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HomeMy WebLinkAbout1994-334 , 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 94-334 RESOLUTION NO, RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, AUTHORIZING AND DIRECTING EXECUTION OF CONSENT TO TRANSFER OF REAL PROPERTY INTEREST AND RIGHTS UNDER OWNER PARTICIPATION AGREEMENT AND TO HOTEL LEASE AGREEMENT, AND EXECUTION OF ASSUMPTION AGREEMENT RELATING TO HOTEL PROPERTY [RABWEH-ARK SERVICES] WHEREAS, the City of San Bernardino (the "City"), the Redevelopment Agency of the City of San Bernardino (the "Agency") and Maruko, Inc. ( "Maruko" ) entered into that certain Owner Participation and Development Agreement ("OPA") on or about July 20, 1987, with regard to certain real property located in the City, described in Exhibit "A" of the OPA, which property is improved with a hotel (the "Property"); and WHEREAS, the OPA was amended by virtue of that certain Amendment No, 1 to Owner Participation and Development Agreement and Convention Center Sublease and Operating Agreement ( "Amendment No.1"); and WHEREAS, Maruko has filed for protection under the bankruptcy laws of the United States; and WHEREAS, Maruko has entered into an agreement for the 24 sale of the Property to Foster-Khoury International, Inc., a 25 California corporation ("Foster-Khoury"); and 26 27 WHEREAS, the principals of Foster-Khoury, Angela Foster 28 and Najib Khoury, intend to sell their shares and interest in -1- 94-334 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Foster-Khoury to Rabweh International Corporation, a California corporation ("Rabweh") owned and controlled by His Royal Highness Shaikh Mohamed Bin Sulman Al Khalifa, contemporaneously with or as soon as possible after Foster-Khoury's acquisition of the Property; and WHEREAS, the City has consented or is contemporaneously herewith consenting to the transfer of the Property, and of an assignment of Maruko's interests in the OPA, to Foster-Khoury; and of the sale of the shares of Foster-Khoury to Rabweh; and WHEREAS, it is the intention of Foster-Khoury and Rabweh that the rights and obligations of Foster-Khoury in and to the OPA should vest in and be exercised and performed by Rabweh; and WHEREAS, Rabweh intends to enter into that certain Hotel Lease Agreement (the "Hotel Lease"), a copy of which is attached hereto as Exhibit "A" and incorporated herein by this reference, whereby some, but not all, of Rabweh's rights and obligations in and to the OPA will be transferred to and assumed by ARK Services Company, presently in formation either as a California limited liability company or a limited partnership, ("Hotel Lessee"), an affiliate of Northwest Lodging, Inc" a Washington corporation, ("Northwest"), with the balance of the non-transferred rights and obligations remaining with Rabweh, and whereby Hotel Lessee will manage and operate the Property; and -2- 94-334 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WHEREAS, Section 6.5 (c) of the OPA provides that neither title to the Property nor the interests of Foster-Khoury and/or the Rabweh under the OPA may be assigned without the prior written consent of the City, which consent shall not be unreasonably withheld, and further provides that the City may require the proposed assignee or transferee to assume, by written agreement, all of the obligations, covenants, conditions and restrictions imposed on the transferor under the OPA; and WHEREAS, the City deems it to be in the public interest to consent to the transfer to Rabweh of title of the Property, and to the assignment of Foster-Khoury's interest under the OPA, and to consent to the subsequent transfer of some of Rabweh's rights and obligations under the OPA to the Hotel Lessee under the Hotel Lease upon the condition that the Hotel Lessee assume all of the obligations, covenants, conditions and restrictions of Rabweh and Foster-Khoury under the OPA, as amended, and that Rabweh and Foster-Khoury nevertheless remain fully liable to the City under the OPA, notwithstanding the partial assignment to Hotel Lessee, and, further, that Northwest guarantee the obligations of the Hotel Lessee under the Hotel Lease, NOW, THEREFORE, THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, DO HEREBY FIND, RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The Recitals hereinabove are true and correct and are incorporated herein by this reference. -3- 94-334 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SECTION 2, The City hereby consents to the transfer to Rabweh of Foster-Khoury's interests in the Property, together with related easements and rights appurtenant thereto, whether by express transfer and assignment or by merger or other corporate reorganization of Foster-Khoury and Rabweh. SECTION 3. The City hereby consents to the assignment to Rabweh of all of Foster-Khoury's rights and obligations under the OPA, as amended, whether by express assignment or by merger or other corporate reorganization of Foster-Khoury and Rabweh, providing that Foster-Khoury remains fully liable under the provisions of the OPA, not withstanding such assignment, SECTION 4. The City further consents to the execution by Rabweh and the Hotel Lessee of the Hotel Lease, substantially in the form attached hereto as Exhibit "A", with such changes as may be reasonably acceptable to the Mayor and the City Attorney, and to the transfer of rights set forth therein. This consent is contingent upon: (i) an assumption by the Hotel Lessee of the obligations of Rabweh and Foster-Khoury under the OPA; (ii) Rabweh and Foster-Khoury remaining fully liable to the City for the performance of the OPA notwithstanding the assumption of obligations by the Hotel Lessee; (iii) the execution by Rabweh, Foster-Khoury and the Hotel Lessee of the Assumption Agreement in the form attached hereto as Exhibit "B" and incorporated herein by reference; and (iv) a guarantee by Northwest of the Hotel Lessee's obligations under the Hotel Lease -4- 94-334 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 and the OPA, which guaranty shall be in a form satisfactory to the Mayor and the City Attorney. SECTION 5. The consents contained in Sections 2, 3 and 4 hereof are contingent upon such transfers being completed within 180 days of the date of execution of the Consent to Transfer attached hereto as Exhibit "C". A transfer under any of said Sections after such period shall require a further review and approval by the City not to be unreasonably withheld. SECTION 6. The City authorizes and directs the Mayor to execute and deliver the Consent to Transfer in the form attached hereto as Exhibit "C", and incorporated herein by reference, and the Assumption Agreement in the form attached hereto as Exhibit "B", with such non-substantive changes as may be reasonable and which are acceptable to both the Mayor and to the City Attorney. SECTION 7. No subsequent transfers of any interest in the Property or of the rights and obligations under the OPA shall occur except in compliance with Section 6,5 of the OPA. -5- 94-334 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO, CALIFORNIA, AUTHORIZING AND DIRECTING EXECUTION OF CONSENT TO TRANSFER OF REAL PROPERTY INTEREST AND RIGHTS UNDER OWNER PARTICIPATION AGREEMENT AND TO HOTEL LEASE AGREEMENT, AND EXECUTION OF ASSUMPTION AGREEMENT RELATING TO HOTEL PROPERTY [RABWEH-ARK SERVICES] SECTION 8, The findings and determinations herein shall be final and conclusive. This Resolution shall take effect upon the date of its adoption. I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor and Common Council of the City of regular meeting San Bernardino at a day of thereof, held on the 17th Qgtgsgr 1994, by the following vote, to wit: AYES: Council Members Nporpt'p Cl1rl in Hprn;:r.nnp Oberhelman, Devlin, Pope-Ludlam, ;:mn Millpr NAYS: ABSENT: ~rk~ The foregoing resolution is hereby approved this ;;:. ~ T1- October , 1994. day of ~l~.. Ralph Hernandez, Mayor Pro Tern San Bernardino Approved as to form and legal content: BC~it:y Attorney) // _~ S--;4~-r; ~iJ?PV s 000l\DOC\103 ~ -;I' -6- 94 334 1 EXHIBIT "A" 2 HOTEL LEASE AGREEMENT 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A - 1 94 334 ,.~ HOTEL LEASE AGRBBMBHT SAlI BBRHlUU>DlO HOTEL AND COHVBNTIOB CBBTBR San Bernardino, california 94 334 HOTEL LEASE AGREEMENT (San Bernardino Hotel and convention center) This Hotel Lease Aqreement ("Lease") is made as of this day of October, 1994, by and between ARK Services Company, a limited liability company ("Tenant"), and Rabweh International Corporation, a California corporation ("Landlordlf), and shall become effective upon the satisfaction or waiver of the contingencies described in Section 53 hereof. THE PARTIES ENTER INTO THIS AGREEMENT on the basis of the following facts, understandings, and intentions: A. Landlord is in the process of purchasing the real property and improvements ("Improvements") located on the real property legally described in Exhibit A hereto (the "Land"), known as the San Bernardino Rotlill and Convention Center, from Maruko, Inc., a Japan corporation (lfMaruko"), pursuant to that certain Purchase and Sale Aqreament and Escrow Instructions, dated August 5, 1994 (the "Sale Aqreement"), a copy of which is attached hereto as Exhibit B and incorporated herein by reference. B. The Improvements inclUde a hotel facility (the "Hotel") (including 231 guest rooms, lobby, meeting rooms and restaurant{ lounge and fitness center) located at 295 North "E" Street in San Bernardino, California and situated on the Land. The facility is currently operated a~ a Radisson Hotel. C. The Hotel includes a fine dining restaurant ("Restaurant") c=rently operated as Spencer's, together with Lombard's lounge and. Boomer's nightclub. D. Landlord is in the process of obtaining a leasehold estate entitling Landlord to the use and possession of the convention center facility adjacent to the Hotel (the "Convention center"). E. operation contained Agreement The parties hereto desire to have Tenant take over the of the property pursuant to the terms and conditions in this Lease, effective on the Closing Date of the Sale ("cutover" or "Commencement Date"). F _ Tenant intends to significantly upgrade the Property ("Upgrades") consistent with Radisson hotel standards, and expects to invest One Million Dollars ($1,000,000) during the first five (5) years of the lease term, and an additional Five Hundred Thousand Dollars ($500,000) during the next five (5) years of the lease term toward the improvement of the. Hotel in thase areas that are Tenant's obligation or responsibility. For purposes of this Lease, such investment shall be treated as a loan made by Tenant to Landlord secured by the Tenant Deed of Trust as set forth herein. G. As used herein, the word "property" or "Premises" shall mean the Land, all easements and other rights relating to the Land, -1- 2'd BI>,~l 1>6, n"l:JO 94 334 the Hotel, the Restaurant, the Convention Center, and all improvements, fixtures, and personal property located on the Land and used in connection with the operation of the Hotel, the Convention Center, and the Restaurant, as more clearly defined in section 1 below. H. As more particularly set forth herein, it is intended that Tenant will be responsible for ordinary and customary matters involving the operation of the Hotel and Convention Center, and that Landlord will, as owner, retain all other risks and responsibilities, except as may be specifically allocated otherwise herein. The parties agree: 1. Leased Premises IPropertv . Effective as of the Commencement Date, Landlord hereby leases to Tenant all of Landlord's rights to and rights relating to the Property, subject to the terms and conditions contained herein. The Property consists of all real, personal and intangible property utilized in connection with the Hotel and Convention Center and their operation, except Excluded Items referenced in section 1.12. The Property includes, but is not limited to: 1. 1 Improvements. All of the buildings, structures and improvements located on the Land, including without limitation the Hotel facility having 231 guest rooms, banquet and meeting room areas and all other facilities involved with the Hotel. 1. 2 Restaurant. The Restaurant, including kitchen, lounge, dining room and meeting room facilities and all furniture, fixtures, equipment and other tangible and intangible property relating thereto. 1. 3 Convention Center. The Convention center, including all meeting rooms, furniture, fixtures and equipment, the right to possession of which shall be assigned or subleased to Tenant upon terms and conditions acceptable to Tenant. Tenant shall pay the basic rent due on Landlord's lease of the Convention Center, as provided in section 5.3 herein. 1. 4 Parkinq Garaqe. All of Landlord's right and interest in the use of the covered parking garage facility adjacent to the Hotel (the "Parking Garage") as provided in that certain Covenant and Agreement Regarding Parking, a copy of which is attached hereto as Exhibit D and incorporated herein by reference. Tenant shall pay any rent due for the use of the above referenced parking spaces in the Parking Garage, as provided in Section 5.3 herein. 1.5 FF&E; FF&E Leases. equipment or owned, 1.5.1 utilized in including, FF&E. All furniture, fixtures and connection with the property whether leased without limitation, carpeting, draperies, -2- Q4, 334 window and door screens and awnings, trade fixtures, bed linens and towels, telephones and related equipment, televisions, television antennas and satellite dishes and related equipment, pool equipment, HVAC equipment, bedding, window treatments, sa:fety equipment, landscaping, data processing and cOIIlputer equipment including, without limitation, front desk, reservation and back office system(s), property management system and other automation equipment and software, smallwares, dishes, silverware, kitchen equipment, chairs, tables, banquet equipment, podiums, audio visual equipment, and other tangible items of personalty (collectively, the "FF&En). A complete list of all FF&E is attached as ScheduJ.e 1.5.1 hereto. 1.5.2 are no leases or other purchase of FF&E. FF&E Leases. Landlord warrants: that there agreements with respect to the lease Or 3..6 Contracts. 1. 6 . 1 Assumed Contracts. All leases, subleases, contracts and agreements affecting the Property (nAssumed Contracts") are listed on Schedule 1..6. Landlord shall assign to Tenant and Tenant shall assume all of the Ass\llIled Con1:racts, effective as of the commencement Date. Except for the Ass\llIled Contracts specifically listed on SChedule 1.6 hereto, Tenant does not assume or agree to becoma liable in any manner for any other liabilities or .obligations of Landlord, and Landlord shall indemnify and hold Tenant harmless from and against any contract not listed on Schedule 1.6. All security or other deposits with respect to the Ass\lllled Contracts shall become the property ot Tenant, and Tenant shall have the benefit of any warranties, representations or performance of third parties with respect thereto. 1.6.2 Convention Center and DeveloDment Aareements. The Hotel and Convention Center are parts of a complex developed in accordance with or governed by certain contracts, rights, easements and agreements (collectively, the "Development Agreements"). The Development Agreements inclUde, without limitation, a Convention Center Lease between the City of San Bernardino ("City") and Maruko (the "Convention Center Lease"); an Owner Participation arid Development Agreement batween The Redevelopment Agency of the City of San Bernardino, the City and Maruko ("OPA"); and certain other documents and instruments, inCluding any amendJnents or changes thereto. The part:ies hereto acknowledge that the benefits of the Development Agreellu~nts, including the TOT (as hereinafter defined), are an inte<;ral part of this Lease and the parties agree not to take any actions Which would jeopardize the Development Agreements and the TOT. Tenant shall sublQase the Convention Center area from Landlord and shall have the right to operate the Convention Center and receive payment of the TOT pursuant to the OPA, as further described in this Lease. 1.7 Permits. All transferable consents, authorizations, variances, waivers, licenses, permits and approvals -3- e:'d 6~:St ~6, e:t lJO . /;/'" 94 334 /'.' board, commission, bureau or other entity or instrumentality in respect of the Hotel, including, without limitation. those with respect to the foundation, use, utilities, building, fire, life safety, alcoholic beverage ("Liquor License"), traffic and zoning (collectively, the "Permits") heretofore or hereafter held by or granted to Landlord. The Liquor License shall either be transferred to Tenant, or Tenant and Landlord shall be jointly listed thereon. 