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Home My WebLink About1982-334l 2; 3 4 5 6i 7� 8 9, 10' ll i� 12 i 13 14 15 16 17 18 19 20 21 22 23 24 25 i 26 27 28 RESOLUTION NO. 82-334 RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING THE EXECUTION OF CONVENTION CENTER, HOTEL OPERATING AGREEMENT BETWEEN THE CITY OF SAN BERNARDINO AND ENGLISH ENTERPRISES INC., OR NOMINEE. BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: SECTION 1. The Mayor of the City of San Bernardino is hereby authorized and directed to execute on behalf of the City of San Bernardino, an agreement, incorporated herein by reference, and entitled, "Convention Center and Hotel Agreement" with English Enterprises, Inc. or Nominee. I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Mayor and Common Council of the City of San Bernardino at a--gular meeting thereof, held on the 2nd `day of Auctust ___, 1982, by the following vote, to wit: AYES: Council Members Castaneda,Reilly� nuiel, _ Flobbs,__..,Strickler NAYS: None ABSENT: Council Atiember Hernandez The foregoing resolution is hereby approved this of - August -------- 1982. Approved as to form: City Att ney City Clerk City ra -----,--day Bernardino .Recording Requested by: REDEVELOPMENT AGENCY ,When Recorded, Mail to: REDE'1L0p rNT ACENCY OF THE CITY OF SAN BERNARDINO, CA 300 Month -Ly, at., RM 320 San Bernardino, CA 92418 OF RE FICCORDED IN RECORD, 1941 SEP 16 Pfd 4: 1 f SAi; ttfcf�A jb,jvo CO., CALIF. E � a: CITY OF SAN BERNARDINO CONVENTION CENTER AND HOTEL OPERATING AGREEMENT OPERATING AGREEMENT TABLE OF CONTENTS ARTICLEI - RECITALS ........................................ Section 1.01. Disposition Agreement ..................... Section 1.02. Need for Operator ......................... Section 1.03. Operator's Qualifications ................. Section 1.04. Operation and Contract .................... Section 1.05. Basis for Standards . ..................... ARTICLE II - DEFINITIONS .................................... Section 2.01. Agency .................................... Section 2.02. Architect ................................. Section 2.03. Section 2.04. Section 2.05. Section 2.06. Section 2.07. Section 2.08. Section 2.09. Section 2.10. Section 2.11. Section 2.12. Section 2.13. Section 2.14. Bonds ..................................... City...................................... Complex ................................... Convention Center ......................... Disposition Agreement ..................... Drawings .................................. Garage Facilities ......................... Hotel ..................................... Land ...................................... Operating Agreement ....................... Operator .................................. Party ..................................... (i) Page 1 1 2 2 2 2 3 3 3 4 4 4 4 4 4 5 5 5 5 6 6 GC 00 Qi d Cz Section 2.15. Section 2.16. Section 2.17. Section 2.18. Section 2.19. Fag Project Area .............................. 6 Redeveloper ............................... 6~j Resolution ................................ 6 Redevelopment Plan ........................ 6 Quality Standards ......................... 6 ARTICLEIII - NAMES ......................................... 7 Section 3.01. Convention Center ......................... 7 Section 3.02. Hotel ..................................... 7 ARTICLEIV - TERM .......................................... 7 Section 4.01. Term of Operating Agreement ............... 7 Section 4.02. Method of Extension ....................... 7 Section 4.03. Article Exclusive ......................... 8 Section 4.04. Temporary Operation of Convention Center.. 9 Section 4.05. Construction Period ....................... 9 Section 4.06. Opening for Business ...................... 9 ARTICLE V - TITLE TO PROPERTY .............................. 10 Section 5.01. Title to Property ......................... 10 ARTICLE VI - OPERATION AND MANAGEMENT POLICY ................ 11 Section 6.01. Operation and Management Policy........... 11 ARTICLE VII - OPERATOR'S RESPONSIBILITIES FOR MANAGEMENT ANDOPERATION ................................. 11 Section 7.01. General Provisions ........................ 11 ARTICLE VIII - CITY'S RESPONSIBILITIES ...................... 21 Section 8.01. Maintenance and Repair of Structure....... 21 Section 8.02. Approvals by City ......................... 22 Section 8.03. Reconstruction of Garage .................. 22 ARTICLEIX - EQUIPMENT .................................... 22 Section 9.01. Equipment and Improvements -- Convention Center ......................... 22 Section 9.02. Equipment and Improvements --Hotel......... 24 Section 9.03. Replacement of Fixed and Moveable Equipment ................................. 24 ARTICLE X - COMPENSATION TO CITY ......................... 25 Section 10.01. Measure of Compensation ................... 25 Section 10.02. Gross Receipts ............................ 26 Page 1 Section 7.02. Operation and Maintenance of the Convention Center ......................... 13 O Section 7.03. Operation and Maintenance of the C?: Convention Center and the Hotel........... 15 Section 7.04. Supplies and Maintenance of the Food and Beverage Facilities ..................: 15 Section 7.05. Liquor License ............................ 16 Section 7.06. Quality of Services ....................... 16 Section 7.07 Employees ................................. 19 Section 7.08 Equal Employment Opportunity .............. 19 Section 7.09 Landscaping ............................... 21 ARTICLE VIII - CITY'S RESPONSIBILITIES ...................... 21 Section 8.01. Maintenance and Repair of Structure....... 21 Section 8.02. Approvals by City ......................... 22 Section 8.03. Reconstruction of Garage .................. 22 ARTICLEIX - EQUIPMENT .................................... 22 Section 9.01. Equipment and Improvements -- Convention Center ......................... 22 Section 9.02. Equipment and Improvements --Hotel......... 24 Section 9.03. Replacement of Fixed and Moveable Equipment ................................. 24 ARTICLE X - COMPENSATION TO CITY ......................... 25 Section 10.01. Measure of Compensation ................... 25 Section 10.02. Gross Receipts ............................ 26 cr Page Z\:� I Section 10.03. Method of Payment ......................... 27 I� Section 10.04. Books and Records ......................... 28 G G' Co.: ARTICLE XI - FIRE AND EXTENDED COVERAGE INSURANCE.......... 28 Section 11.01. Coverage to be Provided ................... 28 Section 11.02. Named and Additional Insureds ............. 30 Section 11.03. Notice of Cancellation .................... 30 Section 11.04. Disbursement of Insurance Proceeds........ 31 Section 11.05. Waiver of Insurance ....................... 36 Section 11.06. Payment and Deposit of Policies........... 37 Section 11.07. Waiver of Subrogation ..................... 37 ARTICLE XII - INDEMNITY AND LIABILITY INSURANCE ............. 38 Section 12.01. Indemnity ................................. 38 Section 12.02. Liability Insurance ....................... 38 Section 12.03. Workmen's Compensation .................... 39 Section 12.04. Policies .................................. 41 39 ARTICLEXIII - TAXES ........................................ 40 Section 13.01. Separate Assessment ....................... 40 Section 13.02. Payment of Taxes on the Land, the Convention Center and the Garage Facilities ......................... 41 Section 13.03. Payment of Taxes on Hotel Parcel i Hotel.. 41 Section 13.04. Allocation of Real Property Taxes......... 42 Page Section 13.05. Right to Contest .......................... 44 Section 13.06. Other Taxes ............................... 45 ARTICLE XIV - GENERAL PROVISIONS .......................... 46 Section 14.01. Utilities .................................. 46 Section 14.02. Compliance with Laws ...................... 46 Section 14.03. Time of Essence and Waiver ................ 46 Section 14.04. Termination by City ....................... 46 Section 14.05. Arbitration ............................... 47 Section 14.06. Enforcement --Costs, Attorneys' Fees....... 47 Section 14.07. Assignment ................................ 48 Section 14.08. Bankruptcy and Insolvency ................. 48 Section 14.09. Right of Access ........................... 48 Section 14.10. Governing Law ............................. 49 Section 14.11. Partial Invalidity ........................ 49 Section 14.12. Vis Major ................................. 49 Section 14.13. Interpretation ............................ 50 Section 14.14. Entire Agreement; Modification in Writing ................................ 50 Section 14.15. Operating Memoranda ....................... 51 Section 14.16. Approvals ................................. 51 Section 14.17. Successors and Assigns .................... 51 EXHIBITS.................................................... Exhibit A - Disposition and Joint Development Agreement ................................. Exhibit B - Management Contract ....................... (v) G• W CITY OF SAN BERNARDINO, on CONVENTION CENTER AND HOTEL 1 F-� OPERATING AGREEMENT Qi CT. This OPERATING AGREEMENT, dated for convenience as of IAV GUST '25 , 1982, by and between the CITY OF SAN BERNARDINO, a municipal corporation (hereinafter referred to as the "City") and ENGLISH ENTERPRISES, INCORPORATED OR NOMINEE (hereinafter referred to as the "Operator") . For and in consideration of the performance of the mutual covenants and promises herein contained, at the time and in the manner specified herein, the Parties hereto agree as follows: ARTICLE I. RECITALS This Operating Agreement is made and entered into with refer- ence to the following facts and assumptions: SECTION 1.01. Disposition and Joint Development Agreement. The Operator has concurrently with execution of this Operating Agreement entered into a Disposition and Joint Development Agree- ment (in which the Operator is called "Redeveloper") with the Redevelopment Agency of the City of San Bernardino and the City of San Bernardino for construction and development of a hotel on the Land upon which the Convention Center is to be developed as said Land are shown on Exhibits attached to said Disposition Agreement, which Disposition Agreement is incorporated herein and made a part hereof (Exhibit A); and -1- SECTION 1.02. Need for Operator. The City has not been finan- cially successful in the operation of the existing Exhibit Hall as it is presently constituted; and it is expected that, by entering into this Operating Agreement, the City will be able to solve the difficult problems of providing for the operation and maintenance of the Convention Center (as reconstructed pursuant to the Disposition Agreement) including, without limitation, the solicitation and booking of conventions, trade shows, exhibitions, dances and other op GTS entertainment and events of interest to the general public, meetings of all types, as well as other events, and the making of food and beverages, vending machines for food, beverages and cigarettes available to the patrons of the Convention Center; and SECTION 1.03. Operator's Qualifications. Operator has demon- strated that it has the extraordinary knowledge, special experience and competence which will enable the Convention Center, when combined with a Hotel to be constructed on the Land, all as more set forth in the Disposition Agreement, to be operated and managed in a successful manner (Exhibit A); and SECTION 1.04. Operation and _Contract. The City and the Operator, under the terms of this Operating Agreement, have agreed to cooperate in accomplishing the foregoing and the City will main- tain control of the management, operation and maintenance of the Convention Center, and SECTION 1.05. Basis for Standards. The City and the Operator have agreed that there is no comparable facility in the City and the most comparable operation of the type contemplated by this Operating -2- Agreement, at the time of the execution hereof, is the RAMADA INN - BEVERLY HILLS; and reports thereon have been prepared and used for the development of the Disposition Agreement and this Operating on Agreement; it being recognized that the RAMADA INN - BEVERLY HILLS i may be more successful or less successful than this operation, but, GC nevertheless the standards of quality of the structures and the interior decor and the fixtures and other appurtenances therein, G.+ which pertain and exist in the RAMADA INN - BEVERLY HILLS at the time of the execution of this Operating Agreement have generally been determined to be the standards of quality which should pertain to the Convention Center and the Hotel, and such standards shall not be reduced without the express consent of the City. The standards of quality of the services, food, beverages, costs, charges, prices, etc. shall be the same standards as pertain to generally comparable facilities in the Southern California area. ARTICLE II DEFINITIONS The following words and terms, unless a different meaning clearly appears from the context, shall have the following meaning in this Agreement. SECTION 2.01. Agency. "Agency" shall mean the Redevelopment Agency of the City of San Bernardino, and its successors and assigns. SECTION 2.02. Architect. "Architect" shall mean the architect or architects, or firm or firms of architects, or an engineer or engineers, or firm or firms of engineers, having a favorable repute -3- for skill and experience as consulting architects and/or engineers, at the time retained by Redeveloper with the consent of the City, to GJ Iti perform the acts, give the Certificates and carry out the duties provided for the engineer in the Resolution. Crol SECTION 2.03. Bonds. "Bonds" shall mean the "Redevelopment Agency of the City of San Bernardino, Meadowbrook--Central City Project No. 1, Bonds, [title to be fixed at time of issuance],' auth- orized by, and at any time outstanding pursuant to, the Resolution. SECTION 2.04. City. "City" shall mean the City of San Bernardino. SECTION 2.05. Complex. "Complex" shall consist of the Hotel and the Convention Center. SECTION 2.06. Convention Center. "Convention Center" shall mean the present Exhibit Hall facilities, as improved by the Redeveloper, plus the various public structures and improvements installed and constructed on the Land. SECTION 2.07. Disposition Agreement. "Disposition Agreement" shall mean that certain Disposition Agreement between the Agency, the City and the Redeveloper, attached hereto and made a part hereof. SECTION 2.08. Drawings. "Drawings" shall mean, collectively, the drawings, plans, specifications and other construction documents prepared or caused to be prepared by the Redeveloper for the con- struction of both the Convention Center and the Hotel and later converted into As -Built Drawings prepared at the completion of the construction and kept up to date as new construction or reconstruc- tion occurs from time to time, for both the Convention Center and -4- the Hotel. Depending upon the context, the word "Drawings" may refer to: 2� (1) Schematics, which shall be the original studies and drawings listing the improvements to be constructed, the gross space C; c requirements and the suggested utilization of the improvements; G% (2) Design Development Documents, which shall be the pre- liminary plans, drawings or prints thereof, consisting of floor plans, elevations and a perspective rendering; (3) Construction Documents, which shall consist of complete architectural, structural, mechanical, plumbing, heating, ventilating, electrical and landscaping drawings and specifications, in accordance with the Design and Development Documents, except for any modifications authorized in writing by the City; and (4) As -Built Documents, which shall consist of the cor- rected final Construction Documents, indicating all changes made during the construction period and resulting in an As -Built set of Final Working Drawings. SECTION 2.09. Garage Facilities. "Garage Facilities" shall mean the parking structure and related facilities adjacent to the Land as described in the Disposition Agreement. SECTION 2.10. Hotel. "Hotel" shall mean the Hotel to be con- structed upon Land including, but not limited to, hotel and restau- rant facilities, pursuant to Drawings. SECTION 2.11. Land. "Land" shall mean all that real property described in the Disposition Agreement. SECTION 2.12. Operating Agreement. "Operating Agreement" shall mean this San Bernardino Convention Center Operating Agreement -5- entered into between the City and the Operator. SECTION 2.13. Operator. "Operator" is the Redeveloper unde r the Disposition Agreement. SECTION 2.14. Party. "Party" or "Parties" shall mean the City(7, 0 and/or the Operator, as the case may be. W SECTION 2.15. Project Area. "Project Area" shall mean the Central City Project Area No. 1, Caif. R-79. SECTION 2.16. Redeveloper. "Redeveloper" shall mean the origi- nal Redeveloper, its successors and assigns, and every successor in interest to the Land and Hotel. Any such successors and assignees shall succeed to all rights hereunder and be responsible for all obligations hereunder. SECTION 2.17. Resolution. "Resolution" shall mean the Resolu- tion authorizing