1 JEFFER MANGELS BUTLER & MITCHELL LLP
`ROBERT B. KAPLAN, P.C. (Bar No. 76950)
`2 rbk@jmbm.com
`SEBASTIEN NGUYEN (Bar No. 340913)
`3 snguyen@jmbm.com
`Two Embarcadero Center, 5th Floor
`4 San Francisco, California 94111-3 813
`Telephone:
`(415) 398-8080
`5 Facsimile:
`(415) 398-5584
`
`6 Attorneys for Plaintiff
`EAST WEST BANK
`
`7
`
`ELECTRONICALLY
`F I L E D
`
`Superior Court of California,
`County of San Francisco
`12/27/2023
`Clerk of the Court
`BY: SANDRA SCHIRO
`Deputy Clerk
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`SUPERIOR COURT OF THE STATE OF CALIFORNIA
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`COUNTY OF SAN FRANCISCO
`
`11
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`EAST WEST BANK, a California
`12 corporation,
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`13
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`14
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`v.
`
`Plaintiff,
`
`15 3100 NORTH FIRST, LLC; a Delaware
`limited liability company; and DOES 1-30,
`inclusive,
`
`16
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`Defendants.
`
`Case No.
`
`CGC-23-611257
`
`DECLARATION OF BO ZOUBEIDI IN
`SUPPORT OF EX PARTE APPLICATION
`FOR IMMEDIATE APPOINTMENT OF
`RECEIVER AND PRELIMINARY
`INJUNCTION IN AID OF RECEIVER
`AND TEMPORARY RESTRAINING
`ORDER, OR, IN THE ALTERNATIVE,
`ORDER TO SHOW CAUSE RE:
`APPOINTMENT OF RECEIVER AND
`PRELIMINARY INJUNCTION IN AID OF
`RECEIVER
`
`Date:
`Time:
`Place:
`
`December 28, 2023
`9:00 a.m.
`Dept. 501
`
`Action Filed:
`Trial Date:
`
`December 26, 2023
`None Set
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`I, Bo Zoubeidi, declare:
`
`1.
`
`I am employed by Plaintiff East West Bank ("Bank'') in the capacity of First Vice
`
`President and Real Estate Owned Manager at its offices located in Cupertino, Caljfornia. If called
`1
`upon to testify as to the matters set forth in this Declaration, I could and would competently testify
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`thereto, as the facts set forth herein are personally known to me to be true.
`
`2.
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`As is more specifically set forth in the accompanying Declaration of Bruce Lofgren
`
`71843604vl
`
`1
`DECLARATION OF BO ZOUBEIDI IN SUPPORT OF EX PARTE APPLICATION FOR IMMEDIATE
`APPOINTMENT OF RECEIVER
`
`
`

`

`1
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`("Lofgren Deel.") in support of the Bank's Ex Parte Application for Immediate Appointment of
`
`2 Receiver and Preliminary Injunction in Aid of Receiver and Temporary Restraining Order, or, in
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`3
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`the Alternative, Order to Show Cause Re: Appointment of Receiver and Preliminary Injunction in
`'
`4 Aid of Receiver ("Ex Parte Application"), the Bank previously made a loan to Defendant 3100
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`5 North First, LLC ("North First"), the repayment of which is secured by a first priority Deed of
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`6 Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing executed by North
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`7 First, as Trustor, in favor of First American Title Insurance Company, as Trustee, for the benefit
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`8 of the Bank, as the beneficiary ("Deed of Trust"), with respect to the Deed of Trust Property (as
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`that term is defined in the Deed of Trust), which includes the real property commonly known as
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`10 3100 North First Street, San Jose, California. A true and correct copy of the Deed of Trust is
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`11
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`attached to the Lofgren Deel., as Exhibit 4.
`
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`3.
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`On December 5, 2023, I conducted an inspection of the Deed of Trust Property
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`along with, among other individuals, Tim Ballas, Director of Asset Management for Orchard
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`Commercial Real Estate, Inc. ("Orchard"), Emma Membrere, Senior Property Manager of
`
`Orchard, and Katie Jessup, Vice President of Orchard. Orchard previously executed a Property
`
`Management Agreement with North First, a true and correct copy of which is attached to that
`
`certain Property Management Consent and Subordination of Management Agreement dated as of
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`October 30, 2018, executed by Orchard and North First in favor of the Bank, a true and correct
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`19 copy of which is attached hereto as Exhibit 1. Orchard is the current property manager of the
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`20 Deed of Trust Property.
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`21
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`4.
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`At the time of the inspection and the meeting with representatives of Orchard, I
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`22 presented to Ms. Membrere a Current Vendor Service Agreement List ("Vendor List"), a true and
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`23 correct copy of which is attached hereto as Exhibit 2, which the Bank had received prior to the
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`24 meeting and which Ms. Membrere stated she had prepared. I asked her if any of the contracts
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`25
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`listed on page 2 of the Vendor List under the heading entitled "Contracts Needed" had been signed
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`26 yet.
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`27
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`5.
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`In response, Ms. Membrere advised me that NIO USA, Inc., the prior tenant of the
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`28 Deed of Trust Property, which vacated the Deed of Trust Property on October 31, 2023 (the
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`71843604vl
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`2
`DECLARATION OF BO ZOUBEIDI IN SUPPORT OF EX PARTE APPLICATION FOR IMMEDIATE
`APPOINTMENT OF RECEIVER
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`

