EXHIBIT 10.1

 

PROPERTY MANAGEMENT AGREEMENT

 

This Property Management Agreement ("Agreement") is made and entered into
effective as of June 17, 2013 ("Effective Date") between and R & K INTERESTS,
INC., a California Corporation doing business as INVESTORS' PROPERTY SERVICES
("MANAGER") and The InterGroup Corporation (“OWNER”).

 

RECITALS

 

A. OWNER owns certain real properties and buildings, improvements and assets
associated therewith more particularly described on Exhibit A hereto (each a
"Property" and if applicable collectively, the "Properties").

 

B. MANAGER and its staff are experienced and capable in the management and
operation of apartments that are similar in size and scope to the Properties.

 

C. OWNER desires to engage MANAGER to furnish to OWNER, and MANAGER agrees to
furnish to OWNER, in accordance with the terms herein, the necessary technical,
advertising, management and operating services described herein in order that
the Properties will obtain the benefits deriving from the experience and
capabilities of MANAGER in said activities.

 

AGREEMENT

 

1. Appointment and Acceptance. To the extent herein provided and subject to the
terms and conditions set forth herein, OWNER appoints MANAGER to manage, operate
and maintain the Properties, and MANAGER accepts the appointment, subject to the
terms and conditions set forth in this Agreement. In the absence of an agreement
in writing between OWNER and MANAGER, no other tract or parcel of real property
or the improvements thereon shall be subject to this Agreement.

 

2. Term. The term of this Agreement ("Term") shall commence on the Effective
Date and shall terminate on the earlier to occur of: (i) the sale of the
Properties or any portion thereof (in which event only as to such portion of the
Properties sold); (ii) the termination of this Agreement pursuant to the terms
hereof; or (iii) one (1) year from the Effective Date, provided that the Term be
shall automatically renewed for successive one (1) year terms unless either
party, upon delivery of written notice to the other party at least ninety (90)
days prior to the expiration of the Term of its intention not to renew the Term.

 

3. Approved Budgets. Every year, on or prior to May 1st, MANAGER shall prepare
and submit to OWNER, in the form required by OWNER, an operating budget
("Operating Budget") and a capital budget ("Capital Budget" and together with
the Operating Budget, collectively referred to herein as the "Budgets") for the
promotion, operation, repair and maintenance of the Properties for the
forthcoming fiscal year beginning July 1. For the first year of this Agreement,
OWNER shall prepare and submit to OWNER Budgets for fiscal year ending June 30,
2014, on or before October 15, 2013.

 

MANAGER agrees to use diligence and to employ all reasonable efforts to ensure
that the actual costs of maintaining and operating the Properties shall not
exceed the Budgets, either in total or in any one line item within the chart of
accounts. All expenses shall be charged to the proper line item contained within
the chart of accounts and no expense may be classified or reclassified for the
purpose of avoiding an excess in the annual budgeted amount of an accounting
category. MANAGER shall secure OWNER's prior written approval for any
expenditure, except for utilities charges, that will result in an excess of five
percent (5%) or more in any one line item within the chart of accounts of the
Operating Budget; however, if said expenditure is cumulatively less than One
Thousand Dollars ($1,000.00), no approval is necessary.

 

During each calendar year, MANAGER agrees to promptly inform OWNER in writing of
any capital expenditure or increase in costs and expenses in excess of the
amount budgeted for such items, and of decreases in revenue that were not
foreseen during the budget preparation period and thus were not reflected in the
Budgets, and shall upon request of OWNER submit to OWNER for approval a revised
Operating Budget or Capital Budget, as the case may be, based upon said
unforeseen costs and expenses.

 

 

 

  

4 Capital Expenditures. With respect to the purchase and installation of major
items of new or replacement equipment (including, without limitation, elevators,
heating or air-conditioning equipment, furniture and furnishings, carpets or
other floor coverings), MANAGER shall recommend that OWNER purchase these items
when MANAGER believes such purchase to be necessary or desirable. OWNER may
arrange to purchase and install the same itself or may authorize MANAGER in
writing to do so subject to such supervision and specification requirements and
conditions as OWNER may prescribe in any such written approval. OWNER may pay
for capital expenses from its own resources or may authorize payment out of the
Operating Account (as hereinafter defined). Unless OWNER specifically waives
such requirements in writing, all new or replacement equipment shall be awarded
on the basis of competitive bidding, solicited in the following manner:

 

4.1 A minimum of two written bids will be obtained for each purchase greater
than One Thousand Dollars ($1,000) but less than Two Thousand Five Hundred
Dollars ($2,500). A minimum of three written bids will be obtained for each
purchase in excess of Two Thousand Five Hundred Dollars ($2,500) with bid bonds,
if applicable or prudent. MANAGER shall be responsible to prudently select a
provider of goods and/or services for expenditures less than One Thousand
Dollars ($1,000) in the aggregate for the goods and services to be supplied.

