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HomeMy WebLinkAbout02-28-2018 Steering Committee Agenda Packet.pdf02/28/2018 Steering Committee Agenda Page 1 of 4 AGENDA CALL TO ORDER DECLARATION OF QUORUM: Clerk of the Board PUBLIC COMMENTS: If you wish to address the Committee on any item, please complete a Speaker’s Form (located at the table at the back of the room) and submit it to the Clerk of the Board or notify the Clerk of the Board the item number on which you want to speak. Speakers will be recognized by the Chairperson and are requested to limit comments to three minutes. REPORTS: The Committee Chairperson and the General Manager may present verbal reports on miscellaneous matters of general interest to the Directors. These reports are for information only and require no action by the Directors. CONSENT CALENDAR: The Consent Calendar Items are considered to be routine and will be enacted, by the Committee, after one motion, without discussion. Any items withdrawn from the Consent Calendar for separate discussion will be considered in the regular order of business. 1.APPROVAL OF MINUTES (Clerk of the Board) RECOMMENDATION: Approve Minutes of the Regular Meeting of the SteeringCommittee held January 24, 2018. NON-CONSENT: 2.ESTABLISH PROJECT NO. J-131 FOR 18350 MT. LANGLEY ST.(Rob Thompson) RECOMMENDATION: Recommend to the Board of Directors to: A. Establish 18350 Mt. Langley St. Building Purchase and Improvement Project, Project No. J-131, for the purchase and needed improvements of 18350 Mt. Langley Street, Fountain Valley, with a budget of $11,000,000; and Orange County Sanitation District Regular Meeting of the STEERING COMMITTEE Wednesday, February 28, 2018 5:00 P.M. Administration Building Conference Rooms A & B 10844 Ellis Avenue Fountain Valley, CA 92708 (714) 593-7433 02/28/2018 Steering Committee Agenda Page 2 of 4 B. Approve a supplemental appropriation of $11,000,000 from available reserves to the Net Capital Improvement Program Budgeted Outlays for FY 2017-18, from $148,061,000 to $159,061,000. 3.PROPERTY MAINTENANCE SERVICES FOR 18350 MT. LANGLEY STREET, FOUNTAIN VALLEY (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Approve a solesource agreement with The Muller Company for Property Management Services, forthe period March 1, 2018 through August 31, 2018, for a management fee of $4,200per month plus other incurred expenses, including two additional renewal periods ofsix months each. INFORMATION ITEMS: None. CLOSED SESSION: During the course of conducting the business set forth on this agenda as a regular meeting of the Board, the Chairperson may convene the Board in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. Reports relating to (a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employment actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Board during a permitted closed session and are not available for public inspection. At such time as the Board takes final action on any of these subjects, the minutes will reflect all required disclosures of information. CONVENE IN CLOSED SESSION. (1) CONFERENCE WITH REAL PROPERTY NEGOTIATORS (Government Code Section 54956.8) Property: 18350 Mt. Langley St. Fountain Valley, CA APN Nos. 156-154-08 and 156-163-17 10950 Virginia Cir. Fountain Valley, CA - APN No.156-165-05; 10870 Spencer Ave. Fountain Valley, CA - APN No.156-163-07; 18480 Pacific St. Fountain Valley, CA - APN No.156-165-04; 18430 Pacific St. Fountain Valley, CA - APN No.156-165-06; 18370 Pacific St. Fountain Valley, CA - APN No.156-165-08; 18429 Pacific St. Fountain Valley, CA - APN No.156-163-09; 18410 Bandilier Cir. Fountain Valley, CA - APN No.156-163-10; 18368 Bandilier Cir. Fountain Valley, CA - APN No.156-163-11; 10700 Spencer St. Fountain Valley, CA - APN No.156-163-16; 10700 Spencer Ave. Fountain Valley, CA - APN No.156-154-07; 18386 Mt. Langley St. Fountain Valley, CA - APN No.156-154-06; 18385 Bandilier Cir. Fountain Valley, CA - APN No.156-163-12; 18401 Bandilier Cir. Fountain Valley, CA - APN No.156-163-13; 18424 Mt. Langley St. Fountain Valley, CA - APN No.156-154-05; 02/28/2018 Steering Committee Agenda Page 3 of 4 18435 Bandilier Cir. Fountain Valley, CA - APN No.156-163-14; 18475 Bandilier Cir. Fountain Valley, CA - APN No.156-163-15; 10725 Ellis Ave. Fountain Valley, CA - APN No.156-154-04; and 10540 Talbert Ave. Fountain Valley, CA - APN No.156-151-03 Agency negotiators: General Manager, Jim Herberg; Assistant General Manager, Bob Ghirelli; Director of Finance and Administrative Services, Lorenzo Tyner; Director of Engineering, Rob Thompson; Engineering Managers, Kathy Millea and Jeff Mohr; CIP Project Manager, Tom Grant; Kevin Turner and John Gallivan, Cushman and Wakefield. Negotiating parties: K & A Investments LP, APN Nos. 156-154-08 & 156-163-17 Valley Business Park, APN Nos. 156-165-05, 156-165-06, 156-163-07; DK-USA LLC, APN No.156-165-04; Fountain Valley Industrial Parcel 13, APN No.156-165-08; Sukut Real Properties LLC, APN Nos. 156-163-09, 156-163-10, 156-163-11; The Ins Trust Shabtai, Nevon, APN No. 156-163-16; The Ins Trust, APN No. 156-154-07; Fountain Valley Star LLC, APN No. 156-154-06; TN Sheet Metal Inc., APN No. 156-163-12; 18401 Bandilier LLC, APN No. 156-163-13; Phone Lilly Lin-Lin TR, APN No. 156-154-05; JDK Partners, APN No. 156-163-14; Chandler Real Properties, APN No. 156-163-15; Ellis Avenue LLC, APN No. 156-154-04; and SFII Fountain Valley LLC, APN No. 156-151-03 Under negotiation: Instruction to negotiator will concern price and terms of payment. (2) CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION Significant exposure to litigation (Government Code Section 54956.9(2)) Claim of Carlos Quiroz. RECONVENE IN REGULAR SESSION. CONSIDERATION OF ACTION, IF ANY, ON MATTERS CONSIDERED IN CLOSED SESSION: OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: 02/28/2018 Steering Committee Agenda Page 4 of 4 ADJOURNMENT: To the Steering Committee meeting scheduled for Wednesday, March 28, 2018 at 5:00 p.m. Accommodations for the Disabled: Meeting Rooms are wheelchair accessible. If you require any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the Board’s office at (714) 593-7433 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2, this agenda has been posted outside the main gate of the Sanitation District’s Administration Building located at 10844 Ellis Avenue, Fountain Valley, California, and on the Sanitation District’s website at www.ocsd.com, not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item, including any public records distributed less than 72 hours prior to the meeting to all, or a majority of the Board of Directors, are available for public inspection in the office of the Clerk of the Board. Agenda Description: The agenda provides a brief general description of each item of business to be considered or discussed. The recommended action does not indicate what action will be taken. The Board of Directors may take any action which is deemed appropriate. NOTICE TO DIRECTORS: To place items on the agenda for a Committee or Board Meeting, items must be submitted to the Clerk of the Board 14 days before the meeting. Kelly A. Lore Clerk of the Board (714) 593-7433 klore@ocsd.com For any questions on the agenda, Committee members may contact staff at: General Manager Jim Herberg (714) 593-7300 jherberg@ocsd.com Assistant General Manager Bob Ghirelli (714) 593-7400 rghirelli@ocsd.com Director of Engineering Rob Thompson (714) 593-7310 rthompson@ocsd.com Director of Environmental Services Jim Colston (714) 593-7450 jcolston@ocsd.com Director of Finance and Administrative Services Director of Human Resources Lorenzo Tyner Celia Chandler (714) 593-7550 (714) 593-7202 ltyner@ocsd.com cchandler@ocsd.com Director of Operations & Maintenance Ed Torres (714) 593-7080 etorres@ocsd.com 01/24/2018 Steering Committee Minutes Page 1 of 4 MINUTES OF THE STEERING COMMITTEE Orange County Sanitation District Wednesday, January 24, 2018 at 5:00 p.m. A regular meeting of the Steering Committee of the Orange County Sanitation District was called to order by Chair Sebourn on Wednesday, January 24, 2018 at 5:02 p.m. in the Administration Building of the Orange County Sanitation District. A quorum was declared present, as follows: COMMITTEE MEMBERS PRESENT: Greg Sebourn, Board Chair David Shawver, Board Vice-Chair Chad Wanke, Administration Committee Chair John Withers, Operations Committee Chair Ellery Deaton, Member-At-Large Tim Shaw, Member-At-Large COMMITTEE MEMBERS ABSENT: Donald Wagner, Member-At-Large STAFF PRESENT: Jim Herberg, General Manager Bob Ghirelli, Assistant General Manager Celia Chandler, Director of Human Resources Jim Colston, Director of Environmental Services Rob Thompson, Director of Engineering Ed Torres, Director of Operations & Maintenance Lorenzo Tyner, Director of Finance & Administrative Services Kelly Lore, Clerk of the Board Jennifer Cabral Mike Dorman Dean Fisher Al Garcia Ted Gerber Mark Kawamoto Mark Manzo Tina Knapp Kathy Millea Jeff Mohr Ddaze Phuong Roya Sohanaki Jim Spears OTHERS PRESENT: Brad Hogin, General Counsel PUBLIC COMMENTS: No public comments were provided. ITEM NO. 1 01/24/2018 Steering Committee Minutes Page 2 of 4 REPORTS: • Chair Sebourn announced that Administration Committee Chair Wanke and Operations Committee Chair Withers will be attending the CASA Conference on January 25-26 on behalf of the Board of Directors. • GWRS Steering Committee/OCSD Wastewater Ordinance Discussion General Manager Jim Herberg introduced Director of Environmental Services Jim Colston who provided information regarding a recent meeting of the GWRS Joint Steering Committee Meeting where the subject of AB 967: Disposal of Human Remains via Water Cremation was discussed at length. A recommendation from the Committee was proposed to OCSD to modify the Wastewater Ordinance to prohibit the receipt of hydrolysate through the sewer system. After Committee discussion, this item was referred to the Legislative and Public Affairs Committee for further review. CONSENT CALENDAR: 1. APPROVAL OF MINUTES (Clerk of the Board) MOVED, SECONDED, AND DULY CARRIED TO: Approve Minutes of the Regular Meeting of the Steering Committee held on December 20, 2017. AYES: Deaton; Sebourn, Shaw; Shawver; Wanke; and Withers NOES: None ABSTENTIONS: None ABSENT: Wagner NON-CONSENT: 2. LABOR COMPLIANCE PROGRAM MANUAL AND RESOLUTION (Rob Thompson) Mr. Herberg provided a brief overview of this item. MOVED, SECONDED, AND DULY CARRIED TO: Recommend to the Board of Directors to: Adopt Resolution No. OCSD 18-01, entitled: “A Resolution of the Board of Directors of the Orange County Sanitation District to Approve and Adopt the Labor Compliance Policies and Procedures Manual Dated January 24, 2018 to be Utilized During the Construction of Grant Funded Projects”. AYES: Deaton; Sebourn, Shaw; Shawver; Wanke; and Withers NOES: None ABSTENTIONS: None ABSENT: Wagner 01/24/2018 Steering Committee Minutes Page 3 of 4 3. RESTRUCTURING OF GENERAL MANAGER’S OFFICE (Jim Herberg) Mr. Herberg provided an overview of his restructuring plan. The Chairman and Vice-Chairman both stated their support. MOVED, SECONDED, AND DULY CARRIED TO: Recommend to the Board of Directors to: A. Create a second Assistant General Manager position with responsibility for the Operations and Maintenance (O&M) and Engineering Departments; and appoint one of the existing department heads to assume these additional responsibilities, while maintaining their current responsibilities; and B. Upon the retirement of the existing Assistant General Manager, appoint one of the existing department heads to that position, overseeing the Finance & Administrative Services and Environmental Services departments. The resulting department head vacancy will remain unfilled. AYES: Deaton; Sebourn, Shaw; Shawver; Wanke; and Withers NOES: None ABSTENTIONS: None ABSENT: Wagner 4. GENERAL MANAGER’S FY 2017-2018 WORK PLAN MID-YEAR UPDATE (Jim Herberg) Mr. Herberg provided highlights of the Mid-Year update and the Cost Savings memo provided with this item. MOVED, SECONDED, AND DULY CARRIED TO: Recommend to the Board of Directors to: Receive and File the General Manager’s Fiscal Year 2017-2018 Work Plan Mid-Year Update and Cost Savings Measures Memo. AYES: Deaton; Sebourn, Shaw; Shawver; Wanke; and Withers NOES: None ABSTENTIONS: None ABSENT: Wagner INFORMATION ITEMS: None. 01/24/2018 Steering Committee Minutes Page 4 of 4 CLOSED SESSION: CONVENED IN CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTIONS 54957(b)(1): The Committee convened in closed session at 5:25 p.m. to discuss one item. Item No. CS-1 was not heard. Confidential minutes of the Closed Session have been prepared in accordance with the above Government Code Section and are maintained by the Clerk of the Board in the Official Book of Confidential Minutes of Board and Committee Closed Session Meetings. RECONVENED IN REGULAR SESSION: The Committee reconvened in regular session at 5:37 p.m. CONSIDERATION OF ACTION, IF ANY, ON MATTERS CONSIDERED IN CLOSED SESSION: General Counsel Brad Hogin did not provide a report. