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HomeMy WebLinkAbout1984-543I RESOLUTION NO. 84-5' ---3 2 RESOLUTION OF THE CITY OF SAN BERNARDINO APPROVING THE LEASE OF THOSE PARCELS OF REAL PROPERTY IDENTIFIED AS APN 148-022-06, 59 3 AND 148-011-30, LOCATED BETWEEN LITTLE MOUNTAIN DRIVE AND THE I- 215 FREEWAY, WITHIN THE STATE COLLEGE PROJECT AREA TO SHANDIN 4 HILLS GOLF CLUB, INC. BY THE REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO (HEALTH & SAFETY CODE SECTION 33433). 5 BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF 6 SAN BERNARDINO AS FOLLOWS: 7 SECTION 1. Recitals. 8 (a) The Redevelopment Agency of the City of San Bernardino 9 ("Agency") proposes to lease to Shandin Hills Golf Club, Inc., 10 ("Developer"), for a term of 52 years, those parcels of real 11 Property identified as APN 148-022-06, 59 and 148-011-30, located 12 between Little Mountain Drive and the I-215 Freeway, within the 13 State College Project Area, the legal description of which is set 14 forth in Exhibit "A" attached hereto and incorporated herein by i 15 ,reference as though set forth in full, for a total minimum rental 16 of $9,940,000.00 during the 52 year term of the lease, plus a 17 percentage of receipts which may total as much as $74,139,162.00 18 during the 52 year term of the lease. 19 (b) Notice of the time and place of hearing has been given 20 i. as required by law. 21 (c) Agency has made available for public inspection and 22 �copying a summary of financial aspects of the proposed sale. 23 (d) The summary of financial aspects represents that the 24 fair market value of the interest to be conveyed by Agency, 25 (determined at the highest use permitted under the plan, is 26 ('$10,500,000.00. 27 i (e) All hearings have been held as required by Health and I 28 'Safety Code Section 33433. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 SECTION 2. Determination. Based upon the representations of Agency, it is found and declared that the consideration for the real property described in Exhibit "A", in accordance with covenants and conditions governing the lease, is not less than the fair market value of the property determined at the highest use permitted under the plan for the State College Project Area. SECTION 3. Approval. The Mayor and Common Council of the City of San Bernardino hereby approve the lease of said property upon the terms and conditions set forth in this resolution and the summary of financial aspects. I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Mayor and Common Council of the City of San 'Bernardino at a regular_ meeting thereof, held on Ithe 17th day of December _, 1984, by the following vote, to wit: AYES: Council Members Castaneda, Reilly, Hernandez, Parks, nuiel, Frazier, Strickler NAYS: None ABSENT: _ None of The foregoing resolution December , 1984. !'Approved as to form: iey ll�l /�, City Clerk REDEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO ALL AMERICA GOLF COURSE APPLICATION OF FUNDS As of November 16 , 1984 Application of Funds: Compromise Agreement Costs: Water Dept (Drill Well) CM Eng (Design Retention Basin) Warner W. Hodgdon All America Golf Course Issue of 1982-$500,000: Costs of Issuance Warner W. Hodgdon for Modification of the Existing Pro Shop Facilites to Accomodate Limited Food and Beverage Facilities; Increases In the Overall Building Fees Culligan Land Purchase SB Fence (Around Culligan) Costs of Undercrossing Costs of Van Dorn Property Drainage Basin Costs of Department of Transporation Property -Back Nine Balance of Funds Required From State College Redevelopment Project $ 35,000 15,610 166,518 46,250 453,750 $ 217,128 500,000 166,948 15,000 228,566 27,687 108,439 $1,263,768 SHANDIN HILLS GOLF CLUB LEASE THIS LEASE shall be effective as of January 1, 1985, regardless of the actual date of execution hereof, by and between the Redevelopment Agency of the City of San Bernardino, California, (the "Agency"), a public body, corporate and politic, organized and existing under the laws of the State of California, and Shandin Hills Golf Club, a California corporation (the "Tenant"). RECITALS This Agreement is made and entered into with reference to the following matters: A. The Agency is a redevelopment agency duly created, established and authorized to transact business and exercise its powers under and pursuant to the Community Redevelopment Law, commencing with Section 33000 of the Health and Safety Code of the State of California (the "Law") and the powers of the Agency include the power to issue bonds for any of its corporate purposes and to own and dispose of property, all in accordance with the Law. B. Under and pursuant to the Law, the Agency adopted Resolution No. 3522 on February 9, 1978 (the "Resolution"), authorizing the issuance of $6,000,000 of tax allocation bonds, which authorization was subsequently increased to $12,000,000. In addition, certain mortgage revenue bonds were issued by the Agency, in two issues, totalling $3,000,000, the proceeds from which have been expended to develop and improve the golf course, referred to in recital D below. All such bonds were issued to finance, among other things, a portion of the cost of a redevelopment project known as the State College Project No. 4 (the "Project"), or the golf course, or both. C. The Redevelopment Plan (the "Plan") for the Project was approved and adopted by Ordinance No. 3067 of the City, which became effective on May 28, 1970. D. The Plan, among other things, provides for the construction of an eighteen (18) hole public golf course (the "Golf Course") within the Project. The Golf Course has heretofore been constructed by the Agency in compliance with its obligations under the First Lease hereinafter referred to in Recital Clause E. E. Pursuant to the provisions of Resolution No. 3589, on or about May 1, 1978, the Agency made and entered into a Lease and Operating Agreement (the "First Lease") relative to the Golf Course. The same was recorded May 8, 1980, as Instrument No. 80- 109858 in the Official Records of San Bernardino County, California. The Operator under the First Lease, All America City Public Golf, Inc., a corporation (the "Former Operator") took possession of and accepted the Golf Course "as is" on or about August 1, 1981, and has heretofore maintained the same, but has not opened it to public play. F. The Former Operator has heretofore defaulted under the First Lease and a notice of such default was duly recorded November 28, 1984, as Instrument No. 84-284506 in the Official Records of San Bernardino County, California. Such default was -2- not cured as prescribed in the aforesaid Notice of Default and, accordingly, all of the rights of the Former Operator under the First Lease have now been terminated. G. The Former Operator has heretofore incurred certain debts and obligations relative to the Golf Course and its possession thereof under the First Lease (the "Existing Debt"). The Agency wishes to be assured that the Existing Debt is paid and Tenant desires to be held fully free and harmless thereof. H. Tenant is experienced in the design, construction operation and management of golf courses and related facilities and is fully qualified to