the issuance of the Redevelopment Agency of the City of San Bernardino, Meadowbrook--Central City Project No. 1, [title to be fixed at time of issuance]. SECTION 2.18. Redevelopment Plan. "Redevelopment Plan" shall mean the Redevelopment Plans adopted for the Central City Project Area No. 1, Calif. R-79, which has been merged with Meadowbrook Pro- ject No. 1, Calif. R-10 for financial purposes only, which merged Projects are known and referred to as the Meadowbrook-Central City Redevelopment Project No. 1. SECTION 2.19. Quality Standards. See Exhibit B - Management Contract. -6- ARTICLE III. Go NAMES SECTION 3.01. Convention Center. The Convention Center shall be referred to as "The Convention Center of the City of San F, Bernardino" or such other name or names as the Parties hereto shall C✓✓ mutually agree in writing by an amendment to this Operating Agree- ment. SECTION 3.02. Hotel. The Hotel to be constructed on the Land shall be referred to as RAMADA INN. ARTICLE IV. TERM SECTION 4.01. Term of Operating Agreement. The term of this Operating Agreement shall be for a period of fifty-five (55) years commencing upon the date hereof, and the Operator shall have the option to renew and extend this Operating Agreement for one or more additional terms of ten (10) years each, but not exceeding two (2) additional terms. SECTION 4.02. Method of Extension. Operator's right to renew and extend the term of this Operating Agreement for such additional terms (hereinafter sometimes referred to as "extended terms") shall be upon the following terms and conditions: (a) That at the time of giving notice of intention to exercise the right to extend, or at any time thereafter, including the extension date, the Operator is not in default in the perform- ance of any of the provisions contained in this Operating Agreement in respect to a matter as to which notice of default has been given by City to Operator pursuant to this Operating Agreement and which -7- default has not been fully remedied or submitted for arbitration within the time limits and upon the conditions stated in this Opera GC ting Agreement; provided, however, that in no event shall this � I A agreement be extended for more than twenty (20) years beyond the C?: C original term. (J% co: (b) That if the Operator elects to exercise its right to extend, written notice of its intention to so exercise such right may be given to the City at any time during the term of this Operating Agreement and shall be given to City not later than twelve (12) months prior to the extension date, and, if not given on said last date, said right to extend shall be deemed to be waived by the Operator and this Operating Agreement shall terminate on the exten- sion date and the City shall be free to negotiate with any other prospective operators; and (c) That, following the written notice given as provided in such Section (b) above, the Operator and the City shall negotiate in good faith to make such changes in the provisions of this Opera- ting Agreement which the Operator and the City may desire; and this Operating Agreement shall not have been extended unless any and all changes to be made in the provisions of this Operating Agreement have been mutually agreed upon by the Operator and the City. The term "extension date," as used in this Section, shall mean the date of the expiration of the initial term of this Operating Agreement or the date of expiration of any extended term of this Operating Agreement. Section 4.03. Article Exclusive. The above Sections 4.01 and 4.02 are the exclusive methods of renewing or extending this Opera- -8- ting Agreement, anything to the contrary notwithstanding; provided, however, that nothing in such Sections shall prevent either party from waiving, in writing, any of its rights thereunder, or prevent On the parties by mutual written agreement from renewing or extending IA this Operating Agreement in some other manner. C SECTION 4.04. Temporary Operation of Convention Center. The G:r City and the Operator shall cooperate to the end that the City's current obligations for the Convention Center can be performed. Prior to the issuance of the Construction Documents for bidding, the Operator shall review all existing contracts and supervise the making of any arrangements for future contracts and arrange the construction schedule so that the revenue of the Convention Center can be maximized, thus reducing the City's current deficit. SECTION 4.05. Construction Period. The Operator shall notify the City, as soon as practicable after the execution hereof, of the construction schedule, using the Critical Path Method or some other like schedule (the "CPM"), which shall be kept up to date as con- struction proceeds. The CPM shall show when and to what extent the Convention Center must be closed for operations so that it can be improved for its ultimate conversion into the Convention Center. The CPM shall show the date upon which the Convention Center and/or the Hotel will be opened for business. SECTION 4.06. Opening for Business. Operator shall commence such staffing as it sees fit for the booking of events in the Convention Center and/or the opening for business of the Hotel at such times as will enable it to maximize its financial returns from the Complex. The parties shall cooperate to the end that the -9- maximum number of events can be accommodated by the Convention Center Center and the maximum number of guests and patrons can be accommodated in the Hotel and the various restaurants and other 1 facilities. The parties hereto shall cooperate for their mutual benefit. ARTICLE V. Cr+ W TITLE TO PROPERTY SECTION 5.01. Title to Property. (a) Title to the Convention Center, as it presently exists, shall be as set forth in the City Hall -Exhibit Hall Ground Lease and the City Hall -Exhibit Hall Facilities Sublease, and all provisions herein shall be construed as to be in compliance and not in violation of said City Hall -Exhibit Hall Ground Lease and The City Hall -Exhibit Hall Facilities Sublease. (b) Title to the Land, which is not controlled by sub- section 5.01 (a) above, [but excluding the Land] shall be conveyed by the Agency to the Redeveloper in accordance with the provisions of [Section 3.03 of] the Disposition Agreement. (c) Title to property, which is not controlled by sub- sections 5.01 (a) and/or (b) above, shall be as follows: (1) Title to all personal property placed in the Complex by either party shall remain in the party involved, subject to subsection 5.01 (c) (3) below. (2) Title to all fixtures placed in the Exhibit Hall for its conversion into a part of the Convention Center shall vest in the City. Replacements shall be treated likewise. =&Z (3 ) It may become necessary, from time to time, for Operator to transfer the ownership of some of its personal property and fixtures placed in the Convention Center to the Agency and/or 1 the City. The Agency and/or the City agree to accept such ownership►MA when tendered by the Operator. ARTICLE VI. OPERATION AND MANAGEMENT POLICY SECTION 6.01. Operation and Management Policy. The parties hereto hereby agree that the Convention Center and the Hotel shall be managed, operated and maintained so as to be mutually supportive and to bring to the City the maximum benefits, and to the maximum extent possible, to reduce the burden to the taxpayers of the City. The City agrees that the controls herein provided are designed to accomplish the purposes above stated and, in any event, shall be exercised in a manner which will enable the Operator to operate the part of its business involved in this Operating Agreement at a reasonable profit. ARTICLE VII. OPERATOR'S RESPONSIBILITIES FOR MANAGEMENT AND OPERATION SECTION 7.01. General Provisions. (a) Operator shall manage, operate and maintain the Convention Center, and shall provide all catering, food, beverage and alcoholic beverage services, including, without limitation, snack bars and all vending machines for food, beverages and cigarettes reasonably required for the Convention Center, including the restaurant located on the roof thereof, if any, and shall provide food and beverage services in the restaurant(s) and cocktail - 11 - bar facilities located in the Hotel, all within the areas provided for such services in the Convention Center and the Hotel as shown on the Disposition Agreement. (b) The location, type and number of vending machines for GC food, beverages and cigarettes shall be subject to the approval of the City. Operator may also, subject to the reasonable approval of the City, provide for the sale of articles of personal property such C G:• as gifts and souvenirs. (c) Several places in this Operating Agreement approvals are required to be given by the City. Such approvals which can be made at one time shall be acted upon promptly upon request by Opera- tor. Other approvals must be given from time to time, and each such approval shall be acted upon promptly upon request by Operator. Whenever an approval is required by any provision of this Operating Agreement, the Operator shall file a request therefor with the City Administrative Officer who, within such limits as the Mayor and Common Council may prescribe, shall act thereon. If the request is one on which the City Administrative Officer has not been authorized to act, such Officer shall present the same to the Mayor and Common Council for action. Any request which is not disapproved within thirty (30) calendar days following the filing thereof shall be deemed approved. In determining the applicable standard to be applied in giving the required approvals: (i) the standards of quality of the structures shall be those of the RAMADA INN - BEVERLY HILLS, as set forth in Section 1.05, and (ii) the standards of service, quality of fixtures and equipment, pricing policies and the types and classes of events scheduled into the Convention Center, -12- and all other standards not involving the quality of the structures shall be, as nearly as practicable, the same standards as pertain to generally comparable facilities in the Southern California area. 1 The parties shall cooperate to the end that such standards can be d set forth in operating memoranda which can be amended from time to D G time. G SECTION 7.02. Operation and Maintenance of the Convention Center. (a) Operation: Operator shall use its best efforts to solicit and generate conventions, trade shows, exhibitions, enter- tainment events, dances and meetings of all types, of interest to the general public or public organizations and groups, including fraternal, social, educational, business related and other groups and the like, so as to provide for substantial usage of the Convention Center. City will cooperate with the Operator where possible to attain such substantial usage. The types and classes and pricing policies for all such events shall be subject to the approval of the City as set forth in Section 7.01 (c), which approval shall not be unreasonably withheld. (b) Operator shall be responsible for the booking of all conventions and other events in the Convention Center including the advertising of the availability of the facilities, providing the necessary personnel to assist the managers of the various conven- tions, exhibitions and other users of the facilities, providing the necessary equipment for the proper conduct of conventions, exhibi- tions, meetings and the like, including but not limited to lecterns, portable band stands, public address systems, tables, chairs, hand -13- trucks and other moving equipment, ladders, lighting facilities and the like, such as are customarily provided by convention center operators for its patrons. (c) Operator shall compile a schedule of reasonable rules and regulations g governing the operation and use of the Convention � Mme%' Center, which, after receiving the approval of the City, shall be in effect. Any change shall be submitted to the City for its approval Cr from time to time. G` (d) Operator shall maintain and repair the interior of the Convention Center including non -load bearing walls, floors and ceilings, all operating and service equipment, including air- conditioning and heating equipment, elevators, electrical, plumbing, ventilating, supply lines, fire protection systems, mobile equipment and all interior painting. Damages occasioned by roof leaks shall be the responsibility of the City. (e) Operator shall provide complete custodial services in all areas of the Convention Center, including all public areas, meeting rooms, equipment rooms, storage rooms, stairways, halls, escalators and elevators if any. (f) Operator shall be responsible for the security of the Convention Center and the Complex and all persons who may be in or using the same. (g) City of San Bernardino and/or the Agency uncondi- tionally warrants the existing equipment in the Convention Center for three (3) years from the commencement of the opening of the Hotel unless the existing equipment in the Convention Center breaks down as a result of normal wear and tear. -14- SECTION 7.03. Operation and Maintenance of the Convention Center and the Hotel. a (a) Operator shall use its best efforts to solicit �- patrons for the Hotel, including advertising the Hotel facilities. (b) Operator shall maintain the entire hotel structure, including, without limitation, all portions thereof which are within G; a portion of the Convention Center, such as foundations, footings, columns, elevators, escalators, if any, air-conditioning, heating and ventilating equipment, plumbing, electrical, fire protection equipment, furniture and furnishings, all in good and working order. (c) Operator shall provide complete custodial services in all areas of the Hotel so as to maintain first class appearance at all times. SECTION 7.04. Supplies and Maintenance of the Food and Beverage Facilities. Operator's services shall include, but not be limited to, the following: (a) Furnishing all linen, uniforms, paper supplies, and all other expendable supplies necessary to serve banquets, parties and meals which shall be of a high quality. (b) Food and beverage service for all functions shall be furnished during such hours as are reasonably necessary for the proper operation of the Complex. (c) Responsibility for providing janitorial and custodial services in all areas under Operator's control such as kitchens, pantries, concession stands, food service holding areas, storage _15- areas, and portable stands which hold food or beverages. (d) Be responsible for maintaining, repairing and clean- ing all fixed and mobile equipment, mobile carts and trucks provided 1 by Operator pursuant to Section 7.02 (b). (e) Be responsible for maintaining and replacing all chinaQ service, glassware, tableware and miscellaneous pots, pans and other G:+ expendable kitchen utensils provided by Operator pursuant to Section 7.01. (f) Provide a Food and Beverage Director and necessary staff to arrange catering functions to supervise food preparation and serving, and to maintain records of all functions. Operator shall have the right to exclusive control of all storage areas where china service, glassware, tableware, miscellan- eous pots, pans, and other expendable kitchen utensils are kept when not in use and may keep the items under lock and key. SECTION 7.05. Liquor License. (a) Operator shall obtain any and all permits or licenses that may be required in connection with the operation of the conces- sion inculding a nontransferable (as to location) liquor license, all of which shall be at Operator's expense. SECTION 7.06. Quality of Services. (a) All food, beverages, confections and refreshments, sold or kept for sale by the Operator shall be of the highest quality. (b) Operator shall furnish good, prompt, efficient and courteous service, adequate to meet the reasonable demands therefor, on a fair, equal, and non-discriminatory basis to all persons. -16- (c) Operator shall not knowingly employ or permit to work on the premises in the processing, handling, preparing and serving I of food or beverages any person who is affected with any disease or Q G illness in a communicable form or who is a carrier of any such G disease or illness. All persons engaged in the processing, handling, preparing and serving of food and beverages shall wear clean uniforms and shall be otherwise clean and sanitary in their personal habits. (d) The premises used by the Operator in the storage, processing, handling, preparing, transporting and serving of food and beverages and all equipment materials used therefor shall at all times be clean, sanitary, and free from rubbish, refuse, food scraps, garbage, dust, dirt, offensive or unclean materials, flies and other insects, rodents and vermin, and shall be maintained in accordance with the ordinances, rules and regulations of the County Health Department. The garbage and refuse disposal areas shall be used for the temporary retention of storage of refuse, food scraps, garbage and waste material and the same shall be removed therefrom at such regular intervals, or oftener, as may be reasonably necessary to maintain said area in a highly sanitary, clean and sightly condition; provided, however, that the removals shall be made at such times so as not to