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VF Outdoor, Inc. - Vans - 2012-01-27
GROUND LEASE AND IMPROVEMENT AGREEMENT("GLIA") (Skate Park) by and between CITY OF HUNTINGTON BEACH, CITY and VF OUTDOOR INC.,a Delaware corporation, doing business as"Vans", LESSEE TABLE OF CONTENTS Page PART 1. SUBJECT OF AGREEMENT.................................................................................I SECTION 101 Purpose of the Agreement............................................................................I SECTION 102 Definitions....................................................................................................1 SECTION 103 The Redevelopment Plan.............................................................................4 SECTION 104 The Property.................................................................................................4 SECTION105 City...............................................................................................................5 SECTION106 Lessee...........................................................................................................5 SECTION 107 Assignments and Transfers..........................................................................6 PART 2. DISPOSITION OF LEASEHOLD............................... ....................7 .................... . SECTION 201 City's Lease of the Property to Lessee ........................................................7 SECTION 202 Conditions Precedent City's Conveyance of Leasehold to Lessee..............7 SECTION203 Escrow..........................................................................................................9 SECTION 204 Recordation of Documents........................................................................I I SECTION 206 Condition of Title.......................................................................................I l SECTION 207 Title Insurance...........................................................................................I I SECTION 207.1 Leasehold Title Policy......................................................... SECTION 208 Notice of Possessory Interest;Payment of Taxes and Assessments on Value of Entire Property.......................................................................I 1 SECTION 209 Contests......................................................................................................12 SECTION 210 Condition of the Property...........................................................................13 SECTION 210.1 Hazardous Substances.......................................................................13 SECTION 210.2 Suitability of the Property.................................................................13 SECTION 211 Method of Financing..................................................................................14 SECTION 212 Evidence of Financing...............................................................................14 SECTION 213 Designation as Point of Sale......................................................................15 PART 3. DEVELOPMENT OF THE PROPERTY..............................................................15 SECTION 301 Land Use Approvals..................................................................................15 SECTION 302 Scope of Development...............................................................................15 SECTION 303 Basic Concept Drawings............................................................................15 SECTION 304 Landscaping and Grading Plans.................................................................16 SECTION 305 Construction Drawings and Related Documents.......................................16 SECTION 3066 City Approval of Plans...............................................................................16 SECTION 307 Cost of Construction..................................................................................17 SECTION 308 Schedule of Performance...........................................................................17 SECTION 309 Indemnification and Insurance...................................................................18 SECTION 310 Nondiscrimination......................................................................................21 SECTION 311 Local, State and Federal Laws........................... ...21 SECTION 312 Notice of Non-Responsibility....................................................................22 SECTION 313 Permits.......................................................................................................22 SECTION 314 Rights of Access........................................................................................22 i SECTION 315 Disclaimer of Responsibility by City.........................................................22 SECTION 316 Taxes,Assessments,Encumbrances and Liens.........................................23 SECTION 317 Prohibition against Transfer.......................................................................23 SECTION 318 No Encumbrances Except Permitted Mortgages.......................................23 SECTION 319 Lender Not Obligated to Construct Improvements....................................24 SECTION 320 Notice of Default to Lenders;Right of Lender to Cure Defaults ..............24 SECTION 321 Failure of Lender to Complete Improvements...........................................25 SECTION 322 Right of the City to Cure Defaults.............................................................25 SECTION 323 Right of the City to Satisfy Other Liens on the Property...........................25 SECTION 324 Release of Construction Covenants...........................................................25 PART 4. USE OF THE PROPERTY....................................................................................26 SECTION401 Uses............................................................................................................26 SECTION402 Maintenance...............................................................................................26 SECTION 403 Obligation to Refrain from Discrimination................................................26 SECTION 404 Form of Nondiscrimination and Nonsegregation Clauses.........................27 SECTION 405 Effect and Duration of Covenants..............................................................28 PART 5. DEFAULTS AND REMEDIES ............................................................................28 SECTION 501 Defaults-General......................................................................................28 SECTION 502 Institution of Legal Actions.......................................................................29 SECTION 503 Applicable Law..........................................................................................29 SECTION 504 Acceptance of Service of Process..............................................................29 SECTION 505 Rights and Remedies Are Cumulative.......................................................29 SECTION 506 Damages.....................................................................................................29 SECTION 507 Specific Performance.................................................................................30 SECTION508 Reserved.....................................................................................................30 SECTION 509 Termination by Lessee...............................................................................30 SECTION 510 Termination by City...................................................................................30 PART 6. GENERAL PROVISIONS....................................................................................31 SECTION601 Notices.......................................................................................................31 SECTION 602 Enforced Delay:Extension of Time of