1.8 Inventorv. All inventories of supplies or raw materials used in connection with the operation of the Hotel and the Restaurant, including but not limited to paper qoods, brochures, stationery, office supplies, food, beverages, chinaware, glassware, flatware, linens, bedding, janitorial and maintenance supplies, soap, gasoline, fuel oil, maintenance parts and replacement items, gift shop items, and other oPQrational and guest supplies (the "Inventory"). Tenant Slhall purchase from Landlord at the aggregate invoice amount (including all shipping charges, taxes, etc.) all Inventory on hand at the Property. Such Inventory shall include only new or unused (in opened packaqing or otherwise), located at the Property as determined by Maruko, Landlord and Tenant between 7:00 p.m. of the evening immed1ate1y before the Commencement Date and 7:00 a.m. on the day after the COll1J1lencement Date. In no event shall the amount paid by Tenant for such items exceed Forty Thousand Dollars ($40,000). 1 . 9 Records. All books, records, files, accounting data. guest registers, employment records, maintenance records, rental and reservations records, and any customer or frequent quest lists (collectively, the "Records") of Landlord in connection with the operation and maintenance of the Hotel, exclusive of (i) original Records Which Landlord desires to retain, provided that Landlord shall permit Tenant, at its expense, to examine and make copies thereof, and (ii) Landlord's income tax records. Landlord shall provide copies of all: Records to Tenant within five (5) days ot execution of this Lease. 1.10 Reservations. All advance reservations and bookings with respect to the Hotel. as the same may be amended, canceled and renewed (the "Reservations"), and advance deposits made in respect thereof (the "Reservation Deposits"). 1.11 Name: other Landlord Rlahts. The name "San Bernardino HotQl and Convention Center" and all telephone numbers and intangible rights: with ):espect to the Hotel, the convention center, and the Restaurant. provided, however, that Tenant shall have no obligation to compensate Landlord or any other party for the use thereof, nor shall Tenant have any obligation to continue to use such name. Tenant shall also have the benefit of all other Landlord rights with respect to the property, including but not limited to the benefits of warranties/representations of manufacturers, suppliers, contractors or third parties and the right to require contractors or agents to perform under applicable agreements and contracts. -4- E"d 2~:11 ~~, 21 ~JO 94 334 1.12 Excluded Items. The Property excludes only: 1.12.1 House Funds. House funds, as set forth in section 7.5 below. 1.12.2 Accounts Receivable. Accounts Receivable, except as set forth in Section 7.5 below. 1.12.3 Pavables. Any payables or other amounts owed by Landlord as of cutover, except as set forth in section 7.6 below. -- 1.12.4 Excluded Items. Specific excluded items, if any, listed on Schedule 1.12.4 hereto. 1.13 Acceptance of the Premises: Cutover Fund: Access to Cutover Fund. 1.13.1 Acceptance of the Premises. Attached hereto as Schedule 1.13 is a "punchlist" of any defects in the Premises which are required to be corrected by Tenant, with the use of the Cutover Fund, pursuant to this Lease. Landlord has not relied upon any representations of Tenant regarding the condition of the Property or any defects in the property. 1.13.2 Cutover Fund. Prior to the Commencement Date, Landlord shall deposit the sum of Five Hundred Thousand Dollars ($500,000) into an interest bearing trust account of the law offices of Hart, King & Coldren, Santa Ana, California (the "Cutover Fund") for the benefit of Tenant, together with instructions to such firm that such funds are to be utilized to (a) pay for repairs to the buildings and improvements on the property provided in Section 1.13.1 above; (b) take corrective action to satisfy Landlord representations and warranties which have been breached; (c) pay obligations/ liabilities involving the Property arising prior to the Commencement Date; (d) pay for Initial Work Order items set forth in Section 5.2 below and otherwise discharge Landlord responsibilities and obligations known to exist at the Commencement Date; (e) pay for fees, costs or expenses in transferring the Radisson franchise to Tenant; (f) repay to Tenant uncollected accounts receivable pursuant to section 7.5; or (g) pay, if any, obligations/liabilities involving employees arising prior to the Commencement Date. Examples of items to be covered by the Cutover Fund include, without limitation, Landlord's obligations as tenant of the Convention Center Lease, Development Agreement obligations not specifically assumed by Tenant hereunder, bringing the buildings and improvements on the property into operating condition and into compliance with codes, addressing fire and safety issues, compliance with ADA requirements, bringing the buildings and improvements up to franchisor standards (exclusive of Hotel guest room FF&E), implementation of corrections and work set forth on Schedule 1.13 recommended by DMJM Engineering, payment of pre- -5- 94 334 Cutover liabilities such as taxes, utilities and service contracts and payment of pre-Cutover employee clai~s and obligations. 1.13.3 Access to Cutover Fund. Tenant shall access the cutover Fund by written request by (i) specifying the Lease section under which Landlord's obligation to fund requested items arises, and (ii) providing invoices for work performed, materialS purchased or services rendered, if the work has already been per~ormed, or quotes, bids or estimates if the work has not been performed. within ten (10) days of such request, Landlord shall cause such funds to be disbursed to Tenant to reilDburse Tenant for amounts paid by Tenant, or to pay over to the appropriate contractors or parties upon completion of the work. Tenant shall, within fifteen (15) days of the end of each quarter, account, to Landlord as to the use of all funds disbursed from the Cutover fund. Any substantial non-emergency work to be performed with cutover Fund proceeds (i.e., work in excess of Ten Thousand Dollars ($10,000)) shall be described and presented to Landlord in advance of work performance. Work of an emergency nature can be performed prior to any attempt to access the cutover FUnd. Such work will include without limitation matters involving security or "afety issues, matters which could ~aterially interrupt operation of the Hotel business, matters involving utilities which may lead to interruption thereof, corrections required by governmental authorities or matters required by the Hotel franchisor which could result in a default under the applicable franchise agreements. All work shall be done at c01Ilpetitive rates, and Landlord or its affiliates shall be able to bid on appropriate projects, provided that all work will be performed with the same quality and expertise. In the event Landlord fails to disburse funds from the Cutover Fund within ten (10) days of a request therefor, Landlord shall notify Tenant in .writing of the specific reason for such refusal to fund. Tenant may thereafter sub~it the matter to arbi tration. Tenant may also, at its discretion, proceed with the work pending arbitration but in such event Tenant assumes the risk as to the arbitrator's decision. Any decision by the arbitrator requiring funds to be distributed to Tenant shall include interest at the prime rate pUblished by the Wall Street Journal, plus four percent (4%). The arbitrator shall be instructed to also award costs and attorney fees to the most prevailing party, which if such award is against Landlord, shall not be funded from the Cutover Fund. In the event Landlord fails to pay an amount requested by Tenant to be disbursed from the cutover Fund within ten (10) days of a request for disbursement, and does not notify Tenant as set forth above as regards Landlord's reason for such failure to pay, Tenant may proceed to perform the requested work/services, and such expenditures by Tenant shall be deemed to be Tenant's performance on behalf of Landlord and Tenant shall have the right to offset such amount against any Rent due Landlord. The cutover Fund shall remain in place for the sooner to occur of disbursement of all funds required to be deposited therein or 24 -6- ".d ?,,:1T. ,,~, ?T. I~n 94 334 months from cutover, at which point any funds remaining in the Cutover Fund shall be returned to Landlord. .2. Franchise Aoreement. At Tenant's option, either (1) the existing franchise agreement (with Radisson) shall be transferred to Tenant, or (2) Tenant shall enter into a new franchise agreement with Radisson. In the event the franchisor thereunder insists on changes or charges any transfer fee, such fee or charge shall be paid from the Cutover Fund. Notwithstanding the foregoing, Tenant shall have the right (with the consent of Landlord, which consent will not be unreasonably withheld, and with the consent of the City, if required), but not the obligation, to elect to reflaq the Hotel with a comparable or better flag. In the event Tenant elects to reflag the Property, Tenant shall incur all of the costs of terminating the prior franchise and installing the new franchise. In the event that this Lease is terminated due to the actions of Tenant, any new franchise shall be the property of Landlord. In the event that this Lease is terminated due to the actions of Landlord or due to the expiration of the term of this Lease, any new franchise shall be the property of Landlord and Landlord shall pay to Tenant the unamortized franchise fee and any costs of transfer, and Landlord shall indemnify, protect, hold harmless and defend Tenant for any costs, liabilities, claims, obligations and expenses (including attorneys' fees) arising in connection with any early termination of the franchise. 3. Use of Premises: Comoliance with Laws. 3.1 ~. Tenant shall use the Premises for hotel, convention center and hospitality purposes and uses incidental thereto. 3.2 Comoliance with Laws. During the terlll hereof Tenant shall comply with all applicable governmental rules, orders, regulations or requirements relating to the use and occupancy of the Premises, provided. however that Tenant shall not be required (but may do so in Tenant's discretion) to make any material capital improvements to the Property to be in such compliance (for eXCll1Iple, compliance with the Americans With Disabilities Act) with respect to laws and regulations existing as of the COJlllllencement Date ("Existing Laws"). Landlord shall be responsible for the expense of bringing the Property into compliance with Existing LaWs. 4. TQrm. 4.1 Initial Term. SUbject to satisfaction and/or waiver of the contingencies described in Section 53 hereof, the term of this Lease and Tenant's obligation to pay rent hereunder shall commence on the Commencement Date and shall continue after its commencement for a period of ten (10) years unless earlier terminated as herein provided. Within ten (10) days after the Commencement Date, Landlord and Tenant shall execute a memorandum setting forth the Commencement Date. 4.2 Tenant's Ricrht to Renew. Tenant shall have successive rights to renew the term of this Lease at the end of the -7- S'd Et>:H t>6. 2, DO 9 it 3~~ initial term described in section 4.1 above for two (2) periods of ten (10) years each ("Renewal Periods"), notice as provided in section 4.2.1. successive by giving 4.2.1 Notice. Such renewal shall be effective only if written notice of the exercise of such right to renew shall be given to Landlord no later than six (6) months prior to the expiration of the then existing term; provided, however, that if Tenant shall not have exercised such right to renew no later than six (6) months prior to expiration of the then existing term, Tenant's right to renew shall not lapse until the sooner to occur of: (a) ten (10) days after Landlord shall have given Tenant written notice of its failure to renew, or (b) Tenant's written notice that it does not elect to renew. 4.2.2 Terms and Conditions. Tenant's occupancy during the Renewal periods shall be upon the same terms and conditions as provided in this Lease but at the rental rate as set forth in section 5.1. 4.2.3 Condition Precedent to Second Renewal Period. Tenant's right to renew the lease term for the final Renewal Period is contingent upon Tenant demonstrating to the reasonable satisfaction of Landlord that during the initial ten (10) year term of this Lease, Tenant has made upgrades (the "Upgrades") to the Property totalling in excess of One Million Five Hundred Thousand Dollars ($1,500,000). Upgrades will occur only in those areas where Tenant is responsible hereunder for such improvements, and will focus primarily on FF&E. Tenant estimates that such Upgrades may include approximately Five Thousand Dollars ($5,000) per room in furniture, case goods, carpet, drapes, etc. during the first five (5) years of the Lease, approximately Five Hundred Thousand Dollars ($500,000) in public area refurbishment in the Hotel and Conference Center for carpet, wall coverings, paint, artwork and the like and lease/purchase of vans, buses, limos or other vehicles for use in connection with the Hotel. If Tenant is unable to comply with the foregoing contingency prior to the expiration of the first Renewal period, then Tenant shall not be entitled to renew the Lease for the second (and final) Renewal Period. In determining whether Tenant has satisfied this One Million Five Hundred Thousand Dollars ($1,500,000) requirement, Tenant's obligation is to make arrangements for same at no cost to Landlord. Accordingly, all means utilized by Tenant, including lease, purchase and/or financing, shall be credited towards this obligation. 5. Minimum Rent. 5.1 Initial Term. Minimum Rent (the "Minimum Rent") shall commence as of the second quarter of the Initial Term (there shall be no rent payable during the first quarter) and thereafter shall be payable quarterly in arrears, at such place as Landlord may designate in writing, as set forth in the following schedule: -8- 94 334 Period Mo. 4 - 48 Mo. 49 - 72 Mo. 73 - 120 Annual Amount $370,000 400,000 440,000 Monthlv Amount $30,833.33 33,333.33 36,666.67 If the term hereof commences on a day other than the first day of a month, then the Minimwn Rent for the fraction of the month starting with the Commencement Date shall be paid on such date, prorated on the basis of the actual number of days in the month. If the term hereof expires or is earlier terminated on a day other than the last day of a month, then the MinilllWll Rent for the month during which the Lease expires or is earlier terminated shall be prorated on the basis of the actual number of days in the month. 5.2 Initial Work Order. Tenant has aqreed to initially perform the following work on behalf of Landlord: (a) replacing (as necessary) the Convention Center carpeting, ()o) reconditioning or repairing (as necessary) the Convention Center HVAC system, (c) reconditioning or repairing (as necessary) the Hotel's boiler equipment, (d) reconditioning or repairing the Rotel's water heating system, (e) replenishing the Hotel's linen supply to meet franchise standaxds, and (f) acquiring additional. chairs, furniture, dishes, smallwares and the like to allow the Convention Center to be reasonably equipped for multipl.e functions at maximum capacity. However, nothing contained in this Section 5.2 shal.l be deemed to otherwise enlarge Tenant's obligations, or dilninish Landlord's obligations, set forth in Section l.4 hereof. Tenant' S agree~ent to be responsible for items (a) through (f) above shal.l. extend onl.y to the initial repair, repleniShment or replacement thereof and not to subsequent repair, replenismnent or replace~ent to the extent sallie . is a Landlord obligation hereundcar. Tenant shall be reilnbursed fro~.the CUtover Fund tor all work performed by Tenant pursuant to this Section 5.2. :tn no event, however, shall Landlord be responsible for more than Five Hundred Thousand Dollars ($500,000) in initial repairs, replacements, etc., pursuant to this Section 5.2 and Section l..l.3.1. 