`

`1
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`termination date ofNIO Lease attached as Exhibit 1 to the Lofgren Deel.), had responsibility for
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`2 entering into contracts with the vendors listed under the "Contracts Needed" portion of the Vendor
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`3 List, and further advised me that Orchard had been in the process of negotiating these contracts
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`4 with certain of these vendors, but had been previously advised by North First to cease further
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`5 contract negotiations.
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`6
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`6.
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`Subsequently, in emails which I exchanged with Mr. Ballas at Orchard on
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`7 December 14th and December 15, 2023, true and correct copies of which are attached hereto
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`8 collectively as Exhibit 3 (except for certain :financial information regarding Orchard which has
`
`9 been redacted from Orchard's email dated December 14, 2023), the Bank was advised as follows:
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`10
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`a.
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`That Orchard had recommended to North First that a burglar alarm system
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`11 at the Deed of Trust Property be leased, but North First had not authorized Orchard to do so;
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`12
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`b.
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`The fire alarm system at the Deed of Trust Property was operational and
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`13 was being monitored, however, a service contract needed to be signed, otherwise monitoring
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`14 would cease;
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`15
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`C.
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`The elevator at the Deed of Trust Property was stuck on the 2nd floor and a
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`16 service contract needed to be put in place to repair the elevator;
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`d.
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`The card access system infrastructure at the Deed of Trust Property needed
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`some repairs in order to restore it to full functionality; and
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`e.
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`The fire sprinkler system at the Deed of Trust Property was operational, but
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`20 a service contract needed to be put in place for periodic inspections and pressure tests.
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`Ill
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`71843604vl
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`3
`DECLARATION OF BO ZOUBEIDI IN SUPPORT OF EX PAR TE APPLICATION FOR IMMEDIATE
`APPOINTMENT OF RECEIVER
`
`

`

`I declare under penalty of peijury and under the laws of the State of California that the
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`foregoing is true and correct.
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`DATED: December 26, 2023
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`BO _,OUBEIDI, Declarant
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`71843604vl
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`4
`DECLARATION OF BO ZOUBEIDI IN SUPPORT OF EX PARTE APPLICATION FOR IMMEDIATE
`APPOINTMENT OF RECEIVER
`
`

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`71843604vl
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`EXHIBIT 1
`5
`DECLARATION OFBO ZOUBEIDI IN SUPPORT OFEX PARTE APPLICATION FOR IMMEDIATE
`APPOINTMENT OF RECEIVER
`
`