 

4.2 MANAGER shall provide OWNER with all bid responses accompanied by MANAGER's
recommendations as to the most acceptable bid. If MANAGER advises acceptance of
other than the lowest bidder, MANAGER shall adequately support, in writing, its
recommendations.

 

4.3 OWNER will approve or disapprove any and all bids and will communicate to
MANAGER, either verbally or in writing, of its approval or disapproval of bids
within five (5) business days. If OWNER does not communicate any response to
MANAGER within fifteen (15) business days, such bids shall be construed by
MANAGER to be disapproved by OWNER.

 

5. Operating Account. MANAGER shall deposit, or cause to be deposited, all Gross
Income From Operations of the Properties in one (1) or more depository accounts
for the Properties at a reputable bank or financial institution ("Bank") which
shall be maintained by MANAGER for the benefit of Owners (such accounts,
together with any interest earned thereon, shall collectively be referred to
herein as the "Operating Account"). "Gross Income From Operations" means all
income, computed in accordance with GAAP, derived from the ownership and
operation of the Properties from whatever source, including the rents, rent
subsidies, housing assistance payments, utility charges, escalations, forfeited
security deposits, interest on credit accounts, service fees or charges, license
fees, parking fees, rent concessions or credits, but excluding sales, use and
occupancy or other taxes on receipts required to be accounted for by Owners to
any governmental authority, refunds and uncollectible accounts, sales of
furniture, fixtures and equipment, insurance proceeds (other than business
interruption or other loss of income insurance), any compensation paid by any
governmental authority with respect to a partial or complete condemnation,
unforfeited security deposits, utility and other similar deposits and any
disbursements to Owners from the Reserve Funds. MANAGER shall maintain books and
records of the funds deposited in and withdrawals from the Operating Account.
From the Operating Account, MANAGER shall pay the operating expenses of the
Properties and any other payments relative to the Properties as required by this
Agreement.

 

6. Security Deposit Account. If applicable law or Lender requires a segregated
account of Tenants' (as defined hereafter) security deposits, MANAGER will open
a separate account at a reputable bank or other financial institution. MANAGER
may return such deposits to any Tenant in the ordinary course of business in
accordance with the terms of the applicable lease.

 

7. Access to Account. As authorized by signature cards, representatives of
MANAGER shall have access to and may draw upon all funds in the accounts
described in Sections 5 and 6 without the approval of OWNER or Owners.

 

8. Additional Operating Funds. In the event MANAGER determines that the funds
generated by the Properties will be insufficient to meet the cash expense
requirements for the next month, MANAGER shall submit a written request to OWNER
setting out the anticipated income and expenses for the next month and the
amount of additional funds necessary to operate the Properties.

 

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9. Emergency Funds. Except as provided in Section 16, in the event there is an
emergency concerning the Properties which requires additional funds, MANAGER
shall submit a written request to OWNER and Owners setting out the facts
concerning said emergency and the amount of money necessary to cure said
emergency.

 

10. Expense of Owners. All obligations and expenses incurred hereunder shall be
for the account of, on behalf of, and at the expense of Owners. Except as
provided in Section 14 below, Owners will not be obligated to reimburse MANAGER
for any salaries of employees of MANAGER. All payments to be made by MANAGER
under this Agreement shall be paid from funds deposited in the Operating Account
pursuant to the terms of the Loan Agreement. MANAGER shall not be obligated to
make any advance to or for the account of Owners 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 Owners without assurance that the
necessary funds for the discharge thereof will be provided.