5.3 Convention Center Rent. Tenant shall be responsible for and pay the rent specified at Section 3.1 of the Convention Center Lease ("convention Center Rent"), inclUding the payment of any fees or rent for the garage or parking for Hotel guests or convention Center users ("Gal:'age Rent") pursuant to the Parking Agreement. Tenant will pay Convention Center Rent and Garage Rent to the City directly. Any additional rent or charges due under the Convention Center Lease, including without limitation, rent or expenses payabl.e as a result of Landlord's amendment of the Convention Center Lease, or any arrearages with respect thereto occurring prior to cutover, shall. be Landlord's obl.iqation. In the event that Landlord obtains any reduction in Convention Center Rent or Garage: Rent, such benefits shall. be passed through to Tenant. -9- pOd 617:S1 176. El lJO 94 33-1 5.4 Rent Durina Renewal Periods. Rent during each Renewal Period shall be an greater of: The annual Minimum amount equal to the (a) the product of the annual Minimum Rent for the year prior to the applicable Renewal Period multiplied by one hundred ten percent (110~); or the product of Rooms Revenue (as defined herein) for each 1II0nth of the Renewal Period multiplied times ten percent (lOt) - (b) Such annual Minimum Rent shall be paid in four equal quarterly installments in arrears in the manner set forth in Section 5.1. If the annual Minimum Rent is to be based upon Rooms Revenue as set forth in section 5.4(b),.then to the extent actual revenue data is not available the quarterly installment shall. be basad upon Tenant's written Capital Spending Budget for the applicable year, and at the end of the applicable lease year Tenant shall calculate and reconcile the actual percentage rent due for such year, and within thirty (30) days after the end of Guch lease yelU" shall either pay any additional amount of percentage rent owing to Landlord or receive a credit for any overpayment of percentage rent (applicable to the rent payment next due Landlord). As used herein, "Rooms Revenue" shall mean all gross proceeds from the rental of quest rooms, including any Rooms Revenue equivalents pursuant to 10n'J term contracts for the rental of roams with volume customers. Rooms Revenue shall not include food & bevera'Je proceeds, vending, laundry and other guest services, meeting/conference room usage, insurance or condemnation proceeds, or any other revenue or income (except for telephone revenues) which is not for the rental of rooms by quests. Rooms Revenue shall include telephone revenues generated by telephones on the Property, but net of all direct cost and expense related thereto, including but not limited to telephone utility bills, telephone maintenance and repair, taxes imposed on telephone service and rental of telephone equipment. Rooms Revenue shall mean only the amount actually collected by Tenant for the rental of rooms, and shall exclude allowances, discounts, credit card fees, gratuities uncollectible accounts, complimentary roams, refunds, overcharges, travel agent commissions, and the value of food & bevera'JQ or other Hotel service included in the room rate to induce Hotel guests to utili2e the rooms and all taxes assessed on goods or services which are paid by customers/guests but collected by Tenant. 6. No Encumbrances. Landlord warrants that as of the Commencement Date, there exists no monetary encumbrances including without limitation liens, judqments, or similar claims against the Property. Throughout the term of this Lease (including Renewal Periods, if applicable), Landlord shall not encumber the Property or permit any liens to be filed against the Property superior to the Tenant Deed of Trust, and Landlord shall fully indemnify Tenant with respect to sallie and shall take prompt action to remove any nonpermitted encumbrances. Landlord shall have a reasonable time to deal with disputed encumbrances, provided Landlord provides a -10- 9'..J t717:n 17/;. ?t 1:)n 94 334 bond or other reasonable security to protect Tenant with respect thereto. 7. Prorations. The following (collectively "Prorations") for the property shall be apportioned between Landlord and Tenant upon cutover as provided 1n the Sale Agreement: 7.1 Taxes. All general real estate and ad valorem personal property taxes and assessments shall be prorated as of midnight of the commencement Date using the latest availa~le tax rates and assessments _ Landlord shall be responsible for all general real estate and ad valorem personal property taxes and all special taxes or assessments accruing with respect to the property. for all periods prior to midnight of the Commencement Date and Tenant shall be responsible for all of such taxes and assessments which accrue after midnight of the Commencement Date. Any tax refunds or rebates which apply to periods before midnight of the commencement Date shall remain the property of Landlord. If subsequent to the Commencement Date it beccnues apparent that the amount of real estate taxes for the property at the time of the Commencement Date was or becomes higher or lower than the amount that was used for apportionment as of the Commencement Date (whether by reason of a.change in either the asset value of the Property or the applicable tax rates or otherwise), real estate taxes shall be re-prorated and Landlord agrees to pay to Tenant and Tenant agrees to pay to Landlord within seven (7) calendar days after demand any amount owed to the other as a result thereof. 7.2 Utilities. Prior to the Commencement Date, Landlord and Tenant shall notify all utility companies servicing the Property of the emticipated change in ownerShip of the Property and request that all billings after the Commencement Date be made to Tenant at the Hotel address. Utility meters will be read, to the extent that the utility company will do so, during the daylight hours on the calendar day immediately before the Commencement Date, with charges accruing prior to 7:00 a.m. on the Commencement Date paid by Landlord and charges accruing thereafter paid by Tenant. prepaid utility charges shall be prorated. Charges for utilities which are unmetered, charges for the meters which have not been read by the commencement Date, or any special assessments relating to utilities prior to 7:00 a.m. on the Commencement Date, will be prorated between Tenant and Landlord as of 7:00 a.m. on the Commencement Date, and an adjustment made to any determinations made by the utility companies necessary to reflect actual operations as .of 7:00 a.m. on the Commencement Date if reasonably e5timable or, if not, after the COlDlllencement Date based upon utility billings received after the Commencement Date in which case Landlord or Tenant, as appropriate, shall, upon receipt, subnit a copy of the utility billings for any such charges to the other party and such party shall pay its pro rata share of such charges to the party requesting payment within seven (7) calendar days from the date of any such request. Landlord shall be =edited and Tenant debited for all deposits previously made by Landlord or Maruko which toe utility company in question will apply to Tenant's account. Tenant shall be responsible for replacing and/or paying, on or before the Commencement Date, all deposits which will not be -11- .1.'d ~~:tt ~6, 2t IJO 94 33il applied by utility companies for Tenant's account or which are otherwise required by utility companies in order to continue service at the Hotel for periods after 7:00 a.m. on the Commencement Date and shall take any other action and make any other paYll\ents required to asgure uninterrupted availability of utilities at the Property for all periods after the CommencemQnt Date. Buyer agrees that as of or following the Close of Escrow, all utility deposits previously made by Landlord which are not applied Tenant's account may be refunded directly to Landlord by the utility company holding same. - 7.3 Assumed Contracts. All incomo and expenses with respect to the Assumed contracts, excludinq any contract wi.th respect to fuel oil, will be prorated as of midnight on the Commencement Date. 7.4 Reservations. Tenant will honor for its account, all guest and banquet room and restaurant reservation agreements and deposits for dates after the Commencement Date, Tenant authorizes Landlord to continue to accept reservations for guest rooms, meeting rooms, restaurant and banquet facilities for periods after the Commencement Date provided the terms and conditions of the reservations are in the ordinary course, and Tenant agrees to honor all such reservations in accordance with their terms. Any pre-Closing deposits or post-Closing deposits accepted by Landlord with respect to confirmed reservations for dates atter the Commencement Date will be forwarded to Tenant. 7.5 House Funds. Trav (Guest) Ledaer and Accounts Receivable. All cash on hand in cash registers, cashier's "banks", and change funds as of 7:00 a.m. on the Commencement Date will be purchased by Tenant. All cash on hand in the PropertY'g operating accounts and reserve accounts for furniture, rixtures and equipment, and restricted and other cash accounts as or 7:00 a.m. on the Commencement Date (the "House Funds") shall remain the sole property of Landlord. House Funds shall be applied and returned to Landlord upon the Commencement Date. All amounts in the accounts 01: guests who have not checked out as of 7:00 a.11I. on the commencement Date (the "Tray (Guest) Ledger") (including charges for rooms, food, beverage, telephone charges and otherwise) accruing prior to 7:00 a.m. on the Commencement Date shall be the property of Landlord, and all amounts in the Tray (Guest) Ledger accruing after 7:00 a.ln. on the Commencement Date shall be transferred to Tenant. The entire Tray (Guest) Ledger shall thereupon become the property of Tenant. All accounts receivable of guests and/or patrons of the Property who have received Hotel services but not yet paid for such services other than the Tray (Guest) Ledg'er (the "City Ledger") accruing prior to 7:00 a.m. on the COllUllencement Date shall be paid by Tenant to Landlord at eighty-five percent (85%) of their face amount. Any accounts receivable which have not been collected by Tenant after ninety (90) days of the Commencement Date shall be repaid to Tenant from the Cutover Fund. All accounts receivable designated as "Other" on the books and records of Landlord or Maruko (which are typically intercompany accounts and which are being retained by Landlord or Maruko) shall not be purchased by Tenant. All accounts receivable -12- R'.-l ~b:T.T b':;, :::'T. I",)() r---... 94 334 related to customer credit card charges shall be dealt with in the same manner as the City Ledger. All other accounts receivable accruing prior to 7:00 a.m. on the Commencement Date shall be paid by Tenant at their face amount. 7.6 Accounts Pavable and Expenses. Subject to the fOllowing, all unpaid accounts payable and expenses relating to operations of the Property prior to the Commencement Date shall be paid by Landlord. By way of illustration, Landlord shall pay (i) accounts payable and expenses relating to personal property, inventory or otherwise; (ii) expenses arising from items not a part of inventory (e. g., energy , utilities, insurance, advertising, trade association dues, subscriptions, etc.); and (iii) amounts outstanding for services provided (e.g., by employees, independent contractors, professionals, other consultants, and vendors pursuant to service contracts, etc.). Tenant alone shall be responsible for all accounts payable related to Inventory or supplies to the extent not yet delivered, or services, to the extent not yet rendered, as of the Commencement Date, providing same are incurred in the ordinary course of business. In addition to the foregoing, all accounts payable and expenses relating to operations of the Property after the Commencement Date will be paid by Tenant. 7.7 respect to the midnight on the Hotel Aqreements. All Development Agreements Commencement Date. costs and expenses with will be prorated as of 7.B Emplovees. The Manager of the Property shall be terminated by Landlord prior to the Commencement Date. In the event that the Manager is not so terminated, Landlord shall indemnify Tenant for any and all claims, causes of action, costs, expenses (including attorneys' fees), liabilities, obligations and damages Tenant sustains as a result of the Manager's employment prior to the Commencement Date. All other employees employed on the Property will be employed by Tenant from and after the Commencement Date in the same capacity of employment and at the same level of compensation and benefits enjoyed by such employees immediately prior to the Commencement Date. Regular periodic employee compensation, vacation pay and sick pay accrued as of midnight on the Commencement Date shall be prorated and all amounts thereof which relate to periods prior to midnight on the Commencement Date shall be paid by Landlord or Maruko. 7.9 Fuel oil. Fuel oil for the Property's emergency generator system shall not be apportioned but shall be considered part of the Property. Tenant shall be responsible for any replenishment of this fuel oil. 8. Operation of Hotel: Transition Upon Commencement. 8.1 Valuables and Baqqaqe. Tenant shall work with Maruko prior to the Commencement Date to implement procedures to be utilized at the Commencement Date to account for and safeguard -13- 94 3"''' .) ..1 guest valuables and baggage left in the custody of Landlord as of the Commencement Date. 8.2 Inventorv. Between 7:00 p.m. on the evening prior to the Commencement Date and 7:00 a.m. on the day after the Commencement Date, representatives of Maruko, Landlord and Tenant shall jointly conduct an inventory of the FF&E, Records and Inventory items, and shall list same on schedules to be executed by both representatives. The inventory of FF&E shall be generally consistent with the list of FF&E to be attached hereto pursuant to section 1. 5. 8.3 Caoital Soendina Budaet. within thirty (30) days of the Commencement Date, Tenant shall provide Landlord with a detailed Capital Spending Budget for the Hotel for the first Lease year. Thereafter, Tenant shall provide an annual Capital Spending Budget at least sixty (60) days prior to each Lease year. within ninety (90) days of the Commencement Date, Tenant shall provide Landlord with a five-year Capital Spending Budget, which Tenant shall update from time to time. All capital Spending Budgets shall be mutually agreed upon by Landlord and Tenant; provided that the Budgets shall not limit Tenant's or Landlord's responsibilities or liabilities for maintenance and other matters as set forth in this Lease. 8.4 pricina: Soecial respect to services or goods in Convention Center shall be at the Benefits. All pricing with connection with the Hotel and sole discretion of Tenant. 9. Warranties and Reoresentations of Landlord. To induce Tenant to execute this Lease, Landlord hereby represents and warrants to Tenant that as of the Commencement Date: 9.1 Title: Leasehold Title Insurance. Landlord owns and has good and marketable title to the property (including FF&E) free and clear of all liens, subject only to the Accepted Encumbrances set forth on Schedule 9.1 hereto. Upon Cutover, title to the Property will be marketable and clear of all liens, encumbrances or adverse claims except (a) easements and restrictions of record not incompatible with the use of the property, and (b) other items accepted in writing by Tenant (" Accepted Encumbrances ") and attached hereto as Schedule 9. 1. Upon cutover, Landlord shall provide Tenant with ALTA extended leasehold title insurance coverage and an ALTA lender's policy on Tenant's Deed of Trust, all in form and endorsements acceptable to Tenant. The expense of such title insurance shall be paid by Landlord. 9.2 Zonina and Permits. The present zoning for the Property fully and completely permits the use of the Property as a hotel and convention center facility with related activities as currently operated by Maruko and/or Maruko's concessionaires. Landlord is not aware of any notice or action by governmental authorities or agencies with respect to any nonconformance of the Property or any component thereof with respect to applicable or -14- . 94 33:1 pending codes or regulations, or of any proposed change in use or zoning with respect to the Property. All Permits or approvals necessary with respect to such operation, including the Liquor License, are listed on Schedule 1.7 hereto, are in full force and effect and are transferable to Tenant. 9.3 condition of FF&E and Propertv. All of the FF&E set forth at Schedule 1.5.1 hereto is present on the Hotel premises and the FF&E and property and components thereof are in the same condition as when Tenant conducted its physical inspection of same. Landlord is not aware, directly or indirectly, of any material defects or conditions with respect to the FF&E or the Property, except as set forth on Schedule 9.3 hereto, including without limitation, latent defects, proposed changes in use or zoning or potential adverse business or competition factors. Upon termination or expiration of this Lease, Tenant shall return all FF&E to Landlord, in not less than the same condition as at the Commencement Date, reasonable wear and tear and casualty excepted. If Tenant replaces any FF&E items (for example an air conditioning unit which breaks and is not economically feasible to repair) then any such replacement items may be returned to Landlord subject to a lease, or to financing, if Tenant elects to lease or finance same. Any such lease or financing shall be part of and subject to the limitations of sections 13.1 and 13.2 below. Notwithstanding any provision herein to the contrary, Landlord specifically warrants that all sewer lines serving the Property meet applicable codes and regulations, and are in good operating condition, without breaks or leaks, and that the roofs of the buildings on the property are in good operating condition as of Cutover, without any leaks. The cost of any repairs made by Tenant on behalf of Landlord to comply with this warranty and representation shall be a Tenant expenditure on behalf of Landlord. 9.4 Claims/Litiqation. There is no litigation, action, claim or proceeding pending or threatened against Landlord or the Property or which could adversely affect the use thereof, the Hotel business or this transaction, including any claims or actions by the City, the Redevelopment Agency or any division, agency or affiliate thereof. 