................Section 12.13
"Regulatory Agreement"....................................................Section 12.17
"Rent".....................................................................Section 10.2
"Revenue Account"...........................................................Section 8.1
"Term"........................................................................Article 2
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MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "AGREEMENT") is made and entered
into as of the 1st day of April, 1998, by and between IRVINE APARTMENT
COMMUNITIES, L.P., a Delaware limited partnership ("OWNER") and IRVINE APARTMENT
MANAGEMENT COMPANY, a California general partnership ("MANAGER").
RECITAL
Owner is the owner of the apartment projects more particularly
described on EXHIBIT A attached hereto. Owner desires to appoint Manager as its
agent to lease, manage and operate the Projects.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises and covenants contained herein, Owner and Manager agree as
follows:
ARTICLE 1. EXCLUSIVE AGENCY
Owner hereby grants to Manager the sole and exclusive right to
lease, rent and manage all of the projects described in Exhibit A attached
hereto, any other apartment project located on the Irvine Ranch in Orange
County, California, the Villas of Renaissance located in San Diego County,
California and acquired, completed or constructed by Owner during the term of
this Agreement, and, to the extent practical (as determined by Owner in its sole
and absolute discretion and without any obligation to do so), any other
apartment projects located in Southern California and acquired, completed or
constructed by Owner during the term of this Agreement. (individually, a
"PROJECT" and collectively, the "PROJECTS"). Manager acknowledges that in
connection with any acquisition or development of projects other than the
Projects, Owner may appoint another Person to act as property manager of such
projects. Manager hereby accepts such appointment, upon the terms set forth
herein. Exhibit A shall be amended, from time to time, as may be necessary to
reflect the addition of apartment projects acquired, completed or constructed by
Owner after the date hereof.
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ARTICLE 2. TERM OF AGREEMENT
The term (the "TERM") of this Agreement shall commence on April
1, 1998 (the "COMMENCEMENT DATE") and shall terminate on March 31, 2001, unless
sooner terminated as provided in ARTICLE 3 below.
ARTICLE 3. TERMINATION
3.1 TERMINATION WITH NOTICE FOR CAUSE. Owner may terminate this
Agreement "FOR CAUSE" (as defined below) by the delivery of written notice of
such termination to Manager. The acts or omissions of Manager which shall
entitle Owner to terminate this Agreement "FOR CAUSE" shall include: (a) failure
to operate or lease the Projects in an independent manner in the best interest
of Owner without favoritism to any other property in which Manager or any
Affiliate (as defined below) of Manager has any direct or indirect interest,
unless Owner fails to act in a commercially reasonable manner in approving the
budgets for such Projects; (b) failure to operate or lease a Project in
accordance with the standards presently in effect with respect to the operation
and leasing of such Project, unless Owner fails to act in a commercially
reasonable manner in approving the budgets for such Projects; (c) failure to
operate or lease a Project at a level of quality at least equal to any other
property of a type similar to such Project located in Orange County or San Diego
County, California (as applicable) in which Manager or any Affiliate has any
direct or indirect interest, unless Owner fails to act in a commercially
reasonable manner in approving the budgets for such Projects; (d) failure to
provide accurate and timely reporting of financial and other information as
required by this Agreement; or (e) failure to cure any other breach of this
Agreement by Manager within the time period specified herein. Any termination
pursuant to this SECTION 3.1 shall be effective upon the expiration of ten (10)
days following the giving of such notice of termination to Manager, unless
Manager cures the specified failure within such ten (10) day period, or,
alternatively, if such failure is not capable of cure within ten (10) days,
unless Manager, within ten (10) days following the giving of such notice, shall
have initiated all necessary and appropriate action to cure such failure and
continues such action diligently to completion; provided, however, that in no
event shall such cure period exceed a total of sixty (60) consecutive days. For
purposes of this Agreement, "AFFILIATE" shall mean any managing general partner
of Manager and any person or entity (other than Owner and The Irvine Company)
which directly, or indirectly through one or more intermediaries, Controls, is
Controlled by or is under common Control (as such terms are defined below) with
a general partner of Manager (ii) any director or executive officer of Manager
or a general partner of Manager, or (iii) any person or entity holding an
ownership interest in Manager or a general partner of Manager. For purposes of
this Agreement, the term "CONTROL" shall mean either (a) the ownership of fifty
percent (50%) or more of the beneficial interest or the voting power of the
appropriate entity, or (b) the power to direct or cause the direction of the
management policies of such entity, by contract or otherwise.
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3.2 TERMINATION WITHOUT NOTICE FOR CAUSE.
(a) In addition to Owner's rights set forth in SECTION 3.1, Owner
may terminate this Agreement, without notice, upon the occurrence of any of the
following: (i) dissolution or termination of Manager or any day-to-day managing
general partner of Manager by merger, consolidation or otherwise; (ii) the sale,
pledge or other disposition or transfer of more than forty percent (40%) of the
interests of any day-to-day managing general partner of Manager to persons or
entities other than the current owners thereof; (iii) the termination or
suspension of Manager's real estate brokerage license, if such license is
legally required as a condition to manage or lease the Project in accordance
with the terms hereof; (iv) the death of ▇▇▇▇▇▇▇ ▇▇▇▇▇; (v) the cessation on the
part of Manager or on the part of any managing general partner of Manager to
continue to do business; (vi) the failure of Manager to deal properly with and
account for trust funds or the bank accounts established hereunder; (vii) the
commission of any fraud, misrepresentation, breach of fiduciary duty or willful
misconduct in connection with the performance of Manager's duties under this
Agreement; (viii) the bankruptcy, insolvency, reorganization or reconstitution
of Manager or any day-to-day managing general partner of Manager or any
assignment for the benefit of the creditors of Manager or any day-to-day
managing general partner of Manager, (ix) an audit by Owner of any of the
financial reports required under SECTION 4.4 reveals a Material Individual
Discrepancy (as hereafter defined) in the income, expenses, ▇▇▇▇▇▇▇▇ or
reimbursements reflected therein or (x) an audit by Owner of any of the
financial reports required under SECTION 4.4 reveals a Material Cumulative
Discrepancy (as hereafter defined) in the income, expenses, ▇▇▇▇▇▇▇▇ or
reimbursements reflected therein.
(b) Owner or its representatives may perform audit procedures on
the books and records of the Manager as deemed appropriate by Owner in its sole
and absolute discretion. Manager shall cooperate to the fullest extent possible
and in a timely manner with Owner's audit of Manager, and Manager shall not
interfere with the performance of any audit procedure.
(c) As used in this Section 3.2, the following terms have the
following meanings:
(i) "MATERIAL INDIVIDUAL DISCREPANCY" means a discrepancy
for any individual Material Matter in a calendar year in an
amount greater than Twenty-Five Thousand Dollars ($25,000) for
such calendar year.
(ii) "MATERIAL CUMULATIVE DISCREPANCY" means a cumulative
discrepancy for all Material Matters in the aggregate in a
calendar year in an amount greater than Fifty Thousand Dollars
($50,000) for such calendar year.
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(iii) "MATERIAL MATTER" means any audit discrepancy,
including, without limitation, any of the
following:
(1) A misappropriation of any funds derived from
the Assets or an intentional misuse of any
Assets;
(2) Any expenditures or contracts that have not
been approved in accordance with the terms
of this Agreement;
(3) Any payments to any Affiliates of Manager
that have not been approved in accordance
with the terms of this Agreement;
(4) Any payments for compensation or bonuses to
Manager's employees for which Manager is
entitled to reimbursement that have not been
approved in accordance with the terms of
this Agreement;
(5) Any severance agreements or employment
contracts for Manager's employees that have
not been approved in accordance with the
terms of this Agreement;
(6) Any political, lobbying or charitable
contribution that has not been approved by
Owner;
(7) The institution of litigation by Manager or
Manager's managing general partner in
violation of this Agreement; and
(8) Entry of a settlement agreement or the
making of any payment with respect to any
authorized litigation that has not been
approved in accordance with the terms of
this Agreement.
(d) Notwithstanding anything to the contrary in Section 3.2(a),
Owner hereby waives its right to terminate the Agreement without notice for
cause for the first Material Individual Discrepancy or Material Cumulative
Discrepancy that meets each of the following criteria:
(i) Manager's managing general partner has provided evidence
satisfactory to Owner in its sole discretion that the
Material Individual Discrepancy
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or Material Cumulative Discrepancy was the result of an
inadvertent error by an individual who is not an officer
of Manager; and
(ii) The Material Individual Discrepancy or Material Cumulative
Discrepancy does not exceed One Hundred Thousand Dollars
($100,000).
Notwithstanding Owner's waiver of its right to terminate the Agreement pursuant
to this Section 3.2(d), Manager shall reimburse Owner for all losses suffered by
Owner as a result of such Material Individual Discrepancy or Material Cumulative
Discrepancy.
(e) If Manager disputes the results and audit, Owner and managing
general partner of Manager shall attempt to agree on a qualified arbitrator to
be the sole judge over the dispute. As used in this Section 3.2(e), a "qualified
arbitrator" is a person that is a current or former audit partner with an
international accounting firm that is not an Affiliate of either Manager or
Owner. If after good faith efforts, Owner and managing general partner of
Manager can not agree on the identity of the qualified arbitrator within ten
(10) business days after written notice of Manager's dispute of the results and
audit, Owner and managing general partner of Manager shall each appoint a
qualified arbitrator and the two appointed arbitrators shall select a third
qualified arbitrator within twenty (20) days to determine the dispute. No later
than sixty (60) days after an arbitration is commenced pursuant to this Section
3.2(e), the qualified arbitrator shall issue its determination, together with
written finding of fact supporting its determination. The qualified arbitrator's
determination must be supported by law and substantial evidence and must comply
with the terms of this Agreement. The non-prevailing party in such arbitration
shall pay the costs and expenses of any arbitrator retained pursuant to this
Section 3.2(e). Subject to the provisions of Section 12.14, Owner and Manager
shall pay their respective costs and expenses incurred in preparation for any
arbitration initiated under this Section 3.2(e).
(f) To the extent that Manager through its own investigation and
review of Manager's books and records determines that a Material Individual
Discrepancy or Material Cumulative Discrepancy exists and reimburses the Manager
and Owner, as appropriate, for such Material Individual Discrepancy or Material
Cumulative Discrepancy prior to Owner's audit of such matter, Owner will have no
right to terminate this Agreement for cause because of such matter.
3.3 TERMINATION FOLLOWING SALE OF THE PROJECT. In the event Owner
sells, conveys, effects a tax-deferred exchange of or otherwise transfers any or
all of the Projects, Owner may elect, but shall have no obligation, to terminate
this Agreement with respect to the Project or Projects to be transferred by
written notice to Manager, with such termination to be effective concurrently
with such transfer.
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3.4 FINAL ACCOUNTING. Upon termination or expiration of this
Agreement for any reason, Manager shall deliver to Owner with respect to each
Project as to which the termination is effective, the following:
(a) a final accounting, setting forth the balance of
income and expenses of such Project as of the date of termination, to be
delivered within sixty (60) days after such termination, and an interim
accounting, in the form set forth in SECTION 4.4, for the thirty (30)
day period immediately following the date of termination;
(b) any balance of funds of Owner or tenant security
deposits applicable to such Project, to be delivered immediately;
(c) all records, contracts, leases, receipts for deposits,
unpaid bills, keys, paid invoices, tenant correspondence files and other
papers or documents which pertain to such Project, to be delivered
immediately. Manager may, at its expense, retain copies of any of the
foregoing documents (excluding keys) for its records;
(d) copies of all policies of insurance required to be
maintained in accordance with ARTICLE 9 hereof; and
(e) whenever received by Manager, all refunds or return of
deposits attributable to Workers' Compensation Insurance paid for by
Owner pursuant to the terms of this Agreement.
Manager's obligations under this SECTION 3.4 shall survive the termination or
expiration of this Agreement.
3.5 CONTINUED OBLIGATIONS OF OWNER.
(a) Upon the termination or expiration of this Agreement
for any reason, Owner shall, subject to the limitations contained in
this Agreement, remain obligated to Manager for any unpaid Management
Fee (as defined below) earned by Manager pursuant to SECTION 10.1
through the date of termination and for all reimbursements due to
Manager pursuant to this Agreement (offset, however, by (i) the amount
of any damages incurred by Owner as the result of any defaults by
Manager under this Agreement, including, without limitation, the
reasonable expenses of Owner and Owner incurred in curing such default,
and (ii) any other amounts due to Owner from Manager). Owner agrees to
defend, indemnify and hold Manager free and harmless against any and all
Losses (as defined below) arising from the acts of Owner or any
successor to Manager under the Contracts (as defined below) following
the date of termination as provided in SECTION 7.1(m) of this Agreement.