interfere with performances, meetings, and other events in the Convention Center which are attended by the public. To the extent possible, such removals shall be coordinated with other removals from the Convention Center. -17- Deliveries of food, supplies, and equipment shall be made at such times so as not to interfere with performances, meetings, and I other events in the Convention Center which are attended by the public. C r -T (f) City shall have the right to inspect the Convention,;/ Center and Hotel premises from time to time to ascertain whether Operator is complying with the requirements of this Agreement. to: (g) Operator shall not itself or knowingly permit others (1) Do any act which results in the creation or commission of a nuisance on the premises of the Convention Center or the Hotel and shall take all reasonable measures using the latest known practicable devices and means to eliminate odors and vibra- tions tending to damage the premises and to maintain the lowest possible sound level in its operations. (2) Do anything which interferes with the effective- ness or accessibility of utility, heating, ventilating or air condi- tioning systems or portions thereof in the Convention Center premises, or do anything which interferes with free access and passage in the premises or the public areas adjacent thereto, or in the streets or sidewalks adjoining the premises; (3) Do anything which interferes with the effective- ness or accessibility of elevators or escalators in or adjacent to the Convention premises, including lines, pipes, wires, conduits, and equipment connected with or appurtenant thereto; (4) Do any act upon the premises of the Convention Center, the Hotel or the Garage which will invalidate any fire -t8- insurance policies covering such premises and Operator shall promptly observe, comply with, and execute the provisions of any and all present and future rules and regulations, requirements, orders, and directions of the Board of Fire Underwriters of the Pacific, or cc of any other successor board or organization exercising the sAi functions, which may pertain or apply to the operations of Operat1 on said premises; Operator shall make any and all non-structurL improvements or repairs to the Convention Center and the Hotct required by any such present or future rule, regulation, requirement, order or direction unless required because of any improper original installation by City, and if by reason of any failure on the part of Operator, after due notice in writing, to comply with the provisions of this clause, any fire insurance rate on the premises or on the buildings in which same are located shall at any time be higher than it would otherwise be, then Operator shall pay City, on demand, that part of all fire insurance premiums paid by City which have been charged because of such violation or failure of Operator. (5) Divert any business from the premises unless same cannot be accommodated due to prior commitments or insuffic- iency(s) of the Complex. SECTION 7.07. Employees. The Operator shall provide trained and neatly -uniformed employees and said employees shall conduct themselves at all times in a proper and respectful manner. SECTION 7.08. Equal Employment Opportunity. The Operator, for itself and its successors and assigns, agrees that during the operation of the catering, food and beverage services in the -19- Convention Center and the food and beverage service in the Hotel provided for in this Agreement that: (a) The Operator shall not discriminate against any employee or applicant for employment because of race, sex, marital status, color, creed, religion, national origin or ancestry. The I A Operator shall take the necessary Affirmative Action to ensure that applicants are employed and that employees are treated during G: employment without regard to their race, sex, marital status, color, creed, religion, national origin or ancestry. Such Affirmative Action shall include, but not be limited to, the following: employ- ment, upgrading, demotion or transfer, recruitment or recruitment advertising, layoff or termination, rates of pay or other forms of compensation, and selection for training, including apprenticeship. The Operator agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the Agency setting forth the provisions of the nondiscrimination clause. (b) The Operator shall, in all solicitations or adver- tisements for employees placed by or on behalf of the Operator, state that all qualified applicants will receive consideration for employment without regard to race, sex, marital status, color, creed, religion, national origin or ancestry. (c) The Operator shall comply with all applicable local, State and Federal laws and regulations. (d) In the event of the Operator's noncompliance with the nondiscrimination clause of this Section, or with any of said laws, rules or regulations, the Agreement may be cancelled, terminated, or -20- suspended in whole or in part. (e) The Operator shall include the provisions of subdivi CC sions (a) through (c) of this Section in every contract, and shall M� require the inclusion of these provisions in every subcontract entered into by any of its contractors, unless exempted by theC applicable laws, rules or regulations and such provisions shall be G� binding upon each such contractor, subcontractor, or vendor, as the case may be. The Operator shall take such action with respect to any construction contract or subcontract, as the Agency may direct, as a means of enforcing such provisions, including sanctions for noncompliance; provided, however, that in the event the Operator becomes involved in, or is threatened with, litigation with a sub- contractor or vendor as a result of such direction by the City, the Operator may require the City to enter into such litigation to protect its interests. SECTION 7.09. Landscaping. If required by the City, or if landscaping is not required by the City and Operator landscapes the area surrounding the hotel, Operator shall maintain it at Operator's Expense. ARTICLE VIII. CITY'S RESPONSIBILITIES SECTION 8.01. Maintenance and Repair_of Structure. (a) City shall maintain and repair the structure, roof, exterior and load bearing interior walls of the Convention Center, in first class condition, including the painting of the exterior walls. Operator, shall nevertheless, at Operator's expense, repair any damages caused by Operator or Operator's employees and Conces- -21- sionaires to the Convention Center structure, including the interior load bearing and non -load bearing walls, except as provided in Section 7.02 (d) of this Operating Agreement. (b) City shall maintain, repair and keep the exterior: 2\-:� walkways and driveways adjacent to the Convention Center clean ander free from dirt and debris. (c) City shall maintain and repair the Garage structure, 55? 11 co: the roof thereof, the floors and adjacent driveways, all directional and other signing and all other facilities used in connection with the operation of the Garage in first class condition. SECTION 8.02. Approvals by City. City shall take prompt action to review any plans, or any other matters requiring approval by the City and to promptly notify Operator of such approval or disapproval and the reasons therefor as provided in Section 7.01 (c). Approval by the City shall not be unreasonably withheld. SECTION 8.03. Reconstruction of Garage. City shall, in the event of any destruction of Garage Facilities, repair or replace the Garage Facilities with approximately the same number of parking spaces as are presently provided in the Garage Facilities. ARTICLE IX. EQUIPMENT SECTION 9.01. Equipment and Improvements --Convention Center. Without limitation by the following, the Operator shall fully equip the Convention Center so as to enable it to perform all of the functions usually expected of a like Complex. (a) Operator shall reconstruct and redecorate the food preparation, storage and service areas in the Convention Center in -22- accordance with plans prepared by the Operator. (b) Operator shall outfit and furnish the food prepara- tion and storage areas with the necessary electrical and plumbingGo installations and the necessary furnishings and fixtures, including food holding kitchen, storage refrigerators, freezers, shelving, Qi stainless steel tables, food disposers, finishing and warmingO equipment, and such other equipment necessary to provide first class food, beverage and catering services in the Convention Center. (c) Operator shall furnish such fixed and/or moveable concession stands in the exhibition areas as are necessary to pro- vide adequate and convenient food and beverage services to the patrons of the Center. All equipment necessary to provide food and beverage to such concession stands, and to provide for the mainten- ance, storage and service of food and drink from such concession stands are to be furnished and maintained by the Operator. (d) Operator shall furnish and maintain all counters, back bars, ice cream cabinets, coffee making equipment, beverage dispensing systems, bar sinks, and refrigerators to be located in the concession stands in the exhibition areas as deemed necessary by Operator. (e) Operator shall furnish and maintain all mobile equip- ment including tray handling carts, dish trucks, glass and china storage caddies, soiled dish holding shelving units, mobile hot food storage cabinets with heating units, coffee thermos holding carts, portable bars with ice bin, portable serving tables and slicers, all as necessary to provide first class service to the public from the -23- various concession stands, and in the various meeting and other rooms in which food and beverages are to be served. cc Iti (f) Operator shall furnish and maintain the following: (1) For the catering service to seated diners in the Convention Center, the china, glass and flatware and table linens. C C7- (2) All cash registers and other equipment necessary Co.: for the proper control of the business activities of the Operator. (3) All lecterns, portable band stands, podiums, portable dance floors, public address systems and other equipment necessary for the successful conduct of conventions, meetings, din- ners, dances and other functions held in the Convention Center. (4) Tables and chairs, in sufficient number to adequately serve the patrons of the Convention Center. All of the equipment specified in ( 1) , ( 2) , ( 3) , and ( 4 ) above shall meet quality standards set forth in Section 7.01 (c) (i). SECTION 9.02. Equipment and Improvements - Hotel. (a) Operator shall install food and beverage facilities, equipment and improvements adequate to serve the Convention Center and the Hotel which shall include, without limitation, the following: (1) Ovens, broilers, fryers and ranges; (2) Storage, refrigerators and freezers; (3) Preparation sinks and tables; and (4) Disposers, food cutters and slicers. SECTION 9.03. Replacement of Fixed and Moveable Equipment. (a) Operator shall replace, as necessary after normal obsolescence and wear, all fixed and moveable equipment furnished by Operator pursuant to Section 9.01 (b), (c), (d), (e), and (f); and Section 9.02. -24- (b) In the event of termination of this Agreement or upon expiration of the term of this Agreement, Operator shall repair any damages caused by the removal of its fixtures. t ARTICLE X. j•, COMPENSATION TO CITY C SECTION 10.01. Measure of Compensation. As compensation for the granting to Operator of the rights granted herein, Operator assumes the entire cost of the management, operation and maintenance of the interior of the structure, equipment and facilities of the Convention Center. In addition, Operator will pay annually to the City a sum equal to one -percent (1%) of the annual Gross Receipts in excess of $1,500,000 derived from the operation of the Convention Center, as defined in Section 10.02, and an additional two percent (28) of the annual Gross Receipts in excess of $2,000,000. During the term of this Agreement, for the purpose of determin- ing the amount to be paid to the City under the formula set forth above, Operator shall, annually on/or before sixty days after the close of the Operator's fiscal year, submit to the City in such manner and detail and upon such forms as are prescribed by City, an accounting of the gross receipts as defined in Section 10.02. In the event that Operator's first fiscal year ends less than six (6) months after the commencement of the term of this Agreement, the first settlement period for determining the profit sharing payments shall include such fractional part of the year and the Operator's subsequent fiscal year. -25- SECTION 10.02. Gross Receipts. The term "gross receipts" asQC used in Section 10.01 shall mean all rentals, fees and charges for the use of the Convention Center, the sales price of all food,X beverages, tobacco, tobacco products, candy, and merchandise sold, O and the charges made for all services performed for which a charge is made by Operator, in or upon any part of the premises of the Convention Center, whether for cash or on credit (whether collected or not); provided, however, there shall be excluded or deducted, as the case may be, from "gross receipts from sales" the following: (1) Federal, state, municipal or other governmental excise taxes (except federal manufacturer's excise taxes), use, sales, privilege or retailer's occupation taxes now or hereafter imposed and required to be collected by Operator directly from patrons or customers, or as part of the price of any goods, wares, merchandise, services or displays, and required to be paid over in turn by the party so collecting to any governmental agency; (2) Receipts from the sale of grease or other scrap material resulting from the operation of Operator's business conduc- ted from or at the premises; (3) Receipts from the sale or trade-in value of any equipment used on the premises and owned by Operator. (4) The value of any merchandise, supplies or equip- ment exchanged or transferred from or to other locations of business of Operator, where such exchanges or transfers are not made for the purpose of avoiding a sale by Operator which otherwise would be made from or at the demised premises; -26- (5) Receipts in the form of refunds from or the value of merchandise, supplies or equipment returned to shippers, on suppliers or manufacturers; ZI 1 (6) Receipts with respect to any sale where the � subject of such sale, or some part thereof, is threafter returned by Cr the purchaser to and accepted by Operator, to the extent of any co: refund actually granted or adjustment actually made, either in the form of cash or credit; (7) The cost or value of free meals given to persons for public relations' reasons, or to employees of Operator or others employed at or serving the premises of Operator's restaurant opera- tions; (8) The amount of any cash or quantity discounts received from sellers, suppliers or manufacturers; (9) The amount of any discounts given to employees; (10) The amount of any gratuities paid or given by patrons or customers to employees of Operator or others employed at or serving the premises or Operator's restaurant operations; (11) Amounts paid by Operator to or for patrons and guests for parking of automobiles. SECTION 10.03. Method of Payment. Within three (3) months after the end of each calendar year, Operator shall submit to City a statement showing the full amount of Gross Receipts, Cost of Sales, Direct and Indirect Expenses resulting from the operation of the Convention Center. Each such annual statement shall be prepared and certified by an independent certified public accountant in accord- ance with standard accounting practice. Each annual statement shall -27- also show gross receipts and net profit to date from the commence- ment of the term of the lease. SECTION 10.04. Books and Records. Go (a) Operator shall maintain complete books and records of its sales and expenses for the Convention Center separate and apart from records kept for Operator's Hotel and restaurant operations.' Operator shall be responsible for maintaining records of all cater- ing functions which it serves and shall handle the collection of all accounts for food and beverage services performed by Operator. (b) City may, during normal business hours, upon five (5) days' written notice to Operator, inspect Operator's books and records of the Convention Center for the purpose of verifying any quarterly or annual statement as to both reasonableness and accuracy within one (1) year after it is submitted. (c) Operator shall be the sole party to determine what steps, if any, shall be taken to collect delinquent acounts, and the decision of Operator in such matters shall be binding and conclusive on City. ARTICLE XI. FIRE AND EXTENDED COVERAGE INSURANCE SECTION 11.01. Coverage to be Provided. Operator, as to the Convention Center and the Hotel, and any other structures and improvements in the Convention Center and the Hotel and all addi- tions thereto and any improvements made by the Operator, and any other improvements constructed beneath the Hotel (including columns, bearing walls, footings, and foundations for the support of Hotel) shall during the term of this