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HomeMy WebLinkAboutC-5567(B) - Ground Lease (Former City Hall) - 3300 Newport BoulevardFIRST AMENDMENT TO GROUND LEASE THIS FIRST AMENDMENT TO GROUND LEASE ("Amendment") is entered into this 3rd day of May, 2016, by and between THE CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("Lessor"), and OLSON REAL ESTATE GROUP, INC., a California corporation doing business as R.D. Olson Development ("Lessee"). RECITALS WHEREAS, Lessor and Lessee are the current parties to that certain Ground Lease dated September 9, 2014 ("Lease"); and WHEREAS, Lessor and Lessee have agreed to amend and clarify the Legal Description and the Depiction of the Premises that are the subject of the Lease, in accordance with the terms and conditions more particularly set forth herein. NOW, THEREFORE, for good and valuable consideration, including the mutual promises contained herein, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Interpretation. The terms used herein and not specifically defined shall have the same meaning as in the Lease. Lessor and Lessee acknowledge that there are no agreements, understanding, restrictions, warranties, representations, or covenants between the parties relating to the Lease other than those set forth in this Amendment. Except to the extent the Lease is modified by this Amendment, the remaining terms and provisions of the Lease shall remain unmodified and in full force and effect. 2. Legal Description of the Premises. The Legal Description of the Premises attached to the Lease as Exhibit A-1 is amended in its entirety and hereby replaced with the Exhibit A-1 attached hereto. 3. Depiction of the Premises. The Depiction of the Premises attached to the Lease as Exhibit A-2 is amended in its entirety and hereby replaced with the Exhibit A-2 attached hereto. 4. Exhibits. To the extent that the Exhibit A-1 and the Exhibit A-2 attached hereto conflict with any provision or exhibit attached to the existing Lease, the Exhibit A-1 and the Exhibit A-2 attached to this Amendment and made a part hereof shall control. 5. Definition of Premises. The definition of "Premises" in Lease Section 2.1 is amended, in part, to add subpart iii to read as follows: (iii) any and all existing public utilities in, over, under and through the Premises, including, but not limited to, water lines, sewer lines, traffic equipment, and vehicle detection loops, together with the right and power to enter the Premises upon reasonable notice to Lessee to inspect, maintain, repair, and replace the public utilities. In the exercise of these rights, Lessor shall use its best efforts to minimize disruption to the construction, development or operation of the Hotel or other Improvements and promptly repair, replace and/or restore, at its cost, any damage or injury to the Improvements constructed on the Premises by Lessee to the same condition as immediately existed prior to the damage or injury caused by Lessor. In the event that Lessor does not promptly repair, replace and/or restore any damage or injury to the Improvements, Lessee shall have the right, but not the obligation, to repair, replace and/or restore any damage or injury to the Improvements and the reasonable cost thereof shall be borne by Lessor. 6. Authority. Each party represents and warrants that, except as otherwise provided herein, as of the date hereof: (i) such party has not made any assignment, lease, transfer, conveyance, or other disposition of the Lease, or any interest in the Lease; (ii) such party has the full right, power and authority to enter into this Amendment without any consent(s) or approval(s) from any third parties (Lessor hereby specifically representing that no lender approval is required); (iii) each individual executing this Amendment on behalf of a corporation, partnership or limited liability company is duly authorized to do so such that this Amendment shall be binding on the applicable entity upon full execution and delivery of the same; and (iv) such party has not dealt with any broker or finder in connection with this Amendment such that no one is entitled to be paid a fee or commission in connection with the amendment of the Lease by such party. 7. Miscellaneous. This Amendment may be modified only in writing signed by the Lessor and Lessee. This Amendment shall be governed by and interpreted in accordance with the laws of the state in which the Premises are located. Any notices required hereunder shall be sent in the same manner and upon the same terms as are required by the Lease. This Amendment shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the respective parties hereto. This Amendment may be executed in several counterparts, each of which may be deemed an original, but all of which together shall constitute one and the same Amendment. Execution copies of this Amendment may be delivered by facsimile or PDF, and the parties hereto agree to accept and be bound by facsimile or PDF signatures hereto. Both Lessor and Lessee assume responsibility for the content and form of this document. Therefore, the parties agree that the rule of judicial interpretation to the effect that ambiguities and/or uncertainties contained in an agreement should be construed against the party who drafted that agreement shall not be applied in the event of any dispute arising from the content of this document. 8. Integrated Agreement. Except as expressly modified herein, all other provisions, terms, and covenants set forth in the Lease shall remain unchanged and shall be in full force and effect. [Signatures on the following page] 2 IN WITNESS WHEREOF, the parties have caused this Amendment to Lease to be executed as of the day and year first above written. LESSOR: CITY OF NEWPORT BEACH, a California municipal corporation and charter city By: Name: Dave 'ff Title: City Manager Date: Mit J� APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE By: —'ZA Name: Aaron C'Tviip Title: City Attorney Date: V(4y a, ATTEST: C By:y�Yl/t/ t44 Name: Leilani 1. Brown Title: City Clerk Date: Jr. 3. LESSEE: OLSON REAL ESTATE GROUP, INC., a California corporation doing business as R.D. Olson Development By: Name: _A Le, -4– P - 4?hsnl, Title: f --es' A -1 - Date: 3 EXHIBIT A-1 LEGAL DESCRIPTION EXHIBIT A-1 LEGAL DESCRIPTION "LEASE PARCEL" THAT PORTION OF LOTS 6 AND 7 IN SECTION 28, TOWNSHIP 6 SOUTH, RANGE 10 WEST, SAN BERNARDINO MERIDIAN IN THE CITY OF NEWPORT BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, TOGETHER WITH THOSE PORTIONS OF LOT 1 IN BLOCK "A" AND 'THE HUDSON" OF MAP OF "LANCASTER'S ADDITION TO NEWPORT BEACH", AS SHOWN ON A MAP RECORDED IN BOOK 5, PAGE 14 OF MISCELLANEOUS MAPS, THAT PORTION OF LOT 3 OF TRACT NO. 1117, AS SHOWN ON A MAP RECORDED IN BOOK 35, PAGE 48 OF MISCELLANEOUS MAPS AND THAT PORTION OF A 20.00 FOOT ALLEY, AS VACATED BY THAT CERTAIN RESOLUTION NO. 3280 OF THE CITY COUNCIL OF SAID CITY, A CERTIFIED COPY OF WHICH WAS RECORDED MARCH 11, 1946 IN BOOK 1400, PAGE 189 OF OFFICIAL RECORDS, ALL OF RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHWESTERLY CORNER OF SAID LOT 3, THENCE ALONG THE WESTERLY LINE OF SAID LOT 3, NORTH 00°09'03" EAST 128.00 FEET TO THE WESTERLY TERMINUS OF THAT CERTAIN COURSE SHOWN AS "N89'15'30"E 90.00 FEET" ON THE SOUTHERLY BOUNDARY OF PARCEL 1 OF PARCEL MAP RECORDED IN BOOK 85, PAGES 1 AND 2 OF PARCEL MAPS, RECORDS OF SAID COUNTY AND BEING THE TRUE POINT OF BEGINNING; THENCE ALONG THE SOUTHERLY BOUNDARY OF SAID PARCEL 1, THE FOLLOWING FOUR (4) COURSES: (1) NORTH 00°09'03" EAST 53.55 FEET, (2) NORTH 39'53'38" WEST 108.61 FEET TO THE BEGINNING OF A CURVE CONCAVE SOUTHWESTERLY, HAVING A RADIUS OF 351.15 FEET, (3) NORTHWESTERLY 306.25 FEET ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 49°58'10" AND (4) NORTH 89°51'48" WEST 97.67 FEET TO THE MOST NORTHEASTERLY CORNER THAT CERTAIN IRREVOCABLE OFFER OF DEDICATION TO THE CITY OF NEWPORT BEACH RECORDED SEPTEMBER 18, 2014 AS INSTRUMENT NO. 2014000378678, OF OFFICIAL RECORDS OF SAID COUNTY; 1 OF 4 April 19, 2016 M:\Mapping\1100\04\Legals\LEASE\1100-004 Lease PL.docx x:)op•ld @seal b00-00'Ct\3S'd31\Slegal\t,0\0OTl\gu!ddew\:W 9TOZ'6T I!jdV 1b3OZ `3NII Alb31Sd3 aldS NI 1NIOd 319Nd Nd Ol „EE,ST.t,T 30 319Nd ldb1N33 d HmMIH13Mbf13 aids 9NOId 1334 VZ -6 A1b3H1f1OS (L) '1S3M „St,,90.Z8 H1bON Sbd391NIOd OIVS 013NIl ldladb d'133d 00'LE 30 Snladb d 9NIAdH 'Mm:) 3S OMH d 30 ONINNID39 3H1 O1 „8S,E5.170 dO 3I9Nd Idb1N33 d H9f1OHH13Abf13 aids 9NOld 1333 S9'bL Alb3H1f1OS (9) '1Sd3 „9b,00.L8 H1f1OS Sbd391NIOd OIVS 01 3NII Idladb d '1333 00*EL8 30 sniadb d 9NIAdH '3AHn:) 3Sb3A3b d dO DNINN1930 3Hl Ol „9S,8T.T0 dO 319Nd ldb1N33 d HE)nO'dH13Mf13 ows 9NOId 1333 Z879 A1b3H1f1OS (S) '1S3M „OS,Tb.S8 H1bON Sbd391NIOd aldS Ol 3N11 Idladb d '1333 170'9ELZ 30 sniadb d 9NIAdH '3Aun:) aNnOdWO3 d 30 9NINN1939 3Hl Ol „OZ,OSAI 30 319Nd 1db1N33 d H9f1ObH13Abf13 aids 9NOId 1333 SFOT A1b3H1f1OS (b) '1333 00'Zt 30 Sflladb d 9NIAdH 'Ala31Sd3 3AV:)NOJ 3Am) d 30 9NINNI939 3Hl 011333 Eb'9£ 1S3M „0£,80.61 Hinos (£) '„OT,SE.ET 30 319Nd Idb1N33 d H9mlH13Adn:) alb's 9NOld 1333 SL'£T Alb3H1f1OS (Z) '1Sd3 „Ob,9Z.b8 H1f1OS Sbd391NIOd CIIVS 013NII Idladb 11'1333 00'8S d0 smovb d 9NIAdH'3Abf13 M13A3b d dO 9NINN1939 3H1 Ol „Eb,ZS.TO dO 319Nd Idb1N33 d H9f1ObHl'3Abf13 aivs 9NOld 1333 TE'68 Alb3Hlf1OS (T) S3svw (L) N3A3S 9NIMOIIOd 3H13NII Alb31Sd3 alb'S 9NOld 33N3H1 `1S3M „SS,EE.Z8 H1bON Sbd391NIOd aldS 013NIl ldladb d '1334 170*tZLZ 30 smovb d 9NIAdH 'AIb31Sd3 3Ad3NO3 3Aun:) 1N39Nd1-NON d NO 9N139 1NIOd aldS '3NIl A1831Sd3 OIVS SI iNIOd d 011333 96'ZZ 1S3M „6S,9Z.6b HinOS 33N3H1 '1334 tVZT 1S3M „LO,LZ.TO H1f1OS 3N11 Alb31Sd3 a111S 9NIAd3133N3H1 'N13b3H11NIOd 319Nd Nd 011333 ET'81S3M „bT,IE.88 H1bON (Z) `1333 SZ'Lb 1S3M „ZZ,9Z.00 H1f1OS (T) S3s8no:) (Z) OMl 9NIMOIIOd 3Hl NOIld31a3a dO b333O 318d3OA3bbl 01115 dO 3NI1 Alb31Sd3 3Hl 9NOld 33N3H1 x:)op'ld aseal bOO-OOTT\3Sd31\ste29l\b0\OOTT\au!ddey4\:W 9TOZ '6T I!add b 30 E `1333 Lb'S ISM.10,00.00 HI2ION 30N3H1 1333 b9'1b lSV3 „6Z,Ttbob8 HDION 3JN3Hl 1333 St'S iSb'3 „TS,S1,L0 HinOS 33N3H1 '1333 Tti'61Sd3 „60,btioZB HiWN 30N3H1 1333 8L'ZT 1Sd3 „9Z,9So8£ HildON 30N3H1 „9Z,Ebo170 30 319Nb' Idb1N30 d HE)nOHH13Am) GIVS 9NOIV 1333 TL'LS Al2f31Sd3 30N3H1 '1333 00'OOL 30 sniad2J `d 9NIAVH 'A1213H1a0N 3AVONOD 3Aun:) -'d 30 9NINN1939 3Hl Ol 1333 917'8TT 1Sd3 „8b,TSo68 HinOS 30N3H1 „ZO,SS.Z9 30 319Nb' IVIdIN30 V HDnOUH1 Mum alb's 9NOIV 1333 E£'6 AIa31Sd3 aNd kIU3iSV3HinOS 30N3H1 '1333 OS'8 30 sniab'b b 9NIAVH 'Ala31Sd3Hla0N 3AVDNO) Mum `d 30 DNINNID39 3Hl Ol 1333 8T'TZ 1Sd3 „9V,9So9Z HinOS 30N3H1 1333 TL'08T 1Sd3 „9b,9So98 HinOS TWHl 1333 LL'OZ 1S3M „9b,9So9Z HiHON 3JN3Hl •1333 ti0'917 1SV3 .,VV,ESa98 HinOS DN3Hl „Z£,8Ta17T 30 319NV I\RIlN3:) d HgnOHHl'3AHn:) GIVS 9NOld 1333 VZ -6 AIH31Sd3 30N3H1 .1S3M „8t,,t7Z.LT Hinos SkIV391NIOd albS Ol 3NIl lb'Iab'b V1333 00 -LE 30 snio l2i d 9NIAVH 'Al%d3HI'dON 3AbONOO 3Abf101N39Ndl -NON V NO 1NIOd `d Ol 1333 0tp'Ob lSV3 „LS,6Zo6E H1f10S '3Mm ai` s Ol LN39NVI NON '3030H1 NOIlt/9NOl0ad AI2OHinOS 3Hl oNd 3N11 AIa31Sd3 GIVS 9NOld 9NinNI1NOJ 30N3H1 xDop-ld aseal b00-OOTT\3SV31\sle2al\b0\OOTT\2u!ddeW\:W 91OZ `61 I!adv b 30 b b58L 'S'l `113X0211'21121f1X 910Z ` —11-# 30 AVG �Sl Hi 031`d0 'ANV 31 `0HOJ321 30 AVM-3O-S1HJI21 (INV S1N3W3SV3 `SNOI1VA213S3d `SNOIlJ1211S321 `SNOI110NO0 `S1NVN3ANOJ 01ID3f8f15 '3O3ld3H I'M V 30VW 30N32133321 SIH1A8 (INV O13213H 03H0VJ1V „9„ 1191HX3 NO NMOHS SV 'SS31 UO RIOW 53b:)V ZL6'E `1333 32 vnoS bOS`TLT 9NINIVINOJ DNINN1939 3O 1NIOd 3nHl 3H1 01 1333 S871 1S3M „LS,OSo68 HBdON A21VONf1O9 A183H1f1O5 OIVS 9NOIV 33N3H1 •t 13021Vd 30 A21VONf1O9 A1213Hinos OIVS 011333 Z9'181SV3 „80,00.00 H121ON 30N3H1 (1333 bZ'61SV3 .ZZ,SS.68 H1f1OS 3JN3H1 1333 8L'6Z 1SV3 ,OS,SV.00 HIHON 3JN3H1 f1SV3 „0£,t Z.09 HlaON SHV391NIOd CIIVS 013NIl IVIOVN V `A0N3JNV1-NON 3O 1NIOd V Ol „9E,6Z,ZE 30 319NV IVUN30 V HE)nO21H1 `3Adn:) OIVS 9NOIV 1333 ZZ'LZ A12131S3PAH1NON 30N3H1 'ISV3 „bS,SO.L8 HI2ION SUV39 iNlOd OIVS 01 3N11 IVIGV21 V `1333 00'8b 30 snia 21 V 9NIAVH 'n131SWHinos 3AVONO0 Mum 1N39NVl-NON V NO 1NIOd V 01 1333 SZ'S ISV3 „6S,6So68 H121ON 30N3H1 EXHIBIT A-2 DEPICTION OF PREMISES Z _ ____ —— VIA OPORTO— TRAGT No. 1117 � S'LY LINESEE ' PARCEL 1 LOT I 3 / DETAIL "C lII �19 P.M.B. 85/1 M.M. 35 / 48 ski I \1 � CJ — T.P.O.B. L20 I b L1 128.00' N N00'09'03"E .55' / L11 ALLEY VACATED PER BK. 1400, PG. 189, P.O.C., \ -- C O.R. REC. 3-11-46 _ S'WLY COR. SO_4' 35'14"E {R) Q ' I LOT 3, TR NO. 1117, r S'LY LINE M.M. 35/48 + 0 PARCEL 1 O P.M.B. 85/1LU co ~ o- — Al� 00 CO C', C8 (Q I Al0 r� ❑ U Q l I �C m r Cj E'LY LINE IRREVOCABLE OFFER OF ; , w a I c te�� DEDICATION TO THE CITY OF NEWPORT � m � I M \ BEACH, FOR STREET AND HIGHWAY o ut SEE PURPOSES, INST NO. 2014000378678, O.R. N z / DETAIL "A" r SHEET2OF 200 wf j f 0 �� r SEE a \y I I 'IN Si j DETAIL "B" r Y N1 fao �fSHEET 2 OF 2I o rj Cl C2 C4 r CV L NEWPORT _ BOULEVARD NOTE: SEE LINE AND CURVE TABLE ON SHEET 3 OF 3 EXHIBIT A _2i DATE: March 2016 /�'� SCALE: 1 °=800'' FUSCOE SKETCH TO ACCOMPANY LEGAL DESCRIPTION JN: 1100.004.01 IIIIu. LEASE PARCEL DRAWN BY: RJL e N 0 1 N I I R 1 N 0 LIDO HOUSE HOTEL CHECKED BY: JLU 16795 Von Korman, Suite 100, Irvine, California 92606 tat 949,474.1960- fox 949.474.5315 avv Juscoo.com NEWPORT BEACH, CA SHEET 1 OF 3 M:\MAPPING\1100\04\LEGALS\LEASE\1100-004 LEASE ONDRY.DWG (04-18-16) (9t -9t-40) 0M4 -AMONG 3Sv31 400-001t\3SV3*1\SIV031\4o\00tt\DNlddvw\:w C d0 Z 133HS V:) 'H:)V39 iNOdM3N WW-QWSnF- SMg-I'Ll"6116"01 00961't[11'61,6101 1310H 3SnOH 0011 909Z6Q1W0PPD'0uwl'001DRAVu0wi0MU0A96L91 nlr .ka 43NJ3H:) 0 N I >! 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D. Olson Development, LESSEE 112/066751.0097 6271361,10a09/04/14 ARTICLE 4 ARTICLE 1 1.1 ARTICLE 2 2.1 ARTICLE 3 TABLE OF CONTENTS Page PURPOSE OF LEASE 1 Purpose 1 DEFINITIONS 1 Defined Terms 1 12 3.1 Lessee Tasks 12 3.2 Lessor Tasks 15 3.3 Satisfaction (or Waiver) of Conditions to Commencement of Lease 17 3.4 Cooperation; Execution and Recordation of Memorandum of Lease; Commencement Date 19 3.5 Miscellaneous Acknowledgements, Agreements, and Covenants 20 LEASE OF PREMISES; POSSESSION; CONDITION OF LEASEHOLD TITLE; PHYSICAL AND ENVIRONMENTAL CONDITION OF PREMISES; LEASE TERM 21 4.1 Grant/Acceptance of Leasehold Interest in Premises 21 4.2 Possession 22 4.3 Condition of Leasehold Title; Reserved Rights of Lessor 22 4.4 Lease Term 22 4.5 Option to Extend Initial Tenn 23 4.6 Liens and Encumbrances Created by Lessee 23 4.7 Lessee's Surrender of Premises and Execution of Quitclaim Upon Expiration or Termination 24 4.8 Holdover Tenancy 24 4.9 No Right To Relocation Expenses 24 ARTICLE 5 5.1 5.2 5.3 TASKS TO BE PERFORMED PRIOR TO LEASE COMMENCEMENT DATE RENT 25 Base Rent During Initial Tenn 25 Percentage Rent 25 Adjustments to Base Rent and Base Rent CPI Adjustment During Option Term 27 5.4 Place of Payment 29 5.5 Triple Net Lease; No Abatement or Set -Off of Rent 30 5.6 Non -Subordination of Rent or Other Sums 30 5.7 Delinquency In Rental Payment; Collection of Rents 30 5.8 Lessee's Maintenance of Books and Records Relating to Calculation of Ground Rent; Lessor's Right to Inspect and Audit Records 30 5.9 Acceptance Not Waiver 31 ARTICLE 6 DEVELOPMENT OF THE HOTEL AND RELATED IMPROVEMENTS ON AND ABOUT THE PREMISES 31 112/066751-0097 6271361.10 a09/04/14 -I- Page 6.1 Commencement and Completion of Hotel 31 6.2 No Construction Before Notice; Notice(s) of Non -Responsibility 31 6.3 Mechanic's, Materialmen's, Contractor's and Subcontractor's Liens 32 6.4 Lessor's Rights of Access 32 6.5 Local, State and Federal Laws 33 6.6 As -Built Drawings 33 6.7 Costs of Construction 33 6.8 Lessor Responsibility for Coastal Commission Lower Cost Overnight Accommodations Mitigation Fee 33 ARTICLE 7 USE AND OPERATION OF HOTEL; CHANGES IN HOTEL MANAGEMENT COMPANY/HOTEL MANAGEMENT AGREEMENT AND/OR HOTEL FRANCHISOR/HOTEL FRANCHISE AGREEMENT 34 7.1 General 34 7.2 Management by Approved Hotel Management Company; Changes in Hotel Management Company and New or Amended Hotel Management Agreement; Removal/Replacement of Hotel Management 36 7.3 Hotel Franchisor and Hotel Franchise Agreement 38 7.4 Prohibition on Lessee's, Hotel Management Company's, and Subcontractors' Employment or Retention of Certain Persons; Lessor's Right to Require Removal 40 7.5 Name of Hotel; Promotions and Advertising 41 ARTICLE 8 MAINTENANCE AND REPAIRS 41 8.1 Maintenance and Repairs; General 41 8.2 Waste 43 8.3 Hazardous Substances 43 8.4 Lessor Not Responsible for Maintenance or Repairs 45 8.5 Capital Replacement Reserve Fund 45 8.6 Lessor's Rights/Remedies for Deficient Maintenance and Repairs 46 ARTICLE 9 TAXES, ASSESSMENTS, UTILITIES, AND OTHER CHARGES 47 9.1 Lessee's Obligation to Pay Impositions 47 9.2 Contesting Impositions 48 9.3 Utilities 49 9.4 Lessor's Right to Cure 49 9.5 Limits of Tax Liability 50 ARTICLE 10 OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS 50 10.1 Ownership of Improvements During Lease Term . 50 10.2 Reversion of Improvements; Duty to Remove Personal Property 50 10.3 Alteration of Improvements 51 10.4 Damage to or Destruction of Hotel and Improvements 51 10.5 Application of Insurance Proceeds 52 10.6 Damage or Destruction During Final Years of Lease Tenn 53 10.7 Faithful Performance and Labor and Material (Payment) Bonds 53 112/066751.0097 6271361.10 a09/04/14 -1I- Page ARTICLE 11 ASSIGNMENT, SUBLETTING, TRANSFER 11.1 Restrictions on Lessee's Right to Transfer 54 54 11.2 Notification to Lessor of Changes in Ownership and Control of Lessee 57 11.3 Release of Transferor Upon Transfer 11.4 No Encumbrance of Lessor's Leased Fee Interest 57 57 11.5 Investigation of Proposed Transferee; Costs 57 11.6 Transfer by Lessor; Attornment by Lessee 11.7 Right of First Opportunity 58 58 ARTICLE 12 MORTGAGES 12.1 Leasehold Mortgages 59 12.2 Rights and Obligations of Leasehold Mortgagees 59 61 12.3 Notice 12.4 Forbearance by Lessor 63 12.5 Conditions Precedent to Mortgagee Rights and Lessor Forbearance 65 65 12.6 Performance on Behalf of Lessee 12.7 Non -Merger 65 12.8 Lessor's Cooperation; Estoppels 65 12.9 Enforceability 65 12.10 Equipment Financing 66 66 ARTICLE 13 INDEMNIFICATION AND INSURANCE 13.1 Indemnification 66 13.2 Indemnification From Third Party Challenges to Lease and/or 66 Development Entitlements 13.3 Required Insurance . 67 13.4 General Insurance Provisions and Requirements 0 7 13.5 Failure to Maintain Insurance 0 13.6 Disposition of Insurance Proceeds Resulting from Loss or Damage to 72 Improvements 72 ARTICLE 14 EMINENT DOMAIN 14.1 Lessee to Give Notice 72 14.2 Total Taking 72 14.3 Partial Taking 73 14.4 Application of Awards and Other Payments 73 73 14.5 Taking Prior to Commencement Date 74 ARTICLE 15 DEFAULTS, REMEDIES, AND TERMINATION 15.1 Defaults - General 74 15.2 Legal Actions 74 15.3 Attorneys' Fees and Court Costs 75 15.4 Rights and Remedies are Cumulative 75 15.5 Additional Remedies of Lessor 75 15.6 Lessee's Waiver of Right to Specific Performance Prior to 76 Commencement Date 15.7 Remedies and Rights of Termination 76 76 112/066751-0097 6271361.10 a09/04/14 -111- Page ARTICLE 16 GENERAL PROVISIONS 78 16.1 Notices, Demands, and Coimiiunications between the Parties 78 16.2 Time of Essence 78 16.3 Conflict of Interests 79 16.4 Non -liability of Lessor Officials and Employees 79 16.5 Inspection of Books and Records 79 16.6 No Partnership 79 16.7 Compliance with Law 79 16.8 Obligation to Refrain from Discrimination 79 16.9 Lessor's Reservation of Police Power Authority 79 16.10 Applicable Law 80 16.11 Severability 80 16.12 Binding Effect 80 16.13 No Third Party Beneficiaries 80 16.14 Captions and Section Headings 80 16.15 No Recording of this Lease 80 16.16 Events of Force Majeure; Extensions of Times of Performance 80 16.17 Entire Agreement, Waivers, and Amendments 81 16.18 Attornnient 81 16.19 Subordination 81 16.20 Approvals 82 16.21 Lessee's Representations and Warranties 83 16.22 Lessor's Representations and Warranties 83 16.23 No Liability for Broker's Commissions or Finder's Fees 83 16.24 Counterparts 84 16.25 Estoppel Certificates 84 EXIIIBIT "A-1" EXHIBIT "A-2" EXHIBIT "B" EXHIBIT "C" EXHIBIT "D" 112/066751-0097 6271361,10 a09; 04/14 LEGAL DESCRIPTION DEPICTION OF PREMISES SCHEDULE OF PERFORMANCE FORM OF MEMORANDUM OF LEASE AAA DIAMOND RATINGS CRITERIA -iv- GROUND LEASE This Ground Lease ("Lease") is dated for reference purposes only as of the 9 day of e pI'elm , 2014 (the "Agreement Date") and is being made and entered into by and between the CITY OF NEWPORT BEACH, a California charter city ("Lessor"), and OLSON REAL ESTATE GROUP, INC., a California corporation doing business as R.D. Olson Development ("Lessee"). Lessor and Lessee are sometimes hereinafter referred to individually as a "Party" and collectively as the "Parties." ARTICLE 1 PURPOSE OF LEASE 1.1 Purpose. The purpose of this Lease is to provide for the lease by Lessor to Lessee of the former Newport Beach City Hall premises located at 3300 Newport Boulevard in the City of Newport Beach, County of Orange, State of California (as more specifically defined herein, the "Premises") and the construction and operation by Lessee on the Premises of a boutique hotel (the "Hotel") with approximately one hundred thirty (130) guest rooms and related facilities. The lease of the Premises and the development and operation of the Hotel thereon pursuant to this Lease, and the fulfillment generally of this Lease, are in the vital and best interests of the City of Newport Beach and the health, safety, morals, and welfare of its residents, and in accord with the public purposes and provisions of applicable federal, state, and local laws and requirements. ARTICLE 2 DEFINITIONS 2.1 Defined Terns. In addition to any terms that are defined elsewhere in this Lease, the following terms used in this Lease shall have the meanings ascribed below: "Affiliate" means any individual, corporation, partner, partnership, limited liability company, trust, or other entity which directly or indirectly controls, is directly or indirectly controlled by, or is under common control, whether it be direct or indirect, with the specified entity. "Agreement Date" shall mean the date first written above. "Approved Title Condition" shall mean that, as of the Commencement Date, Lessor's fee title to the Premises is free and clear of the following: (i) all monetary liens and encumbrances excepting only (A) the lien of any non -delinquent property taxes and assessments, including without limitation supplemental taxes, that accrue from and after the Commencement Date, (B) the lien of any Mortgage placed on Lessee's leasehold interest in the Premises (but not Lessor's leased fee interest, which shall be senior in priority and not subordinated to this Lease) that satisfies the requirements set forth in Sections 3.1.3, 3.2.3, and 3.2.4 of this Lease and is approved by Lessor, as provided therein; and (C) such other monetary liens that are caused by or placed on Lessee's leasehold interest by the acts or omissions of Lessee; and (ii) all non - monetary excepting only (A) those encumbrances that are listed as exceptions to title in the Preliminary Report, (B) the Notice of Lis Pendens recorded by Lido Partners, a California limited partnership, against the Premises in the Lido Partners Litigation and any and all easement and license claims arising therefrom (provided, however, that nothing herein is intended or shall 112/066751-0097 6271361.10 a09/04/14 -1- be interpreted as an acknowledgment by either Party to this Lease that said Notice of Lis Pendens or any of the claims arising therefrom are valid), (C) any easement, license, access, or similar right that is reserved by Lessor or dedicated, granted, or conveyed to Lessor or any other governmental agency or utility company consistent with the Development Entitlements for the Hotel, and (D) such other non -monetary liens that are caused by or placed on Lessee's leasehold interest by the acts or omissions of Lessee. "Base Rent" shall have the meaning ascribed to that term in Section 5.1 of this Lease. "Capital Replacement Reserve" and "Capital Replacement Reserve Fund" shall have the meanings ascribed to those terms in Section 8.5 of this Lease. "Commencement Date" shall mean the date the Lease Term commences, which date shall be the date the Memorandum of Lease is recorded in the Official Records of the Orange County Recorder's office pursuant to Section 3.4 of this Lease. "Construction Period" shall mean the period commencing with the Commencement Date and ending on the first day of the First Operating Year. "Consumer Price Index" shall mean the Consumer Price Index --All Urban Consumers -- All Items (Los Angeles -Riverside -Orange County), published by the United States Bureau of Labor Statistics or, if such index ceases to be published, the most closely analogous substitute index. "Control," "Controlled By," or "Controlling" shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership of an interest therein, through ownership of voting securities, by contract, or otherwise. "Cure Period" shall have the meaning ascribed to that term in Section 15.1 of this Lease. "Date of Taking" shall have the meaning ascribed to that term in Section 14.2 of this Lease. "Default" shall have the meaning ascribed to that term in Section 15.1 of this Lease. "Demolition and Removal Report" shall have the meaning ascribed to that term in Section 10.2.2 of this Lease. "Demolition Security" shall have the meaning ascribed to that term in Section 10.2.2 of this Lease. "Development Entitlements" shall mean all of the land use entitlements required for development and operation of the Hotel on the Premises, including without limitation all of the following (each, individually, a "Development Entitlement" and, collectively, the "Development Entitlements"): (i) a General Plan Amendment (GP2012-002), including text and map change, to replace the Public Facilities (PF) designation for the Premises with a new mixed -use land use category (MU-H5) and establish density and intensity limits within Table LU-2 of the Land Use Element by establishing a new anomaly location; (ii) a Coastal Land Use Plan Amendment 112/066751-0097 6271361.10 a09/04/14 -2- (LC2012-001), including a text and map change to replace the existing Public Facilities (PF) designation for the Premises with a new mixed -use land use category (MU) and establish density and intensity limits within Table 2.1.1-1 and an amendment to Policy 4.4.2-1 to establish the policy basis for higher building height limits; (iii) a Zoning Code Amendment (ZCA No. CA2012-003), including a text and map change to replace the Public Facilities (PF) zoning designation for the Premises with a new zone MU-LV designation (Mixed -Use --Lido Village) to establish density and intensity limits consistent with the proposed General Plan Amendment; (iv) a Site Development Review for demolition and clearance of all existing on -site structures, provision of necessary utility connections to serve the proposed Hotel, modification of existing street improvements within the abutting public rights -of -way, and site plan, floor plans, and elevations for the proposed Hotel submitted by Lessee; (v) a Conditional Use Permit (CUP) for the proposed Hotel which authorizes operation of the Hotel and its ancillary uses (restaurant and bar, rooftop lounge, spa including massage, meeting rooms, retail use including the sale and consumption of alcoholic beverages, and a parking management plan that includes controlled parking access and valet parking when necessary); (vi) a project -level Environmental Impact Report for the Hotel, including the associated Mitigation Monitoring and Reporting Program; (vii) an amendment to City's certified Local Coastal Land Use Plan ("LUP") consistent with the Development Entitlements listed in clauses (i)-(vi), inclusive; and (viii) a Coastal Development Permit ("CDP") consistent with the Development Entitlements listed in clauses (i)-(vii), inclusive. Notwithstanding the foregoing, none of the following shall constitute a "Development Entitlement" within the meaning of this Lease: (i) any State permit required for the sale, distribution, or consumption of alcoholic beverages on the Premises; (ii) any permit required for conducting live entertainment on the Premises; (iii) any permit required for the erection or display of temporary signs or banners on or from the Premises; (iv) any permit required for the amplification of sound outside an enclosed building on the Premises; (v) any permit required to conduct a special event on the Premises that is not a permitted part of the operation of the Hotel; (vi) the issuance of a business license or licenses for any business operating on or from the Premises; and (vii) any ministerial grading, excavation, demolition, shoring, foundation, or building permit; or (viii) any encroachment or similar permit required for construction or installation of public improvements within any of the public rights -of -way in or about the Premises; or (ix) any utility permit required from any publicly regulated utility company that is to provide service to the Hotel. "ENR Index" shall mean the Engineering News Record (ENR) Construction Cost Index for the Los Angeles Area, or such substitute index upon which the Parties may reasonably agree if such index is no longer published or otherwise available. "Estimated Demolition and Removal Costs" shall have the meaning ascribed to that term in Section 10.2.2 of this Lease. "Event of Force Majeure" shall have the meaning ascribed to that term in Section 16.16 of this Lease. "Evidence of Financial Capability" shall have the meaning ascribed to that term in Section 3.1.3 of this Lease. "Final Building Construction Plans" shall mean the plans and specifications and related documents that are required to be approved by Lessor and any other governmental agency with 1121066751-0097 6271361.10 a09/04/14 -3- jurisdiction over the Hotel and the Premises for any grading, excavation, demolition, shoring, foundation, and building permits) that are or may be required, as the same may be revised from time to time. Not by way of limitation of the foregoing, the Final Building Plans shall include the plans and specifications for any public improvements or facilities that are to be constructed and installed within public rights -of -way pursuant to the Development Entitlements. The Final Building Plans shall be consistent with the Development Entitlements and shall comply with all applicable Governmental Requirements. "First Operating Year" shall mean the period that begins on the Operating Commencement Date and ends on the first (tat) anniversary of the Operating Commencement Date. "Governmental Requirements" shall mean all laws, rules, and regulations of all federal, state, and local governmental agencies with jurisdiction over the Premises and the Improvements at any time from the Lease Effective Date through the expiration or termination of the Lease Term, including without limitation all applicable federal and state labor standards and requirements. "Gross Non -Room Revenues" as used herein means all Gross Revenues derived by any of the Lessee Parties from the operation of the Hotel, excluding Gross Room Revenues. Gross Non -Room Revenues include, without limitation, revenue received from the following operations on the Premises during the Lease Term: rental of meeting rooms, revenue from banquet sales/events in the Hotel, cover charges, service charges, and miscellaneous banquet revenues, revenues from food and beverage services, whether provided on or off the Premises, revenues generated from mini -bar, health club, spa, hair and beauty salon, parking, and telephone, cable or video television, and telecommunications services or operations charged separately or in addition to room rates, vending machine revenues, rentals for equipment not customarily provided guests of similar hotels, revenues generated from sales from gift, sundries, and other shops, all rentals or other payments from sublessees, licensees, or concessionaires who are not Affiliates of Lessee, the portion of any Net Awards and Payments that is fairly allocated to any of the foregoing categories of Gross Non -Room Revenues, and the portion of Net Insurance Proceeds from the proceeds of business interruption or rental loss insurance that is fairly allocated to any of the foregoing categories of Gross Non -Room Revenues. In the event that Lessee provides food and beverage service to persons or groups using a meeting room or rooms in the Hotel, Lessee shall fairly allocate the portion of the total charges/revenues between Gross Room Revenues and Gross Non -Room Revenues in accordance with industry custom and practice for hotels that are not subject to ground leases with differing percentage rental rates applicable to use of the meeting room(s) (part of Gross Room Revenues hereunder) and sale/consumption of food and beverages (part of Gross Non -Room Revenues hereunder). In addition, in the event that a group occupying the Hotel arranges a banquet or similar group cocktail party or meal(s), Lessee shall fairly allocate the portion of the total charges/revenues between Gross Room Revenues and Gross Non -Room Revenues in accordance with industry custom and practice for hotels that are not subject to ground leases with differing percentage rental rates applicable to use/occupancy of hotel rooms (part of Gross Room Revenues hereunder) and sale/consumption of food and beverages (part of Gross Non -Room Revenues hereunder). 112/066751-0097 6271361.10 a09/04/14 -4- "Gross Room Revenues" as used herein means all Gross Revenues derived by any of the Lessee Parties from the operation of the Hotel for the rental of Hotel guest rooms. Gross Room Revenues include, without limitation: (i) all guest room rental payments, room deposits forfeited, and room cancellation fees; (ii) proceeds of business interruption and similar insurance payable as a result of loss of room revenues; (iii) so-called "resort fees" (by whatever name called) and any fees for use of any facilities which are customarily included by comparable hotels in the guest room rental rate, excluding, however, food, beverage, mini -bar, health club, parking, telephone, and rentals for equipment not customarily provided guests of similar hotels; (iv) the portion of any Net Awards and Payments that is fairly allocated to any of the foregoing categories of Gross Room Revenues; and (v) the portion of Net Insurance Proceeds from the proceeds of business interruption or rental loss insurance that is fairly allocated to any of the foregoing categories of Gross Non -Room Revenues. In the event that Lessee provides food and beverage service to persons or groups using a meeting room or rooms in the Hotel, Lessee shall fairly allocate the portion of the total charges/revenues between Gross Room Revenues and Gross Non -Room Revenues in accordance with industry custom and practice for hotels that are not subject to ground leases with differing percentage rental rates applicable to use of the meeting room(s) (part of Gross Room Revenues hereunder) and sale/consumption of food and beverages (part of Gross Non -Room Revenues hereunder). In addition, in the event that a group occupying the Hotel arranges a banquet or similar group cocktail party or meal(s), Lessee shall fairly allocate the portion of the total charges/revenues between Gross Room Revenues and Gross Non -Room Revenues in accordance with industry custom and practice for hotels that are not subject to ground leases with differing percentage rental rates applicable to use/occupancy of hotel rooms (part of Gross Room Revenues hereunder) and sale/consumption of food and beverages (part of Gross Non -Room Revenues hereunder). "Gross Revenues" shall mean all gross receipts of every kind and nature, whether for cash, credit, or barter, from any business, use, or occupation, or any combination thereof, transacted, arranged, or performed, in whole or in part, on, from, or for services from the Premises, whether operated by Lessee or by a sublessee, licensee, or concessionaire if such sublessee, licensee, or concessionaire is an Affiliate of Lessee, for Gross Room Revenues or Gross Non -Room Revenues. In the computation of Gross Revenues there shall be excluded the following amounts: (i) rebates, refunds, and discounts (exclusive of credit card discounts or commissions paid to a credit card system) to customers given in the ordinary course of obtaining such revenues; (ii) transient occupancy, excise, sales, and use taxes collected directly from patrons or guests or as a part of the sales price of any goods or services, such as gross receipts, admission, cabaret, or similar taxes, which are accounted for by Lessee to any governmental agency; (iii) income or interest derived from cash, securities, and other property acquired and held for investment by Lessee (including income or interest earned on any amounts held in operating or replacement reserves for the Hotel); (iv) proceeds of insurance other than business interruption or rental loss insurance; (v) up to five percent (5%) of Lessee's advertising, promotional, or charitable billings not actually charged or paid; (vi) security deposits paid by a sublessee, licensee, or concessionaire of Lessee as security for such third party's obligations under its sublease, license, or concession agreement, except to the extent Lessee allocates or applies any portion of such security deposit to unpaid rent or other amounts owed by such third party, in which event the sum so allocated or applied shall be included in Gross Revenues as of the date of such allocation or application; (vii) bad or uncollectible debts; (viii) goods returned to suppliers or which are delivered for resale (as distinguished from delivery) to another retail location or to a warehouse or to any retailers without profit to Lessee, where such returns or 112/066751.0097 6271361.10 a09/04/14 -5- deliveries are made solely for the convenient operation of the business of Lessee or a sublessee, licensee, or concessionaire operating from the Premises and not for the purpose of consummating a sale made in, about, or from the Premises; (ix) the value of gratis meals furnished to Lessee's employees as an incident of their employment; (x) gratuities paid to employees; and (xi) the value of meals provided in connection with charitable events when no Lessee Parties receive payment therefor other than by reason of a charitable contribution. Sales upon credit shall be considered cash sales and shall be included in the gross receipts for the period during which the goods or services are delivered or performed. All Gross Revenues shall be computed without deduction or allowance for costs, charges, or expenses for the purchase, sale, transportation, or delivery of merchandise or services, or for labor and materials in connection with the rendering of services or the sale of goods. Subsequent collection of bad or uncollectible debts previously not reported as Gross Receipts shall be included in Gross Receipts at the time they are collected. Interest, service fees, and late charges collected in conjunction with a transaction, sale, or activity of Lessee and any sublessee, licensee, or concessionaire of Lessee shall be reported in the same percentage category (either "Gross Room Revenues" or "Gross Non -Room Revenues") as the transaction, sale, or activity is reported. "Ground Rent" shall mean rent paid by Lessee to Lessor for the Premises. Ground Rent consists of the greater of Base Rent or Percentage Rent for the applicable period, plus all other payments, fees, and charges that Lessee is required to make to or on behalf of Lessor, as provided herein. "Hazardous Substance," shall mean any substance, material, or waste which is or becomes regulated by the United States government, the State of California, or any local or other governmental authority, including, without limitation, any material, substance, or waste which is (i) defined as a "hazardous waste," "acutely hazardous waste," "restricted hazardous waste," or "extremely hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the California Health and Safety Code; (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code; (iii) defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code; (iv) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code; (v) petroleum; (vi) asbestos; (vii) a polychlorinated biphenyl; (viii) listed under Article 9 or defined as "hazardous" or `extremely hazardous' pursuant to Article 11 of Title 22 of the California Code of Regulations, Chapter 20; (ix) designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317); (x) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act (42 U.S.C. Section 6903); (xi) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601); or (xii) any other substance, whether in the form of a solid, liquid, gas, or any other form whatsoever, which by any governmental requirements either requires special handling in its use, transportation, generation, collection, storage, treatment, or disposal, or is defined as "hazardous" or is harmful to the environment or capable of posing a risk of injury to public health and safety. "Hotel" shall mean the proposed hotel and related facilities to be constructed and operated by Lessee on the Premises pursuant to this Lease. 112/066751-0097 6271361.10 a09/04114 -6- "Hotel Franchise Agreement" shall have the meaning ascribed to that term in Sections 3.1.5, 3.2.6, and 7.3 of this Lease. "Hotel Franchisor" shall have the meaning ascribed to that term in Sections 3.1.5, 3.2.6, and 7.3 of this Lease. "Hotel Management Agreement" shall have the meaning ascribed to that term in Sections 3.1.4, 3.2.5, and 7.2 of this Lease. "Hotel Management Company" shall have the meaning ascribed to that term in Sections 3,1.4, 3,2.5, and 7,2 of this Lease. "Imposition" shall have the meaning ascribed to that term in Section 9.1 of this Lease. "Improvements" shall mean any and all improvements to the Premises, whether previously existing or constructed on the Premises by Lessee pursuant to this Lease, and including any and all amendments, modifications, additions, substitutions, and replacements thereof, "Initial Term" shall have the meaning ascribed to that term in Section 4.4 of this Lease. "Institutional Lender" shall mean any bank, savings and loan association, thrift and loan association, savings bank, pension fund, insurance company, real estate investment trust, or any other comparable or similar entity authorized to make loans in the State of California that has a net worth at the time the loan is made of at least Five Hundred Million Dollars ($500,000,000.00). "Last Partial Operating Year" shall mean the period of less than twelve (12) months that begins on an anniversary of the commencement of the Second Operating Year and ends on the last day of the Lease Term. "Lease" shall mean this Ground Lease, as the same may be amended from time to time in accordance with the terms and conditions set forth herein. "Lease Term" shall mean the term of this Lease, as set forth in Article 4 of this Lease. The Lease Term consists of the Initial Tenn and, if applicable, the Option Term. "Lessee" shall mean Olson Real Estate Group, Inc., doing business as R. D. Olson Development, and each of its lawful and permitted successors and assignees to the leasehold interest in the Premises described in this Lease. "Lessee Parties" shall mean Lessee andany and all of its Affiliates. "Lessee's Conditions to Commencement of Lease" shall have the meaning ascribed to that term in Section 3.3.2 of this Lease. "Lessor" shall mean the City of Newport Beach, a California charter city, and each successor and assignee to the City of Newport Beach's leased fee interest in and to the Premises. This Lease uses the defined term "Lessor" when referring to the City of Newport Beach in both 112/06G751-0097 G27136I.10 a09/04/14 -7- its proprietary capacity, as owner/lessor of the Premises, and in its regulatory capacity, when acting as a governmental agency adopting, amending, administering, and enforcing Governmental Requirements within the jurisdiction of the City of Newport Beach. Except to the extent expressly set forth in the first paragraph of Section 3.2.1 of this Lease, when the context in which the term "Lessor" is used in this Lease refers to the City of Newport Beach acting in its regulatory capacity, nothing in this Lease is intended to limit or restrict Lessor's police power authority, to constitute a contractual commitment to exercise its police power authority in any particular manner, or to subject Lessor to liability for breach of contract or other contract -related remedies for exercising or failing to exercise its police power authority in any particular manner. "Lessor Removal Notice" shall have the meaning ascribed to that term in Section 10.2.2 of this Lease. "Lessor's Conditions to Commencement of Lease" shall have the meaning ascribed to that term in Section 3.3.1 of this Lease. "Lido Partners Litigation" shall mean City of Newport Beach v. Lido Partners, Orange County Superior Court Case No. 30-2014-00715029-CU-OR-CJC, including any cross -actions, appeal and other judicial or administrative proceeding related thereto. "Memorandum of Lease" shall mean the document memorializing the existence of this Lease that is being recorded in the Official Records of the Orange County Recorder's Office on the Commencement Date, as provided in Section 3.4 of this Lease. The form of the Memorandum of Lease shall be substantially as set forth in Exhibit "C" hereto. "Mortgage" shall have the meaning ascribed to that term in Section 12.1.1 of this Lease. "Mortgagee" shall have the meaning ascribed to that term in Section 12.1.1 of this Lease. "Net Awards and Payments" shall have the meaning ascribed to that term in Section 14.4 of this Lease. "Net Insurance Proceeds" shall have the meaning ascribed to that term in Section 10.4.2 of this Lease. "Operating Commencement Date" means the earliest of the following dates, as applicable: (i) if the Hotel opens for business to the general public in the first month and one-half of a calendar quarter (i.e., between January 1-February 15, between April 1-May 15, between July 1-August 15, or between October 1-November 15), the first day in that same calendar quarter (i.e. and as applicable, on January 1, April 1, July 1, or October 1) and if the Hotel opens for business to the general public in the last month and one-half of a calendar quarter (i.e. and as applicable, between February 16-March 31, between May 16-June 30, between August 16- September 30, or between November 16-December 31), the first day in the next succeeding calendar quarter (i.e. and as applicable April 1, July 1, October 1, or January 1); (ii) if City issues the Certificate of Occupancy (including, if applicable a Temporary Certificate of Occupancy) authorizing the Hotel to open for business to the general public in the first month and one-half of a calendar quarter (i.e., between January 1-February 15, between April 1-May 15, between July 1-August 15, or between October 1-November 15), the first day in that same calendar quarter (i.e. and as applicable, on January 1, April 1, July 1, or October 1) and if City issues the 112/066751-0097 6271361.10 a09/04/14 -8- Certificate of Occupancy (including, if applicable a Temporary Certificate of Occupancy) authorizing the Hotel to open for business to the general public in the last month and one-half of a calendar quarter (i.e. and as applicable, between February 16-March 31, between May 16-June 30, between August 16-September 30, or between November 16-December 31), the first day in the next succeeding calendar quarter (i.e. and as applicable April 1, July 1, October 1, or January 1); or (iii) the first day of the first calendar quarter date that commences at least eighteen (18) months after the Commencement Date, provided, however, that the date calculated pursuant to this clause (iii) shall be extended by one (1) day for each day that completion of construction of the Hotel and opening of the Hotel for business to the general public is delayed by an Event of Force Majeure. "Operating Year" means (i) the First Operating Year; (ii) each calendar year which follows the end of the First Operating Year and which ends prior to the Last Partial Operating Year; and (iii) the Last Partial Operating Year. "Option Term" shall have the meaning ascribed to that term in Section 4.5 of this Lease. "Outside Commencement Date" shall mean, subject to the next sentence hereinbelow, the date that is three (3) years after the Agreement Date or such later date as may be approved in writing by Lessor and Lessee, each in its sole and absolute discretion; provided that if Lessee submits evidence reasonably satisfactory to Lessor that Lessee has acted with commercially reasonable diligence to satisfy all of the Lessor's Conditions to Commencement of Lease and Lessee's Conditions to Commencement of Lease within said three (3) year period but one or more of said conditions has not been timely satisfied based upon an Event of Force Majeure, the Outside Commencement Date shall be extended for the period that the Event of Force Majeure remains in effect up to a maximum of two (2) additional years (i.e., to the date that is five (5) years after the Agreement Date). Notwithstanding the foregoing, the maximum two (2) year extension set forth in the preceding sentence for an Event or Events of Force Majeure shall be extended for up to an additional three (3) years (for a maximum extension based upon an Event of Force Majeure of up to five (5) years) if; despite Lessee's exercise of commercially reasonable diligence, Lessee has been unable to timely satisfy all of the Lessee's Conditions to Commencement of Lease set forth in Section 3.3.2 of this Lease and a substantial contributing proximate cause of Lessee's inability to do so is either or both of the following: (i) delays (beyond the time lines set forth in the Schedule of Performance) in obtaining final California Coastal Commission approval of all of the Development Entitlements for the Hotel over which the California Coastal Commission has jurisdiction; or (ii) delays in obtaining final approval of all Development Entitlements and/or Final Building Construction Plains for the Hotel due to the lack of finality in the Lido Partners Litigation. Any extension of the Outside Commencement Date due to an Event or Events of Force Majeure shall be subject to the provisions of Section 16.16 and shall be limited to the period of the enforced delay, Notwithstanding any other provision set forth in this Lease, in no event shall the Outside Commencement Date be extended (including by an Event or Events of Force Majeure) beyond the date that is eight (8) years after the Agreement Date or such later date as may be approved in writing by Lessor and Lessee, each in its sole and absolute discretion. "Partial Taking" shall have the meaning ascribed to that term in Section 15.3 of this Lease. 112/066751-0097 6271361.10 a09/04/14 -9- "Party" and "Parties" shall mean Lessor and/or Lessee, as the context so provides. "Percentage Rent" shall have the meaning ascribed to that term in Section 5.2 of this Lease. "Portion Subject to Demolition" shall have the meaning ascribed to that term in. Section 10.2.2 of this Lease. "Post Term Removal Period" shall have the meaning ascribed to that term in Section 10.2.2 of this Lease. "Preliminary Report" shall mean that certain preliminary title report (V2) issued by Commonwealth Land Title Company for the Premises on August 21, 2014, order number 08012422. "Premises" shall mean that certain real property within the City of Newport Beach, County of Orange, State of California, with the cormnon street addresses of 3300 Newport Boulevard and 475 32nd Street, Newport Beach, California, and more particularly described in the Legal Description of the Premises set forth as Exhibit A-1 hereto and depicted in the Map of the Premises set forth as Exhibit A-2 hereto. The Premises shall include all appurtenant rights and easements which are reasonably necessary to the proper enjoyment of the tenancy created by this Lease, provided, however, that Lessor reserves to itself and its successors and assignees, together with the right to grant and transfer all or a portion of the same, all of the following: (i) any and all oil, oil rights, petroleum, minerals, mineral rights, natural gas rights, and other hydrocarbon substances, by whatsoever name known, geothermal resources, and all products derived from any of the foregoing, that may be within or under the land, together with the perpetual right of drilling, mining, exploring, prospecting, and operating therefor and storing in and removing the same from the Premises or any other land, including the right to whipstock or directionally drill and mine from lands other than those leased hereby, oil or gas wells, tunnels, and shafts into, through, or across the subsurface of the Premises, and to bottom such whipstocked or directionally drilled wells, tunnels, and shafts under and beneath or beyond the exterior limits thereof, and to redrill, retunnel, equip, maintain, repair, deepen, and operate any such wells or mines, without, however, the right to enter, drill, mine, store, explore, or operate on or through the surface or the upper 500 feet of the subsurface of the Premises; provided, however, that the exercise of any such rights by Lessor shall not result in any damage or injury to the improvements constructed on the Premises by Lessee, including without limitation any subsidence of all or any part of such improvements; and (ii) any and all water, water rights, or interests therein, no matter how acquired by Lessor, together with the right and power to explore, drill, redrill, remove, and store the same from the Premises or to divert or otherwise utilize such water, water rights, or interests on any other property owned or leased by Lessor, whether such water rights shall be riparian, overlying, appropriative, percolating, littoral, prescriptive, adjudicated, statutory, or contractual; but without, however, any right to enter upon the surface of the Premises in the exercise of such rights and, provided further, that the exercise of any such rights by Lessor shall not result in any damage or injury to the improvements constructed on the Premises by Lessee, including without limitation any subsidence of all or any part of such improvements. 