 

11. Legal Proceedings. With OWNER's and the affected Owner's prior written
consent, in each instance, MANAGER may initiate legal proceedings such as,
without limitation, collections, enforcement of contracts, labor and employment
matters, and proceedings against the Properties' tenants ("Tenants"), where the
affected Owner shall have the right to participate in such proceedings. MANAGER
shall timely forward all claims arising out of the operation of the Properties
which are covered in whole or in part by insurance to the appropriate insurer
and shall notify OWNER and the affected Owner of all claims in connection with
the Properties as to which it has knowledge. For this purpose, MANAGER is
authorized to execute notices to vacate and bring actions for eviction and
judicial pleadings incident to such actions and follow such instructions as
OWNER or the affected Owner may prescribe for the conduct of any such action.
Attorney's fees and other necessary costs incurred in connection with such
actions will be paid out of the Operating Account as the affected Property's
expenses and in accordance with the Budgets. MANAGER shall not knowingly commit
any act, or fail to act, in any manner that would result in a default under this
Agreement, and shall promptly notify OWNER and the affected Owner in writing of
any such default which comes to the attention of MANAGER. Additionally, MANAGER
shall immediately give written notice to OWNER of any legal action or other
proceedings relating to the Properties (other than suits against Tenants for
rent, security deposits or evictions) and any other reports requested by OWNER.

 

12. Leasing Guidelines. As appropriate, MANAGER shall prepare written leasing
and operating guidelines setting forth, without limitation, the specific unit
rents and terms MANAGER recommends using at the Properties which may be in the
Budgets. These guidelines shall be submitted to OWNER for written approval in
such form and within a time frame acceptable to OWNER. MANAGER shall abide by
only those leasing and operating guidelines which have been approved in writing
by OWNER (the "Leasing Guidelines"). MANAGER shall make every reasonable effort
to lease space now or hereafter becoming vacant in accordance with the Leasing
Guidelines.

 

13. Marketing and Advertising. MANAGER shall arrange and contract in the name
and for the account of Owners all marketing and advertising necessary for the
purpose of promoting the name and business of the Properties consistent with the
Budgets. Further, MANAGER shall advertise and market the Properties, or portions
thereof, prepare and secure advertising signs, space plans, circular matter and
other forms of advertising; provided, however, that MANAGER shall not use
Owners' name in any advertising or promotional material without Owners' express
prior written approval in each instance; and provided further that advertising
and promotional materials shall be prepared and used in full compliance with
federal, state and municipal laws, ordinances, regulations and orders. All costs
and expenses for reservation, marketing and advertising shall be made in
accordance with the Budgets and shall be paid from the Operating Account.

 

14. Employment of Personnel. MANAGER shall investigate, hire, train, pay,
supervise, and discharge the personnel necessary to be employed in order to
properly and adequately maintain and operate the Properties. This includes all
designated personnel assigned solely to the Properties (resident managers,
leasing consultants, maintenance or porters). Such personnel shall in every
instance be deemed employees of MANAGER and not of any Owner, who shall have no
right to supervise or direct such employees. MANAGER shall be bonded with Owners
listed as a payee on each of its respective reimbursement checks. MANAGER shall
be responsible to OWNER and Owners for all such employees. All matters
pertaining to the employment, supervision, compensation, promotion and discharge
of MANAGER's employees and others engaged by MANAGER for the operation and/or
maintenance of the Properties are the responsibility of MANAGER. MANAGER shall
fully comply with all applicable laws and regulations having to do with worker's
compensation, social security, unemployment insurance, hours of labor, wages,
working conditions, and all other employer-employee related subjects. MANAGER's
costs of salaries and wages and its costs of insurance, processing, benefits and
other compensation of those personnel employed by MANAGER hereunder directly at
the Properties, which personnel are working on or in connection with the
Properties, shall be deemed to be reimbursable expenses of MANAGER, as the same
may be amended from time-to-time and approved by OWNER in writing. The costs for
employment of all such personnel shall have been approved by OWNER in writing if
not otherwise reflected in the Budgets.

 

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15. Service Contracts. MANAGER shall negotiate and execute, in Owners' names and
in accordance with the Operating Budget, contracts for water, electricity, gas,
telephone, vermin extermination, trash removal and other necessary services
approved by OWNER in the Operating Budget and deemed by MANAGER to be necessary
or advisable for the operation of the Properties, and all such contracts shall
include a provision for cancellation by OWNER or MANAGER effective upon thirty
(30) days written notice and for a term not to exceed one (1) year; and shall
require that all contractors provide evidence of sufficient liability and
worker's compensation insurance acceptable to OWNER. MANAGER shall also place
orders in Owners' names for such equipment, tools, appliances, materials and
supplies as are approved by OWNER in the Operating Budget and are reasonable and
necessary to maintain the Properties properly and adequately. No such contracts
will be recorded without the prior written consent of Owners.