Agreement, keep such improvements -28- insured against loss or damage to each such portion of this property resulting from: (7C (1) Fire, windstorm, cyclone, tornado, hail, explo-� I A X sion, riot, riot attending a strike, civil commotion, malicious Q', C mischief, vandalism, aircraft, fire and smoke damage, and sprinkler leakage and any other perils commonly covered under "extended cover- age" endorsements in an amount at least equal to ninety percent (90%) of the replacement cost (exclusive of the cost of excavation, foundations and footings) but without deduction being made for depreciation; (2) War risks against any damage to the extent such governmental insurance is obtainable at reasonable cost; and (3) Explosion of steam boilers, pressure vessels and similar apparatus now or hereinafter installed in the Convention Center, the Hotel or installed by Operator in the Garage Facilities. The amounts of each such insurance shall be sufficient to prevent the Parties from being or becoming coinsurers within the term of the policy or policies providing such insurance. During the term of the Resolution providing for the issuance of the Agency's Bonds, the Agency (or the City on its behalf) shall maintain insurance in accordance with the covenants as provided in said Resolution wherever the Resolution requires additional insur- ance coverage or terms of policies differing from terms or coverage required by this Agreement, and, the Operator shall maintain the same types of insurance on the Hotel. After discharge of the Resolution (other than by a refunding), neither the Operator nor the Agency and/or the City shall be required to maintain such insurance -29- as is required by said Resolution; prior thereto, however, each shall direct that the insurance proceeds payable to the Trustee under said Resolution, or to any successor trustee, to be used t0GC zl repair or rebuild the properties to the extent required by this Agreement before directing that any such proceeds be deposited by X such trustee into the Bond Redemption Fund established .by said, Resolution. City shall maintain insurance as specified in (1), (2) and (3) above on the Garage Facilities, and shall name the Operator and English Enterprises, Inc. as additional named insureds, and shall use the proceeds to repair and rebuild the Garage Facilities. SECTION 11.02. Named and Additional Insureds. All insurance required shall be carried for the protection of the Party or Parties involved, the Bondholders of the Agency's Bonds and the holder of any leasehold mortgage on the Hotel or any portion thereof, and, at election of any Party procuring said insurance, anyone else having an interest therein. The policy or policies of insurance required to be maintained by any Party under this Article may name any authorized mortgagee of the Land and Hotel as an additional insured under such policy or under a standard mortgage clause provided that such mortgagee agrees that the proceeds thereof shall be used and applied as provided in this Article XI. SECTION 11.03. Notice of Cancellation. Each policy required to be carried by the provisions of this Article XI shall expressly contain a provision that the same may not be cancelled or materially changed without at least thirty (30) days' prior written notice being given by the insurer to all persons for whose benefit such -30- insurance is carried pursuant to Section 11.02. SECTION 11.04. Disbursement of Insurance Proceeds. Proceeds of insurance maintained pursuant to the Resolution shall be payable to Trustee provided in said Resolution and disbursed as provided i On the Resolution until the same is discharged (other than by•:► C7D refunding), and shall be used as provided in accordance with saidO Resolution. After discharge of such Resolution, proceeds ofd' insurance maintained by any Party hereunder shall be payable as provided in this Section 11.04. Proceeds of insurance maintained by the Operator at all times shall be payable pursuant to this Section. Insurance proceeds on the Hotel, amounting to One Hundred Thousand Dollars ($100,000.00) or less, may be disbursed directly to the Operator with the written consent of any mortgagee, and if such consent shall not be given, then to such mortgagee, or to the Insurance Trustee created by this Section if so directed by said mortgagee, to be nevertheless used to repair or restore such damages. Except as provided above, the insurance proceeds paid on account of any loss on the Hotel shall be disbursed to the Trustee under the Resolution or such other bank or trust company qualified under the laws of the State of California, and having its principal office in California, as Operator shall designate as trustee for the custody and the disposition thereof as hereinafter provided. In every case of loss or damage to the buildings and other improvements on the property, all proceeds (excluding proceeds or any rental value or use and occupancy loss of a Party entitled thereto) shall be used for rebuilding, repairing or otherwise restoring the same -31- buildings in good and substantial manner to the extent then permis- sible by law and to the extent required to be reconstructed pursuant to the provisions of Article XI of this Agreement. Said bank oran 2� trust company (herein called the "Insurance Trustee") shall use the following procedures and requirements in applying insurance proceedscr payable to it under the provisions hereof where the buildings or improvements are so required to be restored: G� (a) The Party responsible for completing the restoration work shall submit to the other Party within thirty (30) days after the receipt by Insurance Trustee of insurance proceeds, complete plans and specifications, which shall be designed to restore the buildings and improvements to the As-Built Drawings or such modified plans conforming to laws and regulations then in effect as shall be first approved in writing by other Parties. It is understood that if the lease of any damaged building or part thereof shall be terminated by tenant pursuant to its terms because of such casualty, the Party involved thereof shall rebuild the same as a modified or substituted building or part thereof as the Party involved shall deem suitable for its portion of the property, subject to written approval by other Parties of complete plans therefor, and in such case shall submit to other Parties preliminary plans therefor within a reasonable time after such casualty. The other Parties, within thirty (30) days after submission thereof, shall either approve the same or serve written notice upon the Party submitting such plans of disapproval thereof and its objections thereto, in default of which such plans and specifications shall be deemed to be approved by other Parties, anything herein contained to the contrary notwith- standing. -32- (b) A Party responsible for completing the restoration work required under the terms of this Operating Agreement shallon furnish to the Insurance Trustee a copy of any contract or contractsil which such Party shall enter into for the making of such restora- , tion; or, if the restoration is to be done by such Party, a co copy of all subcontracts made by such Party in connection with such restora- tion and an estimate of the cost thereof, both in stages and upon completion, which shall be certified by the architect of such Party as being reasonably accurate. A Party responsible for completing such restoration work shall pay to the Insurance Trustee sufficient funds to cover the total cost of restoration after first applying said insurance proceeds. (c) During the progress of restoration, at the end of each month or from time to time as may be agreed upon, and upon the written request of such Party, the Insurance Trustee shall pay to such Party or to the contractors and materialmen of such Party for the account of such Party, out of such proceeds, an amount which shall be that proportion of such proceeds held in trust which ninety percent (908) of the payment to be made for such work done, materials supplied and services rendered during such month or other period bears to the total contract price, or if the restoration is done by such Party then that portion of the insurance proceeds held in trust which ninety percent (908) of the estimated cost of work done, materials supplied and services rendered during that month bears to the total estimated cost; and at the completion of the restoration, the balance of such insurance proceeds to the extent of and as required to complete the payment of restoration costs shall be paid to such Party. -33- (d) At the time of each such request for advance by Party on responsible for completing such restoration work and as a condition precedent thereto such Party shall also submit to the other Parties the following: C (1) A certificate signed by such Party and the C4 architect of such Party not more than thirty (30) days prior to such request setting forth the following: (i) That the sum then requested either has been paid by such party or is justly due to contractors, subcontractors, or other persons who have rendered services or furnished materials for the restoration therein specified; the names and addresses of such persons, a brief description of such services and materials, the several amounts so paid or due to each of said persons in respect thereof; and that the sum then requested does not exceed the value of the services and materials described in the certificate. (ii) That the cost, as estimated by the persons signing such certificate, of the restoration required to be done subsequent to the date of such certificate in order to complete the same, does not exceed the insurance money, plus any amount deposited by such Party to defray such cost and remaining in the hands of the Insurance Trustee after payment of the sum requested in such certi- ficate. erti-ficate. (iii) That all of the work of restoration so far completed is proper and in accordance with the plans and specifica- tions. (2) A report by a title company (which may be selected by such Party), or an official search or other evidence, -34- showing that there has not been filed of record with respect to the Property or the building and improvements on or above the Property or, or any part thereof or upon any leasehold interest therein anyz"i vendor's, mechanic's, laborer's, materialmen's or other similar 4' lien, which has not been discharged of record, except such as will(M. be discharged by payment of the amount then requested, subject toG:r such Party's right to contest. (e) At the completion of the restoration and following disbursement to such Party of the final advance required to complete the payment of restoration costs, any such insurance proceeds remaining shall be paid by the Insurance Trustee to such Party. In no event, however, shall Insurance Trustee be liable for any amount in excess of the amounts so received and held in trust, and in the event that the cost of restoration exceeds the proceeds of insurance so held, such Owner shall pay such additional cost. (f) During such restoration, the Parties, and any architect, engineer or other representative whom other Parties may select to act for it, may inspect the building in the course of such restoration and upon completion, and all work and materials as rendered and installed. The Party making the restoration shall keep copies of all plans, shop drawings and specifications relating to such restoration on the building site and permit the other Parties, or their architect, engineer or other representative to examine them at all reasonable times, or, in the alternative, shall furnish other Parties with copies of such plans, drawings and specifications. In the event that during the restoration of the building, other Parties or their architect, engineer or other representative shall reason- -35- ably determine that the materials do not substantially conform to the approved specifications or that the building is not being restored in accordance with the approved plans, prompt notice in writing shall be given to such Party making the restoration, speci- fying in detail the particular deficiency, omission or other respect C in which it is claimed that the restoration does not conform with the plans and specifications as so approved. Upon the receipt of any such notice, such Party shall take such steps as shall be necessary to cause corrections to be made as to any deficiencies, omissions or otherwise, and shall immediately remove such materials and replace such construction and furnish materials in accordance with said plans and specifications or with materials equally as good as those provided for in such plans and specifications. SECTION 11.05. Waiver of Insurance. Any Party shall have the right at any time to waive requirements imposed on other Parties for fire and extended coverage insurance in whole or in part. The Parties hereby waive the right to such insurance from any tenant of the Convention Center and Hotel with respect to any buildings for which such tenant shall have obtained (and for as long as such undertaking is in full force and effect) the written undertaking by a corporate bonding company of national reputation, with a net worth of not less than Twenty Million Dollars ($20,000,000) a corporate bond sufficient to re -build, repair or otherwise reinstate any such buildings, as such tenant shall in its lease or sublease undertake to reconstruct without regard to insurance, but Operator shall at all times maintain all insurance hereinabove specified on any build- ings or risks not covered by such undertaking. -36- SECTION 11.06. Payment and Deposit of Policies. Each Party agrees that it will promptly pay all insurance premiums when due of a all insurance required to be carried hereunder by said Party and its 1 proportionate share of fees and expenses of the Insurance Trustee in connection with its services as hereinabove provided. True copies C of all insurance policies or certificates of evidence -of such G insurance, executed by the insurance company or companies, or their authorized agents, shall be deposited with the other Parties promptly upon the obtaining of any such policy or policies or any renewal thereof. Nothing contained in this Article XI shall be deemed to prohibit the obtaining of a policy or policies of blanket insurance which may cover any other property or properties, real and/or personal, or a party in addition to the property covered pursuant to Section 11.01; provided, however, that such policy or policies by the terms thereof shall allocate to the properties required to be insured hereunder, an amount not less than the amount of insurance required to be carried pursuant to Section 11.01. SECTION 11.07. Waiver of Subrogation. Each Party hereby waives any claim against the other Parties for any loss required to be covered by the waiving Party by the insurance of the type speci- fied in this Article XI; and the Parties each, on behalf of their respective insurance companies insuring the property of either Party against such loss, waive any right of subrogation that it may have against the other Party on account of such loss, unless such waivers are not obtainable from companies writing insurance in the State of California in which event both Parties and their insurers shall be released from their waivers hereunder. -37- ARTICLE XII. INDEMNITY AND LIABILITY INSURANCE SECTION 12.01. Indemnity. Each Party shall indemnify and hold other Parties harmless from and against all claims and demands forte loss or damage, including property damage, personal injury andQ: C wrongful death, arising out of or in connection with the use or(:r." occupancy of the property (Complex and Garage Facilities), as the proximate result of the negligence of any such Party or its agents, servants or employees, or any accident or fire to any portion of property owned or leased by such Party or any nuisance made or suffered thereon, or any failure by each Party to perform his obligations under this Operating Agreement and so keep the property, as to which he has such responsibility, or rights and easements appurtenant thereto, or any adjacent sidewalks, in a safe condition, and will reimburse other Parties for all costs and expenses, includ- ing reasonable attorney's fees, incurred in connection with the defense of any such claims. SECTION 12.02. Liability Insurance. Each Party shall at his own expense maintain or cause to be maintained, and keep in full force and effect comprehensive general liability insurance with respect to his portion of the property (Complex and Garage Facili- ties), naming other Parties as additional assureds, with minimum limits of not less than One Million Dollars ($1,000,000.00) combined single limit bodily injury and property damage. During the term of the Resolution or until the same is discharged (other than by refunding), the minimum limits of such insurance may be increased from time to time to correspond to any greater amount of such -38- liability insurance as may be recommended as the prudent minimum by a reputable insurance advisor selected by the City pursuant to the terms of the Resolution. Each Party shall consult with a reputable I insurance advisor at least once