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1 SULLIVAN HILL REZ & ENGEL, APLC
Timothy C. Earl, SBN 174967
2 earl@sullivanhill.com
Shailendra U. Kulkarni, SBN 304761
3 kulkarni@sullivanhill.com
600 B Street, Suite 1700
4 San Diego, California 92101
Telephone: (619) 233-4100
5 Fax Number: (619) 231-4372
6 Attorneys for Cross-Complainant THIRD STREET NAPA DEVELOPMENT, LLC
7
8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 COUNTY OF NAPA
10 SYAR CONCRETE, LLC, a limited ) Case No.: 21CV000406
liability company, )
11 ) DECLARATION OF R. BARRY
) MCCOMIC IN SUPPORT OF
12 Plaintiff, ) MOTION OF CROSS-
) COMPLAINANT THIRD STREET
13 v. ) NAPA DEVELOPMENT, LLC FOR
) SUMMARY ADJUDICATION AS TO
14 RLM CONSTRUCTION SERVICES, ) FIRST, SECOND, AND THIRD
INC., a corporation, MICHAEL REYES, also ) CAUSES OF ACTION OF CROSS-
15
known as MIKE L. REYES, a private individual; ) COMPLAINT AGAINST CROSS-
) DEFENDANT RLM CONSTRUCTION
16 ATLANTIC SPECIALTY INSURANCE ) SERVICES, INC. REGARDING
COMPANY, a New York Corporation, and ) CONTRACTUAL INDEMNITY
17 DOES 1 through 30, inclusive, )
) Hearing Date: April 4, 2023
18 Defendants. ) Time: 8:30 a.m.
)
19 ) Complaint Filed on: March 23, 2021
) Judge: Hon. Cynthia P. Smith
20 ) Dept: A
)
21 AND ALL RELATED CROSS-ACTIONS. )
)
22
23 I, R. Barry McComic, declare as follows:
24 1. I am the Managing Member of Defendant/Cross-Complainant THIRD STREET NAPA
25 DEVELOPMENT, LLC (“THIRD STREET”), the owner/developer of the construction project
26 commonly known as the “Third Street Napa/Register Square” project located in Napa, California (the
27 “Project”). I make this declaration in support of THIRD STREET’s Motion for Summary Adjudication
28 as to First, Second, and Third Causes of Action Regarding Contractual Indemnity based on my
#5384484v1 1
DECLARATION OF R. BARRY MCCOMIC IN SUPPORT OF MOTION OF CROSS-COMPLAINANT THIRD
STREET NAPA DEVELOPMENT, LLC FOR SUMMARY ADJUDICATION
1 personal knowledge of the matters set forth herein, save for those matters stated on information and
2 belief, which I believe to be true and to which I would testify, if necessary, under penalty of perjury of
3 the laws of the State of California.
4 2. As the Managing Member of THIRD STREET, I participated in, managed, and oversaw
5 all aspects of the development and construction of the Project. In that capacity, I also serve as a
6 custodian of all business records of THIRD STREET related to the Project.
7 3. Contemporaneous with my execution of this declaration, I have reviewed the
8 documents attached hereto as Exhibits “1” through “5” and hereby verify, based upon my personal
9 knowledge, that the exhibits represent business records of THIRD STREET which were made,
10 received, generated, recorded, and/or collected in the regular course of business, at or near the time of
11 the act(s), condition(s), or event(s) related thereto, and that the sources of information and method and
12 time of preparation concerning such records were such as to indicate their trustworthiness. I further
13 verify, based on my personal knowledge, that the documents attached hereto as Exhibits “1” through
14 “5” are true and correct copies of the documents referenced herein, and that those documents are what
15 they purport to be.
16 4. In or about 2015, THIRD STREET, as owner, and Defendant/Cross-Complainant
17 VESTA PACIFIC DEVELOPMENT, INC. (“VESTA PACIFIC”), as prime contractor, entered into a
18 written agreement entitled “Project Management Services Agreement (the “PMSA”) pertaining to the
19 development and construction of the work of construction and/or improvement commonly known as
20 the “Third Street Napa/Register Square” project located in Napa, California (the “Project”). A true
21 and correct copy of the PMSA is attached hereto and submitted herewith as Exhibit “1.”
22 5. On or about October 15, 2018, VESTA PACIFIC, as prime contractor, entered into a
23 written subcontract agreement (the “Subcontract”) with RLM, as subcontractor, for the performance
24 of certain concrete construction work on the Project. A true and correct copy of the Subcontract is
25 attached hereto and submitted herewith as Exhibit “2.”
26 6. THIRD STREET has made repeated demand upon RLM to defend and indemnify
27 THIRD STREET against all claims asserted by RLM’s material supplier, Plaintiff SYAR
28 CONCRETE, LLC (“SYAR”), in connection with the mechanic’s lien recorded by SYAR against the
#5384484v1 2
DECLARATION OF R. BARRY MCCOMIC IN SUPPORT OF MOTION OF CROSS-COMPLAINANT THIRD
STREET NAPA DEVELOPMENT, LLC FOR SUMMARY ADJUDICATION
Proje t (the" e hani ' ien" and/or the top payment notice se rvedup n THIRD TRE T by
R (the' oti e'"), av ell as the insta nt
law uitfiled b Y R (the " La uit") a agai n t
H e er, RLM refu ed to defend or indemnify THIRD TR · T again tthe
R laim .
7. lnli ght ofRLM' refusa ltodefendor indemnifyTHIRD TR ··Tfro meitherthe top
otice or the M chanic' Lien, THIRD TREET was forced to obta in the fo llowin g bonds from ro -
SPECIALTY I URA E OMPANY ('·ATLA Tl ").a rclea e-bond
urety: a) a ·'Bond to Release Money Withheld on Claim ," Bond o. 800017597 (the " top otice
9 Re lea e Bond") to tand as security for the Stop otice, and b) a "Release of Lien Bond ," Bond o.
IO 8000 I 7598 (the "Mechanic s Lien Release Bond ') to stand as security for the Mechanic· Lien. True
11 and correct copies of the Stop otice Release Bond and the Mechanic ' s Lien Release Bond at attached
12 hereto and submitted herewith as Exhibits "3" and' 4," respect ively. To date. TH JRD RE T has
13 incurred premium costs in a total principal amount of$ I 0.320.00 in connection v ith procuring uch
14 bonds.
15 8. On or about March 17, 2022, THIRD STREET and SY AR entered into a written
16 settlement agreement and assignment of claims (the 'Settlement Agreement"') herein, inter a/ia. a)
17 THI RD STREET agreed to settle all claims asserted by SY AR as against TH I RD TRE ET arising out
18 of RLM 's non-payment for materials provided by SYAR forthe Project in exchange forTHJRD
19 STRE T's payment to SY AR in the amount of $225,000.00, and b) RLM agreed to assign (and
20 THfRD STREET agreed to accept) all claims of SY AR against RLM and/or REYES arising out of or
21 related to the Project. A true and correct copy of the ettlement Agreement is attached hereto and
22 submitted herewith as Exhi bit 5.'' THIRD STREET actually made payment to YAR of the
23 $225,000.00 amount called for in the Settlement Agreement on or about April 15, 2022.
24 I declare under penalty of perjury under the laws of the State of alifornia that the foregoing
25 is true and correct. Executed this J..l::::day of January, 2023 , at San Diego, alifornia.