9.5 Riqht of Possession; options. Except as specifically provided by the Convention Center Lease or the Owner Participation and Development Agreement, no person or entity other than Landlord has any right of possession to the Property or any part thereof. The Property is not subj ect to any outstanding agreements of sale, options, liens, rights of first refusal or other rights of third parties to acquire any interest therein. without limiting the foregoing, Landlord possesses and shall maintain throughout the term of this Lease (including Renewal Periods, if applicable) the right to use and possess the Property, including the Convention Center and any rights relating to the Parking Garage, for the benefit of the Hotel and its patrons, and Landlord shall, as of the Commencement Date, assign or sublease such right to use and possess the convention Center and any rights -15- 94 334 relating to the parking Garage to Tenant upon terms and conditions acceptable to Landlord and Tenant. 9.6 Hazardous Substances. Landlord has conducted a due and diligent inquiry with respect to Hazardous Substances, and is not aware, directly or indirectly, of the presence of same with respect to the Property, except as disclosed on Schedule 9.8 hereto. "Hazardous Substances" means any industrial waste, toxic waste, chemical contaminant or other substance which, as of the date of this Lease, is designated as hazardous or toxic under any federal, state or local legislation applicable to the Property or is defined as hazardous, dangerous or toxic by any governmental authority having jurisdiction over the property, including but not limited to asbestos and PCB's, any explosives, petroleum or petroleum by-products, or any other substances which may pose a hazard to the health or safety of occupants of the Property as members of the public. Except as disclosed on Schedule 9.8 hereto, the Property is free of the presence of Hazardous Substances, there have been no releases of Hazardous Substances on the Property, the Property has not at any time been used for the generation, transportation, management, handling, treatment, storage, manufacture, emission, disposal or deposit of any Hazardous Substances or fill or other materials containing Hazardous Substances in excess of levels permitted under applicable law, and the Property is in compliance with all related environmental laws. In the event that during the term of the Lease Hazardous Substances are determined to have been on the Property prior to Cutover, and are in violation of applicable hazardous substance laws or regulations and/or could be required to be removed or contained under applicable laws or regulations, Landlord shall perform and pay the cost and expense of appropriately dealing with such Hazardous Substances. Landlord shall indemnify, protect, hold harmless and defend Tenant from and against any and all claims, costs, expenses (including attorneys' fees and court costs), liens, judgments, liabilities and obligations arising from Hazardous Materials existing on the Property prior to the Commencement Date or brought onto the Property by Landlord, its agents, contractors or employees. Tenant shall indemnify, protect, hold harmless and defend Landlord from and against any and all claims, costs, expenses (including attorneys' fees and court costs), liens, judgments, liabilities and obligations arising from Hazardous Materials existing on the Property after the Commencement Date or brought onto the Property by Tenant, its agents, contractors or employees. 9.7 Other Aqreements. Except for Development Agreements specifically provided by Landlord to Tenant prior to cutover, Landlord has not entered into any commitments or agreements with any person, entity, federal, state or local government authority or agency affecting the Property. 9.8 Authoritv. The persons executing this Agreement are fully authorized to execute same, and their signature is suff icient to bind Landlord hereunder as owner of the Property. -16- -94 334 Landlord is free to transfer, assign and lease the Property without the consent or approval of any other person or entity. If Landlord is an entity, such entity is duly formed and in good standing as of the Commencement Date. 9.9 Compliance with Laws. The Property complies with all covenants, conditions, restrictions and encumbrances ("CC&R's") and all rules, regulations, statutes, ordinances, laws and building codes (collectively "Laws") affecting the Property. Except as specified otherwise herein, all electrical, plumbing, heating, ventilating, air conditioning, fire protection, elevator and similar building service systems are in working order -and good condition. Tenant shall have no obligation to construct any alteration or improvement required to comply with any Law or CC&R now or hereafter enacted, which alteration or improvement is properly capitalized under generally accepted accounting principles, unless such compliance is necessitated solely because of Tenant's peculiar use of the Property. Landlord shall construct all other capital alterations and improvements to the Property required to comply with any existing or future CC&R's or Laws. 9.10 Assessments. There are districts or special assessments pending affect the property. 9.11 Flood Plain. No portion of the Property is located within a flood plain. no local improvement or contemplated which 9.12 Underqround Storaqe Tanks. The Property has one (1) underground storage tank, which tank, except as provided in the report by DMJM Engineering and listed on Schedule 1.13, fully complies with all applicable federal, state and local laws and regulations. 9.13 Landlord Liabilities: Obliqations. Except as contemplated by section 7.6 hereof, all liabilities or other obligations of Landlord with respect to the Property arising or accrued before Cutover have been fully paid and satisfied. 9.14 Leases. Except for the Convention Center Lease, the Development Agreements and any Assumed Contract, there are no leases or rental agreements, oral or written, with respect to the Property. 9.15 Landlord's Obliqation on Warranties. In the event of any breach of a warranty or representation by Landlord hereunder, upon notice of such breach Landlord shall promptly take such action as may be reasonably necessary to promptly cure such breach or misrepresentation. 9.16 Payment and Compliance. Landlord has paid all amounts due to be paid by Landlord under this Agreement on or prior to Cutover and has complied with all Landlord obligations and landlord liabilities to be performed hereunder on or before Cutover. -17- 94 334 9.17 Development Aqreements. Landlord shall fully enforce all Development Agreements against the City or third parties obligated thereunder. If Landlord fails to do so, Tenant may take action to enforce same, and the cost thereof shall be a Tenant expenditure on behalf of Landlord. 10. Landlord warrants Warranties and Representations to execute this Lease, Tenant to Landlord that: of Tenant. To induce hereby represents and 10.1 Authoritv. The persons executing this Agreement are fully authorized to execute same, and their signature is sufficient to bind Tenant hereunder. If Tenant is an entity, such entity is duly formed and in good standing as of the Commencement Date. 10.2 No Consent. Tenant is free to lease the Property without the consent or approval of any other person or entity. 10.3 Defects to FF&E. Tenant is not aware directly or indirectly, of any material defects or conditions with respect to the FF&E or the Property except as set forth on Schedule 10.3 hereto, including, without limitation, latent defects, proposed changes in use or zoning or potential adverse business or competitive factors. 11. Ouiet Eniovment. Landlord covenants and agrees that so long as Tenant is in compliance with all of Tenant's obligations under this Lease, Tenant shall lawfully and quietly hold, occupy and enjoy the Premises during the term of this Lease without disturbance by Landlord or by any person having title paramount to Landlord's title or by any person claiming under Landlord. 12. utilities and Other Services. Landlord represents and warrants that the Premises are served by water, sewer, garbage, electrical and other utilities adequate for the purposes of conducting a Hotel, Restaurant and convention Center operation therein, that such utilities serve only the Property and that the charges with respect thereto are normal and reasonable for the area and do not involve waste or leakage. As of the Commencement Date Tenant shall be responsible for all charges incurred by it for water, sewer, garbage, electrical, natural gas, and other utilities. In the event Tenant fails to do so, Landlord shall have the right, but not the obligation, to pay any billings related to the above and have the amount paid by Landlord added to the next month's rental billing. 13. Improvements: Financinq. 13.1 Improvements. In accordance with the Capital Spending Budgets outlined pursuant to Section 8.3, Tenant may during the term of this Lease make non-structural improvements to the Property as deemed appropriate by Tenant and Landlord, but except as specifically provided in this Lease, shall have no obligation to make any improvements, except as may be reasonably -18- 94 334 required to keep the Property in good repair and good operating condition not involving casualty. 13.2 New FF&E Financina _ It is anticipated that in order to keep the property competitive, the FF&E on the property will from time to time need to be upgraded and/or replaced. In accordance with the Capital Spending Iludgets outlined pursuant to Section 8.3, Tenant shal:l undertake such upgrading/replacement to the extent Tenant and Landlord deem appropriate. All upgraded or replacement PF&E may De leased or financed DY Tenant ("New FF&E r'inancing") and the lessor or lender of same (which may De Tenant or an affiliate) shall have a first priority security interest on all such replacement or upgraded FF&E. During the terJII hereof, Tenant shall indemnify Landlord with respect to the New FF&E Financing as set forth in Section 24.2 hereof. Any New FF&E Financing for items which replace existing items which have a useful life of less than five (5) years and which replaced items are not subject to an Existing FF&E Lease or financing as of the Commencement Date ("Replacement FF&E") shall upon expiration or termination of this Lease be Tenant's sole responsibility and Tenant shall take appropriate action (by payoff, lease transfer or otherwise) to hold Landlord harmless therefrom. Upon expiration or termination of this Lease, Landlord shall asswne, obtain the release of and hold Tenant harJIIless from all other New FF&E Financing, including Dut not limited to those covering FF&E items with a useful life of five (5) years or more, FF&E items which are significantlY upgraded from that existing as of the Commencement Date and any FF&E items which are new to the Property and not a replacement for FF&E items existing as of the Commencement Date. 14. Maintenance. 14.1 Landlord's Resnonsibi1iti@s. Land10rd shall, at its sole cost and expense, be responsible ~or all capital expenses and all repair, maintenance and replacement of the buildings and improvements located on the Property and their structural components and mechanical and other systems, such as major electrical and plumDing repair or replacement, and shall make all capital improvements, repairs and replacements (the cost of which may be capitalized in accordance with generally accepted accounting principles) that are necessary to keep the buildings and all other improvements located on the property (including the Hotel, Restaurant and Convention Center), their components and systems and major equipment items in good working order and condition, including without limitation, the roofs, exterior, windows, signage, major equipment, structural components, and Duilding systems (HVAC, electrical, plumbing, etc.) and all other repairs, replacements and maintenance not specifically identified as a Tenant responsibility. Landlord shall retain the obligation to maintain the Convention Center pursuant hereto, regardless of the provisions of the Convention Center Lease or any assignment thereof to Tenant. By way of illustration and not limitation, Landlord shall be responsible for the repair, maintenance, or replacement (as necessary) of the following items and systems (and any damages suffered by Tenant as a result of Landlord's failure to perform as required herein after sufficient notice by Tenant): identifiad as -19- GOd. q17:H ",", ;:>T. nn 94 33,1 of the Commencement Date to be deficient: Convention Center roof (numerous leaks); Hotel plumbing system (if required by applicable law or if failure of the system affects more than a modest number of rooms); removal of asbestos (if required) or maintenance of asbestos pursuant to a program that complies with applicable laws, and structural, mechanical and electrical deficiencies referenced in the report of DMJM Engineering. 14.2 Tenant's ResDonsibilities. Tenant shall,_at its sole cost and expense, be responsible for all normal and customary costs and expenses of _intaining, conducting and supervising the ongoing operation of a hotel, restaurant and banquet business after Cutover, along with customary, ordinary or necessary repair and maintenance to the Premises (and any damages suffered by Land10rd as a result of Tenant's failure to perform as required herein), including but not limited to, for example: (i) The cost of all operating equipment (e.g. linens, china, glassware, uniforJlls, etc.) except as initially supplied by Landlord or provided by Landlord pursuant to the provisions hereof; (ii) The compensation of all employees employed at the Rotel by Tenant including salaries, wages, fringe benefits, unemployment compensation, pension fund contributions, worker's compensation, and other reasonable employee benefits customary in the industry; (iii) The costs of repairs to and maintenance of FF&E, carpets, drapes, walls, signs and other items pertaining to the operation of the property that are not the re~ponsibility of Landlord pursuant to section 14.1; (iv) The cost of replacement of minor FF&E items, case goods, soft goods, carpet, etc., as necessary, but not inclUding replacement of major equipment or mechanical items which shall be the responsibility of Landlord; (v) All taxes, assessments and other charges (other than federal, state or local income taxes, and franchise taxes or the equivalent) payable by or assessed with respect to the operation of the Hotel; (vi) Legal fees and fees of any CPA for services directly related to the operation of or for the benefit of the Hotel which relate to the operation of the Hotel; consultants services in functional, activities; (vii) The costs and expenses of technical and specialized operational experts for specialized connection with non-recurring work on operationaL, decorating, design or construction problems and (viii) All eKpenses for advertising the Hotel and all eKpenses of sales promotion and public relations activities. -20- 0rd ll>:H 1>6, 2i 1:)0 94 334 By way Of illustration and not limitation, normal and customary costs and expenses do not include: (a) the costs and expenses for which Landlord is responsible pursuant to Section 14.~; (b) any special assessments (other than general real estate taxes); or (C) any franchise fee Or cost associated with the existing Radisson franchise agreement (other than royalties or marketing fees accruing after CUtover). Subject to the limitations and allocations set fO~herein, Tenant shall maintain and operate the Rotel and the Prope~y in accordance with all applicaDle provisions and standards of thCll Hotel franchisor. 15. Alterations. ReDairs and Chanaes. Tenant may make Changes, improvements or- alterations to the Premises in acc:ordance with the Capital spending BUdgets as approved by Landlord and Tenant. Any consent required of Landlord shall not be unrQasonably withheld. All such changes, improvements and alterations and repairs, if any, made by Tenant whiCh are incorporated into the Premises and which cannot be removed from the PJ:emises without damage to the Premises shail remain on the Premises and shall become the property of Landlord upon the expiration or sooner termination of this Lease. Except as otherwise provided herein, Tenant may remove its equipment and trade fixtures from the Property, provided Tenant repairs any damage occasioned thereby. Any changes, improvements or alterations made by Tenant shall not decrease the value of the property. 16. Taxes. ~6.~ Taxes. Tenant shall pay prior to delinquency all taxes assessed and payable with respect to the Premises (includinq but not limited to real property, personal prope4ty, sales, use, and license taxes) during the term of this Lease. 