Performance.................................31 SECTION603 Conflict of Interest.....................................................................................31 SECTION 604 Nonliability of City Officials and Employees...........................................32 SECTION 605 Inspection of Books and Records..............................................................32 SECTION606 Approvals...................................................................................................32 SECTION 607 Real Estate Commissions;Finder's Fee....................................................32 SECTION 608 Construction and Interpretation of Agreement..........................................32 SECTION 609 Time of Essence.........................................................................................33 SECTION610 No Partnership...........................................................................................33 SECTION 611 Compliance with Law................................................................................34 SECTION612 Binding Effect............................................................................................34 SECTION 613 No Third Party Beneficiaries.....................................................................34 SECTION 614 Authority to Sign........................................................................................34 SECTION 615 Incorporation by Reference........................................................................34 ii SECTION 616 Counterparts...............................................................................................34 PART 7. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS.............................34 PART 8. TIME FOR ACCEPTANCE OF AGREEMENT BY CITY.................................35 PART 1. SUBJECT OF AGREEMENT.................................................................................I SECTION 101 Purpose of the Agreement............................................................................I SECTION 102 Definitions....................................................................................................1 SECTION 103 The Redevelopment Plan.............................................................................4 SECTION104 The Property.................................................................................................4 SECTION105 City...............................................................................................................5 SECTION106 Lessee...........................................................................................................5 SECTION 107 Assignments and Transfers..........................................................................6 PART 2. DISPOSITION OF LEASEHOLD..........................................................................7 SECTION 201 City's Lease of the Property to Lessee........................................................7 SECTION 202 Conditions Precedent City's Conveyance of Leasehold to Lessee..............7 SECTION203 Escrow..........................................................................................................9 SECTION 204 Recordation of Documents........................................................................I I SECTION 206 Condition of Title.......................................................................................I I SECTION207 Title Insurance...........................................................................................I l SECTION 207.1 Leasehold Title Policy......................................................................I I SECTION 208 Notice of Possessory Interest;Payment of Taxes and Assessments on Value of Entire Property........................................................................I 1 SECTION 209 Contests......................................................................................................12 SECTION 210 Condition of the Property...........................................................................13 SECTION 210.1 Hazardous Substances.......................................... ....................13 SECTION 210.2 Suitability of the Property.................................................................13 SECTION 211 Method of Financing..................................................................................14 SECTION 212 Evidence of Financing...............................................................................14 SECTION 213 Designation as Point of Sale......................................................................15 PART 3. DEVELOPMENT OF THE PROPERTY..............................................................15 SECTION 301 Land Use Approvals..................................................................................15 SECTION 302 Scope of Development...............................................................................15 SECTION 303 Basic Concept Drawings............................................................................15 SECTION 304 Landscaping and Grading Plans.................................................................16 SECTION 305 Construction Drawings and Related Documents.......................................16 SECTION 306 City Approval of Plans...............................................................................16 SECTION 307 Cost of Construction..................................................................................17 SECTION 308 Schedule of Performance...........................................................................17 SECTION 309 Indemnification and Insurance...................................................................18 SECTION310 Nondiscrimination......................................................................................21 SECTION 311 Local, State and Federal Laws...................................................................21 SECTION 312 Notice of Non-Responsibility....................................................................22 SECTION313 Permits.......................................................................................................22 iii SECTION 314 Rights of Access........................................................................................22 SECTION 315 Disclaimer of Responsibility by City.........................................................22 SECTION 316 Taxes,Assessments,Encumbrances and Liens.........................................23 SECTION 317 Prohibition against Transfer.......................................................................23 SECTION 318 No Encumbrances Except Permitted Mortgages.......................................23 SECTION 319 Lender Not Obligated to Construct Improvements....................................24 SECTION 320 Notice of Default to Lenders;Right of Lender to Cure Defaults..............24 SECTION 321 Failure of Lender to Complete Improvements...........................................25 SECTION 322 Right of the City to Cure Defaults.............................................................25 SECTION 323 Right of the City to Satisfy Other Liens on the Property...........................25 SECTION 324 Release of Construction Covenants...........................................................25 PART 4. USE OF THE PROPERTY....................................................................................26 SECTION401 Uses............................................................................................................26 SECTION402 Maintenance...............................................................................................26 SECTION 403 Obligation to Refrain from Discrimination................................................26 SECTION 404 Form of Nondiscrimination and Nonsegregation Clauses.........................27 SECTION 405 Effect and Duration of Covenants..............................................................28 