26
27 Cg~
28 ~ . Barr ic
~3M4M v l 3
DECLARATIO OF R. BARR T
TH IRD TREET NA
EXHIBIT 1
EXHIBIT "H"
PROJECT
MANAGEMENT SERVICES AGREEMENT
This Agreement (the "Agreement") is made as of _ _ _ _ _ _ __, 2015 by and between
Third St. Napa Development, LLC, a California limited liability company ("Owner"), and Vesta
Pacific Development, Inc., a California corporation ("Vesta"). Owner and Vesta are sometimes
referred to individually as "Party" and collectively as "Parties".
RECITALS
1. Owner is a limited liability company organized under the laws of the State of California.
[.
2. Vesta is a Corporation in good standing incorporated under the laws of the State of
California. :
3. Owner is the owner of certain real property consisting of approximately 1.7 acres
located at Seminary and Third Street in Napa, California, ("Property"). 1
4. Owner intends to develop a 51+/- unit condominium mixed use project on the Property.
5. Owner wishes to obtain entitlements from the City of Napa for the development based
on plans prepared by Design Professionals under the supervision of Vesta. l _
6. Vesta is licensed as a general building contractor under the laws of the State of
California. Its license number is 8 982585. :~
7. Owner desires to engage the services of Vesta to manage the development and
construction of the Property including, but not limited to, overseeing all pre- development
planning including but not limited to managing all consultants, submittals to the city and other
public agencies, accounting and bookkeeping, loan submissions and draws, assist in tax
preparation, improve the lots and the design and construction of condominiums and related
improvements, and providing oversight of ail marketing and sales activities all pursuant to the
terms and conditions set forth in this Agreement. !
8. Vesta is willing to perfonn such services pursuant to the tenns and conditions set forth
In this Agreement. ·
NOW, THEREFORE, in consideration of the mutual covenants herein the parties hereto
hereby agree as follows:
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EXHIBIT "G"
(1) Land Development & Sale and (2) Home Building Project Pro Formas
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ARTICLE 1
DEFINITIONS
The following definitions shall apply herein:
"Approved Budget" shall mean the Project Budget as approved by the Owner.
"Approved Plans" shall mean the Project Plans as approved by the Owner and any public
agency that has jurisdiction of any part of the Project.
"Design Professionals" shall mean all persons or entitles retained by Owner to provide
architectural, engineering, or other design services to the Project.
"Project" shall mean the construction and development of the Site Development
Activities and Vertical Construction Activities and other items customarily required as part
of residential mixed use project on the Property, pursuant to the Approved Plans.
"Project Budget" shall mean the estimated revenues, expenses and source of funds with
respect to the construction and development of the Project prepared by Vesta.
"Project Costs" shall mean all actual costs and expenses incurred with respect to the
Project in compliance with the Approved Budget.
"Project Plans" shall mean the site plan and plans and specifications with respect to the
construction and development of the Project.
"Project Revenues" shall mean gross proceeds from the sale of condominiums (including
commercial), which comprise the Project.
4
'Site Development Activities" shall mean the installation of all on and offsite development
work including but not limited to demolition, grading, street improvements, wet and dry
utilities, walls/fencing and landscaping required by the conditions of approval and
Approved Plans for the project.
"Vertical Construction Activities" shall mean the installation of all buildings and structures
not included in the Site Development Activities required by the Approved Plans.
"Warranty Servicing" shall mean during a period of one year from the close of escrow of
a Unit, Vesta will, manage any issues that arise relating to homeowner customer service
requests and cause the repair or replacement of affected components covered under the
Fit and Finish Warranty provided by Vesta at the time that the unit sells. The decision
whether to repair or replace the component(s) shall be within the sole discretion of Vesta.
Vesta agrees to devote the time necessary to address customer service requests. Vesta
shall outline to each buyer the proper method of requesting customer service.
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ARTICLE2
VESTA'S DUTIES AND RESPONSIBILITIES
2.1 Approval of Project Plans and Budget. Vesta has prepared a project budget
attached hereto as Exhibit A, Vesta shall submit to Owner for Owner's approval a Project
Budget. Vesta shall revise the Project Budget to incorporate any changes requested by Owner
or applicable governmental jurisdiction(s) and shall re-submit the same for approval by Owner.
As soon as practical, Vesta shall submit Project Plans to Owner for approval. Vesta shall
update and refine this Project Budget for Owner's approval as the development of the
Drawings and Specifications proceeds and advise the Owner if it appears that the Project
Construction Budget will not be met and make recommendations for corrective action. The
Project Plans and Project Budget as approved by Owner will be the "Approved Plans" and the
"Approved Budget".
2.2 Approval of Project Schedule. As soon as practical, Vesta shall submit to Owner a
project schedule. The proposed project schedule as finally approved by Owner will thereafter
be the "Approved Project Schedule". Vesta shall update the Approved Project Schedule
incorporating a detailed schedule for the construction operations of the Project, including
activity sequencing and durations.
2.3 Project Management, Meetings.
2.3.l Vesta shall coordinate, oversee and manage the entitlement, lot development
and construction upon the Property in substantial compliance with the Approved Plans and the
Approved Budget ("Site Development Activities"; and, in the case of vertical improvements, the
..Vertical Construction Activities"). The Development Activities and Vertical Construction
Activities shall include, without limitation, the following:
2.3.2 The day-to-day management of the Project shall be the responsibility of Vesta
which shall make decisions with respect to the Project subject to and as set forth in this
Agreement and in accordance with the Approved Plans and Approved Budget.
2.3.3 Meetings between Owner and Vesta shall be held at least monthly at such
time and at such place as the parties shall determine. Special meetings shall be held on the
written call of the other party. Vesta shall be responsible for having written minutes taken at
each meeting which shall be sent to Owner within five (5) working days following such meeting,
which minutes shall not be binding on Owner.
2.4 Performance of Management. Vesta shall perform its functions in a diligent, careful
and professional manner, devoting its prompt attention to the Project, and shall use
commercially reasonable best efforts to maximize revenues and minimize expenses and
losses, and to complete the Project on time. The Services (defined below) shall be of, and the
Project shall be developed, operated and maintained in, a professional workman like manner,
consistent with the quality generally performed by professional residential community
development managers in California and located in the same market area as the Project (the
"Standard of Care"). Vesta wlll make available to Owner the full benefit of the judgment,
experience and advice of the principals and employees of Vesta's organization. Vesta will at
all times act diligently, in good faith, and in a commercially reasonable manner with respect to
the proper protection of and accounting for Owner's assets. In performing its obligations and
exercising Its rights hereunder, Vesta shall be subject to Owner's overview and supervision.