`

`PROPERTY MANAGER'S CONSENT AND SUBORDINATION
`OF MANAGEMENT AGREEMENT
`
`THIS PROPERTY MANAGER'S CONSENT AND SUBORDINATION OF
`MANAGEMENT AGREEMENT (this "Agreement"), dated as of October 30, 2018, is made by
`ORCHARD COMMERCIAL, INC., a California corporation ("Manager"), and 3100
`NORTH FIRST, LLC, a Delaware limited liability company ("Borrower"), in favor of EAST
`WEST BANK ("Lender").
`
`WI TN E S S E TH:
`
`WHEREAS, Borrower desires to borrow from Lender the sum of $25,000,000.00
`(the "Loan"), pursuant to a loan agreement of even date herewith (the "Loan Agreement"),
`which indebtedness shall be evidenced by a Secured Pr,omissory Note (the "Note") made by
`Borrower payable to the order of Lender;
`
`WHEREAS, the Note shall be secured by a Deed of Trust (With Assignment of
`Leases and Rents, Security Agreement and Fixture Filing) (the "Deed of Trust"), dated as of the
`date hereof and made by Borrower for the benefit of Lender and encumbering Borrower's interest
`in the real property situated in the County of Santa Clara, California as more particularly
`described therein (the "Property"); and
`
`WHEREAS, Lender requires, as a condition to Lender's funding of the Loan, that
`Manager execute and deliver this Agreement.
`
`NOW, THEREFORE, for good and valuable consideration, the receipt and
`sufficiency of which are hereby acknowledged, and in order to induce Lender to fund the Loan,
`Manager hereby represents, warrants, covenants and agrees for the benefit of Lender as follows:
`
`Definitions. All capitalized terms not otherwise defined herein shall have the
`1.
`meanings ascribed thereto in the Loan Agreement.
`
`Manager's Representations. Manager warrants and represents to Lender, as of the
`2.
`date hereof, that the following are true and correct:
`
`(a) Manager has agreed to act as property manager of the Property pursuant to
`that certain Management Agreement dated as of July 14, 2015 by and between Vista Investment
`Group, LLC, a California limited liability company, in its capacity as asset manager on behalf of
`Borrower (in such capacity, "Vista"), and Manager (the "Management Agreement"). Manager
`has delivered a true, correct and complete copy of the Management Agreement to Lender, which
`is attached hereto as Exhibit "A".
`
`The entire agreement bet;ween Manager and Vista, on behalf of Borrower,
`(b)
`for the management of the Property is evidenced by thi Management Agreement.
`'·{-'
`The Management Agreement constitutes the valid and binding agreement
`( c)
`of Manager, enfofceable in accordance with its terms, and Manager has full authority under all
`
`SMRH:487701540.4
`
`-1-
`
`

`

`state and local laws and regulations to perform all of its obligations under the Management
`Agreement.
`,
`
`Borrower is not in default in the performance of any of its obligations
`( d)
`under the Management Agreement and all payments and fees required to be paid by Borrower to
`Manager thereunder have been paid to the date hereof.
`
`Manager's Agreements. Notwithstanding any terms of the Management
`3.
`Agreement to the contrary, Manager hereby consents to and covenants and agrees as follows:
`
`Lender Notice and Cure Rights. Manager shall not terminate the
`(a)
`Management Agreement without first obtaining Lender's written consent. Notwithstanding the
`foregoing, Manager shall have the right to terminate the Management Agreement for default by
`Borrower with respect to non-payment of the management fee due thereunder or any costs of
`operating the Property in accordance with the Management Agreement by giving Lender
`sixty (60) days' prior written notice of such termination. In the event Lender ( or Borrower) shall
`cure such non-payment default in the aforesaid sixty (60) day period, then any termination notice
`related to such cause shall be of no further force or effect.
`
`Subordination of Management Agreement to Loan and Lien of Deed of
`(b)
`Trust. The rights of Manager to receive any management fees, incentive fees or other
`compensation, reimbursement of costs and expenses or other payments in consideration for its
`management services for the Property shall be and remain subordinate in all respects to Lender's
`rights to receive payments under the Loan Documents. The Management Agreement and any
`and all liens, rights and interests (whether choate or inchoate and including, without limitation,
`all mechanic's and materialmen's liens under applicable law) owed, claimed or held by Manager
`in and to the Property, are and shall be in all respects subordinate and inferior to the liens and
`security interests created or to be created for the benefit of Lender, and securing the repayment
`of the Note including, without limitation, those created under the Deed of Trust covering, among
`other things, the Property, and filed or to be filed of record in the public records maintained for
`the recording of mortgages in the jurisdiction where the Property is located, and all renewals,
`extensions, increases, supplements, amendments, modifications and replacements thereof
`
`Lender's Options Following an Exercise of Remedies Under Deed of
`(c)
`Trust. At anytime following a foreclosure, deed in lieu of foreclosure or appointment ofa
`receiver pursuant to the Deed of Trust (unless this Agreement has previously been terminated
`under Section 3(a) above), Lender may at any time, at Lender's sole option: (i) give Manager a
`written notice to continue this Agreement in effect (a "Continuation Notice"), in which case
`Manager shall continue to perform in favor of Lender all of Manager's obligations under the
`Management Agreement, and Lender shall perform or cause to be performed the obligations of
`Borrower to Manager under the Management Agreement first accruing or arising from and after,
`and solely with respect to the period commencing upon, the effective date of the Continuation
`Notice; or (ii) terminate the Management Agreement upon written notice to Manager. Without
`limiting Manage/s rights against Borrower, Lender shall have no liability whatsoever to
`, Manager under the Management Agreement or otherwise with respect to any accrued but unpaj4 ;•
`'management fees, incentive fees or other compensation, reimbursement of costs and expenses or'
`other payments in consideration of Manager's services relating to the Property'accruing prior to
`
`SMRH:487701540.4
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`-2-
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`