 

16. Maintenance and Repair of Properties. MANAGER shall maintain and operate the
buildings, appurtenances and grounds of the Properties (a) in accordance with
federal, state and municipal laws, ordinances, regulations and orders; (b) in
accordance with the rules, regulations and orders of the local fire inspection
department, the agency or board of casualty insurance underwriters or similar
body; and, (c) in accordance with standards acceptable to OWNER, including
within such maintenance, without limitation thereof, interior and exterior
cleaning, painting and decorating, plumbing, carpentry, and such other normal
maintenance and repair work as may be necessary and/or desirable. The cost to
accomplish such maintenance and repairs shall have been approved in, and fall
within, the Operating Budget, excepting, however, that emergency repairs
immediately necessary to protect life and limb, reduce the severity of loss, and
secure any of the Properties may be made by MANAGER without the prior written
approval of OWNER; provided, however, that any such emergency situation shall be
made known to OWNER and the affected Owner immediately by telephone (unless the
emergency situation arises at a time that OWNER or the affected Owner is not
open for business, in which case notice by telephone shall be given as soon as
OWNER or the affected Owner is next open for business) and written notice shall
be given to OWNER and the affected Owner within forty-eight (48) hours of such
occurrence. Disbursements for actual and reasonable expenses for such
maintenance and repair shall be made from the Operating Account.

 

17. Insurance and Indemnity.

 

17.1 OWNER shall cause to be placed and kept in force on the Properties all
forms of property and liability insurance required by law and the Loan Documents
or needed to adequately protect Owners; such insurance may be under OWNER's or
Owner's blanket insurance coverage. All insurance coverage shall be placed with
such companies, in such amounts, and with such beneficial interest appearing
therein as shall be acceptable to OWNER and otherwise be in conformity with the
requirements of the Loan Documents, including any mortgages on the Properties.
MANAGER shall be included on OWNER's or Owners' general liability insurance
policy as an additional insured.

 

17.2 OWNER and MANAGER hereby mutually waive their respective rights of recovery
against each other for any loss insured by fire, extended coverage, and other
property insurance policies existing for the benefit of the respective parties;
each party shall obtain any special endorsements if required by their insurer to
evidence compliance with the aforementioned waiver.

 

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17.3 Except for MANAGER's, or its agents', gross negligence or willful
misconduct, OWNER shall defend and indemnify MANAGER against all third party
claims, damages, liabilities, costs and attorney's fees arising out of MANAGER's
actions taken within the scope of the agency established by this Agreement.

 

17.4 MANAGER agrees to not permit the use of the Properties for any purpose
which might void any policies of insurance relating to the Properties or which
might render any loss thereunder uncollectible, or which would be in violation
of any law or governmental restriction.

 

17.5 MANAGER shall maintain in the name of MANAGER, and at MANAGER's expense,
the following insurance policies with insurance companies acceptable to OWNER or
with a Best's Rating of A: IX or better, and which shall include a provision for
thirty (30) days prior written notice to SAPMC of cancellation or material
change with no exceptions, and shall, prior to commencement of services, provide
to OWNER certificates of insurance evidencing the following coverages:

 

17.5.1 Comprehensive General Liability coverage for bodily injury and property
damage liability, including broad-form comprehensive general liability
endorsement, or Commercial General Liability/occurrence-basis, written on forms
acceptable to OWNER, for a combined single limit of at least Two Million Dollars
($2,000,000) per occurrence. OWNER and Owners shall be named, by endorsement, as
additional insureds on such policy.

 

17.5.2 Automobile Liability covering MANAGER's owned, hired and non-owned autos,
with a combined single limit in the amount of Two Million Dollars ($2,000,000)
per occurrence for bodily injury and property damage liability; and naming OWNER
and Owners, by endorsement, as additional insureds.

 

17.5.3 Worker's Compensation for statutory limits, and Employer's Liability
coverage in an amount of not less than One Million Dollars ($1,000,000), for
MANAGER's employees and including a waiver of carrier's right to subrogate
against OWNER or Owners.