manage and operate the Golf Course. I. Agency and Tenant both recognize the extremely fragile nature of golf course grounds which require constant, meticulous care and attention. The parties recognize that greens are particularly fragile and that, unless constantly cared for, greens can be severely damaged or lost in an extremely short period of time, which in cases, depending on the weather and other conditions, may be as short as eight to twenty-four hours. J. The parties recognize that the average golf player has little opportunity to play except on Saturdays, Sundays and holidays, and the parties desire that the Golf Course be operated in such a manner as to assure maximum feasible availability of the Golf Course for such individual play. The operating agreement to be adopted to implement the policies estahlished in this Lease shall provide for actual hours during which the Golf Course shall be open for individual play on weekends and holidays, and that no non -local tournaments shall be scheduled in such a manner as to interfere with such availability for individual play. -3- OPERATIVE PROVISIONS NOW, THEREFORE, in consideration of the covenants and conditions specified herein, the parties do mutually agree as follows: Section 1. Section Headinas. The section headings appearing herein shall not be deemed to govern, limit, modify or in any manner affect the scope, meaning or intent of the provisions of this Lease and Operating Agreement. Section 2. Demised Premises. A. The Agency hereby leases to Tenant and Tenant hereby leases from the Agency, for the term and upon the conditions hereinafter set forth, the Demised Premises located within the Project, consisting of approximately 100 acres. All existing buildings and structures and other permanent improvements are more particularly described in Exhibit A which is attached hereto and incorporated herein by reference. B. The parties recognize that various title problems and survey difficulties must be resolved, but all parties agree that this Lease is intended to cover the entire golf course area presently being maintained, including all landscaping presently constituting an integral part of the Golf Course. For purposes of this Lease, the parties agree that the descriptions heretofore specified in Exhibits A shall be utilized with an amendment to be entered into when exact legal descriptions have been determined following a survey. Tenant shall maintain all landscaped areas heretofore maintained by the Former Operator. Section 3. Agency Improvements. -4- A. The Agency has heretofore caused and at all times during the term of this Lease shall cause to be delivered to the most northerly boundary of the Demised Premises water in the following quantities: Constant flow of not less than 1,600 gallons per minute; pressure not less than 110 lbs. Tenant shall pay for said water at a rate of $25.00 per acre foot. Cost of said water not derived from the State Water Project shall be adjusted periodically to reflect any increases or decreases in the cost of energy to produce the water, based upon energy rates now in effect, compared to energy costs hereinafter put into effect from time to time. Any increases or decreases based on energy costs shall be effective from the time any such different energy rate becomes effective, notice of which shall be provided promptly by Agency to Tenant. Cost of water derived from any State Water Project shall be adjusted periodically in accordance with the adjustments in the State water supply contracts. Payments for water shall be made by Tenant within ten days from the date of mailing by Agency. Water provided hereunder shall be consumed on the premises, and shall not be removed or transported therefrom. Any use of water contrary to this provision shall constitute a default hereunder. B. As an alternative to delivering gravity flow water at said amounts and pressure, the Agency retains the option to provide water into one of the lakes existing on the Golf Course. The Agency shall provide pumping facilities on the site that will ensure supply sufficient to meet irrigation needs for the Golf Course and appurtenances, and the price for water under this alternative shall remain the same as above. Should Agency -5- install pumping equipment as aforesaid, Agency shall be charged with responsibility of maintaining same. C. The Agency and/or the Former Operator have heretofore constructed a public parking lot, including striping, fencing and lighting, a club house and other improvements, all of which shall be delivered to Tenant upon commencement of this Lease. In consideration thereof, the Tenant agrees to maintain said public parking lot, club house, and other improvements at no cost to the City or Agency. Section 4. Tenant Capital Iml?rovements and apital A. Tenant agrees to operate the Golf Course (including all improvements situated thereon) and, for the purposes of operating it, agrees to equip it with the following at the indicated estimated costs: 1. Pro Shop Equipment and Fixtures Estimate $10,000 2. Pro shop Inventory $15,000 3. Range Furnishings $4,000 Estimated Total $29,000 Such equipment, inventory and fixtures shall be provided by Tenant no later than January 17, 1985, and shall be maintained at no less than that level, adjusted for inflation, during the entire term of this lease. B. In addition to the foregoing, Tenant shall fully maintain the Golf Course at all times during the term of this Lease in a condition substantially equal to that maintained at the Arrowhead Country Club. C. A minimum inventory of golf equipment, supplies and apparel shall be provided by Tenant in the Pro Shop at all times during the term of the Lease. The same shall be offered for sale to the public at reasonable prices comparable to those charged by similar operations in the Riverside - San Bernardino SMSA. D. Agency is providing to Tenant various items of equipment formerly utilized by the Former Operator. Such equipment shall be conveyed by Agency to tenant, and shall include all maintenance equipment presently situated on Golf Course. The pick-up truck is not included within the equipment to be conveyed. Tenant shall execute a security agreement encumbrancing such equipment as security for payment of the promissory note provided for in Section 9 hereof. All such property shall be maintained by Tenant, and shall be replaced in kind, or substantially in kind, with all such replacement equipment also to be subject to the security agreement,subordinate to any purchase financing thereof. All maintenance equipment and other equipment provided by Agency to Tenant is equipment directly and necessarily associated with the operation of the Golf Course, without which Golf Course could not be properly maintained and kept available for use. Such equipment shall be the property of Tenant, subject to Agency's lien. Upon termination of this lease, such equipment, and any substitute or replacements thereof, shall be the property of Tenant, and may be removed therefrom unless Agency elects to purchase the property asset from below. Other equipment, initially provided by Tenant and periodically replaced as necessary, shall remain the property of