every five years as to the amount of � liability insurance being carried and shall increase the amount of such insurance upon the advice and recommendation of such insurance advisor. SECTION 12.03. Workmen's Compensation. Each Party shall maintain or cause to be maintained, workmen's compensation insurance to insure employees against liability for compensation under the Workmen's Compensation Insurance and Safety Act now in force in California, or any act thereafter enacted as an amendment or sup- plement thereto or in lieu thereof, such workmen's compensation insurance to cover all persons employed in connection with such Party's portion of property and to cover full liability for compen- sation under any such act aforesaid based upon death or bodily injury claims made by, for or on behalf of any person incurring or suffering injury or death during or in connection with such Party's portion of property or the business of any Party carried out on the property. The City need not maintain such workmen's compensation insurance so long as it acts as a self insurer for City employees. SECTION 12.04. Policies. All insurance herein provided for shall be effected under policies issued by insurers of recognized responsibility, licensed or permitted to do business in the State of California. All policies or certificates issued by the respective insurers for insurance shall provide that such policies or certi- ficates shall not be cancelled or materially changed without at -39- least thirty (30) days prior written notice to the other Parties, and shall carry loss payable endorsements in favor of the other Parties where applicable. Certified copies of such policies shall be deposited with the other Parties by each Party to provide such insurance, together with appropriate evidence of payment of the premiums therefor; and, at least ten (10) days prior to the expira- tion dates of expiring policies or contracts held by the other Parties, certified copies of renewal or new policies or contracts or certificates, or evidence of said insurance, shall be deposited with the other Parties. The Parties of an interest in the property, or portion thereof, or some of them, may, by mutual agreement, purchase the insurance required hereby under a common policy jointly insuring their respective interests. During the term of the Resolution, or until the same is dis- charged (other than by a refunding), the City shall maintain or cause to be maintained insurance in accordance with the covenants as provided in the Resolution wherever the Resolution requires additional insurance coverage or terms of policies differing from terms or coverage required by this Operating Agreement. ARTICLE XIII. TAX ES SECTION 13.01. Separate Assessment. It is expected that the Convention Center and the Garage Facilities, being publicly owned, are exempt from impositions and taxes of Federal, State, County, City, and other governmental taxes of any nature whatsoever, including, but not limited to excise taxes, ad valorem taxes, and -40- specific lien, special assessments, gross receipts taxes, or rental income taxes. It is further expected that the Land and the Hotel, being privately owned, will be subject to such impositions and taxes. �D It is intended that, to the extent required by law then in CT: G effect, the San Bernardino County Tax Assessor and the City Tax Assessor separately assess ( 1 ) the Land, the Convention Center and the Garage Facilities and, (2) the Redeveloper's possessory interest in the Convention Center, in order that any tax lien to secure the payment of taxes or impositions on such interests and properties shall not constitute a lien on the Convention Center and the Garage Facilities. Each owner of an interest in the property, or portion thereof, covenants and agrees that each shall take any and all action that may be required by said County Assessor or City Assessor to obtain such separate assessment of the respective portions of the property and separate liens (if any) with respect thereto. SECTION 13.02. Payment of Taxes on the Land, the Convention Center and the Garage Facilities. Operator and any tenant thereof shall not be required to pay any taxes, assessments, or impositions which may be assessed or levied against the Convention Center and the Garage Facilities, except as provided by Section 13.03; pro- vided, however, that the City shall pay any other such taxes, impositions and assessments, if any, which may be assessed or levied on the Convention Center and the Garage Facilities. SECTION 13.03. Payment of Taxes on Hotel Parcel and Hotel. Operator shall pay for all taxes, assessments or impositions which may be levied on Operator's possessory interest in the Convention -41- Center, and ad valorem taxes levied upon the Land, including (1) the increase(s) in value, if any, by reason of the exclusive easements appurtenant to the same granted pursuant to this Operating Agreement or any other possessory interest tax(es) which may be levied by I reason of the exclusive easements appurtenant to the Land and Hotel Q: Ca granted pursuant to this Operating Agreement. CO: SECTION 13.04. Allocation of Real Property Taxes. (a) Prior to obtaining separate tax assessments as above stated, or in the event such separate tax assessments cannot be obtained, the Parties hereto hereby covenant and agree that the real property taxes (land taxes and improvements taxes) payable by each shall be determined in accordance with the following: (1) Operator shall pay an amount equal to the total tax levied against the entire property multiplied by a fraction, the numerator of which shall be the "Taxable Value of Possessory Interest in the Convention Center, [Land] and the possessory interest taxes in the easements granted hereunder" as hereinafter determined, and the denominator of which shall be the aggregate of the "Taxable Value of Possessory Interest in the Convention Center, the ad valorem taxes levied upon the Land, plus the "Taxable Value of the Land, the Convention Center and the Garage Facilities," each as hereinafter defined. (2) The City, or its successors or assigns, shall pay the remainder of real property taxes levied against the entire property after determination of the amount pursuant to subparagraph (1) above, and such liability hereunder shall be joint and several between the Operator and the City. -42- (b) "Taxable Value" shall mean the fair market value of Or each such property or interest therein, as is or becomes subject to T' Federal, State, County, City or other governmental real property a Q taxes. Said taxable fair market value shall be determined by agree- ment of the Parties of each portion of property, or if mutual G► agreement cannot be reached, then by agreement of two appraisers, one to be picked by City and one to be picked by Operator. If the two appraisers cannot reach agreement, then they shall select a third appraiser and said Taxable Value shall be determined by a majority of the three appraisers. If there is no such majority agreement, then said Taxable Value shall be the value appraised by the third appraiser. Each appraiser shall be a qualified member of the American Institute of Real Estate Appraisers, or any successor of such institute, or if such organization or successors no longer be in existence, a recognized national association or institute of appraisers; and each appraiser shall have had extensive experience in the appraisal of properties in California. Said Taxable Value shall be redetermined by appraisal every five years commencing five years from the date of this Operating Agreement. The appraisers shall be picked at least ninety (90) days prior to the expiration of the fifth year after the date of this Operating Agreement and each fifth year thereafter. (c) The City and the Operator shall each pay the cost of the appraiser selected by it and each shall bear one-half (1/2) of the costs of the third appraiser, if such third appraiser is required as provided herein. -43- (d) Prior to obtaining a separate tax assessment or in the event such separate assessment cannot be obtained, the City and the Operator hereby covenant and agree that they shall promptly, upon receipt of any tax bill for which any other Party may be responsible in whole or in part, deliver a copy of such tax bill to such other Party. The Party to which taxes are charged shall pay such bill at least ten (10) days prior to the date that any fine, penalty, interest or cost may be added thereto for the nonpayment thereof. The other Party shall reimburse the Party to which the bill is sent for the amount owed by such other Party at the later of either: such bill, or ( 1 ) Ten (10) days following receipt of a copy of (2) Fifteen (15) days prior to the date any fine, penalty, interest or cost may be added to such bill for the nonpay- ment thereof. SECTION 13.05. Right to Contest. Any Party may, if it dis- putes the amount or validity of any liens, taxes, assessments, utility expenses, charges, penalities or claims, including liens or claims of materialmen, mechanics, or laborers, upon its portion of property and improvements thereon, contest and defend against the same at its cost, and in good faith diligently conduct any necessary proceedings to prevent and avoid the same; provided, however, that such contest shall be prosecuted to a final conclusion as speedily as possible. Any rebate made on account of taxes, assessments, utility expenses or charges paid by such Party shall belong and be paid to such Party, except that if such rebate applies to the whole -44- Q! r - Q C C: G or any other additional portion of the property, the rebate shall be GC divided among the Parties of the affected portion of the property2 under the formula specified in paragraph 13.04 (a) after the t?: contesting Party as deducted his costs incurred including attorney Q I1;rl and appraisal fees. The other Parties agree to render to the Party all reasonable assistance, at no expense to such other Parties, in contesting the validity or amount of any such taxes, assessments, utility expenses or charges, including joining in the signing of any protests or pleadings which the Party may deem it advisable to file, except that City does not agree to assist in any challenge by other Parties to any taxes, assessments, utility expenses or charges levied or imposed by City on any portion of the property. During any such contest, contesting Party shall (by the payment of such disputed liens, taxes, assessments, utility expenses, or charges, if necessary) prevent any foreclosure of or any divesting thereby of title, reversion or other interest in or to the property and will further (by the payment of such disputed liens, taxes, assessments, utility expenses or charges, if necessary) prevent the public sale or foreclosure of any lien for any such taxes, assessments, utility expenses or charges. SECTION 13.06. Other taxes. Operator shall be responsible for all sales taxes, excise taxes and inventory taxes which may be levied upon the food, beverages and materials purchased by Operator for use pursuant to this Agreement as part of Operator's expenses. In addition, Operator shall be responsible for all business license taxes and any other tax which may be levied. -45- ARTICLE XIV. GENERAL PROVISIONS SECTION 14.01. Utilities. All utilities to be used at the 1 Convention Center and at the Hotel shall be paid for by the Operator. G SECTION 14.02. Compliance with Laws. Operator shall, at all QZ times, comply with the laws of the State of California, the United States of America, and the ordinances of the City of San Bernardino and the rules and regulations of the City in the government and management of this concession. SECTION 14.03. Time of Essence and Waiver. Time is of the essence in regard to performance of any of the terms or conditions of this Agreement. A waiver of performance of a term or condition shall not constitute a continuing waiver or a waiver of any other term or condition. SECTION 14.04. Termination by City. City shall have the right to terminate this Agreement at any time during the term of this Agreement in the event that Operator: (1 ) Fails or refuses to perform any of the services required pursuant to Section 7.01; or (2) Fails or refuses to comply with the requirements of Section 7.06 (c) or Section 7.07; or (3) Fails or refuses to submit the plans or install the equipment as required pursuant to Section 9.01 or 9.02; or (4) Fails or refuses to pay City the compensation required under Section 10.01; or -46- on (5) Fails or refuses to maintain books and recor&: or refuses to make such books and records available in accordance with the requirements of Section 10.04; or (6) Fails or refuses to indemnify City pursuant ttz the requirements of Section 12.01; or (7) Fails or refuses to maintain the insurance required by Sections 11.01, 12.02 and 12.03; or (8) Fails or refuses to comply with laws as provided in Section 14.02; and any such default or failure pursuant to subsections (1), (2), (3), (4), (5), (6), (7), or (8) is not cured within ten (10) days after written notice by City. SECTION 14.05. Arbitration. Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with the rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. SECTION 14.06. Enforcement --Costs, Attorneys' Fees. In the event of the bringing of any action by either party hereto as against the other hereon or hereunder, or for or by reason of the breach or any covenant, agreement, or condition on the part of the other party or arising out of this Agreement, then and in that event the party in whose favor final judgment shall be entered shall be entitled to have and recover from the other party reasonable attorneys' fees to be fixed by the court wherein such judgment shall be entered. -47- SECTION 14.07. Assignment. This Agreement shall not be On assigned or sublet, in whole or in part, except as provided in the Disposition Agreement. Any such assignment must have the prior written consent of City. In the event that City executes said G V'• assignment, Operator shall be released from any and all liability GJ arising or accruing under this Agreement after the date of such assignment provided that the assignee executes, acknowledges, and delivers to City a valid, binding and enforceable agreement in writing containing assignee's agreement to perform all of the terms and conditions of this Agreement. SECTION 14.08. Bankruptcy and Insolvency. In the event that: (a) Operator shall be adjudicated a bankrupt or adjudged to be insolvent; or (b) a receiver or trustee shall be appointed for the Operator's property and affairs, and Operator fails to set aside or vacate said appointment within thirty ( 30 ) days after said appoint - went; or (c) the aforesaid Operator shall make an assignment for the benefit of creditors or shall file a petition in bankruptcy or insolvency or for reorganization or shall make application for the appointment of a receiver, then City at City's election may terminate this Agreement upon written notice to Operator. In the event of such termination, the provisions of Section 14.04 shall not apply. SECTION 14.09. Right of Access. City shall assure that Operator is provided with reasonable access rights from Operator's -48- Go Hotel to the Convention Center for the purpose of exercising its 1 catering services under this Agreement. C% SECTION 14.10. Governing Law. ,This Agreement and the perfor- mance thereof shall be governed, interpreted, constructed and co: regulated by the laws of the State of California. SECTION 14.11. Partial Invalidity. If any term, covenant or provision of this Agreement or the application thereof to any person or circumstances shall, at any time or to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant, condition and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law. SECTION 14.12. Vis Major. In the event of: (a) Fire, earthquake, act of God, vis major or other casualty; or (b) Destruction of the Complex or any part thereof; or (c) A strike, lockout, boycott or like obstructive action by employee or labor organization; or (d) The imposition by governmental action or authority of restrictions on the procurement of labor, conditional use, building or other permits or materials which prevents the Operator and/or the City from discharging its duties and obligations hereunder: (1) The obligations of both parties shall be suspended for such period, the parties shall cooperate to minimize any damages caused by such event, and -49- (2) Neither party shall be liable to the other, except that each party shall be liable for its own share of costs obj the duties which it is required to perform hereunder which have; already been incurred and contracted for at the time of the happen -On a 110 ing of such event; and, should any discretion be involved, each= party shall use its best efforts to minimize such costs, and CO: (3) That if such event continues, or seems probable to continue, for one year or more the parties shall cooperate to terminate this Operating Agreement in a manner which will minimize damages to them as well as to any third parties involved. SECTION 14.13. Interpretation. Wherever herein the singular number is used, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders, and vice versa, as the context shall require. The table of contents and section headings used herein are for reference and convenience only, and shall not enter into the interpretation hereof. This Agreement may be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. SECTION 14.14. Entire Agreement; Modification in Writing. This Agreement contains the entire agreement of the parties hereto with respect to the matters covered hereby, and no other agreement, statement or promise made by any party hereto, or by any employee, officer or agent of any party hereto which is not contained herein shall be binding or valid. This Agreement shall not be modified or cancelled except by writing subscribed by all parties except as otherwise provided herein. -50- SECTION 14.15. Operating Memoranda. It is recognized that the redevelopment of the Project Area in accordance with the Redevelop - went Plan will require a close degree of cooperation between the Agency, the Operator and the City of San Bernardino. It is further realized that experience will demonstrate changes that will be W required in the project development, construction, maintenance, and use of the Project Area and the Complex and that a certain degree of flexibility will be required; and it is to preserve such flexibility that certain items have been covered in this Agreement in general terms only, with the understanding that details were to be set forth in "operating memoranda." Each operating memorandum shall be approved by the City and the Operator and shall be attached hereto as an addendum and become a part hereof and may be changed and amended from time to time as necessary with further approval by the City and the Operator. SECTION 14.16. Approvals. Whenever approval by either of the Parties hereto is required herein, such approval shall not be unreasonably withheld. SECTION 14.17. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the parties hereto. -51- IN WITNESS WHEREOF, the parties hereto have caused this Operating Agreement to be executed and attested by their proper officers thereunto duly authorized, all as of the day and year firs above written. �4 ATTEST: W CT O CITY OF SAN BERNARDINO IFORNIV; G:+ B y _ CITY CLERK APPROVED AS TO FORM: O CITY ATTORNEY RE -EXECUTED this 2.5"day of Au6vsT" , 1982. ENGLISH ENTERPRISES, INCORPORATED "Operator" By i HERMAN A. GL H - PRESIDENT -52- ACKNOWLEDGEMENTS STATE OF CALIFORNIA COUNTY OF SAN BERNARDINO On d(1)(" (; 5f Z3, ' y& Z before me, SANDRA A. LOWDER, a notary Go public, personally appeared HERMAN A. ENGLISH personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed the within instrument as PRESIDENT OF ENGLISH ENTERPRISES, INC., on behalf of the corporation therein named and acknowledged to me that W the corporation executed it. FAi1 bi J'NJ COUNTY My Commission Expires Dec. 7, 1985�� Ci D` v t -c -a -t-, SANDRA A. LOWDER, NOTARY PUBLIC STATE OF CALIFORNIA COUNTY OF SAN BERNARDINO Ong_f ;� ��<< before me, SANDRA A. LOWDER, a Notary Public, personally appeared !t.. /C Loi � and �/�/'`,' '-GYI I JCo� Q personally known to me to be the persons who executed this instrument as Chairman and Secretary, respectively, of the G; REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO, and acknowledged W to me that the REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO executed it. [my (orriCiAL SEAL) SAN::RA A. LOWDER 1401.11 ',jb.JC CA_IFURNIA SAN bERNAR;INO COUNTY ommission Expires Dec. 7, 1985 I J � Sandra A. lowder, NOTARY PUBLIC i STATE OF CALIFORNIA ACKNOWLEDGEMENT ) SS. COUNTY OF SAN BERNARDINO ) On this — �� day of A uc 19 �s ? before me, a Notary Public duly commissioned, qualified and acting within and for the County and State aforesaid, appeared in person the within named W. R. Holcomb and Shauna Clark, Mayor and City Clerk, respectively, of the City of San Bernardino, California, to me personally known, who state that they were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of the Citv. IN TESTIMONY THEREOF, I have hereunto set my hand and official seal this Z =; day of J� �_ �� - 19 � -2- - (OF�ICiAL SEAL) SANDRA A. LOWDER NOTARY PUBLIC - CALIFORNIA SAN BERNARDINO COUNTY My Commission Expires Dec. 7, 1985 NOTARY PUBLIC on EXHIBIT "A" 1 Disposition and Joint Development Agreement Q' G Recorded etc pT2-�YSr/l �(� , 19 Z CO: Document #82- / (-C-6 / RAMADA HOTEL OPERATING C014PANY 3838 East Van Buren Street Phoenix, Arizona 85008 (602) 273-4311 MANAGEMENT -AGREEMENT THIS AGREEMENT is made and entered into this day of 1981 between RAMADA HOTEL OPERATING COMPANY, a Delaware Corporation, hereinafter referred to as "Operator", and English Enterprises, Inc., hereinafter referred to as "Owner". I:HEREAS, Owner intends to construct, furnish and equip a hotel with related facilities with a minimus of approximately 250 rooms, restaurant and lo;ange to be located at the East Side of E Street between 2nd and 4th, San Bernardino, California, hereinafter referred to as the "Hotel"; and t,HEREAS, Owner intends to lease the Convention Center lccatez: at City Hall Plaza, Sar, Bernardino, California unser terns and conditions specified in the Lease Agreement by and 6;*X4, EW#A0&, n , -r-k between the City of San Bernardino and He ii m dated as approved by Operator (Schedule C);and WHEREAS, Operator is engaged in the operation of facilities of a type similar to that to be developed oy Owner, as well as the operation of Convention Centers; and WHEREAS, Owner desires to employ Operator to manage and operate said Hotel and Convention Center; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, Operator and Owner agree as follows: ARTICLE I - PURPOSE 1.1 The purpose of this Agreement is to provide management services for the operation of the Hotel and Convention 1 EXHIBIT "B" Center for the account of Owner in a manner customary and consistent with the operation of comparable facilities managed for the account of others. ARTICLE II - DEFINITIONS 2.1 "Hotel", wherever used throughout this Agreement, shall be deemed to include the Hotel, restaurant, bar, club, cocktail lounge, and all related facilities as set forth on Schedule A, and the Convention Center and related facilities located at City Hall Plaza, San Bernardino, CA. 2.2 "Hotel Operating Account" shall mean an account in the name of the Hotel in a bank selected by Owner and approved by Operator, into which Operator shall deposit Pre -Opening funds furnished by Owner, the initial and any subsequent Working Capital furnished by Owner, and all Gross Revenues of the Hotel, and from which Operator only, as sole managing agent, shall pay all Pre -Opening Expenses, Expenses of Operation, Management Fees, distributions to Owner, and if so directed by Owner (to the extent funds are available), real estate taxes, insurance, principle and interest on the first mortgage and any other short or long term debts of the Hotel, all in accordance with the terms and conditions of this Agreement. 2.3 "Chart of Accounts" as used herein shall mean Operator's Hotel -Restaurant Operations Chart of Accounts User's Guide dated June, 1979, as adopted from the Uniform System of Accounts for Hotels, Seventh Revised Edition, 13t Printing, 1977. 2.4 "Gross Revenues" shall consist of all revenues or income of any kind, derived directly or indirectly from any source over which Operator has any direct or indirect responsibility under this Agreement, including, without limitation, such sources as: rental of rooms; food and beverage sales; sales from gift or other shops which are operated under the direction of Operator; the rental of space in the Hotel or on the premises to third parties; rentals under the direction of Operator of cars, bicycles, boats, and other items; all net 7�11� 2 cc I revenue received from any concessionaires operating any concession under any agreement with Owner or Operator; and all income derived from the operation of the Convention Center. On Notwithstanding the foregoing, however, "Gross Revenues" shall not include: a)Gratuities added to guests' bills or statements GO in lieu of gratuities which Owner is obligated to pay over to O employees; b)Exc13e, sales or use taxes collected directly from patrons or guests as part of the sales price of any goods or services; c)Allowances for rebates and adjustments as provided for under the Uniform System of Accounts for Hotels (Seventh Revised Edition, 1st Printing, 1977); d)Any proceeds from the sale or disposition of the Hotel or any of the furniture, fixtures and equipment or other asset used in connection with the operation and management of the Hotel; e)Any insured casualty or other loss excluding, however, any amounts received by Owner pursuant to applicable business interruption insurance coverage; or f)Any credits or refunds paid to customers or any amounts received or credited for loss or damage to property or merchandise. 2.5 "Expenses of Operation" shall mean the amount of all general expenses provided for in the Chart of Accounts listed under the classification headings COST OF FOOD; COST OF BEVERAGE; DEPARTMENT COSTS: ROOMS, FOOD AND BEVERAGE, TELEPHONE, GOLF, POOL AND HEALTH, LAUNDRY, OTHER COSTS; HEAT, LIGHT AND POWER; REPAIRS AND MAINTENANCE; ADVERTISING AND PROMOTION; AND ADMINSITRATIVE AND GENERAL, and to the extent not otherwise constituting such a general expense: a)The "Base Management Fee" as the term is hereinafter defined; b)The Ramada Inter -National Association fees and related charges; c)All employees meals and lodging computed on a cost basis; and d)all direct expenses incurred in the operation of the Convention Center. 2.6 "Gross Operating Profit" shall mean that amount remaining after deducting all Expenses of Operation from all Gross Revenues. 1 3 2.7 "Accounting Period" shall mean each of twelve (12) Accounting Periods occuring each tiscal Year. Except as provided for below, eight (8) such Periods shall contain four (4) weeks (� and four (4) such Periods shall contain five (5) weeks in each Fiscal Year; the order of sequence of the four (4) or five (5) week Periods shall be as follows: Four (4) weeks, five (5) weeks, four (4) weeks, four (4) weeks, five (5) weeks, four (4) O CZ weeks, four (4) weeks, five (5) weeks, four (4) weeks, four (4) weeks, five (5) weeks, four (4) weeks. Except however, that an additional one (1) week shall be added to the final Accounting Period in any Fiscal Year that ends four (4) or more days prior to December 31. 2.8 "Operating Supplies" shall be deemed to include all inventories of merchandise held for sale and all stocks of supplies necessary for the operation of the Hotel in accordance with Quality Standards, including without limitation, all office supplies, clearing supplies, guest supplies, paper supplies, laundry supplies, pool and recreational supplies, repair and maintenance supplies, fuel and miscellaneous expendables. Subsequent to the initial purchase thereof, Operating Suppl.es sha:l also include the normal replacement of china, glassware, silver, linen, uniforms, tools and equipment; provided however, that sucn replacement shall not be of an extent which would otherwise require capitalization in accordance with Operator's accounting methodology. 2.9 "Opening Date" shall mean the date when (a) the Hotel is substantially completed and a certificate of occupancy has been issued by the appropriate government agency and (b) permits required for the operation of the Hotel, Including food and beverage permits, are issued, and (c) the Hotel receives and provides services to guests. 2.10 "Quality Standards" shall mean the standards established by Operator for the operation of Hotels and inns under the "Ramada Inn" name as set forth in Operator's "Rules of Operation/Construction Standards" as the same may be amended from time to time. 4 ARTICLE III - FEES an 3.1 In consideration for Operator entering into this Agreement and as consideration for services prior to Operator's assumption of its pre -opening management responsibilities hereunder, Owner upon execution of this Agreement shall pay to CJr Operator the sum of FIVE THOUSAND DOLLARS (=5,000.00). Within ten (10) days of the acceptance by Owner of a commitment for interim and/or permanent financing for the Hotel, Owner shall pay Operator the sum of TEN THOUSAND DOLLARS ($10,000.00). Owner further agrees that for the term of this Agreement or any extension thereof, Owner shall pay Operator in legal United States currency in consideration of and as remuneration for the management services provided hereunder, the management fees ss set forth in Schedule B attached hereto and incorporated herein by this reference. 3.2 Operator shall have the right to withdraw from time to time fror„ the Hotel Operating Account, the amount of compensation to which it is entitled, as provided for in Schedule B attached hereto. ARTICLE IV - TERM 4.1 The term of Operator's management under this Agreement shall commence on execution of this Agreement, and shall continue through the Opening Date and for a period of twenty (20) years thereafter. 4.2 Operator is hereby granted two (2) separate ten (10) year options to renew this Agreement. Such options shall be exercisable by Operator's notice to Owner of its intention to renew prior to June 30th during the last year of the initial term or any renewal term granted by this Agreement. ARTICLE V - WORKING CAPITAL 5.1 "Working Capital" as used herein shall be deemed to include, without limitation, all money necessary to establish petty cash and house bank accounts and to pay current debts, */ 5 management fees and such other obligations as may be incurred in the operation of the Hotel. 5.2 Owner agrees that the initial Working Capital required for the operation of the Hotel shall be no less than ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00) which Owner shall provide to Operator no later than thirty (30) days prior to the scheduled Opening Date. 5.3 All Working Capital furnished to Operator pursuant to this Article shall be deposited by Operator into the Hotel Operating Account and shall be used exclusively in the operation of the Hotel in accordance with the budget prepared by Operator and approved by Owner pursuant to Article 8.1A hereof and Operator's right to fund Reserve for Capital Replacement pursuant to Article 18.1 hereof. Any funds remaining in the Hotel Operating Account as of the twentieth (20th) day of each Accouning Period in excess of the amount necessary to pay accrued expenses payable and to fund anticipated cash deficits in accordance with a cash flow statement prepared by Operator, sha_ be paid to Owner after the twenty-fifth (25th) day of each Accounting Period. 5.4 Owner shall provide Operator, by way of cash or irrevocable letter of credit, a Working Capital reserve in an amount to be mutually -agreed-upon, to be used in the event the Working Capital is inadequate to accomplish its intended purpose in accordance with 5.1 hereof. ARTICLE VI - C01:STRIICTIOfj FUgNTcuT1 r AND EOUIPPit' 6.1 Owner shall, at its expense, cause construction of the Hotel to commence as soon as possible. The Hotel shall include the related facilities as outlined and set forth in Schedule A attached hereto, which by this reference is incorporated herein. All construction shall be completed as soon as reasonably possible and shall be of a standard of quality equal to or better than hotels currently being licensed under the name "Ranada Inn". lar 74111 0 W C) 6.2 Owner shall initiate and complete repair, replacement and capital improvement to the Convention (,enter to the extent necessary to meet Operator's minimum standards for like facilities in hotels managed by Operator. 6.3 Except as otherwise extended in writing by the parties, if construction of the Hotel has not been commenced witnin eighteen (18) months from the date hereof, Operator shall have the option, in its sole and absolute discretion, to terminate this Agreement, and if Operator exercises such option, neither party hereto shall have any liability whatsoever to the other with respect to the management and operation of the Hotel. 6.4 Services or consultation, other than specifically provided for in this Agreement or the Ramada Inn License .,greement ("License Agreement"), including witnout limitation, the preparation of plans, drawings, layouts or specifications, or other services may be provided by Operator or Operator's affiliates at an additional cost under a separate Technical Services Agreement. 6.5 Owner agrees that it will complete and de'_iver to ..perator for management and operation, a fully equipped, licensed anc furnished Hotel complete with Operating Supplies ready for do -ng business. The initial purchase of china, glassware, silver, linen, uniforms, tools and equipment shall be included as part of the furniture, fixtures and equipment provided for in the Hotel construction budget. The normal, ongoing replacement of such items shall be an Expense of Operation of the Hotel. Operator shall prepare a separate budget for initial Operating Supplies necessary for the proper opening of the Hotel for approval by Owner. Owner agrees to provide Operator with sufficient funds to satisfy the requirements of said budget. ARTICLE VII - PR -OPENING, FXPFNSFS 7.1 Operator shall prepare a budget of pre -opening expenses for approval by Owner. Owner agrees to provide Operator sufficient funds to satisfy the requirements of said budget. 