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(b) In the event Owner terminates this Agreement by reason
of a sale or other conveyance of any or all of the Projects as described
in SECTION 3.3, the following provisions shall govern with respect to
the payment of the Management Fee with respect to each Project sold or
conveyed:
(i) If Owner gives Manager at least thirty (30)
days' prior written notice of such sale and termination of this
Agreement or, without regard to whether any such prior notice is
given, the transferee elects to engage Manager to lease, manage
and operate the transferred Project or, in the case of the sale
or conveyance of all of the Projects, to assume Owner's and
Owner's obligations hereunder, Owner shall pay to Manager any
unpaid portion of the Management Fee earned with respect to each
Project being sold or conveyed as of the date of termination or
transfer, as well as any other expenses payable to Manager
hereunder as of such date, and no further sums shall be due
Manager from Owner; or
(ii) If Owner fails to give Manager at least thirty
(30) days' prior written notice of such sale and termination and
the transferee elects not to engage Manager or to assume Owner's
obligations hereunder, Owner shall pay to Manager, in addition to
the portion of the Management Fee earned with respect to each
Project being sold or conveyed, through the date of termination,
an amount equal to the Management Fee Manager would have earned
with respect to such Project(s), but for the termination, during
the thirty (30) days' period following such termination. Except
as provided in this SUBSECTION 3.5(b)(ii), upon any sale or
transfer of a Project, Owner shall be released from all of their
respective obligations hereunder (other than those obligations
which have accrued as of the date of termination), any
obligations to be performed hereunder with respect to such
Project after the date of termination and any continuing
indemnification obligations hereunder.
(c) If Manager is entitled to a Management Fee or any sums
following a termination of this Agreement, Owner shall pay to Manager,
within twenty (20) days after the effective date of such termination, an
amount equal to the Management Fee due Manager, pro-rated to the date of
termination, less any amounts which may be due Owner from Manager and
the amount of any damages incurred by Owner as the result of any
defaults by Manager under this Agreement including, without limitation,
the reasonable expenses of Owner incurred in curing such default. Any
amounts in addition to the Management Fee earned as of the date of
termination and payable under SUBSECTION 3.5(b)(ii) shall be paid within
twenty (20) days following the expiration of the thirty (30) day period
described in SUBSECTION 3.4 (b)(ii).
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Owner's obligations under this SECTION 3.5 shall survive termination and
expiration of this Agreement.
ARTICLE 4. BUDGETS, ACCOUNTING AND REPORTING
4.1 BUDGET.
(a) If any portion of a Project is leased as of the
Commencement Date, Owner shall deliver to Manager the budget for such
Project for the period commencing on the Commencement Date and ending
ninety (90) days thereafter. Manager shall, within thirty (30) days
after the Commencement Date, provide Owner with Manager's written
comments with respect to such budget. If a Project is not ready for
leasing as of the Commencement Date, within forty-five (45) days prior
to the availability of the first residential unit for leasing, Manager
shall prepare and submit to Owner the budget for such Project as
hereinafter described. With respect to the Budget Year (as defined
below), or any applicable portion thereof during the first calendar year
of the Initial Term, and for each Budget Year thereafter during the
Term, Manager shall prepare and submit to Owner, for Owner's approval, a
proposed budget for each Project, in form reasonably acceptable to
Owner, for the promotion, operation, repair and maintenance of the
Project for each forthcoming Budget Year. Manager shall use its best
efforts to minimize the cost to Owner of goods and services supplied to
all Projects (including the utilization of competitive bids, where
possible) without adversely affecting the physical condition, standards
of maintenance or operations of the Projects, taken individually and as
a whole. Owner acknowledges, however, that certain line items to be
included in the proposed budget (e.g., property taxes and charges
imposed by public utility companies) are beyond Manager's control. Each
proposed budget shall be delivered to Owner no later than one hundred
twenty (120) days prior to the end of the Budget Year preceding the
Budget Year for which the proposed budget is to be effective or as
otherwise instructed in writing by Owner. Notwithstanding the foregoing,
Owner shall have the right, from time to time, upon written notice to
Manager, to reasonably modify Manager's duties under this SECTION
4.1(a).
(b) Such proposed budget shall include a proposed
marketing and staffing plan, leasing parameters and an estimated capital
budget, with all line items classified in accordance with a chart of
accounts approved by Owner. Each proposed budget shall include a current
year forecast of operating revenues and expenses for the Project for
which the proposed budget has been prepared.
(c) For each Project Owner shall approve, or specify an
alternative to, the proposed budget or any individual line item set
forth therein in its sole and absolute discretion. Owner shall, on or
before the commencement of each Budget
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Year, at its option, either give written notice of its approval of the
proposed budget or give written notice of an alternative budget. Each
budget, as approved or otherwise specified by Owner in writing, shall be
referred to herein as the "APPROVED BUDGET." Notwithstanding the
foregoing, Owner shall have the right, from time to time, upon written
notice to Manager, to modify any Approved Budget for any Budget Year.
(d) As used herein, "BUDGET YEAR" shall mean the twelve
(12) month period elected by Owner from time to time in its discretion.
Until otherwise elected by Owner, on behalf of Owner, "BUDGET YEAR"
shall mean the fiscal year beginning on January 1 and ending on the
following December 31. In the event Owner, on behalf of Owner elects to
change the Budget Year at any time during the Term, Manager shall revise
the Approved Budget for each affected Project in accordance with the
provisions of this SECTION 4.1 to reflect such change, and Manager shall
cooperate with Owner as necessary to accommodate the change in the
Budget Year.
4.2 OPERATION IN ACCORDANCE WITH BUDGET. Manager shall use its
best efforts to insure that the actual costs of maintaining and operating each
Project do not exceed the amounts agreed upon in the Approved Budget with
respect to such Project, either in total or with respect to any individual line
item. Any change to an Approved Budget shall be subject to the prior written
approval of Owner which approval may be withheld in Owner's sole discretion. All
expenses must be charged to the proper account on the Approved Budget and no
expense may be classified or reclassified for the purpose of avoiding an excess
in the annual budgeted amount of any accounting category. If Manager advances
for Owner's account any amount for the payment of any expenses of Manager, Owner
shall reimburse Manager therefor only if: (a) such expenses are for items on the
Approved Budget and (b) Manager has submitted appropriate details of such
expenses, including, without limitation, paid invoices without Manager's markup.
During any Budget Year, Manager shall not, without the prior written approval of
Owner: (a) disburse any amounts attributable to items not reflected in the
Approved Budget which exceed, in the aggregate, Five Thousand Dollars ($5,000),
except in the case of an emergency situation threatening imminent injury to
persons, damage to property or interruption of essential services to tenants, or
(b) make any expenditure which in Manager's reasonable judgment will cause, on
an annual basis, either the total Approved Budget to be exceeded or the amounts
allocated to the following categories: Payroll and Related Expenditures, General
and Administrative Expense, Advertising and Promotion, Turnover,
Maintenance-Buildings, Maintenance-Grounds, Maintenance-Non-Recurring, Utilities
and Capital Expenses (collectively, the "MAJOR CATEGORIES") to be exceeded;
provided, however, Manager shall be entitled to make expenditures which exceed
individual line items included within the Major Categories by an amount not to
exceed the greater of (i) ten percent (10%) of the budgeted amount for such line
item, or (ii) Ten Thousand Dollars ($10,000), so long as neither the total
budgeted amount for the applicable Major Category nor the total Approved Budget
is exceeded.
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4.3 BOOKS OF ACCOUNT. Manager shall maintain adequate and
separate books and records for each Project with entries supported by supporting
documentation sufficient to allow Owner or its agents to ascertain their
accuracy. Such books and records shall be made available to Owner and its agents
in connection with independent financial audits of Owner, as well as audits by
any governmental authority, including, without limitation, the Internal Revenue
Service, the Franchise Tax Board and the Orange County Assessor's Office.
Manager shall maintain and safeguard such books and records at Manager's office
or at such other location as may be agreed upon in writing. Manager shall ensure
such control over accounting and financial transactions as is reasonably
necessary to protect Owner's assets from theft, error or fraudulent activity by
Manager's employees. Unless any losses arising from any such occurrences are
covered by any of the insurance policies required to be maintained hereunder,
Manager shall bear all monetary losses arising from such occurrences, including,
without limitation, the following:
(a) Theft of assets by Manager's principals, officers,
employees or Affiliates;
(b) Late charges, penalties or interest due to delay in
payment of invoices, bills or other like charges, for any reason other
than the failure of Owner to deposit funds in the Operating Account (as
defined below) in a timely manner. Such late charges, penalties or
interest shall be borne by Manager and paid directly by Manager;
(c) Overpayment or duplicate payment of invoices arising
from either fraud or negligence;
(d) Overpayment of labor costs arising from either fraud
or negligence;
(e) A sum equal to the value of any form of payment or
property from suppliers to Manager's employees arising from the purchase
of goods or services for the Project(s), excluding, however, gifts of
nominal value received in the ordinary course of business and in
compliance with SECTION 12.13; and
(f) Unauthorized use of facilities in any Project by
Manager's employees.
4.4 FINANCIAL REPORTS. No later than the third (3rd) business day
of each calendar month, Manager shall furnish to Owner with respect to each
Project, in such form as Owner may require, a report of all transactions
occurring during the preceding month. Manager shall deliver to Owner no later
than the tenth (10th) day of each calendar month, in such form as Owner may
require, a statement of income and expenses for each Project for the preceding
month and a balance sheet for each Project, each prepared on a cash and
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accrual basis according to generally accepted accounting principles and
accompanied by supporting summaries of adjusting journal entities, bank
reconciliations applicable to the most recent statements prepared by the banks
handling Project funds, an analysis of prepaid rent (if any), a schedule of all
expenses and amounts billed by Manager to Owner and all amounts reimbursed by
Owner to Manager, and such other financial statements or reports as Owner may
require. Manager shall notify Owner, in writing, on a monthly basis, of all
rental arrearages that in its judgment are properly written off as
uncollectible.
4.5 SUPPORTING DOCUMENTATION. As additional supporting
documentation for the monthly financial statements required under SECTION 4.4,
unless otherwise directed by Owner, Manager shall make available, at Manager's
office, the following:
(a) all bank statements and bank deposit slips;
(b) detailed cash receipts and disbursement records;
(c) detailed trial balance for receivables and payables
and billed and unbilled revenue items;
(d) paid invoices;
(e) supporting documentation for payroll, payroll taxes
and employee benefits;
(f) appropriate details of accrued expenses and property
records; and
(g) information necessary for preparation of Owner's tax
returns, including a description of and a statement of amounts
expended in connection with repairs, capital improvements,
taxes, lease summaries and professional fees.
4.6 CHANGES IN MANAGER'S OPERATIONS MANUAL. Within one hundred
twenty (120) days following the end of each calendar quarter, Manager shall
deliver to Owner copies of any changes which have been made in Manager's
Operations Manual during the last preceding calendar quarter.
4.7 AUDIT. Using an in-house audit specialist, Manager shall, at
least 1.5 times per calendar year, audit all books, records and files maintained
by Manager for Owner with respect to the Projects in accordance with the audit
guidelines previously or hereafter delivered by Owner. Owner shall have the
right to revise such audit guidelines from time to time upon written notice to
Manager. Manager shall (i) deliver to Owner an audit schedule within thirty (30)
days after the Commencement Date and (ii) deliver to Owner a copy of the
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completed audit report and discrepancy responses no later than thirty (30) days
after completion of each audit during the Term.
ARTICLE 5. OWNER'S RIGHT TO AUDIT
5.1 OWNER'S RIGHT TO AUDIT. Owner, or persons appointed by Owner,
may, at Owner's expense, examine all books, records and files maintained for
Owner by Manager. Owner may, at its expense, perform any audit or investigation
relating to Manager's activities either at the Project to which such books,
records or files relate or at any office of Manager if such audit or
investigation relates to Manager's activities for Owner. Should Owner's
employees or representatives discover either weaknesses in internal control or
errors in recordkeeping, Manager shall correct such discrepancies either upon
discovery or within a reasonable period of time thereafter. Manager shall inform
Owner in writing of the action taken to correct any audit discrepancies. Nothing
contained in this SECTION 5.1 shall be deemed to limit Owner's right to
terminate this Agreement "FOR CAUSE" as set forth in SUBSECTION 3.2(i).