16.2 Transient OccuDancv Taxes. Tenant acknOWledges that it has reviewed the- Development Aqreements. Pursuant to the OPA, the Agency has agreed to pay, on a periOdic Dasis, an amount equal to a percentage of the transient occupancy taxes ("TOT") actually paid to the City, up to Three Killion Dollars ($3,000,000), on or before July 20, 2003, that woUld otherwise be payable with respect to quest utilization of the Hotel. Tenant has been advised by Landlord that as of October 13, 1994, $~,418,753.37 of TOT remains to be paid by the Agency pursuant to a fOrJllula set forth in the OPA. Landlord agrees not to change the TOT to be paid by the Agency without the consent of Tenant. On or prior to cutover, Landlord and Tenant will obtain from the City an estoppel letter, in form acceptable to Landlord and Tenant, confirming that at least $1,4~8,753.37 of TOT will be available during the initial term of this Lease. 17. Siems. In Tenant's sole discretion Tenant shall be entitled to display any sign, notice or advertising matter in or about the Premises. -21-' <:....1 Cl<::<:T. 111';, ",T. 1'1(1 9 L\ 334 18. Leasehold Mortqaqe Authorized. On one or more occasions, Tenant may, without Landlord's consent, mortgage or otherwise encumber Tenant's leasehold estate created by this Lease to a lender or investor ("Tenant's Lender"), and assign this Lease as security for such mortgage or mortgages; it being understood that by signing this Lease, Landlord shall be deemed to have consented to any such mortgage. Further, Landlord shall reasonably cooperate with Tenant and Tenant's Lender in connection with obtaining such mortgage or mortgages, including without limitation, the execution of a document (or documents) that modifies this Lease to provide for commercially reasonable provisions and protections customarily requested by leasehold mortgagees. 19. Liabilitv Insurance. Tenant shall, at Tenant's expense, maintain public liability and property damage insurance insuring against any and all claims for injury to or death of persons and loss of or damage to property occurring upon, in or about the Premises. Such insurance shall have primary liability limits (including liquor liability) of not less than One Million Dollars ($1,000,000) in respect of injury or death to anyone person, an aggregate of not less than Two Million Dollars ($2,000,000) for all such injuries, and not less than One Million Dollars ($1,000,000) for property damage. Tenant shall also maintain umbrella liability coverage up to Ten Million Dollars ($10,000,000). All such insurance shall name both Landlord and Tenant. All such insurance shall be issued by carriers reasonably acceptable to Landlord and shall contain a provision whereby the carrier agrees not to cancel or modify the insurance without at least twenty (20) days prior written notice to Landlord. On or before taking possession of the Premises pursuant to this Lease, Tenant shall furnish Landlord with a certificate evidencing such insurance coverage, and renewal certificates shall be furnished to Landlord at least thirty (30) days prior to the expiration date of each policy for which a certificate was theretofore furnished. 20. Casualty Insurance. 20.1 Improvements. Tenant shall maintain casualty insurance coverage in an amount sufficient to cover the replacement cost including ordinance coverage of the Property as reasonably determined by Landlord. All proceeds of such insurance shall be applied to the restoration of the Property to the extent provided in Section 21 below and any proceeds of such insurance remaining after such restoration shall belong to Landlord. 20.2 Earthquake Insurance. Tenant shall not be required to insure the Property for earthquake or earth movement, which risks shall be that of Landlord. Landlord may elect to insure against such risks, or not insure against such risks, at Landlord's discretion, but Landlord shall in any event be obligated as set forth in Section 57 hereof, Allocation of Risks. -22- 91\ 331\ 20.3 personal Protlertv. Tenant shall maintain on a11 of Tenant's personal property and leasehold improvements and alterations on the premises a policy of standard fire and casualty insurance, with extended coverage, in thQ amount of their replace- ment value as reasonably deterJllined by Tenant. Such insurance shall name Landlord, Tenant and any applicaDle existing or new FF&E lease lessor, as may ba required DY the respective appJ.icable documents- All proceeds of any such insurance shall be applied to the restoration of fixtures, improvements and alterations to the extent provided in Section 21 balow; any proceeds of such insurance remaining after such restoration shall DliIlong to Tenant. 21. Damaqe or Destruction. 21.1 Risk of Loss. In the event of material damage or casualty loss to the Property, Tenant may elect to require Landlord to rebuild all damaged Property as soon as reasonably possible or Tenant may elect to terminate this Lease as set forth in Section 25.5, in which case Tenant shall not be entitled to any insurance proceeds on the Improvements or FF&E except as set forth in Section 20.3 hereof. In the event that the material damage or casualty loss occurs within the last three (3) years of the first two (2) terms of this Lease, before TenAnt may elect to require Landlord to rebuild the damaged Property, Tenant must exercise its right to renew the term of this Lease for another ten (10) year periOd. Notwithstanding anything contained herein, if the material damage or casualty loss occurs during the last five (5) years of the second Renewal Period and the damage or loss is greater than twenty-five percent (25%) of the Property, Landlord may terminate this Lease and repay to Tenant: (i) the amount of Tenant's Investment Recapture, (ii) any other amounts owed to Tenant hereunder not already included in Tenant's Investment Recapture, <lnd (iii) all Inventory on hand at the Property and all accounts receivable of quests and/or patrons of the property who have received Hotel services but not yet paid for such services other than the Tray (Guest) Ledger. 21.2 Rebuildina. If the Property is damaged or destroyed by fire or any other cause and Tenant elects to require Landlord to rebuild pursuant to Section 21.1 above, Landlord shall restore the Property as nearly as practicaDle to its condition immediately prior to such damage or destruction. All insurance proceeds shall be first applied to the cost of rebuilding and Landlord shall be fully responsible for any uninsured/under insured loss. Landlord shall commence construction as soon as possible and shall diligently pursue such construction to completion. 21. :3 Rent Abatement. If Landlord undertakes to restore the Premises as provided above in this Section 21, then commencing with the date of the damage or destruction and continuing through the periOd of restoration, the rent for the Premises shall be abated for such period in the same proportion as the untenable portion of the Premises bears to the whole thereat. The entire Property shall be considered untenable if the damage is so extensive that it is impractical to operate the Property as a hotel during the rebuilding. -23- ttOd etntt l7f;, 21 J:lO 94- 334. 22. Assiqnment. Successors and Assiqns. Tenant shall have the right to assign its rights under this Lease to any entity owned or controlled by or under common control with Tenant, or any entity which owns or controls or is under common control of Tenant, or any successor by merger or consolidation on any entity that acquires all or substantially all of Tenant's assets provided at least fifty-one percent (51%) of such entity is owned and controlled and continues to be owned by Tenant's shareholders or provided the Lease is held by an entity used by Tenant's shareholders to effect a public offering of stock. This Lease shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. Except as set forth above, this~ease is not assignable to any other party without the express written consent of Landlord, which consent shall not be unreasonably withheld. Provided that the city has approved such assignment, Landlord shall have the right to assign is rights hereunder but shall not be relieved of liability hereunder as a result thereof. 23. Restaurant. Tenant shall have the right to operate or sublease the Restaurant portion of the Hotel in whatever manner Tenant deems most desirable, including continuation of the Restaurant under its present name, changing the name and/or concept thereof, leasing out the Restaurant and/or the other food and beverage operations of the Hotel or entering into a franchise agreement for the Restaurant so long as any agreements with respect thereto entered into by Tenant do not exceed the term of this Lease. 24. Mutual Indemnity. 24.1 Tenant Indemnitv of Landlord. Tenant shall defend, indemnify and hold harmless Landlord, its officers, agents and employees, from and against any and all claims arising from injury to persons, loss of life or damage to or loss of property occurring in or about the Premises and from and against any and all costs, expenses, damages and liabilities (including, without limitation, reasonable attorneys' fees) incurred by Landlord and/or its affiliates in or in connection with any claim or any proceeding based thereon, to the extent such injury, loss of life, damage to or loss of property, cost, expense, damage or liability arises out of (i) any act, neglect, fault or omission of Tenant, any of its officers, employees, agents, contractors, licensees or invitees, or (ii) any breach, default, violation or nonperformance of any obligation or covenant on Tenant's part to be performed or observed under the terms of this Lease, or (iii) any obligations due but not performed under the Development Agreements prior to the Commencement Date. If any action or proceeding shall be brought against Landlord by reason of any such claim, Tenant upon notice from Landlord shall defend the same at Tenant's expense by or through counsel reasonably satisfactory to Landlord. If any such claim involves potential liability in excess of Fifty Thousand Dollars ($50,000), is not covered by Tenant's insurance or if the defense of the matter is not accepted by such insurer, then in such event, Landlord may, at its discretion but at Tenant's expense, engage attorneys of its own choosing to defend Landlord therein. -24- 1\ 'y3:\ <,) 24.2 LancUord Indemnitv of T"lnant. Landlord shall defend, indemnify and hold harmless Tenant, its officers, aqents and employees, from and against any and all olaims arising from injury to persons, loss of life or damage to or loss of property occurring in or about the Premises and from and against any and all costs, expenses, damages, and liabilities (including, without limitation, reasonable attorneys' fees) incurred by Tenant and/or its affiliates in or in connection with any claim or any proceeding based thereon, to the extent such injury, loss of life, damage to or loss of property, cost, expense, damage or li~ility arises out of (i) any act, neglect, fault or omission of Landlord, any of its officers, employees, agents, contractors, licensees or invitees (ii) any Dreach, defaUlt, violation or nonperformance_ of any obligation or covenant on Landlord's part to be performed or observed under the terms of this Lease, including but not limited to the warranties and representations made by Landlord, (iii) the failure of any third party to an Assumed Contract or other agreement to which Tenant is a ~arty or a beneficiary I to perfOrJII any obligation contained therel.n to be perforJlled by such third party, or (iv) any obligations due Dot not performed under the Development Agreements prior to the Commencement Date. If any action or proceeding shall be brought against Tenant DY reason of any such claim, Landlord upon notice from Tenant shall defend the same at Landlord's expense by or through counsel reasonably satisfactory to Tenant. If any such claim invo~ves potential liability in excess of Pifty Thousand Dollars ($50,000) or is not covered by Landlord's insurance (and the defense accepted Dy such insurer) then in such event, Tenant may, at its discretion but at Landlord's expense, engage attorneys of its own choosing to defend Tenant therein. Tenant shall have a claim against the CUtover Fund and any of Landlord's assets, or otherwise as set forth herein, for ~ounts owed by Landlord to Tenant pursuant to this indemnification. 25. Default; Remedies. 25.1 Tenant's Default. following events shall be deemed a The occurrence of any of the breach of this Lease by Tenant: (a) Tenant fails to pay the rent or any part thereof or make any other payment required to be made by Tenant hereunder as and when due and such failure continues for five (5) business days after notice thereof by Landlord to Tenant; or (b) Tenant fails to observe or perform any other provision of this Lease to be observed or performed by Tenant and such failure continues for thirty (30) days after notice by Landlord to Tenant (Dut if the nature of the default is such that it cannot reasonably be cured within the 30-day period, Tenant shall not be deemed to be in default if Tenant shall within the 30- day period commence to cure and thereafter diligently attempts to prosecute such cure to completion). In addition, Tenant shall De in default hereunder if Tenant defaults under the Convention Center Lease or the OPA. 25.2 Landlord's Remedies for Tenant's Default. In the event of default of the Lease Dy Tenant, after written notice and SUbject to Tenant's right to cure, in addition to any other -25- 9'd lS:Sl 1>6, El DO ,---- '1'34 9 <\ ;) remedies at law or in equity (including but not limited to specific performance), Landlord may: (a) Terminate the Lease and declare the Lease term hereof ended and re-enter the Property and take possession thereof, and Tenant shall have no further claim thereon or hereunder; or (b) without declaring a termination of the Lease, or the Lease term hereof ended, re-enter the Property and occupy the whole or any part thereof for and on account of Tenant; or (c) Even though Landlord may have re-ene~red the Property, thereafter elect to terminate this Lease and all of the rights of Tenant in or to the Property. 25.3 Landlord's Damaqes. Should Landlord have re- entered the Property under the provisions of Section 25.2 above, Landlord shall not be deemed to have terminated this Lease or the liability of Tenant to pay any rental or other charges thereafter accruing, or to have terminated Tenant's liability for damages under any of the provision hereof by any action in unlawful detainer or otherwise, to obtain possession of the Property, unless Landlord shall have notified Tenant in writing that it has so elected to terminate this Lease, and Tenant further covenants that the service by Landlord of any notice pursuant to the unlawful detainer statutes of the State of California and the surrender of possession pursuant to such notice shall not (unless Landlord elects to the contrary at the time of or any time subsequent to the serving of such notice and such election is evidenced by a written notice to Tenant) be deemed to be a termination of this Lease. Should Landlord elect to terminate this Lease pursuant to the provisions of section 25.2 above, Landlord may recover from Tenant as damages, the following: (a) The worth at the time of the award of any unpaid rent and other charges which had been earned at the time of termination; plus, (b) The worth at the time of the award by which the unpaid rent and other charges which would have been earned after termination until the time of the award exceeds the amount of the loss of such rental and other charges that Tenant proves could have been reasonably avoided; plus, (c) The worth at the time of the award of the amount by which the unpaid rent and other charges for the balance of the Lease term after the time of the award exceeds the amount of the loss of such rental and other charges that Tenant proves could have been reasonably avoided; plus, (d) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which, in the ordinary course of things, would be likely to result therefrom. -26- 94 334 (e) At Landlord's election, such other amounts in addition to or in lieu of the fo~egoing as may be permitted from time to time by applicable California law. 25.4 Landlord's Default. Landlo~d shall be in defaul.t hereunder if Landlord fails to make any payment required hereunder within the time specified herein or if not so specified, within five (5) business days after notice thereof by Tenant to Landlord, or fails to perform any other provision of this Lease required to De performed by Landlord (inClUding a breach of. a Landlord warranty or representation which after notice by Tenant, Landlord does not promptl.y and diligently attempt to cure), and such failure continues for thirty (30) days after notice by Tenant to Landlord (DUt if the nature of the default is such that it cannot ~asonably be cured within the 30-day period, LandlOrd shall not be deemed to be in default if Landlord shall within the 30-day period commence to cure and thereafter diligently attempts to prosecute ~ch cure to completion). In addition, Landlord shall DQ in default hereunder if Landlord defaults under the Convention Center Lease or the OPA. 25.5 Tenant's Remedies for Landlord's Default. In the event of a default by or breach of warranty by Landlord after written notice and subject to Landlord's right to cure, in addition to other remedies specified herein (including the right to terminate pursuant to Section 35) or availaDle .at law or equity (including Dut not limited to specific performance), Tenant may: (a) cure the default, inCluding, but not limited to, making any repairs or replacements to the Property, and Landlord shall reimburse Tenant, on demand, for all of Tenant's costs and expenses incurred in connection with such cure, plus interest at the prime rate published by the Wall Street Journal, plus four percent (44) per annum, until paid in full, or in the alternative, Tenant may offset against the Minimum Rent an amount equal to Tenant's costs and expenses incurred in connection with such cure, plus interest; or (D) abate the rent in full until such time as Landlord cures the default; or (c) declare the outstanding principal balance of the Loan (as defined in Section 28) and all accrued but unpaid interest thereon immediately due and payable, and apply the rent payments otherwise due hereunder toward the repayment of the Loan; or (d) terminate this Lease by delivery of a written notice of termination to Landlord. In all events, Tenant shall De entitled to repayment of all amounts secured by the Tenant Deed of Trust, in addition to any other amounts owed by Landlord to Tenant, in addition to any damages resulting from Landlord'S default and in addition to any damages resulting from Landlord's failure to perforJII any obligation of Landlord. Alternatively, Tenant may. continue this Lease, and shall in any event be entitled to offset all damages as a Tenant -27- L"d '-. 