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2.5 Power and Authority of Vesta. Except for matters which Vesta is authorized to
undertake hereunder and which are consistent with the Approved Plans and the Approved
Budget, all major or substantive policy decisions with respect to the development and
construction of the Project shall be subject to the advance approval of the Owner. Without
limiting the generality of the foregoing, it is hereby further understood and agreed by the
Parties that Vesta shall not take any of the following actions, which shall be deemed major or
substantive policy decisions for purposes of this Article, without first consulting with and
obtaining the written consent of the members of Owner who hold at least seventy-five percent
(75%) of the percentage interests in Owner, without taking into account any member who is an
affiliate of Vesta:
2.5.1 Authorize the expenditure of any sums other than those approved as part of
the Approved Plans and in accordance with the Approved Budget;
2.5.2 Do any act in contravention of the Agreement;
2.5.3 Commence development of or construction on the Property except in
accordance with the Approved Plans;
2.5.4 Obtain building and other permits except in accordance with the Approved
Plans;
2.5.5 Do any act which would make it impossible to carry on the Project;
2.5.6 Possess, assign or use funds of the Project except in accordance with the
Approved Budget;
2.5.7 Authorize or cause to be constructed, any improvements on the Property or
otherwise take any action to improve or develop the Property except in accordance with the
Approved Plans;
2.5.8 Incur any indebtedness on behalf of the Owner;
2.5.9 Settle any claims for insurance except as approved in writing by Owner;
2.5.1 O Settle any claim for payment of awards or damages arising out of the exercise
of eminent domain by any public or governmental authority;
2.5.1 I Make, execute or deliver on behalf of Owner any guarantee, indemnity bond or
surety bond;
2.5.12 Obligate the Project or another party as a surety, guarantor or accommodation
party, to any obligation, other than by endorsing checks for deposit to the Project accounts in
the ordinary course of business;
2.5.13 Borrow or lend funds out of Project accounts to any third party, or extend to
any person, firm, or corporation, credit on behalf of the Project;
2.5.14 Make or execute any contract with any consultant. subcontractor, supplier or
other person on behalf of Owner other than in its capacity as an Independent Contractor of
Owner; or
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2.5.15 Cause or consent to any Trust Deed or other monetary encumbrance against
the Property.
2.6 Management and Responsibilities of Vesta. Vesta shall act as project manager and
general contractor for the Project and shall take all actions necessary to implement and carry
out the Project in accordance with the Approved Plans, Approved Budget, Section 2.4 above
and this Section 2.6 {collectively, including but not limited to the following items, the
"Services"), Including but not limited to:
2.6.1 Supervising the performance of all consultants and subcontractors to ensure
compliance with the terms of their contracts and with all laws;
2.6.2 Ensuring that all subcontracts for materials and supplies and consultant
services for the Project which are arranged by Vesta are on subcontract forms, material supply
forms, requisitions and work orders approved by Owner:
2.6.3 Supervising and preparing draws for the processing for payment, according to
the procedures set forth herein and subject to any retainage, of all construction obligations
when due. Owner shall be responsible for direct payment of the project expenses;
2.6.4 Ensuring that, concurrent with any payment to a subcontractor, supplier or
materialman, appropriate lien releases are obtained from each such person In accordance
with the terms of Civil Code Sections 8132 et. seq.;
2.6.5 Arranging for and completing the installation and construction of Site
Development Activities to the extent and in the manner authorized by the Approved Plans and
Approved Budget;
2.6.6 Arranging for and completing the construction of the Vertical Construction
Activities;
2.6.7 Subject to Owner's approval, updating the Approved Budget for the Project.
2.6.8 Complying with, and causing the employees of Vesta or any affiliate to comply
with, the terms and provisions of this Agreement and all laws;
2.6.9 Assist in the securing such grading, building and other permits and
authorizations on behalf of the Project as are required by the Approved Plans, and, in
consultation with Owner, representing Owner and the Project at meetings with governmental
bodies and organizations controlling the issuance of such permits and authorizations;
2.6.1 O Taking no actions and, if within Vesta's control or influence, allowing no actions
to be taken which affect the title to the Project except to the extent approved by the Owner In
advance and in writing;
2.6.11 Causing to be prepared, on forms acceptable to Owner, all documents
necessary to implement construction of the Project (including, but not limited to, subcontracts
or other contracts);
2.6.12 Preparing all budgets, and cost estimates which Vesta reasonably deems
necessary relating to the construction of the Project, in a careful, complete and accurate
manner, and promptly thereafter delivering such Information to Owner and thereafter diligently
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and promptly, but not less frequently than monthly, delivering to Owner all revisions,
modificatlons or supplements to such information which reflect a substantial change;
2.6.13 Obtaining bids on subcontracts. Entering into subcontractor agreements
necessary to complete the Project per the Approved Budget;
2.6.14 Causing to be carried out a customer service program, including warranty
work; and
2.6.15 Hiring a sufficient number of employees in order to perform its tasks hereunder
in a timely fashion and In accordance with the Standard of Care.
2.6.16 Keeping books of account for the Project showing all expenses Incurred,
payments made and showing any variances from the Approved Budget; and preparing for
delivery to Owner within 5 days after the end of each calendar month a statement of income
and cash flows showing expenses incurred, revenues and any variances from budgeted
amounts set forth in the Approved Budget.
2.6.17 Establishing an escrow coordination program for processing and closing
escrows.
2.6.18 Implementing, coordinating and directing a sales and marketing program,
including a model complex and sales facility subject to the Approved Plans and the Approved
Budget.
2.6.J9 Assisting with the preparation of all income tax filings related to the Project and
providing Owner with necessary annual income tax documents.
2.7 Warranty and Construction Deficiency Claims
(a) Vesta shall provide each Buyer of a residence from Owner a warranty of, Fit and
Finish, as required by section 900 of the California Civil Code. Under the terms of
the warranty Vesta shall repair and replace any component in the residence which
does not meet the standard of quality as measured by Guidelines set forth in the
Residential Performance Guidelines for Professional Builders and Remodelers or if
an item is not covered in that publication, by standard industry practice.
(b} Vesta shall also administer during the statutory period of ten (10) years under
California Law in accordance with Sections 895 through 940.5 any claims of
construction deficiency with respect to the residence built by Vesta and sold by
Owner. Vesta as the "builder" under the law, shall be Owner's representative in
connection with construction deficiency claims and, as such, shall be the chief
liason with all attorneys, insurance company representatives, claimants and their
representatives and consultants, homeowner association representative, and any
Governmental agency employees or representatives. Vesta shall use its best
efforts to settle any claims for construction deficiency with the approved of Owner.
2.8 Emergency Costs. Irrespective of the provisions set forth elsewhere in this
Agreement, Vesta shall at all times during the term of this Agreement have the authority, with
no further approval required, to Incur costs on behalf of Owner on an emergency basis up to a
maximum aggregate amount of Three Thousand Dollars ($3,000} for any such emergency.
Vesta shall give prompt written and telephonic notice to Owner of any and all such
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emergencies requiring the emergency expenditure of funds by Vesta.
2.9 Contracts. Subcontracts, and work orders for subcontractors, materials and
supplies may be entered into and signed by Vesta; however, Vesta shall have no authority to
bind Owner to any contract or relationship except as may be otherwise provided in this
Agreement. Vesta may not enter into any contract directly or Indirectly relating to the project
with a related party or an entity In any way affiliated with Vesta without the prior written
consent of the members of Owner who hold at least seventy-five percent (75%)of the
percentage Interests In Owner, without taking Into account any member who Is an affiliate of
Vesta.
2.10 Project Costs and Expenses. It Is understood and agreed that all on site costs and
expenses and all indirect project related costs incurred by Vesta pursuant to the Approved
Budget and in connection with Vesta's performance of the Services (other than Vesta's
overhead costs described below) shall be paid by Owner in accordance with this Agreement.