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: None. ADJOURNMENT: Chair Sebourn declared the meeting adjourned at 5:38 p.m. to the next Steering Committee meeting to be held on Wednesday, February 28, 2018 at 5:00 p.m. Submitted by: _____________________ Kelly A. Lore, MMC Clerk of the Board Page 1 of 3 STEERING COMMITTEE Meeting Date 02/28/18 To Bd. of Dir. 02/28/18 AGENDA REPORT Item Number 2 Item Number Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Rob Thompson, Director of Engineering SUBJECT: ESTABLISH PROJECT NO. J-131 FOR 18350 MT. LANGLEY ST. GENERAL MANAGER'S RECOMMENDATION A. Establish 18350 Mt. Langley St. Building Purchase and Improvement Project, Project No. J-131, for the purchase and needed improvements of 18350 Mt. Langley Street, Fountain Valley, with a budget of $11,000,000; and B. Approve a supplemental appropriation of $11,000,000 from available reserves to the Net Capital Improvement Program Budgeted Outlays for FY 2017-18, from $148,061,000 to $159,061,000. BACKGROUND On September 27, 2017, the Orange County Sanitation District’s (Sanitation District) Board of Directors approved the purchase of the Property at 18350 Mt. Langley Street in Fountain Valley for $10,150,000. Per the purchase and sale agreement, staff arranged for completion of a Facility Condition Assessment and Recommendations report. This effort included physical inspection, a Phase 1 Environmental Site Assessment Report, and an ALTA/NSPS Land Title Survey. This due diligence process revealed that some necessary life safety improvements were required. To address identified issues, a negotiated reduction of the purchase price to $9,750,000 was agreed upon. Staff anticipates necessary improvements of $500,000 which has been included in the requested supplemental appropriation above. The balance of the requested project budget is for the inspections, survey, design of necessary improvement, and legal fees associated with the purchase. RELEVANT STANDARDS • Ensure the public’s money is wisely spent • 1, 5, 20 year planning horizons PROBLEM A capital project is required to collect all the costs and properly capitalize the purchase and necessary improvements of the building and the associated fees. Page 2 of 3 PROPOSED SOLUTION Approve establishment of a capital project for the purchase and related purchase costs and necessary improvements of the 18350 Mt. Langley property. Related purchase costs to date have amounted to approximately $80,000 with additional expenses anticipated to close the sale. TIMING CONCERNS Per the Purchase and Sale Agreement, the Sanitation District is required to fund escrow within 30 days of notification from the seller. This notice was received February 9, 2018 and the acquisition is expected to be completed in March 2018. RAMIFICATIONS OF NOT TAKING ACTION Per the Purchase and Sale Agreement, the Sanitation District is obligated to fund the purchase of property. PRIOR COMMITTEE/BOARD ACTIONS September 2017 - Approved a Standard Offer, Agreement, and Escrow Instructions for Purchase of Real Estate (Purchase Agreement) with K&A Investments LP for Property at 18350 Mt. Langley Street, Fountain Valley, in a form approved by General Counsel, for $10,150,000, and authorized the General Manager and General Counsel to execute and approve various related documents and reports. ADDITIONAL INFORMATION N/A CEQA The Sanitation District’s Board of Directors has not approved any particular use of this property. The Sanitation District will perform all environmental review required under the California Environmental Quality Act prior to any use other than its current status as an office building. FINANCIAL CONSIDERATIONS This item was not included in the FY 2017-18 Budget, but will be incorporated into the upcoming Proposed Budget for Fiscal Years 2018-19 and 2019-20 for any residual outlays following the initial acquisition in March 2018. This cost will be offset by the following savings: • The planned sale of the real property at 7311 Doig Drive in Garden Grove, with an estimated value of $6 million to $8 million. Page 3 of 3 •Avoiding up to $1 million in charges to Headworks Rehabilitation at Plant No. 1, ProjectNo. P1-105, related to relocation and interim office space for approximately 30 Sanitation District employees currently housed in trailers that must be demolished for a new power building in that project. •Net income in the range of $400,000 per year based on current occupancy. Since these savings will be realized after the current fiscal year, staff is requesting a supplemental appropriation of $11,000,000 from reserves, of which approximately $122 million has been earmarked for the Capital Improvement Program. ATTACHMENT The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package: N/A Page 1 of 2 STEERING COMMITTEE Meeting Date 02/28/18 To Bd. of Dir. 02/28/18 AGENDA REPORT Item Number 3 Item Number Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: PROPERTY MANAGEMENT SERVICES FOR 18350 MT. LANGLEY STREET, FOUNTAIN VALLEY GENERAL MANAGER'S RECOMMENDATION Approve a sole source agreement with The Muller Company for Property Management Services, for the period March 1, 2018 through August 31, 2018, for a management fee of $4,200 per month plus other incurred expenses, including two additional renewal periods of six months each. BACKGROUND On September 27, 2017, the Board of Directors approved the purchase of property at 18350 Mt. Langley Street in Fountain Valley. The property is scheduled to close escrow on March 12, 2018. The property is occupied by commercial tenants and is managed by The Muller Company, a property management company. Some of the tenant leases extend out to 2021. Orange County Sanitation District (Sanitation District) is anticipating using this property for staff offices, but may continue to lease unneeded space to commercial tenants. RELEVANT STANDARDS • Protection of Orange County Sanitation District assets PROBLEM Although the Sanitation District will own and eventually occupy the Mt. Langley property, the need to professionally manage the property utilizing services such as maintenance, security and repairs currently exists. At present, the Sanitation District does not employ staff with this scope of commercial property management expertise. PROPOSED SOLUTION For a short-term basis, engage the firm currently managing the property until a permanent property management strategy has been developed. TIMING CONCERNS Per the Purchase and Sale Agreement, the Sanitation District is required to fund and close escrow within 30 days of notification from the seller. The Sanitation District received Page 2 of 2 notice on February 9, 2018. Escrow is scheduled to close March 12, 2018. Upon escrow closing, the Sanitation District will assume responsibility for management of the property. RAMIFICATIONS OF NOT TAKING ACTION The Sanitation District will lose continuity of care of the property and of services to existing tenants while developing the permanent property management strategy. PRIOR COMMITTEE/BOARD ACTIONS September 27, 2017 - Approved a Standard Offer, Agreement and Escrow Instructions for and Authorized General Manager and General Counsel to Execute any and all Instruments Related to the Transaction of Purchase of Real Estate (Purchase Agreement) with K&A Investments LP for Property at 18350 Mt. Langley Street, Fountain Valley. ADDITIONAL INFORMATION Monthly expenses for services such as utility bills and repair work will vary month to month. All expenses will be reviewed and approved by Sanitation District staff. CEQA N/A FINANCIAL CONSIDERATIONS The property management costs will be offset by rents collected on the commercial leases. ATTACHMENT The following attachment(s) in attached in hard copy and may also be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package: •Management Agreement 672502.03/LA 237009-00007/8-8-12/dlb/dbs -1- 1297106.1 MANAGEMENT AGREEMENT THIS MANAGEMENT AGREEMENT (this "Agreement") is made and entered into as of February 28, 2018 by and between ORANGE COUNTY SANITATION DISTRICT, a county sanitation district duly organized and existing pursuant to Section 4700 et. seq. of the Health & Safety Code of the State of California (hereinafter called "Owner"), and THE MULLER COMPANY, a California corporation (hereinafter called "Manager"). WITNESSETH WHEREAS, Owner is the owner of that certain real property addressed as 18350 Mt Langley, Fountain Valley, California, commonly known as Fountain Valley Business Center, (the "Property"); WHEREAS, the Property includes an office building and surface parking; and WHEREAS, Owner desires to appoint Manager to manage and operate the Property and Manager desires to accept such appointment, all upon the terms and conditions hereinafter set forth. NOW, THEREFORE, for and in consideration of the promises and mutual covenants and agreements contained in this Agreement and the fees to be paid under this Agreement, Owner and Manager hereby agree as follows: ARTICLE I Establishment of Hiring; Term 1.1 Exclusive Hiring. Owner hereby appoints Manager, in the capacity of an independent contractor, as the sole and exclusive manager for the Property, and Manager hereby accepts such appointment. This Agreement is not one of agency by manager for owner, but one with Manager engaged with respect to the functions undertaken by or assigned to Manager under this Agreement independently in the business of managing properties on its own behalf, as an independent contractor. 1.2 Term of Agreement. The term of this Agreement will be for an initial term of six (6) months and two renew Options with six (6) month term each to be exercised at the discretion of the Owner upon written notice by Owner of renewal at least thirty (30) days prior to the end of the Initial Term. Notwithstanding the foregoing: (i) if Manager defaults in the performance of any of Manager's obligation under this Agreement, and such default is not cured within thirty (30) days after written notice thereof is received by Manager (or, if such default is non-monetary and of such a nature that it cannot be reasonably cured within such 30-day period, Manager fails to commence the curing of such default within such 30-day period and fails to thereafter diligently prosecute such cure to completion), then Owner may thereupon terminate this Agreement for cause by giving written notice of such termination to Manager, such termination to be effective as of the effective date specified in such termination notice; and 672502.03/LA 237009-00007/8-8-12/dlb/dbs -2- 1297106.1 (ii) Manager may terminate this Agreement at any time with or without cause by giving Owner at least thirty (30) days' prior written notice. The Initial Term shall commence once Owner obtains legal title to the Property. 1.3 Furthermore, Owner reserves the right to terminate this Agreement for its convenience, with or without cause, in whole or in part, by giving at least thirty (30) day’s prior written notice to the Manager. 1.4 Cooperation. Owner and Manager shall consult and meet with each other to the extent necessary or appropriate to enable Manager to perform its duties under this Agreement or as requested by either party. Each party shall cooperate fully in all matters relating to the management, operation, maintenance and repair of the Property and the defense of any claim, action or proceeding relating thereto or to this Agreement, and both parties shall promptly respond to all requests for information by the other party, including furnishing all documents and services relating thereto required by Owner in connection with the operation of the Property. Any time the consent of Manager or Owner is required under this Agreement, such consent shall not be unreasonably withheld, conditioned or delayed, and whenever this Agreement grants Manager or Owner the right to take action, exercise discretion or make a determination, Manager and Owner shall act reasonably and in good faith unless a different standard is expressly set forth in this Agreement. ARTICLE II Services to be Performed by Manager 2.1 Employment of Personnel. Manager shall employ such personnel as may be necessary, in Manager's sole but good faith discretion, for Manager to (i) accomplish the efficient and successful operation and management of the Property, and (ii) properly perform Manager's obligations under this Agreement, which may include, without limitation, employing one (1) or more on-site managers. Such personnel shall in every instance be deemed employees of Manager and not of Owner, and Owner shall have no right to supervise or direct any of such employees. Manager shall fully comply with all applicable laws and regulations having to do with workers’ compensation, social security, unemployment insurance, hours of labor, wages, working conditions and other employer-employee related subjects in connection with the Property. All reasonable salaries, wages, and other compensation of personnel employed by Manager under this Agreement, including so-called fringe benefits (but excluding bonuses), medical and health insurance, federal and state unemployment taxes, pension plans, social security taxes, workmen's compensation insurance and the like shall be paid by Manager and reimbursed to Manager by Owner on a pro rata basis of the time such employee has allocated to the Property and where such employee services were required to properly, adequately, safely and economically manage, operate, and maintain the Property, and provided that such employees have been identified by position and compensation enumerated on a schedule provided to Owner by Manager and approved by Owner, or as set forth in the Approved Budget (as defined below). 