112/OG6751-0097 6271361.10 a09/04/14 -10- "Project Budget" shall have the meaning ascribed to that term in Section 3.1.3 of this Lease. "Project Construction Contract" shall have the meaning ascribed to that term in Section 3.1.3 of this Lease. "Project Costs" shall mean all of Lessee's actual costs realized beginning from the initial request for qualifications and request for proposal process up to the Commencement Date and Lessee's anticipated and reasonably estimated costs and expenses to be incurred after the Commencement Date (including, if applicable, any such costs and expenses incurred prior to the Commencement Date that have not been funded and paid in cash or out of Lessee's equity as of that date) to plan, design, engineer, finance, and construct the Hotel on the Premises through the date of the initial opening of the Hotel for business to the general public, including without limitation all such costs and expenses incurred with respect to any of the following: (i) demolition and clearance of existing improvements situated on the Premises; (ii) land development work, including excavation, grading, compacting and re -compacting of soils, and removal/remediation of any Hazardous Substances; (iii) construction of all improvements comprising the Hotel and any public improvements, utilities, or other improvements in the public rights -of -way on or adjacent to the Premises; (iv) installation of all fixtures, equipment, furnishings, and personal property in, on, or about the Hotel and Premises that are needed upon the initial opening of the Hotel and for the full operation thereof; (v) all permit, entitlement, and inspection fees required to be paid to Lessor and other governmental agencies with jurisdiction over the Hotel and the Premises, as applicable; (vi) premiums for fire, public liability, and property damage insurance during construction and on bonds securing work against liens for labor and materials; (vii) real estate taxes (including possessory interest taxes) and assessments upon the Premises and improvements during the period of construction; (viii) interest on construction loans prior to the opening of the Hotel; (ix) fees for architects, engineers, accountants, attorneys, and similar professionals; (x) purchasing fees paid to third parties not affiliated with Lessee in connection with the purchase of furniture, fixtures, and equipment; (xi) costs incurred by Lessee in connection with construction financing, including, without limitation, commitment fees, mortgage broker fees, standby fees and fees of a like nature, printing and duplicating expenses, documentary transfer tax stamps, mortgage taxes, and recording charges; (xii) customary and reasonable pre -opening expenses for the Hotel; (xiii) costs of any required studies, reports, and inspections; (xiv) reasonable fees for management and construction services through opening of the Hotel; (xv) any other anticipated costs to be incurred by Lessee to satisfy its obligations set forth in this Lease; and (xvi) a reasonable contingency for the categories of costs identified above. "Project Security Instruments" shall have the meaning ascribed to that term in Section 3.1.3 of this Lease. "Quarterly Report" shall have the meaning ascribed to that term in Section 5.2.4 of this Lease. "Required Hotel Standard" shall mean, as of the Agreement Date, a standard of hotel operation that meets all criteria (including without limitation operational, amenities, services, improvements, furniture, fixtures and equipment, and appearance) for a minimum "four diamond" hotel rating under the AAA Diamond Rating Guidelines hotel rating system of the 112/066751-0097 6271361.10 209/04/14 -11- American. Automobile Association (or its successor) ("AAA"). Notwithstanding the foregoing, it is understood and agreed that the AAA Rating Guidelines may not remain in effect for the entire Term of this Lease, that the AAA Diamond Rating Guidelines in particular and hotel standards in general change from time to time, and that market conditions may require deviations from the hotel standards specified herein and, accordingly, that the afore -described Required Hotel Standard is subject to modification as set forth in Section 7.1(i) of this Lease. "Restoration" shall have the meaning ascribed to that term in Section 10.4.2 of this Lease. "Schedule of Performance" shall mean that certain schedule attached hereto as Exhibit "B" to this Lease, as the same may be revised from time to time and as the same may be extended due to Events of Force Majeure. "Second Operating Year" shall mean the calendar year which follows the end of the First Operating Year. "Taking" shall mean any acquisition of or damage to all or any portion of the Premises, or any interest therein or right accruing thereto, pursuant to or in anticipation of the exercise of the power of condemnation or eminent domain, or by reason of the temporary requisition of the use or occupancy of the Premises, or any part thereof, by any governmental or quasi - governmental authority, civil or military, or any other agency empowered by law to take property in the State of California under the power of eminent domain. "Timeshares" shall mean any development in which the purchaser receives the right in perpetuity, for life, or for a term of years, to the recurrent, exclusive use or occupancy of a lot, parcel, unit, room(s), or segment of real property, annually or on some other seasonal or periodic basis, for a period of time that has been or will be allotted from the use or occupancy periods into which the project has been divided and included, but is not limited to timeshare estate, interval ownership, vacation license, vacation lease, club membership, timeshare use, condominium/hotel, or uses of a similar nature. "Title Company" shall mean Lawyers Title Company. "Total Taking" shall have the meaning ascribed to that term in Section 15.2 of this Lease. "Transfer" shall have the meaning ascribed to that term in Section 11.1.2 of this Lease. "Transferee" shall have the meaning ascribed to that teen in Section 11.1.2 of this Lease. ARTICLE 3 TASKS TO BE PERFORMED PRIOR TO LEASE COMMENCEMENT DATE 3.1 Lessee Tasks. 3.1.1 Development Entitlements. Within the time set forth in the Schedule of Performance, Lessee shall submit complete application(s) to City for issuance of the Development Entitlements listed in clauses (i)-(vi) of the first sentence of the definition of that 112/066751-0097 6271361.10 809/04/14 -12- term in Article 2 of this Lease and thereafter Lessee shall exercise commercially reasonable diligence in an effort to obtain final administrative City approval of same. Within the time set forth in the Schedule of Performance, Lessee shall submit a complete application to the California Coastal Commission for issuance of the Development Entitlement listed in clause (viii) of the first sentence of the definition of that term in Article 2 of this Lease and thereafter Lessee shall exercise commercially reasonable diligence in an effort to obtain final administrative Coastal Commission approval of same. 3.1.2 Final Building Plans and Satisfaction of All Prerequisites to Issuance of Building Pernut(s). Within the time(s) set forth in the Schedule of Performance, Lessee shall submit complete application(s), plans, and specifications to Lessor for issuance of all of the Final Building Plans and thereafter Lessee shall (i) exercise commercially reasonable diligence in an effort to obtain final Lessor approval of same (with the understanding that Lessor will not issue permits prior to the Commencement Date), (ii) pay or deposit with Lessor all applicable fees and charges owing to Lessor prior to issuance of permits, (iii) deliver to Lessor any security instrument that is required by Lessor for construction of the Hotel pursuant to applicable Governmental Requirements, and (iv) satisfy any other applicable Governmental Requirements that may be a condition to Lessee's right to obtain required permits and commence construction of the Hotel (other than the occurrence of the Commencement Date). 3.1.3 Evidence of Financial Capability, Construction Loan Documents. Within the time set forth in the Schedule of Performance, Lessee shall submit to the City Manager or his or her designee evidence that Lessee has the financial capability necessary to develop the Hotel (herein, "Evidence of Financial Capability"). Such Evidence of Financial Capability shall include without limitation each of the following: (i) a detailed budget showing Lessee's estimated Project Costs (the "Project Budget"); (ii) a financial statement and/or other documentation reasonably satisfactory to Lessor sufficient to demonstrate that Lessee has adequate funds committed to cover the costs set forth in the Project Budget and that such funds will be in Lessee's account as of the Commencement Date (with the understandings that some or all of Lessee's equity funds may not be in Lessee's account as of the date that Lessee submits its Evidence of Financial Capability and loan funds may be held by the Institutional Lender or other Lessor -approved Mortgagee or held in a construction escrow account and disbursed pursuant to a construction loan disbursement agreement as development of the Hotel proceeds); (iii) if the total costs set forth in the Project Budget exceed the amount of equity funds that will be available to Lessee pursuant to clause (ii), a copy of the term sheet obtained by Lessee from an Institutional Lender (or such other Mortgagee as may be approved by Lessor in its commercially reasonable discretion) to cover such difference, with such term sheet certified by Lessee to be a true and correct copy thereof, and such term sheet in form and content reasonably acceptable to Lessor, with only those conditions which are standard or typical for the lender involved for similar projects; (iv) draft construction loan documents evidencing that the Mortgage securing the Institutional Lender's or other Lessor -approved Mortgagee's loan (A) will cover no interest in any real property other than Lessee's leasehold interest in the Premises, (B) will be fully subordinate to Lessor's fee title in and to the Premises and will state on its face that it does not in any way encumber Lessor's fee interest in the Premises or Lessor's rights set forth in this Lease (except as expressly stated herein), and (C) will not exceed seventy-five percent (75%) of the estimated Project Costs (with said 75% cap increased to 85% in the event Lessee uses EB-5 financing as part of its source of funds); (v) a copy of the lump sum construction contract or 112/066751-0097 6271361.10 809/04/14 -13- contracts between Lessee and its general contractor(s) for the Hotel, certified by Lessee to be a true and correct copy thereof, covering all of the excavation, grading, demolition, and construction work comprising the Hotel, including without limitation all related utility and off - site work (the "Project Construction Contract"); and (vi) a corporate surety bond or bonds or other security instrument, approved as to form, content, and company by the City Engineer and City Attorney with Lessee's contractor or contractors as principal(s), in a penal sum not less than one hundred percent (100%) of the estimated cost of constructing improvements in the public rights -of -way in connection with the construction of the Hotel guaranteeing completion of construction and the payment of wages for services engaged and bills contracted for materials, supplies, and equipment used in the performance of the work, and protecting Lessee and Lessor from any liability, losses, or damages arising therefrom (the "Project Security Instruments"), provided, however, that the City Manager or his or her designee shall have the discretion on behalf of Lessor to accept alternate security in his or her sole and absolute discretion. If the City Manager or his or her designee disapproves Lessee's Evidence of Financial Capability, within the time set forth in the Schedule of Performance Lessee shall resubmit its Evidence of Financial Capability to provide the information or assurances required to satisfy Lessor's requirements. As soon as possible after Lessor approves Lessee's Evidence of Financial Capability and in no event later than five (5) business days prior to the Commencement Date, Lessee shall deliver to Lessor complete final executed copies of all of the documents that memorialize Lessee's construction loan for the Hotel with the approved Mortgagee, including without limitation the construction loan agreement, deed of trust, and UCC-1 (collectively, the "Construction Loan Documents"). The Construction Loan Docwunents shall be consistent with the foregoing Evidence of Financial Capability and other applicable provisions of this Lease. 3.1.4 Hotel Management Company and Hotel Management Agreement. Within the time set forth in the Schedule of Performance, Lessee shall submit to the City Manager or his or her designee for his or her review and approval the identity of the entity Lessee desires to have manage the Hotel on the Premises ("Hotel Management Company") and the form of the hotel. management agreement that Lessee proposes to enter into with the Hotel Management Company ("Hotel Management Agreement"), in accordance with the criteria and procedures set forth in Section 7.2 of this Lease. If Lessor disapproves Lessee's proposed Hotel Management Company and/or its proposed Hotel Management Agreement, within the time set forth in the Schedule of Performance Lessee shall resubmit a new Hotel Management Company and/or new or revised Hotel Management Agreement to address and satisfy Lessor's requirements. As soon as possible after Lessor approves the initial Hotel Management Company and Hotel Management Agreement and in no event later than five (5) business days prior to the Commencement Date, Lessee shall deliver to Lessor complete final executed copies of the Hotel Management Agreement consistent with Lessor's approval; provided, that Lessee shall have the right to redact from the Hotel Management Agreement submitted to Lessor the amount of the fees or charges payable by Lessee to the Hotel Management Company as business trade information that is not a matter of public record. 112/066751-0097 6271361.10 a09/04/14 -14- 3.1.5 Hotel Franchisor and Hotel Franchise Agreement. Withinthe time set forth in the Schedule of Performance, Lessee shall submit to the City Manager or his or her designee for his or her review and approval the identity of the hotel chain Lessee desires to have franchise the Hotel on the Premises ("Hotel Franchisor") and the form of the franchise agreement that Lessee proposes to enter into with the Hotel Franchisor ("Hotel Franchise Agreement"), in accordance with the criteria and procedures set forth in Section 7.3 of this Lease. If Lessor disapproves Lessee's proposed Hotel Franchisor and/or its proposed Hotel Franchise Agreement, within the time set forth in the Schedule of Performance Lessee shall resubmit a new Hotel Franchisor and/or new or revised Hotel Franchise Agreement to address and satisfy Lessor's requirements. As soon as possible after Lessor approves the initial Hotel Franchisor and Hotel Franchise Agreement and in no event later than five (5) business days prior to the Lease Commencement Date, Lessee shall deliver to Lessor complete final executed copies of the Hotel Franchise Agreement consistent with Lessor's approval; provided, that Lessee shall have the right to redact from the Hotel Franchise Agreement submitted to Lessor the amount of the fees or charges payable by Lessee to the Hotel Franchisor as business trade information that is not a matter of public record. 3.1.6 Insurance. Within the time set forth in the Schedule of Performance, Lessee shall have submit evidence reasonably satisfactory to Lessor's Risk Manager that Lessee has obtained all insurance required pursuant to Sections 13.3 and 13.4 of this Lease. 3.2 Lessor Tasks. 3.2.1 Development Entitlements. Within the time set forth in the Schedule of Performance, Lessor shall review Lessee's application(s) for those Development Entitlements that are required to be submitted to Lessor, as set forth in clauses (i)-(vi), inclusive, of the definition of that term in Article 2 of this Lease, and any proposed amendments or changes thereto. Once Lessor has taken final action to approve or conditionally approve a Development Entitlement, Lessor shall not thereafter rescind, revoke, or amend such Development Entitlement without Lessee's prior written consent, which consent Lessee may withhold in its sole and absolute discretion, and to the maximum extent permitted by law Lessor shall act reasonably in extending the term of any such Development Entitlement as long as Lessee is timely performing its obligations set forth in this Lease. In addition, if Lessee applies to Lessor for an amendment or change to a previously approved Development Entitlement and Lessor takes final action to approve or conditionally approve the same, Lessor shall not thereafter rescind, revoke, or amend such Development Entitlement as so amended or changed without Lessee's prior written consent, which consent Lessee may withhold in its sole and absolute discretion, and to the maximum extent permitted by law Lessor shall act reasonably in extending the term of any such Development Entitlement as so amended or changed as long as Lessee is timely performing its obligations set forth in this Lease. Subject to the limitations set forth in the preceding two sentences, Lessor reserves its full police power authority with respect to the consideration of all of the Development Entitlements and any proposed amendments or changes thereto and nothing in this Lease is intended or shall be interpreted as a limitation on Lessor's regulatory land use authority or as a pre -commitment or prejudgment of any of the matters as to which Lessor retains 112/066751-0097 6271361.10 a09/04114 -15- discretion to approve, conditionally approve, or disapprove. Not by way of limitation of the foregoing, this Lease does not constitute a statutory development agreement (California Government Code Section 65864 et seq.). If Lessee disputes Lessor's exercise of its police power authority with respect to any of the Development Entitlements, including any proposed amendments or changes thereto, nothing in this Lease is intended or shall be interpreted to grant to Lessee a right to sue Lessor or any official, officer, employee, or agent of Lessor for breach of contract or any other contractual right or remedy and Lessee's rights and remedies shall be limited to only those rights and remedies which Lessee would have as a private property owner in the absence of this Lease. In addition, within the time set forth in the Schedule of Performance, Lessor shall submit a complete application to the California Coastal Commission for approval of the Development Entitlement referred to in clause (vii) of the definition of that term in Article 2 of this Lease (i.e., the required amendment to City's certified Local Coastal Land Use Plan ("LUP")), consistent with the Development Entitlements referred to in clauses (i)-(vi), inclusive, of the definition of that term and thereafter Lessor shall exercise commercially reasonable diligence in an effort to obtain final California Coastal Commission approval of same. 3.2.2 Review and Approval of Final Building Construction Plans. Within the time set forth in the Schedule of Performance, Lessor shall review Lessee's application(s) for approval of the Final Building Plans for the Hotel and all security instruments and other documents submitted by Lessee in conjunction therewith, including any proposed amendments or changes thereto. Lessor shall not unreasonably withhold, condition, or delay its approval of any of the same and Lessor shall not disapprove any such submittal on grounds that are inconsistent with (i) the approved Development Entitlements for the Hotel, (ii) applicable Governmental Requirements, or (ii) Lessor's standard policies and procedures. 3.2.3 Review and Approval of Lessee's Evidence of Financial Capability. Within the time set forth in the Schedule of Performance, the City Manager or his or her designee shall complete his or her review of and approve or disapprove Lessee's Evidence of Financial Capability. The City Manager or his or her designee shall not unreasonably withhold, condition, or delay its approval of Lessee's Evidence of Financial Capability. If the City Manager or his or her designee disapproves Lessee's Evidence of Financial Capability, he or she shall do so by written notice to Lessee stating the reasons for such disapproval. 3.2.4 Review and Approval of Construction Loan Documents. Within the time set forth in the Schedule of Performance, the City Manager or his or her designee shall complete his or her review of and approve or disapprove Lessee's Construction Loan Documents. The City Manager or his or her designee shall not unreasonably withhold, condition, or delay Lessor's approval of Lessee's Construction Loan Documents. If the City Manager or his or her designee disapproves Lessee's Construction Loan Documents, he or she shall do so by written notice to Lessee stating the reasons for such disapproval. 3.2.5 Review and Approval of Hotel Management Company and Hotel Management Agreement. Within the time set forth in the Schedule of Performance, the City Manager or his or her designee shall approve or disapprove the Hotel Management Company and the terms of the Hotel Management Agreement, in accordance with the criteria and procedures set forth in Section 7.2 of this Lease. 112/066751-0097 6271361.10 809/04/14 -16- 3.2.6 Review and Approval of Hotel Franchisor and Hotel Franchise Agreement. Within the time set forth in the Schedule of Performance, the City Manager or his or her designee shall approve or disapprove the Hotel Franchisor and the terms of the Hotel Franchise Agreement, in accordance with the criteria and procedures set forth in Sections 7.3 of this Lease. 3.3 Satisfaction (or Waiver) of Conditions to Commencement of Lease. 3.3.1 Lessor's Conditions to Commencement of Lease. Lessor's obligation to execute and deliver the Memorandum of Lease and the Commencement Date of this Lease shall all be conditional and contingent upon the satisfaction (or written waiver by Lessor) of each and all of the following conditions (collectively, the "Lessor's Conditions to Commencement of Lease"): 3.3.1.1 Finality of Development Entitlements for Hotel. All Development Entitlements for the Hotel shall be final, unappeasable, and in full force and effect. A Development Entitlement shall be deemed to be "final, unappeasable, and in full force and effect" within the meaning of this Lease upon the last to occur of the following, as applicable: (i) on the ninety-first (91st) day following the day the governmental agency with jurisdiction to issue such Development Entitlement takes final administrative action to approve the same; (ii) if litigation challenging the validity or enforceability of any such Development Entitlement/approval that is a legislative act subject to referendum is filed prior to expiration of the deadline referred to in clause (i), on the day that said lawsuit is fmally resolved in a manner that upholds the validity and enforceability of such Development Entitlement, whether such final resolution is by means of a final and non -appealable judgment, a voluntary or involuntary dismissal, or a binding written settlement agreement; (iii) if a referendum petition suspending the validity and enforceability of such Development Entitlement is timely qualified for submittal to the City's voters as to a Development Entitlement/approval that is a legislative act subject to referendum, on the earlier of the date that is ten (10) days after the date of the general or special election at which the City's voters uphold the final City Council action approving such Development Entitlement or the date that any litigation involving said referendum is finally resolved (by means of a final and non -appealable judgment, voluntary or involuntary dismissal, or binding written settlement agreement) in a manner that upholds the final City Council action approving such Development Entitlement. 3.3.1.2 Approval of Final Building Construction Plans and Satisfaction of All Prerequisites to Issuance of Construction Permit(s). Lessee shall have obtained final Lessor approval of all of its Final Building Construction Plans required for construction of the Hotel, Lessee shall have paid or deposited with Lessor all applicable fees and charges owing to Lessor prior to issuance of the building and other construction permits for the Hotel, and Lessee shall have delivered to Lessor any security instrument that is required by Lessor for construction of the Hotel pursuant to applicable Governmental Requirements, and Lessee shall have satisfied any other applicable Governmental Requirements that may be a condition to its right to obtain a building and other construction permits and commence construction of the Hotel. 3.3.1.3 Approval of Evidence of Financial Capability and Submittal of Construction Loan Documents. Lessor shall have approved Lessee's Evidence of Financial Capability, Lessee's financing with its Institutional Lender shall be ready to close concurrently II2/066731-0097 6271361.10 a09/04/14 -17- with the Commencement Date, and Lessee shall have delivered to Lessor complete copies of the executed Construction Loan Documents consistent with Lessor's approval of same. 3.3.1.4 Hotel Management Company and Hotel Management Agreement. Lessor shall have approved (or be deemed to have approved, as applicable) the Hotel Management Company and Hotel Management Agreement and Lessee shall have delivered to Lessor a complete copy of the executed Hotel Management Agreement consistent with Lessor's approval of same. 3.3.1.5 Hotel Franchise Agreement. Lessor shall have approved (or be deemed to have approved, as applicable) the Hotel Franchisor and Hotel Franchise Agreement and Lessee shall have delivered to Lessor a complete copy of the executed Hotel Franchise Agreement consistent with Lessor's approval of same. 3.3.1.6 Insurance. Lessee shall have submitted evidence reasonably satisfactory to Lessor's Risk Manager that Lessee has obtained all insurance required pursuant to Sections 13.3 and 13.4 of this Lease. 3.3.1.7 Lessee's Representations and Warranties. All of Lessee's representations and warranties set forth in Section 16.21 of this Lease shall be true and correct as of the Commencement Date. 3.3.1.8 No Default. Lessee shall not be in Default of any of its obligations set forth in this Lease as of' the Commencement Date and no event shall have occurred that, with the passage of time or the giving of notice, or both, would constitute a Default by Lessee hereunder. 3.3.1.9 Memorandum of Lease. Lessee shall have executed in recordable form the Memorandum of Lease and the same shall be ready to be recorded in the Official Records of the Orange County Recorder's office. 3.3.2 Lessee's Conditions to Commencement of Lease. Lessee's obligation to execute and deliver the Memorandum of Lease and the Commencement Date of this Lease shall all be conditional and contingent upon the satisfaction (or written waiver by Lessee) of each and all of the following conditions (collectively, the "Lessee's Conditions to Commencement of Lease"): 3.3.2.1 Finality of Development Entitlements for Hotel. All Development Entitlements for the Hotel shall be final, unappealable, and in full force and effect, as the phrase "final, unappealable, and in full force and effect" is defined in Section 3.3.1,1 of this Lease. 3.3.2.2 Lessor's Approval of Final Building Plans and Other Prerequisites to Issuance of Construction Permit(s). Lessor shall have issued its final approval of all Final Building Plans required for construction of the Hotel and the form of any security instrument required by Lessor for construction of the Hotel pursuant to applicable Governmental Requirements, provided that Lessee shall be obligated to exercise commercially reasonable diligence and to comply with all applicable Governmental Requirements to obtain said approvals 112/066751-0097 6271361.10 a09/04/14 -18- and nothing in this Section 3.3.2.2 is intended to excuse Lessee's failure to timely comply with such obligations. 3.3.2.3 Title. The Title Company shall be prepared to issue its standard CLTA leasehold policy of title insurance, with Lessee as the insured party, which title policy shows Lessor as holder of fee title and Lessee as Iessee of the Premises, and with Lessee's leasehold title in the Approved Title Condition and the coverage amount of said policy being not less than the Project Budget amount approved by Lessor as part of Lessee's Evidence of Financial Capability. Lessee shall be responsible for paying the entire premium for said leasehold policy of title insurance, any additional costs required to obtain upgraded coverage or non-standard endorsements, and for any survey that may be desired or requested by Lessee or its prospective Mortgagee in conjunction therewith; provided, however, that Lessee's ability to obtain such upgraded coverage, non-standard endorsements, and survey and the timing and cost thereof shall not be one of (or a part of) Lessee's Conditions to Commencement of Lease. 3.3.2.4 Physical/Environmental Condition of the Premises. Lessor shall not be in Default of its obligations set forth in Section 3.5.2 of this Lease with respect to the physical/environmental condition of the Premises. 3.3.2.5 Lessor's Representations and Warranties. A1I of Lessor's representations and warranties set forth in Section 16.21 of this Lease shall be true and correct as of the Commencement Date. 3.3.2.6 No Default. Lessor shall not be in Default of any of its obligations set forth in this Lease as of the Commencement Date and no event shall have occurred that, with the passage of time or the giving of notice, or both, would constitute a Default by Lessor hereunder. 3.3.2.7 Memorandum of Lease. Lessor shall have executed in recordable form the Memorandum of Lease and the same shall be ready to be recorded in the Official Records of the Orange County Recorder's office. 3.4 Cooperation; Execution and Recordation of Memorandum of Lease; Commencement Date. Each Party shall perform all of its obligations that are required to be performed in order to satisfy the Lessor's Conditions to Commencement of Lease and the Lessee's Conditions to Commencement of Lease, as applicable, and each Party shall cooperate in good faith with the other Party in an effort to cause the Lessor's Conditions to Commencement of Lease and Lessee's Conditions to Commencement of Lease to be satisfied as soon as possible and within the times set forth in the Schedule of Performance; provided, however, that (i) neither Party shall have any obligation to perform or cooperate in such regard if such Party is not in Default hereunder and, after and despite its performance of its obligations set forth in this Lease that it is required to perform (and subject to any excuses for its failure to perform) any of the Conditions to Commencement to Lease for its benefit are not satisfied prior to the Outside Commencement Date (as the same may have been extended as provided herein) and (ii) nothing in this Section 3.4 is intended or shall be interpreted as a covenant by either Party to (A) compromise any of its rights or remedies set forth herein, including without limitation the right to demand strict and timely performance from the other Party, or (B) agree to any modifications, waivers, or extensions hereunder. Upon the satisfaction (or written waiver by the benefited 112/066751-0097 6271361.10 a09/04/t4 -19- Party) of all of the Conditions to Commencement of Lease, and within the time set forth in the Schedule of Performance, the Parties shall each (i) execute in recordable form and deliver the Memorandum of Lease and (ii) cooperate in causing the Memorandum of Lease to be recorded in the Official Records of the Orange County Recorder's office. The date the Memorandum of Lease is recorded shall be the Commencement Date of the Lease. 3.5 Miscellaneous Acknowledgements, Agreements, and Covenants. 3.5.1 Lessee's Investigation of Title; Lessor Covenant to Not Further Encumber Title. Lessee acknowledges that prior to the Agreement Date it has had a full and adequate opportunity to review the Preliminary Report, to prepare an ALTA survey with respect to the Premises, and to conduct any investigations and inspections Lessee may have deemed appropriate with respect thereto and the condition of title to the Premises. Lessor makes no representation or warranty to Lessee regarding the accuracy or completeness of the Preliminary Report, whether there are any unrecorded non -monetary liens or encumbrances that are not identified or reflected in the Preliminary Report, or whether the owner of property adjacent to the Premises (Via Lido Partners) has a valid claim to an easement, license, access, or other similar rights over and across the Premises. Lessor covenants, however, that from the Agreement Date through the Commencement Date Lessor shall not take any affirmative action that will cause title to the Premises to become inconsistent with the Approved Title Condition as of the Agreement Date. Prior to the Agreement Date Lessor initiated the Lido Partners Litigation. Lessor makes no representation, warranty, or covenant to Lessee that Lessor will prosecute the Lido Partners Litigation to a final and non -appealable judgment, that Lessor will prevail in the Lido Partners Litigation, or that the Lido Partners Litigation will be finally resolved (whether by final and non -appealable judgment, settlement, dismissal, or otherwise) within any particular time period. Lessor reserves the right, in its sole and absolute discretion, to settle, dismiss, or otherwise abandon the Lido Partners Litigation on such terms and conditions as may be acceptable to Lessor; provided, that (i) without Lessee's prior written consent, which consent Lessee may withhold in its sole and absolute discretion, Lessor shall not consent or agree to any settlement of the Lido Partners Litigation that would result in an expansion or relocation of the easement claimed by Lido Partners onto any other portion of the Premises or any expansion or change in the use of the easement claimed by Lido Partners, and (ii) to the extent not covered by Lessor's covenant under clause (i), in no event shall Lessor take any voluntary action or fail to take any action in or with respect to the Lido Partners Litigation that will cause title to the Premises to become inconsistent with the Approved Title Condition as of the Agreement Date. Lessor shall provide Lessee with five (5) business days' prior notice as to any settlement, dismissal, abandonment, or other resolution by Lessor of the Lido Partners Litigation consistent with the foregoing. 3.5.2 Physical/Environmental Condition of the Premises; Lessor Covenant to Not Alter Existing Physical/Environmental Condition of the Premises. Lessee acknowledges that prior to the Agreement Date it has had a hall and adequate opportunity to review the physical and environmental condition of the Premises and to conduct any investigations and inspections Lessee may have deemed appropriate with respect thereto. All portions of the Premises, and any improvements thereon, which are leased by Lessor to Lessee shall be leased in. an "as is" physical and environmental condition, with no warranty, express or implied, by Lessor as to the 112/066751-0097 6271361,10 a09/04/14 -20- condition of the soil, its geology, the presence of known or unknown earthquake faults, the presence of any Hazardous Substances, the water table and/or groundwater conditions, or any other similar matters and it shall be the sole responsibility of Lessee, at its sole cost and expense, to investigate and determine the physical/environmental conditions of the Premises, its geology, susceptibility to seismic events, the presence of any Hazardous Substances, the water table and/or groundwater conditions, and the physical and environmental suitability of the Premises for development, operation, and maintenance of the Hotel and, if the physical or environmental conditions of the Premises, or any part thereof, are not in all respects entirely suitable for the use or uses to which the Premises will be put, then it will be the sole responsibility and obligation of Lessee, after the Commencement Date, to take such actions as may be necessary to place the Premises in all respects in a condition entirely suitable for development, operation, and maintenance of the Hotel, which may include demolition and clearance of above -ground and below -ground structures or other improvements, removal of Hazardous Substances, compaction or re -compaction of soils, de -watering of soils, replacement of unsuitable soils, extraordinary foundation systems, and the like. Not by way of limitation of the foregoing, Lessee acknowledges that the existing improvements on the Premises may deteriorate prior to the Commencement Date and Lessor shall have no liability or responsibility therefor. Notwithstanding the foregoing, however, Lessor shall retain the responsibility and obligation to remove and/or remediate any Hazardous Substances that are placed, deposited, transported, or migrate onto, in, or under the Premises, due to whatever cause or source, between the Agreement Date and the Convincement Date to the extent that such Hazardous Substances violate applicable federal, state, or local laws, rules, or regulations or interfere with Lessee's proposed development or use of the Premises. In addition, Lessor shall retain the responsibility and obligation to remove and/or remediate any Hazardous Substances that are placed, deposited, transported, or migrate onto, in, or under the Premises at any time prior to the Commencement Date if all of the following conditions are satisfied: (i) such Hazardous Substances exist on, in, or under the Premises as of the Agreement Date; (ii) as of the Agreement Date the City Manager, Public Works Director, City Engineer, or City Attorney have actual subjective knowledge of the existence of such Hazardous Substances on, in, or under the Premises (with the understanding that "actual subjective knowledge" does not place any of such officers/employees of Lessor on a duty of investigation or inquiry); (iii) as of the Agreement Date the management level officers/employees of Lessee who have participated in the negotiation of this Lease have no actual subjective knowledge of the existence of such Hazardous Substances on, in, or under the Premises; and (iv) such Hazardous Substances violate applicable federal, state, or local laws, rules, or regulations or interfere with Lessee's proposed development or use of the Premises. ARTICLE 4 LEASE OF PREMISES; POSSESSION; CONDITION OF LEASEHOLD TITLE; PHYSICAL AND ENVIRONMENTAL CONDITION OF PREMISES; LEASE TERM 4.1 Grant/Acceptance of Leasehold Interest in Premises. Conditional upon the satisfaction (or waiver by the benefited Party) of each of the Lessor's Conditions to Commencement of Lease Term set forth in Section 3.3.1 of this Lease and each of the Lessee's Conditions to Commencement of Lease Term set forth in Section 3.3.2 of this Lease, Lessor agrees to lease the Premises to Lessee and Lessee agrees to lease the Premises from Lessor, for the Lease Tenn and subject to all of the terms and conditions set forth herein. 112/066751-0097 6271361.10 09/04/14 -21- 4.2 Possession. Lessor shall deliver possession of the Premises to Lessee on the Commencement Date. Subject to the (imitations on the condition of title as referred to in Section 4.3 of this Lease, the Parties hereto mutually covenant and agree that from and after the Commencement Date and during the remainder of the Lease Term Lessee, by keeping and performing the covenants contained in this Lease, shall at all times peaceably and quietly have, hold, and enjoy the Premises. 4.3 Condition of Leasehold Title; Reserved Rights of Lessor. Lessor shall convey leasehold title to Lessee subject to following limitations, exceptions, and reservations: (i) Lessee shall accept leasehold title subject to the limitations and exceptions that are consistent with the Approved Title Condition. (ii) Lessor reserves all oil, oils rights, gas, minerals, mineral rights, natural gas rights, and other hydrocarbon substances in and under the Premises and the right to grant and transfer the same, together with all necessary and convenient rights to explore for, develop, produce, and extract, and take the same, subject to the express limitation that any and all operations for the exploration, development, production, extraction, and taking of any such substance shall be carried on at levels below the depth of five hundred feet (500') from the surface of the land by means of wells, derricks, and other equipment from surface locations on adjoining or neighboring land so long as such activities do not interfere with or impair the operation, business, or aesthetics of the Hotel, and provided that the exercise of any such rights by Lessor shall not result in any damage or injury to the improvements constructed on the Premises by Lessee, including without limitation any subsidence of all or any part of such improvements; and subject further to all restrictions and regulations concerning the drilling for, and production of, oil, gas, minerals, petroleum, and other hydrocarbon substances specified in the Newport Beach City Charter and the Newport Beach Municipal Code. (iii) Lessor reserves and shall have the right to enter the Premises during periods of construction, as set forth in Section 6.4 of tliis Lease. (iv) Lessor reserves and shall have the right at all reasonable times during the entire Lease Term to enter the Premises for the purpose of viewing and ascertaining the condition of the same, to protect its interests in the Premises, and to inspect the operations conducted thereon. Except in the case of emergency, any such entry into areas not generally open to the public shall be made only after reasonable notice to Lessee. Nothing in this Lease is intended or shall be interpreted to limit any right that Lessor, as a municipal corporation, has to enter onto private property when acting in its governmental capacity in lieu of its proprietary capacity of the owner and landlord of real property. (v) Lessor further reserves and shall have the right to enter the Premises in order to cure or correct a Default by Lessee as provided in Sections 8.6 and 15.6 of this Lease. (vi) Nothing in this Lease is intended or shall be interpreted as a waiver by Lessor of its power of eminent domain. 4.4 Lease Term. The initial term of this Lease (the "Initial Term") shall commence at 12:01 AM on the Commencement Date and, unless sooner terminated in accordance with the 112/066151-0097 62713GL.10 a09/04/14 -22- provisions set forth herein, shall terminate and expire at 11:59 PM on the fifty-fifth (55th) anniversary of the Commencement Date. 4.5 Option to Extend Initial Term. Lessee shall have the option to extend the Initial Term for one (1) period of thirty (30) years (the "Option Term"), thereby creating a maximum total Lease Term of eighty-five (85) years), on the same terms and conditions then in effect, except as expressly otherwise provided herein. In order for Lessee to exercise its option to so extend the Initial Term, Lessee shall satisfy each of the following requirements and conditions: (i) Lessee shall deliver written notice to Lessor of the exercise of Lessee's option to extend the Initial Term no earlier than five (5) years and no later than twelve (12) months prior to the expiration of the Initial Term. (ii) Lessee shall not be in Default of any of its obligations set forth in this Lease as of the date it delivers written notice to Lessor of the exercise of Lessee's option to extend the Initial Term, nor shall any event have occurred as of that date that, with the passage of time or the giving of notice, or both, would constitute a Default by Lessee hereunder. (iii) Lessee shall not be in Default of any of its obligations set forth in this Lease as of the expiration of the Initial Term (i.e., the fifty-fifth anniversary of the Commencement Date), nor shall any event have occurred as of that date that, with the passage of time or the giving of notice, or both, would constitute a Default by Lessee hereunder. (iv) From the Operating Commencement Date through the date Lessee delivers its written notice to Lessor of the exercise of Lessee's option to extend the Initial Term, as provided for in clause (i) above, and continuing from that date to the first day of the Option Term, Lessee shall have deposited into the Capital Replacement Reserve Fund the minimum amounts required pursuant to Section 8.5 of this Lease and Lessee shall have expended or committed to expend the amounts in such fund, together with an additional amount equal to one-. half percent (0.5%) of Gross Room Revenues and Gross Non -Room Revenues for Operating Year 3 through the last year of the Initial Term, only for eligible capital expenditures, as provided therein. 4.6 Liens and Encumbrances Created by Lessee. Lessee shall not, directly or indirectly, create or permit to be created or to remain, and Lessee shall promptly discharge, at its expense, any mortgage, lien, encumbrance, or charge on or pledge of the Premises or the Improvements, or fixtures and furnishings, or any part thereof, or Lessee's interest therein, or the Ground Rent or other sums payable by Lessee under this Lease, other than (i) such Mortgages as are permitted pursuant to Article 12, and (ii) as necessary in connection with the financing of furniture, fixtures and equipment for the Improvements. Lessee shall notify Lessor promptly of any lien or encumbrance which has been created on or attached to the Premises and Improvements, or to Lessee's leasehold estate therein, whether by act of Lessee or otherwise. The existence of any mechanic's, laborer's, materialmen's, supplier's, or vendor's lien, or any right in respect thereof, shall not constitute a violation of this Lease if payment is not yet due upon the contract or for the goods or services in respect of which any such lien has arisen, or if such lien is being dischargedby the posting of bonds or other lien -release security as is provided for such discharge by law. 112/066751-0097 6271361.10 a09/04/14 -23- 4.7 Lessee's Surrender of Premises and Execution of Quitclaim Upon Expiration or Termination. Upon the expiration or earlier termination of the Lease Term pursuant to the terms hereof, it shall be lawful for Lessor to reenter and repossess the Premises and Improvements without process of law and Lessee, in such event, does hereby waive any demand for possession thereof, and agrees to surrender and deliver the Premises and Improvements peaceably to Lessor immediately upon such expiration or ternination in the physical condition required hereunder and otherwise in. good order, condition, and repair, except for reasonable wear and tear. At such time, all fixtures to the Premises that cannot be removed without causing damage to the Hotel shall automatically revert to and become the property of Lessor without compensation or payment to, or requirement of consent or act of, Lessee, and Lessee shall thereafter have no further rights thereto or interest therein, including any rights to depreciation deductions or tax credits. Following the expiration or earlier termination of the Lease Term, Lessee shall retain its ownership in all items of personal property located on the Premises; provided, however, if Lessee fails to remove the same within ninety (90) calendar days following the expiration or earlier termination of this Lease, any such property remaining on the Premises after that date shall become the sole property of Lessor without compensation or payment to Lessee, or any requirement of consent or act of Lessee, and Lessee shall thereafter have no further rights thereto or therein. At the expiration or earlier termination of this Lease, and upon Lessor's written request, Lessee shall promptly execute, acknowledge, and deliver to Lessor a valid and recordable quitclaim deed covering the Premises and the Improvements, free and clear of all liens and encumbrances. In addition, upon the expiration or earlier termination of this Lease for any reason, Lessee shall surrender to Lessor all keys to any and all Improvements and fixtures on the Premises and shall inform Lessor of all combinations of locks, safes, and vaults, if any, on the Premises. Lessee's obligations and Lessor's rights set forth in this Section 4.7 shall survive the expiration or earlier termination of this Lease. 4.8 Holdover Tenancy. In the event that for any reason Lessee remains in possession of the Premises after the expiration or earlier termination of the Lease Term, Lessee shall be deemed to be a holdover tenant and this Lease shall be deemed to have been renewed on a month -to -month basis only. In such event, Lessee shall be required to comply with all of the terms and conditions set forth herein, including without limitation with respect to the obligation to pay Ground Rent, to the same extent that Lessee was so obligated to comply with such provisions during the Lease Term. Nothing in this Section 4.8 shall be deemed to constitute a waiver of Lessor's rights to evict Lessee or as a limitation or restriction on Lessor's rights and remedies in the event of Lessee's wrongful holding over. 4.9 No Right To Relocation Expenses. Lessee acknowledges that it is (or will become) a "post -acquisition tenant" within the meaning of Title 25, California Code of Regulations, Sections 6008(f)(3)(B) and 6034(b), that it is not (and will not become) a "displaced person" within the meaning of. Title 25, California Code of Regulations, Section 6008(f), and that in no event will Lessee be entitled to any relocation benefits or assistance as a result of its having to move from or vacate the Premises pursuant to otherwise applicable Governmental Requirements, including without limitation California Government Code Sections 7260 et seq. and Title 25, California Code of Regulations, Sections 6000 et seq. Not by way of limitation of the foregoing, Lessee voluntarily waives and releases any claim it might otherwise have to any such relocation benefits or assistance. 112/066751.0097 6271361.10 019/04114 -24- ARTICLE 5 RENT 5.1 Base Rent During Initial Term. Regardless of the amount of Gross Room Revenues and Gross Non -Room Revenues generated by the operation of the Hotel from time to time, Lessee shall pay a minimum annual rent to, Lessor in the amounts set forth in this Section 5.1 (the "Base Rent"). 5.1.1 Construction Period. During the Construction Period Lessee shall have no obligation to pay Base Rent to Lessor. 5.1.2 Base Rent in First Operating Year. Lessee shall pay annual Base Rent to Lessor for the first Operating Year of the Lease Term in the total sum of Seventy -Five Thousand Dollars ($75,000.00) ($18,750.00 per quarter). 5.1.3 Base Rent in Second Operating Year. Lessee shall pay annual Base Rent to Lessor for the second Operating Year of the Lease Term in the total sum of One Hundred Fifty Thousand Dollars ($150,000.00) ($37,500.00 per quarter). 5.1.4 Base Rent Commencing in Third Operating Year. Commencing in the third Operating Year of the Lease Term and continuing thereafter through the end of the Initial Term, Lessee shall pay annual Base Rent to Lessor in the total sum of Two Hundred Fifty Thousand Dollars ($250,000.00) ($62,500.00 per quarter), with said amount increased every five (5) years (i.e., at the commencement of the 8 , 13t , 18th, 23rd, 28th, 33rd, 38th, 43'd, 48th, and 53rd Operating Years), each referred to as the "Base Rent Adjustment Date," to an amount determined by multiplying the Base Rent in effect immediately prior to the applicable Base Rent Adjustment Date by a fraction in which the numerator equals the Consumer Price Index in effect three (3) months prior to the Base Rent Adjustment Date and in which the denominator equals the Consumer Price Index in effect sixty-three (63) months prior to the Base Rent Adjustment Date; provided, however, that in no event shall the applicability of said adjustment to the Base Rent result in an increase in the Base Rent of more than fifteen percent (15%) for any applicable 5-year period. 5.1.5 Time/Amount of Payment of Base Rent. Payments of Base Rent shall be made monthly in advance, no later than the first day of each calendar month during each Operating Year during the Initial Term of the Lease, provided that (i) the first monthly payment of Base Rent shall be due and payable on the first day of the First Operating Year and the amount thereof shall be prorated based on a fraction in which the numerator equals the number of days remaining in the calendar month in which the first day of the First Operating Year occurs and in which the denominator equals thirty (30). 5.2 Percentage Rent. Lessee shall pay rent to Lessor based upon the amount of Gross Room Revenues and Gross Non -Room Revenues generated by the operation of the Hotel from time to time in the amounts set forth in this Section 5.2 (the "Percentage Rent"). 5.2.1 Operating Years 1-3. Commencing in Operating Year 1 and continuing thereafter through Operating Year 3, Lessee shall have no obligation to pay Percentage Rent to Lessor. t12/066751-0097 6271361.10 a09/04/14 -25- 5.2.2 Operating Years 4-14. Commencing in Operating Year 4 and continuing thereafter through Operating Year 14, Lessee shall pay Percentage Rent to Lessor in the sum of (i) four percent (4%) of Gross Room Revenues, plus (ii) two percent (2%) of Gross Non -Room Revenues, less (iii) the Base Rent paid with respect to said Operating Year. 5.2.3 Operating Years 15-19. Commencing in Operating Year 15 and continuing thereafter through Operating Year 19, Lessee shall pay Percentage Rent to Lessor in the sum of (i) four and one-half percent (4-1/2%) of Gross Room Revenues, plus (ii) two percent (2%) of Gross Non -Room Revenues, less (iii) the Base Rent paid with respect to said Operating Year. 5.2.4 Operating Years 20-End of Lease Term. Commencing in Operating Year 20 and continuing thereafter through the end of the Lease Term, Lessee shall pay Percentage Rent to Lessor in the sum of (i) five percent (5%) of Gross Room Revenues, plus (ii) two percent (2%) of Gross Non -Room Revenues, less (iii) the Base Rent paid with respect to said Operating Year. 5.2.5 Accounting For Percentage Rent. Within thirty (30) days after the close of each calendar quarter of each Operating Year during the Lease Tenn, Lessee shall submit to Lessor a report itemizing its Gross Room Revenues and Gross Non -Room Revenues received in such calendar quarter (each, a "Quarterly Report"). Within the category of Gross Non -Room Revenues, each such Quarterly Report shall separately itemize the Gross Non -Room Revenues attributable to (i) food and beverage sales, (ii) banquet sales, (iii) parking receipts, (iv) meeting room receipts, (v) health club/spa facility receipts, (vi) retail sales, (vii) all amounts received by Lessee from its sublessees, licensees, and concessionaires, including a separate specification of all amounts paid as deposits, fees, rents, common area charges, monetary equivalents, pass through rents, or other considerations with a monetary equivalent, (viii) such other subcategories of revenues that Lessee may elect to separately report, and (ix) miscellaneous Gross Non -Room Revenues not fitting into any of the categories listed in clauses (i)-(viii), inclusive. In addition, each Quarterly Report shall separately identify, if applicable, the amount of Gross Receipts attributable to Net Insurance Proceeds and Net Awards and Payments, the portions of such receipts that Lessee has allocated to Gross Room Revenues and Gross Non -Room Revenues, and the methodology used by Lessee in making such allocation. Within one hundred twenty (120) days after the close of each Operating Year during the Lease Term, Lessee shall submit to Lessor, for Lessor's review and written approval, a statement (the "Certified Annual Statement") containing an itemization and a reasonable explanation of the composition of Gross Room Revenues and Gross Non -Room Revenues as specified in the preceding paragraph for the entire applicable Operating Year and reconciling the four (4) Quarterly Reports for each said Operating Year, certified by Lessee as true and correct. Copies of all Form 1099's showing payments to Lessee which are reportable as Gross Room Revenues and/or Gross Non -Room Revenues shall be attached to the Certified Annual Statement. 