ARTICLE 6. LEASING ACTIVITIES
6.1 MANAGER'S LEASING OBLIGATIONS. Subject to the direction of
Owner Manager shall use its good faith, diligent efforts to lease the Projects
in accordance with the Approved Budgets and rental rates, shall act in a
fiduciary capacity with respect to Owner and shall deal at arm's length with all
third parties, including, without limitation, Affiliates. Without limiting the
generality of the foregoing, Manager's leasing obligations shall include the
following:
(a) Manager shall diligently undertake the rental of all
residential units within the Projects which are or may become vacant
during the Term. Manager shall establish controls so that ample time is
available to renew leases or obtain new tenants and shall use its best
efforts to avoid vacancies and loss of income.
(b) In leasing any portion of a Project, Manager shall
utilize only a standard lease form approved by Owner, with no
modifications thereto. Manager shall require each prospective tenant to
submit financial information sufficient to allow Manager to verify the
ability of such prospective tenant to perform its obligations under its
lease.
(c) Manager is hereby authorized, during the Term as agent
for Owner, to execute residential lease agreements in the form of the
then approved standard lease form, provided that Manager shall comply
with all terms and provisions hereof, including, without limitation, the
leasing guidelines previously or
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hereafter delivered by Owner (the "LEASING GUIDELINES"). Owner shall
have the right to revise such Leasing Guidelines from time to time upon
written notice to Manager. In no event shall any lease executed by
Manager provide for a lease term in excess of twelve (12) months,
without Owner's prior written consent. The rental rates established or
approved by Owner shall hereinafter be referred to as the "RENTAL
SCHEDULE."
(d) Manager shall from time to time, but not less often
than once per calendar quarter, submit to Owner, for review and approval
by Owner, in writing, recommended rental rates for each Project. Such
recommendation shall be in writing and shall be sent to Owner no later
than fifteen (15) days prior to the end of each calendar quarter during
the Term. Owner shall, at its option, give written notice of its
approval of such recommendation or, alternatively, of such other rental
rates which Owner desires to establish for each Project. The failure by
Owner to notify Manager, in writing, of Owner's approval of such
recommended rental rates shall be deemed to be Owner's disapproval
thereof. If Owner does not elect to adopt new rental rates for a
Project, the rental rates previously in effect for such Project shall be
controlling. In no event shall Manager deviate from the rental rates
established by Owner for each Project, unless otherwise approved in
writing by Owner.
(e) Manager shall schedule monthly meetings with Owner in
order to review all advertising and promotional materials for each
Project, which materials shall be subject to Owner's approval and shall
comply with all applicable laws, ordinances and regulations, including,
without limitation, any policies or procedures which may be established
by Owner and communicated in writing to Manager. In addition, Manager
shall obtain the prior approval of Owner (which approval need not be in
writing), prior to using any advertising or promotional material not
approved by Owner at such monthly meetings. The cost of all advertising
and promotional procedures and advertising campaigns shall be within the
limits set forth for such expenses in the Approved Budget for the
related Project or as otherwise approved by Owner in writing from time
to time.
ARTICLE 7. MANAGEMENT OF PROJECT
7.1 DUTIES OF MANAGER; STANDARDS. Manager shall manage, operate
and maintain each Project in accordance with the general standards set forth in
this ARTICLE 7, the guidelines, policies and procedures issued by Owner from
time to time (including, without limitation, the HMCP, as defined below) and
Manager's Operations Manual for such Project, in the form delivered to Owner
from time to time. Owner will provide Manager with any additional documentation
reasonably necessary to establish Manager's authority to act as required
hereunder. Without limiting the generality of the foregoing, Manager's functions
hereunder shall include the following:
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(a) Manager shall manage each Project in an efficient and
businesslike manner consistent with the standards currently in effect
for such Project, having due regard for the age and physical condition
of such Project. In addition, Manager shall operate each Project so as
to maintain the good name and reputation of Owner in the community in
which such Project is located. Manager shall perform all services in a
diligent and professional manner in accordance with recognized standards
of the property management industry and in compliance with such
standards and practices as are prevalent in the geographic area where
the Project is located. Manager shall act in a fiduciary capacity with
respect to the proper protection of and accounting for Owner's assets,
in an independent manner with all third parties and in the best
interests of Owner at all times.
(b) Manager shall use its best efforts to collect all
rents and other charges which may become due at any time from any tenant
of a Project, or from others for services provided in connection with or
for the use of a Project or any portion thereof. Manager shall collect
and identify any income due Owner from miscellaneous services provided
to tenants or the public, including, without limitation, parking income,
tenant storage, and coin-operated washers, dryers and other machines of
all types. All funds received by Manager for or on behalf of Owner shall
be deposited in a bank designated by Owner in the Revenue Account (as
defined below).
(c) Manager shall, at Owner's expense, maintain and make
or cause to be made such ordinary repairs and alterations as Manager may
deem advisable or necessary, subject to and within the limitations of
the Approved Budget for each Project and of this Agreement.
(d) (i) Manager shall, at Owner's expense, make or cause
to be made such capital improvements to a Project pursuant to plans and
specifications approved by Owner, as are included in the Approved Budget
for such Project or are otherwise approved by Owner, as well as all
remodeling and refurbishing of tenant premises as approved by Owner in
connection with the requirements of tenant leases. Manager shall make
recommendations, select contractors and follow such bid procedures as
are required by Owner in writing from time to time and shall supervise
all such work to obtain compliance with contract requirements and
applicable law.
(ii) Manager shall, at Owner's expense, contract for
those utilities and provide, or cause to be provided, other
building operation, landscaping and maintenance services Manager
or Owner shall deem advisable. Manager shall not enter into any
contracts with any Affiliate without the prior written consent of
Owner. In the event Manager or an Affiliate is then managing
other projects similar to the Projects, whether or not any of
such other projects are owned in whole or in part by Owner,
Manager shall, if
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possible and subject to the provisions of this SUBSECTION
7.1(d)(ii), use its best efforts to utilize the same individuals
or entities under such service contracts as are performing
similar services for Manager or an Affiliate in connection with
such other projects, if such a procedure would result in cost
savings to Owner. All contractors performing work on a Project
shall comply with, and shall have incorporated in their
contracts, the provisions for OSHA Compliance and Safety and Fire
Requirements previously or hereafter delivered to Manager by
Owner. Manager shall use all reasonable diligence in evaluating,
selecting and supervising all contractors retained by Manager to
perform the services set forth herein. Subject to the provisions
of ARTICLE 4, Manager hereby agrees that it shall use its best
efforts to utilize any group or bulk purchasing opportunities
made available to Manager by Owner. Subject to the provisions of
ARTICLE 4, Manager shall, at Owner's expense, purchase and keep
the Projects furnished with all necessary supplies. The cost of
such supplies shall be charged to Owner at net cost and Owner
shall be credited with all rebates, refunds, allowances and
discounts allowed to Manager.
(iii) All contracts entered into by Manager with
respect to a Project pursuant to this SECTION 7.1(d)
(collectively, the "CONTRACTS") shall, unless Owner otherwise
consents in writing, be on a standard form approved by Owner in
writing and shall include a provision for early termination in
the event of a sale, conveyance or exchange of such Project by
Owner (as described in SECTION 3.3 hereof) if Owner or the
transferee elects to terminate such Contract, a provision for
early termination in the event this Agreement is terminated by
Owner pursuant to SECTION 3.2(h), and a provision obligating the
other contracting party to continue to perform under its Contract
in the event (a) this Agreement is terminated for any reason and
Owner elects to take an assignment of such Contract and require
the other contracting party to continue its performance
thereunder directly on behalf of Owner, or (b) of a sale,
conveyance or exchange of such Project by Owner if the transferee
elects to take an assignment of such Contract and require the
other contracting party to continue its performance thereunder
directly on behalf of such transferee. Subject to this SUBSECTION
7.1(d)(iii), Manager shall be responsible for the negotiation of
all such Contracts and all such Contracts shall be executed by
Manager on its own behalf and not as agent for Owner; provided,
however, that as between Owner and Manager, Owner shall be
responsible for all expenses associated with any such Contract,
so long as such expenses are incurred in compliance with the
applicable Approved Budget and the terms of this Agreement.
Manager shall not enter into any Contract which would cause, on
an annual basis, either the total Approved Budget or the amounts
allocated to Major Categories to exceed the limits set forth in
SECTION 4.2 hereof. Promptly upon the execution thereof, Manager
shall deliver to Owner one fully executed original of any
Contract in an amount equal to or greater
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than Five Thousand Dollars ($5,000). In addition, Manager shall,
within five (5) days after Owner's written request therefor,
deliver to Owner a copy of any other Contract requested by Owner.
(e) Intentionally deleted.
(f) Manager shall operate, in accordance with a budget
approved by Owner, Owner's Information Center and Owner's corporate
housing program.
(g) If requested by Owner in writing, which request shall
specify the applicable amounts due and payable, Manager shall pay from
the Operating Account all bills for payments due under mortgages and
ground leases with respect to the Projects, all real estate, personal
property and improvement taxes and assessments due with respect to the
Projects and insurance premiums for insurance coverage carried by Owner
with respect to the Projects. In such event, all such expenses shall be
included in the Approved Budget for the related Project. Owner shall be
responsible for prosecuting the appeal of any property tax assessment
for each Project and the payment of all costs incurred in connection
therewith.
(h) Subject to the other provisions of this Agreement, at
Owner's expense, Manager shall be responsible for compliance with all
federal, state and municipal laws, ordinances, regulations and orders
related to the leasing, use, operation, repair and maintenance of each
Project, including, without limitation, compliance with all state or
federal fair housing laws, rules and regulations, with the rules,
regulations or orders of the local Board of Fire Underwriters or other
similar body and with the Americans with Disabilities Act. Manager shall
promptly notify Owner of any violation of any such law, ordinance, rule,
regulation or order, and, with the approval of Owner, promptly remedy
any such violation which comes to its attention, at Owner's expense.
Expenses incurred in so complying and in correcting any such violation
shall be included in the Approved Budget for such Project or otherwise
approved in advance by Owner in writing, except in the case of an
emergency threatening imminent personal injury or property damage or a
situation which, in the absence of immediate action, could subject Owner
to civil or criminal penalties, in which event Manager shall use its
best efforts to notify Owner of such violation and corrective action so
taken. Manager shall familiarize itself with the terms of and be
responsible for avoiding any violations of the requirements of Owner set
forth in any development agreement, ground lease, tenant lease,
mortgage, deed of trust or other instrument affecting each Project and
delivered to Manager by Owner, including, without limitation, subject to
the provisions of SECTION 12.17 hereof, any regulatory agreement,
declaration of covenants, conditions and restrictions or similar
document affecting a Project that imposes any requirements regarding
permitted income levels of Project tenants or other restrictions imposed
by applicable governmental agencies in connection with any revenue bond
or similar financing
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applicable to such Project, and shall otherwise comply with any written
instructions of Owner with respect thereto. Manager shall furnish to
Owner, upon receipt by Manager, each notice or order affecting any
Project, including, without limitation, any notice from any taxing or
other governmental authority and notice of violation of any requirement
or order issued by any Board of Fire Underwriters or other similar body
against such Project or Owner, any notice of default or otherwise from
the holder of any mortgage or deed of trust or any notice of renewal,
termination or cancellation of any insurance policy. Manager, however,
shall not take any action under this SECTION 7.1(f) in the event Owner
notifies Manager, in writing, that Owner is contesting or intends to
contest such notice, order or requirement, provided that Manager shall
be subject to no liability resulting from Manager's failure to take such
action during the pendency of such contest. Notwithstanding the
foregoing, however, Manager's responsibilities under this SECTION 7.1(f)
shall not extend to matters requiring the expenditure of Owner's funds
but disapproved in writing by Owner.
(i) Manager shall, at Owner's expense, arrange for the
obtaining and renewal of all business licenses affecting each Project;
provided, however, that the cost of obtaining or renewing any broker's
or similar business license required to be obtained by Manager in order
to fulfill its obligations under this Agreement shall be borne solely by
Manager.
(j) Manager shall, at Owner's expense, engage counsel and
cause such legal proceedings to be instituted and prosecuted in an
expeditious manner as may be necessary to enforce payment of rent and
compliance with leases or to dispossess tenants. Manager shall use legal
counsel approved by Owner to institute such actions and all settlement
negotiations involving claims in excess of Three Thousand Five Hundred
Dollars ($3,500) shall be subject to the prior approval of Owner.
Attorneys' fees and costs so incurred shall be borne by Owner and shall
be submitted to Owner for approval prior to payment, unless the cost is
already reflected in the Approved Budget for the applicable Project or
unless payment is due under a contract previously approved by Owner.