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`the effective date of any Continuation Notice. Further, no acceptance of Manager's services by
`Lender, or payment of fees by Lender to Manager, or failure of Lender to give or delay by
`Lender in giving either a Continuation Notice or a termination notice under this Section, or any
`other course of conduct by Lender, shall be construed as an express or implied election to
`continue the Management Agreement in effect or to assume any obligations thereunder, it being
`agreed that the sole method of continuing the Management Agreement in effect shall be a
`Continuance Notice given under this Section.
`
`Further Assurances. Manager further agrees to (i) execute such affidavits
`( d)
`and certificates as Lender shall reasonably require to further evidence the agreements herein
`contained, (ii) on request from Lender, furnish Lender with copies of such information as
`Borrower is entitled to receive under the Management Agreement, and (iii) cooperate with
`Lender's representative in any inspection of all or any portion of the Property.
`
`Assignment of Leases and Rents. Manager acknowledges that, as further
`(e)
`security for the Note, the Deed of Trust includes an assignment by Borrower to Lender of all
`rents and leases now or hereafter affecting the Property (the "Assignment"). Manager hereby
`agrees that upon receipt of written notice from Lender that an Event of Default exists under the
`Loan Agreement, Manager shall thereafter deliver to Lender, for application in accordance with
`the terms and conditions of the Assignment, all proceeds relating to the Property then being held
`by Manager, and all rents, security deposits (upon compliance with any requirements of
`applicable law with respect thereto) and other proceeds received from and after the date thereof
`from any and all tenants or other parties occupying or using any portion of the Property.
`
`No Joint Venture. Lender has no obligation to Manager with respect to
`(f)
`the Loan Agreement or the other Loan Documents and Manager shall not be a third party
`beneficiary with respect to any of Lender's obligations to Borrower set forth in the other Loan
`Documents. The relationship of Lender to Borrower is one of a creditor to a debtor, and Lender
`is not a joint venturer or partner of Borrower.
`
`Lender Not Obligated Under Management Agreement. Manager further
`(g)
`agrees that nothing herein shall impose upon Lender any obligation for payment or performance
`in any respect under the Management Agreement in favor of Manager, unless and until Lender
`gives a Continuation Notice described in Section 3(c) above (and, in such event, subject to any
`limitations on liability set forth in Section 3(c) or any other provisions of this Agreement).
`
`Lender's Reliance on Representations. Manager has executed this
`(h)
`Agreement in order to induce Lender to fund the Loan and with full knowledge that Lender shall
`rely upon the representations, warranties and agreements herein contained, and that but for this
`instrument and the representations, warranties and agreements therein contained, Lender would
`not take such action.
`
`Governed by Loan Documents. Manager agrees that until such time as the
`(i)
`Deed of Trust shall be released in accordance with its terms and thq~e of the rdher Loan
`Documents, Manager shall not take or fail to take any action ;that would cause Borrower to be in
`breach of any of Borrower's obligations under the Loan Documents with respect to the Property,
`notwithstanding anything contained in the Management Agreement to the contrary. Manager
`
`SMRH:487701540.4
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`-3-
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`

`

`confirms that it has received copies of the Loan Agreement and other Loan Documents and is
`fully familiar with the terms thereof.
`
`Successors and Assigns. Manager agrees that this Agreement and
`U)
`Manager's obligations hereunder shall be binding upon Manager and its successors and assigns
`and shall inure to the benefit of Lender and its successors and assigns including, without
`limitation, any parties to whom Lender's interest in the Note and the Deed of Trust are assigned.
`
`Borrower Consent. Borrower has joined herein to evidence its consent to the
`4.
`terms, covenants and conditions contained in this Agreement.
`
`[Signatures on following page]
`
`SMRH:487701540.4
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`-4-
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`