 

17.5.4 Fidelity Bond including Depositor's Forgery, in the amount of not less
than One Hundred Thousand Dollars ($100,000) per occurrence. Coverage shall
include Owners' liability for funds collected on behalf of Owners.

 

18. Collection of Monies. MANAGER shall collect all monies in accordance with
this Agreement and the Leasing Guidelines or, when due, all rent and other
charges due from Tenants, lessees of other non-dwelling facilities on the
Properties, concessionaires and otherwise due Owners with respect to the
Properties in the ordinary course of business. OWNER authorizes MANAGER to
request, demand, collect, receive and receipt for all such rent and other
charges and, only with OWNER's prior written approval, to institute legal
proceedings in the name of the Owners under the provisions of Section 11 hereof.
MANAGER will arrange for credit card processing services as needed and the cost
of discount fees and chargebacks shall be applied to the Operating Account. All
monies collected by MANAGER shall be forthwith deposited in the Operating
Account.

 

19. MANAGER Disbursements. MANAGER shall cause to be disbursed from the
Operating Account when due regularly and punctually (a) MANAGER's compensation;
and, (b) the operating expenses of the Properties.

 

20. Records. All statements, receipts, invoices, checks, receiving reports,
leases, contracts, worksheets, financial statements, books and records, and all
other instruments and documents relating to or arising from the operation or
management of the Properties shall be and remain the property of OWNER and
Owners. MANAGER shall prepare the same in a detailed manner acceptable to OWNER,
and MANAGER shall keep and maintain the same in a safe place for a period of
five (5) years or until delivered to OWNER or Owners. OWNER and Owners shall be
entitled to inspect, review and audit such records at any time during normal
business hours. All such records shall be delivered to OWNER or Owners upon the
termination of this Agreement.

 

21. Monthly Reports. On or before the fifteenth (15th) day of each month during
the Term, MANAGER shall deliver to OWNER a statement of cash receipts and
disbursements, a financial statement (cash or modified accrual basis as may be
requested by OWNER) and such other financial/management reports as may be
reasonably required by OWNER, for the immediately proceeding fiscal month. A
"fiscal month" shall mean any current month, ending for financial statement
purposes as of the last day of that month.

 

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22. Returns Required by Law. MANAGER shall execute and file punctually when due
all forms, reports and returns required by law relating to the employment of
personnel. Owners shall be responsible for filing any income tax or other
returns.

 

23. Compliance with Legal Requirements. MANAGER shall take such action as may be
necessary to comply with any and all orders or requirements affecting the
Properties by any federal, state, county or municipal authority having
jurisdiction thereover, and orders of the Board of Fire Underwriters or similar
bodies, subject to the limitation contained in Section 16 in connection with the
making of alterations and repairs. MANAGER, however, shall not take any such
action as long as OWNER is contesting, or has affirmed its intention to contest
and institutes proceedings contesting, any such order or requirement, except
that if failure to comply promptly with any such order or requirement would or
might expose MANAGER to criminal liability, MANAGER shall notify OWNER and OWNER
shall approve such expenditure or make other arrangements to timely comply with
such order in order that MANAGER shall not suffer any such liability. MANAGER
shall promptly, and in no event later than forty-eight (48) hours from the time
of its receipt, notify OWNER in writing of all such orders and notices or
requirements.

 

24. Service of Process. MANAGER is not authorized and shall not accept service
of process or citation for violation of any code, ordinance, regulation or law
for OWNER.

 

25. Disclosure. MANAGER shall disclose to OWNER in advance in writing any and
all relationships, and the nature and extent thereof, of MANAGER to any other
party with whom MANAGER contracts, for itself or on behalf of OWNER or Owners,
in connection with the operation, maintenance and repair of the Properties.
Further, MANAGER may not contract for any services or supplies in connection
with the operation, maintenance and repair of the Properties with any affiliated
agencies unless MANAGER demonstrates that the prices and terms (including
continuity, punctuality and reliability of contract performance) of such goods
and services in connection with the operation, maintenance and repair of the
Properties are at least as favorable with the prices and terms of goods and
services of equal quality available from other reputable suppliers and
contractors.

 

26. Licenses and Permits. MANAGER shall take all necessary steps for the
procurement of all licenses and permits required for the operation of the
Properties and its related facilities, and MANAGER shall assist Owners in the
application and processing of such licenses and permits.