Tenant. Golf carts, course equipment provided by Tenant in excess of that provided -7- initially by Agency, pro shop inventory, pro shop fixtures and equipment, and range furnishings shall be included within the category of property which shall be Tenant's property. Agency shall be given the right of first refusal as to the purchase of all such furnishings, fixtures and equipment, prior to removal of such equipment from the premises by Tenant. Agency shall have twenty-one (21) days from and after notification by Tenant of any bona fide offer for such property within which to exercise its right of first refusal. E. Adequate golf course equipment reasonably necessary for the proper maintenance and operation of the Golf Course shall be provided by Tenant on the Demised Premises at all times. Additionally, there shall be available for rental at least 50 operable golf carts at all times during the operation of the Golf Course, such minimum number to be increased as demand necessitates. Adequacy of such equipment shall be subject to consideration by the Problem Resolution Committee. F. Tenant shall have the Golf Course open for play 364 days per year except for those times when the same is reasonably required to be closed because of inclement weather, storm damage or any other similar cause. Subject to the foregoing proviso, Tenant shall have the Golf Course open for public play from sunrise to sunset each day, and shall be open for public play no later than 7:00 a.m. local time. Section 5. On -Site Improvements. Tenant shall commence a capital improvement program to the end that the existing club house shall be remodeled within three years from the effective date hereof so as to provide adequate food and beverage services including banquet facilities and a fully equipped kitchen adequate for at least 150 patrons at any one time. The parties contemplate that tent facilities may be provided for banquets until permanent facilities can be provided by Tenant. Additionally, storage facilities for all golf carts and golf course equipment shall be constructed within three years from the effective date hereof. Section 6. Term of Lease. The term of this Lease shall be for a period of fifty-two (52) years and shall commence as of 6:00 a.m., January 1, 1985. Such date is sometimes hereinafter referred to as the effective date hereof. Rental for the use of the Demised Premises during the term of this Lease shall be computed and paid as follows: A. Tenant shall promptly pay, monthly, in advance, one - twelfth of the minimum annual rent as provided for hereinafter. The first payments shall be made on or before the first day of January, 1985, and Tenants shall promptly pay the applicable amount thereafter on or before the first day of each month, during the term of this lease. For the first three years, the monthly rental rate shall be $10,833.33; during the fourth through eighth lease years, monthly rental shall be $13,333.33; during the ninth through thirteenth lease years, the monthly rental rate shall be $15,833.33; during the fourteenth lease year and for the remainder of the term of this Lease, the monthly rental rate shall be $16,666.67. Actual rental rates shall be subject to adjustment annually based on the formula set forth in Subparagraph B below. Payments shall be made directly to Agency at 300 N. "D" Street, San Bernardino, California, 92418, or elsewhere as Agency may from time to time direct. ME B. Tenant shall pay a minimum annual rental for each year of the Lease, constituting the total of the twelve monthly rental payments, or, in the alternative the total of the percentages of the gross receipts, based on the formula set forth in subsection C below, (the "percentage rental") for each applicable lease year, whichever shall be greater. Rental, other than monthly payments, shall be computed annually, and paid not later than thirty (30) days after the expiration of the lease year. The Lease year shall commence on January 1, at 6:00 a.m. and expire at 5:59 a.m. on the same day of the ensuing year. The excess, if any, of the percentage rental, over and above the minimum.rental paid for the prior year shall be paid by Tenant to Agency within thirty (30) days after the expiration of said lease year. Agency's acceptance of such payments shall not waive its right to audit, or its right to additional rent, if any, disclosed by audit. Such yearly payment shall be accompanied by a financial operating statement for the previous lease year. Any audit by Agency shall relate back to cover no more than the three immediately preceding lease years, and Tenant shall not be required to pay any amount other than those shown to be due for the prior three lease years, if any discrepancies are determined in such audit. Once any particular lease year has been audited by an auditor at Agency's request, no further audit of that year's activities shall be directed. Years 1 through 3 - $130,000 Years 4 through 8 - $160,000 Years 9 through 13 - $190,000 -10- Years 14 through 52 - $200,000 C. The percentage rental shall be as follows: (1) Fifteen percent (15%) of the gross receipts realized from the green fees charged by the Tenant to golfers for the use of the public golf course for years 1 through 3, inclusive, of this Lease; thereafter, eighteen percent (18%) for years 4 through 8, inclusive; and twenty percent (20%) for years 9 through 52, inclusive. (2) Fifteen percent (15%) of the gross receipts realized from the rental of motorized carts charged by the Tenant for the use of the same by golfers upon the public golf course for years 1 through 3, inclusive, of this Lease; thereafter, eighteen percent (18%) for years 4 through 8, inclusive; and twenty percent (20%) for years 9 through 52, inclusive. (3) Fifteen percent (15%) of the gross receipts realized from the rental of hand carts charged by Tenant for the use of the same by golfers upon the public golf course for years 1 through 3, inclusive, of this Lease; thereafter, eighteen percent (18%) for years 4 through 8, inclusive; and twenty percent (20%) for years 9 through 52, inclusive. (4) Three percent (3%) of the gross receipts realized by the Tenant from the rental sales of golf pro shop items, goods wares and merchandise at the public golf course and pro shop for years 1 through 3, inclusive, of this Lease; thereafter, five percent (5%) for years 4 through 52, inclusive. (5) Fifteen percent (15%) of the gross receipts realized from the fees charged by the Tenant for the use of the driving range for years 1 through 3, inclusive, of this Lease; -11- thereafter, eighteen percent (18%) for years 4 through 8, inclusive; and twenty percent (20%) for years 9 through 52, inclusive. (6) Three percent (3%) of the gross receipts realized from the sale, or charges made for the use of, banquet facilities, food and beverage sales, or any other items or services common to golf courses not mentioned above; thereafter, five percent (5%) for years 4 through 52, inclusive. "Gross Receipts" shall be subject to the exceptions and deductions therefrom specified in the definition set forth hereinafter (Section 28).