Vesta's overhead costs and general administration costs shall be those relating to its off-tract
offlce(s) and personnel at such office(s), including but not limited to Vesta's construction,
finance, purchasing, clerical, secretarial, bookkeeping and administrative personnel, and all of
Vesta's costs for telephone and telephone service, facsimile machines, photocopy equipment,
office supplies and utilities.
2.11 Wrap Insurance Policy. Vesta shall assist Owner in connection with Owner's
application for a "wrap" insurance policy covering Owner, Vesta and Trade Contractors in the
amounts set forth in paragraph 4.6.
ARTICLE3
DEVELOPMENT AND CONSTRUCTION LOAN OBLIGATIONS
3.1 Owner Obtaining and Guaranteeine: Loans. It shall be the responsibility of the
Owner to take the actions necessary to obtain development and construction financing
sufficient to provide the funding for all Project Costs. Vesta shall assist Owner In submitting
loan applications to lenders selected by Owner and, to the extent authorized by Owner in
writing, negotiate the terms of such loans as may be necessary to fund Project Costs.
However, any loan documents must be approved by and executed by the Owner. Vesta shall
have no liability on any Project financing.
ARTICLE4
OWNER'S OBLIGATIONS
4.1 Owner's Funding. Owner shall pay all Project Costs to the extent such costs are
reflected in the Approved Budget or are otherwise provided for herein or approved by Owner
in writing.
4.2 Disbursement of Funds. Disbursement of funds by Owner or Owner's Lender
pursuant to this Agreement and as set forth In the Approved Budget, including Vesta's
management fee shall be made monthly in accordance with the approved payment schedule
as set forth herein.
th
4.2. l On or about the tenth (10 ) day of each month, or at such other times as
Owner or Owner's Lender may approve or determine more appropriate, Vesta shall submit to
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Owner or Owner's Lender a written itemized statement, signed by Vesta ("Application for
Payment") setting forth:
(a) a description of the work performed, material supplied and/or costs incurred or
due for which disbursement ls requested with respect to any line item ("item") shown in the
Approved Budget: and
(b) the total amount incurred, expended and/or due for each requested Item less
prior disbursements; and
(c) Lien waivers (if required) in form and substance satisfactory to Owner from all
contractors, subcontractors, suppliers and other personnel who may have rights to file liens
against the Property in connection with the Project (A) evidencing Vesta's payment of funds to
such persons as contemplated in prior disbursement requests and (B) waiving rights to lien the
Property with respect to all payments previously received by such persons; and
(d) if requested by Owner, architect's and/or engineer's periodic certifications of
the percentage and/or stage of construction that has been completed and its conformance
with the Approved Plans and governmental requirements based upon any such architect's,
inspector's and/or engineer's periodic physical inspections of the Property;
4.2.2 Vesta shall maintain a written schedule of all checks to be issued by Vesta
from Owner's bank account and listing the subcontractor, material man, vendor, or laborer to
be paid for work done pursuant to this Agreement or materials furnished or incorporated in
such work as the case may be. Vesta is authorized to issue only such checks as are in
accordance with the Approved Budget. Any checks payable to Vesta itself or any affiliate of
Vesta for other than Vesta's monthly management fee agreed to by Owner as part of the
Approved Budget or any checks which are more than Ten Thousand Dollars ($10,000) in
excess of the amount budgeted for such services or materials in the Approved Budget must be
approved In writing by the members of Owner who hold at least seventy-five percent (75%)of
the percentage interests in Owner, without taking into account any member who Is an affiliate
of Vesta, prior to being issued by Vesta.
4.3 Improvement and Construction Bonds. Before commencing construction, Vesta
shall prepare and advise Owner of any Improvement bonds, which will be required by any
governmental entity having jurisdiction over the Project and shall arrange for such bonds or
security which Owner. at its expense, shall furnish or cause to be furnished for the benefit of
the Project. All expenses incurred in conjunction with the bonds shall be Project Costs and
funded from the loans referred to in Article 3 hereof.
4.4 Owner's Representative. The Owner shall designate its Managing Member as the
authorized representative to approve Project Construction Budgets, Changes in the project,
render decisions promptly and furnish information expeditiously.
4.5 Project Documents. Vesta will be furnished without charge all copies of Drawings
and Specification reasonably necessary for the execution of the Work.
4.6 Insurance. As a Project Cost, Owner agrees to obtain and pay for a Wrap
Insurance policy with $3,000,000 per occurrence and $3,000,000 aggregate limits. In addition,
Owner agrees to pay for a project specific excess liability policy of a minimum of $5,000,000 in
coverage. These costs shall be reflected in the Approved Budget. This policy will be for the
benefit of Owner and Vesta.
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4. 7 On Site Project Superintendent. The Project On Site Superintendent based at the
project in NAPA shall be a reimbursable cost of the Project and not part of the Vesta
Compensation. As set forth in the Approved Budget, there shall be no mark up of this
expense, and this expense shall not be incurred until grading has commenced on the Project.
ARTICLES
COMPENSATION
5.1 Compensation of Vesta. As consideration for the performance by Vesta of its
services under this Agreement, as managing developer and general contractor, Owner shall
pay Vesta, a Management Fee in the sum of $1,660,000 as follows:
(a) Vesta shall receive during the entitlement stage a fee of $30,000 per month for a
period of 15 months commencing at the end of the first month after close of
escrow.
(b) Vesta shall receive during the development and construction stage commencing at
the end of the first month after the issuance of a grading permit, $45,000 per
month for a maximum of 18 month.
(c) At the close of escrow of the last four residential units in the Project, Vesta shall
receive payment(s) equal to a total of $400,000, bringing the total fee paid to
$1,660,000.
5.2 Owner shall also pay to Vesta as consideration for its services with respect to
Warranty and Construction Deficiency Claims under Section 2.7 of this Agreement a sum of
$10,000 per Residential unit. Said amount shall be paid out of escrow at the closing of each
unit sold in the Project
5.3 Vesta shall also be paid incentive compensation in addition to its management fee
in an amount equal to ten percent (10%) of the amount, if any, by which the per annum return
on the capital contributions by the members of Owner to Owner exceeds a twenty percent
(20%) per annum return. Such incentive compensation shall be paid at the conclusion of the
project at the same time as the distribution of available cash is made by Owner to the
members of Owner.
ARTICLE6
CHANGES
6.1 Change Order(s). Any modification, addition or omission to the scope of the work
resulting in a change in the Approved Plans Approved Budget and/or Approved Schedule shall
be set forth In a written change order ("Change Order") signed by both Owner and Vesta,
reflecting the nature of the change of the Approved Plans, any increase or decrease In the
Approved Budget, and any Increase or decrease in the Approved Schedule for completion of
the Project to be performed by Vesta. Vesta shall not be responsible for any work other than
1he work as modified by Change Order. All terms and conditions of this Contract shall be
deemed incorporated into the Change Order.
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Owner or Vesta may initiate a change by issuing either a request for proposal to Vesta or a
proposed Change Order. After receipt of a request from Owner, Vesta shall prepare and
submit a cost proposal for the requested change. If Owner and Vesta are unable to reach an
agreement as to the cost of any additional work to be reflected in a Change Order, Owner may
direct Vesta, by written order, to proceed with the work Involved. The price of such work shall
then be determined on a time and materials basis.