7 on i Qi d Cr.r Should the budget prove to be inadequate to properly open the Hotel, Operator reserves the right to adjust said budget and present the same to Owner for approval and funding. Said budget shall include all expenses incurred prior to the opening of the Hotel such as salaries, pre -opening management fees as outlined in Schedule B, travel expenses, travel agent fees, mailings, sales office expenses and promotional material, the initiation of promotion and inaugural ceremonies, brochures and such other items as are necessary for the proper opening of the Hotel. All such initial operating expenses incurred by Operator shall be in O connection with Operator's performance of services necessary to C -i properly open the Hotel on behalf of Owner. Such expenses shall not include the purchasing of china, glassware, silver, linen, uniforms, tools and equipment, or initial Operating Supplies necessary for the opening of the Hotel. ARTICLE VIII - SERVICES PROVIDED 8.1 Owner hereby appoints and engages Operator, and grants to Operator the sole and exclusive right, and Operator hereby agrees during the term of this Agreement, to supervise, direct and control the management and operation of the Hotel upon the terms and conditions set forth in this Agreement. In connection with such supervision, direction and management, Operator shall perform the following services: A. Operator shall, not later than one hundred twenty (120) days prior to the scheduled opening o!' the Hotel and thereafter not later than ninety (90) days prior to the end of each fiscal year, prepare and submit to Owner for Owner's approval a proposed operating budget for the operation of the Hotel for the following fiscal year. Such budget shall conform to the format recommended in Operator's Chart of Accounts. B. Operator shall, at Owner's expense, be responsible for the selection, employment, termination of employment, supervision, direction, training and assigning of the duties of all employees of Owner engaged in the operation of the Hctel, * 0 including a General Manager. The selection, terms of employment ano termination thereof, including rates of compensation, and the supervision., direction, training and assignment sof duties of all such employees shall be the duty and responsibility of Operator; provided however, Owner shall have the right to approve the initial and each subsequent selection of the General Manager. All salaries and wages of such employees shall be paid by Owner and such employees shall be the employees and agents of Owner and C) not of Operator. It is expressly understood and agreed that all such personnel, including the General Manager, are in the sole employ of Owner and are not in the employ of Operator. Operator is in no way liable to said personnel for their wages or compensation or any taxes attributable thereto, nor to Owner or others for any action or inaction, commission or omission on the part of such personnel. Operator shall, however, have the option to make payment, directly from its own funds, for the salary benefits and other compensation of the General Manager, the Food anc Beverage Manager or other Hotel personnel, in which evert Operator shall be reimbursed therefor by Owner. Owner shall not interfere with or give orders or instructions to any personnel- ersonnelemployed employedon the Hotel premises. C. The costs, fees, compensation or other expenses of any person(s) engaged by Owner or Operator to perform duties of a specialist nature, directly related to the operation of the Hotel, such as attorneys, independent accountants and the like, shall be an Operating Expense of the Hotel. D. Everything done by Operator in the performance of its obligations under this Agreement and all its expenses incurred, shall be for and on behalf of Owner and for Owner's account, subject to the limitations set forth herein,. E. Operator shall, within the recommended ranges set forth in the operating budget prepared by Operator and approved by Owner in accordance with Article 8.1A hereof, establish all Prices, price schedules, rates and rate schedules and shall collect and give receipts for all services or income of any nature from the Hotel operations. 7/ ��► 9 F. Operator shall negotiate, arrange and is hereby authorized to execute on Owner's behalf, all leases for store, an office or lobby space and any other rooms or rental space in the Hotel or elsewhere on the Premises. Owner's prior approval shall be required for any lease exceeding three (3) years in duration or exceeding FIFTY THOUSAND DOLLARS (=50,000.00) per year in C amount. w G. Operator shall apply for, obtain and maintain in the name of, and at the expense of Owner, all licenses and permits required of Owner or Operator in connection with the management and operation of the Hotel. Owner agrees to execute and deliver any and all applications and other documents necessary therefor and to cooperate to the fullest extent possible with Operator in the performance of said obligations. In the event such licenses or permits or any of them cannot be obtained or retained, ther. Operator shall be entitled to terminate this Agreement upor. ten (10) days wr.tten notice to Owner. H. Operator shall obtain and grant such concessions anC privileges including, but not limited to, cigar stancs, newsstands, beauty shops, taxicabs and automobile garages as Operator may deem reasonably necessary or desirable in connection with the operaticn of the hotel, provided however, that al: concessions and privileges exceeding three (3) years in durat:cn or exceeding FIFTY THOUSAND DOLLARS ($50,000.00) per year in amount shall be subject to the prior approval of Owner. I. Operator shall install suitable accounting and internal auditing systems. Operator shall furnish the accounting services specified in Article XII hereof. J. Operator shall negotiate and is hereby authorizes to execute on Owner's behalf, all service and other contracts reasonably necessary or desirable in connection with the norm. operation of the Hotel, except as otherwise provided in this -greement. Owner's prior approval shall be required for ars contract exceeding three (3) years in duration or exceeding FiF7i lao IC THOUSAND DOLLARS ($50,000.00) per year in amount, excepting the sate of rooms, food and liquor. K. Operator shall purchase such Operating Supplies and equipment as Operator may deem reasonably necessary in order to properly maintain and operate the Hotel. L. Operator shalt plan, prepare and contract for advertising and promotional programs for the Hotel. M. Operator shall perform all acts reasonably necessary in connection with the operation of the Hotel in an efficient and proper manner and in accordance with standards and policies established or to be established by Operator, for the operation of similar hotels. N. The costs for obtaining, securing and maintaining all of the foregoing shall be within approved budget guidelines notwithstanding the rights of Operator as set forth under Article 17.1 relating to emergency repairs. ARTICLE IX - RELATION5H:P OF THE PAPTI 5 -AGENCY 9.1 All duties to be performed by Operator under this „greement shall be for and on behalf of Owner, in the name of Owner and for Owner's account. In taking any action pursuant to this Agreement, Operator will be acting only as agent for Owner, anc nothing in this „greement shall be construed as creat_ng a partnership or any other relationship between the parties hereto, except that of principal and agent, or requiring Operator to bear any portion of losses arising out of or connected with, the ownership or operation of the Hotel. Operator shah not, except in the purchase of goods, wares, merchandise, materials, supplies and services reasonably required in the ordinary course of business in the operation of the Hotel, or as may be otherwise required in the performance of its obligations under this Agreement, pledge the credit of Owner, nor shall Operator in the name of, or on behalf of Owner borrow any money or execute any promissory note without the prior consent of Owner. M On i..a G C': 14 ARTICLE X - INSURANCE 10.1 Owner agrees that during the continuance of this ..greement, it will contract for and at all times carry minimum insurance on the Hotel as follows: cc A. Fire insurance on all buildings, contents and structures above ground or subject to being destroyed by fire in an amount not less than eighty percent (BO%) of full insurable C value, together with the additional coverage usually included W under the term 'Extended Coverage", said policy or policies to be endorsea to reflect the hold harmless provision contained in ..rticle 10.5 hereof. B. Steam boiler insurance with limits of not less than .WO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00), said policy or policies to be endorsed to reflect the hold harmless provision contained in Article 10.5 hereof. C. General public liability, including automobile coverage with personal injury limits of ONE MILLION DOLLAxS ($1,000,000.00) combined single limit per person, ONE MILLIUN DOLLARS ($1,000,000.00) per occurence and ONE HUNDRED THOUSAND DOLLARS ($100,000.00) for property damage. Umbrella coverage of ONE HUNDRED NINETY-NINE MILLION DOLLARS ($199,000,000.00) for damages awarded in excess of the primary coverage amount. Operator agrees to provide said umbrella liability coverage at no additional cost to Owner. Said policies shall include errors and omission coverage for Owner's employees and contractual liability coverage with Operator being included in said policies as an additional insured. The aforesaid policies shall specifically reelect the hold harmless provision contained in Article 1U.4 hereon. D. Innkeepers Legal _iability insurance with minimum coverage limits of ONE THOUSAND DOLLARS ($1,000.00), per person per occurence and TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) aggregate limits. Operator to be included in said policy as an additional insured and the aforesaid policy shall specifically reflect the hold harmless provision contained in Article 10.4 herecf. 12 E. Dram Shop Liquor liability insurance with minimum coverage limits of ONE MILLION DOLLARS (:1,000,000.00). Operator to be included in said policy as an additional insured, and the aforesaid policy shall specifically reflect the hold harmless provision contained in Article 10.4 hereof. F. Workmen's Compensation and Employer's Liability Insurance with limits of not less than ONE HUNDRED THOUSAND DOLLARS ($100,000.00). The Employer's Liability Insurance shall name Operator as an additional insured and the aforesaid Employer's Liability policy shall specifically reflect the hold QD harmless provision contained in Article 10.4 hereof. 0 G. A commercial blanket bond with limits of not less than TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) per occurence. Such bond to provide only fidelity and liability bonding of all employees of Owner as defined in Article 8.1b. 10.2 All policies (except the policy described in Section G above) shall contain waiver of subrogation against Operator where applicable. 10.3 All of the above insurance is to be placed with Best -Rated A plus Class X or XI insurance companies, and certificates of insurance for all such policies shall be furnished to Operator. 10.4 Owner and Operator hereby covenant and agree to indemnify and hold each other harmless from and against any claim or loss sustained because of any and all occurences or events arising, directly or indirectly, out of the performance of this Agreement relative to claims by employees of Owner or which result in bodily injury, disease, death or property damage to any third party or to Owner's patrons, employees, licensees, Permittees, visitors, or tenants, except in the case of liability which results from proven gross negligence or willful misconduct of Operator or Owner, or their agents, representatives or employees. 10.5 Owner and Operator hereby covenant and agree to indemnify and hold each other harmless from any loss or damage, or bots, to Owner's property caused by or resulting frog fire or 13 4' explosion, or both, except in the case of liability which results from proven gross negligence or willful misconduct of.Operator or Owner, or their agents, representatives or employees. 10.6 Owner will direct all insurance companies to send bills for insurance premiums to the attention of Operator at the Hotel, and Operator, unless otherwise instructed in writing by Owner, will pay such premiums promptly as due. ARTICLE XI _ INTERRUPTION OF OPERATIONS 11.1 In the event that the Hotel shall be damaged by fire, wind or any act of God to such extent that repairs thereto will cost more than fifty percent (501) of the appraised value of the Hotel excluding the value of the land, this Agreement may be terminated by either party hereto upon thirty (30) days written notice after the determination of such cost has been made or should have been made in the exercise of reasonable diligence, but in any event not later than sixty (60) days following the occurence of such damage. In the event that the Hotel shall be damaged by fire, wind or any act of God but could be repaired at a cost of less than fifty percent (501) of the appraised value of the Hotel excluding the value of the land, Owner shall immediately proceed with such repairs with all due diligence. 11.2 If either party shall have terminated this Agreement by reason of a casualty to the extent described in Article 11.1 of this Agreement and if Owner shall thereafter commence to repair, restore, rebuild or replace the property within two (2) years after the date of such termination, Operator, at its sole option, may reinstate this Agreement for the balance of the original Term and/or any authorized extention thereof. This provision and all other applicable provisions, shall be deemed to survive the expiration or sooner termination Of this Agreement. 11.3 In the event that due to war, riot or insurrection, civil strife and commotion, labor unrest or acts of God, the operation of the Hotel is not feasible according to 14 0C Q: C.r w .cceptea practices of good hotel operation, Operator may close and cease operation of all or part of the Hotel. Operator shall reopen and commence operations when Operator deems that such may be done without jeopardy to the Hotel, its guests or employees. 11.4 If the entire Hotel or the use of the Hotel shall be taken or condemned in any eminent domain, condemnation, compulsory acquisition, or similar proceeding by any authority empowered so to do, or if such a portion of the Hotel shall be C taken or condemned as aforesaid so ss to make it Imprudent or W unreasonable, in the opinion of the Operator, anter consultation with the Owner, to operate the remaining portion under the "Ramada Inn" name in accordance with Quality Standards, then this Agreement shall be deemed to have been terminated by Owner for cause as of the date of such taking or condemnation, or as of the date possession of the Hotel is required to be surrendered as a consequence of such taking or condemnation, whichever is later. 11.5 In the case of the taking or condemnation of a part of the Hotel or the use of a part of the Hotel, it the ,perator determines, after consultation with the Owner, that such taking or condemnation of such part does not make it imprudent or unreasonable to operate the remaining portion under the "Ramada Inn" name in accordance with Quality Standards, then this Agreement shall not terminate and the award for such taking and compensation shall be applied to the extent necessary to repair any damage to the Hotel, or any part thereof, or to alter or modify the Hotel, or any part thereof, so as to make the Hotel a complete and satisfactory architectural unit and a hotel of the type and class as the Hotel existed immediately prior to such taking or condemnation. 11.6 In the event this Agreement is terminated by reason of a taking or condemnation, the entire award shall be retained by and be the property of the Owner. ARTICLE X11 — ACCOUNTING SERVICES 12.1 Operator agrees to maintain accounting records of the current transactions of the Hotel in the same manner as used ,& 15 AIV -t other properties managed by Operator. Should Owner so desire, Operator shall, at an additional fee, perform the accounting for fixed assets, other long-term assets and long-term liabilities, ry 1 using Operator's existing Accounting Methodology and Chart of Accounts; provided however, that Owner provide all information necessary to the performance thereof. Operator shall issue C checks to certain vendors from Operator's home office and provide the clerical work involved in maintaining the necessary operating cash accounts in banks agreed upon by both Owner and Operator. 12.2 The accounting services provided by Operator do not include income tax work or a certified annual report. Owner or its designated representative shall have access to said accounting records at all reasonable times during normal business hours. Certain records may be located in Phoenix, Arizona, and certain records will be at the Hotel. In the absence of fraud or breach of fiduciary duties by Operator or its employees, no annual statement furnished by Operator shall be subject to question after a period of one (1) year has elapsed from the Cate of submission thereon to Owner. 