 

27. Inspection. Within thirty (30) days following the date of this Agreement,
MANAGER shall, if requested by OWNER, conduct a physical inspection of the
Properties and deliver to OWNER, for OWNER's review and approval, a complete
inventory of the Properties.

 

28. Property Management Fee. For the complete performance of the services
described herein, MANAGER's compensation shall be the payment by OWNER to
MANAGER of two and 8 tenths percent (2.80%) of the Gross Income From Operations
("Property Management Fee").

 

29. Construction Management Fee. If extraordinary repairs are made to the
Properties and OWNER requires additional supervisory work from MANAGER that is
out of the ordinary scope of monthly management services (e.g., one (1) of the
Properties is extensively reconstructed or rehabbed, or the MANAGER is required
to perform services not described herein), then MANAGER shall receive an
additional construction management fee of five percent (5%) of the
rehabilitation costs. MANAGER and OWNER agree that prior to performing or
arranging any service or activity which would result in such additional
compensation, MANAGER shall have given written notice thereof to OWNER, and such
performance, arrangement, and additional compensation shall first be authorized
by OWNER in writing.

 

30. Closing Management Fee. MANAGER shall receive a one month closing management
fee per Property equal to the average of the last three months of management
fees incurred prior to termination of the agreement ("Closing Management Fee")
as compensation for services associated with the close of the management account
following the sale of the Properties or noticed termination. MANAGER shall not
receive such fee if this Agreement is terminated because of a breach of contract
by MANAGER .

 

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31. Use and Maintenance of Properties. It shall be the duty of the MANAGER at
all times during the term of this Agreement to operate and maintain the
Properties according to the highest standards achievable consistent with the
expressed plan of OWNER. MANAGER shall use its best efforts to secure full
compliance by the Tenants with the terms and conditions of their respective
leases. MANAGER shall be expected to perform such acts and deeds as are
reasonable, necessary and proper in the discharge of its duties under this
Agreement.

 

32. Termination. Notwithstanding anything to the contrary contained herein, (i)
at any time during the Term, OWNER and MANAGER may terminate this Agreement by
giving thirty (30) days advance written notice to the other party; (ii) this
Agreement shall automatically terminate upon the sale of the Properties or any
portion thereof (in which event only as to such portion of the Properties sold);
(iii) OWNER may terminate this Agreement immediately in the event of a breach of
this Agreement by MANAGER or in the event of MANAGER's misconduct by giving
written notice of such termination to MANAGER, and upon such termination, in
addition to all other rights and remedies OWNER may have, MANAGER shall not be
entitled to receive any further compensation as of the date of MANAGER's receipt
of such written notice of termination; and (iv) in the event OWNER is in default
in the performance of any of its obligations hereunder, and such default remains
uncured for thirty (30) days following MANAGER's giving of written notice of
such default to OWNER, MANAGER shall have the right to terminate this Agreement
upon thirty (30) days written notice to OWNER. Upon OWNER terminating this
Agreement pursuant to subsections (i), (ii) and (iv) of this Section 32, OWNER
shall pay to MANAGER as its sole and exclusive compensation, that portion of the
Property Management Fee earned to the date of termination, less any amounts
previously received by MANAGER.

 

33. Obligations of Parties Upon Termination. Within thirty (30) days after any
termination, MANAGER shall deliver to OWNER the written report required by
Section 21 herein for any period not covered by such a report at the time of
termination, and within forty-five (45) days after any such termination, MANAGER
shall deliver to Owner, as required in Section 21 herein, the financial
statement for the fiscal year or portion thereof ending on the date of
termination. All deposits and funds in the Operating Account or in MANAGER's
possession shall immediately be remitted to OWNER (or, if so directed by OWNER,
to MANAGER's replacement). Immediately upon termination of this Agreement for
any reason, MANAGER shall deliver to OWNER all records, contacts, leases,
receipts for deposits, unpaid bills, a computer printout of all computerized
records and all other papers or documents which are in MANAGER's possession or
under MANAGER's control and which relate to the Properties.

 

34. Assignment. OWNER or Owners may assign its rights and obligations hereunder
to any assignee of the Master Agreement. MANAGER may not assign its rights and
obligations hereunder without the advance written consent of Owner which consent
may be withheld or granted by Owners and Lender in their sole and absolute
discretion.