6.2 Delays and Extensions of Time. If Vesta is delayed in the progress of the Work by
any act or omission of Owner or its agents or employees, any separate contractor employed
by Owner, or by changes ordered in the Work, acts of God, fire, unusual delays in
transportation, adverse weather conditions, strikes or other labor disruptions, acts of public
enemy, civil commotion, failure of issuance of any permits, licenses or approvals within a
reasonable period of time, Owner's failure to make payme
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1 SULLIVAN HILL REZ & ENGEL, APLC Timothy C. Earl, SBN 174967 2 earl@sullivanhill.com Shailendra U. Kulkarni, SBN 304761 3 kulkarni@sullivanhill.com 600 B Street, Suite 1700 4 San Diego, California 92101 Telephone: (619) 233-4100 5 Fax Number: (619) 231-4372 6 Attorneys for Cross-Complainant THIRD STREET NAPA DEVELOPMENT, LLC 7 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 COUNTY OF NAPA 10 SYAR CONCRETE, LLC, a limited ) Case No.: 21CV000406 liability company, ) 11 ) DECLARATION OF R. BARRY ) MCCOMIC IN SUPPORT OF 12 Plaintiff, ) MOTION OF CROSS- ) COMPLAINANT THIRD STREET 13 v. ) NAPA DEVELOPMENT, LLC FOR ) SUMMARY ADJUDICATION AS TO 14 RLM CONSTRUCTION SERVICES, ) FIRST, SECOND, AND THIRD INC., a corporation, MICHAEL REYES, also ) CAUSES OF ACTION OF CROSS- 15 known as MIKE L. REYES, a private individual; ) COMPLAINT AGAINST CROSS- ) DEFENDANT RLM CONSTRUCTION 16 ATLANTIC SPECIALTY INSURANCE ) SERVICES, INC. REGARDING COMPANY, a New York Corporation, and ) CONTRACTUAL INDEMNITY 17 DOES 1 through 30, inclusive, ) ) Hearing Date: April 4, 2023 18 Defendants. ) Time: 8:30 a.m. ) 19 ) Complaint Filed on: March 23, 2021 ) Judge: Hon. Cynthia P. Smith 20 ) Dept: A ) 21 AND ALL RELATED CROSS-ACTIONS. ) ) 22 23 I, R. Barry McComic, declare as follows: 24 1. I am the Managing Member of Defendant/Cross-Complainant THIRD STREET NAPA 25 DEVELOPMENT, LLC (“THIRD STREET”), the owner/developer of the construction project 26 commonly known as the “Third Street Napa/Register Square” project located in Napa, California (the 27 “Project”). I make this declaration in support of THIRD STREET’s Motion for Summary Adjudication 28 as to First, Second, and Third Causes of Action Regarding Contractual Indemnity based on my #5384484v1 1 DECLARATION OF R. BARRY MCCOMIC IN SUPPORT OF MOTION OF CROSS-COMPLAINANT THIRD STREET NAPA DEVELOPMENT, LLC FOR SUMMARY ADJUDICATION 1 personal knowledge of the matters set forth herein, save for those matters stated on information and 2 belief, which I believe to be true and to which I would testify, if necessary, under penalty of perjury of 3 the laws of the State of California. 4 2. As the Managing Member of THIRD STREET, I participated in, managed, and oversaw 5 all aspects of the development and construction of the Project. In that capacity, I also serve as a 6 custodian of all business records of THIRD STREET related to the Project. 7 3. Contemporaneous with my execution of this declaration, I have reviewed the 8 documents attached hereto as Exhibits “1” through “5” and hereby verify, based upon my personal 9 knowledge, that the exhibits represent business records of THIRD STREET which were made, 10 received, generated, recorded, and/or collected in the regular course of business, at or near the time of 11 the act(s), condition(s), or event(s) related thereto, and that the sources of information and method and 12 time of preparation concerning such records were such as to indicate their trustworthiness. I further 13 verify, based on my personal knowledge, that the documents attached hereto as Exhibits “1” through 14 “5” are true and correct copies of the documents referenced herein, and that those documents are what 15 they purport to be. 16 4. In or about 2015, THIRD STREET, as owner, and Defendant/Cross-Complainant 17 VESTA PACIFIC DEVELOPMENT, INC. (“VESTA PACIFIC”), as prime contractor, entered into a 18 written agreement entitled “Project Management Services Agreement (the “PMSA”) pertaining to the 19 development and construction of the work of construction and/or improvement commonly known as 20 the “Third Street Napa/Register Square” project located in Napa, California (the “Project”). A true 21 and correct copy of the PMSA is attached hereto and submitted herewith as Exhibit “1.” 22 5. On or about October 15, 2018, VESTA PACIFIC, as prime contractor, entered into a 23 written subcontract agreement (the “Subcontract”) with RLM, as subcontractor, for the performance 24 of certain concrete construction work on the Project. A true and correct copy of the Subcontract is 25 attached hereto and submitted herewith as Exhibit “2.” 26 6. THIRD STREET has made repeated demand upon RLM to defend and indemnify 27 THIRD STREET against all claims asserted by RLM’s material supplier, Plaintiff SYAR 28 CONCRETE, LLC (“SYAR”), in connection with the mechanic’s lien recorded by SYAR against the #5384484v1 2 DECLARATION OF R. BARRY MCCOMIC IN SUPPORT OF MOTION OF CROSS-COMPLAINANT THIRD STREET NAPA DEVELOPMENT, LLC FOR SUMMARY ADJUDICATION Proje t (the" e hani ' ien" and/or the top payment notice se rvedup n THIRD TRE T by R (the' oti e'"), av ell as the insta nt law uitfiled b Y R (the " La uit") a agai n t H e er, RLM refu ed to defend or indemnify THIRD TR · T again tthe R laim . 7. lnli ght ofRLM' refusa ltodefendor indemnifyTHIRD TR ··Tfro meitherthe top otice or the M chanic' Lien, THIRD TREET was forced to obta in the fo llowin g bonds from ro - SPECIALTY I URA E OMPANY ('·ATLA Tl ").a rclea e-bond urety: a) a ·'Bond to Release Money Withheld on Claim ," Bond o. 800017597 (the " top otice 9 Re lea e Bond") to tand as security for the Stop otice, and b) a "Release of Lien Bond ," Bond o. IO 8000 I 7598 (the "Mechanic s Lien Release Bond ') to stand as security for the Mechanic· Lien. True 11 and correct copies of the Stop otice Release Bond and the Mechanic ' s Lien Release Bond at attached 12 hereto and submitted herewith as Exhibits "3" and' 4," respect ively. To date. TH JRD RE T has 13 incurred premium costs in a total principal amount of$ I 0.320.00 in connection v ith procuring uch 14 bonds. 15 8. On or about March 17, 2022, THIRD STREET and SY AR entered into a written 16 settlement agreement and assignment of claims (the 'Settlement Agreement"') herein, inter a/ia. a) 17 THI RD STREET agreed to settle all claims asserted by SY AR as against TH I RD TRE ET arising out 18 of RLM 's non-payment for materials provided by SYAR forthe Project in exchange forTHJRD 19 STRE T's payment to SY AR in the amount of $225,000.00, and b) RLM agreed to assign (and 20 THfRD STREET agreed to accept) all claims of SY AR against RLM and/or REYES arising out of or 21 related to the Project. A true and correct copy of the ettlement Agreement is attached hereto and 22 submitted herewith as Exhi bit 5.'' THIRD STREET actually made payment to YAR of the 23 $225,000.00 amount called for in the Settlement Agreement on or about April 15, 2022. 24 I declare under penalty of perjury under the laws of the State of alifornia that the foregoing 25 is true and correct. Executed this J..l::::day of January, 2023 , at San Diego, alifornia. 26 27 Cg~ 28 ~ . Barr ic ~3M4M v l 3 DECLARATIO OF R. BARR T TH IRD TREET NA EXHIBIT 1 EXHIBIT "H" PROJECT MANAGEMENT SERVICES AGREEMENT This Agreement (the "Agreement") is made as of _ _ _ _ _ _ __, 2015 by and between Third St. Napa Development, LLC, a California limited liability company ("Owner"), and Vesta Pacific Development, Inc., a California corporation ("Vesta"). Owner and Vesta are sometimes referred to individually as "Party" and collectively as "Parties". RECITALS 1. Owner is a limited liability company organized under the laws of the State of California. [. 2. Vesta is a Corporation in good standing incorporated under the laws of the State of California. : 3. Owner is the owner of certain real property consisting of approximately 1.7 acres located at Seminary and Third Street in Napa, California, ("Property"). 1 4. Owner intends to develop a 51+/- unit condominium mixed use project on the Property. 