`

`IN WITNESS WHEREOF, the pa1iies hereto have caused this Agreement to be
`duly executed by their duly authorized representatives, as of the day and year first above written.
`
`"Manager 11 :
`
`ORCHARD COMMERCIAL, {NC.
`
`a California ~n '
`
`..:....+--~~.~
`
`ft ~-_-IC ___ _
`1r s ,.A f'tJ-J-
`
`[Signatures continue on fol lowing page]
`
`SMRH:487701540
`
`S-1
`
`

`

`"Borrower":
`
`3100 NORTH FIRST, LLC,
`a Delaware limited liability company
`
`By: Vista Investment Group, LLC, a Califo
`limited liability compr,t sole memb
`( 4~~
`Jona)liJrt,,_B_a_ra_ch _ _ _ _ _
`Pr~ent
`
`By:
`Name:
`Title:
`
`ia
`
`SMRH:487701540
`
`S-2
`
`

`

`EXHIBIT "A"
`
`Management Agreement
`
`(See Attached)
`
`SMRH:487701540 .4
`
`EXHIBIT "A"
`
`

`

`MANAGEMENT AGREEMENT
`
`This MANAGEMENT AGREEMENT ("Agreement") is dated as of December 1,
`2015 for reference purposes only, and is made by and between 3100 North First, LLC, a
`Delaware limited liability company ("Owner") and Orchard Commercial, Inc., a
`California corporation,
`("Manager") with reference to
`the following facts and
`circumstances.
`
`Owner owns that improved real property commonly known and referred to
`A.
`as 3100 N. First Street, San Jose, California (the "Project").
`
`Owner and Manager previously entered into that certain Management
`B.
`Agreement dated July 14, 2015 (the "Original Management Agreement") with respect to
`the Project previous to completion of Owner's reverse 1031 exchange transaction, and
`now wish to replace the Original Management Agreement with this Agreement.
`
`Owner desires to continue to retain Manager to supervise and to manage
`C.
`the operation of the Project in accordance with the terms hereof, and Manager desires to
`perform such services for Owner in consideration of the compensation set forth herein.
`
`Manager is a duly licensed property manager under the laws of the State
`D.
`of California and is in the business of managing and operating real property comparable
`to the Project.
`
`NOW, THEREFORE, in consideration of the promises and mutual convenants
`contained herein, the receipt and sufficiency of which are hereby acknowledged, the
`parties agree as follows:
`
`1.
`
`ENGAGEMENT OF MANAGER
`
`Owner hereby engages Manager under the terms and conditions of this
`Agreement as the general manager of the Project. Manager hereby accepts such
`engagement and agrees to use all commercially reasonable efforts in the performance of
`its duties hereunder.
`
`2.
`
`TERM
`
`Basic Term. The term of this Agreement shall commence August 3,
`2.1.
`2015 and shall continue for a period of one year, terminating on the first anniversary of
`the date, unless this Agreement is sooner terminated in accordance with Paragraph 2.2.
`This Agreement shall, however, automatically be extended for successive one (1) year
`terms unless, at least thirty (30) days prior to the expiration of the initial 11r any
`subsequent extended term, Owner or Manager gives the other written notice of
`termination as of the expiration of the then current term. Notwithstanding the foregoing,
`this Agreement may be terminated by either Manager or Owner for any reason by
`
`Management Agreement
`
`Page 1 of 12
`
`