2.2 Service Contracts. Manager shall make in Manager's name as agent for Owner, contracts for utilities and other services such as water, electricity, gas, telephone, vermin extermination, trash removal, heating, ventilating, and air conditioning maintenance, security, and other services deemed by Manager or Owner to be necessary or advisable for the operation, maintenance, or repair of the Property in accordance with this Agreement. All such contracts shall (i) be in the name of the Manager as agent for owner; (ii) be made expressly 672502.03/LA 237009-00007/8-8-12/dlb/dbs -3- 1297106.1 assignable, at Owner’s option, to Owner or Owner’s nominee, (iii) include a provision for cancellation thereof by Owner or Manager effective upon 30 days’ written notice; and (iv) shall provide all contractors provide evidence of adequate and sufficient insurance for the services being proved. Manager shall also place orders in Manager’s name as agent for Owner for such equipment, tools, appliances, materials, and supplies as are reasonable and necessary, in Manager's sole but good faith discretion, to properly maintain, manage, operate, or repair the Property in accordance with this Agreement. In entering into any contracts contemplated by this Agreement, Manager shall use commercially reasonable efforts to include as a condition thereof the right of Owner or Manager, as the case may be, to terminate such contract on thirty (30) days' prior written notice. Manager may obtain goods or services for the Property from direct or indirect affiliates of Manager, its officers, directors, shareholders, or employees (collectively, “Manager Affiliated Parties’), but only if such goods and services are of at least equal quality and of no higher prices than comparable goods and services obtainable from unaffiliated parties and such goods and services are otherwise competitive with comparable goods and services and Owner provides written consent of such contacts with Manager Affiliated Parties and after disclosing to Owner the relationship of Manager to the Manager Affiliated Parties. 2.3 Contracts in excess of $5,000.00 shall be procured as follows: (a) For contracts for goods and services with the value $50,000 or less Manager shall obtain three competitive Bids or Proposals as applicable. (b) For construction contracts with value equal or greater than $35,000 all contracts must be competitively bid and the award provided to the lowest, responsive, responsible Bidder. (c) Sole Source contracts may be initiated provided that the following conditions are met: 1. Goods or Services are of a unique nature based on their quality, durability, availability, fitness or qualifications for a particular use; or only available from one source. Written justification must be provided to Owner for approval prior to proceeding with the sole source contract Owner approval must be obtained by Manager prior to proceeding with all new contracts. 2.4 Maintenance and Repair of Property. To the extent funds of Owner are available, Manager shall make all repairs and perform all maintenance on the buildings, grounds and other improvements of the Property necessary, in Manager's sole but good faith discretion, to maintain the Property in a manner comparable to similar office buildings in the vicinity of the Property, but only to the extent the cost of such work does not exceed $5,000.00; otherwise, prior written approval from Owner shall be required. Notwithstanding the foregoing, Manager shall also perform or furnish any and all emergency repairs or services necessary, in Manager's sole but good faith discretion, for the preservation of the Property or to avoid the suspension of any service to the Property or danger to life or property. Emergency repairs or services may be made or furnished by Manager without Owner's prior written approval, but only if it is not reasonably feasible to secure such prior approval. In any event, with respect to any emergency repair or service which costs more than $5,000.00, only, Manager shall, not later than two (2) business days after performing or furnishing such emergency repair or service, notify Owner of the details and cost thereof. 672502.03/LA 237009-00007/8-8-12/dlb/dbs -4- 1297106.1 2.5 Tenant Relations. Manager shall use commercially reasonable efforts to make itself fully familiar with the terms and provisions of all leases for space within the Property, and to the extent funds are available shall use commercially reasonable efforts to perform all delegable duties of Owner as landlord under each such lease, so that such lease shall remain in full force and effect, with no default by Owner, and shall use commercially reasonable efforts to enforce the full performance of all obligations of the tenant under each such lease (including, without limitation, the tenant's obligation to deliver estoppel certificates, subordination and attornment agreements, financial statements and other documents required under such lease). Manager shall maintain business-like relations with tenants, receive requests, complaints and the like, from tenants and shall use reasonable efforts to respond and act upon the foregoing in reasonable fashion. 2.6 Collection of Moneys. Manager shall use commercially reasonable efforts to collect all rent and other charges due from tenants, licensees and other occupants of the Property and such other rents and charges as shall otherwise be due to Owner in connection with Owner's ownership of the Property. Owner authorizes Manager to request, demand, collect, receive and deposit all such rent and other charges and to institute proceedings in the name of, and as an expense reimbursable by, Owner for the collection thereof and for the dispossession of tenants and other persons from the Property, and such expense may include the engaging of counsel for any such matter. However, no unlawful detainer action shall be filed by Manager without prior written approval of Owner. In connection with any of the foregoing, Manager may settle, compromise, or release any action, claim, or demand of Owner, provided that Owner's prior written consent shall be required for the settlement, compromise, or release of any claim for which the amount at issue exceeds $5,000.00. All moneys collected by Manager shall be forthwith deposited in the Operating Account (as defined below). 2.7 Compliance with Legal Requirements. Manager shall use commercially reasonable efforts to comply with any and all laws, ordinances, rules, regulations, orders, or other requirements affecting the Property of any federal, state, county, or municipal authority having jurisdiction thereover, and orders of the Board of Fire Underwriters or other similar bodies. Manager, however, shall not take any such action as long as Owner is contesting, or has affirmed in writing to Manager its intention to contest and promptly institutes proceedings contesting, any such order or requirement, except that if failure to comply promptly with any such order or requirement would or could expose Manager to criminal liability, Manager shall have the right, but not the obligation, to cause compliance with such order or requirement. However, before any election by Manager to comply with such order or requirement, Manager shall provide Owner written notice of its intent to do so and Owner or Manager shall have the right to immediately terminate this Agreement. Owner agrees to pay all expenses incurred by Manager, including, without limitation, reasonable attorneys' fees for counsel (not exceeding a rate of $250 per hour) employed to represent Manager or Owner, with respect to any proceeding or suit involving an alleged violation by Manager or Owner, or both, of any orders or requirements of any federal, state, county, or municipal authority or orders of the Board of Fire Underwriters or other similar bodies (unless Manager is finally adjudicated to have personally and not in a representative capacity violated such order or requirement), but nothing contained herein shall require Manager to employ counsel to represent Owner in any such proceeding or suit. 2.8 Construction Management and Supervision. Manager shall provide the "CM Services" set forth in Exhibit "A" attached hereto and made a part of this Agreement. 672502.03/LA 237009-00007/8-8-12/dlb/dbs -5- 1297106.1 2.9 Leasing Services. Manager shall endeavor to secure and retain tenants for the Property. All leasing activity, whether for retention of existing tenants or obtaining of new tenants, shall be conducted in accordance with the Approved Budget (as defined below) and the applicable terms and conditions set forth in this Agreement. Manager agrees to cooperate with any third party brokers ("Outside Brokers") in leasing space at the Property; leasing commissions to such Outside Brokers shall be paid by Manager (following payment of same by Owner to Manager) with respect to leases hereunder; if such leasing commission to be paid to an Outside Broker is set forth in the Approved Budget, then such leasing commission shall not require the approval of Owner (otherwise such leasing commission shall require Owner's prior written approval). 2.10 Notices. Manager shall promptly deliver to Owner all notices received from any mortgagee, trustee, ground lessor, governmental or official entity, or any other party with respect to the Property. Manager may sign and serve in the name of Owner any and all notices only required in connection with the proper performance by Manager of the services required to be performed by Manager under this Agreement. ARTICLE III Budgets/Reports 3.1 Process for Approval of Annual Operating Budget. Within thirty (30) days after the commencement of the Initial Term of this Agreement, Manager shall submit to Owner, for Owner's approval (which approval shall not be unreasonably withheld, conditioned or delayed), a current operating budget for the Property from the date of the commencement of the initial Term of this Agreement through June 30, 2018, which proposed budget shall reflect thereon projections of all receipts and operating costs and expenses, capital expenditures, and replacement reserves that Manager, in the exercise of good business judgment, believes will be received or necessary to be incurred, as the case may be, to operate the Property through June 30, 2018. 3.2 Within sixty days from the initial Term of this Agreement, Manager shall submit to Owner for Owner’s approval (which approval shall not be unreasonably withheld, conditioned or delayed) a proposed operating budget for the Property for the fiscal year of July 1, 2018 through June 30, 2019. Such proposed budgets and projections shall be submitted by Manager solely as estimates, without warranty of their accuracy or attainability. Manager may not employ any person, to assist Manager with the preparation of such budget. If Manager has not received written approval or disapproval of Manager's proposed operating budget within thirty (30) days after submittal thereof by Manager, the proposed operating budget submitted by Manager shall be automatically deemed approved by Owner. If written disapprovals are received by Manager, Manager shall promptly revise the proposed operation budget to incorporate any comments thereto proposed by Owner with which Manager agrees and the parties shall consult with each other in order to mutually agree upon an acceptable final operating budget. The approved and/or deemed approved operating budget shall be referred to herein as the "Approved Budget". If, as of July 1 of each fiscal year, a proposed operating budget has not yet been finalized, then Owner and Manager shall continue to proceed under the prior fiscal year's Approved Budget until the current fiscal year's operating budget is agreed upon by Owner and Manager, except that all ordinary reimbursable expenses included in such prior year's Approved Budget (other than taxes, insurance and utilities, which shall be at the actual costs thereof) shall be increased by five percent (5%). If an Approved Budget has not 672502.03/LA 237009-00007/8-8-12/dlb/dbs -6- 1297106.1 been agreed upon by March 31st then ether party upon 30-days’ written notice may terminate this Agreement. 