5. Owner wishes to obtain entitlements from the City of Napa for the development based on plans prepared by Design Professionals under the supervision of Vesta. l _ 6. Vesta is licensed as a general building contractor under the laws of the State of California. Its license number is 8 982585. :~ 7. Owner desires to engage the services of Vesta to manage the development and construction of the Property including, but not limited to, overseeing all pre- development planning including but not limited to managing all consultants, submittals to the city and other public agencies, accounting and bookkeeping, loan submissions and draws, assist in tax preparation, improve the lots and the design and construction of condominiums and related improvements, and providing oversight of ail marketing and sales activities all pursuant to the terms and conditions set forth in this Agreement. ! 8. Vesta is willing to perfonn such services pursuant to the tenns and conditions set forth In this Agreement. · NOW, THEREFORE, in consideration of the mutual covenants herein the parties hereto hereby agree as follows: 64 EXHIBIT "G" (1) Land Development & Sale and (2) Home Building Project Pro Formas 48 ARTICLE 1 DEFINITIONS The following definitions shall apply herein: "Approved Budget" shall mean the Project Budget as approved by the Owner. "Approved Plans" shall mean the Project Plans as approved by the Owner and any public agency that has jurisdiction of any part of the Project. "Design Professionals" shall mean all persons or entitles retained by Owner to provide architectural, engineering, or other design services to the Project. "Project" shall mean the construction and development of the Site Development Activities and Vertical Construction Activities and other items customarily required as part of residential mixed use project on the Property, pursuant to the Approved Plans. "Project Budget" shall mean the estimated revenues, expenses and source of funds with respect to the construction and development of the Project prepared by Vesta. "Project Costs" shall mean all actual costs and expenses incurred with respect to the Project in compliance with the Approved Budget. "Project Plans" shall mean the site plan and plans and specifications with respect to the construction and development of the Project. "Project Revenues" shall mean gross proceeds from the sale of condominiums (including commercial), which comprise the Project. 4 'Site Development Activities" shall mean the installation of all on and offsite development work including but not limited to demolition, grading, street improvements, wet and dry utilities, walls/fencing and landscaping required by the conditions of approval and Approved Plans for the project. "Vertical Construction Activities" shall mean the installation of all buildings and structures not included in the Site Development Activities required by the Approved Plans. "Warranty Servicing" shall mean during a period of one year from the close of escrow of a Unit, Vesta will, manage any issues that arise relating to homeowner customer service requests and cause the repair or replacement of affected components covered under the Fit and Finish Warranty provided by Vesta at the time that the unit sells. The decision whether to repair or replace the component(s) shall be within the sole discretion of Vesta. Vesta agrees to devote the time necessary to address customer service requests. Vesta shall outline to each buyer the proper method of requesting customer service. 65 ARTICLE2 VESTA'S DUTIES AND RESPONSIBILITIES 2.1 Approval of Project Plans and Budget. Vesta has prepared a project budget attached hereto as Exhibit A, Vesta shall submit to Owner for Owner's approval a Project Budget. Vesta shall revise the Project Budget to incorporate any changes requested by Owner or applicable governmental jurisdiction(s) and shall re-submit the same for approval by Owner. As soon as practical, Vesta shall submit Project Plans to Owner for approval. Vesta shall update and refine this Project Budget for Owner's approval as the development of the Drawings and Specifications proceeds and advise the Owner if it appears that the Project Construction Budget will not be met and make recommendations for corrective action. The Project Plans and Project Budget as approved by Owner will be the "Approved Plans" and the "Approved Budget". 2.2 Approval of Project Schedule. As soon as practical, Vesta shall submit to Owner a project schedule. The proposed project schedule as finally approved by Owner will thereafter be the "Approved Project Schedule". Vesta shall update the Approved Project Schedule incorporating a detailed schedule for the construction operations of the Project, including activity sequencing and durations. 2.3 Project Management, Meetings. 2.3.l Vesta shall coordinate, oversee and manage the entitlement, lot development and construction upon the Property in substantial compliance with the Approved Plans and the Approved Budget ("Site Development Activities"; and, in the case of vertical improvements, the ..Vertical Construction Activities"). The Development Activities and Vertical Construction Activities shall include, without limitation, the following: 2.3.2 The day-to-day management of the Project shall be the responsibility of Vesta which shall make decisions with respect to the Project subject to and as set forth in this Agreement and in accordance with the Approved Plans and Approved Budget. 2.3.3 Meetings between Owner and Vesta shall be held at least monthly at such time and at such place as the parties shall determine. Special meetings shall be held on the written call of the other party. Vesta shall be responsible for having written minutes taken at each meeting which shall be sent to Owner within five (5) working days following such meeting, which minutes shall not be binding on Owner. 2.4 Performance of Management. Vesta shall perform its functions in a diligent, careful and professional manner, devoting its prompt attention to the Project, and shall use commercially reasonable best efforts to maximize revenues and minimize expenses and losses, and to complete the Project on time. The Services (defined below) shall be of, and the Project shall be developed, operated and maintained in, a professional workman like manner, consistent with the quality generally performed by professional residential community development managers in California and located in the same market area as the Project (the "Standard of Care"). Vesta wlll make available to Owner the full benefit of the judgment, experience and advice of the principals and employees of Vesta's organization. Vesta will at all times act diligently, in good faith, and in a commercially reasonable manner with respect to the proper protection of and accounting for Owner's assets. In performing its obligations and exercising Its rights hereunder, Vesta shall be subject to Owner's overview and supervision. 66 2.5 Power and Authority of Vesta. Except for matters which Vesta is authorized to undertake hereunder and which are consistent with the Approved Plans and the Approved Budget, all major or substantive policy decisions with respect to the development and construction of the Project shall be subject to the advance approval of the Owner. Without limiting the generality of the foregoing, it is hereby further understood and agreed by the Parties that Vesta shall not take any of the following actions, which shall be deemed major or substantive policy decisions for purposes of this Article, without first consulting with and obtaining the written consent of the members of Owner who hold at least seventy-five percent (75%) of the percentage interests in Owner, without taking into account any member who is an affiliate of Vesta: 2.5.1 Authorize the expenditure of any sums other than those approved as part of the Approved Plans and in accordance with the Approved Budget; 2.5.2 Do any act in contravention of the Agreement; 2.5.3 Commence development of or construction on the Property except in accordance with the Approved Plans; 2.5.4 Obtain building and other permits except in accordance with the Approved Plans; 2.5.5 Do any act which would make it impossible to carry on the Project; 2.5.6 Possess, assign or use funds of the Project except in accordance with the Approved Budget; 2.5.7 Authorize or cause to be constructed, any improvements on the Property or otherwise take any action to improve or develop the Property except in accordance with the Approved Plans; 2.5.8 Incur any indebtedness on behalf of the Owner; 2.5.9 Settle any claims for insurance except as approved in writing by Owner; 2.5.1 O Settle any claim for payment of awards or damages arising out of the exercise of eminent domain by any public or governmental authority; 2.5.1 I Make, execute or deliver on behalf of Owner any guarantee, indemnity bond or surety bond; 2.5.12 Obligate the Project or another party as a surety, guarantor or accommodation party, to any obligation, other than by endorsing checks for deposit to the Project accounts in the ordinary course of business; 2.5.13 Borrow or lend funds out of Project accounts to any third party, or extend to any person, firm, or corporation, credit on behalf of the Project; 2.5.14 Make or execute any contract with any consultant. subcontractor, supplier or other person on behalf of Owner other than in its capacity as an Independent Contractor of Owner; or 67 2.5.15 Cause or consent to any Trust Deed or other monetary encumbrance against the Property. 