`

`providing thirty (30) days' written notice to Manager. The Agreement will automatically
`terminate on sale of the Project, total destrnction or condemnation.
`
`2.2. Default. In the event that Owner or Manager materially defaults in the
`performance of its covenants, obligations and duties or declares corporate bankruptcy, is
`convicted of a felony, or receives a diagnosis of addiction for its employees associated
`with the Property hereunder and such default has not been cured or commenced to be
`cured within five (5) days after the other party has given the defaulting party notice
`thereof, ( or such longer period as may reasonably be required to cure such default so long
`as a cure is promptly commenced and diligently completed at the earliest date reasonably
`possible), then the non-defaulting party shall have the right to terminate this Agreement,
`effective immediately, by giving notice thereof to the defaulting party, which notice will
`include a statement of the grounds for such termination.
`
`Termination. Within thirty (30) days after the termination of this
`2.3.
`Agreement, pursuant to Section 2.1 or 2.2, Manager shall deliver to Owner an up-to-date
`accounting reflecting the balance of income and expenses for the Project as of the date of
`termination. Upon delivery of such accounting, each party shall promptly pay to the
`other all amounts due such other party under the terms of this Agreement. In addition,
`Manager shall, not later than the effective date of termination, deliver to the Owner, all
`books, permits, plans, records, leases, licenses, contracts and all other documents,
`computer disks and tapes, pertaining to the Project and its operation, and all insurance
`policies, bills of sale or other documents evidencing title or rights of the Owner. All
`personal property of Owner, whether on the Project or elsewhere, shall be delivered intact
`to Owner or Owner's representative. The Account provided for in Section 5.1 hereof will
`be transferred as directed by Owner. Manager further agrees to do all other things
`reasonably necessary to cause an orderly transition of the management of the Project
`without detriment to the rights of the Owner or to the continued management of the
`Project. Upon termination of this Agreement and delivery of the funds and items
`described herein, neither Owner nor Manager shall have any further claim or right against
`the other, except as otherwise expressly provided herein.
`
`3.
`
`DUTIES OF MANAGER
`
`Manager shall operate, manage and maintain the Project as an independent
`contractor for Owner in accordance with sound property management practices.
`Manager's responsibilities hereunder shall include the following specific duties.
`
`J.,egal Requirements. Manager shall take such action as may be necessary
`3.1.
`to comply with any and all orders or requirements within the limits of the approved
`budget (defined in Section 4.4) affecting the Project by any federal, state, county or
`municipal authority having jwisdi_ction, prior, to the date such action is required by such
`authority to be taken. Manager shaJl promptly, and in no event take longer than 72 hours
`from time of receipt, send written notice to Owner, including a copy thereof, of all such
`orders and notices and of Manager's actions or proposed actions in response thereto.
`Manager, however, shall not take such action as long as the Owner is contesting or has
`
`Management Agreement
`
`Page2 of 12
`
`