3.3 Expenditures and Liabilities Which Are in Addition to Items on the Approved Budget. Manager shall secure the written approval of Owner (which approval shall be in the sole discretion of Owner) prior to making any expenditure or incurring any liability or obligation not reflected on the Approved Budget; provided, however, that Manager shall not be required to secure the written approval of Owner if such expenditure does not increase any line item by more than five percent (5%) of the line item amount reflected on the Approved Budget. 3.4 Records; Reporting and Audit. (a) Records. All statements, receipts, invoices, checks, leases, contracts, worksheets, financial statements, books and records, and all other instruments and documents relating to or arising from the operating or management of the Property shall be maintained by Manager, and Owner and Manager shall have the right to inspect and to copy all such items, at such party's expense, at all reasonable times, and from time to time, during the term of this Agreement and for a reasonable time thereafter not to exceed three (3) years. Upon the termination of this Agreement, all of such books, records and other information shall be the property of and be promptly delivered (without warranty) to Owner in readily accessible and readable form; provided, however, that Manager or its representatives shall have the right to inspect such books, records, and other information and to make copies thereof during the three (3) year period referred to in the preceding sentence at the offices of Owner upon reasonable advance notice to Owner. (b) Monthly Reports. On or before the twentieth (20th) day of each month during the term of this Agreement, Manager shall deliver to Owner an operating report for the Property (on a cash and not an accrual method) for the preceding calendar month. (c) Audit. Owner retains the reasonable right to access, review, examine, and audit, any and all books, records, documents and any other evidence of procedures and practices that Owner determines are necessary to discover and verify that Manager is in compliance with all requirements under this Agreement. Manager shall include the SANITATION DISTRICT’s right as described above, in any and all of their subcontracts, and shall ensure that these rights are binding upon all Subconsultants. Owner retains the right to examine Manager’s books, records, documents and any other evidence of procedures and practices that the Owner determines are necessary to discover and verify all costs, of whatever nature, which are claimed to have been incurred, or anticipated to be incurred or to ensure CONSULTANT’s compliance with all requirements under this Agreement during the term of this Agreement and for a period of three (3) years after its termination. Manager shall maintain complete and accurate records in accordance with generally accepted industry standard practices and the Owner’s policy. Manager shall make available to Owner for review and audit, all property related accounting records and documents, and any other financial data within 15 days after receipt of notice from Owner. Upon Owner’s request, Manager shall submit exact duplicates 672502.03/LA 237009-00007/8-8-12/dlb/dbs -7- 1297106.1 of originals of all requested records to Owner. If an audit is performed, Manager shall ensure that a qualified employee of the Manager will be available to assist Owner’s auditor in obtaining all accounting records and documents, and any other financial data as they relate to the property and services provided under this Agreement. (d) No Liability for Returns Required by Law. Manager shall not be responsible or liable for preparing or filing any forms, reports, or returns that may be required by law relating to any personnel employed by Owner in connection therewith. Manager, and not Owner, however, shall be responsible for any forms, reports, or returns that may be required by law relating to any of Manager's employees. ARTICLE IV Expenses, Operating Account 4.1 Expense of Owner. Everything done by Manager under the provisions of this Agreement shall be done as an independent contractor of Owner. Unless otherwise provided herein, Owner shall not be obligated to reimburse Manager for (a) any expense for office equipment or office supplies of Manager (unless and only to the extent incurred and used in the promotion and leasing of the Property and/or the collection of income or payment of expenses for the Property); (b) any overhead expenses of Manager incurred in its general offices in excess of the pro rata portions of overhead expenses attributable to the Property; (c) any salaries or wages allocable to time spent on projects other than the Property; or (d) any salaries, wages, and expenses for any personnel other than personnel located at the Property site and/or personnel spending a portion of their working hours (to be charged on a pro rata basis) at the Property site specifically performing Manager's duties under this Agreement. All payments to be made by Manager under this Agreement shall be payable, or if otherwise paid by Manager, reimbursable, from funds deposited in the Operating Account. Manager shall not be obligated to make any advance to or for the account of Owner or to pay any sums except out of funds held in the Operating Account, nor shall Manager be obligated to incur any liability or obligation for the account of Owner without assurance satisfactory to Manager that the necessary funds for the discharge thereof have been or will be promptly provided by Owner. Owner shall at all times provide Manager, free of charge, with an appropriate management office at the Property. 4.2 Separation of Owner's Moneys. Manager shall establish and maintain in a banking or other financial institution reasonably approved by Owner whose deposits are insured by the Federal Deposit Insurance Corporation or Federal Savings and Loan Insurance Corporation, a separate bank or similar account in the name of Owner for the deposit of moneys of Owner received with respect to the Property (the "Operating Account"). Manager shall also establish such other special bank or similar accounts as may be reasonably required by Owner, or as required under the law. If and only if the funds are to be used for an item set forth in the Approved Budget, or as otherwise provided for by this Agreement, funds may be withdrawn through authorized signature cards from all accounts upon the sole signature of Manager or any of the following persons, on behalf of Manager: Tim Gooch, George Derrington, Tammy Le, or Jenny Blanchart (“Authorized Persons”). Manager shall immediately notify all financial institutions if any of the Authorized Persons are no longer employed by Manager and cause them to be removed as a signatory to withdraw funds. Manager’s authority to withdraw funds may be terminated at any time by Owner upon three (3) days written notice to Manager. In the 672502.03/LA 237009-00007/8-8-12/dlb/dbs -8- 1297106.1 vent of such termination, Owner will assume full liability for all existing financial obligations incurred by the Manager for the Property incurred prior to the termination and in accordance with this Agreement. 4.3 Manager Disbursements. Manager shall, from the available good funds collected and deposited in the Operating Account, cause to be disbursed regularly and punctually the following amounts (in the following order of priority (1) the amounts which Owner from time to time advises Manager are to be paid for any loans secured by mortgages on the Property, incurred before or after this Agreement becomes affective, including amounts which Owner from time to time advises Manager are due under any mortgage for interest and amortization of principal and for allocation to reserves or escrow funds; (2) the amounts payable to Manager pursuant to this Agreement; and (3) the amounts otherwise due and payable as operating expenses of the Property. Owner shall at all times maintain in the Operating Account a balance equal to the highest projected monthly expenditures as determined by the applicable Approved Budget for the Property. In addition, Owner shall within five (5) business days after Manager's written request, deposit such additional funds as Manager reasonably determines are needed to effect any authorized disbursements to be made by Manager pursuant to the terms of this Agreement. In the event Owner fails to deposit the amount of such expenses and fees, Manager shall be under no obligation to advance any funds to meet the obligations for which the additional funds have been requested and shall not incur any liability in connection therewith. However, Manager may elect to advance funds to pay such expenses and shall in such event be entitled to reimbursement upon demand from Owner therefor. Any funds remaining at the end of each calendar month during the term of this Agreement in the Operating Account (in excess of the balance required to be maintained in such account) shall be disbursed or transferred as generally or specifically directed from time to time by Owner. Within fifteen (15) days after Manager's receipt of written request by Owner (but no more often than once during each calendar month during the term of this Agreement), Manager shall provide Owner with a list of the disbursements made by Manager during such month and if so requested by Owner, invoices supporting the disbursement. Unless otherwise provided for in the Approved Budget, Owner, and not Manager, shall be responsible for the payment of all real estate taxes and other impositions levied by appropriate authorities. ARTICLE V Management and Other Fees 5.1 Management Fee. Owner shall pay to Manager, as compensation for Manager's management services, on a monthly basis, a management fee (the "Management Fee") in an amount equal $2,000.00 per month. 5.2 Compensation for Tenant Finish Work and Capital Improvements. For services which it performs in overseeing and/or managing the completion of tenant finish work and construction of capital improvements within the Property, Owner shall pay Manager the fees described on Exhibit "A" attached hereto in accordance with the terms and conditions set forth on Exhibit "A" attached hereto. 5.3 Leasing Commissions. For services which it performs in connection with the leasing of the Property, Owner shall pay Manager the fees described on Exhibit "B" attached hereto in accordance with the terms and conditions set forth on Exhibit "B" attached hereto. 