PART 5. DEFAULTS AND REMEDIES ............................................................................28 SECTION 501 Defaults-General......................................................................................28 SECTION 502 Institution of Legal Actions.......................................................................29 SECTION 503 Applicable Law..........................................................................................29 SECTION 504 Acceptance of Service of Process..............................................................29 SECTION 505 Rights and Remedies Are Cumulative.......................................................29 SECTION506 Damages.....................................................................................................29 SECTION 507 Specific Performance..................................................................................30 SECTION508 Reserved.....................................................................................................30 SECTION 509 Termination by Lessee...............................................................................30 SECTION 510 Termination by City...................................................................................30 PART 6. GENERAL PROVISIONS....................................................................................31 SECTION601 Notices.......................................................................................................31 SECTION 602 Enforced Delay:Extension of Time of Performance.................................31 SECTION 603 Conflict of Interest.....................................................................................31 SECTION 604 Nonliability of City Officials and Employees...........................................32 SECTION 605 Inspection of Books and Records..............................................................32 SECTION606 Approvals...................................................................................................32 SECTION 607 Real Estate Commissions;Finder's Fee....................................................32 SECTION 608 Construction and Interpretation of Agreement..........................................32 SECTION 609 Time of Essence.........................................................................................33 SECTION 610 No Partnership...........................................................................................33 SECTION 611 Compliance with Law................................................................................34 SECTION 612 Binding Effect............................................................................................34 SECTION613 No Third Party Beneficiaries.....................................................................34 SECTION 614 Authority to Sign........................................................................................34 iv SECTION 615 Incorporation by Reference........................................................................34 SECTION 616 Counterparts...............................................................................................34 PART 7. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS.............................34 PART 8. TIME FOR ACCEPTANCE OF AGREEMENT BY CITY.................................35 ATTACHMENTS ATTACHMENT NO. 1 - SITE MAP ATTACHMENT NO.2 - LEGAL DESCRIPTION ATTACHMENT NO. 3 - METHOD OF FINANCING ATTACHMENT NO. 3A - PROJECT BUDGET ATTACHMENT NO.4 - SCOPE OF DEVELOPMENT ATTACHMENT NO. 5 - SCHEDULE OF PERFORMANCE ATTACHMENT NO. 6 - ENVIRONMENTAL INDEMNITY ATTACHMENT NO. 7 - GROUND LEASE ATTACHMENT NO.7A - MEMORANDUM OF GROUND LEASE ATTACHMENT NO. 8 - RELEASE OF CONSTRUCTION COVENANTS v GROUND LEASE AND IMPROVEMENT AGREEMENT THIS GROUND LEASE AND IMPROVEMENT AGREEMENT (the "Agreement" or "GLIA") is entered into by and between the CITY OF HUNTINGTON BEACH(the"City") and VF Outdoor, Inc., a Delaware corporation, (the"Lessee") as of%,X 24+0. City and Lessee agree as follows: PART 1. SUBJECT OF AGREEMENT SECTION 101 Purpose of the Agreement The City is the owner of an approximately 119,400 square foot site located at 7541 Center Avenue, in the City of Huntington Beach,California, 92647("Property"). The purpose of this Agreement is to effectuate the Redevelopment Plan for the Huntington Beach Redevelopment Project Area by providing for the City's leasing of the Property to Lessee in accordance with the Ground Lease in consideration for the Lessee's construction of a public skate park ("the Project"), in accordance with this Agreement. The development and use of the Property pursuant to this Agreement, and the fulfillment generally of this Agreement, are in the vital and best interests of the City of Huntington Beach and the health, safety, and welfare of its residents, and in accord with the public purposes and provisions of applicable federal, state, and local laws and requirements. SECTION 102 Definitions i For purposes of this Agreement,the following capitalized terms shall have the following meanings: "Acquisition and Development Costs" means the total cost of acquiring the leasehold interest in the Property and developing and constructing the Improvements thereon. "Affiliate"means(1) any Person directly or indirectly controlling, controlled by or under common control with another Person;(2)any Person owning or controlling ten percent(10%) or more of the outstanding voting securities of such other Person; or (3) if that other Person is an officer, director, member or partner, any company for which such Person acts in any such j capacity. The term "control"as used in the immediately preceding sentence,means the power to direct the management or the power to control election of the board of directors. It shall be a presumption that control with respect to a corporation or limited liability company is the right to ' exercise or control, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the controlled corporation or limited liability company, and, with respect to any individual, partnership, trust, other entity or association, control is the possession, indirectly or directly, of the power to direct or cause the direction of the management or policies of the controlled entity. I "City"means the City of Huntington Beach, California. "Closing" means the point in time when all conditions precedent to close of escrow for 1 City's conveyance of the Leasehold to Lessee have been satisfied, and all Recorded Documents, as set forth in Section 206,have been recorded. "Closing Date"means the date on which the Closing has occurred. "Completion" means the point in time when all of the following shall have occurred: (1) issuance of a certificate of occupancy by the City; (2)recordation of a Notice of Completion by Lessee or its contractor; (3) certification or equivalent by the project architect that construction of the Improvements (with the exception of minor "punchlist" items) has been completed in a good and workmanlike manner and substantially in accordance with the approved plans and specifications; (4) payment, settlement or other extinguishment, discharge, release, waiver, bonding or insuring against any mechanic's liens that have been recorded or stop notices that have been delivered; and (5) the Property has been developed in accordance with this Agreement, the Scope of Development and plans approved by the City pursuant to this Agreement. "Construction Lender"means the maker of any Construction Loan or beneficiary of any Construction Loan deed of trust. "Construction Loan" means, collectively, the Source of Financing in the form of a loan made to the Lessee at the time of the Closing for construction of the Improvements, secured against the Leasehold by the Construction Loan Deed of Trust. "Construction Loan Deed of Trust" means the deed of trust securing the Construction Loan. "Conversion" means the date upon which the Construction Loan is converted to the Permanent Loan. "Effective Date"means the date when this Agreement has been executed by the City. "Environmental Indemnity" means an instrument substantially in the form attached to this Agreement as Attachment No. 6. "Escrow Agent"means an escrow agent mutually acceptable to City and Lessee. "City Manager"refers to the City Manager of the City of Huntington Beach or designee. "Ground Lease"means the ground lease to be executed by City and Lessee substantially in the form as attached to this Agreement as Attachment No. 7. "Hazardous Substances" shall have the meaning set forth in Section 212.1 and the Environmental Indemnity. i "Improvements" means the improvements more particularly described in the Scope of Development. 