- D. In addition to and after the commencement of the liability for the rental as hereinabove set forth, the Tenant shall pay to the Agency an amount or amounts (hereinafter called "Additional Rental") equivalent to the sum of the following: (1) All taxes and assessments of any nature whatsoever, including, but not limited to, excise taxes, ad valorem taxes, ad valorem and specific lien special assessments and gross receipts taxes, if any, levied upon the Golf Course or upon the Agency's interest therein or upon the Agency's operation thereof or the Agency's rental income derived therefrom. (2) Insurance premiums, if any, on all insurance required or permitted to be purchased under the provisions of Section 15 hereof. (3) All costs and expenses which the Agency may incur in consequence of or because of any default by the Tenant under the Lease, including, without limitation, reasonable attorney's fees and costs of suit in equity or action at law to interpret or -12- enforce the terms and conditions of this Lease. In the event of litigation or arbitration, such costs and attorneys' fees shall be awarded by the Court or arbitrator to the prevailing party in any such lawsuit or dispute. The Additional Rental payable hereunder shall be paid by Tenant within thirty (30) days after notice in writing from the Agency to the Tenant stating the amount of Additional Rental then due and payable and the purpose thereof. Nothing herein contained shall prevent the Tenant from making contributions or advances to the Agency from time to time for any purpose now or hereafter authorized by law. E. The payments of rental shall constitute the total rental for the lease year involved and shall be paid by the Tenant for and in consideration of the right of use and occupancy, and the continued quiet use and enjoyment of the Demised Premises for and during said lease year. The parties hereto have agreed and determined that such total rental represents the fair rental value of the Demised Premises. In making such determination, consideration has been given to the costs of acquisition and financing the construction of the Golf Course, the uses and purposes which will be served by the Golf Course and the benefits therefrom which will accrue to the parties and the general public by reason of the Golf Course. Section 8. Security Deposits. Security deposits shall be made and kept in effect in the following amounts for the periods specified herein: For lease years 1 through 3, inclusive . . . . . $390,000 For lease years 4 through 52, inclusive . . . . . $200,000 -13- Notwithstanding the foregoing, the amount of the security deposit applicable to any year shall be at least equal to the prior year's base rental including percentage, or the specified minimum security deposit, whichever is greater. The security deposit may be in the form of a Certificate of Deposit in a financial institution approved by Agency, payable to Tenant, accompanied by an irrevocable power of attorney authorizing Agency to withdraw the funds represented thereby upon filing a certificate that Tenant is in default under the terms of the Lease and has not cured the default as provided for in Section 20; alternatively, at Tenant's option, the security deposit may be in the form of an irrevocable Letter of Credit from a financial institution approved by Agency, payable to Agency, with Agency authorized to withdraw the funds represented thereby at any time upon filing a certificate that Tenant is in default under the terms of the lease and has not cured the default as provided for in Section 20. Agency may utilize such funds for the maintenance of the Golf Course until such time as a new Operator has been obtained therefor and has accepted responsibility for the maintenance of the Golf Course. Once a new Operator has been selected and has assumed operation of the Golf Course, Agency shall compute its expenses incurred from maintenance of the Golf Course from and after the time it first assumed responsibility for maintenance, and shall compute its expenses and losses from all other causes arising during and after the default, including attorney fees, court costs, advertising expenses, operation and maintenance expenses, and any other similar expense encountered as a result -14- result of the default of Tenant. Agency shall remit to Tenant any excess from the Security Deposit not expended, and any portion of such expenses recovered from the new Operator, up to the total amount of the Security Deposit. Section 9. Creation of Existing Debt Fund. The parties agree that Agency may apply the $50,000 earlier placed as a deposit with Agency to its credit toward this account, and, coincident with the signing hereof, shall deposit an additional $50,000 with Agency, for a total of $100,000 to be held or used by Agency, in its sole discretion, toward retirement of debts associated with All America Public Golf, Inc., or otherwise as Agency deems fit. In addition, at the time of execution of this lease, Tenant shall deliver to Agency a promissory note, payable to the order of Agency, in the amount of $600,000, bearing interest at the rate of ten percent per annum (10%), payable as follows: monthly payments, payable on or before the last day of each month, during the first twelve months, sufficient to pay $100,000 on principal, plus all accrued interest; monthly payments, payable on or before the last day of each month during the second lease year, sufficient to pay principal in the amount of $200,000 plus all accrued interest; and monthly payments during the third year, payable on or before the last day of each month, sufficient to pay the entire $300,000 balance on principal, plus all accrued interest. The promissory note shall be secured by personal guarantees, in form satisfactory to Agency by the following persons and entities, who shall be jointly and severally liable thereon: L.S. Hawley Corp., a California corporation; L. David Hawley and Betty J. -15- Hawley, husband and wife; James E. Hawley and Patricia Hawley, husband and wife; David A. Hartley and Barbara E. Hartley, husband and wife; and Henry A. Bickler. In consideration thereof, Agency hereby agrees to hold Tenant entirely free and harmless of all existing debt. Section 10. Use of Demised Premises. A. The Demised Premises shall be used by Tenant only for operation of a public golf course, driving range, an automobile parking facility associated with the golf course and related facilities, a food and beverage service facility, a golf pro shop, and any other uses reasonably related or pertaining to golfing activities. Any additional uses shall be permitted only with the consent of the Agency. B. Tenant shall keep the Demised Premises open for business as hereinbefore provided. Tenant shall conduct its business on the Demised Premises in good faith, fair dealing and with adequate facilities, fixtures, employees and merchandise, and shall endeavor to the utmost good faith and fair dealing to exploit and develop any business conducted on the Demised Premises in such manner as to produce the maximum amount of gross receipts, as gross receipts is defined herein, consistent with sound business practice, taking into consideration labor strikes, lockouts, merchandise and labor shortages and other causes