672502.03/LA 237009-00007/8-8-12/dlb/dbs -9- 1297106.1 5.4 Additional Services. It is expressly agreed that in the event Owner requires Manager to perform or undertake additional services which are of an extraordinary nature or which are not customarily performed (or which are performed less frequently) by property management companies managing projects comparable to the Property located in the vicinity of the Property, Owner shall pay to Manager additional fee(s) for such additional services, and the amount of such additional fee(s) shall be reasonably and mutually agreed upon by Owner and Manager. ARTICLE VI Insurance/Indemnity 6.1 Insurance. Owner shall maintain in full force and effect insurance policies with respect to the Property, including any personal property of Owner, issued by insurance companies which have an A.M. Best General Policyholder's Service rating of not less than "A- VIII" which are licensed, or approved to do business, in the state in which the Property is located. Such insurance policies shall provide the following coverages: (a) Property Insurance. "All Risk" property insurance including fire, sprinkler leakage if applicable and water damage in an amount not less than the full replacement cost of the Property, with an agreed value endorsement sufficient to prevent Owner from becoming a co-insurer in any loss under the policy. The policies of insurance carried in accordance with this Section 6.1(a) shall contain (i) a replacement cost endorsement without deduction for depreciation or obsolescence, (ii) coverage for building ordinance, increased cost of construction, sinkhole (subsidence) and pollution clean-up resulting from insured peril, and (iii) a waiver of subrogation clause; (b) Flood Insurance. If at any time the Property or any part thereof is within a 100 year Flood Zone or an area designated "flood zone" pursuant to the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973 (42 U.S.C. 4001 4128) or any amendments or supplements thereto or substitutions therefor (collectively, the "National Flood Insurance Program"), flood insurance (to the extent available at commercially reasonably rates) in such total amount as Owner may from time to time reasonably require but in an amount not less than the maximum available under the National Flood Insurance Program with a deductible not exceeding $10,000, and which shall in any event comply with the National Flood Insurance Program as set forth in the legislation; (c) Earthquake Insurance. Earthquake insurance on the Property for not less than the maximum probable loss if located in UBC Seismic Zones 3 and 4; (d) Liability Insurance. Commercial General and Excess Liability Insurance, written on an occurrence basis, including blanket contractual liability, products and completed operations and personal injury coverage, notice of occurrence, knowledge of occurrence, unintentional errors and omissions, pollution from hostile fire, building heating equipment with a combined single limit for any one occurrence of Fifteen Million Dollars ($15,000,000) or such higher limit as Manager may from time to time reasonably request. Such requirement may be satisfied by a layering of Commercial General Liability, Umbrella and Excess Liability policies, but 672502.03/LA 237009-00007/8-8-12/dlb/dbs -10- 1297106.1 in no event will the liability insurance be written for an amount less than Fifteen Million Dollars ($15,000,000) combined single limit for bodily injury and property damage liability; (e) Boiler Insurance. Boiler and Machinery Breakdown Direct Damage Insurance and third party liability coverage (if not covered under the Commercial General Liability Policy) with full comprehensive coverage on a repair and replacement basis for all HVAC equipment, electrical equipment, boilers and machinery which form a part of the Property, including building ordinance Business Interruption Coverage for Loss of Rental Income in connection therewith in accordance with Section 6.1(d) above; (f) Builder's Risk Insurance. During the course of any construction or repair of improvements or during the course of restoration on the Property (other than tenant installation), Builder's Risk Insurance on a completed value basis and on a non-reporting form against "all risks of physical loss," including flood (if available at commercially reasonable rates), earthquake (if available at commercially reasonable rates), collapse, transit and off-site coverage (if available at commercially reasonable rates), during construction of such improvements or restoration, with deductibles satisfactory to Owner, covering the total replacement cost value of work performed and the equipment, supplies and materials furnished (unless such equipment, supplies and materials are required to be insured by contractors or vendors) and rent loss insurance for a period not less than twelve (12) months or the construction period, whichever is the greater, in an amount satisfactory to Owner. Such policy of insurance shall include coverage for building ordinance, increased cost of construction, sinkhole (subsidence) and pollution clean-up resulting from an insured peril, and shall contain a "permission to occupy" endorsement, a waiver of coinsurance or an agreed amount endorsement and an agreement by the insurer that following a loss, the insurer will pay to the insured (i) the full value of the loss provided Owner is required to or elects to rebuild or (ii) the actual cash value of the loss in the event Owner is not required to or does not elect to rebuild; AND (g) Other Insurance. Such other insurance with respect to the Property, in such amounts as Owner (or any lender in connection with a Financing) from time to time may require against such other insurable hazards which at the time are commonly insured against in respect of property similar to the Property. 6.2 Manager's Insurance. Manager shall, at the expense of Manager, maintain in full force and effect insurance policies with respect to Manager and the employees of Manager issued by insurance companies which have an A.M. Best General Policyholder's Service rating of not less than "A-VIII," which are licensed and approved and authorized to do business in the state in which the Property is located. Such policies shall provide the following coverage: (a) Worker's Compensation Insurance. Worker’s Compensation Insurance as required by the Labor Code of the State of California, including Employer’s Liability Insurance with a minimum limit of $1,000,000.00. Such Worker’s Compensation Insurance shall be endorsed to provide for a waiver of subrogation in favor of OCSD. A statement on an insurance certificate will not be accepted in lieu of the actual endorsements unless your insurance carrier is State of California 672502.03/LA 237009-00007/8-8-12/dlb/dbs -11- 1297106.1 Insurance Fund (SCIF and the endorsement numbers 2570 and 2065 are referenced on the certificate of insurance. (b) Automobile Liability Insurance. Comprehensive automobile liability insurance covering owned, non-owned, and hired vehicles in an amount not less than Five Million Dollars ($5,000,000) combined single limit for bodily injury and property damage. Such requirements may be satisfied by layering of comprehensive automobile liability, umbrella and excess liability policies, but in no event shall the comprehensive automobile liability policy be written for an amount less than One Million Dollars ($1,000,000) combined single limit for bodily injury and property damage. (c) Errors and Omissions, Fidelity Bond and Cyber Liability Insurance. Fidelity bond and computer crime insurance with an annual limit of a minimum of One Million Dollars ($1,000,000). (i) Errors and Omissions Coverage (professional liability coverage) in an amount of not less than $1.0 (one) million per occurrence throughout the term of this Agreement (ii) A fidelity bond or crime insurance, in content acceptable to OCSD, shall be carried in the amount of $1 (one) million dollars. (iii) If the Manager provides services related to information technology, the Manager must maintain third-party Cyber Liability insurance with limits of not less than $1.0 million per occurrence covering claims involving technology professional liability, privacy liability where applicable (including but not limited to loss of OCSD employee information), security liability where applicable (including but not limited to technology attacks via hackers or viruses, and cyber extortion threats), media liability where applicable (including but not limited to libel, slander and copyright infringement from content created by the Vendor), and damage to or destruction of electronic information or media. (d) Commercial Liability Insurance. Commercial General Liability Insurance written on an occurrence basis providing the following minimum limits of liability coverage: $5.0 million per occurrence with $5.0 million aggregate separate for this contract. Said insurance shall include coverage for the following hazards: Premises-Operations, blanket contractual liability (for this Agreement), products liability/completed operations (including any product manufactured or assembled), broad form property damage, blanket contractual liability, independent contractors liability, personal and advertising injury, mobile equipment, cross liability and severability of interest clauses. A statement on an insurance certificate will not be accepted in lieu of the actual additional insured endorsement(s). If requested by OCSD and applicable, XCU coverage (Explosion, Collapse and Underground) and Riggers Liability must be included in the General Liability policy and coverage must be reflected on submitted Certificate of Insurance. (e) Umbrella Excess Liability The minimum limits of general liability and automotive liability insurance required, as set forth above, shall be provided for either a single policy of primary insurance, or a combination of policies of primary 672502.03/LA 237009-00007/8-8-12/dlb/dbs -12- 1297106.1 and umbrella excess coverage. Umbrella excess liability coverage shall be issued with limits of liability which, when combined with the primary insurance, will equal the minimum limits for general liability and automotive liability. (f) Additional Insured Endorsements Each policy of insurance obtained, except Worker’s Compensation Coverage and Errors and Omissions Coverage, shall name OCSD, its Directors, officers, agents, consultants, and employees for this contract, and all public agencies from whom permits will be obtained and their Directors, officers, agents and employees, as determined by OCSD, as additional insured on said policies. No exclusionary language or limitations shall be applicable to any additional insured that are not applicable to the named insured. In addition, insurance afforded by the additional insured endorsement shall apply as primary insurance, and other insurance maintained by OCSD shall be excess only and not contributing with insurance provided under said policies. If this coverage is not provided within the coverage form (insurance policy) it shall also be endorsed as primary and non-contributory coverage. (g) Proof of Coverage The Vendor shall furnish OCSD with original certificates and amendatory endorsements effecting coverage. Said policies and endorsements shall conform to the requirements herein stated. All certificates and endorsements are to be received and approved by OCSD before work commences. OCSD reserves the right to require complete, certified copies of all required insurance policies, including endorsements, affecting the coverage required, at any time. The following are approved forms that must be submitted as proof of coverage: Certificate of Insurance ACORD Form 25 or other equivalent Certificate of Insurance form. Additional Insured (GL) (ISO Form) CG2010 11 85 or The combination of (ISO Forms) CG 2010 10 01 and CG 2037 10 01 All other Additional Insured endorsements must be submitted for approval by OCSD, and OCSD may reject alternatives that provide different or less coverage to OCSD. Additional Insured (Auto) Submit endorsement provided by carrier for OCSD approval. Waiver of Subrogation State Compensation Insurance Fund Endorsement No. 2570 or equivalent. Cancellation Notice State Compensation Insurance Fund Endorsement No. 2065 or equivalent. (h) Period of Coverage Insurance coverage is required during the period of this contract. (i) Cancellation Notice. Each insurance policy required herein shall be endorsed to state that coverage shall not be cancelled by either party, except after thirty (30) days’ prior written notice. The ACORD Form shall state the required thirty 672502.03/LA 237009-00007/8-8-12/dlb/dbs -13- 1297106.1 (30) days’ written notification. Policy shall not terminate, nor shall it be cancelled nor the coverage reduced, until thirty (30) days after written notice is given to OCSD except for non payment of premium which shall require not less than ten (10) days written notice to OCSD. Should there be changes in coverage or an increase in deductible or SIR amounts, the Vendor and its insurance broker/agent shall send to OCSD a certified letter which includes a description of the changes in coverage and/or any increase in deductible or SIR amounts. The certified letter must be sent to the attention of Risk Management, Div. 260, and shall be received by OCSD not less than thirty (30) days prior to the effective date of the change(s) if the change would reduce coverage or increase deductibles or SIR amounts or otherwise reduce or limit the scope of insurance coverage provided to the OCSD. (j) Insurance Carrier Rating The insurers must have an A- (A minus), or better, policyholder’s rating, and a financial rating of Class VIII, or better, in accordance with the most current A.M. Best Rating. OCSD recognizes that State Compensation Insurance Fund has withdrawn from participation in the A.M. Best’s rating process. Nevertheless, OCSD will accept State Compensation Insurance Fund for the required policy of Worker’s Compensation Insurance, subject to OCSD’s option, at any time during the term of this contract, to require a change in insurer, upon twenty (20) days written notice. OCSD will also require Vendor to substitute any insurer whose rating drops below levels herein specified. Said substitution shall occur within twenty (20) days of written notice to Vendor by OCSD or its agent. (k) Primary Insurance All liability policies shall contain a Primary and Non Contributory Clause. Any other insurance maintained by OCSD shall be excess and not contributing with the insurance provided by Vendor (l) Separation of Insured All liability policies shall contain a “Separation of Insured” clause. (m) Non Limiting (if applicable). Nothing in this document shall be construed as limiting in any way, nor shall it limit the indemnification provision contained in the Agreement, or the extent to which Vendor may be held responsible for payments of damages to persons or property. (n) Deductibles and Self Insured Retentions Any deductible and/or self insured retention must be declared to OCSD on the Certificate of Insurance. All deductible and/or self insured retentions require approval by OCSD. At the option of OCSD, either: the insurer shall reduce or eliminate such deductible or self- insured retention as respects OCSD; or the Vendor shall provide a financial guarantee satisfactory to OCSD guaranteeing payment of losses and related investigations, claim administration and defense expenses. (o) Defense Costs Liability policies, except for Errors and Omissions Coverage, shall have a provision that defense costs for all insureds and additional insureds are paid in addition to and do not deplete any policy limits (p) Limits Are Minimums If Manager maintains higher limits than any minimums shown above, OCSD requires and shall be entitled to coverage for the higher limits maintained by Vendor. 