2 i "Leasehold"or"Leased Premises"means that leasehold estate in the Property created by the execution of the Ground Lease. "Leasehold Permitted Exceptions" refers to those permitted exceptions to title as agreed to by Lessee and City for the Leasehold. "Legal Description" means the legal description of the Property attached to this Agreement as Attachment No.2. "Memorandum of Ground Lease" means that document substantially in form attached hereto as Attachment 7A. "Method of Financing"means Attachment No. 3 to this Agreement. "Notice of Completion" shall have the same definition as set forth in California Civil Code section 3093. "Official Records"means the Official Records of the Office of the County Recorder for Orange County,California. "Permanent Lender" means the maker of any Permanent Loan or beneficiary of any Permanent Loan deed of trust. "Permanent Load"means the Source of Financing in the form of a permanent loan to be made to the Lessee at Conversion, secured against the Leasehold by the Permanent Loan Deed of Trust. "Permanent Loan Deed of Trust"means the deed of trust securing the Permanent Loan. "Permitted Mortgage" means a mortgage approved by the City as a Source of Financing for the Project. "Permitted Mortgagee" means the holder of a Permitted Mortgage, including the Construction Lender or Permanent Lender. "Permitted Transfer"means any of the following: A conveyance of a security interest in the Leasehold in connection with any Permitted Mortgage and any transfer of title by foreclosure, deed or other conveyance in lieu of foreclosure in connection therewith; A conveyance of the Leasehold to any Affiliate of Lessee;or Subleasing or operation of the any concession stand or other related operation permitted on the Leased Premises by a third party operator approved by Lessee and the City. Any transfer described above shall be subject to the reasonable approval of documentation by the City Manager for conformance with this Agreement. 3 "Permitted Transferee"means the transferee of a Permitted Transfer. "Person" means an individual, partnership, limited partnership, trust, estate, association, corporation, limited liability company,or other entity, domestic or foreign. "Project"refers to the construction of the Improvements on the Property. "Project Budget" means the schedule of sources and uses attached to this Agreement as Attachment No.3A. "Property"means the real property described in Section 104 of this Agreement. "Release of Construction Covenants"means the certificate, substantially in form attached hereto as Attachment No. 8, to be to be issued by the City upon Completion in accordance with Section 324 of this Agreement. "Schedule of Performance" means the document attached to this Agreement as Attachment No.5. "Scope of Development" means the document attached to this Agreement as Attachment No.4. .Site Map" means the document which is attached to this Agreement as Attachment No. 1. "Source of Financing" means a source of financing the Project which has been approved by the City,as more specifically described in the Method of Financing. "Title Company" means Lawyers Title Company or another title insurance company mutually acceptable to City and Lessee. "Title Insurance Policy" means and includes any of the following, as appropriate: (i) a leasehold policy of title insurance in favor of Lessee with respect to the Leasehold in an amount as reasonably requested by Lessee(the"Leasehold Title Policy"). SECTION 103 The Redevelopment Plan This Agreement is authorized by and made in furtherance of the Redevelopment Plan, which was approved and adopted by the City Council of the City of Huntington Beach on December 16, 1996,by Ordinance No. 3343,and lawfully amended thereafter. SECTION 104 The Property The "Property" is located at 7541 Center Avenue, in the City of Huntington Beach, California. The Property is depicted on the Site Map attached hereto as Attachment No. 1. The legal description of the Property is set forth in the Legal Description attached hereto as Attachment No. 2. In the event that Lessee subdivides the Property into a vertical subdivision, each parcel within the vertical subdivision shall be subject to the rights and obligations under this 4 Agreement, and the Legal Description referenced herein for the Property shall be modified to reflect the legal descriptions associated with each vertical parcel. SECTION 105 City a. City is a municipal corporation, exercising governmental functions and powers, and organized and existing under and by virtue of the Constitution and laws of the State of California. b. The address of the City for purposes of receiving notices pursuant to this Agreement shall be: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Kellee Fritzal,Economic Development Tel: (714)526-5582 Fax: (714)375-5087 With a copy to: Kane,Ballmer&Berkman 515 S. Figueroa Street, Suite 1850 Los Angeles,California 90071 Attn: Murray O.Kane Tel:213-617-0480 Fax: 213-625-0931 C. "City" as used in this Agreement includes the City of Huntington Beach and any assignee or successor to its rights,powers and responsibilities. SECTION 106 Lessee a. Lessee is VF Outdoor Inc., a Delaware corporation, doing business as "Vans". The address of Lessee for purposes of receiving notices pursuant to this Agreement is as follows: VF Outdoor,Inc.,a Delaware Corporation dba Vans 6550 Katella Avenue Cypress,CA 90363-5102 Attn:Doug Palladini Tel: (714) 889-6702 Fax: (714) With a copy to:: Robert Frisbee, Esq. Connolly, Finkel&Gosselin LLP 601 S.Figueroa Street,Suite 2610 5 Los Angeles, CA 90017-5704 Main Line: (213)452-6500 Direct Dial: (213)452-6506 Facsimile: (213) 622-2171 b. Whenever the term "Lessee" is used herein, such term means and include the Lessee as of the date hereof, and any assignee of or successor to its rights, powers and responsibilities permitted by this Agreement. SECTION 107 Assignments and Transfers a. Lessee represents and agrees that its undertakings pursuant to this Agreement are for the purpose of redeveloping the Property as a public skate park, and not for speculation in land holding. Lessee further recognizes that the qualifications and identity of Lessee are of particular concern to the City, in light of the following: (1)the importance of the development of the Property to the general welfare of the community; (2) the public assistance that has been made available by law and by the.government for the purpose of making such redevelopment possible; and (3) the fact that a change in ownership or control of Lessee or any other act or transaction involving or resulting in a significant change in ownership or control of Lessee, is for practical purposes a transfer or disposition of the property then owned by Lessee. Lessee further recognizes that it is because of such qualifications and identity that the City is entering into the Agreement with Lessee. Therefore, no voluntary or involuntary successor in interest of Lessee shall acquire any rights or powers under this Agreement except as expressly permitted herein. b. Prior to Completion, Lessee shall not assign all or any part of this Agreement, or any interest herein, without the prior written