5.2.6 Time of Payment of Percentage Rent. No later than concurrently with Lessee's submission to Lessor of each Quarterly Report and in any event within thirty (30) days after the end of the each calendar quarter of each Operating Year during the Lease Term, Lessee shall pay to Lessor the amount of Percentage Rent that is owing, if any, as determined based 112iD66751.0097 6271361.10 809/04/14 -26- upon such Quarterly Report (after taking into consideration the Base Rent previously paid by Lessee for said Operating Year pursuant to Section 5.1.5). If Percentage Rent is not timely paid, the amount of Percentage Rent shall bear interest at the lesser of the legal rate or that annual rate of three percent (3%) over the prime rate of the largest bank operating in the State of California until paid; provided, however, that Lessee's obligation to pay interest on delinquent rent shall in no event excuse a Default by Lessee hereunder, extend Lessee's time for performance, or prevent or prohibit Lessor from exercising any of its rights or remedies for Lessee's Default. If Lessee's Certified Annual Statement shows that Lessee has overpaid or underpaid Ground Rent for the applicable Operating Year, an adjustment shall be made. If Lessee has overpaid Ground Rent for the applicable Operating Year, Lessee shall be entitled to reduce its next Ground Rent payment by the amount of such overpayment. If Lessee has underpaid Ground Rent for the applicable Operating Year, it shall pay the additional amount owing, plus interest, concurrently with its delivery of the Certified Annual Statement. 5.3 Adjustments to Base Rent and Base Rent CPI Adjustment During Option Term. If Lessee exercises its option to extend the Initial Term of this Lease, as provided in Section 4.5, the Base Rent (but not the Percentage Rent) during the Option Term shall be adjusted to an amount equal to the "Fair Rental Value of the Premises" as of the first day of the Option Period, as the same is determined and subject to the terms and conditions set forth in this Section 5.3; provided, however, that (i) in no event shall either the Base Rent in effect immediately prior to the first day of the Option Period be reduced, (ii) in the event the determination of the Fair Rental Value of the Premises would result in the Base Rent then in effect being reduced then no adjustment shall be made to the Base Rent figure/amount then in effect and the Base Rent shall continue to be adjusted at 5-year intervals during the Option Term in the manner and subject to the limitations set forth in Section 4.1.4 (i.e., at the commencement of the 58th, 63' 1, 68 , 73' 1, 78th, and 83'a Operating Year), and (iii) the Percentage Rent shall not be increased or decreased during the Option Period. The Fair Rental Value of the Premises shall be determined based upon the following being assumed to be true as of the first day of the Option Term (or as of the date prior to the first day of the Option Term when the elements comprising the Fair Rental Value of the Premises are agreed upon or determined as provided herein): (i) that the Improvements exist in the physical condition required by this Lease, the Hotel is open for business, the Premises are in all respects in the physical and environmental condition required pursuant to this Lease, and the Premises are available for lease on the open market to the highest bidder; (ii) that the hypothetical new lessee would be entitled to assume Lessee's obligations and succeed to its rights under the Hotel Management Agreement and Hotel Franchise Agreement then in effect; (iii) that the terms of the Lease that would apply are the terms set forth in this Lease, including the Percentage Rent that is payable, with the exception of the Base Rent amount which is to be adjusted and the understanding that the assumed remaining Lease Term is thirty (30) years; and (iv) that the highest and best use of the Premises is the actual use required and permitted pursuant to this Lease. The Fair Rental Value of the Premises shall be expressed in terms of a new proposed Annual Base Rent, and a new proposed method for adjusting the Annual Base Rent based on changes in the Consumer Price Index (not more often than every five (5) years, as provided herein), both of which are to apply to the Option Term. 112/066751-0097 6271361.10 a09/04/14 -27- For a period of ninety (90) days after Lessee delivers written notice to Lessor of the exercise of Lessee's option to extend the Initial Term in accordance with Section 4.2(i) of this Lease, the Parties shall meet and endeavor to agree upon the Fair Rental Value of the Premises consistent with the foregoing. If for any reason the Parties fail to agree upon the Fair Rental Value of the Premises within said ninety (90) day period, then the Fair Rental Value of the Premises shall be determined by arbitration conducted within the times, and in the manner, set forth below: (i) For a period of thirty (30) additional days (i.e., until the date that is one hundred twenty (120) days after Lessee delivers written notice to Lessor of the exercise of Lessee's option to extend the Initial Term of this Lease), the Parties shall jointly attempt to agree on the appointment of a single arbitrator to determine the Fair Rental Value of the Premises consistent with the foregoing. The single arbitrator jointly appointed by the Parties shall determine the Fair Rental Value of the Premises within sixty (60) days after his/her appointment or as soon thereafter as possible and shall be instructed to notify the Parties in writing of his/her determination. The Parties shall each pay fifty percent (50%) of the single arbitrator's costs. (ii) If the Parties fail to timely agree on the appointment of a single arbitrator to determine the Fair Rental Value of the Premises, as set forth in subparagraph (i) above, each Party, within an additional fifteen (15) days (i.e., by the date that is one hundred thirty-five (135) days after Lessee delivers written notice to Lessor of the exercise of Lessee's option to extend the Initial Term of this Lease), shall separately designate its own arbitrator to determine the Fair Rental Value of the Premises consistent with the foregoing within sixty (60) days after each such arbitrator's appointment or as soon thereafter as possible and, upon both arbitrators' determination of the Fair Rental Value of the Premises, the Parties shall concurrently exchange such determinations. If the difference between either of the two elements of the respective arbitrators' determinations (Base Rent and the new proposed method/formula for adjusting the Annual Base Rent based on changes in the Consumer Price Index) is an amount less than ten percent (10%) of the higher determination, the mean average of the two determinations shall be used in making the adjustment(s). If the difference between either of the two elements of the respective arbitrators' determinations is ten percent (10%) or more of the higher determination, the two arbitrators shall jointly select a third arbitrator who shall review the data, analysis, findings, and conclusions of the Parties' respective arbitrators and such third arbitrator shall determine which of the two arbitrators' determinations is/are the most reasonable under the criteria set forth above, which determination shall be used in making the adjustment(s) used to determine the Fair Rental Value of the Premises during the Option Tenn. The third arbitrator shall not be permitted to make an independent determination of any of the still -disputed elements of the Fair Rental Value of the Premises. (iii) Each arbitrator selected to make a determination with respect to the Fair Rental Value of the Premises (or either of the elements comprising the Fair Rental Value of the Premises) shall be a licensed real estate appraiser in the State of California and a member of the Appraisal Institute or successor appraisal society or organization (or, in the event real estate appraisers are not licensed or the Appraisal Institute or successor appraisal society or organization does not exist at the time the Fair Rental Value of the Premises is determined, each such arbitrator shall have equivalent qualifications). Each such arbitrator shall also have a minimum of ten (10) years professional experience in Southern California appraising 112/066751.0097 6271361.10 a09/04114 -28- commercial hotel properties. Each arbitrator selected shall be impartial and unrelated, directly or indirectly, so far as employment of services is concerned, to either of the Parties. (iv) Each Party shall be responsible for payment of its selected arbitrator and, if a third arbitrator is selected to determine any matters, the Parties shall each pay fifty percent (50%) of said third arbitrator's costs. (v) In the event either Party Defaults hereunder by failing to timely select an arbitrator pursuant to clause (ii) above, the Fair Rental Value of the Premises shall be determined by the arbitrator selected by the other Party. In the event that the arbitrators selected by the Parties pursuant to clause (ii) do not finally determine the Fair Rental Value of the Premises and they fail to timely appoint a third arbitrator to hear and determine the dispute, either Party not in Default shall have the right to apply to the Orange County Superior Court to appoint the third arbitrator. (vi) In the event that for any reason the Fair Rental Value of the Premises has not been finally determined as of the first day of the Option Term Lessee shall continue to pay Ground Rent in the amounts and at the times that were in effect immediately prior to the Option Term, a retroactive adjustment shall be made (effective as of the first date of the Option Term) when the new Base Rent figure has been established and, within fifteen (15) days after such date Lessee shall make any additional payment of Ground Rent that may be owing to Lessor as a result of said determination. (vii) BY INITIALING IN THE SPACE BELOW, EACH PARTY TO THIS LEASE ACKNOWLEDGES THAT IT IS AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE DETERMINATION OF THE FAIR RENTAL VALUE OF THE PREMISES AND THE ELEMENTS THEREOF DETERMINED BY NEUTRAL AND BINDING ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND IT IS GIVING UP ANY RIGHTS IT MIGHT OTHERWISE POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR DETERMINED IN A JURY TRIAL. BY INITIALING IN THE SPACE BELOW, EACH PARTY ACKNOWLEDGES THAT VOLUNTARILY AGREES TO THIS MEANS OF RESOLVING ANY SUCH DISPUTE AND THAT IT IS GIVING UP IT t.pDI�IAL RIGHTS TO DISCOVERY, JURY TRIAL, AND APPEAL. Lessor's initials Lessee's Initials Subject to the provisions set forth above that the Base Rent, the Percentage Rent based on Gross Room Revenues, and the Percentage Rent based on Gross Non -Room Revenues shall not be reduced during the Option Term, the determination of the Fair Rental Value of the Premises determined in accordance with this Section 5.3 shall be final, binding, and conclusive on both Parties during the Option Tenn. Upon the written request of either Party or any existing or prospective Mortgagee, the Parties shall cooperate in executing an addendum to this Lease memorializing any adjustments to the Ground Rent provisions set forth herein that will apply during the Option Term. 5.4 Place of Payment. All Ground Rent payments shall be made to City at 100 Civic Center Drive, Newport Beach, CA 92660, Attention: Real Property Administrator, or to such address and person/title that Lessor may hereafter provide to Lessee. Lessee shall identify the 112/066751-0097 6271361.10 a09/04/14 -29- purpose of each payment of Ground Rent (on the check or accompanying documentation) so that proper credit can be provided to Lessee. 5.5 Triple Net Lease; No Abatement or Set -Off of Rent. This is an absolute net lease and Lessor shall not be required to provide any services or do any act or thing with respect to the Premises and Improvements or the appurtenances thereto, except as may be specifically and expressly provided herein, and Lessee shall make all payments required by this Lease, including but not limited to the payment of Ground Rent to Lessor, without any claim on the part of Lessee for diminution, set-off, or abatement, and nothing shall suspend, abate, or reduce any rent to be paid hereunder, except as otherwise specifically provided in this Lease. 5.6 Non -Subordination of Rent or Other Sums. It is expressly understood and agreed that there shall be no subordination or encumbrance of any kind under this Lease or otherwise of (i) Lessor's fee title ownership of the Premises; (ii) Lessor's interest in this Lease; and (iii) Lessor's right to receive Ground Rent under this Lease. 5.7 Delinquency In Rental Payment; Collection of Rents. Lessee's failure to pay any installment of Ground Rent by the due date shall constitute a Default. In the event Lessee fails to pay the applicable installment of Ground Rent within ten (10) days following the due date, in addition to any other remedy provided by this Lease, Lessee shall pay to Lessor a late payment charge equal to five percent (5%) of the delinquent payment, which shall be added to the amount due, plus an interest charge on the delinquent payment (not including the late payment charge) equal to three percent (3%) over the prime rate of the largest bank operating in the State of California on the due date, from the date of each delinquency until the amount owing is paid, or the maximum interest rate permitted by law, whichever is less. It is the intent of this provision that Lessor shall be compensated by such additional sums for loss resulting from rental delinquency, including costs to Lessor for servicing the delinquent account. Lessor, in its sole and absolute discretion, may waive any such delinquency compensation required herein, upon written application of Lessee. 5.8 Lessee's Maintenance of Books and Records Relating to Calculation of Ground Rent; Lessor's Right to Inspect and Audit Records. Lessee shall keep full and accurate books and accounts, records, cash receipts, and other pertinent data showing its financial operations pertaining to this Lease, the Premises, and the Hotel at a location in Orange County, California. Such books and records shall be organized in a manner that separately itemizes each of the separate components of Gross Room Revenues and Gross Non -Room Revenues identified in the definitions of those terms and in Section 5.2.4 above. All retail sales and charges shall be recorded by means of cash registers, point -of -sale computers, or other comparable devices which display to the Hotel guest or customer the amount of the transaction and automatically issue a sales receipt. Such devices shall be equipped with technology that customarily lock in sales totals and other transaction records, or with counters that cannot be reset and that record transaction numbers and sales details. Totals registered shall be read and recorded at least once per day. Back-up copies of all such data, records, and reports must be made at least weekly in a computer -readable medium and stored off -site. Lessee shall retain such books of account, records, cash receipts, and other pertinent data for a minimum period of five (5) years after the end of the Operating Year to which such items pertain. Lessor shall be entitled during such five (5) years to inspect, examine, and copy at Lessor's expense Lessee's books of account, records, cash receipts, and other pertinent data as necessary or appropriate for the purpose of this Lease. 112/066751-0097 6271361.10,09/04/14 -30- Lessee shall cooperate fully with Lessor in making the inspection. Except in the event of litigation or arbitration between the Parties arising out of a dispute and otherwise except as required by applicable law, including without Iimitation the California Public Records Act (Government Code Sections 6250 et seq.), Lessee's books and records shall remain confidential and not public. In addition to the foregoing, Lessor shall be entitled at Lessor's expense, once during each Operating Year and once after expiration or termination of the Lease Term, to an independent audit of Lessee's books of account, records, cash receipts, and other pertinent data, by a certified public accountant to be designated by Lessor, as necessary or appropriate to the purposes and provisions of this Lease. Any such audit shall be conducted after reasonable prior written notice by Lessor to Lessee and during Lessee's usual business hours. If the audit shows that there is a deficiency in the payment of Ground Rent, the deficiency and interest thereon at the rate specified in Section 5.7 of this Lease shall become immediately due and payable to Lessor. In addition, if such deficiency exceeds the amount of the greater of Ten Thousand Dollars ($10,000.00) in any Operating Year, or three percent (3%) of the actual amount of Ground Rent due in any Operating Year in which there is a deficiency, Lessee shall reimburse Lessor for the cost of Lessor's audit. If Lessor has not audited Lessee hereunder with respect to a particular Operating Year within the permitted five year period, or has not advised Lessee in writing of any exceptions based on said audit within said five year period, then Lessor shall be deemed to have waived its right to re -determine Ground Rent for such Operating Year. 5.9 Acceptance Not Waiver. Lessor's acceptance of any money paid by Lessee under this Lease, whether shown by any Certified Annual Statement or otherwise, shall not constitute an admission by Lessor of the accuracy or sufficiency of the amount of such payment. ARTICLE 6 DEVELOPMENT OF THE HOTEL AND RELATED IMPROVEMENTS ON AND ABOUT THE PREMISES 6.1 Commencement and Completion of Hotel. Within the tunes set forth in the Schedule of Performance, Lessee shall commence and complete construction of the Hotel and related Improvements on and about the Premises in accordance with the Development Entitlements, the Final Building Plans, and all applicable Governmental Requirements and Lessee shall cause the Hotel to be opened to the general public. Not by way of limitation of the foregoing, prior to commencing work in any public rights -of -way Lessee shall obtain any required encroachment permit(s) and deliver any required security instrument(s) in accordance with Lessor's normal practices. Once construction is commenced it shall be diligently pursued to completion and, subject to Events of Force Majeure, shall not be interrupted, halted, or abandoned for more than twenty (20) consecutive days. 6.2 No Construction Before Notice; Notice(s) of Non -Responsibility. At no time during the Lease Term shall Lessee commence or allow to be commenced any excavation, grading, Premises preparation, utility relocation/installation, street or other public improvement work in the right(s)-of way adjacent to the Premises, or any construction work of any kind on the Premises, nor shall Lessee deliver or allow to be delivered any equipment or materials to the Premises for any of such purposes, until Lessee has first provided at least twenty (20) days prior written notice to Lessor of the intended commencement of such work or the delivery of such 112/066751.0097 6271361.10 a09/04/14 -31- equipment or materials. At any and all times during the Lease Term Lessor shall have the right to post and maintain on the Premises and to record as required by law any notice or notices of non -responsibility provided for by the mechanics' lien laws of the State of California. 6.3 Mechanic's, Materialmen's, Contractor's and Subcontractor's Liens. Subject to Lessee's right to contest as hereinafter provided, at all times during the Lease Term, Lessee shall keep the Premises, including all buildings and improvements now or hereafter located on the Premises, free and clear of all liens and claims of liens for labor, services, materials, supplies, or equipment performed on or furnished to the Premises. Lessee shall notify Lessor in writing of any and all liens and claims of lien made or filed against the Premises within thirty (30) calendar days after Lessee becomes aware of the filing thereof. Thereafter, Lessee shall promptly (i) pay and discharge, or cause the Premises to be released from, any such lien or claim of lien, or (ii) contest such lien and furnish Lessor such bond as niay be required by law to free the Premises from the effect of such lien and to secure Lessor against payment of such lien and against any and all loss or damage whatsoever in any way arising from Lessee's failure to pay or discharge such lien. In the event Lessee provides a bond in lieu of paying or discharging a lien as set forth herein, and Lessor is unable despite reasonably diligent effort to obtain an endorsement to any existing title policy in favor of Lessor insuring Lessor's interest in the Premises free and clear of any such liens that have not been paid or discharged, Lessee shall, at Lessee's sole cost and expense, within thirty (30) days of Lessor's written request therefor, provide the Lessor with such endorsement. Should Lessee fail to pay and discharge, or cause the Premises to be released from, any such lien or claim of lien or to provide a bond as permitted hereunder within thirty (30) days after service on Lessee by Lessor of a written request to do so, Lessor may pay, adjust, compromise, and discharge any such lien or claim of lien on such terms and in such manner as Lessor may reasonably deem appropriate. In such event, Lessee shall, on or before the first day of the next calendar month following any such payment by Lessor, reimburse Lessor for the full amount so paid by Lessor, including any actual and reasonable attorneys' fees or other costs expended by Lessor, together with interest thereon at the annual rate of interest equal to three percent (3%) over the prime rate of the largest bank operating in the State of California as of the close of business on the date of payment by the Lessor, or the highest lawful rate, whichever is less, from the date of payment by Lessor to the date of Lessee's reimbursement of Lessor. Promptly after substantial completion of any work of improvement during the Lease Term, Lessee shall record or cause to be recorded in the Official Records of Orange County a notice of completion. Lessee hereby appoints Lessor as Lessee's attorney -in -fact to record the notice of completion, which appointment shall only become effective on ten (10) days' notice upon Lessee's failure to record such a notice of completion after the work of improvement has been substantially completed; provided, that Lessor shall not be obligated to record such a notice of completion and the failure of Lessor to record said notice shall not excuse the failure of Lessee to discharge its obligation to record said notice of completion. 6.4 Lessor's Rights of Access. Representatives of Lessor shall have the reasonable right of access to the Premises without charges or fees, at normal construction hours during all periods of construction for the purposes of this Lease, including, but not limited to, the inspection of the work being performed in constructing, reconstructing, repairing, and replacing all or any portion of the Hotel and related Improvements. Such representatives of Lessor shall be 112/066751-0097 6271361.10 409/04/14 -32- those who are so identified in writing by the City Manager or Public Works Director of Lessor or their authorized designee(s). Lessor shall provide reasonable prior notice to Lessee of any such entry, and shall use its best efforts to minimize interference with Lessee's use of the Premises, Hotel, and Improvements as much as is reasonably feasible. Such entry shall be in compliance with all applicable safety rules and regulations provided by Lessee (or its general contractor) to Lessor's representative(s) at the time of entry. Lessor shall indemnify, defend, and hold harmless Lessee from and against any claim, liability, losses, and damages caused by Lessor during any such inspections, excluding any such claims, liabilities, losses, and damages arising out of Lessor's discovery of unsafe or substandard conditions not caused by the acts of Lessor and any such claims, liabilities, losses, and damages for which Lessor would not otherwise be liable in the absence of this Lease, and Lessor shall be responsible for the prompt repair and/or restoration of any such damage caused by Lessor or its representative(s) during any such inspection. 6.5 Local, State and Federal Laws. Lessee shall carry out the construction and installation of the Improvements on and about the Premises in conformity with all applicable Governmental Requirements. In this regard, the Parties agree that Lessor is a charter city exempt from the obligation to comply with California's prevailing wage laws, that the Hotel will be a privately owned facility, that the rent to be paid by Lessee to Lessor pursuant to this Lease is not less than the fair market rent for the Premises, that the Hotel is not being "paid for in whole or in part out of public funds" within the meaning of California Labor Code Section 1720(a)(1) and (b), and that any Lessor contribution to the Hotel project is "de minimis in the context of the project" within the meaning of Labor Code Section 1720(c)(3), such that Lessee's construction and installation of the Improvements and its performance of other related development/construction activities pursuant to this Lease does not constitute construction or installation of a "public work" for which prevailing wages must be paid or for which Lessee is required to comply with any other Governmental Requirements applicable to "public works." Notwithstanding such agreement, however, Lessor makes no covenant, representation, or warranty to Lessee in that regard, Lessee bears the full risk with respect thereto, and nothing in this Lease, including this Section 6.5, shall release Lessee from the obligation to comply with all applicable Governmental Requirements, including, if later found to be applicable, Governmental Requirements applicable to "public works." 6.6 As -Built Drawings. Upon completion of any construction work on the Premises, Lessee shall as soon as practicable furnish Lessor with a set of drawings and specifications for all completed construction which accurately reflects the nature and extent of all work done on or to the Premises and marked to show such construction "as built." 6.7 Costs of Construction. Except as expressly set forth in Section 6.8 of this Lease, Lessee shall bear all costs and expenses associated with the planning, design, construction, maintenance, furnishing, equipping, and supplying of the Hotel and the Improvements, which costs and expenses include without limitation: (i) utility hook-up and connection fees and all distribution facilities, conduits, pipelines, and cables required in connection with construction of the Hotel; (ii) all design, engineering, financing, and construction costs; and (iii) all necessary permit fees, charges, assessments, taxes, and exactions. 6.8 Lessor Responsibility for Coastal Commission Lower Cost Overnight Accommodations Mitigation Fee. The Parties acknowledge that prior to the Agreement Date the 112/066751.0097 6271361.10 a09104114 -33- California Coastal Commission has instituted a program requiring developers of hotels in the Coastal Zone to pay a "Lower Cost Overnight Accommodations Mitigation Pee" as a condition to the Commission's approval of a coastal development permit. In the event the California Coastal Commission so conditions its issuance of a coastal development permit for the Hotel and such fee is required to be paid, Lessor hereby covenants and agrees to pay said fee on behalf of Lessee in an amount not to exceed the lesser of (i) Seven. Thousand Five Hundred Dollars ($7,500.00) per room in the Hotel or (ii) Nine Hundred Seventy -Five Thousand Dollars ($975,000) (130 rooms X $7,500/room) at or before the time said fee becomes due and in any event within a time period that will not cause a delay in construction of the Hotel or issuance of those Development Entitlements provided by the California Coastal Commission. In the event the California Coastal Commission does not impose an affordable hotel room fee on the Hotel project or the amount of the affordable hotel room fee imposed by the California Coastal Commission on the Hotel project is less than the maximum amount that Lessor is required to pay pursuant to this Section 6.8, Lessee shall not be entitled to any payment, credit, or offset of its other obligations set forth herein. In the event the affordable hotel room fee imposed by the California Coastal Commission on the Hotel project exceeds the maximum amount that Lessor is required to pay pursuant to this Section 6.8 Lessee shall be responsible for payment of the balance of said fee. Neither Lessor nor Lessee makes any representation or warranty to the other Party with respect to the validity, enforceability, or amount of such fee; provided, however, that the Parties covenant to cooperate in good faith in an effort to not cause any uncertainty or disagreement about the imposition or amount of such fee to delay the California Coastal Commission's final action on the Coastal Development Permit for the Hotel project or result in a disapproval thereof. ARTICLE 7 USE AND OPERATION OF HOTEL; CHANGES IN HOTEL MANAGEMENT COMPANY/HOTEL MANAGEMENT AGREEMENT AND/OR HOTEL FRANCHISOR/HOTEL FRANCHISE AGREEMENT 7.1 General: Use and Operation of the Premises, Hotel, and Improvements. Lessee covenants and agrees that during construction and thereafter through the remainder of the Lease Term, Lessee shall comply with all of the following use and operational requirements, restrictions, and prohibitions: (i) Lessee shall operate and maintain the Hotel in full compliance with the Required Hotel Standard, all applicable Governmental Requirements, and the express provisions set forth in this Lease, as the same may be amended from time to time. Uses normally incidental to a hotel use, including without limitation a restaurant, cocktail lounge, cleaning and laundry service, banquet and catering facilities, meeting rooms, gift shop, spa, resort retail, magazine stand, barber or beauty shop, travel agency, airline ticket office, automobile rental operation, and recreational facilities, shall also be permitted, subject to whatever special permits for such uses may be required therefor from time to time in accordance with Governmental Requirements. The business conducted by each sublessee, licensee, and concessionaire on the Premises similarly shall be consistent with the Required Hotel Standard and the high quality required for the Hotel generally. 112/066751-0097 6271361.10 a09/04/14 -34- If the AAA four diamond hotel standards change, the Required Hotel Standard automatically shall be deemed to change accordingly, subject to the provisions in this Section 7.1(i) set forth hereinbelow. If the AAA ceases to publish hotel rating guidelines, then for purposes of this Lease the "Required Hotel Standard" shall mean a standard of operation that meets all criteria for the most substantially equivalent standard to a AAA four diamond hotel standard under such other rating system that is then generally recognized by the hotel industry. If in connection with any change in, or choice of a replacement rating system Lessor and Lessee are unable to agree upon such changed or replacement rating system, then the City Manager or his or her designee shall have the authority to select the replacement rating system to be used. In addition to the foregoing, the Parties acknowledge that the Lease Term provided for herein is lengthy, that the hotel marketplace in general and hotel standards in particular change over time, and that flexibility needs to be built into the definition of "Required Hotel Standard" to accommodate such changes. Accordingly, the Parties agree that the Required Hotel Standard is intended to keep the Hotel on a par (or better) than the prevailing standard in comparable quality hotels in the Orange County marketplace within a ten (10) mile radius of the Premises, as currently represented by the AAA four diamond standard, but subject to deviations from such standard as the market dictates, and that if either Party believes at any time during the Lease Term that changes in said hotel marketplace have occurred that warrant changes to the then -applicable Required Hotel Standard, that Party shall have the right to notify the other Party in writing of such position and the basis for such position, in which event the Parties agree thereafter to meet and confer in good faith to consider whether to mutually approve a modification in the Required Hotel Standard hereunder. If the Parties agree to a modification to the Required Hotel Standard, they shall cooperate by approving and executing an appropriate amendment to this Lease memorializing the agreed -upon change(s). If Lessee requests in writing that Lessor approve one or more deviations from the AAA four diamond (or substitute) standard, Lessor's approval of such deviation shall not be unreasonably delayed, conditioned, or denied. If the Parties do not mutually agree to modify the Required Hotel Standard, either Party shall have the right to have the dispute concerning changes to the Required Hotel Standard determined by binding arbitration, which arbitration shall be conducted in accordance with the commercial arbitration rules of the American Arbitration Association (with no right to discovery) or such other method and procedure of arbitration to which the Parties may agree at the time. Each Party shall bear its own costs with respect to any such arbitration and the Parties shall each pay fifty percent (50%) of the cost of the arbitrator(s). The final deternunation of the arbitrator shall be memorialized in an appropriate amendment to this Lease, which shall be executed by both Parties. (ii) Lessee shall not allow the Premises to be used for any of the following purposes, which are expressly prohibited: (i) Timeshare use; (ii) long-term residential use, which for purposes of this Lease shall mean continuous occupancy of more than twenty-five percent (25%) of the guest rooms in the Hotel at any one time by the same occupants for periods in excess of twenty-eight (28) consecutive days (and with the understanding that for purposes of this clause (ii) a hotel guest shall be deemed to be continuously occupying a guest room for a period in excess of twenty-eight (28) consecutive days if he or she continuously occupies any room in the Hotel for a period in excess of twenty-eight (28) consecutive days, even if he or she moves from one guest room to another guest room one or more times during or after the twenty- 112/066751-0097 6271361,10 609/04/14 -35- eight (28) day period); and (iii) any adult entertainment purpose, as defined from time to time in the City of Newport Beach Municipal Code (provided that this prohibition is not intended and shall not be interpreted to regulate in violation of applicable Governmental Requirements the private non -business activity of an individual that is confined to such individual's individual hotel room). (iii) Subject to Sections 10.4-10.6 and 14.3-14.4 of this Lease and periods of renovation, from the initial opening of the Hotel through the entire Lease Term, Lessee shall cause the Hotel to be open for business to the general public every day of the year and Lessee shall operate the Hotel in substantially complete fashion in accordance with the standards set forth in this Lease. Lessee shall stock and maintain adequate working capital and adequate inventories of food, beverages, operating equipment, and supplies consistent with the business(es) conducted on the Premises. (iv) Lessee shall not place or permit to be placed on. any portion of the Premises, in locations that are visible from any location off of the Premises, any art, displays, monuments, signs, logos, or advertising unless such art, displays, monuments, signs, logos, or advertising, including without limitation the size, design, subject, wording, composition, color, and lighting thereof, are consistent with the City's Municipal Code and any other applicable Governmental Requirements. (v) To the maximum extent permitted consistent with applicable Governmental Requirements, without the prior written approval of the City Manager or his or her designee, which approval may be withheld in his/her sole and absolute discretion, Lessee shall not erect or maintain or allow to be erected or maintained any antennae or other device for the transmission or reception of television signals or any other form of electromagnetic radiation outdoors above ground on any portion of the Premises, whether attached to an Improvement or otherwise. 7.2 Management by Approved Hotel Management Company; Changes in Hotel Management Company and New or Amended Hotel Management Agreement~ Removal/Reulacement of Hotel Management. At all times from the date the Hotel opens for business to the general public through the remainder of the Lease Term Lessee shall cause the day-to-day operation of the Hotel to be managed by a Hotel Management Company approved by Lessor and, in this regard, Lessee shall cause the Hotel Management Company to continuously (24 hours per day during all days that the Hotel is open for business) maintain competent and professional staff on the Premises. The following Hotel Management Companies shall be deemed approved by Lessor and shall require no further approval by Lessor hereunder: (i) Ace Hotels; (ii) Ascend Collection offered by Choice Brands; (iii) the following Commune Hotels brands: Joie de Vivre and Thompson Hotels; (iv) the following Denihan Hospitality brands: The James and Affinia; (v) Destination Hotels; (vi) Dolce Hotels; (vii) Fairmont Hotels; (viii) Four Seasons Hotels; (ix) the following Hilton Brands: Curio, Conrad and Waldorf-Astoria; (x) the following Hyatt brands: Andaz, Grand Hyatt, Hyatt Regency, and Park Hyatt; (xi) Kimpton or the following Kimpton Hotels brands: Argonaut, Monaco, and Palomar; (xii) Loews Hotels; (xiii) Magnolia Hotel; (xiv) Mandarin Oriental; (xv) the following Marriott brands: Autograph Collection, AC, Bulgari, JW Marriott, Marriott, Renaissance Hotels, and Ritz -Carlton; (xvi) Morgan Hotels (all brands); (xvii) 112/066751-0097 6271361.10 a09/04/14 -36- the following Montage Hotels & Resorts brands: Montage Hotels and Pendry Hotels; (xviii) Omni Hotels; (xix) Orient Express Hotels; (xx) Pacific Hospitality Group; (xxi) Public Chicago Hotel; (xxii) Radisson Blu offered by Carlson; (xxiii) Raffles Hotels and Resorts; (xxiv) Standard International Hotels —all brands; (xxv) the following Starwood Capital Group brands: 1 Hotel, Baccarat Hotel, and Postcard Inn; (xxvi) the following Starwood Hotels & Resorts brands: Le Meridien, Luxury Collection, Sheraton Resorts, St. Regis, Westin Hotels & Resorts, and W Hotel; and (xxvii) Trump Hotel Collection. As to any Hotel Management Company that is not deemed approved pursuant to the preceding paragraph, Lessee shall submit to the City Manager or his or her designee for his or her review and approval the identity of the Hotel Management Company Lessee desires to have manage the Hotel. The City Manager or his or her designee shall not unreasonably withhold, condition, or delay approval of the Hotel Management Company and shall grant such approval if Lessee provides evidence reasonably satisfactory to the City Manager or his or her designee that (i) the executive management of the Hotel Management Company who will be responsible for the management of the Hotel shall have a minimum of ten (10) years experience in the successful operation of hotels in Southern California on a par (or better) than the prevailing standard in comparable quality to the Hotel; (ii) the Hotel Management Company, its principals, and all of the individuals who will be responsible for managing the Hotel on the Premises are of good moral character and none of them ever has been convicted of a felony involving moral turpitude, including without limitation any crime involving dishonesty, theft, embezzlement, forgery, violence, or physical force against another person or persons; and (iii) the Hotel Management Company has or will be in a position to participate in a nationwide reservation system. Concurrently with submitting its request for approval of the Hotel Management Company, Lessee shall submit to the City Manager or his or her designee all information needed to demonstrate compliance with the foregoing criteria and thereafter, upon Lessor's request, Lessee shall cooperate with Lessor and provide such additional information as Lessor may reasonably request relating to such criteria or other factors bearing upon Lessor's approval of the Hotel Management Company. If the City Manager or his or her designee disapproves the Hotel Management Company, he or she shall do so by written notice to Lessee stating the reasons for such disapproval. In addition to the foregoing, at the time set forth in the Schedule of Performance (as to the first Hotel Management Company to be approved or deemed approved prior to the Lease Commencement Date pursuant to Sections 3.1.4 and 3.2.5 of this Lease) or prior to the time that any new or different Hotel Management Company commences to manage and operate the Hotel on the Premises, and whether or not such Hotel Management Company is deemed approved by Lessor as provided herein, Lessee shall submit to the City Manager of Lessor or his or her designee for his or her approval the form of the hotel management agreement that Lessee proposes to enter into with the Hotel Management Company ("Hotel Management Agreement"); provided, that Lessee shall have the right to redact from the Hotel Management Agreement submitted to Lessor the amount of the fees or charges payable by Lessee to the Hotel Management Company. In addition, upon Lessor's request, Lessee shall cooperate with Lessor and provide such additional information as Lessor may reasonably request relating to such criteria or other factors bearing upon Lessor's approval of the Hotel Management Agreement. The City Manager or his or her designee shall not unreasonably withhold, condition, or delay approval of the Hotel Management Agreement and shall grant such approval if Lessee provides evidence reasonably satisfactory to the City Manager or his or her designee that the Hotel 112/066751.0097 6271361.10 a09/04/14 -37- Management Agreement incorporates the applicable obligations of Lessee set forth in this Lease, including without limitation Section 7.4 hereof, and is consistent in all respects with this Lease. If the City Manager or his or her designee disapproves the Hotel Management Agreement, he or she shall do so by written notice to Lessee stating the reasons for such disapproval. Within five (5) days after Lessee and the Hotel Management Company execute and deliver the Hotel Management Agreement, Lessee shall deliver to Lessor a complete final executed copy consistent with Lessor's approval; provided, that Lessee shall have the right to redact from the Hotel Management Agreement submitted to Lessor the amount of the fees or charges payable by Lessee to the Hotel Management Company as business trade information that is not a matter of public record. If after Lessor's approval of the Hotel Management Company and the Hotel Management Agreement, as provided herein, Lessee desires either to (i) change the Hotel Management Company or (ii) enter into a new Hotel Management Agreement (provided that a mere amendment for an extension of the term of the previously approved Hotel Management Agreement shall not be deemed to constitute a new Hotel Management Agreement for purposes of this Section 7.2), Lessee shall be required to submit such matter(s) to the City Manager or his or her designee, who shall have the authority on behalf of Lessor to approve or disapprove the same. The City Manager or his or her designee shall not unreasonably withhold, condition, or delay approval of a change in the Hotel Management Company and/or a new Hotel Management Agreement and shall grant such approval(s) consistent with the criteria and procedures set forth above. In no event shall Lessee change the Hotel Management Company or amend or enter into a new Hotel Management Agreement requiring Lessor's approval hereunder without first obtaining Lessor's approval. Within five (5) days after Lessee enters into any new or amended Hotel Management Agreement, Lessee shall deliver to Lessor a complete final executed copy consistent with Lessor's approval; provided, that Lessee shall have the right to redact from any such new or amended Hotel Management Agreement submitted to Lessor the amount of the fees or charges payable by Lessee to the Hotel Management Company as business trade information that is not a matter of public record. In addition to the foregoing, Lessor shall have the right, but not the obligation, upon delivery of ninety (90) days written notice to Lessee, to require Lessee to remove the Hotel Management Company and replace the Hotel Management Company with another Hotel Management Company meeting the requirements set forth in this Section 7.2 if Lessor reasonably determines that the Hotel Management Company on the Premises is guilty of "Gross Mismanagement." For purposes of this Lease, "Gross Mismanagement" shall include, but is not limited to, any of the following: (i) the Hotel Management Company's intentional underreporting of Gross Room Revenues or Gross Non -Room Revenues; (ii) the Hotel Management Company's failure to timely cure a Default under Section 7.1of this Lease after and despite Lessor's delivery of written notice; and (iii) the Hotel Management Company's failure to timely cure more than three (3) separate Defaults under Article 8 ("Maintenance and Repairs") of this Lease that occur during any continuous one (1) year period during the Lease Term, after and despite Lessor's delivery of written notice of Default. 7.3 Hotel Franchisor and Hotel Franchise Agreement. Lessee shall have the right but not the obligation from time to time to operate the Hotel as a franchise of a hotel company. 1121066751-0097 6271361.10 a09/04/14 -38- The following Hotel Franchisors shall be deemed approved by Lessor and shall require no further approval by Lessor hereunder: (i) Ace Hotels; (ii) Ascend Collection offered by Choice Brands; (iii) the following Commune Hotels brands: Joie de Vivre and Thompson Hotels; (iv) the following Denihan Hospitality brands: The James and Affinia; (v) Destination Hotels; (vi) Dolce Hotels; (vii) Fairmont Hotels; (viii) Four Seasons Hotels; (ix) the following Hilton Brands: Curio, Conrad and Waldorf-Astoria; (x) the following Hyatt brands: Andaz, Grand Hyatt, Hyatt Regency, and Park Hyatt; (xi) Kimpton or the following Kimpton Hotels brands: Argonaut, Monaco, and Palomar; (xii) Loews Hotels; (xiii) Magnolia Hotel; (xiv) Mandarin Oriental; (xv) the following Marriott brands: Autograph Collection, AC, Bulgari, JW Marriott, Marriott, Renaissance Hotels, and Ritz -Carlton Hotels; (xvi) Morgan Hotels (all brands); (xvii) the following Montage Hotels & Resorts brands: Montage Hotels and Pendry Hotels; (xviii) Omni Hotels; (xix) Orient Express Hotels; (xx) Public Chicago Hotel; (xxi) Radisson Blu offered by Carlson; (xxii) Raffles Hotels and Resorts; (xxiii) Standard International Hotels —all brands; (xxiv) the following Starwood Capital Group brands: 1 Hotel, Baccarat Hotel, and Postcard Inn; (xxv) the following Starwood Hotels & Resorts brands: Le Meridien, Luxury Collection, Sheraton Resorts, St. Regis, Westin Hotels & Resorts, and W Hotel; and (xxvi) Trump Hotel Collection. As to any Hotel Franchisor that is not deemed approved pursuant to the preceding paragraph, Lessee shall submit to the City Manager or his or her designee for his or her review and approval the identity of the Hotel Franchisor with which Lessee desires to affiliate. The City Manager or his or her designee shall not unreasonably withhold, condition, or delay approval of the Hotel Franchisor is a nationally recognized hotel chain of comparable quality to the list of pre -approved Hotel Franchisors listed in the preceding paragraph with a minimum of ten (10) years experience in the successful franchising of hotels in Southern California comparable in quality to the Hotel to be operated and maintained on the Premises. Concurrently with submitting its request for approval of the Hotel Franchisor, Lessee shall submit to the City Manager or his or her designee all information needed to demonstrate compliance with the foregoing criteria and thereafter, upon Lessor's request, Lessee shall cooperate with Lessor and provide such additional information as Lessor may reasonably request relating to such criteria or other factors bearing upon Lessor's approval of the Hotel Franchisor. If, the City Manager or his or her designee disapproves the Hotel Franchisor, he or she shall do so by written notice to Lessee stating the reasons for such disapproval. In addition to the foregoing, at the time set forth in the Schedule of Performance (as to the first Hotel Franchisor to be approved or deemed approved prior to the Lease Commencement Date pursuant to Sections 3.1.5 and 3.2.6 of this Lease) or prior to the time that Lessee enters into an agreement with any new or different Hotel Franchisor with respect to the Hotel on the Premises, and whether or not such Hotel Franchisor is deemed approved by Lessor as provided herein, Lessee shall submit to the City Manager of Lessor or his or her designee for his or her approval the form of the franchise agreement that Lessee proposes to enter into with the Hotel Franchisor ("Hotel Franchise Agreement"); provided, that Lessee shall have the right to redact from the Hotel Franchise Agreement submitted to Lessor the amount of the fees or charges payable by Lessee to the Hotel Franchisor, In addition, upon Lessor's request, Lessee shall cooperate with Lessor and provide such additional information as Lessor may reasonably request relating to such criteria or other factors bearing upon Lessor's approval of the Hotel Franchise Agreement. The City Manager or his or her designee shall not unreasonably withhold, condition, or delay approval of the Hotel Franchise Agreement and shall grant such approval if Lessee 112/066751-0097 6271361.10 a09/04114 -39- provides evidence reasonably satisfactory to the City Manager or his or her designee that the Hotel Franchise Agreement is consistent in all respects with this Lease. If the City Manager or his or her designee disapproves the Hotel Franchise Agreement, he or she shall do so by written notice to Lessee stating the reasons for such disapproval. Within five (5) days after Lessee and the Hotel Franchisor execute and deliver the Hotel Franchise Agreement, Lessee shall deliver to Lessor a complete final executed copy consistent with Lessor's approval; provided, that Lessee shall have the right to redact from the Hotel Franchise Agreement submitted to Lessor the amount of the fees or charges payable by Lessee to the Hotel Franchisor as business trade information that is not a matter of public record. If after Lessor's approval of the Hotel Franchisor and the Hotel Franchise Agreement, as provided herein, Lessee desires either to (i) change the Hotel Franchisor or (ii) enter into a new Hotel Franchise Agreement (provided that a mere amendment for an extension of the term of the previously approved Hotel Franchise Agreement shall not be deemed to constitute a new Hotel Franchise Agreement for purposes of this Section 7.3), Lessee shall be required to submit such matter(s) to the City Manager or his or her designee, who shall have the authority on behalf of Lessor to approve or disapprove the same. The City Manager or his or her designee shall not unreasonably withhold, condition, or delay approval of a change in the Hotel Franchisor and/or a new Hotel Franchise Agreement and shall grant such approval(s) consistent with the criteria and procedures set forth above. In no event shall Lessee change the Hotel Franchisor or amend or enter into a new Hotel Franchise Agreement requiring Lessor's approval hereunder without first obtaining Lessor's approval. Within five (5) days after Lessee enters into any new or amended Hotel Franchise Agreement, Lessee shall deliver to Lessor a complete final executed copy consistent with Lessor's approval; provided, that Lessee shall have the right to redact from any such new or amended Hotel Franchise Agreement submitted to Lessor the amount of the fees or charges payable by Lessee to the Hotel Franchisor as business trade information that is not a matter of public record. 