(k) Manager shall employ at all times a sufficient number
of capable employees to enable it to manage, operate and maintain the
Projects properly, adequately, safely and economically. Except as
expressly provided in SECTION 7.1 to the contrary, all matters
pertaining to the employment, supervision, compensation, promotion and
discharge of such employees shall be the responsibility of Manager.
Manager will negotiate with any union lawfully entitled to represent
such employees and shall execute in its own name, and not as agent for
Owner, collective bargaining agreements or labor contracts resulting
therefrom. At least once per year Manager shall train its employees in
the compliance with the HMCP, all state or federal fair housing laws,
rules and regulations and in the reduction of general liability risks.
Owner shall not have any liability with respect to any employment
arrangements with
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employees employed in connection with the management of any Project, and
all employment arrangements shall expressly so provide. Manager shall
comply with the Americans With Disabilities Act and all applicable
governmental requirements relating to workers' compensation, social
security, unemployment insurance, hours of labor, wages, working
conditions, equal employment laws and regulations and other
employer-employee related matters.
(l) If requested by Owner, Manager shall notify Owner of
the identities, job titles and salaries of the on-site employees to be
responsible for the direct management of each Project. Manager shall
notify Owner in advance of any staffing changes relating to the on-site
employees responsible for the direct management of each Project or the
off-site employees responsible for the handling of the relationship
between Owner and Manager and Manager shall cooperate with Owner in
addressing Owner's concerns in connection with such staffing changes.
Manager shall require coverage of all employees by fidelity bond or
coverage under Manager's comprehensive crime insurance policy, each in
amounts required by Owner. Manager shall identify to Owner the job
description of employees whose salaries Manager will initially charge to
a Project for direct services rendered to such Project. All employee
salaries and positions shall be consistent with the Approved Budget for
the related Project.
(m) Manager shall be responsible for administering the
enforcement of all Project parking rules and regulations established by
Owner and furnished in writing to Manager.
(n) Manager hereby agrees to cooperate with any financial
institution or other lender designated by Owner to provide financing for
any Project and consents to the assignment by Owner, individually and as
agent for Owner, of this Agreement as security for any loan to Owner
from such lender. Manager further agrees to cooperate with brokers and
prospective purchasers designated by Owner in connection with the sale,
conveyance or exchange of any Project.
(o) Promptly following the execution of this Agreement and
thereafter upon the commencement of work in connection with the Projects
by any Covered Personnel (as defined below), Manager shall deliver a
copy of the Anti- Discrimination Policy (as defined below) to all
Covered Personnel and shall obtain a written acknowledgment from each
such employee, in form and substance acceptable to Owner, certifying
that they have read and understand the Anti-Discrimination Policy and
agree to abide by its terms. Manager shall maintain and safeguard the
Anti-Discrimination Policy and the original written acknowledgments
relating thereto with the books and records for each Project as provided
in this Agreement. As used herein, the term "COVERED PERSONNEL" shall
mean (i) all of Manager's personnel now or hereafter involved in the
leasing of a Project, whether such employees are on- or
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off-site personnel, and (ii) all of Manager's personnel now or hereafter
employed on-site at a Project. As used herein, the term
"ANTI-DISCRIMINATION POLICY" shall mean a written anti-discrimination
policy prepared by Manager and approved by Owner.
(p) Manager shall maintain frequently and update on a
periodic basis but in no event less than once per year, a complete
inventory of all of Owner's personal property located at each Project
site. Manager shall deliver a copy of such inventory to Owner prior to
the commencement of each Budget Year or more frequently as requested by
Owner.
ARTICLE 8. BANK ACCOUNTS
8.1 REVENUE ACCOUNT. Manager shall deposit all Project Income (as
defined below) and other funds collected from the operation of each Project in a
special account in a bank approved by Owner (interest bearing, if possible)
(individually the "REVENUE ACCOUNT" and collectively the "REVENUE ACCOUNTS") for
such Project in the name of Owner or as Owner may designate. Manager shall have
no authority to withdraw funds from the Revenue Account. Manager shall instruct
the bank to hold such funds in trust for Owner.
8.2 OPERATING ACCOUNT. Owner shall establish one or more bank
accounts, including, without limitation a principal account for the projects
(the "OPERATING ACCOUNT") which shall be used for the payment of all costs and
expenses to be borne by Owner hereunder. Manager shall have the authority to
withdraw funds from the Operating Account to fulfill its obligations under this
Agreement, but shall otherwise have no right, title or interest in such funds.
Manager shall in no event allow any funds withdrawn from the Operating Account
to be commingled with any other funds or bank accounts of Manager. Following
written notification from Manager of projected cash requirements for the
Project, which notices shall be delivered to Owner not more often than once per
week, Owner shall maintain in the Operating Account an amount sufficient to pay
all budgeted expenses for the Projects for each month in a timely manner.
Manager shall pay from the Operating Account the operating expenses of the
Projects and any other required payments applicable to the Projects, as set
forth in this Agreement.
8.3 SECURITY DEPOSIT ACCOUNT. If applicable law requires a
segregated account for tenant security deposits, Manager will open a separate
interest bearing account (the "DEPOSIT ACCOUNT") for each Project in Owner's
name at a bank approved by Owner, and shall instruct the bank to hold the funds
in trust for Owner. Manager shall maintain the Deposit Account, if required, in
accordance with applicable law and shall otherwise comply in all respects with
CALIFORNIA CIVIL CODE SECTION 1950.5. Manager shall use the Deposit Account only
to maintain security deposits for the related Project. Manager shall maintain
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detailed records of all security deposits and allow Owner or its designees
access to such records.
8.4 CHANGE OF BANKS. Owner may direct Manager, in writing, to
change a depository bank or any depository arrangements, provided that any costs
or expenses associated with such change shall be paid by Owner.
ARTICLE 9. INSURANCE AND INDEMNIFICATION
9.1 INSURANCE TYPES.
(a) Manager shall not commence any work under this
Agreement until it obtains all insurance required to be obtained by
Manager hereunder. Manager will not permit any other party with whom it
may contract to perform services on a Project site (hereinafter the
"CONTRACTORS") to commence work under the applicable Contract until the
insurance requirements for Contractors who are not Class I Contractors
(as defined below) described in EXHIBIT B attached hereto and by this
reference incorporated herein, or the insurance requirements for Class I
Contractors described in EXHIBIT C attached hereto, as applicable, have
been complied with by the applicable Contractor and incorporated into
the applicable Contract. As used herein, "CLASS I CONTRACTORS" shall
mean the Contractors performing any of the work or services (the "CLASS
I WORK") described in EXHIBIT D attached hereto and such other
Contractors as may be designated as Class I Contractors by Owner from
time to time. In the event any Contractor is performing work or services
which are both Class I Work and work or services which would not be
considered Class I Work, such Contractor shall be deemed to be a Class I
Contractor with respect to all of the work or services which it
performs.
(b) All insurance described under this ARTICLE 9 which is
to be carried by Manager will be maintained by Manager with insurance
carriers licensed and approved to do business in California, having a
general policyholders' rating of not less than an "A" and a financial
rating of not less than "X" in the most current Best's Key Rating Guide.
In no event shall such insurance be terminated or otherwise allowed to
lapse prior to termination of this Agreement or such longer period as
may be specified herein, unless such terminated or lapsed insurance is
immediately replaced by substitute insurance meeting the requirements of
this ARTICLE 9. Manager may provide the insurance described in this
ARTICLE 9, in whole or in part, through a policy or policies covering
other liabilities and projects of Manager; provided, however, that any
such policy or policies shall: (i) allocate to each Project the full
amount of insurance required hereunder; and (ii) contain, permit or
otherwise unconditionally authorize the waiver contained in SECTION
9.10.
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9.2 EVIDENCE OF INSURANCE. As evidence of Manager's specified
insurance coverage, Owner shall accept certificates and endorsements issued by
Manager's insurance carrier acceptable to Owner showing such policies in force
for the specified period. Owner retains the right to review the actual insurance
policies upon its request. Such evidence shall be delivered to Owner promptly
following the execution of this Agreement or prior to commencement of work,
whichever first occurs. Each policy and certificate shall be subject to approval
by Owner (such approval not to be unreasonably withheld), and shall provide that
such policy shall not be subject to material alteration or cancellation without
thirty (30) days' notice in writing to be delivered by registered mail to Owner.
Should any policy expire or be cancelled prior to the expiration or earlier
termination of this Agreement, and Manager fails immediately to procure other
insurance as specified herein, Owner reserve the right, but shall have no
obligation, to procure such insurance and to deduct the cost thereof from any
sum due Manager under the terms of this Agreement. Manager shall permit Owner to
inspect such evidence of insurance as Manager obtains from its Contractors.
9.3 DAMAGES. Nothing contained in this ARTICLE 9 is to be
construed as limiting the extent of Manager's responsibility for the payment of
damages resulting from Manager's operations under this Agreement nor shall
anything contained herein be deemed to place any responsibility on Owner for
ensuring that the insurance required hereunder is sufficient for the conduct of
Manager's business.
9.4 WORKERS' COMPENSATION INSURANCE. Manager shall obtain and
maintain full Workers' Compensation Insurance, including Employer's Liability,
at a minimum limit of One Million Dollars ($1,000,000) or current limit carried,
whichever is greater, for all personnel whom it employs in carrying out
Manager's obligations under this Agreement, including an endorsement evidencing
waiver of subrogation by the insurance carrier with respect to Owner. Such
insurance shall be in substantial accordance with the requirements of the most
current and applicable State Workers' Compensation Insurance Laws in effect from
time to time. Owner shall bear the cost of such insurance attributable to and
covering Manager's On-Site Personnel (as defined below) and Manager shall bear
the cost of such insurance attributable to and covering any other personnel who
perform services in connection with any of the Projects but who are not On-Site
Personnel. The cost of such insurance attributable to On- Site Personnel shall
not exceed the amount set forth in the applicable Approved Budget, as such
amount may be increased as a result of any audit by the insurer. For the
purposes of this Agreement, the term "ON-SITE PERSONNEL" shall be deemed to
include only those employees of Manager who are located on a Project site on a
full time basis or who are located on a Project site on a part-time basis but
who provide direct services to a Project, such as landscaping, maintenance and
the like. In no event shall "ON- SITE PERSONNEL" include Manager's general
administrative or supervisory employees who provide services to more than one
project.
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9.5 COMPREHENSIVE OR COMMERCIAL GENERAL LIABILITY INSURANCE.
Manager shall, at Owner's expense, obtain and maintain Comprehensive or
Commercial General Liability Insurance on an "occurrence" basis, with acceptable
deductibles, with a combined single limit for bodily injury and property damage
of Five Million Dollars ($5,000,000) or current limit carried, whichever is
greater, covering Operations, Independent Contractors, Products and Completed
Operations, Contractual Liability (specifically covering the indemnification
contained in SECTION 9.13), Broad Form Property Damage (including completed
operations), claims and lawsuits by one insured against another insured,
Personal Injury and Explosion, Collapse and Underground Hazards (X,C,U). The
limits of liability of the insurance coverage specified in this SECTION 9.5 may
be provided by any combination of primary and excess liability insurance
policies. If excess risks are involved, greater limits of liability may be
required by Owner.
9.6 AUTOMOBILE LIABILITY INSURANCE. Manager shall obtain and
maintain owned, hired and non-owned automobile liability insurance covering all
use of all automobiles, trucks and other motor vehicles utilized by Manager in
connection with the performance of its obligations hereunder, with a combined
single limit for bodily injury and property damage of Five Million Dollars
($5,000,000) or current limit carried, whichever is greater. Owner shall bear
the cost of such insurance attributable to and covering Manager's On-Site
Personnel and Manager shall bear the cost of such insurance attributable to and
covering any other personnel of Manager who perform services in connection with
the Project but who are not On-Site Personnel. The cost of such insurance
attributable to On- Site Personnel shall not exceed the amount set forth in the
applicable Approved Budget.
9.7 COMPREHENSIVE CRIME INSURANCE. Manager shall, at Manager's
expense, obtain and maintain either a policy of comprehensive crime insurance or
a fidelity bond, at Manager's option, in an amount not less than Two Hundred
Fifty Thousand Dollars ($250,000) per occurrence for any of Manager's employees
who may handle funds or property in connection with a Project and to provide
coverage to protect Owner.