which may exist through no fault of Tenant. A separate operating agreement, to be entered into coincident with this lease shall further expand upon the agreements of the parties as to operation of the facilities demised hereunder. -16- Section 11. All structures and improvements, including alterations, if any, made, erected or constructed by Tenant upon the Demised Premises, shall remain the property of Tenant during the term of this Lease. Upon the expiration or termination of this Lease, title to all structures and improvements made, erected or constructed upon the Demised Premises shall vest in the Agency. Any remodeling or new construction or any modification of the course layout or changes in the physical plant may be made only with the advance written consent of the Agency. Section 12. Maintenance and Repair. Tenant, at no cost to Agency, shall do and perform all structural, maintenance, landscape and repair work necessary or required to keep the Demised Premises in such condition and repair as is required for the occupancy by Tenant for the uses and purposes herein authorized. Section 13. Liability Insurance. Tenant shall procure, at his expense, or upon his failure to do so, Agency may, at the expense of the Tenant, obtain and keep in effect at all times during the term of the Lease, the following insurance, to wit: Public liability insurance in the amount of at least $5,000,000, and property damage liability insurance in the amount of at least $1,000,000, protecting Tenant and Agency from any damages, injury or death from any single occurrence. All policies of insurance required under this Lease shall be in standard form, in such amounts and written by such qualified insurance companies authorized to do business in the State of California as shall be satisfactory to the Agency. Further, all such policies shall name the Agency as an additional insured, and -17- a copy of the policy shall be provided to Agency. Such insurance policies shall contain a clause whereby the insurance carrier waives all right of subrogation against Tenant and Agency, and, if obtained by Agency, there shall be included in each such policy a waiver by the carrier of all rights of subrogation against Tenant. Such policies shall not be subject to cancellation upon less than thirty (30) days' prior written notice by registered mail to the Agency. The Agency shall be consulted whenever such policies of insurance become subject to renewal or extension and its consent shall be required as to the amount thereof, the parties recognizing that the adequacy of insurance limits may be increased based upon increases in the cost of living. Section 14. Agency Held Harmless. Except for losses, damages or injury occasioned by the negligence of Agency, its agents, servants or employees, Tenant shall keep and hold Agency free and harmless from any and all costs, liability, damage or expense (including costs of suit and expense of legal services) claimed by anyone by reason of injury or damage to person or to property sustained in, on or about the Demised Premises, or arising out of Tenant's operations on the Demised Premises as a proximate result of the acts or omissions of its agents, servants or employees, or arising out of any condition of the Demised Premises, or arising out of the operations of Tenant upon, about or above the Demised Premises. Section 15. Insurance Covering Demised Premises. Tenant shall, at its own expense, or upon failure of Tenant to do so, Agency may, at the expense of Tenant, obtain and keep in effect �-M at all times during the term of this Lease, fire and extend coverage insurance, including debris removal, upon all improvements to the Demised Premises, customarily covered by such insurance. The Agency shall have the property appraised by a competent appraiser, and provided a copy thereof to Tenant. The Agency may thereafter have the property reappraised periodically at its option. Such policies of insurance shall be for not less than ninety (90%) percent of the insurable replacement value of the property covered and shall provide for payment of losses to Agency and Tenant as their interests may appear. All policies of insurance required under this Lease shall be in standard form, in such amounts and written by such qualified insurance companies authorized to do business in the State of California as shall satisfy the Agency. Such insurance policies shall contain a clause whereby the insurance carrier waives all right of subrogation against Tenant and Agency, and, if obtained by Agency, there shall be included in each such policy a waiver by the carrier of all rights of subrogation against Tenant. Copies or certificates of all such policies shall not be subject to cancellation upon less than thirty (30) days' prior written notice by registered mail to the Agency. Such policy or policies of insurance shall name the Tenant as the insured party and the Agency as an additional insured, and provide that losses payable thereunder shall, upon the consent of Agency, be payable to Tenant. The proceeds of such insurance shall be used to discharge Tenant's obligation under this Lease as respects repair, restoration or replacement of the improvement referred to in this Lease. In the event such improvements are -19- not required to be repaired, restored or replaced under the terms of this Lease and any insurance proceeds shall be used first to cover the costs of removing all debris, then the net proceeds then remaining shall be divided between the Agency and the Tenant respectively in the ratio that the period of time from the date of the casualty to the expiration date of the term hereof bears to the entire term. Section 16. Assignments and Subleases. A. Tenant shall not mortgage, hypothecate, pledge or otherwise encumber or assign the leasehold herein created without the prior written consent of the Agency. The parties recognize that Tenant has been selected from several proposed Operators in large part on the basis of the Tenant's experience and the qualifications of the key managers and proposed operating personnel of Tenant. Any consideration of assignment shall be judged by the same standards. B. The interest of Tenant under this Lease shall not, except at Agency's option and with its written consent, be assignable by operation of law. In case of bankruptcy of Tenant or the appointment of a receiver for Tenant, or if an attempt is made to appoint a receiver to take possession of the Demised Premises as a result of any act or omission of Tenant, of if Tenant makes an attempt to assign this Lease for the benefit of its creditors, or if possession of the Demised Premises shall be attempted to be taken by virtue of any attachment, execution or the levy of any judicial process, then, and in each and every such case, .any person taking such possession pursuant to any such proceeding or process shall not acquire any right, title or -20- interest in and/or to this leasehold, the Demised Premises or the rights granted herein without first securing the written consent of the Agency. C. Any concessionaire, subtenant, restaurateur or other person or entity operating any part of the operations of the Golf Course shall be