7.4 Prohibition on Lessee's, Hotel Management Company's, and Subcontractors' Employment or Retention of Certain Persons; Lessor's Right to Require Removal. To the maximum extent permitted by law, during the entire Lease Term Lessee shall not knowingly employ or retain and shall not permit the Hotel Management Company or any other independent contractor, subcontractor, or firm operating on or from the Premises to employ or retain any person who works at or from the Premises and who is not of good moral character, which for purposes of this Lease shall mean that such person (i) is registered or is required to be registered as a sex offender in California or any other state; (ii) has been convicted of a crime in another country or state that would require such person to register as a sex offender in California if such crime were committed in California; (iii) has been convicted in any country or state at any time of a felony involving moral turpitude, including without limitation any crime involving dishonesty, theft, embezzlement, forgery, extortion, or intimidation, violence, or physical force, or the threat of violence or physical force against any other person or persons; or (iv) has a criminal charge then pending based on the alleged commission of a felony meeting the requirements of clause (iii) (provided, that as to persons who meet the disqualification of this clause (iv) only, such persons shall not be considered to meet the disqualification of this clause (iv) if the criminal charge is dropped, the person is acquitted of the alleged criminal offense, or the criminal case is finally disposed of on a basis that does not result in the person meeting any of the disqualifications in clauses (i)-(iii), inclusive). Lessee shall institute appropriate employment screening procedures to verify that all of Lessee's employees who work at or from 112/066751-0097 6271361.10 009/04/14 -40- the Premises are of good moral character and through the Hotel Management Agreement and any other contracts with independent contractors, subcontractors, and other firms operating on or from the Premises Lessee shall require that those other firms and entities institute similar appropriate employment screening procedures as well. The requirements of this Section 7.4 shall be included in the Hotel Management Agreement approved by Lessor in accordance with Section 3.2,5 of this Lease (prior to the Commencement Date) and Section 7.2 (with respect to any new or amended Hotel Management Agreement submitted to Lessor from and after the Commencement Date). The requirements of this Section 7.4 shall be included in each contract entered into by Lessee, the Hotel Management Company, or any other authorized agent of Lessee with any other person, firm, or entity that occupies space or provides services on the Premises during the Lease Term. In addition to Lessor's rights under Section 7.2 to require removal/replacement of the Hotel Management Company for Gross Mismanagement, to the maximum extent permitted by law Lessor shall have the right, but not the obligation, to require Lessee, the Hotel Management Company, and any other person, firm, or entity that occupies space or provides services on the Premises during the Lease Term, as applicable, to immediately remove or cause the removal from the Premises and to immediately tenninate or cause termination of the employment or retention of any person who is not of good moral character, as provided herein. 7.5 Name of Hotel; Promotions and Advertising. At all times the Hotel shall be operated under the trade name of Lido House, Lido House Hotel, or such other trade name that is approved by Lessor in its reasonable discretion; provided that Lessee shall at all times have the tight to add or include in the name of the Hotel either or both of the following without Lessor's written consent: (i) "Newport" or "Newport Beach"; and (ii) the trade name of the Hotel Franchisor. All of Lessee's promotions and advertising for the Hotel shall refer to and use said name and, if the word "Newport" or "Newport Beach" is not part of the name of the Hotel itself all such promotions and advertising shall prominently include reference to the Hotel's locationin the City of Newport Beach. ARTICLE 8 MAINTENANCE AND REPAIRS 8.1 Maintenance and Repairs; General. At Lessee's sole cost and expense, at all times during the Lease Term Lessee shall be responsible for maintaining, repairing, and operating the Premises, all Improvements constructed or to be constructed thereon (including landscaping, lighting, and signage), and all equipment and personal property placed from time to time on the Premises in a quality and condition consistent with the Required Hotel Standard and similar quality hotel properties in the Southern California marketplace, in compliance with the terms of the City of Newport Beach Municipal Code, other applicable Governmental Requirements, and the following: (i) All Improvements on the Premises shall be maintained in appropriate condition in accordance with the practices prevailing in the operations of similar developments, and in conformance and substantial compliance with all plans, drawings, and related documents approved by Lessor pursuant to this Lease and all conditions of approval of land use entitlements adopted by Lessor in its governmental or regulatory capacity, including without limitation the interiors and exteriors of all buildings and structures and all grounds to the curbline, the 112/066751-0097 6271361.10 a09/04/14 -41- entrances, windows, partitions, doors, lighting and plumbing fixtures, heating, ventilation and air conditioning systems, benches, shelters, planters, kiosks, trash containers, signs, sculptures, fountains, play areas, swimming pools, jacuzzis, spas, exercise rooms, platforms, stages, lateral water and sanitary sewer lines, drainage facilities, sidewalks, driveways, parking areas and facilities, landscaping and irrigation facilities, exterior lighting systems, and pedestrian walkways. (ii) All furnishings and fixtures on the Premises shall be kept at all times in a neat, clean, and appropriate condition in accordance with the practices prevailing in the operations of similar developments and shall be periodically repaired and replaced in accordance with the practices prevailing in the operations of similar developments. (ili) All exterior and interior painted surfaces shall be kept clean, shall be periodically repainted, and shall not be allowed to show unreasonable peeling or worn surfaces. (iv) All wallpapered or other treated surfaces shall be kept clean and shall be periodically repaired or replaced in accordance with the practices prevailing in the operations of similar developments. (v) Landscape maintenance shall include, without limitation, periodic watering/irrigation, fertilization, mowing, edging, trimming of grass, tree and shrub pruning, trimming, and shaping of trees and shrubs to maintain a natural and healthy appearance, road visibility, and irrigation coverage, and replacement, as needed, of all dead or diseased plant materials, control of weeds in all planters, shrubs, lawns, ground covers, and other planted areas; and staking for support of trees. (vi) Clean-up maintenance shall include, without limitation, maintenance of all sidewalks, paths, and other paved areas to keep the same in a clean and weed -free condition, maintenance of all such areas to keep the same clear of dirt, mud, trash, debris, and other matter which is unsafe or unsightly, removal of all trash, litter, and other debris from improvements and landscaping, and clearance and cleaning of all areas maintained prior to the end of each day on which maintenance operations are performed to ensure that all cuttings, weeds, leaves, and other debris are properly disposed of by maintenance workers. (vii) Maintenance of appropriate entrance, exit, and directional signage, markers, and lights shall be provided as reasonably required and in accordance with the practices prevailing in the operation of similar developments. (viii) Lighting fixtures shall be cleaned and lamps/bulbs shall be promptly replaced Eliot operating. (ix) Pavement striping, markers, directional signs, and similar improvements shall be periodically repainted or replaced as necessary to maintain the same in appropriate condition in accordance with the practices prevailing in the operations of similar developments. (x) Adequate security personnel and security measures shall be instituted and maintained in a commercially reasonable manner to provide a safe and secure environment in all interior and exterior areas of the Premises and for all activities and events occurring on the Premises. 112/066751.0097 6271361,10809/04/14 -42- 8.2 Waste. Lessee shall not commit or suffer to be committed any waste or impairment of the Premises or the Improvements, or any part thereof. 8.3 Hazardous Substances. Lessee covenants each and all of the following: (i) Following the Commencement Date and within commercially reasonable time periods, Lessee shall remove all existing Hazardous Substances from the Premises in the manner prescribed by law. (ii) Upon completion of construction of the Hotel and prior to opening the Hotel for business to the general public the Premises shall be free and clear of any Hazardous Substances to the extent required by applicable law. (iii) The development, construction, and uses of the Premises required and permitted under this Lease do not require the presence of any Hazardous Substance on, in, or under the Premises, except for those customarily used in the ordinary course of business for such development, construction, and use consistent with applicable law. (iv) If at any time during the Lease Term any Hazardous Substance is present on, in, or under the Premises (including, without limitation, the soil and groundwater) in violation of applicable law, Lessee, at no expense to Lessor, and at the earliest practicable date, shall remove such Hazardous Substances from the Premises (including without limitation any Hazardous Substances in the soil or groundwater) and any surrounding areas to which such Hazardous Substances may have migrated from the Premises in accordance with and to the extent required by any and all applicable legal requirements. The parties intend to require Lessee to remove all Hazardous Substances from the Premises and surrounding areas to which such Hazardous Substances may have migrated to the extent required by applicable law, if such Hazardous Substances are present at levels of concentration which require removal under applicable law. If, at any time during the Lease Term, Lessor has reasonable cause to believe one or more Hazardous Substances may be present on, in, or under the Premises in violation of applicable law, Lessor may by written notice inform Lessee of the basis for Lessor's concern and require Lessee to cause the Premises to be tested for such Hazardous Substance(s) at Lessee's sole expense in accordance with a testing plan and schedule first approved in writing by Lessor. Lessee shall exercise reasonable diligence to submit a testing plan to Lessor within 30 days after the date of the Lessor's notice, endeavor to obtain Lessor's approval of the testing plan as soon as practicable thereafter, and cause the testing to begin within 30 days Lessor's approval of the testing plan. Notwithstanding the foregoing, nothing in this Section 8.3(iv) is intended to limit, restrict, or modify Lessor's obligations and responsibilities set forth in Section 3.5.2 of this Lease. (v) Lessee shall not bring or allow to be brought onto the Premises or use or store on the Premises any Hazardous Substances without the prior express written consent of Lessor, except for those Hazardous Substances (including without limitation fuel stored in motor vehicles) customarily used in the ordinary course of business in the use and operation of the Premises and the Improvements. (vi) The following covenants pertain to Lessee's occupancy and use of the Premises and Improvements: I12/066751-0097 6271361.10 a09/04/14 -43- (a) No underground storage tanks for Hazardous Substances shall be installed on or under the Premises. (b) Lessor and its officers, employees, contractors and agents shall at all times have the right to go upon and inspect the Premises and Improvements and the operations conducted thereon to assure compliance with the requirements herein stated. Lessor shall provide reasonable prior notice to Lessee of such entry, and shall seek to minimize interference with and interruption to Lessee's use of the Premises and Improvements as much as is reasonably feasible. Such entry shall be in compliance with all applicable safety rules and regulations. This inspection may include taking samples for testing of substances and materials present and/or testing soils on the Premises and Improvements. Lessor shall indemnify, defend, and hold hannless Lessee from and against any claims, liabilities, losses, and damage caused by Lessor during any such inspections (excepting that this indemnity obligation shall not apply to claims, liabilities, losses, and damage not created by Lessor and resulting only from Lessor's discovery of Hazardous Substances on the Premises), and Lessor shall be responsible for the prompt repair and/or restoration of any such damage caused by Lessor during any such inspection. (c) Lessee shall be responsible for posting on the Premises and Improvements any signs required by Section 25249.6 of the California Health and Safety Code and regulations promulgated pursuant thereto. Lessee shall also complete and file any business response plans or inventories required by Chapter 6.95. of the California Health and Safety Code and regulations promulgated pursuant thereto. Lessee shall concurrently file a copy of any such business response plan or inventory with Lessor. (d) Lessee shall immediately notify Lessor in writing of the release of any Hazardous Substance on the Premises and Improvements in violation of applicable law. (e) Lessee shall to the extent required by applicable law immediately remove any Hazardous Substances located on the Premises and Improvements and shall dispose of such Hazardous Substances in a safe and legal manner. Lessee shall immediately disclose to Lessor its disposal of any Hazardous Substance located on the Premises and Improvements and upon Lessor's written request shall provide written documentation of its safe and legal disposal. Notwithstanding the foregoing, nothing in this Section 8.3(vi)(e) is intended to limit, restrict, or modify Lessor's obligations and responsibilities set forth in Section 3.5.2 of this Lease. (f) Lessee shall be responsible for and bear the entire cost of removal and disposal of Hazardous Substances. Lessor may also pass through to Lessee any and all clean-up costs incurred by Lessor as a result of Lessee's activities on the Premises and Improvements or the presence of any Hazardous Substance(s) on, in, or under the Premises and Improvements. Upon termination of this Lease, Lessee is required, in accordance with all applicable laws, to remove from the Premises and Improvements any equipment or improvement to the Premises that is contaminated by Hazardous Substances. Notwithstanding the foregoing, nothing in this Section 8.3(vi)(f) is intended to limit, restrict, or modify Lessor's obligations and responsibilities set forth in Section 3.5.2 of this Lease. (vii) From and after the Commencement Date, Lessee shall indemnify, defend, and hold harmless City and its officials, officers, employees, agents, contractors, and consultants I12/066751-0097 6271361.10 a09/04/14 -44- from andagainst any claims, actions, suits, legal and administrative proceedings, liability, injury, deficiency, damages, fines, penalties, punitive damages, costs, and expenses (including, without limitation, the cost of any cleanup, remediation, removal, mitigation, monitoring or testing of Hazardous Substances, and reasonable attorneys' fees) resulting from, arising out of, or based upon (a) the presence, release, use, generation, discharge, storage, or disposal of any Hazardous Substances on, under, in, or about, or the transportation of any Hazardous Substances to or from, the Premises; and (b) the violation, or alleged violation, of any statute, ordinance, order, rule, regulation, permit, judgment, or license relating to the use, generation, release, discharge, storage, disposal, or transportation or Hazardous Substances on, under, in, about, to, or from the Premises. Notwithstanding the foregoing, nothing in this Section 8.3(vii) is intended to limit, restrict, or modify Lessor's obligations and responsibilities set forth in Section 3.5.2 of this Lease and Lessee's indemnity obligations set forth herein shall not apply if Lessor is obligated and responsible thereunder for remediation and/or removal of the Hazardous Substances. (viii) From and after the Commencement Date Lessee waives, releases, and discharges Lessor and its officials, officers, employees, agents, contractors, and consultants from any and all present and future claims, demands, suits, legal and administrative proceedings, and from all liability for damages, losses, costs, liabilities, fees, and expenses (including, without limitation, attorneys' fees) arising out of or in any way connected with Lessor's or Lessee's use, maintenance, ownership, or operation of the Premises, any Hazardous Substances on the Premises, and the existence of Hazardous Substances contamination in any state on the Premises, however the Hazardous Substances came to be placed there, except that arising out of the intentional misconduct of Lessor or its officials, officers, employees, agents, contractors, or consultants. Lessee acknowledges that it is aware of and familiar with the provisions of Section 1542 of the California Civil Code which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." As such relates to this Section 8.3, Lessee hereby waives and relinquishes all rights and benefits which it may have under Section 1542 of the California Civil Code. Notwithstanding the foregoing, nothing in this Section 8.3(viii) is intended to limit, restrict, or modify Lessor's obligations and responsibilities set forth in Section 3.5.2 of this Lease and Lessee's waiver of rights and release of claims set forth herein shall not apply if Lessor is obligated and responsible thereunder for remediation and/or removal of the Hazardous Substances. 8.4 Lessor Not Responsible for Maintenance or Repairs. Lessor shall have no responsibility for and shall not be required to perform any maintenance, repairs, or services or to assume any expense in connection with the Premises, the Improvements, or any furnishings, fixtures, and equipment. 8.5 Capital Replacement Reserve Fund. Commencing no later than the Operating Commencement Date and continuing thereafter through the balance of the Lease Term Lessee shall establish and maintain a capital replacement reserve fund with a reputable financial 112/066751-0097 6271361.10 a09/04/14 -45- institution reasonably acceptable to the City Manager or his or her designee (the "Capital Replacement Reserve Fund") and shall deposit into said fund a minimum of the following amounts: (i) for the first Operating Year, two percent (2%) of the sum of Gross Room Revenues and Gross Non -Room Revenues for said year; (ii) for the second Operating Year, three percent (3%) of the sum of Gross Room Revenues and Gross Non -Room Revenues for said year; and (iii) for the third and each subsequent Operating Year through the balance of the Initial Term, four and one-half percent (4-1/2%) of the sum of Gross Room Revenues and Gross Non -Room Revenues for each said year; and (iv) for each year during the Option Term, if applicable, four percent (4%) of the sum of Gross Room Revenues and Gross Non -Room Revenues for each said year (collectively, the "Capital Replacement Reserve"). All interest and earnings on funds deposited into the Capital Replacement Reserve Fund shall be kept in said fund but shall not be credited against the minimum deposits required hereunder. Within thirty (30) days after the close of each Operating Year during the Initial Term, Lessee shall submit to Lessor (i) evidence that Lessee has deposited the required minimum amount in the Capital Replacement Reserve Fund for the previous Operating Year (based upon Lessee's accounting for Gross Room Revenues and Gross Non -Room Revenues that is due at that time), (ii) an itemization of all withdrawals from and expenditures of funds deposited into the Capital Replacement Reserve Fund in the preceding Operating Year and the purpose thereof, and (iii) the balance remaining in the Capital Replacement Reserve Fund at the time the annual report is prepared. The Capital Replacement Reserve Fund shall not be pledged or encumbered, except to a permitted Mortgagee, and shall be used only for capital expenditures for additions, replacements, renovations, or significant upgrades of or to the Improvements, including fixtures and equipment, that have a useful life of not less than five (5) years which benefit the Premises and which are approved in advance by the City Manager of City or his or her designee, which approval(s) shall not be unreasonably withheld, conditioned, or delayed. Notwithstanding the foregoing, Lessee acknowledges that its responsibility to maintain, repair, and replace the Hotel and related Improvements as required hereunder shall not be limited or restricted based on the amount of funds held from time to time in the Capital Replacement Reserve Fund. Upon the expiration or earlier termination of this Lease, all funds in the Capital Replacement Reserve Fund shall be allocated first to any repairs, maintenance, replacements, and renewals necessary to place the Hotel in the physical condition required by this Lease, as reasonably determined by Lessor, and any excess shall be the sole property of Lessee. 8.6 Lessor's Rights/Remedies for Deficient Maintenance and Repairs. In addition to Lessor's rights and remedies for Lessee's Default hereunder, as set forth in Article 16 of this Lease, Lessor shall have the rights and remedies set forth in this Section 8.6. If Lessor delivers written notice to Lessee that the maintenance or condition of the Premises or any portion thereof or any Improvements thereon does not comply with this Lease or that Lessee has committed waste and such notice describes the deficiencies/conditions that need to be corrected, remedied, or cured, Lessee shall correct, remedy, or cure the deficiencies (i) within two (2) business days after receipt of Lessor's written notice if the deficiencies relate to dirt, mud, trash, debris, waste, litter, graffiti, broken or inoperative irrigation systems, or other landscape maintenance deficiencies or (ii) within thirty (30) days after receipt of Lessor's written notice if the deficiencies relate to any other maintenance or repair requirements unless (as to deficiencies otherwise subject to this clause (ii)) Lessor's notice states that the deficiencies are an urgent matter relating to public health and safety, in which case Lessee shall correct, remedy, or cure the deficiencies with all due diligence and shall complete the correction, remedy, or cure at the earliest possible time but in no event more than two (2) business days after receipt of Lessor's I12/066751-0097 6271361.10 a09/04/14 -46- written notice, subject only to extensions of time if Lessee's inability to correct, remedy, or cure the deficiency(ies) within said two (2) day period is excusable due to an Event or Events of Force Majeure. Notwithstanding the foregoing, in the event such deficiencies are of a nature which takes longer than thirty (30) days or two (2) business days to cure, correct or remedy, then such time frames shall be extended so long as Lessee commences to cure, correct, or remedy such deficiencies, and diligently prosecutes same to completion. In the event Lessee fails to maintain or repair the Premises or any portion thereof or any Improvements thereon in accordance with this Lease and fails to cure any deficiencies within the applicable correction, remedy, or cure period described above, Lessor, in addition to any other rights and remedies hereunder, shall have the right to enter onto the Premises or to contract with a third party or parties for the correction, remedy, and cure of any such deficiencies, and Lessee shall be responsible for payment of all such costs actually and reasonably incurred by Lessor. ARTICLE 9 TAXES, ASSESSMENTS, 'UTILITIES, AND OTHER CHARGES 9.1 Lessee's Obligation to Pay Impositions. In accordance with California Revenue and Taxation Code Section 107.6(a), the Parties acknowledge that from and after the Commencement Date and for the balance of the Lease Term Lessee will have a possessory interest in the Premises that will be subject to the obligation to pay possessory interest taxes. Lessee agrees to pay or cause to be paid, as and when they become due and payable, and before any fine, penalty, interest, or cost may be added thereto, or become due or be imposed by operation of law for the nonpayment thereof, all taxes, assessments, franchises, excises, license and permit fees, and other governmental levies and charges, general and special, ordinary and extraordinary, unforeseen and foreseen, of any kind and nature whatsoever which at any time during the Lease Term may be assessed, levied, confirmed, imposed upon, or grow or become due and payable out of or in respect of, or become a lien on: (i) the Premises and Improvements or any part thereof or any appurtenance thereto; (ii) the rent and income received by Lessee from subtenants, guests, or others for the use or occupation of the Premises and the Improvements thereon; or (iii) this transaction or any document to which Lessee is a party, creating or transferring an interest or estate in the Premises and Improvements. All such taxes, franchises, excises, license and permit fees, and other governmental levies and charges shall hereinafter be referred to as "Impositions," and any of the same shall hereinafter be referred to as an "Imposition". Notwithstanding the foregoing or any other provision of this Lease, an Imposition shall not include nor shall Lessor be responsible to pay any so-called "business license tax" or "gross receipts tax" (or the like) imposed upon landlords generally in connection with the operation of their business, even if such tax is calculated based upon rents payable under a lease. Any Imposition relating to a fiscal period of the taxing authority, a part of which period is included within the Lease Term and a part of which is included in a period of time either (i) before the commencement of the Lease Term or (ii) after the expiration of the Lease Term, shall (whether or not such Imposition shall be assessed, levied, confirmed, imposed upon, become a lien upon the Premises and Improvements, or shall become payable, during the Lease Term) be adjusted between Lessor and Lessee as of the commencement, expiration or termination of the Lease Term, as applicable, so that Lessee shall pay that portion of such Imposition which is applicable to the Lease Term, and Lessor shall pay the remainder thereof. 112/06675I-0097 6271361.10 a09/04/14 -47- The failure of Lessee to pay an Imposition that cannot under any circumstances give rise to a lien against the Premises and Improvements shall not be a breach of the second paragraph of this Section 9.1. Lessee hereby agrees to defend, indemnify, and hold harmless Lessor and Lessor's officials, officers, employees, and agents from and against all claims, liability, loss, damage, costs, or expenses (including reasonable attorney's fees and court costs) arising from or as a result of Lessee's failure to pay any Imposition to the extent that such Imposition relates to a fiscal period included within the Lease Term. If, by law, any Imposition may at the option of the payer be paid in installments (whether or not interest shall accrue on the unpaid balance of such Imposition), Lessee may exercise the option to pay the same (and any accrued interest on the unpaid balance of such Imposition) in installments and, in such event, shall pay such installments during the Lease Tenn as the same respectively become due and before any fine, penalty, or further interest or cost may be added thereto; provided, however, that the amount of all installments of any such Imposition which will be the responsibility of Lessee pursuant to this Section 9.1, and which are to become due and payable after the expiration or termination of the Lease Term, shall be deposited with Lessor for such payment on the date which shall be ninety (90) days immediately prior to the date of such expiration or termination. Lessee shall furnish to Lessor, within thirty (30) days after the date when any real property taxes, assessments, or any other Imposition which could have any effect on Lessor's title to the Premises would become delinquent, official receipts of the appropriate taxing authority or other evidence, satisfactory to Lessor, evidencing payment thereof. Nothing in this Section 9.1 shall alter, modify or limit in any way the rights and obligations of Lessee to contest property tax assessments as set forth and as limited in Section 9.2 of this Lease. 9.2 Contesting Impositions. Notwithstanding Section 9.1, Lessee shall have the right to appeal or contest any Imposition subject to the limitations set forth in this Section 9.2. If Lessee desires to appeal or contest any Imposition, the appeal, contest, opposition, or objection shall be filed before the tax, assessment, or other Imposition at which it is directed becomes delinquent, written notice of the appeal, contest, opposition, or objection shall be given to Lessor before the date the tax, assessment, or other Imposition becomes delinquent, and Lessee shall prosecute such proceeding to final adjudication with reasonable dispatch.. No such appeal, contest, opposition, or objection shall be continued or maintained after the date the tax, assessment, or other Imposition at which it is directed becomes delinquent unless Lessee has met one of the following conditions: (i) paid such tax, assessment, or other charge under protest prior to its becoming delinquent; or (ii) obtained and maintained a stay of all proceedings for enforcement and collection of the tax, assessment, or other Imposition by posting such bond or other matter required by law for such a stay; or (iii) delivered to Lessor a good and sufficient bond in a form reasonably acceptable to Lessor's City Manager or designee, in an amount equal to one hundred twenty-five 112/066751-0097 627136110 a09/04/14 -48- percent (125%) of the amount in controversy (inclusive of fines, interests, penalties, costs, and other expenses that may have accrued or been imposed thereon) and issued by a surety company authorized to issue undertakings in California, conditioned on the payment by Lessee of the tax, assessment, or other Imposition, together with any fines, interest, penalties, costs, and expenses that may have accrued or been imposed thereon within thirty (30) days after final determination of Lessee's appeal, contest, opposition, or objection to such tax, assessment, or other Imposition. Lessee may only exercise its right to contest an Imposition hereunder if the subject legal proceedings shall operate to prevent the collection of the Imposition so contested, or the sale of the Premises and Improvements, or any part thereof, to satisfy the same, and only if Lessee shall, prior to the date such Imposition is due and payable, have given such reasonable security as may be required in order to insure the payment of such Imposition and prevent any sale, foreclosure, or forfeiture of the Premises and Improvements or any part thereof, by reason of such nonpayment. In the event of any such contest and the final determination thereof adversely to Lessee, Lessee shall, before any fine, interest, penalty, or cost may be added thereto for nonpayment thereof, pay fully and discharge the amounts involved in or affected by such contest, together with any penalties, fines, interest, costs, and expenses that may have accrued thereon or that may result from any such contest by Lessee and, after such payment and discharge by Lessee, Lessor shall promptly return to Lessee such security as Lessor shall have received in connection with such contest. Lessor shall not be required to join in any appeal, contest, opposition, or objection brought by Lessee unless the provisions of any law requires that the proceeding be brought by or in the name of Lessor or any owner of the Premises. In that case, Lessor shall join in the proceeding or permit it to be brought in Lessor's name but such action shall be without cost or other liability to Lessor, and in this regard Lessee agrees to pay to Lessor all costs incurred by Lessor in connection therewith and Lessee further agrees to indemnify, defend, and save harmless Lessor from and against any and all loss, cost, or expense of any kind, including, but not limited to, reasonable attorneys' fees and expenses, which may be unposed upon or incurred by Lessor in connection therewith. 9.3 Utilities. Lessee agrees to pay or cause to be paid, as and when they become due, all hook-up and connection fees and all charges for water, sewer, electricity, gas, light, heat, air conditioning, telephone, interne, cable television, solid waste/trash/refuse collection disposal, recycling, and other utility and communication services furnished to or rendered or used on or about the Premises and Improvements at all times during the Lease Term. Upon Lessee's written request, Lessor agrees to join in the grant of such easements and licenses upon the Premises to any supplier of utilities to the Premises as necessary to construct, install, operate, and maintain any facilities, conduits, transmission lines, and pipelines for the provision of utility services to the Premises; provided, however, that the locations of all such facilities, conduits, transmission lines, and pipelines associated with utility services located upon the Premises shall be consistent with the Development Entitlements and Final Building Plans and shall be located below grade in subterranean easements. 9.4 Lessor's Right to Cure. If Lessee, in violation of the provisions of this Lease, shall fail to pay and to discharge any Impositions or any utilities furnished to or rendered or used on or about the Premises, Lessor shall have the right, but not the obligation, to pay or discharge such obligation(s), and in such event the amount paid by Lessor plus all of related Lessor's costs 112/066751-0097 6271361.10 a09104/14 -49- and expenses, including attorney fees, together with interest at the maximum legal rate or the rate of three percent (3%) over the prime rate of the largest bank operating in the State of California on the date payment is made by Lessor, whichever is lower shall be deemed to be and shall be payable by Lessee as additional Ground Rent and shall be reimbursed by Lessee to Lessor immediately upon demand. 9.5 Limits of Tax Liability. The provisions of this Lease shall not be deemed to require Lessee to pay municipal, county, state, or federal income or gross receipts or excess profits taxes assessed against Lessor, or municipal, county, state, or federal capital levy, estate, succession, inheritance, gift, or transfer taxes of Lessor, or corporation franchise taxes imposed upon any corporate owner of the fee of the Premises; provided, however, that in the event the State of California or any taxing authority thereunder changes or modifies the system of taxing real estate so as to tax the rental income from real estate in lieu of or in substitution (in whole or in part) for the real estate taxes and so as to impose a liability upon Lessor for the amount of such tax, then Lessee shall be liable under this Lease for the payment of the taxes so imposed during the Lease Term, or any renewal thereof, to the same extent as though the alternative tax was a tax upon the value of the Premises and Improvements. In order to determine the amount of such alternative tax for which Lessee shall be liable, the Premises and Improvements shall be considered as if it was the only asset of Lessor, and the rent paid hereunder shall be considered as if it were the only income of Lessor. ARTICLE 10 OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS 10.1 Ownership of Improvements During Lease Term. All Improvements on the Premises constructed or installed by Lessee as permitted or required by this Lease, shall, during the Lease Term, be and remain the property of Lessee. All Improvements located on the Premises, whether existing thereon at the Comxnencement Date or constructed or installed thereon by Lessee as permitted or required by this Lease, shall, at the expiration or sooner termination of the Lease Term, be and remain the property of Lessor. Subject to Lessee's rights and obligations set forth in this Lease relating to alterations and additions, Lessee shall have no right at any time to waste, destroy, demolish, or remove any of the Improvements. Lessee's rights and powers with respect to the Improvements are subject to the terns and limitations of this Lease. Lessor and Lessee covenant for themselves and all persons claiming under or through them that the Improvements are real property. 10.2 Reversion of Improvements; Duty to Remove Personal Property. Upon the expiration or earlier termination of the Lease Term, whether by cancellation, forfeiture, or otherwise, all Improvements located on, in, or under the Premises (including all fixtures and equipment affixed thereto) shall remain upon and be surrendered with the Premises as part thereof, and title to such Improvements shali vest in Lessor without any compensation to Lessee. Northing contained herein is intended or shall be construed to deny or abrogate Lessee's right, prior to the expiration or earlier termination of the Lease Term, to (i) receive any and all proceeds which are attributable to a Taking of Improvements belonging to Lessee immediately prior to the Date of Taking, to the extent provided in Article 14 of this Lease, or (ii) remove any furniture or equipment that is neither permanently affixed to, or reasonably necessary for the operation of the Premises, any signage identifying Lessee (as distinguished from other signage used in the operation of the Premises and Improvements), or any pcasonal property, upon the 112/066751-0097 6271361,10 a09/04/14 -50- expiration or earlier termination of the Lease Term or at any time during the Lease Term, subject to Lessee's obligations under this Lease to use the Premises for the uses described in Section 7.1. No later than the expiration or earlier termination of the Lease Term, Lessee shall remove, at its sole cost and expense, all furniture, equipment, and other personal property that is not affixed to the Improvements or reasonably necessary for the orderly operation of the Premises or Improvements. Should Lessee fail to remove such furniture, equipment, and other personal property within said period, and said failure continues for ten (10) days after written notice from Lessor to Lessee, Lessee shall waive and lose all right, title, and interest therein, and Lessor may elect to keep the same upon the Premises or to sell, remove, or demolish and destroy the same, in which event Lessee shall reimburse Lessor for all of Lessor's actual and reasonable costs for all of Lessor's actual and reasonable costs (including without limitation employee costs at the full payroll rate) incurred in connection with any such sale, removal, or demolition/destruction in excess of any consideration received by Lessor as a result thereof. As between Lessor and Lessee, title to all utility lines, transformer vaults, and all other utility facilities constructed or installed by Lessee upon the Premises shall vest in Lessor upon construction or installation to the extent that they are not owned by a utility company or other third party provider. Notwithstanding the foregoing, such utility lines, transformer vaults, and all other utility facilities (other than any sewer, storm drain, or other utility systems that have been dedicated to and accepted by Lessor pursuant to a dedication separate from this Lease) shall be maintained, repaired, and replaced, if and as needed, by Lessee during the Lease Tenn. 10.3 Alteration of Improvements. Lessee shall not make or permit to be made any alteration of, addition to, or change in the Improvements, other than (i) routine maintenance, repairs, interior decoration, and minor interior alterations or (ii) interior alterations, additions, or changes which cost in the aggregate over a cumulative period of one (1) year less than an amount equal to Two Hundred and Fifty Thousand Dollars ($250,000) escalated from the Lease Effective Date in accordance with the Consumer Price Index, nor demolish all or any part of the Improvements, without the prior written consent of Lessor, which consent shall not be unreasonably withheld, conditioned or delayed. In requesting such consent, Lessee shall submit to Lessor detailed plans and specifications of the proposed work and an explanation of the need and reasons thereof. Notwithstanding the foregoing, Lessee may make such changes, repairs, alterations, improvements, renewals, or replacements to the Improvements as are required by reason of any law, ordinance, regulation, or order of a competent government authority. 10.4 Damage to or Destruction of Hotel and Improvements. 10.4.1 Lessee to Give Notice. In case of any damage to or destruction of the Hotel or the Improvements, or any part thereof, in excess of an amount equal to Two Hundred and Fifty Thousand Dollars ($250,000.00) escalated from the Commencement Date of this Lease in accordance with increases in the Consumer Price Index, Lessee shall within ten (10) days after Lessee becomes aware of such damage or destruction give written notice thereof to Lessor generally describing the nature and extent of such damage or destruction. 10.4.2 Restoration. Lessee shall be responsible for the restoration of the Hotel or other Improvements in accordance with the damage and destruction clauses of this Lease. 112/066751-0097 6271361.10 a09/04/14 -51- In case of any damage to or destruction of the Hotel or other Improvements, or any part thereof, Lessee shall commence the restoration, replacement, or rebuilding of the Improvements with such alterations and additions as may be approved by Lessor (such restoration, replacement, rebuilding, alterations, andadditions, together with any temporary repairs and property protection pending completion of the work being herein called "Restoration") within thirty (30) days of such damage or destruction, plus any additional period reasonably required to obtain any Net Insurance Proceeds to be used to pay all or a portion of the cost of such Restoration, and Lessee shall complete such Restoration within a reasonable period of time thereafter. As used herein, the term "Net Insurance Proceeds" means the gross insurance proceeds paid by an insurer to Lessee for loss or damage to the Improvements on the Premises and Improvements, less any and all costs and expenses (including, but not limited to reasonable attorneys' fees) incurred to recover said proceeds. Lessee agrees to promptly commence and prosecute to completion the settlement of insurance proceeds with respect to any event of damage or destruction of the Improvements on the Premises. Lessee agrees that, notwithstanding any other provision of this Lease, upon any event of damage or destruction to the Improvements, Lessee shall at its sole cost and expense (whether or not Lessee terminates or intends to terminate this Lease pursuant to Section 10.6 below) immediately take or cause such work to be taken as is necessary to assure the safe condition of the damaged Improvements pending the ultimate disposition of the Improvements. In any instance in which Lessee may elect to terminate this Lease rather than restore the Improvements pursuant to 10.6 below, if Lessee does not terminate this Lease, Lessee shall restore the Improvements. 10.5 Application of Insurance Proceeds. Net Insurance Proceeds shall be applied as follows: (i) Within a reasonable time and in any event within 180 days after the damage to or destruction of the Hotel or other Improvements, Lessee shall furnish or cause to be furnished to Lessor and any Mortgagee evidence satisfactory to Lessor and the Mortgagee (a) of the total cost of Restoration of the damaged or destroyed Improvements pursuant to Section 10.4.2 and (b) that the total amount of money available will, when added to the insurance proceeds received and available to pay for the Restoration pursuant to the terms of this Section 10.5, be sufficient to pay the cost of such Restoration. (ii) Net insurance proceeds received on account of any damage to or destruction of the Improvements, or any part thereof, shall be paid to Lessee or as Lessee may direct (except that, during the term of any Mortgage, such net insurance proceeds shall be paid to the Mortgagee which holds the highest priority Mortgage, if required by such Mortgagee) from time to time as Restoration progresses, solely to pay (or reimburse Lessee for) the cost of, Restoration. Upon receipt by Lessor and any Mortgagee of evidence that Restoration has been completed and the cost thereof paid in full or has been adequately provided for, and that there are no mechanic's or similar liens for labor or materials supplied in connection therewith which have not been adequately provided for, the balance, if any, of such proceeds shall be paid to Lessee. 112/066751-0097 6271361.10 a09/04/14 -52- (iii) Any insurance proceeds held by the recipient on. any termination of this Lease and not required to be paid to Lessor pursuant to the provisions of this Lease shall be paid first to the expenses of clearing the Premises of any rubble, and next to the Mortgagee as its interests may appear, and next to Lessee. 10.6 Damage or Destruction During Final Years of Lease Term. Notwithstanding Sections 10.4 and 10.5 to the contrary, in the event of major damage or destruction to the Improvements on the Premises during the last ten (10) years of the Lease Term, Lessor shall not unreasonably withhold its approval if Lessee requests that this Lease be terminated on thirty (30) days' notice, provided Lessee first complies with all of the following conditions: (i) Lessee shall give Lessor notice of the damage or destruction within ten (10) business days after the event causing such damage and destruction. (ii) Lessee shall give Lessor notice requesting that this Lease be terminated as a result of such damage or destruction within forty-five (45) days after settlement of insurance proceeds, but in any event within one hundred eighty (180) days after the event causing such damage or destruction. (iii) Lessee shall pay to Lessor all applicable Ground Rent and other charges that are Lessee's responsibility prorated to the date of such termination. (iv) Lessee shall clear and remove all debris from the Premises, restore the Premises to a safe and neat condition, deliver possession of the Premises to Lessor, and shall quitclaim all of Lessee's right, title, and interest in the Premises to Lessor. (v) Lessee shall transfer to Lessor all insurance proceeds (except that, during the term of any Mortgage, such insurance proceeds shall be paid to the Mortgagee which holds the highest priority Mortgage, if required by such Mortgagee) resulting from the casualty to be retained by Lessor without limitation as to use. Major damage or destruction to the Improvements as used in this Section means such damage or destruction that the cost of Restoration will exceed fifty percent (50%) of the cost to replace the Improvements on the Premises in their entirety. 10.7 Faithful Performance and Labor and Material (Payment) Bonds: Indemnification; Non -responsibility Notices. Lessee agrees to indemnify, defend, and hold harmless Lessor from and against all claims, liabilities, costs, and expenses for labor and materials in connection with all construction, repairs, or alterations on the Premises and Improvements and the Improvements, including reasonable attorney's fees. Lessee agrees to procure, or cause the procurement of, contractor's bonds covering labor, materials, and faithful performance for all construction work on the public right of ways in accordance with the following requirements: (i) As to the initial construction work on any public right of ways required by this Lease, such bonds shall be in an amount equal to one hundred percent (100%) of the cost of the Improvements on such public right of ways, as the same may be amended from time to time. 112/066751-0097 6271361.10 a09/04/14 -53- (ii) As to subsequent work involving repair, alteration, or replacement of the work on any public right of way in. an aggregate amount exceeding $250,000 plus escalations to such amount after the Lease Effective Date in accordance with the Consumer Price Index, such bonds shall be in the amount equal to one hundred percent (100%) of the construction price in the contract entered into by Lessee and its general contractor. Subsequent work in an aggregate amount of $250,000 (plus escalations to such amount after the Lease Effective Date in accordance with the Consumer Price Index) or less shall not be subject to bonding requirements. Said bonds and the construction contract must first be approved in writing as to content and form by Lessor. Lessee shall, prior to commencement of construction, deliver to Lessor a certificate or certificates from the bonding company or companies issuing the aforesaid bonds, naming Lessor as additional insureds under said bonds. Lessor shall have the right to post and maintain on the Premises and the Improvements any notices of non -responsibility provided for under applicable law. ARTICLE 11 ASSIGNMENT, SUBLETTING, TRANSFER 11.1 Restrictions on Lessee's Right to Transfer. 11.1.1 Lessee represents and warrants that this Lease, the construction of the Improvements, and Lessee's other undertakings pursuant hereto are and will be used for the purpose of redevelopment of the Premises and not for speculation in land holding. Lessee further recognizes that (i) the qualifications and identity of Lessee and its principals are of particular concern to the community and Lessor; (ii) it is because of such qualifications and identity that Lessor is entering into this Lease with Lessee; (iii) the timely redevelopment of the Premises is important to the general welfare of the community; (iv) the anticipated tax and Ground Rent income to be generated by this Lease and the reduction and elimination of Lessor's holding costs for the Premises are important financialleconomic reasons for Lessor wishing to ensure the timely redevelopment of the Premises; (v) Lessor does not intend to allow Lessee to acquire leasehold rights in the Premises and then simply hold such rights or the Premises for purposes of speculation; and (vi) a change in ownership or Control of Lessee, or any other act or transaction involving or resulting in a direct or indirect change in the ownership or Control of Lessee is for practical purposes a transfer or disposition of Lessee's leasehold rights and interest hereunder. Accordingly, from the Agreement Date through the entire Lease Term, Lessee shall be subject to the restrictions on its Transfer rights set forth herein. 11.1.2 Except as expressly permitted herein, Lessee shall not make, allow, or authorize any Transfer (as that term is hereinafter defined) to any person or entity (a "Transferee"), without the prior written consent of Lessor and any permitted Mortgagee. Any purported Transfer not permitted by this Article 11 or Article 12, as applicable, shall be ipso facto null and void, and no purported voluntary or involuntary successor or assignee to any interest of Lessee pursuant to such an attempted Transfer shall acquire any rights pursuant to this Lease. These restrictions shall be binding on any successors, heirs, or permitted Transferee of Lessee. Except as set forth in the next sentence herein, the term "Transfer" shall mean any assignment or attempt to assign this Lease or any right herein, any total or partial transfer, sale, assignment, lease, sublease, license, franchise, gift, hypothecation, mortgage, pledge, 1I2/066751-0097 6271361.10 a09/04/14 -54- encumbrance, or the like. As used herein, the term "Transfer" shall also include any direct or indirect transfer, assignment, or pledge, whether voluntary or involuntary, and determined on an aggregate or cumulative basis from and after the Agreement Date, of (i) more than fifty percent (50%) of the beneficial interest (whether stock, partnership interest, membership interests, or any other equity interest and whether in a single transaction or a series of related transactions) of Robert D. Olson in Lessee or the transfer of management Control of Robert D. Olson to any other person or entity, or (ii) more than thirty percent (30%) of the beneficial interest (whether stock, partnership interest, membership interests, or any other equity interest and whether in a single transaction or a series of related transactions) of any person other than Robert D. Olson in Lessee or the transfer of management Control by any person other than Robert D. Olson to another person or entity. As used herein, the term "beneficial interest" shall refer to the ultimate direct or indirect ownership interests in Lessee, regardless of the form, of ownership and regardless of whether such interests are owned directly or through one or more layers of constituent partnerships, corporations, limited liabilities, trusts, or other persons or entities. In addition, any transaction by which Lessee undergoes a merger or other reorganization, including a sale of all or substantially all of its assets, wherein Lessee is not the surviving corporation (or the shareholders of Lessee of Lessee immediately prior to the merger or reorganization do not retain Control of the surviving corporation) shall be deemed a "Transfer" for purposes of this Lease. Notwithstanding the foregoing, the term "Transfer" shall not include and Lessor's approval shall not be required with respect to any of the following: (i) the execution by Lessee and the Hotel Management Company of a new or amended Hotel Management Agreement (approved by Lessor in accordance with Section 3.2.5 and/or Section 7.2 of this Lease, as applicable; (ii) the execution by Lessee and the Hotel Franchisor of a new or amended Hotel Franchise Agreement approved by Lessor in accordance with Section 3.2.6 and/or Section 7.3 of this Lease, as applicable; (iii) the granting of easements or permits for the development of the Premises consistent with the approved Development Entitlements and Final Building Plans for the Hotel or otherwise as may be approved by Lessor; (iv) the renting of guest rooms, suites, meeting rooms, or other guest facilities in the Hotel consistent with the permitted uses of the Hotel; (v) the subleasing or licensing of space within the Hotel for incidental uses or concessions that are consistent with the customary uses and practices of a hotel and related facilities and the use restrictions set forth in Section 7.1 of this Lease, provided that any such subleases, licenses, or concession agreements shall cumulatively cover a maximum of two thousand (2,000) square feet of floor area, shall be done in arms -length transactions to persons unrelated to any of the Lessee Parties, and shall be on customary terms for not less than fair rental value; (vi) if Lessee is or becomes a publicly traded entity, any sale or other transfer of any outstanding stock of, or limited partnership interests in Lessee, unless said sale or other transfer is made by a person or entity owning a Controlling interest in Lessee and results in a change in the person(s) or entity(ies) having Control of Lessee, (vii) a mere change in the form, method or status of ownership, as long as there is no change in the actual beneficial ownership of the transferor (e.g., by virtue of a transfer of an individual ownership interest to a trust for the benefit of one or more of the transferor's immediate family members, which for purposes of this Lease shall be limited to the transferor's spouse, domestic partner, children, parents, siblings, and grandchildren), (viii) a transfer of an individual ownership interest to one or more immediate family members (as limited in clause (vii) above) on account of the death or mental or physical incapacity of the transferor, and (ix) a Transfer occurring as a result of a Taking. In addition, the following Transfers shall be deemed to be permitted Transfers and shall be allowed as long as the transferor and Transferee execute and deliver to Lessor an assignment and assumption agreement in a form subject to the reasonable approval of Lessor's counsel pursuant to which the Transferee 112/066751.0097 6271361.10 a09104/14 -55- assumes and agrees in writing to perform and be subject to all of the transferor's obligations set forth herein: (i) the foreclosure of a permitted Mortgage or the acceptance of a deed in lieu of foreclosure by a permitted Mortgagee; (ii) the subsequent Transfer by a permitted Mortgagee of an interest acquired pursuant to clause (i) (provided, however, that subsequent Transfers by any person or entity acquiring its interest in the Premises and/or this Lease from a permitted Mortgagee in accordance with this clause (ii) shall not be deemed to be permitted Transfers and shall require Lessor's approval); (iii) the acquisition at a foreclosure sale in connection with a permitted Mortgage by any third party (provided, however, that subsequent Transfers by any person or entity acquiring its interest in the Premises and/or this Lease at a foreclosure sale in accordance with this clause (iii) shall not be deemed to be permitted Transfers and shall require Lessor's approval); and (iv) the Transfer of this Lease to an entity (A) controlled by Lessee or Robert D. Olson, (B) which has Lessee, Robert D. Olson, or an entity controlled by Lessee or Robert D. Olson, as a manager, managing member or general partner, or (C) as to which Lessee or Robert D. Olson has the power to name and/or approve a majority of the members of a management board or committee which directs the management and policies of such entity, and (D) in which Robert D. Olson owns, directly or indirectly, a minimum of fifty percent (50%) of the beneficial ownership interests. 