2.6 Management and Responsibilities of Vesta. Vesta shall act as project manager and general contractor for the Project and shall take all actions necessary to implement and carry out the Project in accordance with the Approved Plans, Approved Budget, Section 2.4 above and this Section 2.6 {collectively, including but not limited to the following items, the "Services"), Including but not limited to: 2.6.1 Supervising the performance of all consultants and subcontractors to ensure compliance with the terms of their contracts and with all laws; 2.6.2 Ensuring that all subcontracts for materials and supplies and consultant services for the Project which are arranged by Vesta are on subcontract forms, material supply forms, requisitions and work orders approved by Owner: 2.6.3 Supervising and preparing draws for the processing for payment, according to the procedures set forth herein and subject to any retainage, of all construction obligations when due. Owner shall be responsible for direct payment of the project expenses; 2.6.4 Ensuring that, concurrent with any payment to a subcontractor, supplier or materialman, appropriate lien releases are obtained from each such person In accordance with the terms of Civil Code Sections 8132 et. seq.; 2.6.5 Arranging for and completing the installation and construction of Site Development Activities to the extent and in the manner authorized by the Approved Plans and Approved Budget; 2.6.6 Arranging for and completing the construction of the Vertical Construction Activities; 2.6.7 Subject to Owner's approval, updating the Approved Budget for the Project. 2.6.8 Complying with, and causing the employees of Vesta or any affiliate to comply with, the terms and provisions of this Agreement and all laws; 2.6.9 Assist in the securing such grading, building and other permits and authorizations on behalf of the Project as are required by the Approved Plans, and, in consultation with Owner, representing Owner and the Project at meetings with governmental bodies and organizations controlling the issuance of such permits and authorizations; 2.6.1 O Taking no actions and, if within Vesta's control or influence, allowing no actions to be taken which affect the title to the Project except to the extent approved by the Owner In advance and in writing; 2.6.11 Causing to be prepared, on forms acceptable to Owner, all documents necessary to implement construction of the Project (including, but not limited to, subcontracts or other contracts); 2.6.12 Preparing all budgets, and cost estimates which Vesta reasonably deems necessary relating to the construction of the Project, in a careful, complete and accurate manner, and promptly thereafter delivering such Information to Owner and thereafter diligently 68 and promptly, but not less frequently than monthly, delivering to Owner all revisions, modificatlons or supplements to such information which reflect a substantial change; 2.6.13 Obtaining bids on subcontracts. Entering into subcontractor agreements necessary to complete the Project per the Approved Budget; 2.6.14 Causing to be carried out a customer service program, including warranty work; and 2.6.15 Hiring a sufficient number of employees in order to perform its tasks hereunder in a timely fashion and In accordance with the Standard of Care. 2.6.16 Keeping books of account for the Project showing all expenses Incurred, payments made and showing any variances from the Approved Budget; and preparing for delivery to Owner within 5 days after the end of each calendar month a statement of income and cash flows showing expenses incurred, revenues and any variances from budgeted amounts set forth in the Approved Budget. 2.6.17 Establishing an escrow coordination program for processing and closing escrows. 2.6.18 Implementing, coordinating and directing a sales and marketing program, including a model complex and sales facility subject to the Approved Plans and the Approved Budget. 2.6.J9 Assisting with the preparation of all income tax filings related to the Project and providing Owner with necessary annual income tax documents. 2.7 Warranty and Construction Deficiency Claims (a) Vesta shall provide each Buyer of a residence from Owner a warranty of, Fit and Finish, as required by section 900 of the California Civil Code. Under the terms of the warranty Vesta shall repair and replace any component in the residence which does not meet the standard of quality as measured by Guidelines set forth in the Residential Performance Guidelines for Professional Builders and Remodelers or if an item is not covered in that publication, by standard industry practice. (b} Vesta shall also administer during the statutory period of ten (10) years under California Law in accordance with Sections 895 through 940.5 any claims of construction deficiency with respect to the residence built by Vesta and sold by Owner. Vesta as the "builder" under the law, shall be Owner's representative in connection with construction deficiency claims and, as such, shall be the chief liason with all attorneys, insurance company representatives, claimants and their representatives and consultants, homeowner association representative, and any Governmental agency employees or representatives. Vesta shall use its best efforts to settle any claims for construction deficiency with the approved of Owner. 2.8 Emergency Costs. Irrespective of the provisions set forth elsewhere in this Agreement, Vesta shall at all times during the term of this Agreement have the authority, with no further approval required, to Incur costs on behalf of Owner on an emergency basis up to a maximum aggregate amount of Three Thousand Dollars ($3,000} for any such emergency. Vesta shall give prompt written and telephonic notice to Owner of any and all such 69 emergencies requiring the emergency expenditure of funds by Vesta. 2.9 Contracts. Subcontracts, and work orders for subcontractors, materials and supplies may be entered into and signed by Vesta; however, Vesta shall have no authority to bind Owner to any contract or relationship except as may be otherwise provided in this Agreement. Vesta may not enter into any contract directly or Indirectly relating to the project with a related party or an entity In any way affiliated with Vesta without the prior written consent of the members of Owner who hold at least seventy-five percent (75%)of the percentage Interests In Owner, without taking Into account any member who Is an affiliate of Vesta. 2.10 Project Costs and Expenses. It Is understood and agreed that all on site costs and expenses and all indirect project related costs incurred by Vesta pursuant to the Approved Budget and in connection with Vesta's performance of the Services (other than Vesta's overhead costs described below) shall be paid by Owner in accordance with this Agreement. Vesta's overhead costs and general administration costs shall be those relating to its off-tract offlce(s) and personnel at such office(s), including but not limited to Vesta's construction, finance, purchasing, clerical, secretarial, bookkeeping and administrative personnel, and all of Vesta's costs for telephone and telephone service, facsimile machines, photocopy equipment, office supplies and utilities. 