approval of the City. Subject to review of documentation effectuating any such proposed assignment or transfer, the City agrees to reasonably give such approval if the assignment is a Permitted Transfer. c. For the reasons cited above, Lessee represents and agrees for itself and any successor in interest that prior to Completion, without the prior written approval of the City, there shall be no significant change in the ownership of Lessee or in the relative proportions thereof,or with respect to the identity of the parties in control of Lessee or the degree thereof, by any method or means,except Permitted Transfers. d. Any assignment or transfer of this Agreement or any interest herein or significant change in ownership of Lessee, other than certain Permitted Transfers, shall require the approval of the City, which shall not be unreasonably withheld. To the extent City approval of an assignment or transfer is required by this Agreement, in granting or withholding its approval, City shall base its decision upon the relevant experience, financial capability and reputation of the proposed assignee or transferee and the effect, if any, of such proposed transfer on the public purposes of this Agreement. In addition, City shall not approve any assignment or transfer of this Agreement or any interest herein or significant change in ownership of Lessee that results in payment of consideration to any Person prior to the issuance of the Release of Construction Covenants and that is not conditioned upon the issuance of the Release of Construction Covenants. i 6 e. Lessee shall promptly notify the City of any and all changes whatsoever in the identity of the parties in control of Lessee or the degree thereof, of which it or any of its officers have been notified or otherwise have knowledge or information. Except for Permitted Transfers, this Agreement may be terminated by the City if there is any significant change (voluntary or involuntary) in membership, management or control, of Lessee (other than such changes occasioned by the death or incapacity of any individual)prior to Completion. f. Permitted Transfers and any other assignments or transfers approved by the City in conformance with this Agreement shall be evidenced by the Lessee's, assignee's, and City's execution of an Assignment and Assumption Agreement. g. The restrictions of this Section 107 shall terminate upon Completion. PART 2. DISPOSITION OF LEASEHOLD SECTION 201 City's Lease of the Property to Lessee Subject to the conditions precedent set forth in Section 202, herein, City shall convey the Leasehold to Lessee in consideration for and on such terms and conditions as are contained in the Ground Lease. Lessee understands, acknowledges and agrees that nothing herein authorizes the Lessee,Permitted Mortgagee, or any Person,to pledge the City's fee interest as security for any purpose whatsoever. SECTION 202 Conditions Precedent City's Conveyance of Leasehold to Lessee For the benefit of the City, the City's conveyance of the Leasehold is conditioned upon the occurrence of each of the following conditions on or prior to the scheduled Closing Date as set forth in the Schedule of Performance: a. Final Construction Drawings. Lessee shall have submitted and City shall have approved Final Construction Drawings,in accordance with Section 305,herein. b. Project Budget. Lessee shall have delivered to the City fmal revisions to the Project Budget, which have been approved by the City Manager and certified by Lessee's Construction Lender, demonstrating to the satisfaction of the City the availability of sufficient funds to pay all Acquisition and Development Costs("Final Project Budget"). C. Construction Contract. Lessee shall have delivered to the City a general construction contract between the Lessee and a licensed general contractor, covering all construction required by this Agreement and the approved Final Construction Drawings, in an amount that is consistent with the Final Project Budget, together with a construction schedule showing a detailed trade-by trade breakdown of the estimated periods of commencement and completion of construction and complete fixturization of the Project, and demonstrating that construction will be completed within the time provided in the Schedule of Performance. d. Evidence of Financing. Lessee shall have submitted and the City Manager shall have approved evidence relating to all Sources of Financing, and all documents required to be 7 executed in connection with such financing shall have been duly executed, acknowledged and delivered. Such evidence shall include: (1) a copy of all loan documents relating to the Construction Loan, certified by Lessee to be a true and correct copy or copies thereof; (2) a copy of loan commitments evidencing that Permanent Loan(s) will be available at Project completion, certified by Lessee to be a true and correct copy or copies thereof; (3) a copy of any other financing commitments evidencing that Lessee has obtained the financing necessary for the acquisition and development of the Property in accordance with this Agreement, certified by Lessee to be a true and correct copy or copies thereof. C. Insurance. Lessee shall have submitted to the City evidence of the insurance policies required by Section 309,herein. f. Permits. Lessee shall have delivered to the City a list of all permits required for the construction of the Improvements. i g. Lessee's Formation Documents. Lessee shall have delivered documentation relating to the corporate, partnership, limited liability or other similar status of Lessee and its general partner(s), including, without limitation and as applicable: limited partnership agreements and any amendments thereto; articles of incorporation; Limited Liability Company Articles of Incorporation (LLC-1); Statement of Information and Operating Agreement (including any amendments thereto);copies of all resolutions or other necessary actions taken by such entity to authorize the execution of this Agreement and related documents; a certificate of status issued by the California Secretary of State; and a copy of any Fictitious Business Name Statement, if any,as published and filed with the Clerk of Orange County. h. Recording Instructions. Escrow Agent shall have approved such supplemental recording instructions as may have been prepared on behalf of the City. i. Documents. City, Lessee and/or other parties, as appropriate, shall have executed, and filed or recorded as appropriate,the following documents: (1) Ground Lease (Attachment No. 7) and Memorandum of Ground Lease (Attachment No. 7A),to be signed and acknowledged by City and Lessee; (2) Environmental Indemnity(Attachment No. 6),to be signed by Lessee; j. Closing Certificate. When all conditions precedent have been satisfied to the satisfaction of the City Manager,the City Manager shall execute and submit to the Escrow Agent a certificate stating that all conditions precedent to recording of the documents have been satisfied or waived, if such be the case. I i 8 k. No default.Lessee shall not be in default of this Agreement. SECTION 203 Escrow City agrees to open an escrow in the County of Orange for the City's conveyance of the Leasehold to Lessee with Title Company or such other escrow company,escrow department of a bank, or escrow department of a title insurance company first approved by City and Lessee (the "Escrow Agent'),no later than the applicable dates established in the Schedule of Performance. Sections 201 through 209 (inclusive) of this Agreement shall constitute the joint escrow instructions of City and Lessee with respect to the City's conveyance of the Leasehold to Lessee, and a duplicate original of this Agreement shall be delivered to the Escrow Agent upon the opening of the escrow. City and Lessee shall provide such additional escrow instructions as shall be necessary to close the escrow with respect to the purchase of the Property and conveyance of