subject to the written approval, in advance, or Agency, any such person or entity shall permit its books and records to be audited upon the same basis as tenant. Section 17. Inspection of premises; Emerg ncy Action. The Executive Director, or any person designated by him or her, shall have access at all reasonable times, in, to and upon the Demised Premises for the purpose of inspecting the same and to post any notices which, in the opinion of the Executive Director, shall be necessary to hold Agency harmless from any claim or liability arising out of any work done in, on or about the Demised Premises, or in connection with the use thereof by Tenant, subject, however, to reasonable protection, rules and regulations of Tenant. In addition to the foregoing, Agency shall at all times have the right to enter upon the premises for the purpose of inspecting the grounds and the greens, and for this purpose is authorized to bring upon such property such advisers and experts as Agency may designate. In the event that Agency determines that any green or greens are in imminent danger of loss, due to disease, fungus, or improper or inadequate care, or that any other portion of the course is in immediate danger, Agency shall immediately attempt to notify Tenant or Tenant's management of the conditions found and demand immediate corrective action. -21- Section 18. Agency Regulations. In the use of the Demised Premises, Tenant agrees to observe, obey and abide by all regulations of Agency as set forth in the Redevelopment plan for the State College Project No. 4 as adopted by Ordinance No. 3067 of the City of San Bernardino, applicable to the Demised Premises. In addition to the foregoing, Tenant shall comply immediately with any and all directives issued by the Agency. 19. Utility Services. The Tenant shall pay all charges for heat, power, telephone, water, light and any other utility services in connection with its occupancy of the Demised Premises, including deposits, connection fees or charges and meter rentals required by the supplier of any such utility services. Section 20. Default and Right to Terminate. A. If either party shall fail to perform, keep or observe any of the terms, covenants or conditions herein contained on its part to be performed, kept or observed, or any terms of the operating Agreement executed coincident herewith, or any amendment thereof or substitute therefor, the other party may give written notice to correct such condition or cure such default. If such condition or default shall continue for 30 days after the service of such notice, the party not in default may give notice of its election to terminate this Lease within 20 days after service of such notice that this Lease shall cease and terminate. Such election to terminate by either party shall not be construed as a waiver of any claim it may have against the other party, consistent with such termination. -22- If, however, any default is of such nature that it cannot physically be remedied within 30 days, and if the party in default shall have commenced the elimination of such default promptly after the receipt of such notice, and shall continuously and diligently proceed in good faith to eliminate such default, then the period for correction shall be extended for such length of time as is reasonably necessary to complete such correction. This provision, however, shall not affect any rights of Agency if there shall be any default in the payment by Tenant of the rent, Additional Rent or other consideration provided herein. If there be such default, Agency may give Tenant a 15 -day written notice to pay all sums due, owing and unpaid, and if such payment be not made within such 15 -day period, this Lease and Tenant's rights hereunder shall, at the election of the Agency stated therein, forthwith terminate. B. In the event that Tenant shall be prevented from occupying or using the Demised Premises or shall be prevented from conducting or carrying on its golf course operations, or other operations as permitted by this Lease on said Demised Premises, or shall be prevented from carrying on said businesses by any final action, order or ruling of any federal or state authority, then Tenant may, at its option, cancel this Lease by written notice to Agency and said Lease shall be and become cancelled and terminated 30 days after the mailing thereof, as provided in Section 20, Subsection A thereof, or by delivering such notice to the Agency. C. In the event of a cancellation of this Lease as a result of Agency's default, the damages recoverable by Tenant shall be IWMI limited to those recoverable under .the laws of the State of California. In the event of a cancellation of this Lease by Tenant as a result of the occurrence of any of the events specified in Subsection B of Section 20, Agency shall not be liable to Tenant for any damages claimed by it as a result thereof, but Tenant shall be relieved of its obligations to pay the rental provided herein commencing as of the effective date of Tenant's notice of cancellation. Section 21. Taxes. Tenant shall promptly pay without default all taxes whatever character that may be lawfully levied upon or charged against the Demised Premises, in conformance with Section 33673 of the California Health and Safety Code, or the structures, improvements or other property thereon, or upon Tenant's operations hereunder, including, without limitation, possessory interest taxes. Tenant shall also promptly pay without default all license or permit fees necessary or required by law for the conduct of its operations hereunder. However, Tenant may contest, in good faith, the levy of any such taxes or fees without cost to Agency, provided that no such contest shall result in any attachment, lien or encumbrance against or upon the Demised Premises. Nothing herein contained shall be construed so as to deprive Tenant of any rights to which it would otherwise be entitled. Section 22. Signs. Tenant shall not erect display, or permit to be erected or displayed, on the Demised Premises, any sign or advertising matter of any kind without first obtaining the written consent of the Agency. Tenant shall also comply with all provisions of the San Bernardino Municipal Code relating to signs. QrX10 Section 23. Tenant's Books and Records. Tenant shall maintain on the Demised Premises, or at such other location as the Agency shall approve, during the term of the Lease, its permanent books, ledgers, journals, accounts and records wherein are kept all entries reflecting the gross receipts derived by him from the business transacted under this Lease. Upon 48 hour notice, Tenant shall arrange for all such records to be available on the premises. No approval for removal of the books and records outside the City limits of San Bernardino shall be authorized except by formal action of Agency's governing board. Tenant shall also furnish Agency annually, an operating statement covering all business transacted by Tenant on the Demised Premises, and such other reasonable financial or statistical reports as the Agency may, from time to time, require by written notice to Tenant. The aforementioned operating statements shall be certified by