 

35. Notices. All notices, requests, demands or other communications under this
Agreement shall be in writing. Notice shall be sufficiently given for all
purposes as follows: (a) when personally delivered to the recipient; notice is
effective upon delivery; (b) when mailed first class to the last address of the
recipient known to the party giving notice; notice is effective three (3) mail
delivery days after deposit in a United States Postal Service office or mailbox;
(c) when mailed certified mail, return receipt requested; notice is effective
upon receipt, if delivery is confirmed by a return receipt; (d) by overnight
delivery using a nationally recognized overnight courier, charges prepaid or
charged to the sender’s account; notice is effective upon delivery, if delivery
is confirmed by the delivery service; or (e) when sent by telex or facsimile to
the last telex or fax number of the recipient known to the party giving notice;
notice is effective upon receipt, provided that (i) a duplicate copy of the
notice is promptly given by first-class or certified mail or by overnight
delivery, or (ii) the receiving party delivers a written confirmation of
receipt; any notice given by telex or facsimile shall be deemed received on the
next business day if it is received after 5:00 PM (recipient’s time) or on a
nonbusiness day. Any correctly addressed notice that is refused, unclaimed, or
undeliverable because of an act or omission of the party to be notified shall be
deemed effective as of the first date that said notice was refused, unclaimed,
or deemed undeliverable by the postal authorities, messenger or overnight
delivery service. Any party may change its address, telex or fax number by
giving the other party notice of the change in any manner permitted by this
Agreement.

 

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Addresses for purposes of giving notice are as follows:

 

If to OWNER,

addressed to:John Winfield

President and Chairman

The InterGroup Corporation

10940 Wilshire Blvd., Suite 2150

Los Angeles, CA 90024

Phone: 310/889/2555

FAX: 310/440/0081

 

With Copy to:Michael G. Zybala

Asst. Secretary & General Counsel

The InterGroup Corporation

Phone: 310/466/7961

Email: mzybala@intgla.com

FAX: 858/673/5406

 

If to MANAGER

Addressed to:Investor's Property Services

15707 Rockfield, Suite 225

Irvine, CA 92618

Attention: Robert C. Warren III Phone: 949/900-6160

FAX: 949/900-6601

 

 

36. Entire Agreement. This Agreement contains the entire agreement between the
parties hereto, and supersedes any prior written or oral agreement between said
parties concerning the subject matter contained herein. There are no
representations, agreements, arrangements or understandings, oral or written
between and among the parties hereto, relating to the subject matter contained
in this Agreement, which are not fully expressed herein.

 

37. Governing Law. The validity, interpretation, construction and performance of
this Agreement shall be controlled by and construed under the laws of the State
of California, without giving effect to principles of conflict of law thereof.
In the event of any litigation arising out of any dispute in connection with
this Agreement, the parties hereby consent to the jurisdiction of the California
courts.

 

38. Mediation If a dispute, controversy or claim: (i) occurs, in law or in
equity; (ii) involves any of the Parties; and (iii) arises under, out of, in
connection with, or in relation to this Agreement, any amendments to this
Agreement or a breach of this Agreement, the disputing Parties agree first to
try in good faith to settle the dispute by mediation under the mediation rules
of JAMS or its successor organization before resorting to litigation. The
disputing Parties agree that mediation shall be completed within thirty (30)
days of a notification of a dispute, unless otherwise agreed by such Parties in
writing.

 

39. No Recording. Unless required by Lender, this Agreement shall not be filed
of record in the deed, deed of trust, real property or other records in any
county or office in any state. OWNER may file a copy of this Agreement with its
reports to the Securities and Exchange Commissions (“SEC”) to meet its public
company reporting requirements with the SEC and NASDAQ.

 

40. MANAGER's and OWNER's Liability. MANAGER shall be liable to OWNER for all
losses, damages, liabilities, actions, proceedings, claims, fines, penalties,
costs and expenses, including without limitation attorney's fees and court
costs, sustained or incurred by OWNER by reason of or arising out of MANAGER's
breach of the duties and obligations required by this Agreement. OWNER shall be
liable to MANAGER for all losses, damages, liabilities, actions, proceedings,
claims, fines, penalties, costs and expenses, including without limitation
attorney's fees and court costs, sustained or incurred by MANAGER by reason of
or arising out of OWNER's breach of the duties and obligations required by this
Agreement.