9.8 INSURANCE TO BE MAINTAINED BY OWNER. Owner shall, at Owner's
expense, obtain and maintain "All Risk" Insurance covering loss or damage to
each Project, with such deductibles as Owner shall determine in its sole
discretion. Owner shall also maintain Comprehensive or Commercial General
Liability Insurance, with such deductibles or self insured retention as Owner
shall determine in its sole discretion, with a combined single limit for bodily
injury and property damage of One Million Dollars ($1,000,000) and shall, on a
primary basis, name Manager as an additional insured for claims arising out of
Owner's negligence. Owner shall, at Manager's written request to be made not
more than annually, deliver to Manager a certificate issued by Owner's insurance
carrier showing such Comprehensive or Commercial General Liability Insurance to
be in force.
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9.9 CONDITIONS TO OWNER'S INSURANCE BEING PRIMARY. Owner's
obligation to name Manager as additional insured pursuant to SECTION 9.8 shall
be subject to the following conditions:
(a) Manager shall comply with Owner's accident reporting
procedures, which may be modified from time to time upon written notice
to Manager;
(b) Manager shall notify Owner immediately upon learning
of any material loss, damage or injury occurring on a Project;
(c) Manager shall not take any action (such as an
admission of liability) which might bar Owner from obtaining any
protection afforded by any insurance policy of Owner or which might
prejudice Owner in defending a claim based on any loss, damage or
injury;
(d) Owner shall have the exclusive right, at its option,
to conduct the defense of any claim, demand or suit within limits
prescribed by the policy or policies of insurance;
(e) Manager shall cooperate with Owner in the disposition
of claims, including furnishing all available information to Owner and
Owner's insurers;
(f) Manager shall not be covered for any claims against
Manager by Owner's insurers or Owner, as Owner is specified in SECTION
9.12; and
(g) Manager recognizes that the foregoing conditions shall
not diminish Manager's duties, obligations and responsibilities under
this Agreement.
9.10 MANAGER'S OBLIGATIONS. Manager shall:
(a) Comply with Owner's accident reporting procedures,
which may be modified from time to time upon written notice to Manager;
(b) Notify Owner immediately upon learning of any material
loss, damage or injury occurring on a Project;
(c) Not take any action (such as an admission of
liability) which might bar Owner from obtaining any protection afforded
by any insurance policy of Owner or which might prejudice Owner in
defending a claim based on any loss, damage or injury;
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(d) Cooperate with Owner in the disposition of claims,
including furnishing all available information to Owner and Owner's
insurers;
(e) Not be covered for any claims against Manager by
Owner's insurers or Owner, as Owner is specified in SECTION 9.12; and
Owner shall have the exclusive right, at its option, to conduct the defense of
any claim, demand or suit within limits prescribed by the policy or policies of
insurance;
9.11 WAIVER OF SUBROGATION. Owner and Manager hereby waive all
rights against each other for damages caused by fire and other perils and risks
to the extent covered by Manager's policies of insurance and Owner's "All Risk"
Insurance, except such rights as Owner, as specified in SECTION 9.12, may have:
(a) to the proceeds of such insurance held by Owner as trustee, and (b) to
payment for damages as set forth in SECTION 9.13.
9.12 ADDITIONAL INSURED. Owner, as specified below, shall be
included as an additional insured under the coverage specified in SECTIONS 9.5
AND 9.6 , with the following endorsement or provision included within each
applicable policy: "It is understood and agreed that the coverage afforded by
this Policy shall also apply to Irvine Apartment Communities, L.P., a Delaware
limited partnership, and its respective officers, directors, agents, servants,
employees, divisions, subsidiaries, partners, shareholders and affiliated
companies of each of them as additional insureds, but only with respect to legal
liabilities or claims caused by, arising out of or resulting from the acts or
omissions of the named insured or of others performed on behalf of the named
insured." In the event Owner assigns this Agreement in connection with the sale,
conveyance or exchange of a Project, the endorsement or provision required
pursuant to this SECTION 9.12 shall use the name of such transferee in lieu of
Irvine Apartment Communities, L.P.
9.13 CLAIMS PROCEDURES. In the event an incident occurs or any
legal action or other claim (a "CLAIM") is asserted by a third party against
Owner, as the result of an alleged injury or loss sustained within a Project
during the Term, Manager shall, promptly after receipt of actual knowledge of
such Claim, investigate same and submit a report to Owner in accordance with
Owner's incident reporting procedures. Upon receipt of such information,
together with any filed pleadings, Owner shall submit such information to its
insurer and/or claims adjusting firm for the purpose of initiating investigation
and disposition of the Claim. Manager shall, within a reasonable time after its
report to Owner notify its insurer that Owner's insurer and/or claims adjusting
firm is investigating such Claim and determining whether to settle, deny or
defend such Claim. Owner may instruct its insurer and/or claims adjusting firm
to contact Manager's insurer before any offer of settlement is made for the
purpose of agreeing upon the respective negligence of, and participation in such
settlement by, Owner and Manager. All costs of the foregoing investigation,
settlement and defense, and any judgments and other costs related to any such
Claim, shall be shared by Owner and Manager in proportion to their respective
negligence.
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9.14 INSURANCE AUDIT; REFUNDS. Any insurance charges, including,
without limitation, Workers' Compensation Insurance, which are submitted to
Owner by Manager shall be subject to audit by Owner. Any insurance dividends
earned or returned premiums applicable to the policies required to be carried
hereunder at Owner's expense, including, without limitation, Workers'
Compensation Insurance, shall be refunded by Manager to Owner immediately upon
receipt thereof, and any such refunds shall be accompanied by supporting
documentation evidencing the refunded amounts.
9.15 OWNER'S ELECTION TO INSURE. Owner reserves the right, but
shall have no obligation, to procure the insurance, or any portion thereof, for
which Manager is herein responsible and which is described in this ARTICLE 9.
Owner shall notify Manager if Owner exercises its right, whereupon Manager's
responsibility to carry such duplicative insurance shall cease and the sums paid
by Owner to Manager hereunder shall be equitably adjusted by the parties to
reflect any resulting cost saving to Manager. Owner further reserves the right
at any time, with thirty (30) days' prior notice to Manager, to require that
Manager resume the maintenance of any insurance for which Owner has elected to
become responsible pursuant to this SECTION 9.15; and in such event, the sums
paid to Manager by Owner shall increase to the extent of any previously agreed
and implemented reduction as aforesaid attributable to Owner's prior assumption
of the particular insurance coverage.
ARTICLE 10. COMPENSATION OF MANAGER
10.1 MANAGEMENT FEE. As compensation for the performance of its
obligations hereunder, Manager shall be paid a monthly management fee
("MANAGEMENT FEE") as set forth on EXHIBIT F attached hereto.
10.2 PROJECT INCOME. For purposes of this Agreement, "PROJECT
INCOME" shall mean with respect to each Project the sum of (a) all Rent (as
defined below) recognized on an accrual basis during such month, and (b) all
other Income (as defined below) from such Project operations recognized on an
accrual basis during such month. For purposes of this Agreement, "RENT" shall
mean all amounts collected from Project tenants, licensees and concessionaires,
excluding, however (i) security and other tenant deposits (other than as applied
to pay rent or other amounts included within Project Income), (ii) fees paid by
tenants of such Project for special services or programs, including, without
limitation, payments made by tenants to Manager or any third party in connection
with rental insurance or furniture rental programs, and (iii) rents paid in
advance by tenants, except the portion of any such advance payment applied to
the rent due for the current month. For purposes of this Agreement, "INCOME"
shall mean all income from such Project other than Rent, including, without
limitation, income from coin-operated washers and dryers installed at such
Project, parking charges and fees and amounts paid for vending machine rental
charges. Income shall not include interest income, extraordinary receipts,
amounts received in settlement of insurance claims, costs and fees recovered in
litigation and refunds or returns
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from governmental authorities or public agencies of taxes paid, amounts received
as compensation for condemnation or other similar proceedings affecting all or
any portion of such Project, the proceeds of the sale, conveyance, exchange or
refinancing of all or any portion of such Project or refunds from contractor's
or service providers of amounts paid under construction or service contracts.
10.3 INTENTIONALLY DELETED.
ARTICLE 11. PAYMENT OF EXPENSES
11.1 COSTS ELIGIBLE FOR PAYMENT FROM OPERATING ACCOUNT. Manager
shall pay all expenses incurred in connection with the operation, maintenance
and repair of each Project, to the extent, and only to the extent, included in
the Approved Budget for such Project directly from the Operating Account,
subject to the conditions set forth in ARTICLE 7, including the following:
(a) costs of the gross salary and wages or proportionate
shares thereof, payroll taxes, employee's health insurance, workers'
compensation, termination benefits payable pursuant to California law
and other benefits of Manager's employees who are located on-site,
including temporary employees performing on-site services in connection
with such Project (and including, without limitation, accrued benefits
owed to former employees of the Sares-Regis Group, J&M Realty and
Western National Property Management and assumed by Manager and any
accrued benefits owed by Manager to any On-site Personnel upon
termination of this Agreement), and are required to manage, operate and
maintain such Project properly, adequately, safely and economically, in
accordance with this Agreement, provided that such costs are provided
for in the Approved Budget for such Project and provided that in no
event shall Owner, in its capacity as Owner, be responsible for any
compensation paid to any such employee in the form of stock or options
to acquire stock in Irvine Apartment Communities, Inc. Manager shall not
be entitled to pay such employees in advance;
(b) costs incurred to correct the violation of any
governmental requirement relating to the leasing, use, repair and
maintenance of the Project, or relating to the rules, regulations or
orders of the local Board of Fire Underwriters or other similar body, if
such costs are not incurred as the result of Manager's negligence or
willful misconduct;
(c) actual and reasonable costs of all repairs,
decorations and alterations, if such cost is not the result of Manager's
negligence or willful misconduct;
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(d) all costs incurred in connection with all service
agreements approved by Owner;
(e) all costs of collection of delinquent rents collected
by a collection agency approved in advance by Owner;
(f) all legal fees of attorneys approved (or designated as
provided in SECTION 7.1(h)) by Owner in advance of retention, if Owner
has approved the specific amount of such attorneys' fees in advance of
payment;
(g) the cost of capital expenditures;
(h) with the prior written approval of Owner, the cost of
cash registers, adding machines and other equipment of such type and use
(including any and all electronic data processing equipment) located at
the Project site and owned or leased by Owner;
(i) the cost of utilities;
(j) the cost of advertising approved by Owner;
(k) the cost of the insurance policies required to be
maintained by Manager at Owner's expense pursuant to ARTICLE 9;
(l) the cost applicable to the items set forth in SECTION
7.1(f), to the extent Owner has requested that Manager pay such items;
(m) if approved in advance by Owner, the cost of travel by
Manager's employees described in SECTION 11(a) hereof, incurred in
connection with the performance of Manager's obligations hereunder,
exclusive of daily commuting expenses to and from the Project;
(n) the Management Fee;
(o) emergency expenses incurred pursuant to SECTION 4.2
hereof; and
(p) such other amounts as may be approved in advance by
Owner.
11.2 NON-REIMBURSABLE COSTS. The following expenses or costs
incurred by or on behalf of Manager in connection with the management and
leasing of the Projects shall be at the sole cost and expense of Manager and
shall not be reimbursed by Owner:
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(a) cost of gross salary and wages, payroll taxes,
insurance, workers' compensation and other benefits of Manager's office
and other off-site personnel (including any stock options granted to
off-site personnel);
(b) general accounting and reporting services within the
reasonable scope of Manager's responsibility to Owner;
(c) the cost of printed checks for each bank account
required to be maintained hereunder;
(d) cost of printed forms, papers, ledgers and other
supplies and equipment not located at the Project sites;
(e) cost of electronic data processing hardware and
software, including repair and maintenance expenses related thereto,
located at Manager's office and used for preparation of reports,
information and returns to be prepared by Manager under the terms of
this Agreement;
(f) cost of electronic data processing provided by
computer service companies for preparation of reports, information and
returns to be prepared by Manager under the terms of this Agreement;
(g) cost of daily commuting expenses incurred by Manager's
employees to and from the Projects;
(h) cost of transferring Manager's employees to the
Project, unless such cost is approved in advance by Owner;
(i) vacation and other benefits earned by Manager's
employees which are transferred to a Project, which benefits are earned
by such employees prior to the date of such transfer;
(j) costs charged by Manager to Owner unless such costs
have been approved in advance by Owner;
(k) costs charged by any Affiliate of Manager under any
subcontract unless such costs have been approved in advance by Owner;
(l) costs attributable to losses arising from negligence,
fraud, willful misconduct or misrepresentation on the part of Manager or
Manager's employees;
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(m) cost of workers' compensation insurance with respect
to Manager's personnel performing services in connection with the
Projects (other than On-Site Personnel);
(n) cost of the comprehensive crime insurance or fidelity
bond required pursuant to SECTION 9.7; and
(o) unless required by Owner, the cost of comprehensive
crime insurance or other fidelity bond or other insurance purchased by
Manager for its own account.