11.1.3 Prior to completion of the Hotel and Improvements on the Premises and the opening of the Hotel for business to the general public, Lessor may withhold its consent to a Transfer requiring Lessor's approval hereunder in its sole and absolute discretion. After that date, Lessor shall not unreasonably withhold its consent to a requested Transfer by Lessee that requires Lessor's approval as long as all of the following conditions are satisfied: (i) Lessee is not in Default under this Lease and no facts shall exist that, with the giving of notice or the passage of time, would constitute a Default by Lessee hereunder; (ii) Lessee is proposing to Transfer the Premises and Improvements and Lessee's rights therein as a whole and Lessee is not proposing to subdivide the Premises and Improvements or its rights for the duration of the Lease (which shall in no event be permitted); (iii) Lessor determines that the proposed Transferee has a minimum net worth of Ten Million Dollars ($10,000,000.00) (with said figure increased from the Commencement Date to the date Lessee requests approval of the Transfer based on increases in the Consumer Price Index over that period of time); (iv) Lessor determines that the proposed Transferee and its principals are of good moral character (as that term is defined in. Section 7.4); (v) Lessor determines that the proposed Transferee has a minimum of ten (10) years experience in owning or operating three or more hotels in California on a par (or better) than the prevailing standard in comparable quality to the Hotel and Improvements on the Premises; (vi) Lessor determines that the requirements of Sections 7.2-7.4 of this Lease with respect to the Hotel Management Company and Hotel Management Agreement and the Hotel Franchisor and Hotel Franchise Agreement, as applicable, will continue to be satisfied after the proposed Transfer is completed or, if the proposed Transferee intends to operate and manage the Hotel and Improvements itself, Lessor determines that the proposed Transferee satisfies all of the requirements applicable to the approval of a Hotel Management Company by Lessor as set forth herein; and (vii) the transferor and proposed Transferee execute and deliver to Lessor an assignment and assumption agreement in a form subject to the reasonable approval of the City Attorney of Lessor pursuant to which the Transferee assumes and agrees in writing to perform and be subject to all of the transferor's obligations set forth herein. 11.1.4 The acceptance by Lessor of any payment or other performance due from Lessee hereunder from any person or entity other than Lessee shall not be deemed to be a waiver 112/066751-0097 6271361.10 a09/04/14 -56- by Lessor of any provision of this Lease or to be a consent by Lessor to any Transfer requiring Lessor's approval hereunder. Consent by Lessor to one or more Transfers of this Lease shall not operate as a waiver or estoppel to the future enforcement by Lessor of its right to approve or disapprove a subsequent Transfer in strict accordance with the provisions of this Lease. 11.1.5 Even if Lessor consents to a Transfer pursuant to this Article 11 or Article 12 that requires Lessor's approval, such consent shall not be effective unless and until Lessee or the proposed Transferee delivers written notice of the Transfer to Lessor, together with a copy of any documents effecting and/or evidencing such Transfer and (if required) the fully executed assignment and assumption agreement in the form approved by Lessor's legal counsel. 11.2 Notification to Lessor of Changes in Ownership and Control of Lessee. From the Effective Lease Date through the expiration or earlier termination of the Lease Term, Lessee shall promptly notify Lessor in writing of (i) any and all voluntary and involuntary changes in the identity of the persons and entities having direct or indirect ownership interests in the management control of Lessee of which Lessee or any of its members, officers, or directors have been notified or otherwise have knowledge or information (excluding, however, any limited partners or other purely passive investors who do not manage or control of Lessee) and (ii) the nature and extent of such change(s), in order to enable Lessor to keep track of the cumulative changes in ownership and control of Lessee. 11.3 Release of Transferor Upon Transfer. In the absence of Lessor's express written approval, where applicable, a Transfer of this Lease and the Premises and Improvements by Lessee shall not release the transferor (or any guarantor(s) of Lessee's obligations, if applicable) from any obligations set forth in this Lease, whether such obligations arise prior to or after the effective date of the Transfer; provided, however, that a Mortgagee shall be deemed to be released from and after the date of a Transfer from such Mortgagee. If the transferor (or guarantor(s) of Lessee's obligations, if applicable) submits a written request to Lessor to be released in conjunction with an approved Transfer, Lessor shall approve such release if the transferor and proposed Transferee provide reasonably satisfactory evidence to Lessor that the proposed Transferee has suitable financial capability to perform the obligations that are being so transferred by the transferor and the interests of Lessor hereunder will not be compromised or jeopardized. 11.4 No Encumbrance of Lessor's Leased Fee Interest. No provision hereof authorizing a Transfer or encumbrance of Lessee's interest herein shall be construed to authorize encumbrance of Lessor's fee title to the Premises or Lessor's interest under this Lease, and Lessee shall not by any act or deed cloud Lessor's fee title or Lessor's interest under this Lease. 11.5 Investigation of Proposed Transferee; Costs. In the event that Lessee requests Lessor's written consent to a proposed Transfer pursuant to this Article 11 or Article 12 of this Lease, Lessee agrees to provide Lessor with such information as Lessor may reasonably require in order to evaluate whether to approve such request, including without limitation and to the extent applicable, all information relating to the criteria to be considered by Lessor in determining whether to approve such request that are set forth in Section 11.1.3. Within thirty (30) days after the receipt of Lessee's written notice requesting Lessor approval of a Transfer, Lessor shall respond in writing by stating what further information, if 112/066751-0097 6271361.10 a09/04/14 -57- any, Lessor reasonably requires in order to determine whether or not to approve the requested Transfer. Upon receipt of such a timely response, Lessee shall promptly furnish to Lessor such further information as may be reasonably requested. Lessee's request for approval of a Transfer pursuant to this Article 11 or Article 12 of this Lease and delivery of necessary information with respect thereto shall be deemed complete thirty (30) days after Lessor's receipt thereof if Lessor does not deny approval or if no timely response requesting further information regarding the proposed Transferee is delivered to Lessee, or, if such a timely response requesting further information is received, on the date which is fifteen (15) days after the date that Lessee delivers such additional information to Lessor. None of the foregoing shall restrict Lessor's rights to deny approval of any Transfer not found acceptable by Lessor pursuant to this Lease. Any Transfer requiring Lessor's consent shall only be effective upon Lessor's written consent to such Transfer. Lessor shall approve or disapprove any requested Transfer for financing purposes requiring Lessor approval within thirty (30) days after Lessee's request therefor is accepted as complete or is deemed complete, and Lessor shall approve or disapprove any other type of requested Transfer requiring Lessor approval within forty-five (45) days after Lessee's request therefor is accepted as complete or is deemed complete. Any disapproval shall be in writing and shall specify the reasons for the disapproval and, if applicable, the conditions required to be satisfied by Lessee in order to obtain Lessor's approval. If Lessee's initial notice requesting approval of an Transfer for financing purposes (but not any other type of Transfer) states that the Transfer will be deemed approved unless rejected within the time required in this Lease, Lessor's failure to timely disapprove the Transfer shall be conclusively deemed to constitute an approval. 11.6 Transfer by Lessor; Attornment by Lessee. Lessor shall at all times have the right to assign, encumber, and/or convey all or a portion of its Leased fee interest in the Premises and/or in the Lease to any other person or entity. In the event of any assignment of all or a part of Lessor's interest in either the Premises or the Lease to any other person or entity, Lessee shall attorn to such other person or entity and recognize such other person or entity as the landlord under this Lease, and such other person or entity shall not disturb Lessee's right to possess the Premises and Improvements, subject to the provisions of this Lease. 11.7 Right of First Opportunity. If at any from the Agreement Date through the end of the Lease Term Lessor desires to consider selling its leased fee interest in the Premises, before Lessor may enter into a purchase/sale agreement with a third party to do so Lessor shall first obtain an appraisal of Lessor's leased fee interest in the Premises. Said appraisal shall be prepared by a qualified MAI appraiser who (i) has no history of being employed or retained by Lessor or Lessee or any persons or entities affiliated with Lessor or Lessee and (ii) has a minimum of ten (10) years experience appraising hotel properties in Southern California. Lessor and Lessee shall cooperate and act reasonably in an effort to mutually agree upon the identity of the appraiser. If the Parties are unable to agree on the identity of the appraiser to conduct the appraisal within thirty (30) days after Lessor notifies Lessee in writing of Lessor's desire to consider selling its lease fee interest in the Premises, the appraiser (meeting the same qualifications) shall be appointed by the Orange County Superior Court upon the petition or request of either Party. After receiving the appraisal, Lessor may elect to proceed with its efforts to sell its leased fee interest in the Premises or it may abandon that effort in Lessor's sole and absolute discretion; provided, however, that if Lessor abandons the effort to sell Lessor's leased 112/066751-0097 6271361.10 a09/04/14 -58- fee interest in the Premises it shall not be entitled to initiate the process provided for in this Section 11.7 for a minimum of one (1) year. The appraiser shall be instructed that in appraising the value of Lessor's leased fee interest in the Premises, the appraiser shall assume that this Lease is valid, binding, and enforceable on the Parties, the Hotel and Improvements are or shall be consistent with the provisions of this Lease, and the permitted uses provided for in this Lease constitute the highest and best use of the Premises. If, after receiving the appraisal, Lessor still desires to sell its leased fee interest in the Premises, Lessor shall first offer to sell its leased fee interest in the Premises to Lessee at the amount set forth in the appraisal. Lessee shall have thirty (30) days after receipt of Lessor's offer within which to accept said offer and to negotiate with Lessor concerning other terms and conditions of an agreement to purchase Lessor's leased fee interest in the Premises. In so doing, both Lessor and Lessee covenant to negotiate in good faith. If Lessee does not accept said offer or if an agreement to purchase Lessor's Leased fee interest in the Premises is not agreed upon between Lessor and Lessee within said thirty (30) day period, Lessor shall be free to market and sell the Premises to a third party for a purchase price that is not less than the purchase price offered to Lessee and subject to terms and conditions that are not less favorable than the terms and conditions offered to Lessee. Thereafter, if Lessor does not enter into a binding written agreement with a third party to sell Lessor's leased fee interest in the Premises to such third party consistent with the foregoing parameters within one hundred eighty (180) days (measured from the end of the thirty (30) day period referred to above), the procedure described in this Section shall again be applicable. In addition to the foregoing, any sate by Lessor of its leased fee interest in the Premises pursuant to this Section 11.7 shall comply with all applicable Governmental Requirements. ARTICLE 12 MORTGAGES 12.1 Leasehold Mortgages. 12.1.1 From time to time during the Lease Term of this Lease, Lessee shall have the right to mortgage, pledge, deed in trust, assign rents, issues and profits (for purposes of security if required by any lender), enter into capitalized leases or other financing mechanisms in connection with the acquisition of furniture, fixtures and equipment for the Hotel and other Improvements, or otherwise encumber the interest of Lessee under this Lease, in whole or in part, and any interests or rights appurtenant to this Lease, and to assign or pledge the same as security for any debt (the holder of any such mortgage, pledge or other encumbrance, and the beneficiary of any such deed of trust being hereafter referred to as "Mortgagee" and the mortgage, pledge, deed of trust or other instrument hereafter referred to as "Mortgage"), upon and subject to each and all of the following terns and conditions: (i) Lessee shall not make or enter into an agreement to make any Mortgage without the prior written approval of Lessor's City Manager or his or her designee. Upon Lessee's request for approval of a proposed Mortgage and Lessee's submission to Lessor of such information concerning the proposed Mortgage as Lessor may reasonably request, Lessor's City Manager or designee shall not unreasonably delay its approval or disapproval of the proposed Mortgage and, in any event, shall approve or disapprove the proposed Mortgage within ten (10) business days. The City Manager or his or her designee shall be authorized to approve minor non -substantive changes to this Article 12 that do not materially jeopardize or impair Lessor's rights hereunder as reasonably requested by a proposed Mortgagee; provided, 112/066751-0097 6271361.10 a09/04/14 -59- that the City Manager or designee shall be entitled to withhold consent to any such proposed changes in his or her reasonable discretion. (ii) The Mortgagee shall be an Institutional Lender or, if not, such other lender that Lessor may approve in its reasonable discretion. (iii) The Mortgage shall cover no interest in any real property other than Lessee's interest in the Premises, the Hotel, and other Improvements or some portion thereof, and the leasehold estate of Lessee under this Lease. The Mortgage shall be fully subordinate to Lessor's fee title in and to the Premises and all of Lessor's rights set forth in this Lease and shall state on its face that it does not encumber in any way Lessor's fee interest in the Premises or Lessor's rights set forth in this Lease. (iv) Prior to the completion of construction of the Hotel and related Improvements and the opening of the Hotel for business to the general public, Mortgages may be made only for the purposes of financing necessary and appropriate to pay Project Costs. (v) Prior to completion of construction of the Hotel and the opening of the Hotel for business to the general public, the total amount of all loans secured by Mortgages recorded against the Premises shall not exceed seventy-five percent (75%) of the estimated Project Costs (85% if Lessee is using EB-5 financing as part of its source of funds), as said estimate may be revised from time to time. (vi) Subsequent to completion of construction of the Hotel and opening the Hotel for business to the general public, the total amount of all loans secured by Mortgages recorded against the Premises shall not exceed seventy-five percent (75%) of the fair market value of Lessee's leasehold interest in the Premises (85% if Lessee is using EB-5 financing as part of its source of fiends), as determined by a licensed California appraiser retained at Lessee's sole cost and expense who is a member of the Appraisal Institute and who has a minimum of ten (10) years experience appraising hotel properties comparable to the Hotel and Improvements to be developed on the Premises, with the City Manager or his or her designee having the right of reasonable approval or disapproval of the appraisal; provided, however, that Lessee shall not be deemed to be in Default of this Section 12.1.1(vi) if a loan or loans secured by Mortgages recorded prior to completion of construction of the Hotel in compliance with Section 12.1.1(v), including any amendment(s) or extension(s) of such loan(s) that do(es) not increase the total outstanding principal balance of such loan(s) and whether or not such amendment(s) or extension(s) occur(s) prior or subsequent to completion of construction of the Hotel and the opening of the Hotel for business to the general public, exceed(s) seventy-five percent of the fair market value of Lessee's leasehold interest in the Premises. In addition, it is understood and. agreed that the loan -to -value ratio constraint in this Section 12.1.1(vi) shall be made only at the time Lessor is determining whether to approve or disapprove the proposed Mortgage and thereafter this Section 12.1.1.(vi) shall not limit, restrict, invalidate, or result in the disapproval of any such Mortgage or any amendment or extension of any such Mortgage that does not increase the total outstanding principal balance of the loan secured by such Mortgage if the fair market value of .Lessee's leasehold interest in the Premises that was relied upon by Lessor in approving the Mortgage declines. 112./066751-0097 6271361. LO a09/04/ 14 -60- 12.1.2 All rights acquired by a Mortgagee under a Mortgage shall be subject to each and all of the covenants, conditions, and restrictions set forth in this Lease, and to all rights of Lessor hereunder, none of which covenants, conditions, and restrictions is or shall be waived by Lessor by reason of the giving of such Mortgage, except as expressly provided in this Article 12. Notwithstanding the foreclosure of any such Mortgage, Lessee shall remain liable for the payment of the accrued but unpaid rent reserved in this Lease while Lessee remains in possession of the Premises and Improvements. 12.1.3 Promptly upon the recording of a Mortgage, Lessee shall, at its own expense, cause to be recorded in the Official Records of Orange County a written request executed and acknowledged by Lessor for a copy of all notices of default and all notices of sale under the Mortgage as provided by applicable law to be provided to Lessor. Inclusion of a request for notice having the effect described above in the body of the recorded Mortgage shall constitute compliance with this provision. 12.1.4 If Lessee encumbers its leasehold estate by way of a Mortgage in accordance with this Article 12, and if such Mortgagee has registered its name and address in writing with Lessor, then this Lease shall not be terminated or canceled on account of any Default by Lessee in the performance of the terms, covenants, or conditions hereof until Lessor shall have complied with the provisions of Sections 12.2-12.6 as to the Mortgagee's rights to cure and to obtain a new lease. 12.2 Rights and Obligations of Leasehold Mortgagees. If Lessee, or Lessee's successors or assigns, shall mortgage the leasehold interest herein demised, then, as long as any such Mortgage shall remain unsatisfied of record, the following provisions shall apply: (i) If the holder of any Mortgage on the leasehold interest herein demised shall register with Lessor its name and address in writing, no notice of default by Lessor to Lessee shall be deemed to have been duly given unless and until a copy thereof has been mailed to the Mortgagee in accordance with the notice provisions set forth in this Lease at the address registered with Lessor. (ii) In the event Lessee shall be in Default hereunder, the Mortgagee shall, at any time prior to the termination of this Lease (which termination can occur only after notice to the Mortgagee and an opportunity to cure in accordance with this Article 12) and without payment of any penalty, have the right, but not the obligation, to pay all of the rents due hereunder, to effect any insurance, to pay any taxes and assessments (subject to Lessor's right to cure under Section 9.4 of this Lease), to make any repairs and improvements, to do any other aet or thing required or permitted of Lessee hereunder, and to do any other thing which may be necessary and proper to be done in the performance and observation of the agreements, covenants, and conditions hereof to prevent termination of this Lease. All payments so made and all things so done and performed by such Mortgagee shall be accepted by Lessor and shall be effective to prevent a termination of this Lease as the same would have been if made, done, and performed by Lessee instead of such Mortgagee. Lessee hereby constitutes and appoints the Mortgagee as Lessee's agent and attorney in fact with full power coupled with an interest, in Lessee's name, place, and stead, and at Lessee's cost and expense, to enter upon the Premises and Improvements and the Improvements, and perform all acts required to be performed herein. No Mortgagee shall have the right to take or perform any action hereunder, under its leasehold 112/066751-0097 6271361,10 a09/04/14 -61- Mortgage, or otherwise which might result in any detriment to the rights of a prior Leasehold Mortgagee with respect to the same lease or leasehold Premises. (iii) While any such Mortgage remains unsatisfied of record, and an event or events shall occur which shall entitle Lessor to terminate this Lease, Lessor shall forbear from terminating this Lease if and to the extent that such forbearance is required under Section 12,4 of this Lease or Mortgage documents. (iv) If the holder of a Mortgage obtained in accordance with Section 12.1 of this Lease acquires the leasehold estate created hereunder or otherwise acquires possession of the Premises and Improvements pursuant to available legal remedies, Lessor will look to such holder to perform the obligations of Lessee only from and after the date of foreclosure or possession and will not hold such holder responsible for the past actions or inactions of the prior Lessee. Notwithstanding the foregoing, (a) on and after the date of such foreclosure or possession, such holder shall be required to perform and abide by each and all of the obligations of Lessee under this Lease and (b) on and after the date of such foreclosure or possession, Lessor shall have the right to enforce each and all of the provisions of this Lease against such holder. Nothing herein is intended or shall be construed to limit or restrict Lessor's rights and remedies against any prior Lessee, provided that Lessor's pursuit of such remedies shall not affect the rights of the holder of any Mortgage obtained in accordance with Section 12.1 of this Lease to the use, enjoyment, or operation of the Premises and Improvements (v) The foreclosure of a Mortgage obtained in accordance with Section 12.1 of this Lease, or any sale thereunder, whether by judicial proceedings or by virtue of any power of sale contained in such Mortgage, or any conveyance of the leasehold estate created hereby from Lessee to the holder of any such Mortgage through, or in lieu of, foreclosure or other appropriate proceedings in the nature thereof shall not require the consent or approval of Lessor or constitute a Default under this Lease, and upon such foreclosure, sale, or conveyance Lessor shall recognize the Mortgagee, or any other foreclosure sale purchaser, as the new Lessee hereunder. In the event that such Mortgagee becomes the Lessee hereunder, or in the event that the leasehold estate created hereunder is purchased by any other party at a foreclosure sale or by any other lawful means, such Mortgagee, or such other foreclosure sale purchaser, shall be responsible for performance of the obligations of Lessee under this Lease only for the period of time that the Mortgagee or such other foreclosure sale purchaser remains Lessee hereunder, and such Mortgagee or foreclosure sale purchaser shall thereafter have the right to assign this Lease without need to obtain the approval of Lessor; provided, however, that any subsequent assignment of this Lease shall be subject to the provisions of Article 11 of this Lease, including, to the extent set forth therein, Lessor's right of approval of a Transfer. Notwithstanding anything to the contrary herein: (a) as a precondition to any Mortgagee, foreclosure sale purchaser, or other person obtaining the rights of Lessee hereunder, such person shall first be required to expressly assume each and all of the obligations of Lessee under this Lease pursuant to a written document in form and substance reasonably satisfactory to Lessor; (b) such new Lessee shall have no right to construct any Improvements on the Premises unless and until such new Lessee has submitted evidence reasonably satisfactory to Lessor that such new Lessee has the financial capability and overall competence to perform the obligations of Lessee hereunder, provided that this clause (b) shall not require submission of such evidence if such new Lessee is the holder of a Mortgage obtained in accordance with Section 12.1 of this Lease but shall require submission of such evidence if such new Lessee is the successor of such a holder; and (c) Lessor shall have the 112/066751.0097 6271361.10 a09/04/14 -62- right of prior written approval over any prospective operator or manager (including but not limited to such new Lessee) of the Hotel uses on the Premises and Improvements and any prospective hotel franchisor, in accordance with Sections 7.2-7.4 of this Lease. (vi) In the event that the holder of any Mortgage obtained in accordance with Section 12.1 of this Lease remedies or causes to be remedied, within the times specified herein, all monetary Defaults of Lessee and all nonmonetary Defaults of Lessee which by their nature are capable of being remedied by such Mortgagee, such Mortgagee shall have the right within thirty (30) days after all such Defaults are remedied to request that Lessor promptly execute and deliver to such Mortgagee a new lease of the Premises (naming such Mortgagee as Lessee) for the remainder of the Lease Term with the same agreements, covenants, and conditions (except for any requirements which have been fulfilled prior to execution of the Lease) as are contained herein and with priority equal to that hereof, along with a Quitclaim Deed first approved in writing by Lessor as to form and substance; provided, however, that if more than one Mortgagee requests such a new lease, the Mortgagee holding the most senior Mortgage shall prevail; and provided, further, that Lessor shall not be required to execute such new lease earlier than concurrently with the execution of such new lease by such Mortgagee. Lessor shall prepare such new lease at the expense of such Mortgagee, and all costs incurred by Lessor in preparing such new lease (including attorneys' fees) shall be paid to Lessor by such Mortgagee prior to the execution by Lessor of such new lease. The execution of a new lease by Lessor pursuant to this subparagraph (vi) shall automatically and immediately terminate this Lease. Although not necessary to effect the termination of this Lease, the former Lessee shall, upon Lessor's execution of such new lease, execute any documents and perform any acts which may be reasonably necessary to evidence the termination of this Lease. Upon Lessor's execution and delivery of such new lease, Lessor, at the expense of the new Lessee, shall take such action as shall be necessary to remove the former Lessee from the Premises and Improvements. Notwithstanding any provision herein., Lessor shall not be required to forbear from terminating this Lease except to the extent required by Section 12.4 hereof and the Mortgage documents and Lessor shall not be required to execute a new lease after the termination of this Lease in accordance with the provisions hereof. (vii) Anything herein contained to the contrary notwithstanding, the provisions of this Section 12.2 shall inure only to the benefit of the holders of Mortgages and such other persons that acquire the leasehold interest created hereunder pursuant to a foreclosure, sale, or conveyance of the type described in this Section 12.2. 12.3 Notice. In the event that Lessee's interest under this Lease is subject to any Mortgage, Lessor will simultaneously give to Mortgagee at such address as is specified by the Mortgagee in accordance with Section 12.2 hereof a copy of each notice of default from Lessor to Lessee hereunder at the time of giving such notice or communication to Lessee. Lessor shall not exercise any right, power, or remedy with respect to any Default hereunder, and no notice to Lessee of any such Default and no termination of this Lease in connection therewith shall be effective, unless Lessor has given to Mortgagee written notice or a copy of its notice to Lessee of such Default or any such termination, as the case may be. 12.4 Forbearance by Lessor. During the continuance of any Mortgage obtained in accordance with Section 13.1 of this Lease and until such time as the lien of such Mortgage has been extinguished: 1121066751-0097 6271361.10 a09/04114 -63- CO Lessor shall not agree to any mutual termination nor accept any surrender of this Lease, nor shall Lessor consent to any amendment or modification of this Lease, without the prior written consent of the Mortgagee. (ii) Notwithstanding any Default by Lessee in the performance or observance of any agreement, covenant, or condition of this Lease on the part of Lessee to be performed or observed, Lessor shall have no right to terminate this Lease unless an event of Default shall have occurred and be continuing, Lessor shall have given such Mortgagee written notice of such event of Default, and such Mortgagee shall have failed to remedy such Default, or caused such Default to be deemed remedied, within the times specified in (iii) and (iv) below. (iii) Should any event of Default under this Lease occur, any Mortgagee shall have sixty (60) days after receipt of written notice from Lessor setting forth the nature of such event of Default, and, if the Default is such that possession of the Premises is reasonably necessary to remedy the Default, a reasonable time after the expiration of such sixty (60) day period, within which to remedy such Default; provided, however that Lessor shall not be required to forbear beyond such initial sixty (60) day period unless (a) the Mortgagee shall have fully cured any Default in the payment of any monetary obligations of Lessee under this Lease within such sixty (60) day period and shall continue to pay currently such monetary obligations as and when the same are due, and (b) such Mortgagee shall have acquired Lessee's leasehold estate created hereby or commenced foreclosure or other appropriate proceedings in the nature thereof within such sixty (60) day period, or prior thereto, and shall be diligently prosecuting any such proceeding. Lessor agrees that all payments so made and all things so done and performed by such Mortgagee shall be accepted by Lessor and shall be effective to prevent a termination of this Lease as the same would have been if made, done, and perfonned by Lessee instead of such Mortgagee. (iv) Any event of Default under this Lease which in the nature thereof cannot be remedied by a Mortgagee shall be deemed to be remedied if the Mortgagee does all of the following: (a) within sixty (60) days after receiving written notice from Lessor setting forth the nature of an event of Default, or prior thereto, the Mortgagee shall have acquired Lessee's leasehold estate created hereby or shall have commenced foreclosure or other appropriate proceedings, (b) Mortgagee shall diligently prosecute any such proceedings to completion, (c) within the sixty (60) day period referred to in (a) above, Mortgagee shall have fully cured any Default in the payment of all monetary obligations of Lessee hereunder and any non -monetary obligations which do not require possession of the Premises and Improvements, and (d) after gaining possession of the Premises, Mortgagee shall perform and abide by each and all of the obligations of Lessee under this Lease as and when the same are due; provided, however, that Mortgagee shall not be required to cure any Default which occurs prior to the date on which Mortgagee obtains possession of the Premises and which by its nature cannot be cured by such Mortgagee. (v) In the event that Mortgagee is prohibited by any process or injunction issued by any court of competent jurisdiction or by reason of any action by any court having jurisdiction of any bankruptcy or insolvency proceeding involving Lessee from commencing or prosecuting foreclosure or other appropriate proceedings in the nature thereof, the times specified in subparagraphs (iii) and (iv) immediately above for commencing and prosecuting such foreclosure or other proceedings shall be extended for the period of such prohibition. 112/066751-0097 6271361.10 a09/04/14 -64- Notwithstanding anything to the contrary herein, Lessor shall in no event be required to forbear hereunder unless Mortgagee shall within sixty (60) days after the giving of notice by Lessor pay all moneys due and in respect of which there exists a monetary event of Default. 12.5 Conditions Precedent to Mortgagee Rights and Lessor Forbearance. Lessor shall not be required to comply with Sections 12.2 through 12.4 of this Lease with respect to any Mortgage, unless and until a true copy of the original thereof bearing the date and book and page of recordation thereof, and a certified copy of the original note secured by such Mortgage has been delivered to Lessor together with written notice of the address of the Mortgagee to which notices may be sent; and in the event of an assignment of such Mortgage, such assignment shall not be binding upon Lessor unless and until a certified copy thereof bearing the date and book and page of recordation together with written notice of the address of the assignee thereof to which notices may be sent, have been delivered to Lessor. 12.6 Performance on Behalf of Lessee. In the event that Lessee shall fail to make any payment or perform any act required hereunder to be made or performed by Lessee, then Lessor or Mortgagee may, but shall be under no obligation to, after such notice to Lessee, if any, as may be reasonable under the circumstances, make such payment or perform such act with the same effect as if made or performed by Lessee. Nothing herein shall limit the right of Mortgagee to take action or make a payment if permitted under its Mortgage. Entry by Lessor or Mortgagee upon the Premises and Improvements for such purpose shall not waive or release Lessee from any obligation or Default hereunder (except in the case of any obligation or Default which shall have been fully performed or cured by Mortgagee). Lessee shall reimburse Lessor (with interest at the rate of three percent (3%) over the prime rate of the largest bank operating in the State of California or the maximum legal rate of interest, whichever is less) or Mortgagee (with interest as provided in the Mortgage) for all sums so paid by Lessor or Mortgagee and all costs and expenses incurred by Lessor and Mortgagee in connection with the performance of any such act. 12.7 Non -Merger. There shall be no merger of this Lease, or of the leasehold estate created thereby, with the fee estate in and to the Premises and Improvements by reason of the fact that this Lease, or the leasehold estate created thereby, or any interest in either thereof, may be held directly or indirectly by or for the account of any person who shall own the fee estate in and to the Premises and Improvements, or any portion thereof, and no such merger shall occur unless and until all persons at the time having any interest in this Lease or the leasehold estate, including the Mortgagee and the holder of any mortgage upon the fee estate in and to the Premises and Improvements, shall join in a written instrument effecting such merger. 12.8 Lessor's Cooperation; Estoppels. Lessor covenants and agrees that it will act and cooperate with Lessee in connection with Lessee's right to grant a Mortgage or Mortgages, subject to the reserved rights of Lessor as set forth herein. At the request of Lessee or any proposed or existing Mortgagee, Lessor shall within a reasonable time execute and deliver (i) any documents or instruments reasonably requested to evidence, acknowledge, and/or perfect the rights of a Mortgagee as herein provided; and (ii) an estoppel certificate certifying the status of this Lease and Lessee's interest herein and such matters as are reasonably requested by Lessee or such Mortgagee. Such estoppel certificate shall include, but not be limited to, certification, if true, by Lessor that (i) this Lease is unmodified and in full force and effect (or, if modified, a statement as to the nature of such modification and certification that this Lease, as so modified, is in full force and effect), (ii) all rents currently due under the Lease have been paid or the status 112/066751-0097 6271361.10 a09/04/14 -65- and amount of rent payments then owing, (iii) there are not, to Lessor's knowledge, any uncured Defaults on the part of Lessee under this Lease or facts, acts, or omissions which with the giving of notice or passage of time, or both, would constitute a Default, (iv) the requirements under Section 12.1 of the Lease have been satisfied and Lessor consents to the execution and delivery by Lessee to Mortgagee of a deed of trust encumbering Lessee's leasehold interest in the Premises; (v) Lessee's use and operation of the Premises complies with any use covenants or operating requirements contained in the Lease; (vi) Lessor has not received any notice of any assignment, transfer, or encumbrance of the interest of Lessee in the Lease or any rights of Lessee thereunder, except in favor of Mortgagee; and (vii) Lessor has received and/or by virtue of this estoppel certificated acknowledges Mortgagee has registered its name and address with Lessor in accordance with Section 12.1.4 of the Lease. Any such estoppel certificate may be conclusively relied upon by any Mortgagee or permitted successor or assignee of Lessee's interest in this Lease. Lessee shall be responsible to pay or reimburse Lessor for the costs incurred by Lessor in investigating the facts relating to Lessor's execution of an estoppel certificate, including without limitation in-house administrative costs at the full payroll rate of the City employees performing services with respect to same and, to the extent Lessor retains outside attorneys or consultants for said purpose, the costs incurred by said attorneys or consultants. Lessor may withhold issuance of an estoppel certificate until Lessee concurrently pays to Lessor the costs owing to Lessor hereunder. 12.9 Enforceability. The rights granted herein to a Mortgagee shall be enforceable only by such Mortgagee. In the event any action or proceeding is brought to enforce or interpret the provisions hereof or to seek damages or performance or declare the rights of the parties hereto or such Mortgagee, the prevailing party including such Mortgagee, if prevailing, shall be entitled to attorneys' fees, costs, and expenses. 12.10 Equipment Financing. Lessor understands that Lessee, Hotel Manager or Hotel Franchisor may lease and/or purchase with purchase money financing certain of the equipment and furnishings which may be installed in or used in connection with the Hotel from time to time during the Lease Term. Lessor hereby agrees, upon Lessee's written request, to release, waive, or subordinate its landlord's lien to such equipment leases, retained title contracts, security interest, or other forms of purchase money financing and to execute documents, in form and substance reasonably satisfactory to Lessor, that permit the equipment lessors, title and lien holders, as applicable, the right to enter the Premises for the sole purpose of exercising their rights to remove such equipment and furnishings subject to such leases, retained title contracts, security interests, or other forms of purchase money financing, and provided that the same obligate the equipment lessors, title and lien holders, as applicable, to repair and restore any damage caused to the Premises and the Improvements resulting from such removal. ARTICLE 13 INDEMNIFICATION AND INSURANCE 13.1 Indemnification. To the maximum extent permitted by law and except as hereinafter expressly limited, from and after the Agreement Date Lessee agrees to and shall defend, indemnify, and hold harmless Lessor and Lessor's officials, officers, employees, agents, contractors, and consultants from and against all claims, liability, loss, damage, costs, and 112/066751-0097 6271361.10 a09/04/14 -66- expenses (including investigation costs, reasonable attorneys' fees, and court costs) arising from or as a result of the death or injury of any person, property damage, economic loss, penalties, fines, and other damages of any kind whatever which is directly or indirectly caused by or based on (or alleged to be caused by or based on) Lessor's ownership of or interest in the Premises or any portion thereof or any improvements thereon, the condition of the Premises or any portion thereof or any Improvements thereon, Lessee's entry onto or occupancy of the Premises, Lessee's acts or omissions with respect to the development, construction, use, maintenance, operation, and repair of the Premises or any portion thereof or any Improvements thereon, and any of Lessee's activities under this Lease, whether such actions or inactions be prior to or after the Commencement Date, whether such actions or inactions be by Lessee or anyone directly or indirectly employed or contracted with by Lessee, and whether such damage or injury shall accrue or be discovered before or after the termination of this Lease. Notwithstanding the foregoing, Lessee shall not be responsible for (and such indemnity shall not apply to) property damage or bodily injury caused by Lessor's entry onto the Premises and Improvements pursuant to various provisions of this Lease, and/or to the extent such damage or injury is caused by the willful misconduct or active negligence of Lessor or its designated employees or agents. Each Party shall promptly provide notice to the other Party of any actual or threatened claim that gives rise or may give rise to the indemnity obligations set forth herein and thereafter the Parties agree to cooperate in the defense of any such claim. 13.2 Indemnification From Third Party Challenges to Lease and/or Development Entitlements. In addition to the provisions set forth in Section 13.1 and except as stated in the next paragraph hereinbelow, in the event of any legal action instituted by a third party (not a Party to this Lease) challenging the validity or enforceability of (i) this Lease or any provision of this Lease, (ii) any action by either Lessor or Lessee pursuant to this Lease, including without limitation any consent or approval issued by Lessor pursuant hereto, or (iii) any Development Entitlement or other permit or approval approved or issued by Lessor (in its regulatory capacity) or any other governmental agency with jurisdiction over the Premises and the Hotel, the Parties hereby agree to cooperate in defending said action; provided, however, Lessee shall indemnify, defend (by counsel reasonably acceptable to Lessor), and hold harmless Lessor and Lessor's officials, officers, employees, agents, contractors, and consultants from and against all claims, liabilities, and losses, including without limitation all litigation expenses (including investigation costs, reasonable attorneys' fees, and court costs), arising therefrom. In the event that such action involves mediation, arbitration, or any other means of alternative dispute resolution, the provisions of this Section 13.2 shall apply equally thereto. Lessor shall have the right to appoint and designate independent counsel to represent Lessor and/or any of Lessor's officials, officers, employees, agents, contractors, and consultants named as parties in any such third party action, as reasonably determined to be necessary and appropriate by Lessor, at Lessee's expense; provided, that in such event Lessor shall instruct its independent counsel to cooperate with counsel retained by Lessee to defend the same persons and entities in order to avoid unnecessary duplication of expense. Upon being served with process in any such legal action, the Party so served shall promptly notify the other Party to this Lease. Lessee shall have the right to settle or compromise any such action; provided, however, that no such settlement or compromise shall terminate, modify, alter, or amend any of Lessor's rights or obligations set forth in this Lease or with respect to any of the Development Entitlements or permits or approvals issued or approved by any governmental agency with respect to the Premises without compliance with any applicable legal procedures and requirements and without Lessor's prior written consent, which consent Lessor may withhold in its sole and absolute discretion. 112/066751.0097 6271361.10 s09/04/14 -67- Notwithstanding the foregoing, Lessee's indemnity obligations set forth in the preceding paragraph shall not apply to the claims of Lido Partners that, as of the Agreement Date, are being litigated in Orange County Superior Court Case No. 30-2014-00715029-CU-OR-CJC. 13.3 Required Insurance. During the entire Lease Term, Lessee, at its sole cost and expense, shall maintain or cause to be maintained insurance policies protecting against all of the following types of risk and loss: (i) Insurance against loss or damage to the Improvements on the Premises, resulting from fire, earthquake (to the extent commercially available at commercially reasonable rates), windstorm, hail, lightning, vandalism, malicious mischief, riot and civil commotion, and such other perils ordinarily included in extended coverage fire insurance policies. Such insurance shall be maintained in an amount not less than one hundred percent (100%) of the full insurable value of the Improvements, all furnishings, fixtures, and equipment on the Premises from time to time, and the estimated cost of any architectural and engineering fees, inspection and supervision costs, and other costs that would be incurred to replace the Improvements on the Premises to their pre-existing condition. As used herein, the term "full insurable value" shall mean the actual replacement cost (excluding the cost of excavation, foundations, and footings below the ground level and without deduction for depreciation) of the Improvements, including without limitation the cost of construction of the Improvements, architectural and engineering fees, inspection and supervision, and applicable governmental permit fees. To ascertain the amount of coverage required, Lessee shall cause the full insurable value to be determined from time to time by the insurer or by a qualified expert mutually acceptable to Lessor and Lessee, not less often than once every three years. Lessor shall be included as a loss payee under the commercial property insurance. (ii) Use and occupancy or business interruption or rental income insurance against the perils of fire, windstorm, hail, lightning, vandalism and malicious mischief, riot and civil commotion, and such other perils ordinarily included in extended coverage fire insurance policies, in an amount equal to not less than two tunes the sum of the highest Participation Rent paid to Lessor in any year under this Lease and twelve (12) months fixed operating expenses of Lessee, except to the extent such insurance is not commercially available at commercially reasonable rates due to reasons other than the wrongful acts or omissions or dangerous or hazardous activities of Lessee. (iii) Commercial general liability insurance, to protect against loss from liability imposed by law for damages on account of personal injury, including death therefrom, suffered or alleged to be suffered by any person or persons whomsoever, resulting directly or indirectly from any act or activities of Lessee or under Lessee's control or direction, and also to protect against loss from liability imposed by law for damages to any property of any person caused directly or indirectly by or from the acts or activities in connection with the Premises and Improvements of Lessee or its invitees and sublessees, or any person acting for Lessee, or under its control or direction, Any such property damage and personal injury insurance maintained by Lessee at any time during the term of this Lease shall name Lessor and its officials, officers, employees, agents, volunteers, and consultants as additional insureds and shall also provide for and protect Lessor against incurring any legal cost in defending claims for alleged loss. Coverage shall be at least as broad as that provided by Insurance Services Office form CG 00 01 and may be arranged through any combination of primary and excess insurance as required to 1.12/066751-0097 6271361.10 a09/04/14 -68- achieve the limits specified, provided that any excess liability policy does not restrict coverage provided in the primary policy. Such personal injury and property damage insurance shall be maintained in full force and effect during the entire terra of this Lease in an amount not less than Ten Million Dollars ($10,000,000.00) combined single limit, Twenty Million Dollars ($20,000,000) in the aggregate, as of the Effective Date of Lease, which minimum amount of coverage shall escalate on the January 18t next following the fifth anniversary of the Commencement Date and once every five years thereafter in proportion to the escalation, if any, during such period in the Consumer Price Index. Lessee agrees that the provisions of this Section 13.3(iii) as to maintenance of insurance shall not be construed as limiting in any way the extent to which Lessee may be held responsible for the payment of damages to persons or property resulting from Lessee's activities, the activities of its invitees and sublessees, or the activities of any other person or persons for which Lessee is otherwise responsible. (iv) Business automobile coverage for bodily injury and property damage liability for all activities of Lessee arising out of or in connection with the activities and services to be performed and provided pursuant to this Lease, including coverage for any owned, hired, non -owned, or rented vehicles, in an amount not less than. Five Million Dollars ($5,000,000.00) combined single limit for each occurrence, which minimum amount of coverage shall escalate on the January 1st next following the fifth anniversary of the Commencement Date and once every five years thereafter in proportion to the escalation, if any, during such period in the Consumer Price Index. (v) Builder's risk insurance during all periods of construction, reconstruction, or alteration of any Improvements on the Premises against "all risk" of physical loss, including without limitation the perils of flood, collapse, and transit, with deductibles acceptable to Lessor, covering the total cost of work performed, equipment, supplies, and material furnished on a replacement cost basis with no co-insurance penalty. (vi) Contractor's pollution liability insurance for contractors or subcontractors performing constriction work written on a form acceptable to Lessor providing coverage for liability arising out of sudden, accidental, and gradual pollution. The policy limit shall be not less than One Million Dollars ($1,000,000.00) per claim and Two Million Dollars ($2,000,000.00) in the aggregate, which minimum amount of coverage shall escalate on the January 1st next following the fifth anniversary of the Commencement Date and once every five years thereafter in proportion to the escalation, if any, during such period in the Consumer Price Index. When this insurance is required, all activities comprising the work shall be specifically scheduled on the policy as "covered operations." The policy shall provide coverage for the hauling of waste from the Premises to the final disposal location, including non -owned disposal sites. Products/completed operations coverage must be maintained and evidence of insurance must be provided for at least five (5) years after completion of the work. (vii) Liquor liability coverage in the amount of not less than Ten Million Dollars ($10,000,000) per occurrence and in the aggregate, which minimum amount of coverage shall escalate on the January 1st next following the fifth anniversary of the Commencement Date and once every five years thereafter in proportion to the escalation, if any, during such period in the Consumer Price Index. 