672502.03/LA 237009-00007/8-8-12/dlb/dbs -14- 1297106.1 6.3 Blanket Insurance. Manager may effect any coverage required of Manager under Section 6.2 above under a blanket insurance policy, provided that the protection afforded under any policy of blanket insurance hereunder shall be no less than that which would have been afforded under a separate policy or policies relating only to the Property. 6.4 Policies. (a) Owner Named Insured. All of the insurance policies maintained under Section 6.1 shall name Owner as the insured and shall also include Manager as an additional insured or loss payee, as its interest may appear. (b) Owner and Manager Named Insured. The insurance maintained under Section 6.1(d) (Liability Insurance) shall name Manager as an insured, and the insurance maintained under Section 6.2(b) (Automobile Insurance), Section 6.2(c) (Fidelity Bond Insurance) and Section 6.2(d) (Commercial Liability Insurance) shall name Owner, if requested, as an insured and such other parties in interest as Owner or Manager may reasonably specify from time to time as additional insureds or loss payees, as their respective interests might appear. (c) Terms of Policies. All insurance policies maintained pursuant to this Agreement shall provide that (i) no cancellation, material change or reduction thereof shall be effective until at least thirty (30) days after receipt by Owner and Manager of written notice thereof; and (ii) all losses covered by the required insurance shall be payable notwithstanding any act of negligence of Manager or any tenant or their partners, members, stockholders, directors, officers, employees or agents which might, absent such agreement, result in a forfeiture of all or part of such insurance payment and notwithstanding ( (1) any foreclosure or other action or proceeding taken pursuant to the provision of any financing instruments encumbering the Property or (2) any change in title or ownership of the Property. In the event of any financing secured by the Property, all insurance shall comply with the terms of such financing. (d) Self Insurance. It is understood that Owner is a large public agency that has a program of insurance and self-insurance with regard to its properties. Orange County Sanitation District will arrange for insurance or self-insurance on the Property, as its Board or management shall approve from time to time, and which may include insurance or self-insurance for property, flood, earthquake, business interruption, excess liability, workers compensation, boiler & machinery, builder’s risk, pollution liability and perhaps others. Owner will from time to time, as reasonably requested by Manager, provide certificates of insurance and letters of self-insurance describing the insurance and self-insurance carried by Owner. Variations of Owner’s actual insurance program from the requirements defined in the Agreement shall not constitute a default under this Agreement, but shall be deemed to be an election by Owner to self-insure for any risks or liabilities. Upon the full execution of this Agreement, Owner shall provide Manager with a description of the process by which a claim may be made under Owner’s self- insurance program. All of Owner’s insurance obligations undertaken with respect to self-insured risks shall survive the expiration or earlier termination of the Agreement. 672502.03/LA 237009-00007/8-8-12/dlb/dbs -15- 1297106.1 (e) Evidence of Renewal and Premium Payment. Owner and Manager shall furnish to each other, upon request, prior to the expiration date of each insurance policy required to be maintained under this Article VI, certificates of insurance of the renewal thereof. 6.5 Claims. In the event of a loss related to the Property under any of the insurance policies described in Sections 6.1, Section 6.2(b), Section 6.2(c) and Section 6.2(d), Manager shall, at Owner's expense, promptly and timely after Manager learns of such loss, file a claim on behalf of Owner (and Manager or any other party to the extent Manager or such other party is also an insured party) and use commercially reasonable efforts to monitor such claim on behalf of such insured party and cooperate fully with any appointed representatives, consultants and adjusters retained by or on behalf of the insurance companies' interests. 6.6 Subrogation. Owner and Manager each waive any right of recovery against the other (and the respective officers, directors, partners, members and employees of each), for any loss or damage covered by any policy of property insurance applicable to the Property, whether due to the negligence of Owner or Manager or their agents, contractors, officers, directors, partners, members or employees. If any property insurance policy provides that a waiver of subrogation may only be granted by endorsement, the party maintaining such policy shall secure an endorsement providing the waiver of subrogation. 6.7 Indemnity. Neither Manager (nor any employee, agent, director, officer, or owner thereof (collectively, the "Manager Partners")) shall be liable, responsible, or accountable in damages or otherwise to Owner for any acts performed by Manager or any of the Manager Partners in good faith. Manager shall be liable for, and shall indemnify, defend and hold harmless Owner from and against, any and all claims, losses, damages, liabilities, costs and expenses, including reasonable attorneys' fees (collectively, "Claims") arising out of any actions of Manager not within the scope of its duties under this Agreement and proximately caused by the negligence or willful misconduct of Manager, except (i) to the extent such losses are of the type insured, or are required to be insured by Owner under this Agreement, (ii) any latent defect on the Property; or (iii) Owner’s failure to cooperate in any repairs or remediating any defects to the Property after such conditions are discovered and brought to the attention of Owner. Owner shall be liable for, and shall indemnify, defend and hold harmless Manager and the Manager Partners, from and against any and all Claims arising out of or resulting from (i) the acts or omissions of Manager in connection with the performance of Manager's duties under this Agreement, and (iii) from the acts or omissions of Owner and its directors and officers, except that the foregoing indemnity obligation of Owner shall not apply in the case of the acts or omissions of Manager or any other Manager Partner which (a) are a breach by Manager under this Agreement, (b) are beyond the scope of authority conferred upon Manager under this Agreement, , or (c) constitute gross negligence, fraud, malfeasance, breach of fiduciary duty, willful, reckless or criminal misconduct. The provisions of this Section 6.7 shall survive the expiration or termination of this Agreement. ARTICLE VII Obligations Upon Termination 7.1 Survival of Obligations. Upon termination of this Agreement, each party shall continue to be fully liable for its obligations which have accrued up to and including the termination date and shall promptly pay to the other party all amounts due to such other party 672502.03/LA 237009-00007/8-8-12/dlb/dbs -16- 1297106.1 under the terms of this Agreement. Such payment shall be made as soon after the effective date of termination as such amounts are determinable. Upon such payment, neither party shall have any further claim or right against the other, except as expressly provided in this Agreement. 7.2 Obligations Upon Termination. In the event of termination of this Agreement, upon the effective date of such termination, Manager shall (i) surrender and deliver to Owner all rent and other income of the Property and other moneys of Owner then held by Manager and/or in any bank account (including, without limitation, the Operating Account) in excess of compensation or reimbursements owed Manager by Owner, including without limitation any fees payable or reimbursement of expenses due and payable to Manager, (ii) deliver to Owner as received by Manager any moneys or other property due Owner under this Agreement but received after such effective date of termination, and (iii) deliver to Owner (without warranty) copies of all records regarding the Property, keys and all other materials, property and supplies pertaining to the Property and/or this Agreement in the possession of Manager to allow Owner to fully operate, maintain, and manage the Property. ARTICLE VIII Miscellaneous 8.1 No Assignment by Manager. Without the prior written consent of Owner, Manager shall not have the right to assign, transfer, or convey any of its rights, title, or interest under this Agreement, nor shall it have the right to delegate any of the obligations or duties required to be kept or performed by it under this Agreement.,. 8.2 Successors and Assigns. Subject to the terms and conditions of Section 8.1 above, this Agreement shall be binding upon and shall inure to the benefit of the parties to this Agreement and their respective permitted successors and assigns. 8.3 No Agency. Manager is an independent contractor and, as such, shall be solely responsible for all of its employees, for the supervision of all persons performing services in connection with the performance of all of Manager's obligations under this Agreement and/or relating to the Property, and for determining the manner and time of performance of all acts under this Agreement. Nothing contained in this Agreement shall be deemed or construed to create a partnership or joint venture between Owner and Manager or to cause Manager to be responsible in any way for the debts or obligations of Owner or any other party (but nothing contained herein shall affect Manager's responsibility to transmit payments for the account of Owner as provided in this Agreement), it being the intention of the parties that the only relationship under this Agreement is one of independent contractor , and Manager shall not represent to anyone that its relationship to Owner is other than that set forth herein. 8.4 Notices. All notices, demands, consents, approvals, and requests given or required to be given by either party to the other under this Agreement shall be in writing, shall be sent by (a) United States mail, postage prepaid, return receipt tracked or confirmed, or (b) delivered by a nationally recognized overnight courier or (c) delivered personally: (i) to Manager at the appropriate address set forth below in this Section 8.4, or to such other place as Manager may from time to time designate in a notice to Owner; or (ii) to Owner at the addresses set forth below in this Section 8.4, or to such other place as Owner may from time to time designate in a notice to Manager . Any notice, demand, consent, approval, and/or request will be deemed given (a) on the date which is seventy-two (72) hours after it is mailed as provided in this 672502.03/LA 237009-00007/8-8-12/dlb/dbs -17- 1297106.1 Section 8.4, (b) upon the date personal delivery is made or rejected, or (c) on the date which is one (1) business day after it is sent by nationally recognized overnight courier, as the case may be. If to Owner: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708 Attention: Ann M. Crafton Principal Staff Analyst With a copy to: Bradley R. Hogin, Esq. Woodruff, Spradlin & Smart, APC 555 Anton Boulevard, Suite 1200 Costa Mesa, CA 92626-7670 If to Manager: The Muller Company 18881 Von Karman Avenue, Suite 400 Irvine, CA 92612 Attention: Jenny Blanchart 8.5 Security Deposits. Owner agrees to indemnify, defend and hold harmless Manager from and against any and all Claims with respect to any use, detention, or misapplication by Owner of tenants' security deposits. 