ARTICLE 12. GENERAL PROVISIONS
12.1 INDEPENDENT CONTRACTOR. It is expressly understood and
agreed that Manager will act as an independent contractor in the performance of
its duties and responsibilities set forth in this Agreement. No provisions
hereunder shall be intended to create a partnership or a joint venture between
Owner and Manager with respect to any Project or otherwise; and neither party
shall have the power to bind or obligate the other party, except as expressly
set forth in this Agreement.
12.2 NOTICES. All notices, demands and reports provided for in
this Agreement shall be in writing and shall be personally served or sent by
certified mail, postage prepaid and return receipt requested, to the parties at
their respective addresses for notice set forth following their signatures to
this Agreement or to such other address as either may provide to the other by
written notice. For purposes of this Agreement, notices shall be deemed to have
been "given" upon personal delivery thereof or two (2) business days after
having been deposited in the United States mail, postage prepaid and properly
addressed.
12.3 BROKERS. If Owner executes a listing agreement for the sale
of a Project, Manager shall cooperate with such broker to permit the broker to
exhibit such Project during reasonable business hours, provided that such broker
has secured Manager's permission in advance, and shall cooperate with
prospective purchasers of the Project. At Owner's, Manager's duties shall also
include, but shall not be limited to, using diligent efforts to obtain, at
Owner's expense, tenant estoppel certificates from tenants then leasing
residential units within the Project.
12.4 ATTORNEYS' FEES. In any judicial action between the parties
to enforce any of the provisions of this Agreement or any right of any party
under this Agreement, regardless of whether such action or proceeding is
prosecuted to judgment and in addition to any other remedy, the unsuccessful
party shall pay to the prevailing party all costs and expenses, including
reasonable attorneys' fees and expenses (including fees and charges
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attributable to legal assistants or other non-attorney personnel performing
services under the supervision of an attorney), incurred by the prevailing
party.
12.5 ASSIGNMENT. Manager may not voluntarily or involuntarily,
directly or indirectly, sell, assign, hypothecate, pledge or otherwise transfer
or dispose of all or any portion of its interest in this Agreement to any third
party without the prior written consent of Owner, which may be withheld in
Owner's sole and absolute discretion. Any such attempted sale, assignment,
hypothecation, pledge or other transfer without such consent shall be void.
Owner shall be entitled to assign or otherwise transfer or dispose of all or any
portion of its interest under this Agreement at any time without the consent of
Manager and upon any such assignment or transfer Owner shall be released from
all obligations hereunder (other than those obligations which have accrued as of
the date of such assignment or transfer), any obligations to be performed
hereunder after the date of such assignment or transfer and any continuing
indemnification obligations hereunder. In addition to the foregoing, Owner
assign, pledge, hypothecate or otherwise grant a security interest in and to all
of its rights under this Agreement as may from time to time be required by any
lender as security for a loan by such lender to Owner.
12.6 AMENDMENTS. Except as otherwise provided herein, all
amendments to this Agreement shall be in writing and executed by Owner and
Manager.
12.7 LICENSING. Manager represents and warrants that it is, and,
as necessary, its employees are, and Manager covenants and agrees that at all
times throughout the Term it and, as necessary, its employees shall be, fully
qualified and licensed, to the extent required by law, to manage real property
and perform all of the obligations of Manager hereunder. Manager agrees to take,
and to cause its employees to take, any and all action necessary to retain all
licenses required to carry out its duties hereunder and otherwise to comply with
all such laws now or hereafter in effect.
12.8 ENTIRE AGREEMENT. This Agreement and the Exhibits attached
hereto and made a part hereof comprise the entire agreement of the parties with
respect to the matters described in this Agreement and such Exhibits. The
Exhibits attached to this Agreement are incorporated into this Agreement as
though set forth herein in full.
12.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
12.10 GOVERNING LAW. This Agreement is executed and shall be
governed by and construed in accordance with the laws of the State of
California.
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12.11 THIRD-PARTY DISPUTES. Should any claim, demand, action or
other legal proceeding arising out of matters covered by this Agreement be made
or instituted by any third party against a party to this Agreement, the other
party to this Agreement shall furnish such information and reasonable assistance
in defending such proceeding as may be reasonably requested by the party against
whom such proceeding is brought. The requesting party shall pay the reasonable
and customary expenses incurred by the other party in complying with any such
request.
12.12 FIDUCIARY RELATIONSHIP. Manager shall at all times act as a
fiduciary of Owner in connection with its duties, responsibilities and actions
pursuant to this Agreement. Without limiting the generality of the foregoing,
Manager shall disclose in advance any affiliation of Manager or an Affiliate
with any vendor rendering services or supplying materials to any Project. Any
contract with such a vendor shall be entered into on an arm's length basis and
for fair market value, and Manager shall receive prior written approval of any
such contract from Owner. Manager shall disclose to Owner any conflict-of-
interest which may arise in connection (a) with Manager's negotiations with
prospective tenants or vendors of a Project, or (b) as a result of Manager's or
an Affiliate's management of other projects, changes in Manager's or Affiliate's
structure or as a result of other potentially conflicting actions taken by
Manager.
12.13 GIFTS. Manager agrees not to accept any "GIFT" from vendors
employed in connection with any Project, other than gratuities of nominal value
received in the ordinary course of business. Manager shall not, on Owner's or
Owner's behalf or in connection with the services being rendered under this
Agreement, provide any "GIFT" to or otherwise entertain any "PUBLIC OFFICIAL" or
any other person required under California law to file a Statement of Economic
Interest. The term "PUBLIC OFFICIAL" means every member, officer, employee or
consultant of a state or local agency. The term "GIFT", as used herein, includes
any service or merchandise of any kind, discounts on merchandise or services,
meals and other entertainment expenses and all other transfers of cash or any
other item of value. Under no circumstances shall Owner be deemed to have waived
the provisions of this Section as to a specific gift unless the waiver is in
writing and signed by two (2) authorized officers of Owner.
12.14 CONFIDENTIALITY. Except as provided in this SECTION 12.14 or
unless otherwise approved by Owner in writing, Manager shall treat this
Agreement as confidential and shall not disclose the contents of this Agreement
to any party. Manager shall hold confidential any information which Manager
receives in connection with the performance of its obligations hereunder and
which concerns Owner or Owner's operations or business or the Projects and shall
not disclose all or any portion of such information to any third party, except
for such disclosures as are necessary to perform Manager's obligations
hereunder, as are approved by Owner in writing or as are required by law, any
governmental agency or any proposed lender or mortgagee of a Project.
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12.15 SUBORDINATION TO MORTGAGES. Manager acknowledges and agrees
that (i) it has no right, title or interest in any of the Projects, and (ii) its
rights hereunder are expressly subordinate to the right, title and interest of
the holder of any mortgage or deed of trust encumbering each Project, whether
the lien of such mortgage or deed of trust attaches to such Project before or
after the execution or effectiveness of this Agreement. Manager agrees to
acknowledge any assignment by Owner of the Project Income to any lender as
security for a loan by such lender to Owner. In the event that a Project is
transferred as a result of a foreclosure of any mortgage or deed of trust
covering such Project or pursuant to a deed in lieu of foreclosure, Manager may,
at its sole option, at any time thereafter, terminate this Agreement with
respect to such Project by written notice of termination to the then owner of
the Project.
12.16 HAZARDOUS WASTES.
12.16.1 Owner has developed a Hazardous Materials Compliance
Program ("HMCP") which outlines Manager's responsibilities with respect to
Hazardous Wastes (as defined below) at each Project. The HMCP is set forth in a
Manual that Owner will furnish to Manager. Manager shall take all steps
necessary or appropriate to carry out the HMCP, as it may be amended from time
to time. Such steps shall include the following:
(a) surveying existing and prospective maintenance
contractors with respect to existing and intended uses of
Hazardous Wastes on or about the Project;
(b) ensuring that spills or dumping of Hazardous Wastes
that occur on the Project are reported to agencies and cleaned up
in accordance with applicable regulatory requirements;
(c) informing Owner: (i) immediately of any spills or
dumping of Hazardous Wastes that occur on the Project; and (ii)
in regular monthly reports of any other incidents involving
Hazardous Wastes affecting the Project;
(d) providing tenants with notice and disclosure forms
provided by Owner with respect to Hazardous Wastes or asbestos
affecting the Project;
(e) implementing any asbestos management program
established by Owner for the Project; and
(f) establishing and maintaining a recordkeeping system
for information concerning Hazardous Wastes on the Project.
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12.16.2 Manager agrees that it shall not place or cause or permit
to be placed on any Project, other than in the ordinary course of performing its
obligations under this Agreement and in compliance with applicable law, any
hazardous or toxic wastes or substances, as such terms are defined during the
period up to and including the end of the Term by Federal, State or municipal
statutes or regulations promulgated thereunder (collectively, "HAZARDOUS
WASTES"). In the event Manager discovers the existence of any Hazardous Wastes
on any Project, Manager shall immediately notify Owner. If such Hazardous Wastes
were placed or permitted to be placed on a Project by Manager, Manager shall, at
its cost, diligently arrange for and complete the immediate removal thereof in
accordance with the terms of this Agreement. Except as expressly provided herein
to the contrary, Manager shall not be responsible for any Hazardous Wastes
present on any Project prior to the date hereof, unless deposited thereon by
Manager; provided, however, Manager shall immediately notify Owner of any notice
received by Manager from any governmental authority of any actual or threatened
violation of any applicable laws, regulations or ordinances governing the use,
storage or disposal of any Hazardous Wastes and shall cooperate with Owner in
responding to such notice and correcting or contesting any alleged violation.
12.16.3 Without limiting the generality of anything contained in
SECTION 12.16.2, if, as a result of any act or failure to act on a Project by
Manager or its employees, agents, representatives or consultants, the presence,
use or on-site or off-site disposal or transport of Hazardous Waste on, to,
under, from or about such Project results in any spills or releases, any injury
to any person or any injury or damage to such Project, or if Manager, Owner, or
any governmental entity reasonably suspects that any such spills, injury or
damage has occurred or is likely to occur, Manager shall promptly and at its
sole cost: (a) notify Owner; (b) if such spill, injury or damage has occurred,
obtain all permits and approvals necessary to remove such Hazardous Waste or
otherwise remedy any suspected problem; (c) if such spill, injury or damage has
occurred, remove such Hazardous Wastes and remedy any associated problems to the
reasonable satisfaction of Owner, in accordance with applicable legal
requirements and good business practices; and (d) if such spill, injury or
damage is likely to occur, take all measures reasonably necessary to prevent
such spill, injury or damage.
12.16.4 If any Hazardous Waste comes to be located on a Project
during the Term as a result of illegal or unauthorized disposal or dumping by
any person, Manager shall promptly upon discovery of the Hazardous Waste: (a)
notify Owner; and (b) at Owner's cost, take all measures reasonably necessary to
secure the site to prevent further disposal or dumping.
12.16.5 If, as a result of work on a Project by Manager or its
employees, agents, representatives or consultants, the presence, use or on-site
or off-site disposal or transport of Hazardous Material on, to, under, from or
about such Project results in any spills or releases affecting persons or
property off-site, or any injury or damage to the
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environment or to any other real or personal property wherever situated, or if
Manager, Owner or any other governmental entity reasonably suspects that any
such spill, injury or damage has occurred or is likely to occur, Manager shall
promptly and at its sole cost: (a) notify Owner if applicable; (b) obtain all
permits and approvals necessary to remove such Hazardous Waste or otherwise
remedy any suspected problem; and (c) remove such Hazardous Waste and remedy any
associated problems to the reasonable satisfaction of Owner, in accordance with
applicable legal requirements and good business practices.
12.16.6 Manager shall be responsible for providing its employees,
agents, consultants, governmental entities and the public with any notices or
disclosures concerning Hazardous Waste associated with each Project required to
be delivered by Manager under any applicable laws, including, without
limitation, any notices or disclosures concerning Hazardous Waste which Manager
has received from Owner. Owner shall have the right to review such notices and
disclosures prior to their distribution or submission by Manager and shall have
the right, but not the obligation, to prescribe the form and content of any such
notices or disclosures as long as the form and content prescribed by Owner
complies with all applicable laws relating to such notices or disclosures. Owner
shall provide Manager with any notices or disclosures concerning Hazardous Waste
associated with the Project required to be delivered by Owner under any
applicable laws.