the Leasehold, consistent with this Agreement. The Escrow Agent hereby is empowered to act under such instructions, and upon indicating its acceptance thereof in writing, delivered to City and to Lessee within five (5) days after the opening of the escrow, shall carry out its duties as Escrow Agent hereunder. Upon receipt by the Escrow Agent of all executed and acknowledged documents, as required by Section 204,herein,the Escrow Agent shall record all documents in accordance with Section 206 of this Agreement when the fee interest of the Property can be vested in the City and the Leasehold can be vested in Lessee in accordance with the terms and provisions of this Agreement. The Escrow Agent shall buy, affix and cancel any transfer stamps required by law. Any insurance policies governing the Property or any portion thereof are not to be transferred. Lessee shall pay in escrow to the Escrow Agent the following fees, charges and costs promptly after the Escrow Agent has notified Lessee of the amount of such fees, charges and costs,but not earlier than three(3)days prior to the Closing Date: a. Escrow fee; b. Recording fees; C. Notary fees; d. Premiums for the Title Insurance ordered by Lessee as set forth in Section 209 of this Agreement. e. Costs necessary to place the title in the condition required by the provisions of this Agreement; I g. Ad valorem taxes and any other taxes, assessments or impositions of any kind, if any,attributable to the Property prior to conveyance of the Leasehold. h. State,county,city or other documentary stamps and transfer taxes, if any. 9 The Escrow Agent is authorized to: 1. Pay, and charge City and Lessee, respectively, for any fees, charges and costs payable under this Section 205. Before such payments are made, the Escrow Agent shall notify Lessee of such fees, charges and costs; 2. Disburse funds and deliver all documents to the parties entitled thereto when the conditions of the escrow have been fulfilled by City and Lessee;and 3. Record any instruments delivered through the escrow if necessary or proper to vest the applicable interests in Lessee and City in accordance with the terms and provisions of this Agreement. All funds received in the escrow shall be deposited by the Escrow Agent in an interest bearing account for the benefit of the depositing party as directed by the depositing party. If any escrow is not in condition to close on or before the Closing Date,either party who then shall have fully performed the acts to be performed before the Closing Date may, in writing, demand the return of its money,papers or documents. No demand for return shall be recognized until ten (10) days after the Escrow Agent shall have mailed copies of such demand to the other party at the address of its principal place of business. Objections, if any, shall be raised by written notice to the Escrow Agent and to the other party within the ten- (10)day period. If any objections are raised within the ten- (10) day period, the Escrow Agent is authorized to hold the money, paper and documents until instructed by mutual agreement of the parties or, upon failure thereof, by a court of competent jurisdiction. Notwithstanding the foregoing, the termination rights of City and Lessee and other rights and remedies on default are governed by Sections 501 through 510, inclusive, of this Agreement, and no demand for such return shall affect such rights or remedies. If no such demands are made,the escrow shall be closed as soon as possible. The Escrow Agent shall not be obligated to return any such money, papers or documents except upon the written instructions of both City and Lessee affected thereby, or until the party entitled thereto has been determined by a final decision of a court of competent jurisdiction. Any amendments to these escrow instructions shall be in writing and signed by both City and Lessee. At the time of any amendment the Escrow Agent shall agree to carry out its duties as escrow agent under such amendment. All communications from the Escrow Agent to City or Lessee shall be directed to the addresses and in the manner established in Section 601 of this Agreement for notices, demands and communications between City and Lessee. The liability of the Escrow Agent under this Agreement is limited to performance of the obligations imposed upon it under Sections 201 through 209, inclusive of this Agreement. I 10 SECTION 204 Recordation of Documents City and Lessee, respectively, agree to perform all acts necessary to achieve recordation and delivery of documents in sufficient time for escrow to be closed in accordance with the foregoing provisions. a. The following documents shall be recorded in the following order ("Recorded Documents"): ORDER OF DOCUMENT NAME RECORDATION 1 Memorandum of Ground Lease(Attachment No. 7A) 2 Construction Loan Security Instruments b. All documents to be recorded shall be recorded in the Official Records. SECTION 205 Possession of Leasehold Upon Close of Escrow Possession of the Leasehold shall be delivered to Lessee concurrently with Close of Escrow. SECTION 206 Condition of Title The Leasehold shall be conveyed free of any possession or right of possession except that of Lessee, unless waived in writing by Lessee. SECTION 207 Title Insurance SECTION 207.1 Leasehold Title Policy Concurrently with the recordation of the Memorandum of Ground Lease,Title Company shall provide and deliver to Lessee a Title Insurance Policy, issued by`Title Company, insuring that the Leasehold is vested in Lessee in the condition required by Section 208 of this Agreement, together with any endorsements as the Lessee may reasonably require ("Leasehold Title Policy"). The Title Company shall provide City and Lessee with a copy of the Leasehold Title Policy. If Title Company is unable or unwilling to deliver the Leasehold Title Policy consistent with the provisions of this Agreement,then in addition to any other rights or remedies of Lessee, Lessee may terminate this Agreement pursuant to Section 509. SECTION 208 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Property i In accordance with California Revenue and Taxation Code section 107.6(a) and California Health and Safety Code section 33673, City states that by entering into the Ground Lease, a possessory interest subject to property taxes shall be created. Lessee and/or its successors or other party(ies) in whom the possessory interest is vested shall be subject to the 11 payment of property taxes, liens or encumbrances levied on such interest,unless an exemption is otherwise available. Lessee acknowledges and agrees that the Leasehold and/or the Improvements thereon, and any possessory interest therein, shall at all times after the commencement of the Ground Lease, be subject to ad valorem taxes levied, assessed or imposed on such property, and that Lessee shall pay taxes upon the assessed value of the entire property unless exempt, and not merely upon the assessed value of its leasehold interest. SECTION 209 Contests a. Lessee shall refrain from appealing, challenging or contesting in any manner the validity or amount of any tax assessment, encumbrance or lien on the Property; provided, however, that such prohibition shall not apply to an appeal, challenge or contesting of the erroneous initial assessment for property tax purposes of the Property in the fiscal year of the completion of the Improvements to be constructed pursuant to the Agreement, and further provided that in the absence of transfer of ownership or new construction Lessee shall not be prohibited from appealing, challenging or contesting any increases in assessment of the Property for property tax purposes over and above the current 2%per annum permitted amount. b. Lessee agrees that any such permitted proceedings shall be begun without undue delay after any contested item is imposed and shall be prosecuted to final adjudication with reasonable dispatch. Lessee shall give City prompt notice in writing of any such contest at least ten (10) days before filing any contests. 