2S:S"t 176, E"t 1::10 91\ '3'31\ offset, secured by the Tenant Deed of Trust. Notwithstanding ~ cure period set forth in Section 25.1, Tenant may cure any default without notice to Landlord, where the failure promptly to cure such default would, in the reasonable opinion of Tenant, create or allow to persist an emergency condition or materially adversely affect the operation of Tenant's business on the Premises. 26. Trade Fixtures. Tenant may install on the Premises such trade fixtures and/or signs as is customarily used in the type of business conducted by Tenant on the Premises. Upon the expiration or sooner termination of this Lease, Tenant shall, at Tenant's expense, remove from the Premises all such trade fixtures:Or signs and all other property of Tenant and repair any damage to the Premises occasioned by the removal thereof. 27. Condemnation. If all of the Premises are taken by any public authority under the power of eminent domain, or any equivalent, this Lease shall terminate as of the date possession is taken by such public authority pursuant to such condemnation and Landlord and Tenant shall be released from any liability thereafter accruing pursuant to this Lease. If any part of the Premises is so taken and, in the reasonable opinion of either Landlord or Tenant, it is not economically feasible to continue this Lease in effect, either party may terminate this Lease. Such termination by either party shall be made by notice to the other given not later than thirty (30) days after possession is so taken, the termination to be effective as of the later of thirty (30) days after said notice or the date possession is so taken. If part of the Premises is so taken, and neither Landlord nor Tenant elects to terminate this Lease, or until termination is effective, as the case may be, rent shall be abated in the same proportion as the portion of the Premises so taken bears to the whole of the Premises, and Landlord shall make such repairs or alterations, if any, as are required to render the remainder of the Premises tenantable. Tenant shall be entitled to receive from Landlord the portion of any damages awarded for the taking or damaging of all or any part of the Premises that represents the value of this Lease, and any damage to the Hotel business. If this Lease is terminated pursuant to this Section 27, Tenant's right to receive reasonable compensation for its rights hereunder from the condemning authorities, or from Landlord if included in Landlord's award, shall not be affected or diminished. In any event, in the event of a condemnation which results in a termination of this Lease, such termination shall be treated as a termination covered by section 25.5 hereof, and Tenant shall have a first priority claim against any award to Landlord to fully satisfy all sums payable to Tenant, including full satisfaction of amounts secured by the Tenant Deed of Trust. -28- .94 ~'3L\ A voluntary sale by Landlord to any public body or agency, either under threat of condemnation or while condemnation proceedings are pending, shall be considered a taking under the power of eminent domain for purposes of this section. 28. Tenant Deed of Trust. This Lease is intended as a long term arrangement in which Tenant will make substantial financial commitments, including costs and expenses pertaining to the Upgrades based upon occupying the Property and conducting the Hotel business for the full term hereof, and Tenant is also relying on Landlord to fulfill Landlord's financial and other obligations hereunder. Accordingly, repayment of the amount of all ~pgrades made to the Property by Tenant, and all amounts subject to Tenant offset or otherwise owed by Landlord to Tenant pursuant to this Lease shall be deemed to constitute a loan from Tenant to Landlord (the "Loan") the repayment of which will be secured by a Deed of Trust/Security Agreement in the form attached hereto as Schedule 28 ("Tenant Deed of Trust") on the Property, inferior in priority only to this Lease and matters of record as of the Commencement Date. Landlord shall execute any documents and take any other actions which may from time to time be necessary to document and record the Tenant Deed of Trust. The parties acknowledge that at commencement of this Lease the Property is experiencing substantial operating losses, which losses are expected to continue for some time and will be absorbed/funded by Tenant. In the event this Lease is terminated for any reason other than the default of Tenant, Landlord shall also be obligated to repay to Tenant all of Tenant's accumulated operating losses at the time of termination which obligation shall also be secured by the Tenant Deed of Trust. Accumulated operating losses shall mean losses incurred by Tenant under generally accepted cash basis accounting principles after the cutover, plus any costs/expenses related to the property incurred/paid by Tenant prior to cutover, plus interest. Every expenditure by Tenant for an Upgrade or otherwise on behalf of Landlord for any purpose, every increment of accumulated operating loss from the Cutover Date, and any other amounts due Tenant pursuant to Section 56, shall constitute an advance under the Loan and the principal balance of Landlord's obligation secured by the Tenant Deed of Trust shall increase accordingly. All amounts secured by the Tenant Deed of Trust shall become due and payable as otherwise set forth herein or by law, but in any event at such time as this Lease is terminated for any reason prior to the full duration of the term hereof, including any extension terms exercised by or available to Tenant. Notwithstanding any provision hereof to the contrary, the Tenant Deed of Trust shall survive any termination or expiration of this Lease, until fully paid and satisfied. 29. Waiver of Subroqation. Landlord and Tenant shall each procure, if obtainable without payment of an additional premium, an -29- 'I :) .\ <3.\ J appropriate clause in, or an endorsement on, any policy of fire or extended coverage insurance covering the Premises and the personal property, fixtures and equipment located in or on the Premises, pursuant to which the insurance companies waive subrogation or consent to a waiver of right of recovery, and, conditioned upon a party having obtained such clauses or endorsements or waiver of subrogation or consent to a waiver of right of recovery, such party hereby agrees that it shall not make any claim against or seek to recover from the other for any loss or damage to its property, or the property of the other, resulting from fire or other hazards covered by such insurance, notwithstanding other provisionp of this Lease; provided, however, that the release, discharge, exoneration and covenant not to sue herein contained shall be limited by the terms and provisions of the waiver of subrogation clauses or endorsement consenting to a waiver of right of recovery, and shall be coextensive therewith. If either Landlord or Tenant is unable to obtain such clause or endorsement, such party shall promptly give the other party notice of such inability. If either Landlord or Tenant is able to obtain such clause or endorsement only upon payment of an additional premium, such party shall promptly give the other party notice to that effect, in which event the other party shall have the right to pay such additional premium, and upon such payment, the party whose insurer requires such payment shall promptly procure such clause or endorsement. 30. Landlord Expenditures. 30. :1 Budqet Approved Items. Any item contained and approved by Landlord in any Capital Spending Budget as provided for in Section 8.3 hereinabove, shall be paid by Landlord within ten (10) days of Tenant's notice to pay. In the event that Landlord does not remit payment within said ten (10) day period after notice, Tenant shall have the right to offset such amount against any rent due to Landlord. 30.2 Ordinarv and Necessarv Expenditures. Tenant may, without Landlord's approval and without inclusion in the Capital Spending Budget, expend up to Fifty Thousand Dollars ($50,000): (i) in ordinary and necessary mechanical expenditures where the cost to repair any mechanical item is (:1) greater than ten percent (10%) of the cost to replace said item, or (2) greater than fifty percent (50%) of the then book value of the item; and, (ii) in ordinary and necessary electrical and plumbing expenditures where the electrical or plumbing problem affects over five percent (5%) of the guest rooms. 30.3 Items Not Included in Budqet. Any expenditure required pursuant to governmental notice which is not included in a Capital Spending Budget shall be paid by Landlord within thirty (30) days of Tenant's notice to pay. 30.4 Emerqencv Expenditures. In the event of a life- threatening situation or a situation which causes a substantial interruption in the day-to-day operations of the Property, Tenant may directly advance an expenditure. In such case, Tenant shall -30- 91\ 331\ provide notice of the expenditure and the reason therefor to Landlord and Landlord shall have fifteen (15) days within which to reimburse Tenant for such expenditure. 30.5 Interest on Advancements. Upon any advancement by Tenant of expenditures as provided in this Section 30, Tenant shall, so long as it is entitled to be repaid, be entitled to interest thereon at the existing prime rate published by the Wall Street Journal, plus four percent (4%). 31. prioritv of Tenant's Interest. This Lease, and Tenant's right to occupy the Property pursuant to this Lease, is and shall throughout the term hereof (as extended, if applicable) be prior to any and all monetary encumbrances affecting the Property. 32. Surrender of Premises. Subject to Landlord's obligations hereunder, Tenant, at the expiration or sooner termination of this Lease, shall quit and surrender the Premises in good, neat, clean and sanitary condition, except for reasonable wear and tear and casualty damage. 33 . Force Ma i eure. Tenant's and Landlord's failure to timely perform any of their respective obligations under this Lease shall be excused if due to causes beyond the reasonable control and without the fault or negligence of Tenant or Landlord, including but not restricted to acts of God, acts of the public enemy, acts of any government, fires, floods, epidemics, unusual 'and adverse market factors, such as a dramatic drop in lodging occupancy in the general area, closure of the adjacent mall, sustained closure of an airport serving the area, environmental, catastrophes and the like. 34. Interference with Tenant's Use. If all or any part of the Property should become unsuitable for Tenant's use for any reason (other than Tenant's fault) including, but not limited to, force majeure events, then Tenant shall be entitled to a full abatement of rent for the period of time the Property (or portion thereof) is unsuitable for Tenant's use after thirty (30) consecutive days of unsuitability; provided, however, that if the Property (or portion thereof) remains unsuitable for Tenant's use for one hundred twenty (120) consecutive days or more, then in addition to abatement of rent, Tenant shall be entitled to elect (in Tenant's sole discretion) (a) to declare the outstanding principal balance of the Loan and any accrued but unpaid interest thereon immediately due and payable, or (b) to terminate this Lease by delivery of written notice of termination to Landlord, or (c) do both (a) and (b). 35. Tenant's Riqht to Terminate Lease. In light of Tenant's entering into this Lease without conducting its normal extensive due diligence, Tenant shall have the right, after the first two (2) years of this Lease and upon one hundred eighty (180) days' notice, to terminate this Lease without cause, and without liability to Landlord, provided that if Tenant does so, the Tenant Deed of Trust shall be deemed extinguished and Landlord shall succeed to ownership of any improvements made by Tenant. -31- 9.\ '331\ TO TENANT: c/o Northwest Lodging, Inc. Box C- 1 9167 Seattle, Washington 98109 Attn: Lawrence P. Horwitz and Attn: John T. Blanchard Phone: (206) 389-9860 or (206) 621-3555 Fax: (206) 727-2207 WITH A COPY TO: Craig Anders Brobeck, Paleger & Harrison 550 West C Street, suite 300 San Diego, California 92101 Telephone: (619) 234-1966 Fax: (619) 234-3848 Notices shall be deemed received upon personal delivery or confirmed fax, or at the earlier of actual receipt or three (3) business days after deposit into the mail. Purchaser and Seller may change their respective addresses and add additional addressees by written notice to the other party. 39. Interpretation. This Agreement has been submitted to the scrutiny of all parties hereto and their counsel, if desired, and shall be given a fair and reasonable interpretation in accordance with the words hereof, without consideration or weight being given to its having been drafted by any party hereto or its counsel. 40. Partial Invalidity. If any term or provision of this Lease or the application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced as written to the fullest extent permitted by law. 41. Estoppel certificate. Landlord and Tenant agree from time to time to promptly execute, acknowledge and deliver to the other party a statement in writing certifying that the Lease is unmodified and in full force and effect (or if there have been modifications that the same is in full force and effect as modified and stating the modifications), whether any party is in default or breach of the Lease, and the dates to which the basic rent and other charges have been paid in advance, if any. 42. Consent/Approval. approval is required, such unreasonably withheld. Where another party's consent consent or approval shall not or be -33- 1------ 91\ 331\ 43 . Entire Aqreement. This Agreement contains all representations and the entire understanding between the parties hereto with respect to the subject matter hereof. 44. Time. Time is of the essence hereof. 