12.16.7 Manager shall not, and shall ensure that all employees,
agents and consultants of Manager do not, cause or permit any
asbestos-containing material to be brought upon or incorporated into any
Project, unless: (a) such materials are specifically authorized and approved by
Owner; or (b) no substitute is available at a reasonable cost and Manager
obtains Owner's prior written approval.
12.16.8 Manager shall immediately notify Owner in writing of any
circumstances or incident known to Manager involving Hazardous Waste that may
affect any Project or that may give rise to liability on the part of Owner or
Manager. Promptly upon receipt or submission thereof, Manager shall provide
Owner with true, correct, complete and legible copies of all notices,
complaints, orders, reports, citations, listings, disclosure forms and
correspondence received or submitted by Manager with respect to any Hazardous
Waste associated with the Project.
12.16.9 Manager shall ensure that all of its employees, agents
and consultants comply with all of the terms of this SECTION 12.16. Manager
shall monitor all such persons to ensure such compliance.
12.16.10 Manager shall include in its contracts with employees,
agents and consultants a specific provision requiring compliance by such persons
with the terms of SECTION 12.16.
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12.17 REGULATORY COMPLIANCE. In the event that a Project is
encumbered at any time during the Term by a local, state or federal regulatory
or other agreement or similar declaration of restrictions ("REGULATORY
AGREEMENT") containing any leasing or other restrictions related to any
tax-exempt revenue bonds or similar instruments issued in connection with the
financing of such Project or related to affordable housing requirements, Owner
shall deliver to Manager a copy of such Regulatory Agreement, together with any
documents related thereto, and a copy of Owner's Bond Compliance Manual. Owner
represents to Manager that: (a) the information in the Bond Compliance Manual
conforms, in all material respects, with the provisions of the Regulatory
Agreement and the provisions of other related documents which are summarized
therein, and (b) as of the date hereof, Owner has received no notices of default
or similar communications with respect to the Regulatory Agreement nor, to the
best of its knowledge, does there exist any occurrence which, with the giving of
notice or the passage of time, or both, would constitute an event of default
thereunder. Neither Owner makes warranty or representation whatsoever that the
Bond Compliance Manual reflects all terms and provisions of the Regulatory
Agreement and the documents relating thereto. Manager shall be responsible for
avoiding any violations of the terms of the Regulatory Agreement, including,
without limitation, restrictions governing the permitted income levels of such
Project's tenants and reporting requirements to applicable entities, including
the Internal Revenue Service; however, Manager shall not be responsible for any
violations of the provisions of the Regulatory Agreement as of the Commencement
Date and, in fulfilling its obligations hereunder, Manager shall be entitled to
rely upon the Monthly Summary of Income and Rent Restrictions delivered to
Manager by Owner from time to time, setting forth, among other things,
permissible tenant income levels. Owner agrees to cooperate with Manager in
interpreting the terms and conditions of the Regulatory Agreement and to respond
promptly to Manager's requests for clarification of any of the terms thereof or
additional information with respect thereto.
12.18 APPROVALS. In the event any provision in this Agreement
requires Owner's approval of a particular document, any financial information or
any action by Manager hereunder, whether or not such provision sets forth a
specific period of time within which such approval must be obtained, Owner shall
use its best efforts to approve or disapprove such matter in a timely manner.
All such requests for approvals must be directed by Manager to Owner. The
authorized representatives of Owner upon whose notices of approval or
disapproval Manager shall be entitled to rely are identified on EXHIBIT E
attached hereto, as the same may be amended from time to time by written
notification by Owner to Manager.
12.19 PROPOSITION 65 COMPLIANCE. Manager shall, at all times and at
Owner's expense, comply with any program or policy of Owner relating to
compliance by Owner with the terms of SECTION 25249.5 ET SEQ. of the California
Health and Safety Code and all rules and regulations promulgated pursuant
thereto, as such statute, rules and regulations may hereafter be amended
(collectively, "PROPOSITION 65"). Owner shall indemnify, defend and hold Manager
harmless from and against any and all Losses incurred
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by Manager in connection with Manager's compliance with any such program or
policy of Owner. In addition, and without limiting the generality of the
foregoing, Manager shall, promptly upon receipt of knowledge thereof, notify
Owner of the existence on the Project site of any "HAZARDOUS SUBSTANCE" (as
defined under Proposition 65), notice of the existence of which has not been
given to tenants of the Project. Manager shall, at all times, and at its sole
cost and expense, comply with the requirements of Proposition 65 which apply to
Manager in its capacity as a manager of real property and with which Manager
would not otherwise be obligated to comply pursuant to this SECTION 12.19.
12.20 INDEMNIFICATIONS. Manager shall defend, indemnify and hold
Owner, and its officers, directors, agents, servants, employees, divisions,
subsidiaries, partners, shareholders, affiliated companies, successors and
assigns (the "OWNER INDEMNITEES") harmless from and against any and all loss,
claim, damage, fines, penalties, disbursements, actions, causes of action, cost,
expense, (including, without limitation, reasonable attorneys' fees and costs)
and every other liability whatsoever (collectively, "LOSSES") arising out of or
incurred directly or indirectly by reason of (1) [Intentionally Deleted] (2)
Manager's failure or alleged failure to perform its obligations under any
Contract, unless such failure or alleged failure directly arises from Owner's
failure to maintain funds in the Operating Account in accordance with SECTION
8.2 hereof or otherwise arises directly from Owner's or Owner's failure to
perform its obligations hereunder, (3) loss or damage to Owner's or Owner's
property or any claim, suit or judgment brought by or on behalf of any person or
persons for damage, loss, liability or expense due to, but not limited to,
bodily injury or property damage sustained by such person or persons, which
arises out of, is occasioned by or is in any way attributable to the negligence
or willful misconduct of Manager or its employees or otherwise attributable to
Manager's negligence in selecting or supervising any of its agents, any
Contractor and/or any other person or entity supplying service or performing
work in connection with the operation of any Project, or the breach of any of
Manager's obligations hereunder, except to the extent any such Loss is caused by
the negligence or willful misconduct of an Owner Indemnitee, (4) the payment of
any cost or expense from the Operating Account, or the incurrence by Manager of
any obligation to pay any cost or expense, except in accordance with a current
Approved Budget or otherwise in accordance with Section 4.2 and Section 11.1,
(5) the investigation, preparation for, service as a witness in or defense of
any action or proceeding, whether actually commenced or threatened, or in
removal or remediation of any Hazardous Wastes on, under, from or about a
Project, to the extent arising out of or relating to, directly or indirectly,
Manager's breach of any of the terms of SECTION 12.16, (6) any violation by
Manager of any term, condition or restriction set forth in any Regulatory
Agreement applicable to a Project, unless such violation arises out of Manager's
reliance on a written interpretation or instruction from Owner, or (7) Manager's
fraud, gross negligence or willful misconduct or other failure to perform its
obligations hereunder. This indemnity shall survive expiration or termination of
this Agreement.
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43
Owner shall defend, indemnify and hold Manager harmless from and
against any and all Losses arising out of, or incurred directly or indirectly as
a result of, (1) Owner's failure or alleged failure to perform, from and after
the date of assumption, its obligations under any Contract assumed by Owner on
the termination of this Agreement, (2) any claims asserted against Manager by
any of Owner's former employees whether or not employed by Manager, to the
extent such claim is alleged and determined by a court of competent jurisdiction
to result solely from Owner's acts in terminating the employment of the employee
bringing such action, (2) any loss or damage to Manager's property or any claim,
suit or judgment brought by or on behalf of any person or persons for damage,
loss, liability or expense due to, but not limited to, bodily injury or property
damage sustained by such person or persons if and to the extent such Loss arises
out of, is occasioned by or is in any way attributable to the condition of any
Project existing prior to the date Manager or any partner of Manager in its
individual capacity began managing such Project or otherwise results from an
occurrence beyond Manager's reasonable control not involving a breach by Manager
of any of its duties or obligations hereunder (3) investigation, preparation
for, service as a witness in or defense of any action or proceeding, whether
actually commenced or threatened, or in removal or remediation of any Hazardous
Wastes on, under, from or about a Project, to the extent arising out of or
relating to, directly or indirectly, Owner's breach of any of the terms of
SECTION 12.16. This indemnity shall survive the expiration or termination of
this Agreement.
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44
IN WITNESS WHEREOF, Owner and Manager have executed this
Management Agreement as of the day and year first above written.
MANAGER:
IRVINE APARTMENT MANAGEMENT COMPANY,
a California general partnership
By: APARTMENT MANAGEMENT COMPANY, LLC,
a Delaware limited liability company,
its general partner
By: IRVINE APARTMENT COMMUNITIES, L.P.,
a Delaware limited partnership,
its sole member
By: Irvine Apartment Communities, Inc.,
a Maryland corporation,
its general partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
Vice President, Finance and Controller
By: WESTERN NATIONAL SECURITIES, d/b/a WESTERN NATIONAL PROPERTY
MANAGEMENT,
a California corporation,
its managing general partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
Chief Executive Officer
Address for Notice:
c/o Western National Property Management
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇
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OWNER:
IRVINE APARTMENT COMMUNITIES, L.P.,
a Delaware limited partnership,
its general partner
By: Irvine Apartment Communities, Inc.,
a Maryland corporation,
its general partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
Vice President, Finance and Controller
Address for Notice:
Irvine Apartment Communities, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Vice President and Controller
39
46
EXHIBIT A
DESCRIPTION OF THE PROJECTS
Project Name (No. of Units) Street Address
--------------------------- --------------
A-1
47
EXHIBIT B
MINIMUM INSURANCE REQUIREMENTS
FOR
OUTSIDE CONTRACTORS
NOT CLASSIFIED AS CLASS I
1. Commencement of Work. No Contractor shall commence any
work on any Project site until it obtains all insurance required to be obtained
by such Contractor under this EXHIBIT B. No Contractor will permit any of its
subcontractors to commence work on the Project site under the applicable
subcontract until all insurance requirements specified in this EXHIBIT B have
been complied with by such subcontractors.
2. Maintenance of Insurance. All insurance described under
this EXHIBIT B shall be maintained by the applicable Contractor at its expense
with insurance carriers licensed and approved to do business in California and,
in the case of liability insurance, the carrier must be listed in Best's Key
Rating Guide. In no event shall such insurance be terminated or otherwise
allowed to lapse prior to termination or expiration of the applicable Contract.
3. Commercial General Liability Insurance. Unless Owner
otherwise agrees in writing, each Contractor shall maintain Commercial General
Liability insurance on an "occurrence" basis, without a deductible, with a
combined single limit for bodily injury and property damage of Three Hundred
Thousand Dollars ($300,000) or current limit carried, whichever is greater.
4. Automobile Liability Insurance. Each Contractor shall
maintain automobile liability insurance covering all use of all automobiles,
trucks and other motor vehicles utilized by such Contractor in connection with
the work with a combined single limit for bodily injury and property damage of
Three Hundred Thousand Dollars ($300,000) or current limit carried, whichever is
greater.
5. Workers' Compensation Insurance. Each Contractor shall
maintain full Workers' Compensation Insurance for all persons whom it employs in
carrying out the work under the applicable Contract. Such insurance shall be in
strict accordance with the requirements of the most current and applicable
California State Workers' Compensation Laws.
6. Additional Insured. Owner, the respective officers,
directors, agents, servants, employees, divisions, subsidiaries, partners,
shareholders and affiliated companies and Manager and its officers, directors,
agents, employees, shareholders, subsidiaries and partners shall be included as
additional insureds on a primary basis under the coverage
B-1
48
specified in SECTION 3 of this EXHIBIT B, but only with respect to legal
liability or claims caused by, arising out of or resulting from the acts or
omissions of the named insured or of others performed on behalf of the named
insured.
7. Evidence of Insurance. As evidence of specified insurance
coverage, Manager shall, in lieu of actual policies, be provided certificates
and/or endorsements showing such policies in force for the specified period.
Such evidence shall be delivered to Manager promptly following the execution of
the applicable Contract or prior to commencement of work on a Project site,
whichever first occurs. Each policy and certificate/endorsement shall be subject
to approval by Manager and shall provide that such policy shall not be subject
to material alteration or cancellation without thirty (30) days' notice in
writing to be delivered to Manager. Should any such policy expire or be canceled
before termination or expiration of the applicable Contract and the Contractor
fails immediately to procure other insurance as specified, Manager shall have
the right, but not the obligation, to procure such insurance and to deduct the
cost thereof from any sum due the Contractor under its Contract. Each Contractor
shall permit Manager to inspect such evidence of insurance as such Contractor
obtains from its subcontractors.