 

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41. Sale of Properties. If OWNER so requests, MANAGER shall cooperate with any
and all brokers specified by OWNER to the end that the respective activities of
MANAGER and broker(s) may be carried on without friction and without
interference with Tenants and occupants. MANAGER will permit the broker to
exhibit any of the Properties during reasonable business hours provided the
broker has notified MANAGER in advance. MANAGER agrees that failure on its part
to extend cooperation to a broker(s) desiring to show any of the Properties is a
material default on its part under this Agreement and is a ground for
termination of this Agreement immediately upon written notice to MANAGER.
MANAGER shall not be entitled to a commission or fee of any nature whatsoever
with respect to such sale.

 

42. Audits. OWNER or Owners may examine or audit or cause to be examined or
audited any and all books, records, computer software or other materials
maintained by MANAGER with respect to the operation, management, maintenance, or
repair of the Properties, either at the Properties or at any office of MANAGER.

 

43. Attorneys' Fees. With regard to any action or proceeding between the parties
arising from or relating to this Agreement or the enforcement or interpretation
hereof, the party prevailing in such action or proceeding shall be entitled to
recover from the other party all of its reasonable attorneys’ fees and other
costs and expenses of the action or proceeding.

 

44. Applicability of Agreement. It is understood and agreed that (a) the
provisions of this Agreement shall apply to each of the Properties described on
Exhibit A as if each Property has a separate management agreement, and (b) the
parties hereto may act in any manner that is authorized by this Agreement with
respect to any one (1) Property without affecting any of the other Properties.

 

45. Confidentiality. MANAGER shall regard all information relating to the
Properties and all information supplied to MANAGER by OWNER, lenders or any of
its employees or agents as confidential and proprietary information of OWNER
and/or Owners, and shall not permit its release to other parties without OWNER's
prior written authorization.

 

46. Force Majeure. Neither party shall be liable to the other in damages nor
shall this Agreement be terminated nor a default be deemed to have occurred
because of any failure to perform hereunder caused by a "Force Majeure". In this
Agreement, the term "Force Majeure" shall mean an event, such as, but not
limited to, fire, earthquake, flood, explosion, casualty, strike, unavoidable
accident, riot, insurrections, civil disturbance, act of public enemy, embargo,
war, act of God, inability to obtain labor, materials or supplies, any outbreak
of disease, and any governmental regulation, restriction or prohibition, or any
other similar cause beyond the parties' control.

 

47. Standard of Operation. MANAGER agrees to manage and operate the Properties
in the name and for the account of Owners, in accordance with the terms of this
Agreement and in regular, continuous and substantial consultation with OWNER,
and MANAGER hereby agrees to furnish such management and operational skills in
such a manner to protect, preserve, and enhance the financial return to Owners.
MANAGER shall operate the Properties considering the physical characteristics of
the Properties and the quality level, marketing mix and other matters set forth
in the Budgets, and shall provide or cause to be provided all amenities in
connection therewith which are customary and usual to such an operation.

 

48. Meetings. OWNER and MANAGER shall meet regularly upon OWNER's request, at
mutually agreeable times and places, for the general purpose of consultation and
advisement as to Properties' operating plans for the balance of the fiscal year
and all other material aspects of Properties' performance, including without
limitation, operations and management of all material policies and procedures
affecting all material phases of the conduct of business at the Properties.
MANAGER shall consult with and seek advice from OWNER prior to MANAGER
effectuating any policies or procedures.

 

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[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

 

 

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date and
year first above written.

 

"OWNER"   "MANAGER"           THE INTERGROUP CORPORATION   R & K INTERESTS,
INC., a California Corporation doing business as INVESTORS' PROPERTY SERVICES  
        By: /s/ John V. Winfield   By: /s/ Robert C. Warren   John V. Winfield  
  Robert C. Warren,   President and Chairman     President

 

 

 

 

EXHIBIT A

 

DESCRIPTION OF PROPERTIES

 

Property Address City St Units           Villas at Beaver Creek 1000 Meadow
Creek Dr   Irving TX 358 Capitol Village 6855 U.S. 290   Austin TX 249 Cross
Keys 3209 Cross Keys Dr #2 Florissant MO 264 Meadowbrook 3579 Us Highway 46
Parsippany NJ 151 Pine Lake 101 Pinehurst Dr Florence KY 157