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 Property, 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 by City from time to time in order to insure the payment of such imposition to prevent any sale, foreclosure or forfeiture of the Property, 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,City will promptly return to Lessee such security as City shall have received in connection with such contest. C. City shall cooperate reasonably in any such contest permitted by this Section 2I 1, and shall execute any documents or pleadings reasonably required for such purpose. Any such proceedings to contest the validity or amount of Imposition or to recover back any Imposition paid by Lessee shall be prosecuted by Lessee at Lessee's sole cost and expense;and Lessee shall indemnify and save harmless City against any and all loss, cost or expense of any kind, including, but not limited to, reasonable attorneys' fees and expenses, which may be imposed upon or incurred by Agency in connection therewith. 12 SECTION 210 Condition of the Property SECTION 210.1 Hazardous Substances a. "Hazardous Substance,"as used in this Agreement means 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. "Hazardous Substances" do not include materials customarily used in the construction, development, operation or maintenance of real estate, provided such substances are used in accordance with all laws. b. Lessee hereby represents and warrants that the development, construction and uses of the Leasehold permitted under this Agreement (i) will comply with all applicable environmental laws; and (ii) do not require the presence of any Hazardous Substance on the Property. C. Within five (5) days of request by City, Lessee shall deliver to City, if not previously delivered, all documents relevant to the condition of the Property within the Lessee's possession or control, including, without limitation, a preliminary title report with underlying exceptions, environmental reports, studies, surveys, and all other relevant documents within the City's possession or control (collectively referenced as"Documents"). SECTION 210.2 Suitability of the Property a. The Leasehold shall be delivered to Lessee in an "as is" physical condition, with no warranty, express or implied by City as to the presence of Hazardous Substances, or the condition of the soil, its geology or the presence of known or unknown faults. If the condition of the Leasehold is not in all respects entirely suitable for the use or uses to which such Leasehold 13 will be put,then it is the sole responsibility and obligation of Lessee to place the Leasehold in all respects in a condition entirely suitable for the development thereof, solely at Lessee's expense. b. Effective upon Closing, Lessee agrees to indemnify, defend and hold harmless City and its respective members, officers, agents, employees, contractors and consultants, in accordance with the Environmental Indemnity. C. On and after the Effective Date of this Agreement,Lessee hereby waives,releases and discharges the City and its respective members, 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 the use, maintenance, ownership or operation of the Property or any portion thereof, any Hazardous Substances on the Property,or the existence of Hazardous Substances contamination in any state on the Property, however the Hazardous Substances came to be placed there, except that arising out of the active negligence or willful misconduct of the City or its employees, officers or agents. 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 or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor." To the extent of the release set forth in this Section 212.2,Lessee hereby waives and relinquishes all rights and benefits which it may have under Section 1542 of the California Civil Code. SECTION 211 Method of Financing The Acquisition and Development Costs shall be financed with a combination of Sources of Financing as provided in the Method of Financing. SECTION 212 Evidence of Financing a. Not later than fifteen (15) days prior to the scheduled Closing Date and in no event later than as provided in the Schedule of Performance, Lessee shall submit to the City evidence satisfactory to the City Manager that Lessee has obtained the financing necessary for the acquisition and development of the Property in accordance with this Agreement. Such evidence of financing shall include all items referenced under subsections (a) through (k) of Section 204.1,herein. b. The City Manager shall approve or disapprove such evidence of financing within the time established in the Schedule of Performance(Attachment No. 5). Such approval shall not be unreasonably withheld. If the City shall disapprove any such evidence of financing,the City shall do so by written notice to Lessee stating the reasons for such disapproval. 14 SECTION 213 Designation as Point of Sale Lessee and its successors and assigns shall maintain such licenses and permits as may be required by any governmental agency to conduct taxable sales arising from any project on the Property and, to the extent permitted by law, shall designate City as the "point of sale" for all taxable sales and lease transactions occurring from any project on the Property in all reports to the California State Board of Equalization in accordance with the Bradley-Burns Uniform Sales and Use Tax Law (Revenue and Taxation Code 72000 et seq.), as it may be amended or substituted from time to time, and on sales tax returns to the State of California for all taxable sales occurring at any project on the Property. PART 3. DEVELOPMENT OF THE PROPERTY SECTION 301 Land Use Approvals It is the responsibility of Lessee, without cost to City, to ensure that zoning of the Property and all applicable City land use requirements will permit development of the Property and construction of the Improvements and the use, operation and maintenance of such Improvements in accordance with the provisions of this Agreement. The following shall be conditions of the Closing and shall be accomplished by the date set forth in the Schedule of Performance: (A) Lessee shall submit and City Manager shall approve complete Final Construction Drawings; (B) Lessee shall obtain all entitlements, approvals, variances and permits necessary for the construction of the Improvements and(C)Lessee shall satisfy all other conditions precedent to the Closing as set forth in the Method of Financing. Nothing contained herein shall be deemed to entitle Lessee to any City permit or other City approval necessary for the development of the Property, or waive any applicable City requirements relating thereto.This Agreement does not(a)grant any land use entitlement to Lessee,(b)supersede,nullify or amend any condition which may be imposed by the City in connection with approval of the development described herein, (c) guarantee to Lessee or any other party any profits from the development of the Property, or (d) amend any City laws, codes or rules. This is not a Development Agreement as provided in Government Code Section 65864. SECTION 302 Scope of Development The Property shall be developed in accordance with and within the parameters established in the Scope of Development. j SECTION 303 Basic Concept Drawings I a. Lessee shall prepare and submit basic concept and schematic drawings and related documents for the development of the Property to the City for review and written approval within the time established in the Schedule of Performance. Basic concept and schematic drawings shall include a site plan, elevations and sections of the Improvements as they are to be developed and constructed on the Property. Lessee shall consult with and seek the recommendations of property management and community service providers with experience relating to similar developments before submission of the basic concept and