8.6 Remedies. Notwithstanding anything herein to the contrary, Manager shall not be liable to Owner and Owner shall not be liable to Manager under this Agreement for any damages (other than actual damages) such as, without limitation, any lost profits, loss of business, consequential, special, or other similar damages. Prior to any recovery against Manager or Owner under this Agreement, Manager or Owner, as the case may be, must be given written notice and a reasonable opportunity to cure any default or other condition which is the basis for such recovery. 8.7 Captions. The captions of this Agreement are inserted only for the purpose of convenient reference and do not define, limit or prescribe the scope or intent of this Agreement or any part hereof. 8.8 No Waiver. The failure of a party hereto to seek redress for breach, or to insist upon the strict performance of any covenant, agreement, provision or condition of this Agreement, shall not constitute a waiver thereof, and such party shall have all remedies provided herein and by applicable law with respect to any subsequent act which would have originally constituted a breach. 8.9 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 8.10 No Third Party Beneficiaries. Neither this Agreement nor any part of this Agreement nor any service, relationship, or other matter alluded to herein shall inure to the benefit of any third party (specifically including any lenders, tenants, or contractors), to any trustee in bankruptcy, to any assignee for the benefit of creditors, to any receiver by reason of 672502.03/LA 237009-00007/8-8-12/dlb/dbs -18- 1297106.1 insolvency, to any other fiduciary or officer representing a bankruptcy or insolvent estate of either party, or to the creditors or claimants of such an estate. Without limiting the generality of the foregoing sentence, it is specifically understood and agreed that insolvency or bankruptcy of either of Owner (including any partners thereof) or Manager shall at the option of the other void all rights of such insolvent or bankrupt party under this Agreement (or so many of such rights as the other party shall elect to void). 8.11 Subordination. Manager’s rights hereunder are all expressly subordinate, junior, and inferior to any ground lease, mortgage, or deed of trust now or hereafter placed upon the Property and to any and all advances to be made thereunder and to the interest thereon and to all renewals, replacements, and extensions thereof. 8.12 Attorneys’ Fees. If either party to this Agreement brings any action to enforce its terms, the prevailing party shall be entitled to receive reasonable attorneys’ fees and costs from the other party. 8.13 Change of Manager Status. If there is any dissolution, termination of corporate status, suspension in any licenses required to carry out Manager’s duties as provided in this Agreement, change in control (i.e. sale of stock, sale of company, merger, sale of substantially all the assets, etc.), or any of the of the current Executive Team (as set forth in the 2/13/18 proposal) leaves the employment of Manager, Owner shall be provided immediate written notice of such change and Owner shall have the right to terminate this Agreement by delivery of a written notice of termination to Manager within 30 days from receipt of Manager’s notice. 8.14 Validity. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law. 8.15 Entire Agreement. This Agreement contains the entire agreement between the parties hereto with respect to the matters herein contained and any agreement hereafter made shall be ineffective to effect any change or modification, in whole or in part, unless such agreement is in writing and signed by the party against whom enforcement of the change or modification is sought. [SIGNATURES APPEAR ON THE FOLLOWING PAGE] 672502.03/LA 237009-00007/8-8-12/dlb/dbs -19- 1297106.1 Consultant: THE MULLER COMPANY Jenny Blanchart 18881 Von Karman Avenue Suite 400 Irvine, CA 92612 ORANGE COUNTY SANITATION DISTRICT Dated: By: __________________________________ Gregory C. Sebourn, PLS Chair, Board of Directors Dated: By: __________________________________ Kelly A. Lore Clerk of the Board Dated: By: __________________________________ Marc Dubois Contracts, Purchasing and Materials Manager THE MULLER COMPANY Dated:By: ___________________________________ ______________________________________ Print Name and Title of Officer ______________________________________ IRS Employer’s I.D. Number 672502.03/LA 237009-00007/8-8-12/dlb/dbs -1- 1297106.1 EXHIBIT "A" CM SERVICES AND FEES (a) Construction Management Fee. Manager shall be entitled to a fee (the "Construction Management Fee") for oversight, conformity, coordination and supervision of the design and build out of tenant improvements made in conjunction with new leases, extensions or renewals of existing leases or expansions of the leased space under existing leases, and construction projects authorized by the Owner that take place during the term of the Agreement (each, an "Improvement Project"). For Improvement Projects where the construction costs for the Improvement Project exceed Five Thousand Dollars ($5,000), Owner shall pay Manager a Construction Management Fee in an amount equal to five percent (5%) of the hard construction costs for such Improvement Project. (b) Minor Improvement Projects. Notwithstanding anything to the contrary, no Construction Management Fee will be paid for any Improvement Projects where either (i) the scope of such Improvement Project is limited to paint and carpet or (ii) the construction costs are Five Thousand Dollars ($5,000) or less. (c) Construction Management Services. As part of Manager's construction management services with respect to Improvement Projects, Manager shall, at Owner's expense, use commercially reasonable efforts to manage, arrange, supervise and coordinate, subject to the approval and direction of Owner, the design, construction and planning services of such Improvement Project, which services shall include the following: (i) Arranging, supervising and coordinating the preparation of feasibility, architectural, engineering, environmental and other studies as may be required; (ii) Arranging for the preparation and submission to Owner for approval and, following approval by Owner, monitoring compliance with: A. Plans and specifications, such plans and specifications to be prepared by one or more independent consultants approved by Owner, setting forth the scope of the Improvement Project and methods of construction to be used in the Improvement Project; B. A budget setting forth estimated costs of the design and construction of the Improvement Project; and C. A list of proposed contractors, consultants and other professionals to be employed in the design and construction of the Improvement Project. (iii) Arranging, supervising and coordinating the design, construction and planning services necessary to complete the Improvement Project, which actions shall be subject to the approval and direction of Owner, including the following: A. Coordinating with the consultants and other professionals on matters relating to the plans and specifications and any modifications thereto; 672502.03/LA 237009-00007/8-8-12/dlb/dbs -2- 1297106.1 B. Coordinating with contractors to prepare cost estimates of the Improvement Project and reviewing and advising Owner with respect to all bid documents; C. Preparing and negotiating design and construction contracts and other Contracts, if required, for the supply of services and materials necessary to design, construct and complete the Improvement Project; D. Reviewing and negotiating all change orders for the Improvement Project which change orders shall be submitted to Owner for its approval; E. Reviewing applications for payment submitted by consultants, contractors and suppliers in connection with the design, construction and completion of the Improvement Project, and submission of such applications to Owner for approval of payment; F. Preparing applications to municipal, other governmental, quasi- governmental and private authorities for Permits, including building permits, inspections and approvals, which applications shall be submitted to Owner for Owner's approval, and upon approval thereof by Owner, shall be submitted by Manager to the applicable authority; G. Supervising and coordinating construction of the Improvement Project; H. Coordinating and supervising the obtaining and maintenance of all Permits and other authorizations necessary for the Improvement Project; and I. Recording and reporting to Owner the progress of the construction of the Improvement Project. (iv) Causing complete and accurate files, books of account and other records of all construction costs and expenses of the Improvement Project incurred by Owner to be prepared and maintained in accordance with generally accepted accounting principles. 672502.03/LA 237009-00007/8-8-12/dlb/dbs -3- 1297106.1 EXHIBIT "B" LEASING COMMISSIONS Owner shall pay Manager a Leasing Commission (i) for each New Tenant (as defined below) who executes an Occupancy Lease (as defined below) during the term of the Agreement (each, a "New Tenant Lease"), (ii) for each tenant who extends the term of its Occupancy Lease during the term of the Agreement (an "Extension"), and (iii) for each tenant who expands the space leased by such tenant under its Occupancy Lease during the term of the Agreement (an "Expansion"), which Extension or Expansion (as the case may be) shall be pursuant to (A) the exercise by such tenant of its extension or expansion rights under the Occupancy Lease, and/or (B) an Amendment to an Occupancy Lease entered into by Owner and such tenant. All leasing commissions shall be paid from the Operating Account and all leases (i.e. New Tenant Lease, Extension, or Expansion) shall be signed by Owner. The term "New Tenant" shall mean a tenant who has not previously entered an Occupancy Lease then in effect for space at the Property. The term "Occupancy Lease" shall mean a lease of space at the Property, executed and delivered by Owner (or Owner's predecessor, as applicable) and a tenant. The term "Amendment to an Occupancy Lease" shall mean an amendment to an Occupancy Lease executed and delivered by Owner and a tenant. The term "Gross Rentals" shall mean the annual base rental rate stipulated in the Occupancy Lease or Amendment to Occupancy Lease (including stipulated increases, if any) multiplied by the rentable square footage of the leased space subject to the New Tenant Lease, Extension or Expansion (as applicable), the total of which shall then be multiplied by the period comprising the Basic Term. For each Occupancy Lease or Amendment to Occupancy Lease, the "Basic Term" shall be the initial term of such New Tenant Lease, Expansion or Extension (i.e., the term of the New Tenant Lease, Expansion or Extension without regard to any option to extend); and provided that if an Occupancy Lease or Amendment to Occupancy Lease contains an express option in favor of the tenant to cancel or terminate the New Tenant Lease, Expansion or Extension (herein a "Tenant Termination Option"), the "Basic Term" shall initially include only that portion of the term of such New Tenant Lease, Expansion or Extension which is not subject to cancellation by exercise of such Tenant Termination Option; provided, however, if such Tenant Termination Option is waived by the tenant (or otherwise lapses) during the term of the Agreement, then the Leasing Commission applicable to the remainder of the initial term of such New Tenant Lease, Expansion or Extension shall become payable to Manager within thirty (30) days after the date such Tenant Termination Option is waived by such tenant (or otherwise lapses). Notwithstanding the foregoing, should an Occupancy Lease or Amendment to Occupancy Lease for any such New Tenant Lease, Expansion or Extension contain a Tenant Termination Option which is conditioned upon the tenant paying a cancellation penalty to the landlord therefor and such cancellation penalty includes the amount of all unamortized Leasing Commissions payable to Manager with respect to such New Tenant Lease, Expansion