2.11 Wrap Insurance Policy. Vesta shall assist Owner in connection with Owner's application for a "wrap" insurance policy covering Owner, Vesta and Trade Contractors in the amounts set forth in paragraph 4.6. ARTICLE3 DEVELOPMENT AND CONSTRUCTION LOAN OBLIGATIONS 3.1 Owner Obtaining and Guaranteeine: Loans. It shall be the responsibility of the Owner to take the actions necessary to obtain development and construction financing sufficient to provide the funding for all Project Costs. Vesta shall assist Owner In submitting loan applications to lenders selected by Owner and, to the extent authorized by Owner in writing, negotiate the terms of such loans as may be necessary to fund Project Costs. However, any loan documents must be approved by and executed by the Owner. Vesta shall have no liability on any Project financing. ARTICLE4 OWNER'S OBLIGATIONS 4.1 Owner's Funding. Owner shall pay all Project Costs to the extent such costs are reflected in the Approved Budget or are otherwise provided for herein or approved by Owner in writing. 4.2 Disbursement of Funds. Disbursement of funds by Owner or Owner's Lender pursuant to this Agreement and as set forth In the Approved Budget, including Vesta's management fee shall be made monthly in accordance with the approved payment schedule as set forth herein. th 4.2. l On or about the tenth (10 ) day of each month, or at such other times as Owner or Owner's Lender may approve or determine more appropriate, Vesta shall submit to 70 Owner or Owner's Lender a written itemized statement, signed by Vesta ("Application for Payment") setting forth: (a) a description of the work performed, material supplied and/or costs incurred or due for which disbursement ls requested with respect to any line item ("item") shown in the Approved Budget: and (b) the total amount incurred, expended and/or due for each requested Item less prior disbursements; and (c) Lien waivers (if required) in form and substance satisfactory to Owner from all contractors, subcontractors, suppliers and other personnel who may have rights to file liens against the Property in connection with the Project (A) evidencing Vesta's payment of funds to such persons as contemplated in prior disbursement requests and (B) waiving rights to lien the Property with respect to all payments previously received by such persons; and (d) if requested by Owner, architect's and/or engineer's periodic certifications of the percentage and/or stage of construction that has been completed and its conformance with the Approved Plans and governmental requirements based upon any such architect's, inspector's and/or engineer's periodic physical inspections of the Property; 4.2.2 Vesta shall maintain a written schedule of all checks to be issued by Vesta from Owner's bank account and listing the subcontractor, material man, vendor, or laborer to be paid for work done pursuant to this Agreement or materials furnished or incorporated in such work as the case may be. Vesta is authorized to issue only such checks as are in accordance with the Approved Budget. Any checks payable to Vesta itself or any affiliate of Vesta for other than Vesta's monthly management fee agreed to by Owner as part of the Approved Budget or any checks which are more than Ten Thousand Dollars ($10,000) in excess of the amount budgeted for such services or materials in the Approved Budget must be approved In writing by the members of Owner who hold at least seventy-five percent (75%)of the percentage interests in Owner, without taking into account any member who Is an affiliate of Vesta, prior to being issued by Vesta. 4.3 Improvement and Construction Bonds. Before commencing construction, Vesta shall prepare and advise Owner of any Improvement bonds, which will be required by any governmental entity having jurisdiction over the Project and shall arrange for such bonds or security which Owner. at its expense, shall furnish or cause to be furnished for the benefit of the Project. All expenses incurred in conjunction with the bonds shall be Project Costs and funded from the loans referred to in Article 3 hereof. 4.4 Owner's Representative. The Owner shall designate its Managing Member as the authorized representative to approve Project Construction Budgets, Changes in the project, render decisions promptly and furnish information expeditiously. 4.5 Project Documents. Vesta will be furnished without charge all copies of Drawings and Specification reasonably necessary for the execution of the Work. 4.6 Insurance. As a Project Cost, Owner agrees to obtain and pay for a Wrap Insurance policy with $3,000,000 per occurrence and $3,000,000 aggregate limits. In addition, Owner agrees to pay for a project specific excess liability policy of a minimum of $5,000,000 in coverage. These costs shall be reflected in the Approved Budget. This policy will be for the benefit of Owner and Vesta. 71 4. 7 On Site Project Superintendent. The Project On Site Superintendent based at the project in NAPA shall be a reimbursable cost of the Project and not part of the Vesta Compensation. As set forth in the Approved Budget, there shall be no mark up of this expense, and this expense shall not be incurred until grading has commenced on the Project. ARTICLES COMPENSATION 5.1 Compensation of Vesta. As consideration for the performance by Vesta of its services under this Agreement, as managing developer and general contractor, Owner shall pay Vesta, a Management Fee in the sum of $1,660,000 as follows: (a) Vesta shall receive during the entitlement stage a fee of $30,000 per month for a period of 15 months commencing at the end of the first month after close of escrow. (b) Vesta shall receive during the development and construction stage commencing at the end of the first month after the issuance of a grading permit, $45,000 per month for a maximum of 18 month. (c) At the close of escrow of the last four residential units in the Project, Vesta shall receive payment(s) equal to a total of $400,000, bringing the total fee paid to $1,660,000. 5.2 Owner shall also pay to Vesta as consideration for its services with respect to Warranty and Construction Deficiency Claims under Section 2.7 of this Agreement a sum of $10,000 per Residential unit. Said amount shall be paid out of escrow at the closing of each unit sold in the Project 5.3 Vesta shall also be paid incentive compensation in addition to its management fee in an amount equal to ten percent (10%) of the amount, if any, by which the per annum return on the capital contributions by the members of Owner to Owner exceeds a twenty percent (20%) per annum return. Such incentive compensation shall be paid at the conclusion of the project at the same time as the distribution of available cash is made by Owner to the members of Owner. ARTICLE6 CHANGES 6.1 Change Order(s). Any modification, addition or omission to the scope of the work resulting in a change in the Approved Plans Approved Budget and/or Approved Schedule shall be set forth In a written change order ("Change Order") signed by both Owner and Vesta, reflecting the nature of the change of the Approved Plans, any increase or decrease In the Approved Budget, and any Increase or decrease in the Approved Schedule for completion of the Project to be performed by Vesta. Vesta shall not be responsible for any work other than 1he work as modified by Change Order. All terms and conditions of this Contract shall be deemed incorporated into the Change Order. 72 Owner or Vesta may initiate a change by issuing either a request for proposal to Vesta or a proposed Change Order. After receipt of a request from Owner, Vesta shall prepare and submit a cost proposal for the requested change. If Owner and Vesta are unable to reach an agreement as to the cost of any additional work to be reflected in a Change Order, Owner may direct Vesta, by written order, to proceed with the work Involved. The price of such work shall then be determined on a time and materials basis. 6.2 Delays and Extensions of Time. If Vesta is delayed in the progress of the Work by any act or omission of Owner or its agents or employees, any separate contractor employed by Owner, or by changes ordered in the Work, acts of God, fire, unusual delays in transportation, adverse weather conditions, strikes or other labor disruptions, acts of public enemy, civil commotion, failure of issuance of any permits, licenses or approvals within a reasonable period of time, Owner's failure to make payme