1121066751-0097 6271361.10 a09104114 -69- (viii) Workers compensation insurance, statutory limits, and employer's liability insurance with limits of at least One Million Dollars ($1,000,000) each accident for bodily injury by accident and each employee for bodily injury by disease in accordance with the laws of the State of California, Section 3700 of the Labor Code. Such workers compensation insurance shall cover all persons employed by Lessee in connection with the Premises and Improvements, and shall cover full liability for compensation 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 in connection with the Premises and Improvements, or the operation thereof by Lessee. In addition, Lessee shall require each subtenant and subcontractor to similarly maintain workers compensation insurance and employer's liability insurance meeting the requirements of this Section 13.1(iv) for all of said subtenant's and subcontractor's employees. (ix) Lessee hereby agrees to waive rights of subrogation which any insurer of Lessee may acquire from Lessee by virtue of payment of any loss. Lessee agrees to obtain any endorsements that may be necessary to effectuate this waiver of subrogation. The workers compensation policy shall be endorsed with a waiver of subrogation in favor of Lessor for all work performed by Lessee, its employees, agents, and contractors and subcontractors. In the event that the holder of a Mortgage obtained in accordance with Section 12.1 of this Lease which has registered its name and address with Lessor acquires the leasehold interest created by this Lease, such Mortgagee shall have the right to self -insure with respect to the risks specified in this Section 13.3 if such Mortgagee is an Institutional Lender. 13.4 General Insurance Provisions and Requirements. Lessee shall provide copies of all insurance policies or certificates of insurance, with original endorsements, to Lessor as evidence of the insurance coverage required herein. Insurance certificates must be approved by Lessor prior to the Commencement Date and prior to commencement of performance by Lessee or issuance of any permit. Current certification of insurance shall be kept on file with Lessor at all times during the Lease Term. Lessee shall also deliver to Lessor appropriate evidence of payment of the premiums for all required insurance prior to the Commencement Date and thereafter, during the entire Lease Term, at least thirty (30) days prior to expiration of coverage. All insurance provided under Section 13.3 of this Lease shall be primary insurance for the benefit of Lessee and Lessor and not contributory with any other insurance that may be maintained from time to time by Lessor in its sole and absolute discretion. Each insurer shall waive all rights of subrogation against Lessor, its elected and appointed officers, officials, employees, agents, and volunteers. Lessor and its elected and appointed officers, officials, employees, agents, and volunteers are to be covered as additional insureds under all general, Iiquor, and pollution liability policies with respect to liability arising out of Lessee's activities related to this Lease and with respect to Lessee's use and occupancy of the Premises. Said insurance shall also be for the benefit of the Mortgagee, if any. Lessor shall be listed as payee on property and builder's risk policies. Lessee covenants not to keep on the Premises or permit to be kept, used, or sold thereon, anything prohibited by any fire or other insurance policy covering the Premises. 112/066751.0097 6271361.10,09/04/14 -70- All insurance shall be written on an occurrence -made form except pollution liability insurance. Lessee shall require and verify that all contractors and subcontractors maintain insurance meeting all the requirements stated herein and Lessee shall ensure that Lessor is an additional insured on the insurance required from contractors and subcontractors. For CGL coverage, contractors and subcontractors shall provide coverage with a form at least as broad as CG20380413. Any failure to comply with reporting provisions of the policies shall not affect coverage provided to Lessor, its elected and appointed officers, officials, employees, agents, and volunteers. The insurance required by this Lease shall not be suspended, voided, canceled, or reduced in coverage or limits except after thirty (30) calendar days (ten (10) calendar days written notice of non-payment of premium) written notice has been received by Lessor. It shall be Lessee's obligation to ensure that provisions for such notice have been established. All insurance provided 'Under Section 13.3 shall be periodically reviewed by the Parties for the purpose of adjusting the minimum limits of such insurance to amounts which may be reasonable and customary for similar facilities of like size and operation; provided, however, that in no event shall Lessor be required to consent to or approve a reduction in the amount of insurance to be provided pursuant to Section 13.3(iii). The insurance to be provided by Lessee may provide for a deductible or self -insured retention of not more than Ten Thousand Dollars ($10,000.00), with such amount to increase at such times as Lessor may require increases in the policy limits as set forth above; provided that the percentage increase in the deductible or self -insured retention shall not exceed the percentage increase in the Consumer Price Index since the last requested adjustment; and further provided that Lessee may maintain such higher deductibles or self -insured retention as may be approved in writing by the City Manager or his or her designee. In the event such insurance does provide for deductibles or a self -insured retention, Lessee agrees that it will fully protect Lessor, its boards, officials, officers, employees, and consultants in the same manner as these interests would have been protected had the policy or policies not contained the deductible or retention provisions. All insurance herein provided for under Section 13.3 shall be effected under policies issued by insurers of recognized responsibility licensed or permitted to do business in the State of California with an assigned policyholders' Rating of A- (or higher) and Financial Size Category Class VII (or larger), in accordance with the latest edition of Best's Key Rating Guide, unless otherwise approved by the City Manager of Lessor or his or her designee. Any insurance required to be maintained by Lessee pursuant to Section 13.3 may be taken out under a blanket insurance policy or policies covering other premises or properties, and other insureds in addition to the Parties hereto; provided, however, that any such policy or policies of blanket insurance shall specify therein, or supplemental written certification from the insurers under such policies shall specify, the amount of insurance irrevocably allocated to the coverage to be provided under Section 13.3 and provided further, that in all other respects, any such blanket policy shall comply with the other provisions of Section 13.3. 112/066751-0097 6271361.10 a09/04/I4 -71- Lessee hereby waives any claim against Lessor for any loss that is required to be covered by insurance of the type specified in Section 13.3. By requiring insurance herein, Lessor does not represent that coverage and limits will necessarily be adequate to protect Lessee, and such coverage and limits shall not be deemed as a limitation on Lessee's liability under the covenants set forth in this Lease, including without limitation the indemnity provisions herein. Lessee shall give Lessor prompt and timely notice of any claim made or suit instituted arising out of or resulting from Lessee's performance under this Lease and confirmation, if such be the fact, that the claim or suit has been tendered to Lessee's insurer and the insurer has accepted said tender. 13.5 Failure to Maintain Insurance. If Lessee fails or refuses to procure or maintain insurance as required by this Lease, Lessor shall have the right, but not the obligation, at Lessor's election, and without notice to Lessee or any Mortgagee, to procure and maintain such insurance. The premiums paid by Lessor shall be treated as additional rent due from Lessee, to be paid on the first day of the month following the date on which the premiums are paid. Lessor shall give prompt notice of the payment of such premiums, stating the amounts paid and the name of the insured(s). 13.6 Disposition of Insurance Proceeds Resulting from Loss or Damage to Improvements. 13.6.1 Subject to the provisions of Section 13.6.2 below, proceeds of insurance with respect to loss or damage to the Improvements to be maintained and repaired by Lessee during the Lease Term shall be payable, under the provisions of the policy of insurance, to Lessee or, if such loss or damage involves the need for Lessee to obtain any governmental approvals or permits, jointly to Lessee and Lessor, and said proceeds shall constitute a trust fund to be used for the repair, restoration, or reconstruction of the Improvements in accordance with plans and specifications approved in writing by Lessor. 13.6.2 In the event this Lease is terminated by mutual agreement of Lessor and Lessee and the Improvements are not repaired, restored, or reconstructed, the insurance proceeds shall be applied first to any payments due under this Lease from Lessee to Lessor, second to restore the Premises to a neat and clean condition, and finally any excess shall be paid to Lessee; provided, however, that during any period when there is an outstanding Mortgage upon the Improvements, such proceeds shall be applied first to discharge the debt secured by the Mortgage and then for the purposes and in the order set forth above in this paragraph. ARTICLE 14 EMINENT DOMAIN 14.1 Lessee to Give Notice. In case of a Taking of all or any part of the Premises or the commencement of any proceedings or negotiations which might result in a Taking, Lessee shall promptly give written notice thereof to Lessor generally describing the nature and extent of the Taking or the nature of such proceedings or negotiations and the nature and extent of the Taking which might result therefrom, as the case may be. 1121066751-0097 6271361.10 a09/04/14 -72- 14.2 Total Taking. In case of a Taking of the fee of the entire Premises and Improvements, or in case of the taking of only a part of the Premises and Improvements that leaves the remainder of the Premises and Improvements in such location, or in such form, shape, or reduced size or condition as to render the same not effectively and practicably usable for the conduct thereon of the Hotel and ancillary uses required hereunder, this Lease shall terminate as of the date title vests in the condemning authority or the date the condemning authority is entitled to possession, whichever first occurs (the "Date of Taking"). Any Taking of the Premises and Improvements of the character referred to in this Section 14.2 which results in the termination of this Lease is referred to herein as a "Total Taking." Lessee shall continue to pay all Ground Rent due hereunder and, in all respects, keep, observe, and perform all of the terms, covenants, and conditions of this Lease to be kept, observed, and performed by Lessee until the Date of Taking. 14.3 Partial Taking. In case of a Taking of a portion of the Premises and Improvements that does not constitute a Total Taking (a "Partial Taking") (i) this Lease shall remain in full force and effect as to the portion of the Premises and Improvements remaining immediately after such Partial Taking, and a fair and equitable proportion of the Ground Rent or other sum payable hereunder shall be abated according to the nature and extent of the Partial Taking and the duration and extent of the interruption of Lessee's operations due to such taking and restoration of the Premises, and (ii) Lessee, to the extent the awards or payments, if any, on account of such Partial Taking shall be sufficient for the purpose, at its expense, but first subject to Section 14.4, shall within a reasonable period of time commence and complete, or cause to be commenced and completed, restoration of the Premises and Improvements as nearly as possible to their value, condition, and character immediately prior to such Partial Taking, except for any reduction in area caused thereby; provided, however, that in case of a Partial Taking for temporary use Lessee shall not be required to effect such restoration until such Partial Taking is terminated. 14.4 Application of Awards and Other Payments. Awards and other payments on account of a Taking, less costs, fees, and expenses incurred in the collection thereof ("Net Awards and Payments") shall be applied as follows: (i) In the event of a Partial Taking, Lessee shall furnish to Lessor and any Mortgagee evidence satisfactory to Lessor and the Mortgagee of the total cost of the restoration required by Section 14.3. (ii) In the event of a Partial Taking, Net Awards and Payments shall be held and applied as provided with respect to proceeds of insurance as set forth in Section 13.6.1. The balance, if any, shall be paid to Lessee and Lessor as their respective interests may appear in the Premises and the Improvements. (iii) Net Awards and Payments received on account of a Partial Taking for temporary use shall initially be received by Lessee. (iv) Net Awards and Payments received on account of a Total Taking shall be allocated as follows: 112/066751-0097 6271361.10,09/04/14 -73- First. There shall be paid to each Mortgagee an amount equal to the sum of any unpaid principal amount of the indebtedness secured by the Mortgage, if any, and any interest accrued thereon, all as of the date on which such payment is made; provided, however, that each such Mortgagee shall only be paid to the extent of its security in the applicable portion which is the subject of the Taking. Second: To Lessee and Lessor as their respective interests may appear in the Premises and the Improvements; provided, that (i) any payment to a Mortgagee or pursuant to the preceding paragraph shall be charged against Lessee's interest; and (ii) Lessee shall be entitled to payment and receipt of any portion of Net Awards and Payments attributable to leasehold bonus value. 14.5 Taking Prior to Commencement Date. Notwithstanding any other provision set forth in this Lease to the contrary, Lessee shall have no right to share in any Net Awards and Payments if the Date of Taking occurs prior to the Commencement Date. Notwithstanding the foregoing sentence, in the event a Taking occurs prior to the Commencement Date, Lessee shall have the right, in its sole and absolute discretion, to terminate this Lease. ARTICLE 15 DEFAULTS, REMEDIES, AND TERMINATION 15.1 Defaults — General. Subject to the extensions of time for Events of Force Majeure, the failure or delay by either Party to timely perform any term or provision of this Lease constitutes a default under this Lease (herein, a "Default"). The Party who so fails or delays must immediately commence to cure, correct, or remedy such failure or delay, and shall complete such cure, correction, or remedy within such time as may be expressly stated in any other provision of this Lease (including without limitation Section 8.6) and, if the time for completion of such cure, correction, or remedy is not expressly stated in any other provision of this Lease, within ten (10) days of such failure or delay for monetary Defaults and, for non - monetary Defaults, within the minimum reasonable period of time within which such Default can be cured if the Defaulting Party acts with commercially reasonable diligence to cure, correct, or remedy the same (the "Cure Period"). The injured Party shall give written notice of default to the Party in Default, specifying the Default complained of by the injured Party. Except as required to protect against further damages, and except as may be otherwise expressly provided elsewhere in this Lease, the injured Party may not institute proceedings against the Party in Default until the expiration of the applicable Cure Period. In addition, Lessor's exercise of its remedies under this Article 15 shall be subject to the provisions of Article 12 of this Lease. In addition to the foregoing, each of the following shall be deemed to constitute a Default hereunder and the Cure Period shall be deemed to have expired at the times specified: (i) if Lessee becomes insolvent or files any debtor proceedings, or if any adjudication in bankruptcy is rendered against Lessee, or if Lessee takes or has taken against it, in any court pursuant to any statute either of the United States or of any State, a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of all or any portion of Lessee's property, and should the same not be discharged within one hundred twenty (120) calendar days thereafter; (ii) if Lessee makes an assignment for the benefit of creditors or petitions for or enters 1121066751-0097 6271361.10 a09/04/14 -74- into such an arrangement; (iii) if Lessee abandons or vacates the Premises for a period of fifteen (15) consecutive calendar days after written notice to Lessee (excluding, however, any abandonment or vacation attributable to an Event of Force Majeure or by the remodeling, reconstruction, alteration, or repair of the Hotel); (iv) if a trustee or receiver is appointed to take possession of substantially all of the assets of Lessee located at the Premises where possession is not restored within one hundred twenty (120) calendar days; and (v) if Lessee permits or suffers this Lease or any substantial portion of its property on the Premises or any portion of its interest in the Premises or the Hotel to be taken under any writ of attachment or execution, and should the same not be discharged within ninety (90) calendar days thereafter. Except as may be otherwise expressly provided in this Lease, any failure or delay by either Party in asserting any of its remedies or rights as to any Default shall not operate as a waiver of any Default or of any such rights or remedies or deprive either such Party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert, or enforce any such rights or remedies. Failure or delay in giving a notice of default shall not change the time of Default. 15.2 Legal Actions. In addition to any other rights or remedies it may have hereunder or under applicable law, either Party may institute legal action to cure, correct, or remedy any Default by the other Party, to recover damages for any Default by the other Party, or to obtain any other remedy consistent with the purpose of this Lease. Such legal actions must be instituted and maintained in the Superior Court of the County of Orange, State of California, in any other appropriate court in that county, or in the United States District Court in the Central District of California. To the fullest extent permitted by law, each Party consents to the jurisdiction of such court(s) and waives any right it might have in the absence of this Lease to object to such jurisdiction or transfer venue to another court. In the event that any legal action is commenced by Lessor against Lessee, service of process on Lessee shall be made on any officer of Lessee or any authorized agent for service of process and shall be valid whether made within or without the State of California. 15.3 Attorneys' Fees and Court Costs. Subject to the express provisions of this Lease relating to indemnity, in the event of any legal action for enforcement of this Lease or arising out of this Lease, the prevailing Party, in addition to whatever relief to which it may be entitled, shall be entitled to recover all of its litigation expenses, including, to the maximum extent permitted by law, its attorney's fees, expert witness fees, and costs, and including such litigation expenses arising in preparation for litigation and prior to the commencement or Filing of the initial pleading, litigation expenses incurred with respect to any appeal, and litigation expenses as may be incurred to enforce any judgment or settlement agreement that is entered or agreed to. The foregoing provisions shall apply equally to any arbitration, mediation, or other alternative dispute resolution proceeding. 15.4 Rights and Remedies are Cumulative. Except with respect to any rights and remedies expressly declared to be exclusive in this Lease, the rights and remedies of the Parties are cumulative, and the exercise by either Party of one or more of such rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same Default or any other Default by the other Party. L 12/066751-0097 6271361.10 a09/04/14 -75- 15.5 Additional Remedies of Lessor. In addition to any other rights and remedies to which Lessor may be entitled under applicable law or this Lease, including without limitation Section 8.6, if Lessee commits a Default and fails to cure such Default within the applicable Cure Period, and subject to any rights of a Mortgagee pursuant to Article 12, Lessor, at its option, shall have the right but not the obligation to do any of the following: (i) Correct or cause to be corrected said Default and charge the costs therefor to the account of Lessee; (ii) Correct or cause to be corrected said Default and pay the costs thereof from the proceeds of any insurance; (iii) Continue this Lease and Lessee's right to possession in effect and enforce its rights and remedies under the Lease, including the right to recover rent as it becomes due, as provided in Section 1951.4 of the California Civil Code; (iv) Have a receiver appointed to take possession of Lessee's interest in the Premises and Improvements, with power in said receiver to administer Lessee's interest therein, collect all funds available to Lessee in connection with its operation and maintenance thereof, and perform all other acts consistent with Lessee's obligations under this Lease as the court deems proper; (v) Maintain and operate the Premises and Improvements without terminating this Lease; (vi) Terminate this Lease pursuant to Section 15.7 hereof, by written notice to Lessee of its intention to do so. 15.6 Lessee's Waiver of Right to Specific Performance Prior to Commencement Date. Notwithstanding any other provision set forth in this Lease to the contrary, in no event shall Lessee have the right to specific performance or similar injunctive or mandamus relief to compel Lessor to execute and deliver the Memorandum of Lease or cause the Commencement Date to occur. In the event Lessee alleges that Lessor has committed an uncured Default of its obligations under this Lease by failing or refusing to perform any of its obligations hereunder, and/or by failing or refusing to execute and record the Memorandum of Lease or consenting to or causing the Commencement Date to occur, Lessee's sole and exclusive remedy shall be compensatory (but not special or consequential) damages proximately caused thereby and Lessee, upon receipt of written request from Lessor, shall promptly execute (in recordable form) and deliver to Lessor a quitclaim deed disclaiming and terminating any right, title, and interest Lessee may have or claim to have in the Premises. 15.7 Remedies and Rights of Termination. 15.7.1 In the event that at any time during the Lease Term, in violation of this Lease, Lessee shall: (i) fail to commence and/or complete the construction of the Improvements as required by this Lease or within the time required by this Lease; (ii) abandon or substantially suspend construction of the Improvements as required by this Lease prior to the completion thereof; (iii) use the Premises and Improvements for any purpose other than those provided for in this Lease or fail to use and maintain the Premises and Improvements in accordance with Article 112/066751-0097 6271361.10 a09/04114 -76- 7 of this Lease; (iv) fail or refuse to pay to Lessor when due the applicable rents and other sums required by this Lease to be paid by Lessee; (v) fail or refuse to pay when due any taxes, assessments, or other Impositions as required by this Lease; (vi) make or suffer to be made any voluntary or involuntary conveyance, assignment, sublease, or other Transfer of all or any portion of Lessee's Ieasehold interest in the Premises and Improvements, or of the rights of Lessee under this Lease, in violation of any of the provisions of Article 11 and Article 12 hereof; (vii) commit or suffer to be committed any waste or impairment of the Premises or the Improvements, or any part thereof; (viii) alter the Improvements iii any manner except as expressly permitted by this Lease; (ix) fail to maintain insurance as required by this Lease; (x) fail to make full repair and restoration of the Improvements in the event of damage or destruction in violation of the provisions of this Lease; (xi) engage in any financing except as permitted by the terms of this Lease, or any other transaction creating any mortgage on the Premises, or placing or suffering to be placed thereon any lien or other encumbrance, or suffering any levy or attachment to be made thereon in violation of the provisions of this Lease; (xii) voluntarily file or have filed against it any petition under any bankruptcy or insolvency act or law, or be adjudicated a bankrupt, or make a general assignment for the benefit of creditors; (xiii) fail to pay when due any payment or charge or otherwise default on any loan secured by a leasehold Mortgage permitted by this Lease; (xiv) abandon or surrender possession of the Premises or Lessee's interest therein; (xv) fail to perform any of Lessee's Hazardous Substances covenants; or (xvi) fail to perform or comply with any other material term or provision hereof, and any such Default of any of Lessee's covenants referred to in clauses (i)-(xvi), inclusive, is not be cured or remedied within the applicable Cure Period, then, in such event, subject to the provisions of Article 12 of this Lease running in favor of any Mortgagee, Lessor may, at its option and in addition to any other remedy provided for in this Lease, terminate the Lease and revest in Lessor the leasehold interest theretofore transferred to Lessee, by written notice to Lessee of its intention to do so. 15.7.2 Upon termination of this Lease pursuant to this Section 15.7 it shall be lawful for Lessor to re-enter and repossess the Premises without process of law, and Lessee, in such event, does hereby waive any demand for possession thereof, and agrees to surrender and deliver peaceably to Lessor immediately upon such termination in good order, condition, and repair, except for reasonable wear and tear. Upon such termination title to all Improvements on the Premises specified in this Lease shall remain in Lessor. 15.7.3 No ejectment, re-entry, or other act by or on behalf of Lessor shall constitute a termination unless Lessor gives Lessee notice of termination in writing. Such termination shall not relieve or release Lessee from any obligation incurred pursuant to this Lease prior to the date of such termination. 15.7.4 Termination of this Lease under this Section 15.7 shall not relieve Lessee from the obligation to pay any suns due to Lessor or from any claim for damages against Lessee. Damages which Lessor may recover in the event of Default under this Lease shall include, but are not limited to, the worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term remaining after the time of award exceeds the amount of such rental loss that Lessee proves could be reasonably avoided. 15.7.5 The right of termination provided by this Section 15.7 is not exclusive and shall be cumulative to all other rights and remedies possessed by Lessor, and nothing contained 112/066751-OO97 6271361.10 a09104/14 -77- herein shall be construed so as to defeat any other rights or remedies to which Lessor may be entitled. ARTICLE 16 GENERAL PROVISIONS 16.1 Notices, Demands, and Communications between the Parties. Formal notices, demands, and communications between Lessor and Lessee shall be sufficiently given if personally delivered, delivered by reputable overnight delivery service providing a receipt confirming delivery, or delivered by registered or certified mail, postage prepaid, return receipt requested, to the following addresses: If to City: With copies to: If to Lessee: With a copy to: City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 Attention: City Manager City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 Attention: City Attorney and City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 Attention: Community Development Department — Real Estate Manager Olson Real Estate Group, Inc. Attn: Robert D. Olson 2955 Main Street, 3rd Floor Irvine, CA 92614 Scott S. Pollard, Esq. Attorney at Law 2804 Cliff Drive Newport Beach, CA 92663 Such written notices, demands, and communications may be sent in the same manner to such other addresses as either Party may from time to time designate by delivery of written notice of change of address in the same manner as provided in this Section. Notices shall be deemed delivered upon receipt for purposes of calculating all times for performance and all Cure Periods provided for herein. 16.2 Time of Essence. Time is of the essence with respect to the performance of each of the covenants and agreements contained in this Lease. 112/066751-0097 6271361.10 a09/04/14 -78- 16.3 Conflict of Interests. 16.3.1 No official, officer, or employee of Lessor who participates in the making of this Lease or in the implementation or enforcement of this Lease by or on behalf of Lessor shall have any personal financial interest, direct or indirect, in this Lease. 16.3.2 Lessee represents and warrants to Lessor that neither Lessee nor any official, officer, employee, consultant, or agent of Lessee has paid or given any official, officer, employee, consultant, or agent of Lessor any money or other consideration for obtaining this Lease. 16.4 Non -liability of Lessor Officials and Employees. No official, officer, employee, consultant or agent of Lessor shall be personally liable to Lessee, or any successor in interest of Lessee, in the event of any Default by Lessor or any for any amount which may become due to Lessee or successor of Lessee with respect to the negotiation, execution, implementation, or performance of this Lease. 16.5 Inspection of Books and Records. Lessor has the right at all reasonable times to inspect the books and records of Lessee pertaining to the Premises and Improvements as pertinent to the purposes of this Lease. Lessee shall maintain such books and records in Orange County, California, or shall make such books and records available for inspection in Orange County, California, during normal business hours on not less than two (2) business days' notice from Lessor. Lessee also has the right at all reasonable times to inspect the books and records of Lessor pertaining to the Premises and hprovements as pertinent to the purposes of this Lease. 16.6 No Partnership. Nothing in this Lease and no acts of Lessor or Lessee are intended or shall be deemed or construed by any person to create the relationship of principal and agent, or of partnership, or of joint venture, or of any association between Lessor and Lessee. 16.7 Compliance with Law. Lessee agrees, at its sole cost and expense, to comply and secure compliance with all the applicable and valid requirements now in force, or which may hereafter be in force, of all municipal, county, State, and federal authorities, pertaining to the Premises and Improvements, as well as operations conducted thereon, and to faithfully observe and secure compliance with, in the use of the Premises and Improvements, all applicable municipal, county, State and federal statutes, ordinances, regulations, and official rules and policies now in force or which may hereafter be in force, including all laws prohibiting discrimination or segregation in the use, sale, lease, or occupancy of the Premises. 16.8 Obligation to Refrain from Discrimination. There shall be no discrimination against or segregation of any person, or group of persons, on account of sex, sexual orientation or identity, marital status, race, color, creed, religion, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the Premises and Improvements, and Lessee itself or any person claiming under or through it shall not establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy of subtenants, sublessees, or vendees of the Premises and Improvements. 16.9 Lessor's Reservation of Police Power Authority. Lessee acknowledges that Lessor is approving and entering into this Lease in its proprietary capacity as fee owner of the 112/066751-0097 6271361,10 e09/04/14 -79- Premises only, that Lessor, as a municipality, also has governmental and regulatory authority over the Premises, and that, notwithstanding any other provision set forth in this Lease to the contrary, nothing in this Lease is intended or shall be deemed to limit or restrict in any respect Lessor's exercise of its governmental and regulatory authority over the Premises, the construction that occurs on or about the Premises, or the maintenance and use of the Premises, nor is anything in this Lease intended to constitute a prejudgment or commitment by Lessor as to how it will exercise its governmental and police power regulatory authority with respect to any such matters. In no event shall Lessor be in Default of its obligations set forth in this Lease if it takes or fails to take an action when acting in its governmental or regulatory capacity. Notwithstanding the foregoing, nothing in this Lease is intended or shall be construed as a waiver of any right or remedy Lessee would have in the absence of this Lease with respect to any alleged act or omission of Lessor when acting in its governmental or regulatory capacity. 16.10 Applicable Law. The internal laws of the State of California shall govern the interpretation and enforcement of this Lease, without regard to conflict of law principles. 16.11 Severability. If any provision of this Lease shall be adjudged invalid or unenforceable by a court of competent jurisdiction, the remaining provisions of this Lease shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. 16.12 Binding Effect. This Lease, and the terms, provisions, promises, covenants, and conditions set forth herein shall be binding upon and shall inure to the benefit of the Parties hereto and their respective andpermitted heirs, legal representatives, successors, and assigns. 16.13 No Third Party Beneficiaries. Except to the limited extent set forth in Article 12 and any other provisions of this Lease specifying rights of permitted Mortgagees, this Lease is intended to be for the benefit of only the Parties hereto and their respective permitted successors and assigns and this Lease is not intended to create any third party beneficiaries. Not by way of limitation of the foregoing, by entering into and administering and enforcing this Lease Lessor does not intend to protect any third party against the risk of any particular kind of injury within the meaning of California Governrnent Code Section 815.6 and Lessor does not intend to create any rights or liabilities thereunder. 16.14 Captions and Section Headings. The captions and section headings contained in this Lease are merely a reference and are not to be used to construe or limit the text. 16.15 No Recording of this Lease. This Lease shall not be recorded. 16.16 Events of Force Majeure; Extensions of Times of Performance. In addition to specific provisions of this Lease, performance by either Party hereunder shall not be deemed to be in Default where delays or defaults are due to causes beyond the control and without the fault of the Party claiming an extension of time to perform, including war, insurrection, strikes, lockouts, riots, floods, earthquakes, fires, casualty losses, supernatural causes, acts of the public enemy, epidemics, quarantine restrictions, freight embargoes, lack of transportation, governmental restrictions or priority, litigation, unusually severe weather, inability to secure necessary labor, materials or tools, delays of any contractor or supplier, and unanticipated and unreasonable failures to timely act by any governmental agency acting in its regulatory capacity (each, individually, an "Event of Force Majeure" and, collectively, "Events of Force 112/066751-0097 6271361,10 a09/04/14 -80- Majeure"). An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause. A Party claiming an extension of time to perform a covenant or satisfy a condition set forth in this Lease due to an Event of Force Majeure shall promptly, and in no event more than sixty (60) days after the commencement of any Event of Force Majeure that delays its performance of a covenant or satisfaction of a condition set forth in this Lease, notify the other Party in writing of the Event of Force Majeure, such Party shall continue with commercially reasonable diligence in an effort to limit the period of the delay, and the period of the delay shall be limited accordingly._If, however, notice by the Party claiming such extension is sent to the other Party more than sixty (60) days after the commencement of the cause, the period of the enforced delay shall commence to run only sixty (60) days prior to the giving of such notice. Times of performance under this Lease may also be extended in writing by Lessor and Lessee. In no event, however, shall an Event or Events of Force Majeure extend the Commencement Date beyond the Outside Commencement Date without Lessor's and Lessee's written approval, which approval either Lessor or Lessee may withhold in its sole and absolute discretion. 16.17 Entire Agreement, Waivers, and Amendments. This Lease constitutes the entire agreement between Lessor and Lessee with respect to the subject matter addressed herein and supersedes all prior discussions, negotiations, and agreements between the Parties with respect thereto, including without limitation the Exclusive Negotiating Agreement dated as of September 9, 2013. All waivers of the provisions of this Lease must be in writing and signed by the appropriate authorities of the Party or Parties to be charged and all amendments hereto must be in writing and signed by the appropriate authorities of both Lessor and Lessee. Lessor and Lessee shall each have the right to disapprove waivers of and amendments to this Lease in their sole and absolute discretion. During the term of any Mortgage obtained in accordance with Article 12 of this Lease, any amendment to this Lease additionally shall require the written approval of the Mortgagee. 16.18 Attornment. In the event any proceedings are brought for the foreclosure of, or in the event of the conveyance by deed in lieu of foreclosure, or in the event of exercise of the power of sale under, any mortgage and/or deed of trust made by Lessor covering the Premises, or in the event Lessor sells, conveys, or otherwise transfers its leased fee interest in the Premises, Lessee hereby agrees to attom to the new owner, and Lessee further covenants and agrees to execute an instrument in writing reasonably satisfactory to the new owner whereby Lessee attorns to the successor in interest and recognize the successor as the Lessor under this Lease. 16.19 Subordination. Lessee agrees that this Lease shall be subordinate to any mortgages or deeds of trust that may hereafter be placed upon the fee of the Premises by Lessor and to any and all advances to be made thereunder, and to the interest thereon, and all renewals, replacements, and extensions thereof, provided that the mortgagees or beneficiaries named in said mortgages or trust deeds shall execute and deliver a written non -disturbance and recognition agreement by and among Lessee, Lessor, and such mortgagees or beneficiaries, in form reasonably satisfactory to Lessee and its counsel and the holder of any Mortgage and their counsel, which shall provide the following assurances for the benefit of Lessee, Mortgagee, and their permitted assignees, sublessees, successors, and assigns: 112/06675I-0097 6271361,10 a09/04114 -81- (i) The leasehold estate granted by this Lease shall not be affected in any manner by any foreclosure action, trustee's sale, or other action taken or proceeding commenced under or in connection with any mortgages or deeds of trust placed upon the fee of the Premises by Lessor, or by any taking of possession of the Premises pursuant thereto, or by the exercise of any rights or remedies in connection therewith; (ii) if the interest of Lessor under this Lease is transferred in connection with any foreclosure action, trustee's sale, or other proceedings brought under any mortgages or deeds of trust placed upon the fee of the Premises by Lessor (including, without limitation, any transfer by deed in lieu of foreclosure), then, so long as Lessee is not in Default in the performance of the terms, covenants, and conditions of this Lease beyond all applicable notice, grace, and Cure Periods, the transferee of any such interest of Lessor (including, without limitation, the holder of any such mortgage or deed of trust), together with its successors and assigns (collectively, "Lessor's Transferee"), shall not terminate this Lease or interfere with or disturb Lessee in its possession, use, occupancy, and quiet enjoyment of the Premises under this Lease, for the remaining term of this Lease (as the same may be earlier terminated pursuant to any other Article of this Lease), subject to all of the terms, covenants, and conditions of this Lease; (iii) Lessee shall not be named or joined in any foreclosure action, trustee's sale, or other proceeding to enforce any mortgages or deeds of trust placed upon the fee of the Premises by Lessor; and (iv) any Lessor's Transferee will accept the attornment of Lessee and will assume and perform all of Lessor's obligations under the Lease for the benefit of Lessee and its successors and assigns. The foregoing written assurances shall, at Lessee's request, also be provided to any permitted Transferee of Lessee under this Lease. Lessee also agrees that in the event Lessor and any mortgagee or beneficiary elect to have this Lease prior to such mortgage or deed of trust, and upon notification by Lessor or such mortgagee or beneficiary to Lessee to that effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust, whether this Lease is dated prior to or subsequent to the date of said mortgage or deed of trust. Lessee agrees that upon the request of Lessor, or any mortgagee or beneficiary, Lessee shall execute whatever instruments may be required to carry out the intent of this section. 16.20 Approvals. Except to the extent that this Lease authorizes a Party to withhold its approval or consent to a specified request by the other Party in its sole and absolute discretion, approvals and consents required of Lessor and Lessee shall not be unreasonably withheld, conditioned, or delayed. The City Manager or his or her designee shall have the authority to implement and. enforce this Lease on behalf of Lessor; provided, however, that (i) in no event shall the City Manager (or designee) have the authority, without City Council approval or express delegation of authority, to approve substantive amendments to this Lease that materially increase Lessor's obligations or materially impair or jeopardize its rights hereunder; (ii) in no event shall the City Manager (or designee) have the authority, without City Council approval or express delegation of authority, to approve waivers that materially impair or jeopardize Lessor's rights hereunder; (iii) the City Manager (or designee) shall have the right, even if he or she has the authority to act 1 12/066751-0097 6271361.10 a09/04/14 -82- hereunder without seeking City Council approval, to seek such approval, and in such event Lessor shall not be deemed to be in Default hereunder; and (iv) the City Attorney's approval shall also be required with respect to (A) the form and content of any agreement, estoppel certificate, or other document approved by the City Manager or his or her designee, (B) whether the City Manager's and/or his/her designee's approval is consistent with the terms and conditions set forth in this Lease, including without limitation the provisions of clauses (i) and (ii) above, and (C) whether the City Manager and/or his/her designee has the authority under this Lease and applicable law to grant or provide such approval. In the event that Lessee requests Lessor approval of any matter pertaining to this Lease, including without limitation approval of Lessee's Evidence of Financial Capability, any of Lessee's development or building plans or permits, Transfer of Lessee's interest, Transfer to a Mortgagee, and execution of an estoppel certificate, as a condition to Lessor's taking such action, and without regard to whether Lessor's final action is to approve, conditionally approve, or deny such request, Lessee shall pay or reimburse Lessor for all of Lessor's actual and reasonable costs and expenses in conjunction therewith, including without limitation the payroll costs of Lessor's in-house staff and reasonable consultant fees incurred with respect thereto. This obligation of Lessee shall survive the termination or expiration of this Lease. 16.21 Lessee's Representations and Warranties. As a material inducement to Lessor to enter into this Lease, Lessee represents and warrants the following: (i) Lessee is a corporation organized, validly existing, and in good standing under the laws of the State of California; (ii) Lessee has all necessary power and authority to enter into this Lease and to carry out the transactions and obligations contemplated herein; (iii) the execution and delivery of this Lease and the performance by Lessee of its obligations hereunder will not violate or constitute an event of default under the terms and provisions of any agreement, ordinance, regulation, law, or court order to which Lessee is a party or by which Lessee is bound; (iv) all actions required to be taken by or on behalf of Lessee to authorize it to execute, deliver, and perform its obligations set forth in this Lease have been taken; (v) the person(s) executing this Lease on behalf of Lessee have full power and authority to bind Lessee to the terms hereof; and (vi) this Lease is a valid and binding obligation of Lessee enforceable in accordance with its terms, except as the same may be affected by bankruptcy, insolvency, moratorium, or similar laws, or by legal or equitable principles relating to or limiting the rights of contracting parties generally. 16.22 Lessor's Representations and Warranties. As a material inducement to Lessee to enter into this Lease, Lessor represents and warrants the following: (i) Lessor is a municipal corporation duly organized, validly existing, and in good standing under the laws of the State of California; (ii) the execution and delivery of this Lease and the performance by Lessor of its obligations hereunder will not violate or constitute an event of default under the terms and provisions of any agreement to which Lessor is a party or by which Lessor is bound; (ii.i) all actions required to be taken by or on behalf of Lessor to authorize it to execute and deliver this Lease have been taken; and (iv) the person(s) executing this Lease on behalf of Lessor have full power and authority to do so. 16.23 No Liability for Broker's Commissions or Finder's Fees. Each Party represents and warrants to the other Party that it has not entered into any agreement or incurred any obligation which might result in the obligation to pay a brokerage commission or finder's fee with respect to this transaction. Each Party agrees to indemnify, defend, and hold harmless the 112/066751-0097 6271361.10a09/04/14 _83_ other Party from and against any and all claims, liabilities, and losses, including attorney's fees, which the other Party may incur as the result of any claim made by any person or entity to a right to a brokerage commission or finder's fee in connection with this transaction to the extent such claim is based, or purportedly based, on the acts or omissions of the indemnifying Party. 16.24 Counterparts. This Lease may be executed in counterparts and when so executed, each such counterpart will constitute an original document and such counterparts will constitute one and the same agreement. 16.25 Estoppel Certificates. Within fifteen (15) days after each request therefor by either Party, the other Party agrees to deliver a certificate to any person designated by the requesting Party (including a proposed Mortgagee or purchaser), or to the requesting Party, certifying (if such be the case) that this Lease is in full force and effect, that to the best of such Party's knowledge at that time, there are no Events of Default by Lessee hereunder or any defaults by Lessor hereunder and that no events have occurred which, with the giving of notice or the passage of time or both, would constitute an Event or Default with respect to Lessee or a default with respect to Lessor hereunder, or stating those claimed by the responding Party, and that to the best of such Party's knowledge, there are no defenses or off -sets in favor of either Party hereto, or stating those claimed by the responding Party, and/or certifying whether any consent or approval required under this Lease has been denied or granted by the responding Party and whether any specified rights have been waived or deemed waived or expired. Any such certificate shall also contain a warranty that the person signing has the authority to execute the certificate on behalf of such Party. Each such estoppel certificate shall identify the Lease and all amendments, shall specify the date to which Base Rent and Percentage Rent have been paid, and shall specify the then applicable Base Rent payable hereunder. Nothing in this Section 16.25 shall be construed as reducing the period of time that either Party has under the terms of this Lease to respond to a request by the other Party for a consent or an approval. [The remainder of this page has been intentionally left blank. Signatures on next page.] 1I2/0667S1-0097 6271361,10 a09/04114 -84- Date: ATTEST: City Clerk 112/066751-0097 6271361.10 a09/04/14 Aaron C. Harp, City Attorney -85- "LESSOR" CITY OF NEWPORT BEACH, a chaff cjy By: Rush . Hill II Mayor APPROVED AS TO FORM: ,AA-: IA; (\47 'IN vi 1121066751-0097 6271361.10 aD9/04/14 "LESSEE" OLSON REAL ESTATE GROUP, INC., a California corporation doing business as R. D. Olson Development By: Its: -86- Pascfr.vi t EXHIBIT "A-1" LEGAL DESCRIPTION "LEASE PARCEL" THAT PORTION OF LOTS 6 AND 7 IN SECTIONN 28, TOWNSHIP 6 SOUTH, RANGE 10 WEST, SAN BERNARDINO MERIDIAN IN THE CITY OF NEWPORT BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, TOGETHER WITH THOSE PORTIONS OF LOT 1 AND "THE HUDSON" OF "LANCASTER'S ADDITION TO NEWPORT BEACH", AS SHOWN ON A MAP RECORDED IN BOOK 5 PAGE 14 OF MISCELLANEOUS -MAPS; THAT PORTION OF LOT 3 OF TRACT NO. 1117, AS SHOWN ON A MAP RECORDED IN BOOK 35, PAGE 48 OF MISCELLANEOUS MAPS AND THAT PORTION OF A 20.00 FOOT ALLEY, AS ABANDONED BY THAT CERTAIN RESOLUTION NO. 3280 OF THE CITY COUNCIL OF SAIDCITY, A CERTIFIED COPY OF WHICH WAS RECORDED MARCH 11, 1946 IN BOOK 1400, PAGE 189, ALL OF OFFICIAL RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTI•IWESTERLY CORNER OF SAID LOT 3, THENCE ALONG THE WESTERLY LINE OF SAID LOT 3, NORTH 00°09'03" EAST 128;00 FEET TO THE TRUE POINT OF BEGINNING, SAID POINT ALSO BEING THE SOUTHERLY CORNER OF PARCEL 1, AS SHOWN ON PARCEL MAP RECORDED 1N BOOK 85., PAGES 1 AND 2 OF PARCELS MAPS, RECORDS OF SAID COUNTY; THENCE ALONG THE SOUTHERLY BOUNDARY OF SAID PARCEL 1, THE FOLLOWING .FOUR (4) COURSES: 1. CONTINUING ALONG SAID WESTERLY LINE, NORTH 00°09'03" EAST 53.55 FEET; 2, 'NORTH 39°53'38" WEST 108.61 PEST TO THE BEGINNING OF A CURVE CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 351.15 FEET; 3. NORTHWESTERLY AND WESTERLY ALONG SAID CURVE 306.25 FEET THROUGH A CENTRAL ANGLE OF 49°58'10"; 4. NORTH89°51'48" WEST 92.71 FEET; THENCE LEAVING SAID SOUTTIE LY LINE, SOUTH 00°27'00" WEST 47.79 FEET; THENCE NORTH 89°33'00" WEST 7.65 FEET; THENCE SOUTH 43°47'33" WEST 24.57 FEET' TO THE BEGINNING OF A NON -TANGENT CURVE CONCAVE EASTERLY HAVING A RADIUS OF 2,724.04 FEET, A RADIAL LINE TO SAID POINT BEARS NORTH 82°21'27" WEST; M:\Mapping\ 1100\04\Lag°Is\LEASE\1100-004 LGX•Exh A-1-doc 8/29/20T 4 112/966751-0097 6271361.10 809/04/14 EXIIIB.IT "A-1" THENCE SOUTHERLY ALONG SAID CURVE 98.72 FEET THROUGH A CENTRAL ANGLE OF 02°04'35" TO A POINT OF REVERSE CURVE HAVING A RADIUS OF 58.00 FEET, A RADIAL LINE TO SAID POINT BEARS SOUTH 84°26'01" EAST; THENCE SOUTHERLY ALONG SAID CURVE 13.75 FEET THROUGH A CENTRAL ANGLE OF 13°35'10"; THENCE SOUTH 19°09'08" WEST 36.43 FEET TO THE BEGINNING OF A CURVE CONCAVE EASTERLY HAVING A RADIUS OF 42.00 FEET; THENCE SOUTHERLY ALONG SAID CURVE 10.88 FEET THROUGH A CENTRAL ANGLE OF 14°50'20" TO A POINT OF COMPOUND CURVE HAVING A RADIUS OF 2,736.04 FEET, RADIAL LINE TO SAID POINT BEARS NORTH 85°41'12" WEST; THENCE SOUTHERLY ALONG SAID CURVE 62.82 FEET THROUGH A CENTRAL ANGLE OF 01 ° 18'56" TO A POINT OF REVERSE CURVE HAVING A RADIUS OF 873.00 FEET, A RADIAL LINE TO SAID POINT BEARS SOUTH 87°00'07" EAST; THENCE SOUTHERLY ALONG SAID CURVE 74.65 FEET THROUGH A CENTRAL ANGLE OF 04°53'58" TO A POINT OF REVERSE CURVE HAVING A RADIUS OF 37.00 FEET, A RADIAL LINE TO SAID POINT BEARS NORTH 82°06'09" WEST; THENCE SOUTHERLY ALONG SAID CURVE 9.24 FEET THROUGH A CENTRAL ANGLE OF 14°18'33" TO A POINT OF NON -TANGENCY, A RADIAL LINE TO SAID POINT BEARS SOUTH S3°35'18" WEST; THENCE SOUTH 39°29'57" EAST 40.40 FEET TO THE BEGINNING OF A NON -TANGENT CURVE CONCAVE NORTHERLY RAVING A RADIUS OF 37.00 FEET, A RADIAL LINE TO SAID POINT BEARS SOUTI-I 17°24'48" WEST; THENCE EASTERLY ALONG SAID CURVE 9.24 FEET THROUGH A CENTRAL ANGLE OF 14°18'32"; THENCE SOUTH 86°53'44" EAST 49.94 FEET; THENCE NORTH 26°56'46" WEST 21.09 FEET; THENCE SOUTH 86°56'46" EAST 172.05 FEET; THENCE SOUTH 26°56'46" EAST 21.18 FEET TO THE BEGINNING OF A CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 8.50 FEET; THENCE SOUTHEASTERLY AND EASTERLY ALONG SAID CURVE 9.33 FEET THROUGH A CENTRAL ANGLE OF 62°55'02"; THENCE SOUTH 89°51'48" EAST 118.46 FEET TO THE BEGINNING OF A CURVE CONCAVE NORTHERLY HAVING A RADIUS OF 700.00 FEET; THENCE EASTERLY ALONG SAID CURVE 57.87 FEET THROUGH A CENTRAL ANGLE OF 04°44'13"; THENCE NORTH 85°23'59" EAST 74.86 FEET TO A POINT OF CUSP OF A NON -TANGENT CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 10.00 FEET, A RADIAL LINE TO SAID POINT BEARS SOUTH 00°12'24" WEST; i•^.:ih4°np,r:g\1 19$\04\L e9°'s\LEASE I lO0-004LGX-E0' A\- i d°;. S/29i201 4 1121066751.0097 6271361.10 a09i04114 -2- THENCE NORTHWESTERLY AND NORTHERLY ALONG SAID CURVE 15.92 FEET THROUGH A CENTRAL ANGLE OF 91 °12'25" TO A POINT OF REVERSE CURVE HAVING A RADIUS OF 48.00 FEET, A RADIAL LINE TO SAID POINT BEARS SOUTH 88°35'l 1" EAST; THENCE NORTHERLY ALONG SAID CURVE 25.97 FEET THROUGH A CENTRAL ANGLE OF 31°00'19" TO A POINT OF NON -TANGENCY, A RADIAL LINE TO SAID POINT BEARS NORTH 60°24'30" EAST; THENCE NON -TANGENT TO SAID CURVE, NORTH 00°43'30" EAST 29.78 FEET; THENCE SOUTH 89°58'22" EAST 9.24 FEET; THENCE NORTH 00°00'08" EAST 81.62 FEET TO SAID SOUTHERLY BOUNDARY; THENCE ALONG SAID SOUTHERLY BOUNDARY, NORTH 89°50'57" WEST 12.85 FEET TO THE TRUE POINT OF BEGINNING. HAVING AN AREA OF 170,244 SQUARE FEET OR 3.908 ACRES, MORE OR LESS. AS SHOWN ON EXHIBIT "A-2" ATTACHED HERETO AND BY THIS REFERENCE MADE A PART HEREOF. DATED THIS t DAY OF A , 2014 ELTO'4, L.S. 5347 .1Amoppi(:;\ i 100\04\!.eg 8/29,2014 112!066751-0097 6271361.10 n09104,14 I \i SE\1100-004!GX Exh A•1.dac -3- EXHIBIT "A-2" DEPICTION OF PREMISES ---��c.Z- 1 N ALLEY VACATED PER BK. 1400, PC. 189, O.R. REC. 3-11-46 1') L4 L5 C2 C3 T.P.O.B.