45. Disputes: Arbitration. In the event of a dispute between Landlord and Tenant regarding this Lease or their respective duties hereunder, the matter shall be submitted to binding arbitration. submission of the matter to arbitration shall not be a default under this Lease. Arbitration shall be as follows: (a) ANY DEMAND FOR ARBITRATION SHALL BE IN WRITING AND MUST BE MADE WITHIN A REASONABLE TIME AFTER THE CLAIM, DISPUTE OR OTHER MATTER IN QUESTION HAS ARISEN. IN NO EVENT SHALL THE DEMAND FOR ARBITRATION BE MADE AFTER THE DATE THAT INSTITUTION OF LEGAL OR EQUITABLE PROCEEDINGS BASED UPON SUCH CLAIM, DISPUTE OR OTHER MATTER WOULD BE BARRED BY THE APPLICABLE STATUTE OF LIMITATIONS. NOTICE OF DEMAND FOR ARBITRATION MUST PROVIDE: (a) A DESCRIPTION OF THE DISPUTE; (b) FACTS FROM WHICH THE DISPUTE ARISES, INCLUDING WITNESSES, DATES, TIMES, AND CIRCUMSTANCES; (c) A DESCRIPTION OF THE RELIEF OR ACTION REQUESTED. (b) ANY DISPUTE BETWEEN THE PARTIES THAT IS TO BE RESOLVED BY ARBITRATION SHALL BE SETTLED AND DECIDED BY ARBITRATION BY AMERICAN ARBITRATION ASSOCIATION ("AAA") IN ORANGE COUNTY, CALIFORNIA. IF AAA IS UNWILLING OR UNABLE TO ACT AS ARBITRATOR, THEN THE PARTIES SHALL APPLY TO THE PRESIDING JUDGE OF THE SUPERIOR COURT OF THE COUNTY IN WHICH THE PROPERTY IS LOCATED. AAA (OR, IF APPLICABLE, THE PRESIDING JUDGE) SHALL PROVIDE BOTH PARTIES WITH A LIST OF AT LEAST THREE (3) NEUTRAL ARBITRATORS, FROM WHICH THE PARTIES SHALL SELECT THE ARBITRATOR. SHOULD THE PARTIES FAIL TO AGREE UPON AND SELECT AN ARBITRATOR THEREFROM, AAA (OR, IF APPLICABLE, THE PRESIDING JUDGE) SHALL MAKE THE SELECTION FROM SAID LIST. EACH PARTY SHALL, HOWEVER, BE GIVEN THE RIGHT OF ONE (1) PREEMPTORY CHALLENGE. ARBITRATION SHALL BE HELD AND CONDUCTED BEFORE THE ONE (1) SELECTED ARBITRATOR. (c) ALL PROCEEDINGS INVOLVING THE PARTIES SHALL BE REPORTED BY A CERTIFIED SHORTHAND COURT REPORTER, AND WRITTEN TRANSCRIPTS OF THE PROCEEDING SHALL BE PREPARED AND MADE AVAILABLE TO THE PARTIES. (d) THE ARBITRATOR OR ARBITRATORS SHALL PREPARE AND PROVIDE THE PARTIES WITH WRITTEN FACTUAL FINDINGS AND THE REASONS ON WHICH THE DECISION OF THE ARBITRATOR IS BASED. (e) FINAL DECISION BY THE ARBITRATOR MUST BE MADE WITHIN ONE HUNDRED SIXTY (160) DAYS FROM THE DATE THE ARBITRATION PROCEEDINGS ARE INITIATED. (f) THE PREVAILING PARTY SHALL BE AWARDED REASONABLE ATTORNEYS FEES, EXPERT AND NON-EXPERT WITNESS COSTS AND EXPENSES, AND OTHER COSTS AND EXPENSES INCURRED IN CONNECTION WITH -34- , 9.1 334 THE ARBITRATION. COSTS AND FEES OF THE ARBITRATOR SHALL BE BCP~~ BY THE NON-PREVAILING PARTY. (g) AS SOON AS PRACTICABLE AFTER SELECTION OF THE ARBITRATOR, THE ARBITRATOR SHALL DETERMINE A REASONABLE ESTIMATE OF ANTICIPATED COSTS AND FEES OF THE ARBITRATOR, AND EACH PARTY SHALL DEPOSIT WITH THE ARBITRATOR AN AMOUNT EQUAL TO ONE-HALF (~) OF THE ESTIMATED AMOUNT WITHIN FIVE (5) DAYS FROM THE DETERMINATION. FAILURE OF ANY PARTY TO MAKE SUCH DEPOSIT SHALL RESULT IN A FORFEITURE BY THE NON-DEPOSITING PARTY OF THE RIGHT TO DEFEND OR PROSECUTE THE CLAIM SUBJECT TO ARBITRATION, BUT SHALL NOT OTHERWISE SERVE TO ABATE, STAY OR SUSPEND THE ARBITRATION PROCEEDI~GS. (h) ARBITRATION SHALL BE CONDUCTED PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 1280 ET SEQ. THE PROVISIONS OF TITLE 9 OF PART 3 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, INCLUDING SECTION 1283. 05, AND SUCCESSOR STATUTES, PERMITTING EXPANDED DISCOVERY PROCEEDINGS SHALL BE APPLICABLE TO ALL DISPUTES WHICH ARE ARBITRATED. (i) IF THESE ARBITRATION PROVISIONS ARE HELD UNENFORCEABLE FOR ANY REASON, IT IS AGREED THAT ALL ARBITRABLE ISSUES IN ANY JUDICIAL PROCEEDING WILL BE SUBJECT TO AND REFERRED ON A MOTION BY ANY PARTY FOR HEARING AND DECISION BY A REFEREE AS PROVIDED BY CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 638 ET SEQ. (j) NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE FOLLOWING MATTERS SHALL BE EXEMPT FROM ARBITRATION: i) UNLAWFUL DETAINER AND FORCIBLE DETAINER ACTIONS; AND ii) ACTIONS FOR INJUNCTIVE RELIEF PROVIDED, HOWEVER, THAT SAID ACTIONS SHALL BE ABATED OR STAYED EXCEPT TO THE EXTENT NECESSARY TO AFFORD THE PARTIES THE RIGHT TO OBTAIN AND ENFORCE PROVISIONAL INJUNCTIVE RELIEF (TEMPORARY RESTRAINING ORDERS AND PRELIMINARY INJUNCTIONS). Hi) NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THIS CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. -35- ~1 J3~ WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO THE NEUTRAL ARBITRATION. Tenant's In1t1als Landlord's Initials 46. Sur~dval. The representations, warranties, covenants and agreement~ made herein shall survive the COJlllllonCQJllent Date and cutover. 47. Governina Law. Venue. This Agreement shall be governed by and construed under the laws of the State of California. Venue for any legal action commenced between the parties hereto shall be in San Bernardino, california. 48. Commissions. No real estate, finders or other commissions are payable with respect to this transaction. Each party agrees to defend, indemnify and hold the other harmless with respect to any breach by or through such party of this mutual representation. 49. creditor List. Prior to cutover, Landlord shall provide Tenant with a current list of all Landlord's vendors, suppliers and =editors ("Creditors") which Landlord sball represent to be complete and accurate. Such list shall be attached as Schedule 49 hereof. All such creditors shall be paid DY Landlord. Landlord shall defend, indemnify and hold Tenant harmless from and against any liaDility with respect to such creditors or any creditor omitted from such list, I!lnd any other liability accruing to Tenant as a result thereof. Tenant shall assist Landlord in preparing such Creditors' list but shall not be liable for the accuracy thereof. 50. Schedules and EXhiDits. hereto are as follows: The SohQdules: and ExhiDi ts -36- 2t"d 6l>:tt 176. 2t lJO 91\ 111 Exhibits DescriDtion A B c '0 Legal Description Purchase and Sale Agreement Guaranty of Lease Covenant and Agreement Reqarding Parking Schedules DescriJ:)tion L5.1 1.6 1.12.4 1.13 9.1 9.3 9.6 10.3 28 49 51 FF&E AssUllled Contracts Specific ExCLuded Items DMJM Recommended Repairs/Corrections Accepted Encumbrances Defects to FF&E Known to Landlord Hazardous substances Defects to FF&E Known to Tenant Oeed of Trust/Security Agreement Creditor List MemorandUlll of Lease 51. Memorandum of Lease. This LeaSe shall not be recorded wi thout the consent of both parties. However, the parties agree to execute a memorandum of this Lease, in form set forth at Schedule 51, upon the other's request. 52. Counterparts. This Lease Agreement may be executed in two or more counterparts, each of which shall constitute an original and all of which shall be one and the same agreement. 53. continaencies. This Agreement shal-l be contingent upon the following: 53.1 Close of Sale Aareement. Landlord purChasing the Property from Maruko pursuant to the Sale Agreement. The purchase and sale is scheduled to close on or before November 30, 1994. 53.2 Guarantv. Northwest Lodging, a Washington corporation. executing a "Guaranty of Lease", in form SUbstantially similar to ExhiDit C attached. hereto and incorporated herein DY reference. 53 . 3 CUtover Fund. Landlord estaDlishing the cutover FUnd as provided by Section 1.13.2. 53.4 AlOlOroval of Citv. Approval by the City of thi$ Lease and the assignment to Tenant of Landlord's rights under the OPA and the Convention Center Lease. 5305 AlOproval of Aqencv. Approval by the Agency of this Lease and the assignment to Tenant of Landlord's rights under the OPA. -37- SOd 2S:S1 1>6, El l:lO 94 334 53. 6 Liquor License. Approval by the Bureau of Alcohol and Beverage Control to the assignment of the Liquor License as provided in Section ~.7. 53.7 agreement with between Tenant Radisson Agreement. Radisson or execution and Radlsson. Transfer of the franchise of a new franchise agreement 53.8 ALTA. Issuance of the ALTA lender'S and AL'l'A owner's policies with endorsements acceptable to Tenant. 53. 9 Deed of 'l'rust. Recordation of the Tenant _Deed Of 'l'rust and execution of such other documents raasonably necessary to evidence the Loan and Tenant's security intarest in the PX'operty, in form satiSfactory to Landlord and Tenant. 53.10 Memorandum of Lease. Recordation of a Memorandum of Lease in form satiSfactory to Landlord and,Tenant. S3.~1 EstoPDel Certificates. Execution of estoppel certificates by the City and the Agency in favor of Landlord and Tanant, in form acceptable to Landlord and 'l'enant. S4. No PartnershiD. Nothing contained herein or in any instrument relating hereto shall De construed as creatinq a partnership or joint venture between Landlord and Tenant or between Landlord and any other party, oX' cause Landlord to De responsiDle in any way for debts or obligations of Tenant or any other party. 55. Riqht of First Refusal. In the event Landlord receives an offer to sell its interest in the Property covered by this Lease, Landlord hereby grants to Tenant the right of first refusal to acquire the property on the same terms and conditions as offered" The consideration under such offer shall be entirely monetary. This right of first refusal shall not apply to a sale, assignment or transfer to Landlord's principalS or to an entity owned or controlled hy Landlord and/or its principals or to an exchanqe for other property. Tenant shall have ten (:to) days after receipt of a complete copy of the offer to notify Landlord of its intention to match such offer. Within said ten (:LO) days and accompanyinq Tenant's notice of intent to match such offer, Tenant must deliver a cashier's check to the Landlord for the amount of any cash deposit called for in such offer. Tenant's failure to exercise this right of first refusal timely shall release Landlord of any further obligation to Tenant with respect to Tenant's right of first refusal and Landlord shall ~e free to'sell the Property. However, should Landlord'S sale fail to consummate, and a new offer is received by Landlord, Tenant shall again have the right of first refusal as heretofore provided. Tenant's offer shall be noncontinqent as to due diligence and property investigation matters. Tenant acknowledges that this right of first refusal may adversely affect Landlord's marketing of the Property if Landlord wishes to sell same. Accordingly, Tenant agrees to reasonably cooperate with Landlord as regards Landlord's desire to sell the property and to give bona fide consideration to waiving this right of first refusal in the event (ll) Landlord advises Tenant in -38- 6"d ES:Sl 176, El DO 94 3~.1 vriting of the price and general terms under which LandlOrd wishes to sell the Property, (b) Tenant does not wish to purchase under such terms and conditions, and (c) Landlord subsequently sells the Property pursuant to such previously stated terms and conditions, Dut not otherwise. 56. particiDation in sale: Termination of LGlase. '!'he parties acknowledge that Tenant's operation of the Property will affect the value thereof, and that Tenant should participate in the increase in value of the property over a certain level. Accordingly, shouJ.d Landlord elect to sell the property at any time durin~ the term hereof, Tenant shall be entitled to receive in cash at the Closing of the sale the following: (a) Tenant's accumulated capital investment in the property and accumulated losses, if any, existing at the time of sale, plus interest thereon from the time incurred at the prime rate published by the Wall street Journal, plus four percent (4%) (collectively WTenant's Investment Recapture") plUS (b) the greater of ten pe=ent (1.0%) of the Adjusted Sale Proceeds reSUlting from the sale .of the Property, or One Million Dollars ($1,000,000) plus Cc} any amounts owing by Landlord to Tenant pursuant to this Lease and not included in calCUlating (a) above (collectively "Tenant Participation"). Landlord's obligation to pay Tenant the amounts hereunder shall be secured DY the Tenant Deed of Trust. In determining the.Tenant Particip~tion the followin~ shall apply: Adjusted Sale Proceeds shall mean gross proceeds of the sale including the total of all consideration received or to De received by the seller whether same is cash, debt reduction/forgiveness:, other property, promissory notes or other evidence of indebtedness, services or consideration of any nature, less (i) FivQ Million Dollars ($5,000,000), (iil an amount equal to total T01:' credits actually taken or received by Tenant during the term of this Lease, directly from the City or indirectly from Landlord, and (iii) the amount of Tenant's Investment Recapture paid to Tenant pursuant to Ca) above. Tenant's Investment Recapture shall be determined quarterly on the basis of cumulative Cash Plow generated by the Property commencing as of cutover. "cumulative Cash Floww shall be calculated in accordance with generally accepted cash basis accounting principles as follows: (i) calculate beginning CUmulative Cash Flow as of the start of each quarter; (iil further include any capital expenditures made by Tenant in that quarter; (iii) further include any Cash Losses incurred I:ly Tenant during that quarter,. ("cash Losses" means net income without deduction of noncash expenses such as depreciation, amortization, and reserves or inclusion of noncash credits not immediately available to Tenant, if any) i (iv). net any Cash prOfits during that quarter ("Cash Profits" means net income without deduction of noncash expenses such as depreciation, amortization and reserves or inclusion of noncash credits not immediately available to Tenant, if any); and (iv) apply applicable cumulative interest. -39- 0t.d 1>S:St 1>6, Et 1:10 94 334 It is intended that if the Property generates sufficient cash basis profits to offset Tenant's cumulative losses and capital expenditures, plus interest, then in such event Tenant's Investment Recapture "account" would be zeroed out and Tenant will not receive that particular aspect of sale proceeds, but will in any event receive the amounts set forth at (b) and (c) above. In the event of a sale, upon payment to Tenant of all amounts owed to Tenant pursuant to this Section 56, this Lease shall terminate and Tenant shall remove the Tenant Deed of Trust from the Property. Upon six (6) months notice, Landlord may, in Landlord's discretion, terminate this Lease at any time without involving a sale of the Property by paying to Tenant the sum of (i) Tenant's Investment Recapture, (ii) any other amounts owed to Tenant hereunder not already included in Tenant's Investment Recapture, (iii) a cash payment of One Million Dollars ($1,000,000), and (iv) all inventory on hand at the Property and all accounts receivable of guests and/or patrons of the property who have received Hotel services but not yet paid for such services other than the city Ledger. 57. Allocation of Risks. The parties acknowledge that the Property has historically experienced significant losses and that, notwithstanding a certain level of due diligence by both Landlord and Tenant, and notwithstanding that Tenant is a prudent, experienced and successful hotel operator, neither Landlord nor Tenant is intimately familiar with the property and the various business, ownership and other risks attendant thereto. Landlord and Tenant have agreed that in entering into this Lease, Tenant is assuming certain operating risks concerning the Property as specifically set forth herein, but that Landlord is assuming all risks of ownership of the Property and all other risks not specifically allocated to Tenant herein, including but not limited to those risks specified at section 57.2 hereof. 57.1 Risks Allocated to Tenant. (a) All risks and obligations specifically set forth herein as Tenant's responsibility; (b) Normal, customary and recurring risks of operation of a hotel/convention center business; (c) Normal and customary risks of dealing with guests and the public in the context of hotel/convention center operation; (d) Risks attendant to Tenant's employment of personnel after cutover, but specifically excluding claims/obligations arising or accruing prior to cutover or relating to former employees not hired by Tenant. -40- 94 334 (e) Compliance with franchisor standards f~ operational aspects of the Hotel/Convention Center, to the extent same are not a Landlord obligation or responsibility hereunder. 57.2 Specific Risks Allocated to Landlord. (a) All maintenance, repair and replacement in conjunction with the buildings and improvements and components thereof including, without limitation, roof, structure, exterior, windows, plumbing, electrical, HVAC, pools, major equipment and the like, and excluding only normal maintenance and repair that is a normal and customary charge to Hotel operations, ft being understood that Tenant will be responsible only for normal and customary operational aspects of the business and Landlord shall be responsible for all other items and matters. (b) Earthquake/earth movement damage and impacts. (c) Unusual and significant market conditions such as, without limitation, adverse publicity (not caused by Tenant) concerning the Property, the City or the surrounding area, which may significantly affect Hotel/Convention Center operations or closure of a major facility or resource such as freeways, airports, shopping areas and the like. (d) The relationship of the Hotel/Convention Center with the City, enforcement of Development Agreements or other contractual arrangements, realization of the TOT credits and maintenance/repair of any areas of the Property, the Parking Garage or adjacent common areas to the extent same is the responsibility of the City or third parties. (e) Claims, damages or issues relating to obligations, actions or inaction of Maruko, or any former operator or contractor of the Property or any aspect thereof, it being understood that Tenant assumes no such risks or obligations of any nature. (f) Property other than Tenant obligation. The indemnity prov~s~ons of section 24 hereof shall apply to any obligation owed by one party to the other herein which is not performed and thus must be performed by the other party. In addition, in the event there is an occurrence that is a Landlord risk that affects the Property to such an extent as Tenant reasonably determines that it is not feasible for Tenant to continue to operate the Property pursuant to this Lease, and Landlord after written notice and reasonable opportunity to respond is unwilling or unable to take appropriate steps to allow Tenant to continue to operate, then Tenant may terminate this Lease without further obligation to Landlord and Landlord shall upon such termination pay to Tenant the full amount then secured by the Tenant Deed of Trust, reduced only by the amount of All risks and obligations concerning the those specifically identified herein as a -41- C'4 334 depreciation/a~ortization then taken with respect to Improvements made by Tenant, in accordance with generally accepted accounting principles. The parties acknowledge that Tenant is relying substantially on the Property and the Tenant Deed of TruSt for security as regards this Lease. Ih the event LaIidlOrd, as a result of a natural disaster or otherwise, elects to directly or indirectly abandon the property, then in addition to any other r_edies specified herein or available to Tenant DY law, Landlord shall upon request of Tenant assign to Tenant all of its rights as regards the Property, including without limitation, the right to insurance proceeds and the right to apply for governmental assistance or participation in governmental programs. The Property will bQ deemed to be abandoned if Landlord fails to commit to Tenant to rebuild the Property as soon as is reasonably practicable. In the event Landlord elects to purchase earthquake and/or earth movement insurance coverage for the property, such coverage shall include Tenant as an additional insured. 