8. Damages. Nothing contained in these insurance requirements
shall be construed as limiting the extent of any Contractor's responsibility for
payment of damages resulting from its operations under its Contract, nor shall
anything contained herein be deemed to place any responsibility on Owner or
Manager for ensuring that the insurance required hereunder is sufficient for the
operation of any Contractor's business.
9. Indemnification. Each Contractor shall defend (with
attorneys approved by Owner, which approval may not be unreasonably withheld),
indemnify and hold harmless Owner and Manager from and against any and all
Losses incurred directly or indirectly by reason of loss of or damage to
Owner's, Owner's or Manager's property or any claim, suit or judgment brought by
or on behalf of any person or persons for damage, loss or expense due to, but
not limited to, bodily injury or property damage sustained by such person or
persons which arise out of, are occasioned by or are in any way attributable to
the negligence or willful misconduct of such Contractor or its employees or
otherwise attributable to such Contractor's negligence in selecting or
supervising any of its agents or the subcontractors and/or service companies
involved in such Contractor's work under the applicable Contract, or the breach
of any such Contractor's obligations under its Contract with Manager, except to
the extent any such damage, loss, cost or expense is caused by the sole
negligence or willful misconduct of Manager (with respect to such Contractor's
indemnification of Manager only), Owner (with respect to such Contractor's
indemnification of Owner only) or Owner (with respect to such Contractor's
indemnification of Owner only). Each Contractor agrees that its obligation under
this indemnification provision shall survive the expiration or earlier
termination of its Contract with Manager.
B-2
49
EXHIBIT C
MINIMUM INSURANCE REQUIREMENTS
FOR
CLASS I OUTSIDE CONTRACTORS
1. Commencement of Work. No Contractor shall commence any
work on any Project site until it obtains all insurance required to be obtained
by such Contractor under this EXHIBIT C. No Contractor will permit any of its
subcontractors to commence work on the Project site under the applicable
subcontract until all insurance requirements specified in this EXHIBIT C have
been complied with by such subcontractors.
2. Maintenance of Insurance. All insurance described under
this EXHIBIT C shall be maintained by the applicable Contractor at its expense
with insurance carriers licensed and approved to do business in California and,
in the case of liability insurance, the carrier must have a rating level of not
less than "A-" and financial size rating of not less than "VI" in the most
current Best's Key Rating Guide (unless specifically waived in writing by
Owner). In no event shall such insurance be terminated or otherwise allowed to
lapse prior to termination or expiration of the applicable Contract or such
longer period as may be specified herein. Any Contractor may provide the
insurance described in this EXHIBIT C, in whole or in part, through a policy or
policies covering other liabilities and projects of such Contractor provided,
however, that any such policy or policies shall: (i) allocate to the Project the
full amount of insurance required hereunder, and (ii) contain, permit or
otherwise unconditionally authorize the waiver contained in SECTION 9 of this
EXHIBIT C.
3. Commercial General Liability Insurance. Unless Owner
otherwise agrees in writing, each Contractor shall maintain Commercial General
Liability insurance on an "occurrence" basis, with a maximum deductible of Ten
Thousand Dollars ($10,000), with a combined single limit for bodily injury and
property damage of One Million Dollars ($1,000,000) or current limit carried,
whichever is greater, covering Operations, Independent Contractors, Products and
Completed Operations, Contractual Liability specifically covering the
indemnification contained in SECTION 10 of this EXHIBIT C, Broad Form Property
Damage, claims and lawsuits by one insured against another insured, Personal
Injury, and Explosion, Collapse and Underground Hazards.
4. Automobile Liability Insurance. Each Contractor shall
maintain owned, hired and non-owned, automobile liability insurance covering all
use of all automobiles, trucks and other motor vehicles utilized by such
Contractor in connection with the work with a combined single limit for bodily
injury and property damage of One Million Dollars ($1,000,000) or current limit
carried, whichever is greater.
C-1
50
5. Workers' Compensation Insurance. Each Contractor shall
maintain full Workers' Compensation Insurance, including Employer's Liability
with a minimum limit of Five Hundred Thousand Dollars ($500,000), for all
persons whom it employs in carrying out the work under the applicable Contract,
including a waiver of subrogation by the insurance carrier with respect to Owner
and Manager. Such insurance shall be in strict accordance with the requirements
of the most current and applicable California State Workers' Compensation Laws.
6. Additional Insured. Owner, its officers, directors,
agents, servants, employees, divisions, subsidiaries, partners, shareholders and
affiliated companies, and Manager and its officers, directors, agents,
employees, shareholders, subsidiaries and partners shall be included as
additional insureds on a primary basis under the coverages specified in SECTIONS
3 and 4 of this EXHIBIT C, but only with respect to legal liability or claims
caused by, arising out of or resulting from the acts or omissions of the named
insured or of others performed on behalf of the named insured.
7. Evidence of Insurance. As evidence of specified insurance
coverage, Manager shall, in lieu of actual policies, be provided certificates
and/or endorsements showing such policies in force for the specified period.
Such evidence shall be delivered to Manager promptly following the execution of
the applicable Contract or prior to commencement of work on a Project site,
whichever first occurs. Each policy and certificate/endorsement shall be subject
to approval by Manager and shall provide that such policy shall not be subject
to material alteration or cancellation without thirty (30) days' notice in
writing to be delivered to Manager. Should any such policy expire or be canceled
before termination or expiration of the applicable Contract and the Contractor
fails immediately to procure other insurance as specified, Manager shall have
the right, but not the obligation, to procure such insurance and to deduct the
cost thereof from any sum due the Contractor under its Contract. Each Contractor
shall permit Manager to inspect such evidence of insurance as such Contractor
obtains from its subcontractors.
8. Damages. Nothing contained in these insurance requirements
shall be construed as limiting the extent of any Contractor's responsibility for
payment of damages resulting from its operations under its Contract, nor shall
anything contained herein be deemed to place any responsibility on Owner or
Manager for ensuring that the insurance required hereunder is sufficient for the
operation of any Contractor's business.
9. Waiver Of Subrogation. Each Contractor and each of its
subcontractors shall waive all rights against Owner and Manager, and each other
for any claims for damages or injuries to the extent covered by such
Contractor's and applicable subcontractor's policies of insurance.
10. Indemnification. Each Contractor shall defend (with
attorneys approved by Owner, which approval may not be unreasonably withheld),
indemnify and hold harmless
C-2
51
Owner and its officers, directors, agents, employees, shareholders, subsidiaries
and partners and Manager and its officers, directors, agents, employees,
shareholders, subsidiaries and partners from and against any and all Losses
incurred directly or indirectly by reason of loss of or damage to Owner's or
Manager's property or any claim, suit or judgment brought by or on behalf of any
person or persons for damage, loss or expense due to, but not limited to, bodily
injury or property damage sustained by such person or persons which arise out
of, are occasioned by or are in any way attributable to the negligence or
willful misconduct of such Contractor or its employees or otherwise attributable
to such Contractor's negligence in selecting or supervising any of its agents or
the subcontractors and/or service companies involved in such Contractor's work
under the applicable Contract, or the breach of any such Contractor's
obligations under its Contract with Manager, except to the extent any such
damage, loss, cost or expense is caused by the sole negligence or willful
misconduct of Manager (with respect to such Contractor's indemnification of
Manager only), Owner (with respect to such Contractor's indemnification of Owner
only) or Owner (with respect to such Contractor's indemnification of Owner
only). Each Contractor agrees that its obligation under this indemnification
provision shall survive the expiration or earlier termination of its Contract
with Manager.
C-3
52
EXHIBIT D
CLASS I CONTRACTORS
The term "CLASS I CONTRACTOR" shall be deemed to include the following
contractors performing work on a Project site and any other Contractor
designated by Owner in its reasonable discretion:
EXTERIOR PAINTING
HAZARDOUS MATERIALS CONTRACTORS (CONTACT OWNER FOR SPECIAL INSURANCE
REQUIREMENTS)
ROOFERS
TREE TRIMMERS
D-1
53
EXHIBIT E
OWNER'S AUTHORIZED REPRESENTATIVES
ARTICLE SUBJECT AUTHORIZED Owner
------- ------- ----------------
FOR OWNER
---------
3 Termination President or Vice President,
Asset Management
3.4 Final Accounting Vice President and
Controller or Vice
President, Asset
Management
4 Budget Approval Vice President, Asset
Management
4.2 Operation in Accordance with Vice President, Asset
Budget Management or Director of
Asset Management
4.4 Financial Reports Vice President, Asset
Management or Director of
Asset Management
6 Leasing Reports Vice President, Asset
Management or Director of
Asset Management
6.1(d) Leasing (Rental Rates) Vice President, Asset
Management or Director of
Asset Management
6.1(e) Leasing (Advertising) Vice President, Asset
Management or Director of
Asset Management
E-1
54
ARTICLE SUBJECT AUTHORIZED AGENT
------- ------- ----------------
FOR OWNER
---------
7.1(d) Management of Project Vice President, Asset
(Capital Improvements) Management or Director of
Asset Management
7.1(e) Management of Projects Vice President, Asset
(Contracts) Management
7.1(i) Management of Projects Vice President, Asset
(Legal Counsel/Settlements) Management
8.1 Revenue Account Vice President and
Controller
8.2 Operating Account Vice President and
Controller
8.3 Security Deposit Account Vice President and
Controller
9.1 Insurance Types Vice President, Asset
Management
9.4 Comprehensive Crime Vice President, Asset
Management
Insurance/Fidelity Bonds
12.5 Assignment Vice President, Asset
Management
12.6 Amendments Vice President, Asset
Management
12.16 Hazardous Wastes Vice President, Asset
Management
Note: For guidance or approval concerning other Owner related directives,
Manager's primary contacts shall be either Vice President, Asset
Management or Director of Asset Management.
▇-▇
▇▇
▇▇▇▇▇▇▇ ▇
MANAGEMENT FEE SCHEDULE
IRVINE APARTMENT COMMUNITIES, LP
--------------------------------------------------------------------------------
MANAGEMENT FEE PAID TO IRVINE APARTMENT MANAGEMENT COMPANY, LLC
I. FULLY STABILIZED PROPERTIES
Definition of Fully Stabilized NOI:
Preliminary property NOI*
plus: corporate housing operating contribution
less: marketing advertising programs paid by IAC, IAC Information
Center operating expenses, property related insurance premiums and
risk management costs.
*Fully Stabilized NOI does not include property taxes or managment fees
CALCULATION OF PAYMENT
----------------------
NOI growth percentages specified for an increase in managment fees will be based
on increases in NOI compared to the prior year for same-store properties. The
fee schedule is as follows:
FULLY STABILIZED ANNUAL NOI GROWTH PER UNIT FEE
---------------------------------- ------------
2% $22
to to
16% $28
NOI will be reviewed quarterly and calculated by a comparison of NOI as defined
above for the most recent quarter to the same period of the previous year. The
management fee will be paid monthly based on an estimate using the management
fees from the previous quarter and adjusted in the following quarter for actual
results of the current quarter. An annual reconciliation will be performed to
adjust for quarterly fluctuations in NOI, as defined above. In the situation of
newly stabilized properties such as Baypointe and Santa ▇▇▇▇▇, the NOI growth
would not be used in the management fee calculation until the property has
stabilized operations for an entire year (the data of the same quarter in the
prior year is not comparable). the year of stabilized operations would commence
with the first full quarter of operations after the project has reached
stabilization. From April, 1998, through September 30, 1999, the minimum per
unit fee paid will be $22.86.
II. LEASE-UP PROPERTIES
Definition of "Lease-up Properties": properties stabilized four quarters or
less.
For purposes of management fee calculation, all stabilized properties which have
achieved stabilization within the last year would remain classified under the
lease-up category. Stabilization will continue to be defined as 95% occupancy or
one year after completion of construction, whichever occurs first. As such, for
all properties categorized as lease-up, IAMC will receive a management fee based
on the lease-up fee structure until comparable data is available for NOI growth
measurement.
CALCULATION OF PAYMENT
-----------------------
The fee schedule is as follows:
TERM/PERIOD PER UNIT FEE
----------- ------------
4 months initial lease-up $15
4 successive months $2/month increase
Through 4 stabilized quarters $25 plus bonus potential of $3
A discretionary bonus of up to $3 per unit during the $25 phase will be
determined solely by IAC after year-end results and will be paid, if awarded, in
the February following year-end.
F-1