or Extension, then Owner will pay Manager all of the Leasing Commissions due hereinabove with respect to such New Tenant Lease, Expansion or Extension as if no such Tenant Termination Option existed. Fifty percent (50%) of the applicable Leasing Commission will be paid to Manager within thirty (30) days after all of the following have occurred: (i) if an Occupancy Lease or Amendment to Occupancy Lease is entered into with respect to such New Tenant Lease, Extension or Expansion, the execution of the Occupancy Lease or Amendment to Occupancy Lease by all parties; (ii) the tenant's payment of any security deposit and prepaid rent applicable to such New Tenant Lease, 672502.03/LA 237009-00007/8-8-12/dlb/dbs -4- 1297106.1 Extension or Expansion if provided for in the Occupancy Lease or Amendment to Occupancy Lease and delivery of any Occupancy Lease or Amendment to Occupancy Lease guaranty, letter of credit and other security documents that are due on Occupancy Lease or Amendment to Occupancy Lease execution; (iii) if an Occupancy Lease or Amendment to Occupancy Lease is entered into in accordance with such New Tenant Lease, Extension or Expansion, the delivery of the fully executed Occupancy Lease or Amendment to Occupancy Lease by Owner (or Manager on behalf of Owner) to tenant; (iv) the expiration of any contingencies effecting the validity of the Occupancy Lease or Amendment to Occupancy Lease for such New Tenant Lease, the Extension or Expansion; and (v) Owner's receipt of a factually correct invoice from Manager for all Leasing Commissions due for the subject Occupancy Lease or Amendment to Occupancy Lease. The balance of the applicable Leasing Commission will be paid within thirty (30) days after the commencement date of the New Tenant Lease, Extension or Expansion. The Leasing Commission is as set forth below and the percentage set forth below shall equal the percentage of Gross Rentals required to be paid by (x) each New Tenant under its New Tenant Lease over the Basic Term of such New Tenant Lease, and (y) each tenant of any Extension or Expansion over the Basic Term of such applicable Extension or Expansion: I. New Tenant Leases No Outside Broker: 4.0% of Gross Rentals for years 1 to 5 of the Basic Term 2.0% of Gross Rentals for years 6 to 10 of the Basic Term Outside Broker: Lesser of (i) 1.0% of Gross Rentals for years 1 to 5 of the Basic Term / 0.50% of Gross Rentals for years 6 to 10 of the Basic Term or (ii) the net of 5.0% of Gross Rentals for the Basic Term minus any leasing commission payable to any Outside Broker (if applicable). II. Extension/Expansion No Outside Broker: 2.5% of Gross Rentals for years 1 to 5 of the Basic Term 1.25% of Gross Rentals for years 6 to 10 of the Basic Term Outside Broker: Lesser of (i) 1.0% of Gross Rentals for years 1 to 5 of the Basic Term / 0.5% of Gross Rentals for years 6 to 10 of the Basic Term or (ii) the net of 5.0% of Gross Rentals minus any leasing commissions payable to any Outside Broker or any Listing Broker (if applicable). 1290735.1 555 AN T O N B O U L E V A R D, SU I T E 12 0 0 C O S T A ME S A , CA 9 2 6 26-7 6 70 (714) 558-7000 MEMORANDUM TO: Hon. Chair and Members of the Orange County Sanitation District Steering Committee FROM: Bradley R. Hogin, Esq. General Counsel DATE: February 21, 2018 RE: Closed Session Items The Steering Committee will hold a closed session on February 28, 2018 for the purpose of conferring with its negotiators regarding the purchase of real property. The negotiating parties and properties are as follows: K & A Investments LP, APN Nos. 156-154-08 & 156-163-17; Valley Business Park, APN Nos. 156-165-05, 156-165-06, 156-163-07; DK-USA LLC, APN No.156-165- 04; Fountain Valley Industrial Parcel 13, APN No.156-165-08; Sukut Real Properties LLC, APN Nos. 156-163-09, 156-163-10, 156-163-11; The Ins Trust Shabtai, Nevon, APN No. 156-163-16; The Ins Trust, APN No. 156-154-07; Fountain Valley Star LLC, APN No. 156-154-06; TN Sheet Metal Inc., APN No. 156-163-12; 18401 Bandilier LLC, APN No. 156-163-13; Phone Lilly Lin- Lin TR, APN No. 156-154-05; JDK Partners, APN No. 156-163-14; Chandler Real Properties, APN No. 156-163-15; Ellis Avenue LLC, APN No. 156-154-04; and SFII Fountain Valley LLC, APN No. 156-151-03. The District’s negotiators are Jim Herberg, Bob Ghirelli, Lorenzo Tyner, Rob Thompson, Kathy Millea and Jeff Mohr, Tom Grant, Kevin Turner and John Gallivan, Cushman and Wakefield. Said closed session will be held pursuant to authority of California Government Code Section 54956.8. Respectfully submitted, By: ___________________________ Bradley R. Hogin, General Counsel 1297912.1 555 ANTON B OULEVARD, SUITE 1200 C OSTA MESA, CA 92626-7670 (714) 558-7000 MEMORANDUM TO: Hon. Chair and Members of the Orange County Sanitation District Steering Committee FROM: Bradley R. Hogin, Esq. General Counsel DATE: February 21, 2018 RE: Closed Session Items The Steering Committee desires to hold a closed session on February 28, 2018 for the purpose of conferring with its legal counsel regarding anticipated litigation. Existing facts and circumstances reflect a significant exposure to litigation against the District. The closed session will be held pursuant to the authority of California Government Code Section 54956.9(d)(2). The facts and circumstances are as follows: The District received a claim from an employee Carlos Quiroz. Respectfully submitted, By: _________________________ Bradley R. Hogin, General Counsel ORANGE COUNTY SANITATION DISTRICT Agenda Terminology Glossary Glossary of Terms and Abbreviations AQMD Air Quality Management District ASCE American Society of Civil Engineers BOD Biochemical Oxygen Demand CARB California Air Resources Board CASA California Association of Sanitation Agencies CCTV Closed Circuit Television CEQA California Environmental Quality Act CIP Capital Improvement Program CRWQCB California Regional Water Quality Control Board CWA Clean Water Act CWEA California Water Environment Association EIR Environmental Impact Report EMT Executive Management Team EPA US Environmental Protection Agency FOG Fats, Oils, and Grease gpd gallons per day GWRS Groundwater Replenishment System ICS Incident Command System IERP Integrated Emergency Response Plan LOS Level Of Service MGD Million Gallons Per Day NACWA National Association of Clean Water Agencies NPDES National Pollutant Discharge Elimination System NWRI National Water Research Institute O & M Operations & Maintenance OCCOG Orange County Council of Governments OCHCA Orange County Health Care Agency OCSD Orange County Sanitation District OCWD Orange County Water District OOBS Ocean Outfall Booster Station OSHA Occupational Safety and Health Administration PCSA Professional Consultant/Construction Services Agreement PDSA Professional Design Services Agreement POTW Publicly Owned Treatment Works ppm parts per million PSA Professional Services Agreement RFP Request For Proposal RWQCB Regional Water Quality Control Board Glossary of Terms and Abbreviations SARFPA Santa Ana River Flood Protection Agency SARI Santa Ana River Interceptor SARWQCB Santa Ana Regional Water Quality Control Board SAWPA Santa Ana Watershed Project Authority SCADA Supervisory Control And Data Acquisition SCAP Southern California Alliance of Publicly Owned Treatment Works SCAQMD South Coast Air Quality Management District SOCWA South Orange County Wastewater Authority SRF Clean Water State Revolving Fund SSMP Sewer System Management Plan SSO Sanitary Sewer Overflow SWRCB State Water Resources Control Board TDS Total Dissolved Solids TMDL Total Maximum Daily Load TSS Total Suspended Solids WDR Waste Discharge Requirements WEF Water Environment Federation WERF Water Environment & Reuse Foundation WIFIA Water Infrastructure Finance and Innovation Act WIIN Water Infrastructure Improvements for the Nation Act WRDA Water Resources Development Act Activated sludge process – A secondary biological wastewater treatment process where bacteria reproduce at a high rate with the introduction of excess air or oxygen and consume dissolved nutrients in the wastewater. Benthos – The community of organisms, such as sea stars, worms, and shrimp, which live on, in, or near the seabed, also known as the benthic zone. Biochemical Oxygen Demand (BOD) – The amount of oxygen used when organic matter undergoes decomposition by microorganisms. Testing for BOD is done to assess the amount of organic matter in water. Biogas – A gas that is produced by the action of anaerobic bacteria on organic waste matter in a digester tank that can be used as a fuel. Biosolids – Biosolids are nutrient rich organic and highly treated solid materials produced by the wastewater treatment process. This high-quality product can be recycled as a soil amendment on farmland or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. Glossary of Terms and Abbreviations Capital Improvement Program (CIP) – Projects for repair, rehabilitation, and replacement of assets. Also includes treatment improvements, additional capacity, and projects for the support facilities. Coliform bacteria – A group of bacteria found in the intestines of humans and other animals, but also occasionally found elsewhere, used as indicators of sewage pollution. E. coli are the most common bacteria in wastewater. Collections system – In wastewater, it is the system of typically underground pipes that receive and convey sanitary wastewater or storm water. Certificate of Participation (COP) – A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. Contaminants of Potential Concern (CPC) – Pharmaceuticals, hormones, and other organic wastewater contaminants. Dilution to Threshold (D/T) – The dilution at which the majority of people detect the odor becomes the D/T for that air sample. Greenhouse Gases (GHG) – In the order of relative abundance water vapor, carbon dioxide, methane, nitrous oxide, and ozone gases that are considered the cause of global warming (“greenhouse effect”). Groundwater Replenishment System (GWRS) – A joint water reclamation project that proactively responds to Southern California’s current and future water needs. This joint project between the Orange County Water District and the Orange County Sanitation District provides 70 million gallons per day of drinking quality water to replenish the local groundwater supply. Levels Of Service (LOS) – Goals to support environmental and public expectations for performance. N-Nitrosodimethylamine (NDMA) – A N-nitrosamine suspected cancer-causing agent. It has been found in the Groundwater Replenishment System process and is eliminated using hydrogen peroxide with extra ultra-violet treatment. National Biosolids Partnership (NBP) – An alliance of the National Association of Clean Water Agencies and Water Environment Federation, with advisory support from the US Environmental Protection Agency. NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation to enhance the credibility of local agency biosolids programs and improved communications that lead to public acceptance. Plume – A visible or measurable concentration of discharge from a stationary source or fixed facility. Glossary of Terms and Abbreviations Publicly Owned Treatment Works (POTW) – A municipal wastewater treatment plant. Santa Ana River Interceptor (SARI) Line – A regional brine line designed to convey 30 million gallons per day of non-reclaimable wastewater from the upper Santa Ana River basin to the ocean for disposal, after treatment. Sanitary sewer – Separate sewer systems specifically for the carrying of domestic and industrial wastewater. Combined sewers carry both wastewater and urban runoff. South Coast Air Quality Management District (SCAQMD) – Regional regulatory agency that develops plans and regulations designed to achieve public health standards by reducing emissions from business and industry. Secondary treatment – Biological wastewater treatment, particularly the activated sludge process, where bacteria and other microorganisms consume dissolved nutrients in wastewater. Sludge – Untreated solid material created by the treatment of wastewater. Total Suspended Solids (TSS) – The amount of solids floating and in suspension in wastewater. Trickling filter – A biological secondary treatment process in which bacteria and other microorganisms, growing as slime on the surface of rocks or plastic media, consume nutrients in wastewater as it trickles over them. Urban runoff – Water from city streets and domestic properties that carry pollutants into the storm drains, rivers, lakes, and oceans. Wastewater – Any water that enters the sanitary sewer. Watershed – A land area from which water drains to a particular water body. The Orange County Sanitation District’s service area is in the Santa Ana River Watershed.