58. Interest. Any interest provided for under this Lease shall be at the prime rate published by the Wall street Journal, plus four percent (4%). -42- ETd ':;17:H 17':;, n 1:\0 94 33<1 DATED as of the date first written aDove. LANDLORD : RabWeh International corporation a california corporation ~- B' /..,;;::: ..--: &rry ves~ra, ecretary TENANT: ARK services Company, a limited liaDility company By: Name: Its: 0102651.05 -43- :;>'-l Rt:J1 m;, F't 1')(1 . ~ ,~ "'T.,....,..,f 94 334 I2IUU4 DATED as .of the date f~t w:r.itten above. LA.'IDLORD: TENANT : 0102651.04 Rabweh :tnt:~'"IUl.tional Corpora1:ion a California corporation Bv' . . Larry Vesce>:'a, Secre1:a...""Y ARlC services company, il CIJl./.I6ilN,/A UI/II~ V#.2,1u?;y ~I'_". By:~~ Name: ~1J/l.y4!! f. It./UI/:r<. l:ts: /4->'/4&4 r- ,...;;.../".. .h'Gl7~ Lg4-::f"c A-GU.GI?6J :r- ...il'h>l A'Ep./A-;!,tI/N l> C . "'Ve,.J77:./ #=7 ~,t C4"",;r~ MtJ ~ (},<,;&>/~ #/ ,-,,7Jfiy ~~.<rz-JI1 r.z!tt>lJ (;# -~3- } c!!""CI...e..... . .~T "'''.:I'~,..~n.., so ~"'T'U ..).fW.........,""'.3 r:u:~.ef:lll "c!_""_T..,n ~4 334 94-334 . 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 EXHIBIT "B" ASSUMPTION AGREEMENT [RABWEH-ARK SERVICES] This Assumption Agreement ("Agreement") is entered into as of October , 1994, by and between the City of San Bernardino, California (the "City"), the Redevelopment Agency of the City of San Bernardino (the "Agency"), Foster-Khoury International, Inc., a California corporation ("Foster-Khoury"), a California corporation, Rabweh International, Inc., a California corporation ("Rabweh") and ARK Services Company ("ARK") . Recitals A. The City, the Agency, Foster-Khoury and Maruko, Inc. ("Maruko") have entered or are contemporaneously herewith entering into an assumption agreement (the "Foster-Khoury Assumption Agreement") whereby Foster-Khoury assumes the rights and obligations of Maruko under in and to that certain Owner Participation Agreement ("OPA") entered into on or about July 20, 1987. The OPA concerns certain real property located in the City (described in Exhibit "A" to the OPA) , which property is improved with a hotel (the "Property"). The OPA was amended by virtue of that certain Amendment No. 1 to Owner Participation and Development Agreement and Convention Center Sublease and Operating Agreement. B. Under the Foster-Khoury Assumption Agreement, Foster-Khoury also assumes the rights and obligations of Maruko under that certain City of San Bernardino Convention Center Sublease and Operating Agreement (the "Operating Agreement") dated as of August 4, 1987. The Operating Agreement concerns certain convention center facilities (the "Leased Premises") located adjacent to the Property. C. The City and the Agency have consented or are contemporaneously herewith consenting to the transfer of the shares of Foster-Khoury from Angela Foster and Najib Khoury to Rabweh. D. It is the desire and intention of Foster-Khoury and Rabweh that the rights and obligations of Foster-Khoury in and to the OPA and the Operating Agreement vest in Rabweh and be exercised and performed by Rabweh. E. Section 6.5 (c) of the OPA provides that neither title to the Property nor the interests of Foster-Khoury under the OPA may be assigned without the prior written consent of the City and the Agency, which consent shall not be unreasonably withheld, and further provides that the City and the Agency may require the proposed assignee or transferee to assume, by written agreement, all of the obligations, covenants, conditions and B-1 94 334 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 restrictions imposed on Foster-Khoury under the OPA. F. Section 12.1 of the Operating Agreement provides that Foster-Khoury may not assign its interests under the Operating Agreement without the City's prior written consent, not to be unreasonably withheld. G. The City and the Agency have consented to the transfer to Rabweh of Foster-Khoury's interests in the Property, together with related easements and rights appurtenant thereto, Foster-Khoury's rights and obligations under the OPA, as amended, and Foster-Khoury's rights and obligations under the Operating Agreement, whether by express transfer and assignment or by merger or other corporate reorganization of Foster-Khoury and Rabweh. H. Rabweh and ARK have or will enter into that certain Hotel Lease Agreement (the "Hotel Lease"), whereby ARK will lease the Property and sublease the Leased Premises from Rabweh, acquire some, but not all, of Rabweh's rights and obligations under the OPA and the Operating Agreement and whereby ARK will manage and operate the Property and the Leased Premises. Pursuant to the Hotel Lease, Rabweh shall execute a deed of trust ("Tenant Deed of Trust") in favor of ARK, encumbering Rabweh's interest in the Property and the Leased Premises, as security for Rabweh's performance of certain obligations under the Hotel Lease. The City and the Agency have consented to the Hotel Lease and the Tenant Deed of Trust upon certain conditions as set forth in that certain Consent to Transfer [Convention Center Sublease and Operating Agreement] executed by the City concurrently herewith. NOW, THEREFORE, THE PARTIES HERETO AGREE AS HEREINAFTER PROVIDED. Terms and Conditions 1. The Recitals stated above are true and correct and incorporated herein by reference. 2. Rabweh assumes all of Foster-Khoury' s obligations, without exception, and acquires all of Foster-Khoury's rights, under the provisions of the OPA, as amended. 3. Rabweh hereby assumes all of Foster-Khoury's obligations, without exception, and acquires all of Foster- Khoury's rights, under the provisions of the Operating Agreement. 4. By the assumptions set forth in Sections 2 and 3 above, Rabweh agrees to perform each and every obligation of Foster-Khoury under the OPA and/or the Operating Agreement, including obligations, if any, previously due but unperformed. Foster-Khoury agrees to remain fully liable for all of its obligations under the OPA and/or the Operating Agreement, notwithstanding Rabweh's assumption thereof. B-2 '94 33 J 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5. During the term of the Hotel Lease, ARK shall operate the Property and the Leased Premises in a manner consistent with the terms and conditions of the OPA and the Operating Agreement. As more particularly set forth in the Hotel Lease, ARK shall, during the term of the Hotel Lease, assume certain of the obligations of Rabweh and Foster-Khoury under the OPA and the Operating Agreement. This assumption by ARK shall in no way release Foster-Khoury or Rabweh from their obligations under the OPA and the Operating Agreement, and they shall remain fully liable therefor. 6. The City and the Agency hereby agree that so long as the Hotel Lease shall remain in effect or the Tenant Deed of Trust shall remain a lien on Rabweh's interest in the Property and the Leased Premises, the City shall not accept a voluntary surrender of the Operating Agreement and the City and the Agency shall not accept a voluntary termination of the OPA by Rabweh, unless the City is legally required or contractually bound to do so. 7. In the event of a default by Rabweh or Foster- Khoury under the OPA or the Operating Agreement, the City and the Agency shall give to ARK all of the rights and remedies given to an approved "Lender" under Article 18 of the Operating Agreement, which is incorporated herein by this reference. Without limiting the generality of the foregoing, the City and the Agency agree to deliver any notices of default under the Operating Agreement and/or the OPA to ARK concurrently with delivery to Rabweh, and to afford ARK the opportunity to cure such defaults within the time periods set forth in Article 18 of the Operating Agreement. 8. The various transfers and assumptions contained in this Agreement are subj ect to the provisions of the OPA, the Operating Agreement, the Consent to Transfer in favor of Foster- Khoury previously given by the City and the Agency, and the Foster-Khoury Assumption Agreement. 9. The parties hereto agree that no further transfer of any right in or title to the Property or of rights under the OPA or the Operating Agreement may occur except in compliance with the applicable provisions of the OPA and/or the Operating Agreement. No transfer or assignment of any rights and obligations under the OPA may be made unless the rights and obligations under the Operating Agreement are likewise transferred or assigned to the same transferee, and vice versa. 10. This Agreement shall become effective upon the Closing Date of Foster-Khoury's purchase of the Property from Maruko (as "Closing Date" is defined in the Purchase and sale Agreement and Escrow Instructions dated August 5, 1994, by and between Maruko and Naj ib Khoury and Angela Foster). No rights or obligations of any party to this Agreement shall be deemed to be changed, amended or modified hereby until the effective date hereof. B-3 94-334 1 2 11. This Agreement may be executed in counterparts. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. 3 4 5 6 7 APPROVED AS TO FORM AND LEGAL CONTENT: 8 ~y./1-w>W/A~aj2v 9 s~~;;""M~~;y 10 CITY OF SAN BERNARDINO, CALIFORNIA By: Tom Minor Mayor 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 APPROVED AS TO FORM AND LEGAL CONTENT: Sabo & Green By: V;::.Ai.. ~.~ Ag:n,,;;; c'cimel REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO By: Tom Minor Chairman B - 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 94-334 APPROVED AS TO FORM: By: FOSTER-KHOURY INTERNATIONAL, INC., a California corporation By: Name: Title: Attorneys for Foster-Khoury APPROVED AS TO FORM: By: RABWEH INTERNATIONAL CORPORATION, a California corporation By: Name: Title or Capacity: Attorneys for Rabweh APPROVED AS TO FORM: By: ARK SERVICES COMPANY By: Name: Title or Capacity: Attorneys for ARK B - 5 94-334 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 EXHIBIT "c" CONSENT TO TRANSFER [Owner Participation and Development Agreement] [RABWEH-ARK SERVICES] This Consent to Transfer is made as of October , 1994, by the City of San Bernardino, California (the "City") and by the Redevelopment Agency of the City of San Bernardino (the "Agency"), with respect to the following facts: Recitals A. The City, the Agency and Maruko, Inc. ( "Maruko" ) entered into that certain Owner Participation and Development Agreement ("OPA") on or about July 20, 1987, with regard to certain real property located in the City, described in Exhibit "A" of the OPA, which property is improved with a hotel (the "Property"). The OPA was amended by virtue of that certain Amendment No. 1 to Owner Participation and Development Agreement and Convention Center Sublease and Operating Agreement ("Amendment No.1"). B. Maruko has entered into an agreement for the sale of the Property to Foster-Khoury International, Inc., a California corporation ("Foster-Khoury"). The principals of Foster-Khoury, Angela Foster and Najib Khoury, intend to sell their shares and interest in Foster-Khoury to Rabweh International Corporation, a California corporation ("Rabweh") owned and controlled by His Royal Highness Shaikh Mohamed Bin Sulman Al Khalifa, contemporaneously with or as soon as possible after Foster-Khoury's acquisition of the Property. The City and the Agency have consented or are contemporaneously herewith consenting to the assignment of Maruko's rights and obligations under the OPA and to the transfer of the shares of Foster-Khoury to Rabweh. C. It is the desire and intention of Foster-Khoury and Rabweh that the rights and obligations of Foster-Khoury in and to the OPA vest in and be exercised and performed by Rabweh. D. Rabweh and ARK Services Company ("ARK") have or will enter into a certain Hotel Lease Agreement (the "Hotel Lease") whereby ARK will acquire some, but not all, of Rabweh's rights and obligations under the OPA and whereby ARK will manage and operate the Property, and sublease the convention center property adjacent to the Property ("Convention Center") . E. Section 6.5 (c) of the OPA provides that neither title to the Property nor the interests of Foster-Khoury under the OPA may be assigned without the prior written consent of the City and the Agency, which consent shall not be unreasonably withheld, and further provides that the City and the Agency may require the proposed assignee or transferee to assume, by written agreement, all of the obligations, covenants, conditions and restrictions imposed on Foster-Khoury under the OPA. C - 1 , ' 94 33,J 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Consent 1. The City and the Agency hereby consent, upon the conditions set forth in Sections 2 and 3 below, to the following: a. Foster-Khoury may transfer to Rabweh its interests in the Property, together with related easements and rights appurtenant thereto, whether by express transfer and assignment or by merger or other corporate reorganization of Foster-Khoury and Rabweh. b. Foster-Khoury may assign to Rabweh all of Foster-Khoury's rights and obligations under the OPA, as amended, whether by express assignment or by merger or other corporate reorganization of Foster-Khoury and Rabweh. Foster-Khoury shall remain fully liable under the provisions of the OPA, notwithstanding the assignment to Rabweh. c. Rabweh and ARK may enter into the Hotel Lease, in the form approved by the City and Agency, with such changes as may be reasonably acceptable to the City and Agency. Rabweh (and Foster-Khoury) shall remain fully liable under the provisions of the OPA, notwithstanding the Hotel Lease. 2. The consents set forth in Section 1 above are contingent upon the following, to which the parties hereto agree: a. During the term of the Hotel Lease, ARK shall operate the Property in a manner consistent with the restrictions set forth in the OPA and shall assume certain of the obligations of Rabweh and Foster-Khoury under the OPA, which assumption shall not release Rabweh and Foster-Khoury from their obligations under the OPA. b. Pursuant to the Hotel Lease, ARK will sublease from Rabweh the Convention Center and assume certain of the obligations of Rabweh and Foster-Khoury under that certain City of San Bernardino Convention Center Sublease and Operating Agreement (the "Operating Agreement") dated as of August 4, 1987. Such assumption by ARK will not release Rabweh and Foster-Khoury from their obligations under the Operating Agreement. c. ARK, Rabweh and Foster-Khoury shall execute and deliver to the City and Agency the Assumption Agreement in the form required by the City and Agency. d. Northwest Lodging, Inc. , a Washington corporation and affiliate of ARK ("Northwest") shall guarantee the obligations of ARK under the OPA and the Operating Agreement, with such guarantee to be in a form acceptable to the City and the Agency. C - 2 94-334 . . 1 2 3 4 5 3. The consents set forth in this agreement are contingent upon completion of the contemplated transactions within 180 days of the date hereof. Any transaction not completed within that time shall require the further review and consent of the City and the Agency. 4. No subsequent transfers or assignments of the Property, or the rights under the OPA, other than as permitted hereunder, shall occur without compliance with Section 6.5 of the OPA. 6 7 8 9 10 CITY OF SAN BERNARDINO, CALIFORNIA By: Tom Minor Mayor APPROVED AS TO FORM AND LEGAL CO:~ (2. / 11 S~~~~t~ 12 ...7 - REDEVELOPMENT AGENCY OF 13 CITY OF SAN BERNARDINO THE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 By: Tom Minor Chairman APPROVED AS TO FORM AND LEGAL CONTENT: Sabo & Green . ~.. By: '-/h"""" Attorney C - 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 . . .. , . . . 94-334 STATE OF CALIFORNIA COUNTY OF On before me, (here insert name and title of the officer), personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name (s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature (Seal)