`

`notified Manager of its intention to contest and promptly institutes proceedings
`contesting any such order or requirement. Manager shall prepare, execute and, after
`obtaining the approval of Owner, file any reports or documents as may be required by
`any local, state or federal authority. Any fees, or out-of-pocket expenses in connection
`with such legal compliance shall be borne by Owner.
`
`Enforcement. Manager shall take all reasonable actions to enforce the
`3.2.
`terms of tenant leases including, but not limited to, all actions and proceedings to (i)
`collect or cause the collection of all rentals and other charges due Owner from tenants of
`the Project in accordance with the terms of their leases; and (ii) notify Owner of any
`default under any tenant lease, and, at the direction of Owner, commence appropriate
`legal proceedings to oust, dispossess or evict tenants or other persons from the Project, or
`otherwise enforce the tenant leases. All such actions or proceedings shall be through
`legal counsel approved by, and the fees and costs of which shall be borne by, Owner.
`Manager shall, within the limitations of the Approved Budget, comply with the
`obligations of Owner under the tenant leases to maintain and repair the Project, and
`furnish to the tenants or occupants of the Project such services as are required to be
`furnished by the Landlord under any tenant lease. Manager shall notify Owner of any
`additional services from time to time provided by Manager to tenants at their expense.
`
`3.3. Repairs and Maintenance Contracts. Manager shall, on behalf of the
`Owner and at the Owner's expense, make or contract for all repairs, replacements,
`renovations and capital improvements on the Project as approved by Owner in the then
`current budget, provided that Owner's prior approval shall be required for execution of
`any contract on behalf of Owner, and for any such expenditures outside of the Approved
`Budget or in excess of the budgeted amounts. Manager shall also be responsible for
`paying ( at Owner's expense) the fees, charges, expenses and commissions due to any
`independent contractor pursuant to a contract approved by Owner. It is understood and
`agreed that whenever possible two bids shall be obtained for any contract estimated to
`cost in excess of $2,5000. In the event any contract is estimated to cost in excess of
`$10,000, every effort will be made to obtain three bids. Manager shall obtain from all
`independent contractors working in or about the Project certificates of insurance,
`evidencing property damage, liability and workmen's compensation insurance in amounts
`in compliance with federal and state statutes. Manager shall not mark up the cost of
`outside services and materials. Manager shall promptly pay the Owner all profits, fees,
`rebates and any other value received directly or indirectly from any person or company
`furnishing any type of service or goods to the Project. Manager shall obtain and maintain
`records and enforce any guarantees or warranties that may concern Owner's real or
`personal property included within the Project. Written approval of the Owner must be
`obtained before pursuing any legal remedies to enforce such guarantees ·or warranties.
`Manager shall notify Owner within two (2) business days of any emergency that has
`occurred and the estimated costs to repair.
`
`3A. Books. Records and Budgets. Manager shall, at the cost and expense of
`Manager, maintain financial and business books and records and prepare budgets for
`Owner as required by Section 4 hereof.
`
`Management Agreement
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`Page 3 of 12
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`3.5. Manager's Employees. Manager shall pay, at Manager's cost and
`expense: (a) all the wages, salaries and employee benefits of all full or part-time on-site
`employees of Manager ( except as otherwise provided herein), and (b) all amounts due
`for workers' compensation insurance, social security taxes, unemployment insurance and
`all other taxes now in force or hereafter imposed with respect to Manager's employees.
`All parties engaged by Manager in the performance of Manager's duties hereunder shall
`be employees of Manager and not Owner. All matters pertaining to the employment,
`supervision, compensation, promotion and discharge of such employees shall be the
`responsibility of Manager and Owner shall not have any rights or obligations with respect
`thereto.
`
`3.6. Other Actions. Manager shall take such action from time to time as
`manager deems advisable for the efficient and economic management, leasing, operation
`and maintenance of the Project, subject to the terms and conditions hereof.
`
`Payment of Debt Service and Insurance Premiums. Manager shall (at
`3.7.
`Owner's expense) pay regularly scheduled installments of principal, interest, and other
`charges due under any mortgage or deed of trust encumbering the Project, and premiums
`for insurance covering the Project, but only as expressly instructed in writing in advance
`by Owner or as otherwise contemplated in the Approved Budget.
`
`Tenant Defaults. Manager shall advise Owner promptly of any claim of
`3.8.
`default under any tenant lease.
`
`Financial Reports to Lenders. Manager shall prepare and submit to
`3.9.
`holders of mortgages or deeds of trust on the Project any financial reports relative to the
`Project required by such holders, provided that such reports shall first be submitted to and
`approved by Owner.
`
`3.10. Property Inspections. Manager shall periodically inspect the Project, not
`to exceed every (6) months, to determine that tenants are complying with the
`requirements of their leases and any laws relating to the Project. Manager shall not be
`responsible for inspecting the operations of any tenant to determine whether or not the
`operations of such tenants are in compliance with all laws regulating hazardous materials.
`However, if Owner so requires, Manager shall, at Owner's expense, engage the services
`of an environmental consulting firm to conduct such periodic inspections with the
`assistance of Manager as are reasonably necessary to monitor the operations of any tenant
`on the Project concerning hazardous materials. Manager shall advise owner of the results
`of all such inspections. Owner shall approve any such consultant and consulting
`agreement prior to any consultant being retained.
`
`3.11. Claims and Awards. When requested by Owner, Mauager shall, without
`charge, except for out-of-pocket expenses, render advice and assistance to Owner in the
`negotiation and prosecution of-all claims under any property or liability insurance policy.
`
`Management Agreement
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`Page 4 of 12
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`3.12. Estoppel Certificates. If, during the term of this contract, Owner requires
`estoppel certificates or subordination agreements from the tenants of the Project,
`Manager shall use reasonable efforts to obtain such estoppel certificates or subordination
`agreements.
`
`3 .14. Construction Management. At Owner's request and discretion, Manager
`shall manage all construction on or in the Property, including construction of tenant
`improvements.
`
`4.
`
`ACCOUNTING AND BUDGET.
`
`Books of Account. Manager, at its expense, shall maintain or cause to be
`4.1.
`maintained true and accurate books of account reflecting the operation of the Project in
`accordance with sound accounting practices consistently applied. The format and
`. account method shall be subject to Owner's approval.
`
`Financials and Operating Statements. Manager, at its expense, shall
`4.2.
`prepare or cause to be prepared and shall furnish to Owner by the fifteenth (15 th) of each
`month an unaudited statement of receipts and disbursements reflecting the operation of
`the Project for the calendar month immediately preceding, together with a schedule
`indicating tenants whose rentals are then delinquent, the amount of delinquencies and a
`description of the proposed course of action for collection of such delinquencies. No
`later than April 1 of each year, Manager, at its expense, shall prepare or cause to be
`prepared and