-- 2 VIA OPORTO_ \I SEE DETAIL "B" /g1 T2 OF 2 -- L18 \128.00' -� N 00.09' 0 3"E—\--4181.55 �I P.O.B„ S WLY COR. LOT 3, TR NO. 1117, M.M. 35/48 LEGEND: P.O.B. - POINT OF BEGINNING T.P.0.B. - TRUE POINT OF BEGINNING NEWpoRT -� L] NOTE: SEE LINE AND CURVE TABLE ON SHEET 2 OF 2 W / 0 o;a SEE DETAIL "A" C4 93 BEET 2 OF2 cn C5 BOULEVARD C6 M 0 O 11 - FUSCOE 1 1 G I N 1 1 1 1 Y G 74f Von Y::A..lco. Sul" 1611, r: ,,na, Cciilo.nu Vi ciM 1,..“49474 '9,f10 1,.V.19. 474'.fli •.+...+IV..<ve.. rA EXHIBIT `A-21 SKETCH TO ACCOMPANY LEGAL DESCRIPTION LEASE PARCEL LIDO HOUSE HOTEL NEWPORT BEACH, CA DATE AtAjusl 29, 2014 SCALE 1"-80E IN: 1 100 004.01 DRAWN 8Y (BF CHECKED 8Y 1LU SHEET 1 OF 2 M:\VAPPNG\1100\04\LEGALS\LEASE \1100-004L,X—EXH n-2.DWC (OH•-25-14) 112,066751-0047 62 71361. I 0 1109'04. 1-I EXHIBIT "A-2" DETAIL "B" SCALE: 1"=4Cr 50012_247W (R1 . _ / 588'35'11"E (R) (PRC)' ` C,1 17 I�-^ua N60'24'30"E (R) J 3 LINE TABLE LINE BEARING LENGTH Lt N00'09'03"E 53.55' L2 N39'53.38"W 108.61' L3 N89'51'48"W : 92.71' L4 600'27'00"W 47.79' L5 N89'33`00"W 7.65' L6 643'47'33"W 24.57' L7 619'09'08"W 35.43' L8 539'29'57"E 40.40' L9 S86'53'44"E 49.94' L10 N26'56'46"W 21.09' Lit S86'56'46"E 172.05' L12 S26 56'46 E 71.18' L13 689'51'48"E 118.46' L14 N85'23'59"E 74.86' L15 N00'43'30"E 29.78' L16 S89'58'22"E 9.24' L17 N001.)0'08" E: 81.62' L18 N89'50'57"W 12.85' CURVE TABLE CURVE DELTA RADIUS LENGTH C1 49'58'10" 351 15' 306.25' C2 2'04'35' 2724.04' 98, 72' C3 13'35' 10" 58 00' 13.75' C4 14'50'20" 42.00' 10.88' C5 118'56" 2736.04' 62.82' C6 4'53'58" 873.00' 74.65' C7 1418'33" 37.00' 9.24' CB 14'18'32" 37.00' 9.24' C9 62'55'02" 8.50' 9.33' C10 4'44'13" 700.00' 57.87' C11 91'12'25" 10.00' 15.92' C12 31'00'19" 48.00' . 25.97' i • • / DETAIL "A" SCALE: 1"'=40 S17'2.4'48"W (R) I S83'35'18"W (R) N82'06'09"W (R)_,' (PRC FUSCOE t114111If R 1 1 6 I6/95 v,o Ka, Svile +OC. 1,. .E0 . Co,irer";e w/6 •1,15cu 414?af0a In 949.4/4 };I!} eww• f:r:c.,••<nm EXHIBIT 'A-2' SKETCH TO ACCOMPANY LEGAL DESCRIPTION LEASE PARCEL LIDO HOUSE HOTEL NEWPORT BEACH, CA DATE- Avgus1 29, 2014 SCALE 1'=BD 3N. 1 100.004.01 DRAWN 8Y 266 CHECKED 8Y. 1LU SHEET 2 OF 2 u:\µ996/NG\11 00\D4\LEC/&S\LEASE\1100-004LGX-E%H 4-•2.0'WC- (08--29- II1066751-0097 6271361.10 4109.04.14 EXHIBIT "B" SCHEDULE OF PERFORMANCE ITEM OF PERFORMANCE TIME FOR COMPLETION 1. Lessor takes fmal administrative action to approve all Development Entitlements for which City is the final administrative decision -maker (i.e., all of the Development Entitlements identified in clauses (i)-(vi), inclusive, of the definition of that term in Article 2 of this Lease (Sections 3.1.1, 3.2.1). Completed. 2. Lessor files application with California Coastal Commission to approve amendment to certified Coastal Land Use Plan for Premises consistent with Development Entitlements referred to in Item 1 above (Section 3.2.1). Within ten (10) days after Agreement Date. 3. Lessor/Lessee cooperate and exercise commercially reasonable diligence in Lessor's effort to cause California Coastal Commission to approve amendment to Lessor's certified Coastal Land Use Plan for Premises, consistent with Development Entitlements referred to in Item 1 above (Section 3.2.1). Subject to Events of Force Majeure, within eighteen (18) months after Agreement Date. 4. Lessee submits to Lessor, for "approval in concept," the site plans, floor plans, landscaping, and elevations for Hotel, consistent with Development Entitlements referred to in Items 1 and 3 above. Within ten (10) days after the effective date of the California Coastal Commission approval of the Coastal Land Use Plan amendment for the Premises. 5. Lessor's staff issues its "approval in concept" of Lessee's site plan, floor plans, landscaping, and elevations for Hotel, consistent with Development Entitlements referred to in Items 1-3 above. Within thirty (30) days after Lessor's receipt of a complete submittal of the items referred to in Item 4. b. Lessee files application with California Coastal Commission for Coastal Development Permit (CDP) for Hotel, consistent with Development Entitlements referred to in Items 1-4 above (Sections 3.1.1, 3.2.1) Subject to Events of Force Majeure, within ten (10) days after Lessor issues its "approval in concept" (Item 5 above). 112/066751-0097 6271361.10 a09l04/14 EXHIBIT `B" ITEM OF PERFORMANCE TIME FOR COMPLETION 7. Lessor/Lessee cooperate and exercise commercially reasonable diligence in Lessee's effort to cause California Coastal Commission to approve CDP for Hotel (Sections 3.1.1, 3.2.1). Subject to Events of Force Majeure, within twelve (12) months after Lessee files application for CDP approval with Coastal Commission (Item 6 above). 8. Lessee submits building permit application(s) to Lessor for approval of Final Building Construction Plans, security instruments, any applicable application fees, and other items (other than fees payable upon issuance of permits) required to obtain approval of all construction permits for Hotel (Section 3.1.2). Within one hundred eighty (180) days after date on which all Development Entitlements for Hotel become final and in. full force and effect (Section 3.1.1). 9. Lessor completes first plan check of construction plans/documents referred to in Item No. 8 and returns comments/requested corrections to Lessee (Section 3.2.2). Within sixty (60) days after Lessor's receipt of Lessee's Building Permit application submittal. 10. Lessee resubmits corrections to Lessor's plan check comments/review of' construction plans/documents (with any applicable additional fees that are owed) (Section 3.1.2) Within sixty (60) days after Lessee receives Lessor's plan check comments/review. 11. Lessor completes subsequent plan check(s) of Lessee's resubmittal(s) of matters referred to in Item No. 10 (Section 3.2.2). Within sixty (60) days after Lessor's receipt of Lessee's resubmittal(s). 12. Lessee submits Evidence of Financial Capability, Construction Loan Documents, Hotel Management Agreement, Hotel Franchise Agreement, as applicable, and supporting documents/information to Lessor for review/approval (Section 3.1.3). Within thirty (30) days after Lessor approves Final Building Construction Plans (Item 11 above). 13. Lessor approves or disapproves Lessee's Evidence of Financial Capability, Construction Loan Documents, Hotel Management Agreement, and Hotel Franchise Agreement, as applicable, and notifies Lessee (Section 3.2.3). Within thirty (30) days after Lessee submits complete request for approval. 112/066751-0097 6271361.10a09/04/14 -2- ITEM OF PERFORMANCE TIME FOR COMPLETION 14, Lessee resubmits any additionaUnew information required to obtain Lessor approval of Lessee's Evidence of Financial Capability, Construction Loan Documents, Hotel Management Agreement, and Hotel Franchise Agreement, as applicable, in response to Lessor's disapproval notice, if applicable (Section 3.1.3). Within fifteen (15) days after Lessee receives Lessor's notice of disapproval. 15. Lessor approves Lessee's Evidence of Financial Capability, Construction Loan Documents, Hotel Management Agreement, and Hotel Franchise Agreement, as applicable (Section 3.2.3). Within fifteen (15) days after Lessor receives Lessee's revised request(s) for approval that cure(s) the reasons for Lessor's initial disapproval(s), if applicable. 16. Parties execute and deliver Memorandum of Lease and cooperate in causing Memorandum of Lease to be recorded; Lease Commencement Date occurs (Section 3.4). Within one (1) week after satisfaction (or waiver by the benefited Party or Parties) of each of the Lessor's Conditions to Commencement of Lease and Lessee's Conditions to Commencement of Lease (Sections 3.3.1 and 3.3.2), but not later than the Outside Commencement Date. 17. Lessee commences construction of Hotel (Section 6.1). Within fifteen (15) days of construction permits, but in no event earlier than thirty (30) clays after Commencement Date, 18. Lessee completes construction of Hotel- and opens Hotel for business to the general public (Section 6.1). Within one (1) year and six (6) months after commencement of construction and not later than eighteen (18) months and thirty (30) days after Commencement Date. It is understood that the foregoing Schedule is subject to all of the terms and conditions set forth in the text of this Lease. The summary of the items of performance in this Schedule is not intended to supersede or modify the more complete description in the text; in the event of any conflict or inconsistency between this Schedule and the text of this Lease, the text shall govern. 112/066751-0097 6271361.10 a09/04/14 -3- 1121066751-0097 6271361.10 a09/04/14 EXHIBIT "C" FORM OF MEMORANDUM OF LEASE [See following pages] EXHIBIT "C" RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: City of Newport Beach 100 Civic Center Drive Newport Beach, CA 92660 Attn: City Clerk (SPACE ABOVE THIS LINE FOR RECORDER'S USE) MEMORAND UM OF GROUND LEASE This Memorandum of Ground Lease ("Memorandum") is entered into and is effective as of , 201_ (the "Commencement Date"), by and between the CITY OF NEWPORT BEACH, a charter city and California municipal corporation ("Lessor"), and OLSON REAL ESTATE GROUP, INC., a California corporation doing business as R. D. Olson Development ("Lessee"). RECITALS A. Lessor and Lessee have entered into that certain Ground Lease ("Lease") dated as of , 2014, relating to certain real property located in the City of Newport Beach, County of Orange, State of California, described more particularly on Attachment No. 1 hereto and by this reference made a part hereof ("Premises"). Lessor. and Lessee desire to execute this Memorandum for recordation in the real property records of the County of Orange in order to memorialize the existence of the Lease and the occurrence of the Commencement Date thereof. NOW, THEREFORE, with reference to the foregoing recital, Lessor and Lessee agree as follows: 1. Lease of Premises. Lessor hereby leases the Premises to Lessee and Lessee hereby hires to Premises from Lessor on the terms and conditions set forth in the Lease. 2. Term. The initial term of the Lease shall be for a period of fifty-five (55) years commencing upon the Commencement Date, unless sooner terminated pursuant to the provisions of the Lease. Lessee has an option to extend the initial term of the Lease for an additional thirty (30) years, subject to the provisions set forth in the Lease. 3. Incorporation of Lease. This instrument is a memorandum of the Lease and is subject to all of the terns and conditions of the Lease. The terms of the Lease shall prevail if there is any inconsistency between the terms of this Memorandum and the terms of the Lease. 112/066751-0097 6271361.10 a09/04/14 [end — signature page follows} -1- IN 'WITNESS WHEREOF, Lessor and Lessee have executed this Memorandum as of the date first set forth above. APPROVED AS TO FORM: LESSOR: Aaron C. Harp, City Attorney City of Newport Beach CITY OF NEWPORT BEACH, a California charter city By: Rush N. Hill, Mayor ATTEST: LESSEE: Leilani Brown, City Clerk 112/0667$1.0047 6271361,10 a09/04/14 OLSON REAL ESTATE GROUP, INC., a California corporation doing business as R. D. Olson Development By: Robert D. Olson, President By: Its: -2- State of California County of Orange On , before me, (insert name and title of the officer) Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) State of California County of Orange On , before rne, (insert name and title of the officer) Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) 112/066751-0097 6271361.10 a04/04/14 -3- State of California County of Orange On , before me, (insect name and title of the officer) Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) 112/066751-0097 627L36[.10 a09104/14 -4- 112/066751-0097 6271361.10 a09/04/14 EXHIBIT "D" AAA DIAMOND RATINGS CRITERIA [See following pages] EXHIBIT "D" Appendix F - AAA Diamond Guideline for Lodging Approval Requirements & ea( twe,4 LODGING 111066751-0097 G271361.10 a09414114 0AAA Publishing Tourism Information Development •1000 AAA Drive • Heathrow, FL 32746.5063 -6- t 2008 AAA Revised il/2007 Approval Requirements & Introduction Dear Hospitality Professional, On behalf of AAA, I am pleased to introduce to you the latest edition of the Lodging Approval Requirements & Diamond Rating Guidelines. This year marks the 30th anniversary of the AAA Diamond Ratings, as well as the 20n' anniversary of the Diamond Rating Guidelines. Since Its inception in 1902 as a federation of independent motor clubs, AM has existed to provide information, safety, security, and peace of mind to its now more than 50 million members. AAA's services have evolved to encompass roadside assistance, insurance and financial services, safety education, and public affairs. AAA is also an undisputed leader in travel information and services. In 1937, the first AAA field representatives were hired to inspect lodgings and restaurants, and in 1963, AAA began assigning lodging ratings from 'good' to 'outstanding'. 1n 1977 — AAA's 75x" (diamond) anniversary — the Diamond Rating system was introduced for lodgings, with restaurants included in 1989. In 1987, the first AAA Lodging Diamond Rating Guidelines booklet was introduced for industry review. Prior to this date, only minimum approval requirements were printed and distributed upon request. The new edition of the AAA Approval Requirements and Diamond Rating Guidelines was designed with two objectives in mind: • To ensure that our ratings program is accurate and consistent when compared to meeting the travel needs of over 50 million AM members. • To provide hospitality professionals a valuable reference so they may be successful in achieving their goal as it relates to AAA Approval and our proprietary Diamond Rating Process. To that end, we feel that it is important to partner with the hospitality industry by gathering input, discussing the meaning of our ratings, and openly sharing how the Diamond Rating Process is applied at the property level. We strongly urge property representatives to take full advantage of the information provided by AAA inspectors during an evaluation, since our experts are exposed to a wide range of properties throughout the United States, Canada, Mexico and the Caribbean. MA evaluates more than 32,000 accommodations, 28,000 restaurants and nearly 11,000 campgrounds as key content for over 168 million copies of travel -related materials annually. AM travel products are wide-ranging and include 26 regional TourBoak" guides, 11 regional CampBoole guides, AAA.com— including the well-known TripTik' Travel Planner —as well as, numerous retail guidebooks, atlases and maps. We look forward to your continued service an behalf of AAA members at large and appreciate your participation in AAA programs. Sincerely, .. • Michael Petrone, CEC Director/AAA Tourism Information Development i12i06675l-0097 6271361.10 49104,14 -7- TABLE OF CONTENTS Section One 1 Defining AAA Approval Requirements and AAA Diamond Rating Guidelines 1 Applying for a AAA Diamond Rating 1 AAA Approval Requirements ..,. 2 The AAA Evaluation and Diamond Rating Process 4 Section Two 6 What the Diamond Ratings Mean 6 Diamond Rating Guidelines - Exterior 7 Diamond Rating Guidelines - Public Areas 9 Diamond Rating Guidelines - Guestroom .... 17 Diamond Rating Guidelines - Bathroom 24 The AAA Four and Five Diamond Rating 30 Four and Five Diamond Service Expectations 30 Section Three 37 The Listing 37 Lodging Classifications 37 Accessibility 39 Member Comment Procedures 39 The AAA Appeals Process 40 Green Programs ., 40 Addresses and Phone Numbers 41 1l2:OGG751-0097 G271361.10 909,04- l4 -8- Section One Defining AAA Approval Requirements and AAA Diamond Rating Guidelines It is important to note the difference between AAA Approval Requirements and Diamond Rating Guidelines as this concept is often misunderstood. The evaluation process is made up of three parts: Approval Requirements, objective Diamond Rating Guidelines, and subjective elements based on the professional experience and training of MA inspectors — who visit over 32,000 lodgings each year. The essential AAA Approval Requirements are common-sense qualifications that AAA members have told us are important to them and, similarly, that most professional operators routinely employ. All properties must first meet: this set of criteria in order to be considered for AAA Approval and Diamond Rating, The Diamond Ratina Guidelines are not rattna requirements. but are components used to determine thR anoroortate Diamond Rating level. Diamond Rating guidelines are simply a reflection of what is typically seen throughout the various market segments of the lodging industry. Therefore, failure to meet some of the components listed for the ratings categories does not necessarily preclude the achievement of that rating. During our evaluation, inspectors will assess the strengths and weaknesses of the property and assign the most appropriate rating that will provide the best match in meeting AAA member expectations. Furthermore, not all of the Diamond Rating Guidelines will apply to all property types. For example: meeting rooms would not be expected at a Bed & Breakfast property, but would be essential at a convention -oriented hotel. Also, the availability and type of swimming pool will be dictated by climatic influences and/or the property classification. AM inspectors will only use the sections of the Diamond Rating Guidelines that are appropriate for the property classification in assessing the overall Diamond Rating. Applying for a AAA Diamond Ratin;";; AAA CONSIDERS ALL VALID APPLICATIONS FOR EVALUATION. To be considered a valid applicant for AM evaluation, lodging properties must meet all of the Approval Requirements for their property category. These minimum requirements reflect members' basic expectations. Prior to completing an Application For Evaluation (provided at: www.AAA.biz/Approved), please review the requirements to verify your property's eligibility to apply. Currently listed establishments need not reapply, as our inspectors will routinely conduct an evaluation of your property on a continual basis. Include recent and accurate pictures of the exterior, public areas, as well as examples of a standard guest unit and bathroom, and return to AAA. Please note that if our research indicates past disqualifying issues, you may be asked to provide written documentation of the corrective action taken since then. 112/O6675 t-00977 6271361.10 09,04 14 As of August 1, 2006. lodging properties that request evaluation by AAA are charged a nonrefundable application lee: S150for first-time applicants and S300 for repeat applicants that previously failed an evaluation or were disassociated from AAA for any reason. The tee does not apply to currently Approvedand listed establishments that remain in good standing. Please do not send a payment with the initial application. On receipt of your Application For Evaluation, AAA will provide written notice regarding the status of your application and. if accepted for further consideration, an invoice for your application tee. On receipt of payment, AAA will schedule your property for an unannounced evaluation within one year. All application fees should be made in U.S funds and are nonrefundable and will have no bearing on the outcome of evaluations. AAA conducts property evaluations as a service to members, and does not guarantee that all applicants will be Approvedand listed in member publications Basic listings are provided without charge to Approved properties. -9- AAA does not guarantee an immediate evaluation of all properties that apply, but does guarantee a fair review of all applications. Additionally, AAA reserves all rights to apply priority consideration to those properties demonstrating traits that provide the highest degree of AAA member value. Through ongoing member research, AAA has developed criteria reflecting key elements of consideration in making travel -related decisions. Some examples of AAA member value criteria are: • LOCATION • NEWLY BUILT / RENOVATED • HIGH DEGREE OF CLEANLINESS AND COMFORT • APPROPRIATELY MAINTAINED CONDITIONS • PRICE (willingness to provide a discount or best rate available) Once your property is approved, it will be evaluated at least once per evaluation cycle by a AAA inspector. All evaluations are unannounced to ensure that our inspectors see your property just as our members would see it. The conditions noted at the time of the annual evaluation will be the basis of the decision to list or rate a property. This decision is at the sole discretion of AAA. By applying for an evaluation, you agree to allow AAA to publish your property information and the respective Diamond Rating in our travel publications. AAA will make every effort to ensure that your property is fairly represented. If, after continued review, or up to and including the end of one year, the property is determined to be of limited AAA member value, a letter will be sent advising that the property has been released from any further consideration. AAA Approval Requirements AAA APPROVAL REQUIREMENTS REFLECT THE MINIMUM ACCEPTABLE CONDITIONS AS ESTABLISHED THROUGH MEMBER SURVEYS AND CONTINUOUS FEEDBACK. To be AAA Approved and Diamond Rated, an estabfis1 an ent must meet the following requirements: Cleanliness and Condition 1. All facilities directly associated with a property must be clean and welt -maintained throughout. 2. At a minimum, each guest unit must be thoroughly cleaned, with complete bed and bath linens changed between guest stays. 3. Fresh linens, maid services, and bathroom supplies must be available upon request. Management Style of Operation 4. A property may not use AAA trademarks —including but not limited to the AAA logo and Diamond Rating, without AAA's prior written consent. 5. The property must be appropriately located for business or leisure travel. 6. The establishmert must be a primarily transient operation with four or mare units available for AAA members. 7. The establishment must provide AAA room rates for travel publications as requested. 8. The establishment must assist AAA in the resolution of member complaints. 9. The establishment must accommodate unannounced AAA property evaluations within 20 minutes of notice. 10, All property staff roust conduct business in a professional and ethical manner providing attentive, conscientious service to guests. 11. A property must only place AAA members in AAA inspected and approved guest units —overflow buildings or guest units (associated with the property but not approved by AM) are unacceptable. 12. Property management, or their representative, must be readily accessible at all times for guest needs or requests. 13. Guests must have easy access to 24-hour incoming and outgoing phone service, ensuring prompt guest unit message delivery. Emergency messages must be delivered to the guest immedratej+ upon receipt. 14. Management will readily provide property information as requested by AAA on a continual basis for the purpose of maintaining the most accurate travel information for AAA publications. 15 The establishment must be in compliance with all local, state, and federal codes, _2_ t 12'066751-0097 6271361.10 49114; t4 -10- Exterior and Public Areas 16. Properties must have accurate, legible signage in appropriate areas. 17. All facilities directly associated with a property (such as a restaurant, health club, gift shops, recreation facilities, etc.) provided for guest's use must meet all appropriate AAA Approval Requirements. 18. Adequate illumination is required in all public areas. This includes sufficient lighting in all corridors, walkways, stairways, landings, parking areas, etc. Guest Roorrts 19. Each guest unit must contain a comfortable bed with a mattress pad, two sheets, two pillows with pillowcases, and an appropriate bed covering. 20. Each guest unit must have a nightstand or equivalent by each bed, a chair, a writing surface, a waste container, clothes -storage space, and clothes -hanging facilities with hangers for two guests. 21. Each guest unit must have adequate shades, drapes, or blinds to cover all windows or other transparent areas to provide the guest with privacy. 22. The level of soundproofing must be adequate to muffle outside noises and normal sounds in adjacent units and public areas. 23. Each guest unit must have an active light switch at the main entry. 24. Each guest unit must have good illumination at a writing surface, a sitting area, and at each bed. 25. Each guest unit door must be equipped with both a primary lock and a secondary deadbolt lock. A primary lock is defined as a device that permits a guest to enter a unit using some form of key and allows the door to be locked while the unit is occupied and when the guest leaves the unit. Passkeys assigned to appropriate staff members will function to operate only these locks. A secondary lock is defined as a mortised, deadbolt-locking device with a throw that extends at least one inch from the edge of the door into the door frame. This permits a guest an extra measure of security against any unwanted intrusions. Unlike the primary lock, deadbolt master keys will not be provided to guests or to staff. Master key systems will be acceptable when the emergency master key is only available to top management and security personnel. Secondary Lock Variances !n certain instances, the requirement for secondary locks may be modified to meet a variety of exceptions. The most common are noted below. AAA claims the right of rinaf arbitrator in all decisions of this nature. Sliding Glass Doors - Each sliding door must be equipped with an effective locking device. A secondary security lock is required on all ground floor doors and those which are accessible from common walkways and adjoining balconies. French Doors - In addition to the deadbolt lock requirements, surface -mounted slide bolts must be provided at the top and bottom to secure the stationary/auxiliary door. These bolts must extend into the upper doorframe and the lower doorframe or floor and must be strong and sturdy mechanisms. 26. Each door to connecting guest units or maintenance corridors must be equipped with a deadbolt lock. 27. Each guest unit entry door must have a viewpoit or window convenient to the door. 28. Each window overlooking a common walkway or in a ground floor unit must be equipped with a functional lock. 29. Each guest unit must have an operational, single station smoke detector. Hard -wired smoke detectors are preferred, When battery -operated detectors are used, there must be an adequate maintenance program to routinely test and replace batteries. 30. Each guest unit must have its own private bathroom. 31. All bathrooms must contain a toilet, a sink with a wet -lit mirror and a convenient electrical outlet, adequate shelf space, and a tub or a shower with a non -slip surface. 32. Each bathroom must be equipped with toilet tissue, a cloth bath mat, and two bars of soap or equivalent — furthermore, each guest must be provided a bath towel, hand towel, face cloth, and a drinking tumbler. 33. All toilet area surfaces (floors, walls, baseboards, etc.) must be non -porous to facilitate proper sanitation. (For example, carpeting is not acceptable in the toilet area.) 111066751-0007 6271360.10 n09,04/14 -11- The AAA Evaluation and Diamond Rating Process The AAA Evaluation and Diamond Rating Process primarily consists of three parts: INTRODUCTION, INTERVIEW PROPERTY TOUR AND PRACTICAL APPLICATION OF THE APPROVAL REQUIREMENTS AND DIAMOND RATING GUIDELINES ASSESSMENT SUMMARY First, all establishments must meet AAA Approval Requirements and be determined to provide member value. This validation is conducted through a combined process of applications, inspections, referrals, and media research. If a property is presumed to qualify, one of our inspectors will visit and observe the curbside appeal, exterior, and other factors pertaining to the basic foundation of the establishment. This preliminary review will verify that this property dearly exhibits characteristics that would appeal to AAA members. If satisfied, our representative will contact the owner, general manager, or property designee for a brief Interview. This Interview is an extremely important part of the evaluation, as factual data is gathered for inclusion Into our travel infcrmation inventory with potential use In AAA's worldwide printed and electronic publications. This session also gives the property representative a chance to advise AAA of any plans for improvement that may be forthcoming. Following the interview, the inspector will tour the establishment with the property representative to assess the AAA Approval Requirements & Diamond Rating Guidelines. The tot/ will include an evaluation of all public areas and a cross section of rooms. The Inspector will discuss both strengths and weaknesses of the property as it relates to our Guidelines. This dialogue Is unique to the AAA Diamond Rating Process and is a valuable resource to any property. The overall evaluation process will include the review of six key areas: • CLEANLINESS AND CONDITION • MANAGEMENT AND STAFF • EXTERIOR, GROUNDS, AND PUBLIC AREAS • GUESTROOM DECOR, AMBIANCE, AND AMENITIES • BATHROOMS • GUEST SERVICES (If applicable) 77.71717.., P11 establishin e..nts must t dean, corn torcaGle, aril Vi?II-rrmaintained The inspector will evaluate the overall condition of the property to determine if the property meets above average standards and should be considered for a Diamond Rating. _a- 1124366751-0097 6271361.10 a0T04 l4 -12- • properties will receive a mars of Pass' or 'Fail' based on the manner of interaction with all property representatives. The inspector will be evaluating the overall level of hospitality, professionalism, and deportment. It is critical to receive a passing mark to be considered for a Diamond Rating. This area is assigned a specific rating overall based on the components listed under the applicable Diamond Rating Guidelines section. Varying weights are applied based on the classification of the property. For example, the exterior, grounds, and public areas at a resort carry more weight than at a downtown hotel. .r- ��t a a Guestn3om dicor, arnbiancer and amenities This area is assigned a specific rating overall based on the componerts listed under the applicable Diamond Rating Guidelines section. Varying weights are applied based on the classification of the property. For example, the roan decor, ambiance, and amenities at a hotel carry more weight than at an outdoor vacation resort. Bathrooms This area is assigned a specific rating over t based on the components listed under the applicable Diamond Rating Guidelines section. Weights remain relatively the same regardless of classification. Gi*est services' A high level of guest services is the hallmark of the coveted AAA Four and Five Diamond L - t Ratings. All properties must first match the physical guidelines respective of the Four or Five Diamond levels to qualify for a series of anonymous visits by AAA inspectors. Our overnight ,,,t hospitality assessment includes a review of twelve critical areas and measures approximately 300 guest interaction points. All properties must achieve at least a Four Diamond Rating in guest services to be considered for a Four Diamond Rating overall; similarly, a property must achieve a Five Dimond Rating in guest services to be considered for a Five Diamond Rating overall. THE ACHIEVEMENT OF A AAA DIAMOND RATING FANS THAT AN ESTABLISHMENT IS ONE OF AN EXCLUSIVE GROUP THAT HAS SUCCESSFULLY COMPLETED THIS THOROUGH EVALUATION PROCESS. If a property is approved, the inspector will assign, or recommend, a Diamond Rating or FYI designation as appropriate based on conditions that exist at the time of the evaluation, The inspector will provide the property representative a written summary of the evaluation, including tine rating decision. The frequency of subsequent AAA evaluations varies slightly, depending on the classification and the assigned rating of each establishment. _S_ IIV066751-0097 6271361.10 a09 4!I4 -13- Section Two AAA DIAMOND RATINGS REPRESENT A COMBINATION OF THE OVERALL QUALITY, THE RANGE OF FACILITIES, AND THE LEVEL OF HOSPITALITY OFFERED BY A PROPERTY. These widely recognized and trusted symbols help AAA members choose lodgings that will meet their needs and expectations. AAA inspectors are responsible for determining a property's Diamond Rating based on established standards that are developed with input from our trained professionals, AAA members, and various lodging Industry professionals. AAA's Diamond Rating Guidelines Indicate what is typically found at each rating level. However, the size, age, and overall appeal of an establishment are also considered, as well as regional architectural style and design. Diamonds are assigned based on the average of all property characteristics, with a focus on overall guest Impression rather than on Individual elements. Therefore, not meeting a guideline (in one area) may not necessarily affect the overall Diamond Rating. The final factor in determining the Diamond Rating for a property is professional judgment, which is a very important part of the rating assessment. Our Inspectors are North America's travel experts based upon ongoing training and experience in conducting more than 32,000 lodging evaluations per year. What the Diamond Ratings Mean One Diamond V These establishments typically appeal to the budget -minded traveler. They provide essential, no -frills accommodations. They meet the basic requirements pertaining to comfort, cleanliness, and hospitality. Two Diamond i011 These establishments appeal to the traveler seeking more than the basic accommodations. There are modest enhancements to the overall physical attributes, design elements, and amenities of the facility • typically ata moderate price. Three Diamond These establishment; appeal to the traveler with comprehensive needs. Properties are multifaceted with a distinguished style, including marked upgrades In the quality of physical attributes, amenities, and level of comfort provided. Four Diamond NIV These establishments are upscale in all areas. Accommodations are progressively more refined and stylish. The physical attributes reflect an obvious enhanced level of quality throughout. The fundamental hallmarks at this level Include an extensive array of amenities combined with a high degree of hospitality, service, and attention to detail. Five Diamond ►i` ?iCPWPS ri These establishment, reflect the characteristics of the ultimate In luxury and sophistication. Accommodations are first class. The physical attributes are extraordinary in every manner. The fundamental hallmarks at this level are to meticulousty serve and exceed all guest expectations while maintaining an impeccable standard of excellence. Many personalized services and amenities enhance an unmatched level of comfort. 112:066751-0097 6271361.10 09;04.14 -14- GLOSSARY: ✓ Climate controlled - Heat, ventilation and/or air conditioning and cooling. ► Dated - Marked by features of the past; showing the effects of long use or wear; unfashionable. ► Form - The essence of design or configuration. ✓ Function - The action for which something is fundamentally fitted or purposed. ► Plus - When you see this term used (such as 2D, plus), it means that the rating includes the bolded elements of the previous columns in addition to elements of the current column. ► Residential - Of, or relating to, or connected with, residential style; invokes a personal presence of home. Diamond Rating Guidelines - Exterior EXTERIOR GENERAL CURB APPEAL ONE DIAMOND The combination of all exterior elements imparts a basic or dated style; Limited coordination in design; Limited quantity and variety of appointments; Overall, conveys an unadorned curb appeal Limited quantity and variety of landscaping; Basic design TWO DXAMOND Scale — The exterior elements are moderately enhanced (as compared to basic) in quantity, function, and/or variety, with an increased coordination in design: Overall, conveys a modestly enhanced curb appeal Enhanced quantity, function, and variety of landscaping; Coordinated design IFIRFE DIAMOND Mid -Scale Plus:. 'FOUR DIAMOND Upscale FIVE DTAIt OND Ultra -Luxury The exterior elements are obviously enhanced and are well - coordinated for form, function, and seasonality; Some areas have a residential feel; Overall, conveys a very attractive curb appeal Various landscape features are well - coordinated for form, function, and seasonality; An ample quantity and variety of plants are integrated with buildings, walkways, parking lots, courtyards, gardens, etc. 30, olu@: The combination of all exterior elements is substantial, impressive, well - integrated, and imparts an excellent level of curb appeal which is upscale in style 3D, plus: Excellent variety of mature plants; Obviously professionally planned and manicured 4D. olus: The combination of all exterior elements imparts an extraordinary and luxurious feel; Appointments are unique and contribute to an elegant level of curb appeal 40, pIus: Elegant and extensive variety of landscaping, with meticulous attention to detail in placement and care 7 112 066751-0097 6271361. 10 a09.04 F 14 -15- EXTERIOR ONE zivafdND Economy Basic or dated in style 40 ox iftie +io -: Mid -Scale -• Modest enhancements to form and function via roofing, windows, siding, or some other architectural feature(s) i rrE Ir r a ,. i tel_ r,-. rr , p -.. rarr r r ° `'.. Ultra-l.rsxu significantly enhanced in form and function with some residential appointments, such as: enhanced roofs, intricate moldings, window treatments, balconies, chimneys, etc. ». D lus: 4D, plus: Obviously upscale Extraordinary with unique architectural features sin Entrance .No _ - .. - drive -through covered entry Drive -through covered entry; Limited capacity (one -car width) 2D, obis: Increased capacity (two -car width); Structure Is decorative 30. plus: 4D plus: Oversized capacity (two- car width and depth); Upscale design and appointments Elegant design and appointments - .. Varied surfaces; Illumination is adequate ID, plus: 2D. plus: 30, plus: 413, plus: Paved and marked areas Lighting is well- positioned, from multiple sources, and provides a good level of overall illumination Lighting fixtures reflect upscale characteristics with respect to the design of the property Valet parking upon request or some other upgraded feature, such as: covered/indoor parking, shuttle service, or evidence of added security Valet parking Is automatic I I_' 066751-0097 6271361.10 1109, 04; L4 -16- GLOSSARY: I. Climate controlled - Heat, ventilation and/or air conditioning and cooling. ► Dated - Marked by features of the past; showing the effects of long use or wear; unfashionable. P. Form - The essence of design or configuration. . Function - The action for which something is fundamentally fitted or purposed. ► Plus - When you see this term used (such as 2D, plus), it means that the rating includes the bolded elements of the previous columns in addition to elements of the current column. ♦ Residential - Of, or relating to, or connected with, residential style; invokes a personal presence of home. Diamond Rating Guidelines - Public Areas GENERAL DECOR STYLE F COUtll ngs ONE DIAMOND predominantly asic or dated style with limited coordination of appointments that provide an adequate level of comfort Basic material, such as: linoleum, painted concrete, or low density pile carpet with padding that provides little or no comfort underfoot (floor feels hard) PUBLIC AREAS TWO DIAMOND Increased coordination of appointments combined with modest enhancements to function, design elements, room size, and/or amenities that provide an enhanced level of comfort Enhanced material, such as: wood laminates and vinyl, or medium density pile carpet with padding that provides average comfort underfoot 7HW}� DIAMOND .S le ,lus Predominantly residential style with decorative appointments that are attractive, well - coordinated for form and function, and provide an obvious degree of comfort ZD, plug: Wood laminates or carpet with enhanced design, such as: patterns, textures, or inlays; Oecorabve the (ceramic, stone, concrete, terra cotta, etc.); Hard surfaced floors have decorative area rugs as appropriate cifID Predominantly upscale style that provides an exceptional degree of comfort 3D, plus: High grade wood, marble, granite, or other upscale stone floors, or high density pile carpet with padding that provides exceptional comfort underfoot DIAMOND am 4D, °lust Predominantly elegant style with luxurious, unique, and artistic appointments 4D, plus: Custom inlays or textured enhancements that provide an overall design that is obviously elegant and unique; Area rugs are luxurious and unique 9 12 , 066751-0097 6271361.10 a09'0414 -17- rAti-dhff3 Ecanom Walls are of basic material and design, such as: cinder block with a plain paint finish, standard grade wood, prefab modular laminate paneling, or wallpaper PUBLIC AREAS 1i..A4lrfEhJb Mid -Scale i Wall treatments are modestly enhanced, such as: drywall with basic paint finish or plain vinyl coverings; Rubber or vinyl baseboards CSTAI(1U-ND 1 Mid -Scab Pius ,! Decorative wall treatments, such as: drywall with textured and painted finish, decorative vinyl coverings, or select grade wood/stone; Chair rails and carpeted baseboards DT1 Of�ID U • - Cat. 3D. plus: .diiiRilCIA Ultra-Wxu 40, plus: At least one significant upscale design enhancement, such as: accent wall(s), furniture -finish wood paneling, soft wall coverings, ceiling trim, architectural feature, wainscot, etc.; Wood baseboards Wall finishes are of the highest grade materials; Accented with multiple luxurious design enhancements Climate controlled Climate controlled Climate controlled Climate controlled • tenor CDf•ri.tor5 fir applkabie) •t '.c -. Building structure and design is basic or dated in style Weather appropriate (Provides protection and comfort with respect to climatic elements); Building structure shows modest enhancements to design and function via roofing, windows, siding, or some other architectural feature(s) 2D. plug: 3D. plus: 4D. plug: Building structure and design is significantly enhanced in form and function with some residential appointments, such as: enhanced roofs, moldings, window treatments, etc. Building structure and design is obviously upscale Extraordinary with unique architectural features (Reiait rig O - - - i - •4 Limited quantity and variety of landscaping; Basic design Enhanced quantity, function, and variety of landscaping; Coordinated design Various landscape features are well- coordinated for form, function, and seasonality; An ample quantity and variety of plants are integrated with buildings, walkways, parking tots, courtyards, gardens, etc. 30, plus: 4D, plus: Excellent variety of mature plants; Obviously professionally planned and manicured Elegant and extensive variety of landscaping, with meticulous attention to detail in placement and care IV 1f2.066751-0097 6271361.10 a09:04;14 -18- PUBLIC AREAS 4 �� J .: Wall Han9h1g5/ - Decorative. r .-• Enhancements ff i.��. 0.111E DYAMOIVO Eaohorn . 'TWO IIYAlhdf+(D Mid -Scale Poster(s) or commercial artwork with thin, un-enhanced wood, metal, or plastic frame(s) 10 H +` Dxj' 1 Old -Scale Pius 1 Matted artwork (common or commercial) in enhanced frame(s) or other decorative appointments 'Ft. ... iadviii 13 sale Variety of matted and framed or unframed canvas artwork (varied sizes and scenes) or other appointments that provide a distinctive or thematic upscale appeal F 'rE. 6 t ii1VD ultrs-hkxu a { 40..olus: Variety of styles and accent pieces, such as: limited edition prints, canvas art, tapestries, or lithographs with enhanced matting and preservation frames, assorted artisan pieces or sculptures, floral displays or plants " - Basic material and design, such as: drop tile, concrete, or standard grade wood Modest enhancements to material and design, such as: enhanced drop tile, painted drywall, popcorn finish, sand textured concrete, etc. Predominant use of decorative elements to painted drywall, such as: an advanced textured finish (knockdown, orange peel, comb, slap brush, etc,) or select grade wood/stone 3D, plus: 4D, plus: One architectural or design feature, such as: treys, beams, medallions, vaulted/volume, murals/stencils, tin tiles or skylights, ceiling fans, special effect lighting, etc. Multiple architectural or design features Basic lighting fixtures that provide an adequate level of overall illumination Lighting fixtures are modestly enhanced in style, positioning, and function to provide a good level of overall illumination 2D, plug: }D. Plus: 4D, plug: Lighting fixtures are decorative and well -coordinated for form and function Lighting fixtures reflect upscale design and provide an excellent level of overall illumination Custom lighting fixtures of outstanding quality provide a unique illumination effect Basic design in limited locations throughout the property Modestly enhanced design in appropriately placed locations throughout the property 20, plus: 3D, plus: 40, plus: Decorative enhancements in design Upscale design in ample locations Custom design creatively placed for a unique effect ll 112;066751-O097 6271361.10 a09/04;14 -19- PUBLIC AREAS "Grit 4i1AOltllVD Eeonom 7if.JQ .ija koN>7 Mid -Scales -i' Modest restrictions due to size and/or placement of appointments; Seating arrangement for one small group, such as: a sofa and two arm chairs I.yes 1 •. dlgt, ° e Mkt -Scats Pius No restrictions, as placement of appointments i5 well-proportioned to area size; Expanded seating arrangement accommodating two small groups; Placement of appointments is well-proportioned to area size and traffic flow F7 D1i#�i71D U• Ode ' :' Area size and placement of appointments provide an obvious degree of spaciousness allowing increased ease of movement for many guests; Multiple conversational groupings, including one or more privacy areas; Identifiable guest service area and bell stand FOIE dVad.Aii3; Ultra-LuxUe Area size and placement of appointments provide a free Flowing abundance of space that contributes to the ultimate level of comfort and relaxation for many guests; Identifiable concierge area Obviously restricted by size and/or placement of appointments; Basic counter registration with limited or no seating capacity If available, predominantly basic materials, such as: particle board, laminate, or vinyl finishes; Dated styles with limited coordination; Provides an adequate level of comfort An increased level of coordinabon; Modest enhancements In materials, design, and function; Provides an enhanced level of comfort Decorative and well -coordinated for form and function; Overall construction and design reflects current industry trends, such as: Melamine resins, solid wood trim, or upgraded laminate finishes; Provides an obvious degree of comfort 3D, plus,: 4D, plus: Modern or antique upscale style and materials, such as: solid wood, polished metals, leather, designer fabric, veneer finishes with solid wood accents, laminate insets, etc.; Provides an exceptional degree of comfort Luxurious, unique, and elegant custom design and workmanship ice machine(s) available Vending machine(s) available Multiple sealed ice machines Basic hygiene amenities, such as: toothbrush/paste, razors, mouthwash, shower caps, combs, etc., available at the front desk or in vending machine 2D. plug: 3D. Pius: Specialized service, delivery or In -room honor bar Variety of first- class shops Located in a recessed area Dedicated sundry area offering a variety of merchandise, such as: health and beauty needs, food, beverage, and reading materials Conveniently located and appropriately soundproofed Upscale gift shop 112:0&h751-0097 6271361.10 a09 04 I4 -20- PUBLIC AREAS (Jar. r,fr r,;r;rr. rr, _ . r• ' •fin Mid -Scale ._Z_.. 'alia 11 Mid -Scale ' us 1 Dedicated open area (out of traffic pattern) with desk and chair, to include at least three business -related items, such as: PC, printer, copier, fax machine, supplies, etc. 'Foift. 1 film-dNu U•sca►e 3D. oluf: ,7 ► ,i0A Np itra-Wxu 4D. plus: Personal computer, with Internet access, available in lobby for guests' use Well-appointed, enclosed area; Multi -guest capability with comprehensive office supplies Luxurious surroundings Include the latest business technology; Professionally staffed area Elevator is available for guests' use in multi -story buildings 20. plus: 30, plus: 40, plus: Primarily dedicated to guests' use; Prompt response, quick moving, and spacious; Elevator includes decorative appointments; Landing includes a limited (four) amount of decorative furnishings, such as: tables, lamps, phone, artwork, chair, mirror, flowers, etc., and is recessed from the lobby and guestroom corridors Multiple elevators include upscale appointments; Landings include a variety of upscale furnishings (five), such as: sofa table, lamps/wall sconce, phone, artwork, chair, coffee table, mirror, flowers/plants, etc.; Additional service elevator is available for staff's use Elevator cabs have dual call button panels; landings are elegant with luxurious, unique, and artistic appointments Artificial or live plants in limited locations Good variety of live plants or artificial floral arrangements used as appropriate for decorative accents throughout the property Abundant variety of live plants, silk, or dried floral arrangements used as appropriate to enhance an upscale theme throughout the property Garden -fresh condition, outstanding variety of live plants and flowers that are uniquely arranged to provide a luxurious appeal throughout the property 3 112:06t3751-0097 6271361.10 a09'04' I4 —71- PUBLIC AREAS I f.. Irr!