a Certified Public Accountant firm satisfactory to Agency and shall be transmitted to the Agency promptly. Tenant shall use such modern methods and mechanical equipment as is necessary to account for any control as to the fees, dues and monies collected in a manner satisfactory to the Agency. Agency shall have the right, at all reasonable times, to have access to examine the books, papers and records showing the affairs, transactions, property and financial condition of the Tenant. Such Examination may be made by the members of the Agency, examiners of the Agency or any other duly authorized representative thereof, including any accounting firm or auditing firm retained for such purpose by Agency. -25- Section 24. Compliance with Laws. Tenant shall comply with all applicable rules, regulations, laws, ordinances, statutes or orders of any governmental authority, Federal, State or Local, lawfully exercising authority over the Agency or Tenant's operations pursuant to this Lease. Tenant shall conduct all operations and business activities on the Demised Premises so as not, on the grounds of race, religion, color, national origin, marital status or sex, to descriminate or permit discrimination against any person or group of persons in any manner. The Tenant herein covenants by and for itself, its successors, administrators and assigns and all persons claiming under or through it, and this Lease is made and accepted upon and subject to the following conditions: (a) That there shall be no discrimination against or segregation of any person or group of persons, on account of race, religion, color, creed, sex, marital status, national origin or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the Demised Premises nor shall the Tenant itself, or any person claiming under or though Tenant, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants or vendees in the Demised Premises. Section 25. Equal Employment Opportunity. The Tenant, for itself and its successors and assigns, agrees that during the operation of the Golf Course provided for in this Lease that: (A) The Tenant shall not discriminate against any employee or applicant for employment because of race, sex, -26- marital status, color, creed, religion, national origin or ancestry. The Tenant shall take the necessary Affirmative Action to ensure that applicants are employed and that employees are treated during 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: employment, 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 Tenant 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 Tenant shall, in all solicitations or advertisements for employees placed by or on behalf of the Tenant, 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) In the event of the Tenant's noncompliance with the nondiscrimination clause of this Section, or with any of said laws, rules or regulations, this Lease may be cancelled, terminated or suspended in whole or in part. (d) The Tenant shall include the provisions of Subsections (a) and (b) of this Section in every contract, and shall require the inclusion of these provisions in every subcontract entered into by any of its contractors, concessionaires, subtenants or other persons carrying on business operations at the Golf Course, unless exempted by the applicable -27- laws, rules or regulations and such provisions shall be binding upon each such contractor, subcontractor or vendor, as the case may be. The Tenant 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 Tenant becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction by the Agency, the Tenant may require the Agency to enter into such litigation to protect its interests. Section 26. Controls to be Exercised by Agency. A. Concession Approval. Any contract for any concession for any purpose entered into by Tenant shall be filed with the Agency for its approval. No such contract shall be valid unless approved by the Agency. B. Price Approval. Fees and prices to be charged to the public for green fees, use of the Golf Course and related facilities, including, without limitation, use of the driving range, rental of electric carts and rental of hand carts shall initially be as set forth in the schedule attached hereto as Exhibit B, but specifically excluding those items available at the pro shop. Banquet, restaurant and beverage fees and charges shall not be subject to approval, but shall be subject to consultation under procedures for problem resolution established in the Operating Agreement. Prices per the attached Exhibit B may be adjusted annually to reflect increases to the cost of living index for the Southern California Area and green fees and cart rentals may be adjusted based upon increases in the energy cost of water. There shall be no free service or reduced price services to any person or party except as the same may be related to promotional events or activities. No such prices shall be changed or modified, except to the extent as set forth above, unless approved by the Agency pursuant to the procedures established in the Operating Agreement, which shall include, at a minimum, a provision for binding arbitration in the IM -M event that Tenant and Agency are unable to, or fail to, agree on proposed changes on fees or prices. Tenant shall grant no annual passes to any elective or appointive official of Agency or of the City of San Bernardino. C. Rules and Regulations. Tenant shall promulgate reasonable rules and regulations, applicable equally to all members of the public desiring to use the Golf Course, which said rules and regulations shall be of a type common to public golf courses in the Southern California Area. No such rules and regulations shall be effective unless approved by the Agency pursuant to the procedures established in the Operating Agreement, which shall include, at a minimum, a provision for binding arbitration in the event that Tenant and Agency are unable to, or fail to, agree on proposed changes on fees or prices. D. Approvals. In the event the request for approvals required by Subsections A, B and C hereby are withheld for a period in excess of thirty (30) days from the date of filing of the appropriate documents by Tenant with the Agency or are not disapproved within said time, the same shall take effect as if approved, subject to reference to arbitration upon demand of either party. E. Reasonableness of Approvals. In determining the reasonableness of its approvals as herein required, the Agency or Tenant may conduct an independent survey of similar facilities in order to determine the reasonableness and -30- comparability of Tenant's proposed fees, charges, rules and regulations and any other matters involved. Any arbitrator shall consider such survey as relevant in any dispute submitted for decision. F. No Loss. Agency hereby agrees that the controls provided herein are to be exercised in such a manner that the Golf Course shall not be operated at an annual loss, and that Tenant shall be entitled to a fair profit on its investment. G. Maximizing Individual Play. The Operating Agreement shall include provisions to provide that the Golf Course shall be open for individual play on Saturdays, Sundays and holidays to