12.3 Operator shall furnish to Owner withir a reasonable time after the end of each Accounting Period a monthly financial report for the immediately preceding Accounting Perioc wnich shall include a profit and loss statement for the Hotel. The year-end (annual) financial report will be mailed as soon as reasonably possible after the close of the Fiscal Year and shall utilize the same format as the Financial Reports for the Accounting Period. ARTICLE XIII - FRANCHISED SYSTEM 13.1 Owner and Operator recognize that the Hotel will be operated as part of the Ramada Inn Franchise system. Therefore, during the term of this Agreement, the Hotel shall at ail times be known as a RAMADA INN. During the term of this Agreement, Owner shall continue to perform all of Owner's obligations under the terms of its franchise or license_ R7 agreement, and Operator will operate the Hotel following the ..ules of Operation of the Ramada Inn franchise to the extent On Possible and permitted by Owner. It is agreed that Owner shall not be liable to Licensor under said License Agreement for a CIro default thereunder during the term of this Agreement to the extent that such defaults are caused by Operator's failure to properly perform its obligations under this Agreement, or by any action or inaction, commission or omission on the part of the ..perator which constitutes a default. 13.2 it is understood that Owner acquires no rights to the trademarks, service marks, or copyrights of Operator or its affiliated companies by virtue of this Agreement. Any rights or privileges of Owner to use the Ramada Inn trade name, trademarks, service marks or copyrighted material, shall be pursuant to and governed by the Ramada Inn License Agreement. 13.3 The terms of this Agreement will in all respects govern and supersede any inconsistent terms set forth in the License Agreement. ARTICLE XIV - DEFAULT AND TERMINATION 14.1 It is agreed that, if either Owner or Operator defaults in performing any of its obligations under this ..greement and fails to correct or remedy such default within. sixty (60) days after written notice to cure such default, the other party may terminate this Agreement upon written notice. In the case of a default reasonably requiring longer than sixty (b0) days to be cured, the defaulting party shall be required to have commenced a cure within sixty (60) days after receipt of notice to cure and it shall thereafter continue to diligently proceed to complete said cure or the other party may terminate this ..greement upon written notice. The failure of any party to Insist upon strict performance of a covenant hereunder or of any obligation hereunder shall not be a waiver of such party's right to demand strict compliance therewith in the future. ,W 17 14.2 Notwithstanding the foregoing, Operator shall have the option, upon written notice to Owner, to immediately (� terminate this Agreement upon the occurence of any one or more of the following events: A. In case Owner sells, leases or otherwise disposes of more than a forty-nine percent (49%) interest in the Hotel; or, B. In case a receiver or trustee has been appointed for Owner on behalf of its creditors, or an insolvency, bankruptcy, merger or corporate reorganization has taken place with respect to Owner. 14.3 Owner may, at its discretion, terminate this Agreement at any time after the first year of the Term of this .+greement by giving Operator sixty (60) days written notice accompanied by a payment to Operator of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00), plus all accrued management fees and reimbursable expenses payable under this Agreement. The foregoing payment shall be the sole remedy of Operator for Owner's failure or refusal to continue this Agreement for the entire term hereof and shall be fixed, liquidated and ascertained damages without further proof of loss or damage for Owner's failure or refusal to continue the remaining term of this .,greemer,t. 14.4 Notwithstanding Owners right to cure pursuant to ..rticle 14.1 hereof, Owner agrees to pay Operator all accrued Management Fees and reimbursable expenses payable under this ..greement plus the sum of TWO HUNDRED F1FT1 THOUSAND DOLLAt(S ($250,000.00) if Operator shall terminate this Agreement by reason of a material default of contract by Owner, including but not limited to: A. Failure by Owner to construct the Hotel substantially in accordance with the final plans and specifications approved in writing by Operator except for such changes as are occasioned through no fault of Owner; 18 S. Continual interference by Owner or Owner's representative(s) in the Operation of the Hotel following notice of such continual interference; (C C. Failure by Owner to act in accordance with the provisions of Article 11.2 hereof; D. Owner's assignment of or attempt to assign this Agreement without the prior written approval of Operator; 0 E. Failure by Owner to fund Reserve for Capital Replacement COD in accordance with Article 18 hereof; F. Failure by Owner to maintain sufficient working capital In accordance with Article 5.1 hereof; G. Failure by Owner to pay Management Fees in accordance with Schedule B hereof; or, H. Failure by Owner to reimburse Operator on a timely basis for all authorized expenses incurred in performance of its obligations hereunder. 14.5 Beginning with the fourth year of operat—or., Owner shat; have the option to terminate this Agreement with cause if Operator fails to acnieve a Gross Operating Profit equal to twenty-eight percent (28N) of Gross Revenues in any two (2) of twee (3) years; provided however, that said option to terminate shall not apply to Operator's failure to achieve such level of performance in any year or years in which the Hotel exper.,encec an event of Force Majeure or interruption of operations. Termination with cause snail be effective on ninety (90) days written notice to Operator and payment of all accrued tlanace-.ent Fees to and including the date of termination. 14.6 Operator reserves the right to seek General damages for any other breach of contract by Owner. 14.7 Beginning with the first month of the eleventh (11th) year of operation, the TWO HUNDRED FIFTY THOUSAND DCLLAF (1250,000.00) amount specified in Articles 14.3 and 14.4 snail be reducible each remaining month of this Agreement by a fraction, the denominator of which is one hundred twenty (120) and tr.e numerator of which is one (1). 4 19 UTICLE IV - LAWS AND ORDINANCES 15.1 Operator agrees that it will at all times conduct the business of the Hotel in a lawful manner and in full compliance with all governmental laws, ordinances, rules and regulations and that Operator will, provided that sufficient funds are available, comply with all such governmental laws, ordinances, rules and regulations as may be applicable to the business conducted by Operator on the Hotel premises. Any payments or obligations in connection with the above shall be considered an expense of operation of the Hotel. ARTICLE XVI - CHARGES 16.1 It is agreed that Operator shall not be liable to third parties for any debts, liabilities or obligations of the Hotel arising in the course of business of the Hotel or by virtue of its management, supervision, control and operation of the Hotel for Owner, as provided for in this Agreement. AnTICLE X1'Il - MAINTFNAINCE AND TtdPBnV� !F TS 17.1 In addition to services referred to unser Article 'III nereir,, Operator shall (provided that sufficient funds are available), make or install, or cause to be made or installed, all unbudgeted but necessary and reasonable repairs, decorations, renewals, revisions, alterations, rebuilding, replacements, additions and improvements in and to the premises and its furnishings and equipment. No obligation or expenditure for such purpose in excess of TEN THOUSAND DOLLARS ($10,000.00) per year per item on a cumulative basis shall be made or incurred without the prior written consent of Owner, except in the case of emergency or other circumstances requiring action prior to Owner's availability. 17.2 For purposes of assuring that necessary funds are available for maintenance and improvements, Owner agrees that the operating budget presented to it for approval shall include a reasonable allocation for such expenditures and that Owner will not unreasonably withhold his approval thereof. Operator is 1 20 hereby authorized to expend funds for all necessary maintenance and improvements to the extent provided for In the.approved operating budget. On � , ARTICLE XVIII - RESERVE FOR CAPITA C ■eotAPMEUT l; 18.1 Owner hereby agrees to establish a reserve 00 account for replacement of capital items such as furniture, fixtures and equipment and for redecoration and refurbishment in an amount equivalent to: First Year of Operation One percent (1'•) of G Second Year of Operation Third Year of Operation Fourth Year of Operation ana thereafter ross Revenue One and one half percent (1-1/2:) of Gross Revenue Two percent (2:) of Gross Revenue Two and one half percent (2-112:) of Gross Revenue Sucn requirement shall be subordinate to a higher Reserve for Capital Replacement requirement of any permanent lender. 18.2 Such account shall be funded cumulatively in equal monthly installments and shall be helc in an interest bearing account for and on behalf of Owner. 18.3 The reserve account shall be used in accordance with a Capital Expenditure Budget prepared by Operator and presented to and approved by Owner on an annual basis. 18.4 Operator shall not be required to utilize in excess of ten percent (10Z) of the Reserve Fund for leasehold improvements to the Convention Center. ARTICLE XIX - NOTI rn 19.1 All notices necessary or desired to be given by one party to the other shall be in writing and shall be Personally delivered or delivered by certified or registered M 21 mail, return receipt requested, addressed to the respective party at its address specified in Schedule A or at such other address ss it may subsequently specify in writing. ARTICLE XX - ENTIRF AGREEMENT 20.1 All prior conversations, discussions and agreements between the parties are hereby merged into and are set forth in writing as part of this Agreement, which constitutes the entire agreement between the parties. Owner and Operator acknowledge there have been no representations, inducements, promises or agreements made by Operator or Owner other than those set forth herein. In particular, Operator, neither by entering into this Agreement, nor otherwise, makes any prediction, representation, warranty or claim that the operation of the Hotel will be successful or profitable, other than as specifically outlined in Article 14.5 hereof. ARTICLE XXI - INT RPPFTATrnn OF AG4 F IF !T 21.1 Any prohibition by law or invalidation by court decree of any provision of this Agreement in any locality or state having proper jurisdiction over the subject matter hereof, shall be effective to the extent of such prohibition or invalidation without in any way invalidating or affectinb the remaining provisions of this Agreement and without invalidating or affecting the provisions of this Agreement within states and localities where not prohibited by law or invalidated by court decree. 21.2 The construction, interpretation and performance of this Agreement shall be governed by the laws of the State of Arizona. 21.3 Headings or titles of paragraphs are inserted solely for convenience or reference and shall not constitute a Part of this Agreement, nor shall they affect its meaning, Construction or effect. 22 W W 21.4 Whenever this Agreement provides for Owner's approval or consent to be obtained, said approval or consent shall be deemed granted in the absence of written disapproval to Operator within fifteen (15) days following Operator's written notice to Owner requesting such approval or consent. ARTICLE YTII - ASSIGNMENT 22.1 Neither party shall assign this Agreement or any rights hereunder without the prior written consent of the other party. Any attempted assignment without such written consent shall be of no force or effect. Owner and Operator recognize that certain Ramada Affiliates are now engaged, and will in the future be engaged, in various gaming or casino business activities which are strictly regulated by governmental authorities, and that, by virtue of applicable licensing requirements and other regulations, such activities may be adversely affected by the character and reputation of persons with whom Operator does business. Consequently, Owner agrees to notify Operator in writing of the identity of any proposed assignee of this Agreement, together with such additional information concerning the officers and owners of such proposed assignee as Operator may reasonably request, not less than thirty (30) days prior to the effective date of any proposed assignment. During such thirty (30) day period, Operator shall be permitted to investigate the background and reputation of such persons, and shall have the right to approve the proposed assignee as a condition precedent to the effective assignment of this Agreement. Owner and Operator acknowledge the discretionary nature of the governmental regulations and licensing requirements imposed upon Ramada Affiliates, and agree that Operator shall have the widest possible discretion in withholding its approval if it determines in good faith that any proposed assignment of this Agreement is likely to have an adverse impact or would otherwise jeopardize or delay any present or future gamin6 or casino business venture (including without limitation any 23 j.� C) approvals, temporary or permanent licensing requirements, or other regulatory procedures in connection therewith). engaged in by any Ramada Affiliate. ARTICLE XXIII - FURCHAcrwr pnuco MAINTAT..•. 23.1 Expenditure limitations specified in Article 8.1 F, H, and J, and Article 10.1 8, C, D, E, F, and G, hereof are based on the purchasing power of money at the date of this Agreement and, throughout the Term hereof, are subject to annual adjustment, coincidental with each Year of Operation, in a manner mutually acceptable to Owner and Operator, for the purpose of maintaining their relative value at the levels designated herein. ARTICLE XXIV TIME REOUIR EFFt 24.1 Time shall be of the essence regarding all duties and obligations to be performed by all parties to this Agreement. ARTICLE XXV - AUTHORITY 25.1 Each individual executing this Agreement on behalf of a corporation or partnership represents and warrants that he is duly authorized to execute and deliver this Agreement on behalf of said corporation or partnership and that this Agreement is binding upon said corporation or partnership in accordance with its terms. 24 SIN BERNARDINO, CA .S,CHEDULE B In consideration of services performed by Operator under this Agreement, Owner &hall pay to Operator: w A pre -opening Management Fee of TWO THOUSAND FIVE HUNDRED DOLLARS ($2,500.00) per month commencing twelve (12) months prior to the scheduled Opening Date. Said fee is payable in advance on the first day of each month. Commencing on the Opening Date and continuing throughout the Term of this Agreement, a Cost -Of -Services Fee of ONE THOUSAND DOLLARS ($1,000.00) per Accounting Period payable in advance on the first day of each Accounting Period. Commencing on the Opening Date and continuing through the first full Year of Operation, a Base Management Fee of TEN THOUSAND FIVE HUNDRED DOLLARS ($10,500.00) per Accounting Period payable in advance on the first day of each Accounting Period, plus three percent (3:) of Gross Room Sales. Throughout the second full Year of Operation, a Base Manabement Fee of ELEVEN THOUSAND FIVE HUNDRED DOLLARS ($11,500.00) per Accounting Period payable in advance on the first day of each Accounting Period, plus three percent (3S) of Gross Room Sales. Throughout the third full Year of Operation, a Base Management Fee of TWELVE THOUSAND SIX HUNDRED DOLLARS ($12,600.00) per Accounting Period payable in advance on the first day of each Accounting Period, plus three percent (31) of Gross Room Sales. Thereafter, throughout the Term of this Agreement, a Base Management Fee of three percent (3s) of Gross Revenues. Said fee shall include the Ramada Inn Franchise Royalty (Three percent (3S) of Gross Room Sales) payable under the License Agreement. Go Commencing on the Opening Date and continuing throughout the Term of this Agreement, an Incentive Management Fee of ten QD percent (10%) of Gross Operating Profit. Said fee shall be subordinate to payment of real estate taxes, insurance, principle and interest on the original first mortgage and a fifteen percent (15S) preferred return on equity up to ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00) annually. dlkl IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. OPERATOR RAMADA HOTEL OPERATING COMPANY a Delaware Corporption � �:01 ATTEST: By- By. y By. Title Owner _ English Enterorl�Pc In O 8520 S. Broadway Los Angeles, CA 90003 Title President 25