(r, rr b r4D llld-Scate i Limited (washer and dryer only) coin -operated laundry facilities Try t711�D MM-Scale PIUS i. Expanded coin- operated laundry facilities, such as: multiple machines, vending supplies, folding table, etc. -or- valet laundry 1FotJR DTAt4o JD ► y , : cafe 1 Valet laundry and pressing available 1FS!EdJrr+TI.f; i stip _Wnrel-Lww 4D, olus: Personalized services available, such as: one hour pressing, shoeshine, tailoring or alterations, etc. Luggage carts available 2D, olug: Design enhancements, such as: solid construction, larger, smooth tracking wheels, and bumper guards 3D, Deus: Luggage assistance upon arrival is automatic upscale design enhancements, such as: brass or metal finish, carpeted base, and multiple hanging capabilities. Luggage assistance available upon request , p ;.. �"inj � &inn:; Private meeting room available; Basic audiovisual equipment available, such as: projectors, microphones, television, sound system, etc. Expanded meeting space with decorative appointments; increased variety of audiovisual equipment available, such as: dropdown projector and screen, smart lectern, controlling lights and surround sound, multi- casting, wireless communication, etc.; Some conference services available, such as: planning assistance, catering, and most technology needs A variety of meeting rooms, such as: ballroom, boardroom, theatre, and/or meeting rooms of various sizes, with upscale appointments; All audiovisual equipment is state-of-the-art; Full conference services available including on -site professional conference planner and technical support 40. olus: Luxuriously appointed, first - class facilities; Custom conference services 14 121066751-0097 6271361.10 a09.04/14 -22- reakfast Area nded 'mental- At Imam, two items In of the following ; pries: juice, ea, fresh fruits, low pi breads, sweet milk. PUBLIC One full -service outlet or food court (comparable to a one diamond restaurant) onsite: fig Standard continental breakfast (minimum: juice, pastry, and hot beverage) is served in a dedicated area with modest restrictions due to size and/or placement of appointments; Limited seating is available AREAS ,2D. olus: (comparable to a two diamond restaurant); Lounge or bar area Qg 1 Expanded continental breakfast, or more, is served in a dedicated area that is distinctly separate from the lobby traffic; Appointments are well.proportioned to area size, with appropriate seating for the size of the establishment; Television Upscale, full - service restaurant (comparable to a three diamond restaurant); Separate lounge or bar area; Room service available for breakfast, lunch, and dinner 4D. olus: Multiple outlets (at least one is comparable to a four diamond restaurant); Room service available 24/7 Pool area with a limited amount of furniture of basic or mixed styles; Property location determines seasonal availability 112 0h6751-0097 62 7136I.10 a09,04i 14 t5 Weather appropriate pool (usable at least nine months annually); Area is well-appointed with a good variety of decorative, comfortable pool furniture; Hot tub or whirlpool spa -23- 30. nlus: Pool area reflects the use of upscale building materials and design, with a variety of pool furniture; Hot tub or whirlpool spa, steam room, or sauna; Food and beverage service is available poolside 40. olus: Pool area is of elegant design, with unique appointments, such as: sculptures, waterfalls/features, exotic plants and gardens, stone/tile surfaces with designer inlays, etc.; Outstanding variety of luxurious furniture; Cabanas; Full-time professional attendant is on duty PUBLIC AREAS Two pieces of equipment on site In a designated room Fatl1 tiers Programs (Golf, tennis, b;.ting, horseback tng, children's activities, bysitting, etc.) One unisex 112066751,0097 6271361 10 a09 04,14 to 2D, plus• Three or more pieces of equipment; Room is enhanced with at least three purposeful appointments, such as: mirrored walls, television, water cooler, bathroom, towels, clock, scales, etc. Multiple facilities/ programs onsite; Some with off - site privileges Separate gender restrooms in a convenient location (If property has expanded meeting facilities, then additional restrooms are available in proportion) -24- Full spa services available 3D, olus: Five or more pieces of state-of- the-art equipment, including cardio and weight training capability 9D, olus: Arrangements are made for off - site services D, olus: Upscale appointments Full spa onsite 40, plus: Ten or more pieces of equipment; Luxurious health club environment: dressing area includes: lockers, showers, and restrooms; Full- time professional attendant is on duty; In -room exercise equipment available 4D, olus: First-class facilities/ programs with custom concierge services provided 4D, olus: First-class with luxurious appointments GLOSSARY: N. Climate controlled - Heat, ventilation and/or air conditioning and cooling. ► Dated - Marked by features of the past; showing the effects of long use or wear; unfashionable. ► Form - The essence of design or configuration. ► Function - The action for which something is fundamentally fitted or purposed. ► Plus - When you see this term used (such as 2D, plus), it means that the rating includes the bolded elements of the previous columns in addition to elements of the current column. it. Residential - Of, or relating to, or connected with, residential style; invokes a personal presence of home. Diamond Rating Guidelines - Guestroom ONE DIAM+%OND GU ESTROOM TWO DrAMoND THREE DIAMOND Mid-< a . P :, FOUR ;' DIAMOND Upaca s, POE DIAMOND Ubtra-W u GENERAL DECOR ^' Predominantly Increased Predominantly ,3D. Plus' 40, olus; S-rfLE basic or dated coordination of residential Predominantly Predominantly style with limited appointments style upscale style elegant Style $ coordination of appointments combined with modest with decorative that provides an exceptional with luxurious, unique, and that provide an enhancements appointments degree of artistic adequate level of comfort to function, design elements, room size, and/or amenities that provide an enhanced level of comfort that are attractive, well - coordinated for form and function that provide an obvious degree of comfort comfort appointments Free Floor spa'-- obviously Modest restrictions No restrictions, as Room size and Room size and restricted by size due to size and/or placement of placement of placement of and/or placement placement of appointments is appointments appointments of appointrnents; appointrnents well-proportioned provide an obvious provide a free however, provides to room size degree of flowing abundance . - guest an adequate level of comfort spaciousness, allowing increased ease of movement for multiple guests of space that contributes to the ultimate level of comfort and relaxation for multiple guests 17 1 I2 06675I -0097 6271361.10 n09114,14 -25- GUESTROOM •_ 'ONE �, 'iiX OiND Economy Basic material, such as: linoleum or low density pile carpet with padding that provides little or no comfort underfoot (floor feels hard) JWO 'DYAMOIVJ Mid -Scale Enhanced material, such as: wood laminates and vinyl, or medium density pile carpet with padding that provides average comfort underfoot TftiI4E D'LA 4OND MId-Scale Plus 20, plus: Wood laminates or carpet with enhanced design, such as: patterns, textures, or inlays; Decorative tile (ceramic, stone, concrete, terra cotta, etc.); Hard surfaced floors have decorative area rugs as appropriate FOLK DIAMOND iI etprscale D. plus: FTV,E DIAMOND i Ultra -Luxury 4P, plus: High grade wood, marble, granite, or other upscale stone floors, or high density pile carpet with padding that provides exceptional comfort underfoot Custom inlays or textured enhancements that provide an overall design that is obviously elegant and unique; Area rugs are luxurious and unique Y Waif CoveiTngs , --s .' Basic material and design, such as: cinder block with a plain paint finish, standard grade wood, prefab modular laminate paneling, or wallpaper Wall treatments are modestly enhanced, such as: drywall with basic paint finish or plain vinyl coverings; Rubber or vinyl baseboards Decorative wail treatments, such as: drywall with textured and painted finish, decorative vinyl coverings, or select grade wood/stone; Carpeted baseboards 30. olus: 4D. olus: At least one significant upscale design enhancement, such as: accent wall(s), furniture -finish wood paneling, soft wall coverings, ceiling trim, architectural feature, wainscot, chair rails, etc.; Wood baseboards Wall finishes are of the highest grade materials; Accented with multiple luxurious design enhancements Poster(s) or commercial artwork with thin, un-enhanced wood, metal, or plastic frame(s) Matted and framed artwork (common or commercial) in enhanced frame(s) or other decorative appointments Variety of matted and framed artwork (varied sizes and scenes) or other appointments that provide a distinctive or thematic upscale appeal 40, plus: • Variety of styles and accent pieces, such as: limited edition prints, canvas art, tapestries, or lithographs with enhanced matting and preservation frames, assorted artisan pieces or sculptures, floral displays or plants 112.Ooo751-R09; 6271361,10 a09: 04 ' 14 -26- GU ESTROOM ONE ; 1r4ON D Economy Basic material and design, such as: drop tile, concrete, or standard grade wood TWO &AMciNEl i Mid -Scale Modest enhancements to material and design, such as: enhanced drop tile, painted drywall, popcorn finish, sand textured concrete, etc. THREE.: r rrtAMa$ D Mid -Scale plus . Predominant use of decorative enhancements to painted drywall, such as: an advanced textured finish (knockdown, orange peel, comb, slap brush, etc.) or select grade wood/stone FOUR DIAMOND Upscale 3D, plus: iFLUE. DMAMi1ND Ultra -Luxury 4D, plus: One architectural or design feature, such as: treys, beams, medallions, vautted/volume, murals/stencils, tin tiles or skylights, ceiling fans, special effect lighting, etc. Multiple architectural or design features COv146 Basic drapes, blinds, or shades offering limited blackout effect from the sun or outside light sources 1D, Plug: Full blackout effect 20, plus: 3D. Plus: 4D. plug: hdow y; ... Two design enhancements, such as: blinds, shutters, sheers, fabric side panels, valance, glass treatment, cornice, etc., provides a professional design effect Three or more design enhancements Elaborate, luxurious, and unique visual effect No headboard -or- headboard and mattress are of basic materials and plain design (vinyl fiat top); Box spring or bed base Headboard and mattress are of modestly enhanced material and design (quilted, soft top); Box spring or bed base 20, plus: Upscale headboard, bed base and mattress which includes a comfort enhancement, such as: pillow top, memory foam padding, adjustable comfort level, etc. 4D, plus: Decorative headboard Elaborate, luxurious, and unique visual appeal Bed coverings are of basic style; Bed linens are of common blends and thread counts (sheer, coarse to touch); Pillows are of a standard grade (thin Polyester batting) Bed coverings are quilted or modestly enhanced In style; Bed linens are of average (180.250) thread count, closely woven and smooth to touch; Pillows are of an enhanced grade (thick Cluster Fiber) 2D. Plus: Bed coverings include three or more accent features (see 3D); Bed linens are of increased thread count (>250), tightly woven, crisp, and very soft to the touch; Pillows are of an upscale grade, such as: down or feather 4D. olus: Two accent features, such as: comforter, duvet, dust ruffles, bed throw/scarf, multiple pillows, accent pillows/ shams or triple sheeting 2 300 thread count bed linens (Egyptian cotton, satin, silk or similar) provide a super soft, silk -like feel; Choice of pillow fills, such as: silk, wool, cashmere, premium foams, latex or goose down, etc., is provided 1'? 112'066751-0007 6271301.10 509,04: 14 -7 /- GUESTROOM ` Additional' c.. " torage Space '- - ONE j DI1YP(OND Economy Open wall- mounted clothes rack with simple wire or non- detachable hangers TWO OrAitONR Mid -Scale Semi -enclosed area with detachable wood, plastic, or heavy metal hangers 'L E DLAMdND { Hid -Scale Plus r. Fully -enclosed with at least six open -hook wood ar heavy gauge, sculptured plastic matching hangers; Some with skirt or pant hanging attachments; Closet depth is 22 inches ( at minimum) and can enclose full length apparel o ! ratAMOND Upscale 3D, plot: PIl/E •DrIAI4OND Ultra -Luxury 4D, olug: At least eight hangers At least ten hangers (two of which are satin or similar); One or more designer features, such as: drawers, shelves, shoe rack, walk-in capability, etc.; Closet is illuminated Open clothes storage space Multiple enclosed drawers; Total storage space can accommodate the needs of two ar mare guests 2D. plus: 3D. plus: 40. plus: Sufficient space for one piece of luggage, such as: folding metal rack, bench, or credenza top Sufficient space for two pieces of luggage (upgraded wooden racks or designer -style benches); Total storage space can accommodate the needs of three or more guests Total storage space can accommodate the needs of four or more guests .. Two or more well- positioned basic lighting fixtures; Provide an adequate level of overall illumination Three or more lighbng fixtures; Modestly enhanced in style, positioning, and function; Provide a good level of overall illumination Four or mare well -positioned lighting fixtures; Decorative and well -coordinated for form and function; Provide a good level of overall illumination at each location 3D, plus: 4D, plus: Predominantly freestanding fixtures of upscale design; Provide an excellent level of overall illumination Custom lighting fixtures of outstanding quality; Custom function(s), such as: dimmers, point lighting, multiple switches, and/or natural light sources; Provide a unique illumination effect Predominantly basic materials, such as: particle board, pressboard, laminate, or vinyl finishes; Dated styles with limited coordination; Provides an adequate level of comfort ID, plus: Predominantly freestanding; Decorative and well -coordinated for form and function; Overall construction and design reflects current industry trends, such as: Melamine resins, solid wood trim, or upgraded laminate finishes; Provides an obvious degree of comfort 3D, plus: 4D, plus: An increased level of coordination; Modest enhancements in materials, design, and function; Provides an enhanced level of comfort Modern or antique upscale style and materials, such as: solid wood, polished metals, leather, designer fabric, veneer finishes with solid wood accents, laminate insets, etc.; Provides an exceptional degree of comfort Luxurious, unique, and elegant custom design and workmanship 20 112,066751-0097 6271361.10 a09,0Ji tt -28- GUESTROOM ;A .—cm.,E i I7TAmoui) Economy One chair (typically placed as part of a duplex, triplex, or task table) 'TWO t7 iffOlVD Mid -Scale 10. plus: FHFIBE 1x1AMilf Mid -Scale Plus ' Comfortable seating for two guests - to include desk chair with arms and partial upholstery, such as: vinyl, leather, or fabric; Plus one additional fully upholstered easy/lounge chair that is positioned for television viewing (OUR oIA{(''ff)lUE} Upscale 30. plus: RUE bteiMC1Nl7 Ultra-Luxu 4D, plus: Additional seating for one guest; Vinyl or fabric upholstery Comfortable seating for three guests; Upscale materials and design in an expanded setting, such as: a loveseat, sofa, or oversized chair with ottoman Luxurious materials and design; Additional furniture pieces, such as: end tables, coffee or occasional tables 4 ,- . > Work Space/ :;: Writing Surface ,.r" Items stored on a writing surface :f ". decrease the available ;; working space. A • writing surl`dce is * '-,fadged, in part, on the; _ - basis labia space, Duplex, triplex, or small task table that provides adequate work space (e.g., enough space for a laptop computer and an 8x10 inch reference material item) Desk or medium task table that provides good work space (e.g., enough space for a laptop computer and two 8x10 Inch reference material items) Desk or large task table that provides very good work space (e.g., enough space for a laptop computer and three 8x10 inch reference material items); One electrical outlet (not in use) conveniently placed at the desk Large desk that provides ample work space (e.g., enough space for a laptop computer, three Sx10 inch reference material items, and a portable printer); Multiple electrical outlets (not In use) conveniently placed at the desk 4D. plug: Desktop enhancements, such as: desk blotter, pull-out writing surface, stationery, and other office supplies Ventilation Heat and/or air conditioning available on a seasonal basis as needed; Window style air- conditioning units 10, plus: 2D, plus: Heat and air conditioning available on demand; Central system with thermostat control 40, plus: Conveniently located through- wall units Heat and air conditioning available on demand; Modern, quiet, with easily accessible controls in each guestroom Digital thermostat control i. - -. Touch-tone telephone ID, plus: Message light on telephone 2D, olus: 3D. plus: 4D, plus: Voice messaging Multiple telephones; Two- line telephone or separate Internet capability Cordless telephone; Expanded phone features, such as: pre-programmed dialing keys, speaker capability, personalized display or vo-scemail I I 2106675 l -U097 6271361.10 a09,04i 1-t -29- GU ESTROOM =w,v ; J.' Internet={- is" M<.r1t'.,.,. oNE DIAMOND Economy Dial -up capability Td [IAICI'f�D Mld-Scale High-speed access (cable or wireless) available In some rooms 1JIAli�C1%�D Mid -Scale Plus I: High-speed cable access available in all rooms ea ' ii DTAiMMiiUD Upscale High-speed wireless access available in all rooms FZGE DIAMOND Ultra -Luxury 4D, plus: Available in some public areas of the property 9 eleVislen Type ''' and Placement .: ... - .i;�' �`.(Cathode tt$-•., ej * (liquid Crystal day) ° (Sudan: `•,•ricto; Ete,. Standard CRT TV (curved screen); Wall -mounted; Limited viewing angles; Basic cable W. plug: Standard CRT TV (curved screen) with remote control; Located on credenza, dresser, or other furniture piece without without a swivel base; Limited viewing angles; Channel directory 2D. plus: 3D. Plus: 4D. olu5: 2 25 inch screens with portable full function remote control; With swivel/pull-out base; Multiple viewing angles; Multiple televisions In suites; Expanded Cable channel selection (at least 35 channels); Plus one additional feature, such as: free movie channel, pay - per -view movie channels, video games, etc. a 25 inch Flat Screen CRT or Flat Panel TV (such as: LCD, Plasma, SED, etc.); Located on credenza, dresser, or on/in other furniture piece with a swivel/pull-out base or wall mounted; Cables and cords are hidden from view Custom, decorative enhancement (e.g., framing, mange placement, remote enclosure, mirrored screen, etc.); High - definition channels available Clock Standard clock radio 2D, plus: 3D, plus: 4D, plus: Decorative design Digital display DVD player (in lieu of pay -per- view movies) CD player with at least one CD selection; MP3 docking station; Surround sound audio DVD Player; DVO library available 1 I _2,01i675I -0097 U271361. 10 a09:0-1.1,1 -30- GU ESTROOM r�; r:rrr rfr. r , fMr,rli.. rfr rr,tgi i r ,Tir5r rir, fVff: ., Uttra-Luxu '.._. Local telephone ID. plus: 212, plus: 30, Pius: 4D, plug: directory Local Business Guest -service Enhanced guest- Uniquely appointed flyers (food, attractions, transportation, etc.); Notepad and directory; Complimentary daily newspaper available; service directory in folder, binder, or digital format; Complimentary guest -service directory in folder, binder or digital format; In -room pencil Notepad and pen daily newspaper delivered to room; Additional reading materials, such as: magazines, books, etc.; Upgraded stationery package comfort menu providing exercise, spa, butler, or other personalized services; Assortment of complimentary daily newspapers available for delivery to room (envelopes, postcards, writing paper) Basic ice bucket Plastic ice bucket Insulated plastic Ice bucket with lid Ice bucket of (polystyrene foam, plastic, cardboard, etc.) with disposable cups with lid and disposable cups ice bucket with lid and disposable cups of upscale design, such as: insulated and padded vinyl, acrylic or metal; Glass tumblers luxurious design, such as: designer glass, silver, brushed or glossy metal finish, rings or handles, etc.; Selection of glassware; Ice tongs Iron & board available Full-size iron and board Refrigerator ,iO, plus: 4D, olus: available Microwave oven In -room snacks, mini bar, or a refrigerator that Two robes; Two pairs of slippers available can be custom stocked upon Umbrella Extra pillows and blankets available request In -room comfort menu providing exercise, spa, butler, or other In -room safe Coffee maker and supplies, including tea bags In -room safe that is large enough for a standard 12" laptop computer personalized services Full-length mirror Framed or beveled full- length mirror 23 112066751-0097 6271361.10 a00;0-1.I-1 -31- GLOSSARY: ► Climate controlled - Heat, ventilation and/or air conditioning and cooling. ► Dated - Marked by features of the past; showing the effects of long use or wear; unfashionable. ► Form - The essence of design or configuration. ► Function - The action for which something is fundamentally fitted or purposed. ► Plus - When you see this term used (such as 2D, plus), it means that the rating includes the bolded elements of the previous columns in addition to elements of the current column. ► Residential - Of, or relating to, or connected with, residential style; invokes a personal presence of home. Diamond Rating Guidelines - R',lthroon BATHROOM ': GENERAL DtcoR .: S-rets ° t bi ;. Free Floor Space'.;, - - - i7N 0241cND ono Ecmy Predominantly basic or dated style with limited coordination of appointments that provide an adequate level of comfort TiVci 0141.4df4D Mid -scale Increased coordination of appointments, combined with modest enhancements to function, design elements, room size, and/or amenities that provide an enhanced level of comfort THREE DIAMOND Mid -Scale Pius Predominantly residential style with decorative appointments pp that are attractive, well - coordinated for form and function that provide an obvious degree of comfort FO.fJfi DTAMdND 3D, plus: *tit' DXAMdJW ;. 4D, plus: Predominantly upscale style that provides an excellent degree of comfort Predominantly elegant style with luxurious, unique, and artistic appointments obviously restricted by size and/or placement of appointments; however, provides guest an adequate level of comfort Modest restrictions due to size and/or placement of appointments No restrictions, as placement of appointments is well-proportioned to room size Room size and placement of appointments provide an obvious degree of spaciousness, allowing increased ease of movement for multiple guests Room size and placement of appointments provide a free flowing abundance of space that contributes to the ultimate level of comfort and relaxation for multiple guests Basic material, such as: linoleum, painted concrete, plain resin, or poured composite surface Vinyl or ceramic the Decorative tile (ceramic, stone, concrete, terra costa, etc.) Marble, granite, or other upscale stone floors; Area rug(s) as appropriate 411, plus: Custom inlays or textured enhancements provide an overall design that is obviously elegant and unique 24 l?i(l 75 t-O097 627136I . I O a09'04' 11 -32- pTFTMf]IVp " Economy Basic material and design, such as: cinder block with a plain paint finish, standard grade wood, prefab modular laminate paneling, dated ceramic tile or wallpaper BATH ROOM DI'AI ti1V• D Mid -Scale Wall treatments are modestly enhanced, such as: drywall with basic paint finish or plain vinyl coverings; Rubber, vinyl, or ceramic tile baseboards DI'Al UIVD Upscale 3D, plus: DYICMOlIID Ultra-t.wxa 4D, plus: EfIAMCI D ' Mid -Scale Plus Decorative wall treatments, such as: drywall with textured and painted finish, decorative vinyl coverings, or select grade wood/stone; Wood or decorative ceramic tile baseboards At least one significant upscale design enhancement, such as: accent wall(s), furniture -finish wood paneling, soft wall coverings, ceiling trim, architectural feature, wainscot, etc.; Wood or high - end stone baseboards Wall finishes are of the highest grade materials; Accented with multiple luxurious design enhancements all Hangings/: Matted and 4D, olag: Decorative Q l7anCementS '>. .., framed artwork or other appointments that provide a distinctive or thematic upscale appeal Variety of styles and accent pieces, such as: limited edition prints, canvas art, tapestries, or lithographs with enhanced matting and preservation frames, assorted artisan pieces or sculptures, floral displays or plants Basic material and Modest Predominant use 3D, plus: 4D, plus: ([it • - design, such as: enhancements to of decorative One architectural Multiple drop tire, concrete, or standard grade wood material and design, such as: enhanced drop the, painted drywall, popcorn finish, sand textured concrete, etc. enhancements to painted drywall, such as: an advanced textured finish (knockdown, orange peel, comb, slap brush, etc.) or select grade wood/stone or design feature, such as: treys, beams, moldings, medallions, raised/vaulted/ volume, murals/stencils, tin or skylights, ceiling fans, special effect lighting, etc, architectural or design features -'5 112/06675 t -0097 r,271361, 10 a09 111 14 -33- BATH ROOM ONE DIAMOND Economy Basic rectangular style, size (4%2 ft. length and 14 in. depth) and materials (fiberglass, acrylic, or porcelain on steel); Simple design (straight sided) IWO DIAMOND Mid -Scale D. plug: THREE DIAMOND Mid -Scale Plus '. 2D, plus: FO1jfl DIAMOND Upscale Enhancements to size (>41/2 ft. length and >14 in. depth), design, and/or style, such as: oval, round, or free form Ff►E DIAMOND 4 Ultra-l.uxusy 4D, plug: Modest design enhancement Decoratively enhanced in design, or augmented for comfort or function Obvious enhancements in comfort, design, function, and/or material, such as: larger, two person capability, contoured backs, built•in lumbar back support, water jets, enamel -coated cast iron, natural marble, stone, or other designer features If separate from tub (or shower only), base is of basic material (metal or fiberglass) and of plain design Basic square size (59 sq. ft.) 10. plus: If separate from tub (or shower only), base Is decorative ceramic tile, cultured marble/granite, or poured acrylic Very good size (>9 sq. ft.) If separate from tub (or shower only), base Is of upscale material, such as: marble, granite, stone, or porcelain tiles, Oversized (>12 sq. ft.) 4D, plug: If separate from tub (or shower only), base is of enhanced material (acrylic or ceramic tile) Modest enhancement to design -or- irregular shape (rectangular, rounded corner or neo angle) Separate shower stall in addition to the tub; base is of outstanding material and artistic design, such as: marble, granite, stone, or porcelain tiles with complementary inlays or treatments Fiberglass or metal Acrylic or ceramic tile Acrylic with enhancements for comfort, style, or function -or- decorative ceramic tile or other solid surface, such as: cultured marble/granite, poured acrylic, etc.) Marble, granite, stone, or porcelain tiles; Enhanced solid surface; Tub and shower height soap dishes 40, plus: Luxurious material and artistic design, such as: marble, granite, stone, or porcelain tiles with complementary inlays or treatments; Seating is integrated into design lightweight vinyl curtain Heavyweight vinyl curtain or plexi- glass door with aluminum frame Decorative vinyl, polyester, or nylon curtains with curved shower rod; or- lightweight glass door with aluminum frame; -or- effective door -less design ,D. plus: 4D. plus: Double curtains -or- heavyweight glass door with/without metal frame Fixed door enclosure (framed or frameless); Enhanced (etched, frosted, embossed, tinted, etc.) glass . - ... 26 I12,066751.0097 6271361.10 a09; 04 ` 14 -34- BATH ROOM LiYg iSID �E Economy 1I{i0ilib Mid -Scale v tilia3d14-6 i Mid -Scale Plus Oki b AMdrb Upscale MI DIAMOND �DO Ultra -luxury Traditional, single function shower head Multiple setting shower head Multiple setting shower head with metal finish Enhanced style, of modern design, fixed shower head Custom water features, such as: body jets, hand- held sprayers, multiple shower heads, rain showers, or gentle flow environmentally friendly features Two-piece, round; Basic style I.D. plus: Two-piece, elongated; Basic style 30. olus: 4D. plug: Enhanced style Enhanced style or function Distinct toilet -only area; Enclosed or semi -enclosed .druty Area Size .< • and Location c. Xlacludes• Sink, .". srter/Shelf Spacer i._ ror, Cabinetry an.`„ 1- Fixtures) - - Combined with toilet area within an enclosed space that is restricted by size and/or placement of appointments /D. olus: D. plus: 3D. plus: 4D. olug: Modest restrictions due to size and/or placement of appointments If vanity area is separate from the toilet area, it is positioned in plain view of the guestroom No restrictions, as placement of appointments are well-proportioned to room size DR If vanity area is separate from the toilet area, it is positioned in restricted view from the rest of the guestroom Vanity is well- integrated into the overall scheme of the bathroom for convenience and comfort; Room size and placement of appointments provide an obvious degree of spaciousness, allowing increased ease of movement for multiple guests Room size and placement of appointments provide a free flowing abundance of space that contributes to the ultimate level of comfort and relaxation for multiple guests Wall -mounted, basic style, porcelain Standard self- rimming porcelain or porcelain on steel Seamless (Poured acrylic or cultured marble/granite/ quartz) -or- Under -mounted porcelain or porcelain on steel Porcelain or porcelain on steel, with an upscale counter enhancement, such as: wall faucets or upscale counter- mounted faucets 40. plus: Multiple sinks of ornate design, such as: above counter vessel or pedestal -or- of designer materials, such as: glass, stainless steel, vitreous china, enameled cast iron, fireclay, brass, nickel, copper, marble, or either real/synthetic Stone 37 II21066751-0097 6271361.10 n09,0-U 14 -35- BATHROOM -i ONE, 13I' PiciNO Economy T fp DT'AN D l34 D Mid -Scale s =`%t DIIAM0 D a Mid -Scale Plus ;; .q- R A E)N❑ • Upscale i. CIxIx1NOND Ultra-Luxu,. ... Small size (<2 sq. ft.) shelf of bask material, such as: glass, metal, or sheet laminate Moderate size (2 2 sq. ft.) laminate counter Very good size (24 sq. ft.) counter space of solid surface, such as: poured acrylic, cultured marble/ granite/quartz, or ceramic tile Oversized (2 6 sq. ft.) counter space of excellent quality, such as: marble, granite, or other solid stone 4D, taus: Multiple counters and/or shelves; Artistic design, such as: marble, granite, solid stone, or porcelain tiles with complementary Inlays or treatments Small (lye ft. x 2 ft.) mirror Medium-sized (>3 sq. ft.) mirror 20, plus: Large (3 ft. x 5 ft.) mirror with an upscale frame 4D, plus: Beveled or decoratively framed mirror Artistic design enhancement Skirting partially conceals plumbing Enhanced skirting conceals plumbing Upscale, furniture- finished skirting 4D, plus: Elaborate design features, cabinetry, multiple shelving, and/or drawers Basic design and function, such as: bulb and cover; Provide an adequate level of overall illumination Modest design enhancements, such as: box/egg crate style or enhanced glass rover; Provide a good level of overall illumination Decorative, well- coordinated for form and function; Multiple bulbs and covers provide a good level of overall illumination 34. plus: 4D, taus: Upscale design; Multiple locations; Illuminated shower; Provide an excellent level of overall illumination at each location Designer fixtures; Custom function(s), such as: dimmers, point lighting, multiple switches, and/or natural light sources; Provide a unique illumination effect Standard function; Basic materials of plain design 1D. taus: 20. plus: Upscale design enhancements, such as: satin or enamel finishes, two or more metal combinations, embossing, etc. 4D. pluq: Modest design enhancements Metal with decorative finishes, such as: chrome, pewter, brass, nickel, gold, etc. Designer materials and style; Unique appointments Basic, lightweight; Rough to touch; Limp feel; Low absorbency; Displayed on caddies ID. Plus: Modest enhancements in design; Displayed on bars and/or shelves Medium weight; Soft to touch; Medium absorbency Heavyweight; Plush to touch; Firm, self- supporting feel; Premium cotton with high absorbency 4D, plus: Generous sized towels or bath sheets; Luxurious appearance, with Intricate and detailed enhancements to design ?Y 112 006751-0097 G271361.10 a09.0414 -36- BATHROOM (vita,.—(.rr,..., r±i f f,M1 rr, Two small (<'„ oz.) bars of soap (or equivalent) rri,17, �fr1i; .41,li'.:-i;:,: rj cj rrrrtit,'p, ash,° ,it iT.: rr1.. ri41 tit,[, 'D. plus: r�i1,r r , ... - 4D. plug: Two medium (2 a/i az.) bars of soap (or equivalent); one packet or bottled item; modest Presentation Four -piece personal care package, includes: one large (2 11/4 oz.) and one medium (2 3oz.) bars of soap (or equivalent); two (23/4oz.) bottled items; Decorative presentation; Additional amenities (such as: toothpaste/ brush, comb, sewing kit, mouthwash, etc.) are available ansite Seven -piece personal care package; Toiletries are enhanced by fragrance, natural supplement, packaging, etc.; Includes: two large (2 1'/4oz.) bars of soap (or equivalent), three (2 1 oz.) bottled items, and two additional items; Upscale presentation; Freestanding soap dish at sink Ten -piece personal care package of designer/spa toiletries; Ample sized (2 1'4oz.) bars of soap and bottled items (214 oz.); Unique presentation Facial tissues W. plus: Facial tissues inset in vanity (no chrome) Facial tissues freestanding in decorative container 4D. plus: Wall -mounted with chrome covers Custom designed container Wall -mounted hair dryer Freestanding hair dryer; Makeup mirror 4D, plus: Illuminated makeup mirror; Scale; vanity seating Night -light D. plus: 40. plug: Landline or cordless telephone available Television 19 112 06675 I -0097 (271361IPa099414 —37— The AAA Four and Five Diarnond Rating These prestigious ratings are achieved by Tess than four percent of all Approved properties —typically the mot luxurious and pampering properties throughout North America. Less than one third of one percent of lodgings receives the Five Diamond& Rating Wile approximately three and one half percent receives the Four Diarnond& Rating. Establi:!-rments must consistently reflect upscale and extraordinary characteristics (respectively) in both phyacal attributes and level of gue services. if the AAA inspector determines that your establishment meets our Four or Five Diarnond Guidelines, the property will next be scheduled for an anonymous hospitality evaluation. Only the Four and Five Diamond evaluations incorporate a review of twelve critical service areas and meaeure over 300 guest interaction points into the overall rating. In addition, all Five Diamond Rating recommendations are forwarded to AAA's Five Diamond Committee for further review, Once the committee's assessment is concluded, the eablisttment will be advised in writing of the outcome, Four and Five Diamond Service Expectations IN ADDITION TO THE FOLLOWING GUEST SERVICE INTERACTION POINTS, each section is assessed a subjective point value based on the overall levels of competency, refinement, and howitality. 1. Reservation Services Service )svel D - 4D .;aa e i :.. . ... .. x Accepted 24 hours, either at property or through a central reservation system X Operator answers phone promptly within three rings X Operator provides a warm and sincere greeting X Reservationist thanks caller for contacting the property X Reservationist provides an introduction x Reservationist asks for caller's name Reservationist addresses caller by name prior to dosing Reservationist anticipates caller's needs or offers a personalized recommendation x Reservationist provides rate structure and room availability x Reservationist provides an overview of facilities and services Reservationist exhibits competent knowledge of all associated facilities and hours of operation X Reservationist collects registration information X Reservationist explains deposit and cancellation polities X Reservationist explains unusual payment options X Reservationist reviews reservation request Reservationist exhibits a sincere desire and compliance to all guest requests X Reservationist provides confirmation number or contact's name Reservationist is efficient yet unhurried and sensitive to the mariner of the guest x Reservationist provides a warn and sincere thank you to guest for calling Operator addresses guest by name during dosing X The guest feels well served Property offers follow-up reservation confirmation to guest in advance of arrival _art_ II2ig60751.0097 627 136 L 10 a09r04/ 14 -38- 2. Arrival Services 5' 4D Cars in queue are acknowledged and directed as appropriate upon arrival X Uniformed attendant promptly opens the car door X Attendant provides a warm and sincere welcome greeting X Attendant makes a proper introduction X Attendant Inquires about the guest's name Attendant uses guest's name at least once prior to closing X Attendant explains parking procedure Valet parking is automatic X Attendant promptly unloads luggage X Attendant explains luggage handling procedure X Attendant provides direction to registration area Attendant anticipates guest's needs or offers a personalized recommendation Attendant Is efficient yet unhurried and sensitive to the manner of the guest Attendant exhibits a sincere desire and compliance to all guest requests Attendant escorts guest to appropriate area X Attendant provides a warm and sincere closing Attendant addresses guest by name during closing X The guest feels well served Lobby greeters are available to escort guest to appropriate area 3. Check In Services 40 X Attendant provides a warm and sincere greeting; recognizes guest appropriately X Attendant inquires about guest's name Attendant addresses guest by name during initial greeting without inquiry Attendant uses guest's name at least once prior to closing Staff associate acknowledges (with a warm and welcoming greeting) guests waiting in line X Registered guests are not asked for duplicate information X Attendant confirms rate and type of room X Attendant provides room number discreetly Attendant places all registration materials into the guest's hand Attendant exhibits a sincere desire and compliance to all guest requests Attendant anticipates guest's needs or offers a personalized recommendation Attendant is efficient yet unhurried and sensitive to the manner of the guest X Attendant arranges escort of guest and belongings to roam Attendant provides introduction to escort X Attendant provides a warm and sincere closing Attendant addresses guest by name during closing X The guest feels well served 31 11 ?'066 751-0097 6271361.10 a09404. 14 19- 4. Bell Services (Check In) 4D s,v.��x,-. X Escort provides a warm and sincere greeting Escort uses guests name at least once prior to closing X Escort is able to provide information about facilities when asked Escort takes the Initiative in providing information about all facilities Escort anticipates guest's needs or offers a personal recommendation Escort exhibits a sincere desire and compliance to all guest requests X Escort places luggage on luggage stand or In appropriate area X Escort explains features and functions of room X Escort offers to fill ice bucket X Escort is efficient yet unhurried and sensitive to the manner of the guest X Escort provides a warm and sincere closing Escort addresses guest by name during closing X The guest feels welt served 5. Evening Housekeeping Services 4D Evening housekeeping service is automatic Attendant folds back or removes bedspread Attendant turns up pillows Attendant straightens bathroom Attendant re -points tissues Attendant cleans soiled surfaces Attendant replaces or straightens (Green Program) used towels Attendant replenishes used amenities Attendant empties wastebasket Attendant adjusts drapes Attendant adjusts room lighting Attendant delivers gift amenity, such as: goodnight wish, chocolates, etc. Attendant refreshes ice Attendant replaces used glasses Attendant displays evening services, such as: robe on bed, laundry, shoeshine, etc. Attendant leaves personalized message for guest There is additional evidence of personalized services 32 112,0b6751-0097 6271361.10 009'04' 1.1 -40- S. Wake -Up Call Services 4D X Some type of service is available 24/7; Alarm dock or alternative method is used if there are no phones in room X Service number is answered within three rings X Operator provides a warm and sincere greeting Operator uses guest's name at least once prior to closing X Operator asks appropriate questions and replies in a professional manner Operator anticipates guest's needs or offers a personalized recommendation Operator is efficient yet unhurried and sensitive to the manner of the guest X Operator provides a warm and sincere closing Operator addresses guest by name during closing X Call is received within five minutes of requested time X Call is an automated message Call is a live message X Message includes a warm and sincere greeting Message includes the use of guest's name Message includes time of call Message includes other pertinent information, such as weather Operator anticipates guest's needs or offers a personalized recommendation Operator is efficient yet unhurried and sensitive to the manner of the guest Operator provides a warm and sincere closing Operator addresses guest by name during closing X The guest feels well served There is additional evidence of personalized services 7A. Room Service (Order Services) 4D X Service is available at limited hours Service is available 24/7 X Service number is answered within three rings X Operator provides a warm and sincere greeting Operator uses guest's name at least once prior to closing Operator exhibits a sincere desire and compliance to all guest requests Operator anticipates guest's needs or offers a personalized recommendation X Operator asks appropriate questions and replies in a professional manner X Operator repeats order to guest Operator is efficient yet unhurried and sensitive to the manner of the guest X Operator provides time estimate for delivery(within 30 minutes) X Operator provides a warm and sincere closing Operator addresses guest by name during closing X Operator calls to advise guest if order will be late or if items ordered are not available 33 112'06675I-0097 6271.361.10 04/l4 -41- X The guest feels well served X Special express services are available for breakfast orders Evidence of personalized services exists 76. Room Service (Delivery Services) 1Attendant 4D X Delivered within five minutes of time promised X Morning newspaper is presented with breakfast X Attendant provides a warm and sincere greeting uses guest's name at least once prior to closing Attendant exhibits a sincere desire and compliance to all guest requests Attendant anticipates guest's needs or provides a personalized recommendation X Attendant provides a suggesbon as to tray/table placement Attendant is conversant during set-up and delivery X Attendant reviews guest order X Attendant prepares table set up and removes food covers, with guest permission X Food presentation and quality of ingredients reflects an upscale experience X All appropriate dishware and linens are of an upscale quality X AR food is served at the proper temperature (hot food hot and cold food cold) X All food is prepared as ordered There is additional evidence of personalized services X Attendant offers to pour beverage X Attendant provides written or verbal direction for table/tray removal Attendant is efficient yet unhurried and sensitive to the manner of the guest X Attendant provides a warm and sincere closing Attendant addresses guest by name during closing X The guest feels well served X Prompt (within 15 minutes) removal of trays/tables, upon request 8. Bell Services (Check Out) 4D X Service number is answered within three rings X Operator provides a warm and sincere greeting Operator uses guest's name at least once prior to closing Operator exhibits a sincere desire and compliance to all guest requests Operator anticipates guest's needs or offers a personalized recommendation X Operator offers to retrieve car or arrange other transportation Operator is efficient yet unhurried and sensitive to the manner of the guest X Operator provides a warm and sincere closing Operator addresses guest by name during closing X The guest feels well served X Bell staff arrives promptly; tf not within five minutes, guest is notified of delay at time of request X Bell staff provides a warm and sincere greeting 34 t12lOh6751.0097 6_2 71361.111 509,04r 14 _47_ Dell staff uses guest's name at least once prior to closing Bell staff exhibits a sincere desire and compliance to all guest requests 3a!'y; Bell staff anticipates guests needs or offers a personalized recommendation X Bell staff inquires about guest's stay Bell staff is appropriately conversant with guest while providing assistance Bell staff is efficient yet unhurried and sensitive to the manner of the guest X Bell staff provides a warm and sincere closing Bell staff addresses guest by name during closing X The guest feels well served 9. Check Out Services 4D X Express check out services are available 24/7 X Attendant provides a warm and sincere greeting; recognizes guest appropriately Attendant addresses guest by name during initial greeting, and as appropriate thereafter Staff associate acknowledges guests (with a warm and welcoming greeting} guests waiting in line X Attendant inquires about guest stay Attendant exhibits a sincere desire and compliance to all guest requests Attendant provides a copy of bill for review in guest's hand X Attendant confirms payment method Attendant places check out folio into the guests hand Attendant expresses a warm and sincere thank you for staying at the property Attendant sincerely encourages guest to return Attendant anticipates guest's needs or offers a personalized recommendation Attendant is efficient yet unhurried and sensitive to the manner of the guest X Attendant provides a warm and sincere closing Attendant addresses guest by name during closing X The guest feels well served 10. Departure Services 4D Guests vehicle is waiting or comfortable accommodations are provided X Guest does not wait more than five minutes for pre -arranged transportation X Attendant provides a warm and sincere greeting Attendant uses guest's name at least once prior to closing Attendant anticipates guests needs or offers a personalized recommendation Attendant is conversant pertaining to the guest's stay Attendant reviews all of guest's belongings and their placement in vehicle X Attendant opens and closes door for guest(s) Attendant is efficient yet unhurried and sensitive to the manner of the guest X Attendant provides a warm and sincere closing Attendant addresses guest by name during closing X The guest feels well served 35 111066751-0097 6271361.10 a09,04 14 -43- 11. Concierge Services 4D X Concierge is on duty with limited hours of availability Concierge is on duty, or a "special services" number is available for guests, 24/7 X Attendant provides a warm and sincere greeting Attendant uses guest's name at least once prior to closing Attendant exhibits a sincere desire and compliance to all guest requests Attendant anticipates guests needs or offers a personalized recommendation X Attendant demonstrates a general knowledge of area attractions and services Attendant demonstrates an extensive knowledge of area attractions and services Attendant fulfills guests special request(s) Attendant is efficient yet unhurried and sensitive to the manner of the guest X Attendant provides a warm and sincere closing Attendant addresses guest by name during closing X The guest feels well served 12. Miscellaneous Staff Services 4D All associates exhibit a professional vocabulary that is devoid of common slang Guests are graciously escorted to areas when directions are requested All associates consistently maintain eye contact with guests There is evidence that all associates are empowered by management to resolve guest issues immedia tely X All staff associates fulfill guest's special request(s) All phone calls are answered promptly within three rings X All associates are appropriately attired; name tags are clearly visible X Ail associates demonstrate appropriate behavior X All associates demonstrate appropriate hygiene Short -notice pressing is available Shoe shine service is available X Accurate pre-programmed phones X Miscellaneous charges are billed directly to the guest room Butler services are available for all rooms X At least one food and beverage outlet is comparable to a Three Diamond rating At least one food and beverage outlet is comparable to a Four Diamond rating At least one food and beverage outlet is coinparabte to a Five Diamond rating 36 112 066751.0097 6271361.10 a09:04'14 -44- Section Three tSisailmterte:440.ae The Listing ONCE A PROPERTY IS APPROVED, AAA PUBLISHING ESTABLISHES THE CONTENT AND FORMAT OF EACH USTING IN ALL OF OUR PUBLICATIONS. The listing is provided at no cost to the establishment and does not contain advertising or promotional verbiage provided by the operator. The listing copy describing the lodging is hated in part on objective information provided by the establishment. This listing information is updated annually, and your establishment will be contacted either in person, by mail, or via the telephone. Failure to provide this information in a timely manner may result in the deletion of your establishment from our publications. Additionally, AAA's professionally trained inspectors enhance our inventory with descriptive prase for each establishment. This skilled degree of subjectivity enables us to capture the feel of an experience and pass along this valuable information to AAA members. Each Diamond Rated property has the opportunity to participate in the AAA Official Appointment Program, entitling the establishment to use the renowned AAA (CAA in Canada) emblem and Diamond Rating in its advertising and promotions. This program also entitles the establishment to an entranced listing in AAA publications. Personalized display advertising in AAA publications is also available. FYI Designation This designation means that a property has not been Diamond Rated by a AAA inspector, but is of notable significance and potential member value. The property is unrated due to one of the following reasons: • The property is too new to rate. • The property is under construction. • The property is undergoing extensive renovations. • The property has not been evaluated. • The property does not meet all Diamond Rating requirements. Lodging Classifications ALL DIAMOND RATED LODGINGS ARE CLASSIFIED USING KEY DESCRIPTIVE ELEMENTS. ElFIRST, ALL LODGINGS ARE CLASSIFIED BY STYLE OF OPERATION: Bed and Breakfast: Typically smaller scale properties emphasizing a high degree of personal touches that provide guests an "at home" feeling. Guest units tend to be individually decorated. Rooms may not include some modern arnenities such as televisions and telephones, and may have a shared bathroom. Usually owner -operated with a common room or parlor separate from the innkeeper's living quarters, where guests and operators can interact during evening and breakfast hours. Evening office closures are normal. A continental or full, hot breakfast is served and is included in the room rate. _37- 11E066751-0097 627 t361.10 a09 04i Id -45- Vacation-tirientect1h/pic611tsmaller!qcale',.frgestanding-,4nits•pf.:simplq.•;:onqtrgction:-..tqughlyliniqhe4,19p.,or.. ' tora—and•bati .design-6('46Cor.,::pften•la4ated In •-w.ii6,4i4d "1.-Oraf,,.or'iiii0t0rfrierit'•16tations. • . 11(.:41i8•0; basic cleaning ,..SuPPROP-;-140!ilp 440 ,Onipl0te:pita• and : '.. Bouticue APPLXCA • • : smwNch P-!, • •'. BLE),litimr,BE. •• ' j • • ••• • ' ..• • , • • -. •••••• : • ' • '•:.. liga hIghly(i.9. • • • . •-• !, "!.!'! • •• FeeIin and ntlmate, •.• - : dMdualized epenence, cIno xtQnsIve CIassc ciii.!than. 50. years well known forthelr unlque style nd ambiance .!* .• • • gtrearrijOg4s.....i.,..:stye xIended fficiercy '...;-";:••::••••••• • ia•%,•1•'6ffd!'0.•Pteu(17.,-.. • Jilstori These propertre are typicaijy aver 75 1aai Qf age and exhibit jnany features cf a hrstcrtc nature wtth 1-epect to aithttecftJre design fumis]iings p4.blic record or acdalm Properties nust meet ene of the foftWihg thin ea.ch-49iti; i the i•#:kaiiefq.,:•rature ;- Atst!.5.,012.,• -..t•eideLindpIrrkF;: • ••••••• 112/066751-0097 6271361.10 09/04/14 fled ieidI4PS1919t*i?'• • • .'•••••••• • • : . •-•-• : •••.:: • -38- -46- Resort: Recreation -oriented, geared to vacation travelers seeking a specific destination experience. Travel packages, meal plans, theme entertainment, and social and recreational programs are typically available. Recreational facilities are extensive and may include spa treatments, golf, tens, skiing, fishing, or water sports. Larger resorts may offer a variety of guest accommodations. guar Overall design and theme reflects a contemporary design reinterpreting styles from a bygone era. Vacation Rental: Typically houses, condos, cottages or cabins; these properties are a "home away from home" offering more room and greater value for the money. In general, they provide the conveniences of home, such as full kitchens and washers/dryers. Located in resort or popular destination areas arithin close proximity to major points of interests, attractions, or recreation areas, these properties may rewire a pre -arranged reservation and check -in at an off -site location. Housekeeping services may be limited or not included &ring stay. Vintaaq: Offers a window to the past and provides an experience reflecting a predominance of traits associated with the era of their origin. AccessibUifty Rs: Accessible Features: This property has some accessible features. accessible, or meet some of the needs of hearing -impaired individuals. It may be fully accessible, semi - Accessibility is not a requirement for fisting and will not affect your Diamond Rating. (However, we strnnaly encourage you to make ggem attar to meet the needs of II your guests - including the mature traveler and those ltiith disabilities. Member Comment Procedures AAA CLOSELY MONITORS THE NUMBER AND TYPE OF COMMENTS WE RECEIVE FROM MEMBERS P.EGARDING ALL APPROVED PROPERTIES. When members write to us expressing dissatisfaction with a particular lodging, it is tracked through the AAA National Office Member Relations department. All complaints are carefully reviewed for validity. The eablishment is then notified of each complaint so they have an opportunity to respond and resolve the matter within a reasonable period of time. Even though a complaint may be satisfactorily resolved, the complaint becomes a permanent part of the establishment's record. If a member complaint is determined to be of an extreme nature, an establishment may be disapproved immediately and without warning. This action is at AAA's sole_ discretion. If a property has been disapproved for excessive member complaints, a written request for a reevaluation may be submitted, accompanied by an explanation of the actions taken to limit future complaints. Note: Such properties may not reapply until one year has passed from the date of disapproval. All requests may be addressed to: 112i066751.0097 027 1361.10. 09l044i 14 AAA Tourism Information Development 1000 AAA Drive Mail Stop 51 Heathrow, FL 32746-5063 -47- The AAA Appeals Process THE APPEALS PROCESS WAS ESTABLISHED AS A CAMPGROUNDS, AND ATTRACTIONS EVALUATED RESOURCE FOR ALL RESTAURANTS, LODGINGS, BY AAA. What can I appeal? We value our relationship with all properties, therefore, properties can appeal any aspect of their status with AAA. Each situation is kept confidential and is handled on an individual basis. How do I file an appeal? First, contact the MA Customer Service Center, Monday through Friday, from 8:30am to 5: 15pm (Eastern Time) at 407-444-8370. In many cases, our analysts will be able ID answer your concern immediately. If resolution i s not obtained, your call will be directed to the AAA Regional Manager for your area. If an issue remains unresolved after the above steps, an establishment is aeced to state its concerns in writing for review by the AAA Appeals Committee. All appeals entertained by the committee must be in writing from the establishment only. In order to expedite this process, appeals S-rould outline the specific concerns in a s.iccinct manner. Each appeal is thoroughly researched and given thoughtful consideration and a substantive reply. All appeals should be sent to the attention of: AAA Appeals Committee 1000 AAA Drive Mail Stop 51 Heathrow, FL 32746-5063 Please note: The committee's decision on your appeal will be considered as AAA's final deckiott, You will be notified by mail as to the status of your appeal within 45 days of receipt of your written statement. Green Programs 4111 10/U66751-0097 0271361.10 409,0404 AAA SUPPORTS ENVIRONMENTAL MANAGEMENT AND SUSTAINABILITY THROUGHOUT THE HOSPITALITY INDUSTRY TO THE EXTENT THAT TRULY EFFECTIVE PROGRAMS MAINTAIN QUALITY STANDARDS OF GUEST COMFORT. We strongly encourage continued use of programs that offer guests choices without consequences for noncompliance. Effective green programs are intended to reduce weste without reducing guest comfort. -40- -48- Addresses and Phone Numbers If you have additional questions... ► Please call AAA at: (407) 444-8370 Evaluation Applications, Operations, Rating and Listing Information (407) 444-8280 Display Advertising & Official Appointments ► Visit us at www.AAA.biz/Approved ► Or, write to us at: AAA Tourism Information Development Mail Stop 51 1000 AAA Drive Heathrow, FL 32746-5063 Establishments located in Southern California should contact the following AAA club: Automobile Club of Southern California P.O. Box 25001 Santa Ana, CA 92799-5001 (714) 885-2247, option #2 Evaluations, Ratings, and Official Appointments (714) 885-2410 TourBook Advertising —41- 112,066751-0097 6271361.10 n0910411-1 -49-