the maximum extent feasible consistent with demand for individual play time. The Tenant shall assure reasonable access to weekend and holiday play by individuals from opening until such hour as individual demand slackens, and no non -local tournaments shall be scheduled to conflict with such reasonable availability of the Golf Course for individual play on holidays and weekends. The Problem Resolution Committee shall be charged with the responsibility of assuring that actual hours of such availability for individual play will be provided for, and actual hours during which tournament play is limited shall be specified in the Operating Agreement, subject to such changes from time to time as conditions may warrant. Section 27. Problem Resolution Committee. A Problem Resolution Committee shall be established by Agency to meet -31- with Tenant to attempt to resolve any matters of dispute or of public concern. The committee shall be provided for in the Operating Agreement. Section 28. Definitions. "Gross receipts" shall include all money, cash, receipts, assets, property or other things of value, including but not limited to, gross charges, sales, rentals, fees and commissions made or earned, and all gross sums received or earned by Tenant and all its assignees, sublessees, licensees, permittees or concessionaires, whether collected or accrued, from any business, use or occupation, or any combination thereof, originating, transacted or performed, in whole or in part, on the premises, including but not limited to, rental, the rendition or supplying of services, memberships, and the sale of goods, wares or merchandise; less sales and excise taxes applicable thereto, required to be collected by Tenant, its assignees, sublessees, licensees and permittees in connection with the rendering or supplying of services or goods, wares or merchandise. "Gross receipts" shall not include fees, charges or rentals paid to Tenant by a sublessee where the gross receipts of such sublessee are reported and subject to the percentage rental schedule provided for hereinbefore. There shall be no deduction from gross receipts for any overhead or cost or expense of operation, such as but without limitation to salaries, wages, cost of goods, interest debt -32- amortization, collection, credit card and bad debt charges, insurance and taxes, except as specifically provided for herein. Gross receipts shall include the amount of any manufacturer's or importer's excise tax included in the prices of any property or material sold, even though the manufacturer or importer is also the retailer thereof, and it is immaterial whether the amount of such excise tax is stated as a separate charge. Gross receipts, however, shall not include discounts, customer returns and Federal, State, Municipal or other taxes collected from the consumer (regardless of whether the amount thereof is stated to the consumer as a separate charge) and paid periodically by Tenant to a governmental agency, accompanied by a tax return or statement, but the amount of such taxes shall be shown on the books and records elsewhere herein required to be maintained. Section 29. Abandonment;_Appointment of Agent. In the event of an abandonment, vacation or discontinuance of operations for a period in excess of twenty-four (24) hours, Tenant hereby irrevocably appoints Agency as an agent for continuing operation of the services granted herein, and in connection therewith authorizes the officers and employees thereof to (1) take possession of the premises, including all improvements, equipment and inventory thereon; and (2) remove any and all persons or property on said premises and place -33- of the State of California. E. This Lease shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto; however, it shall not be construed as a third party beneficiary contract as to anyone not a party to this Lease and the rights and remedies afforded the parties hereto, or either of them, are not enforceable by anyone not a party to this Lease. F. The term "Tenant" shall include any assignee from Tenant under any assignment permitted hereunder or approved in writing by the Agency. G. Written notice to Agency hereunder shall be given by registered mail, postage prepaid, return receipt requested, and addressed to the Agency, 300 North "D" Street, Room 320, San Bernardino, California 92418; and written notices to Tenant hereunder shall be given by registered mail, postage prepaid, return receipt requested, and addressed in duplicate, with one copy to Shandin Hills Golf Club, 3380 Little Mountain Drive, San Bernardino, California 92407, and one copy to David Hawley, P. 0. Box 2007, Irwindale, California 91706, or to such other address or addresses as Tenant may designate by written notice to Agency. Such notices shall be effective upon mailing. IN WITNESS WHEREOF, Agency has caused this Lease'to be executed by its Chairman and attested by its Secretary, and -35- any such property in storage for the account of and at the expense of Tenant; and (3) sublease or license the premises; and (4) after payment of all expenses of such subleasing or licensing apply all payments realized therefrom to the satisfaction and/or mitigation of all damages arising from Tenant's breach of this Lease. Entry by the officers and employees of Agency upon the premises for the purpose of exercising the authority conferred hereon as agent of Tenant shall be without prejudice to the exercise of any other rights provided herein or by law to remedy a breach of this Lease. Section 30. Miscellaneous. A. No waiver by Agency or Tenant of any breach of any provision of this Lease shall be deemed for any purpose to be a waiver of any breach of any other provision hereof, or of any continuing or subsequent breach of the same provision. B. Each right of the parties hereto is cumulative and is in addition to each other legal right which the party may have in the event of any default of the other. C. In the event any covenant, condition or provision herein contained is held to be invalid by final judgment of any court of competent jurisdiction, the invalidity of such covenant, condition or provision shall not in any way affect any other covenant, condition or provision herein contained. D. This Lease and its affiliated Operating Agreement shall be construed and enforced in accordance with the laws ERIC Tenant has executed the same, all as of the day and year first above written. AGENCY: TENANT: Redevelopment Agency of Shandin Hills Golf Club, a the City of San Bernardino, California corporation California W. R. HOLCOMB, Chairman President (SEAL) ATTEST: Glenda Saul, Secretary APPROVED AS TO FORM: AGENCY COUNSEL By Secretary -36- HENRY BIOKLER COMPANY SHANDIN HILLS GOLF CLUB Initial charges and fees: After first year, all rates will be reviewed and any changes will be based on the existing economy, competition and inflation indes. 1985 Golf Rounds 50,000 Rates Weekdays -Reg. 18 holes $10.00 Seniors & Juniors 8.00 Twilite 6.00 Weekend/Holidays 18 holes Twilite & 9 holes Cart Rentals Weekdays 18 holes 9 holes Weekend/holidays 18 holes 9 holes $14.00 8.00 $13.00 7.00 $14.00 8.00 1986 1987 54,000 58,000 EXHIBIT B 1988 1989 62,000 66,000