schematic drawings to the City. j 15 b. The Property shall be developed as established in the basic concept and schematic drawings and related documents except as changes may be mutually agreed upon between Lessee and the City Manager. Any such changes shall be within the limitations of the Scope of Development. SECTION 304 Landscaping and Grading Plans a. Lessee shall prepare and submit to the City for its approval preliminary and final Iandscaping and preliminary and finish grading plans for the Property. These plans shall be prepared and submitted within the times established in the Schedule of Performance. b. The landscaping plans shall be prepared by a professional landscape architect and the grading plans shall be prepared by a licensed civil engineer. Such landscape architect and/or civil engineer may be the same firm as Lessee's architect. Within the times established in the Schedule of Performance, Lessee shall submit to the City for approval the name and qualifications of its architect, landscape architect and civil engineer. SECTION 305 Construction Drawings and Related Documents a. Lessee shall prepare and submit construction drawings and related documents (collectively called the"Plans")to the City for review (including but not limited to architectural review), and written approval in the times established in the Schedule of Performance. Such construction drawings and related documents shall be submitted as 50% and Final Construction Drawings.Final Construction Drawings are hereby defined as those in sufficient detail to obtain a building permit. b. Approval of progressively more detailed Plans will be promptly granted by the City Manager if developed as a logical evolution of Plans theretofore approved. Any items so submitted and approved by the City Manager shall not be subject to subsequent disapproval. C. During the preparation of all Plans, the City Manager and Lessee shall hold regular progress meetings to coordinate the preparation of, submission to, and review of Plans and related documents by the City Manager. The City Manager and Lessee shall communicate and consult informally as frequently as is necessary to insure that the formal submittal of any documents to the City can receive prompt and speedy consideration. d. If any revisions or corrections of Plans approved by the City shall be required by any government official, agency, department, or bureau having jurisdiction over the development of the Property, Lessee and the City Manager shall cooperate in efforts to obtain waiver of such requirements or to develop a mutually acceptable alternative. SECTION 306 City Approval of Plans a. Subject to the terms of this Agreement, the City shall have the right to review (including without limitation architectural review) and approve or disapprove all Plans and submissions, including any proposed substantial changes to any such Plans or submissions approved by City. Upon receipt of any disapproval, Lessee shall revise the Plans, and shall 16 resubmit to the City Manager as soon as possible after receipt of the notice of disapproval. The City shall reasonably approve or disapprove the Plans referred to in Sections 303,304 and 305 of this Agreement within the times established in the Schedule of Performance. Any disapproval shall state in writing the reasons for disapproval and the changes which the City Manager requests to be made. Such reasons and such changes must be consistent with the Scope of Development and any items previously approved hereunder. Lessee, upon receipt of a disapproval based upon powers reserved by the City hereunder shall revise the Plans, and shall resubmit to the City Manager as soon as possible after receipt of the notice of disapproval. b. If Lessee desires to make any substantial change in the Final Construction Drawings after their approval, such proposed change shall be submitted to the City Manager for approval. For purposes of this Section, "Substantial'shall mean any material change in building materials or equipment, specifications, or the structural or architectural design or appearance of the Project. Nothing herein shall be interpreted as altering, modifying, waiving, amending, or reducing any requirements of any governmental permit required by any local, state or federal permitting authority for the development contemplated herein. SECTION 307 Cost of Construction The cost of demolishing any improvements on the Property and developing the Property and constructing the Improvements,including any offsite or onsite improvements required by the City in connection therewith,shall be the responsibility of Lessee,without any cost to City. SECTION 308 Schedule of Performance a. Each party to this Agreement shall perform the obligations to be performed by such party pursuant to this Agreement within the respective times provided in the Schedule of Performance, and if no such time is provided, within a reasonable time consistent with the Schedule of Performance. The Schedule of Performance shall be subject to amendment from time to time upon the mutual agreement of the City and Lessee. b. After the Closing,the certification of the site specific Final Environmental Impact Report for the Improvements, and the approval of the construction of the Improvements by the City pursuant to such Final Environmental Impact Report, Lessee shall promptly begin and thereafter diligently prosecute to completion the construction of the Improvements as provided herein and in the Scope of Development. C. During periods of construction, Lessee shall submit to the City a written report of the progress of construction when and as reasonably requested by the City, but not more frequently than once every quarter. The report shall be in such form and detail as may be reasonably required by the City and shall include a reasonable number of construction photographs(if requested)taken since the last report by Lessee. If City utilizes the services of a construction monitor, Lessee shall reasonably cooperate with the City's monitor to coordinate inspections. 17 SECTION 309 Indemnification and Insurance a. Lessee's Indemnity. To the maximum extent permitted by law,and in addition to any other provisions of this Agreement independently requiring Lessee to defend, indemnify,and hold harmless the City and its respective officers, employees, contractors and agents, including, without limitation, the Environmental Indemnity and the Ground Lease, Lessee agrees to and shall defend, indemnify and hold harmless City and its respective officers, employees, contractors and agents from and against all claims, liability, loss, damage, costs or expenses (including reasonable attorneys' fees and court costs) arising from or as a result of the death of any person or any accident, injury, loss or damage whatsoever caused to any person or the property of any person resulting or arising from or in any way connected with the following, provided Lessee shall not be responsible for (and such indemnity shall not apply to) any active negligence or willful misconduct of the City, City, or their respective officers, employees, contractors or agents: 1. The existence, release, presence or disposal on, in, or under the Property of any Hazardous Substances resulting from the acts or omissions of Lessee, its contractors, subcontractors, agents or other persons acting on Lessee's behalf (individually, "Indemnifying Party,"and collectively,"Indemnifying Parties"); 2. The development, construction, marketing, use, operation or condition of the Property and the Improvements by any Indemnifying Party; 3. Any accident, personal injury or casualty on the Property or the Improvements resulting from the acts or omissions of any Indemnifying Party; 4. Any plans or designs for Improvements (collectively, "Plans") prepared by or on behalf of any Indemnifying Party, including without limitation any errors or omissions with respect to such plans or designs, except in the event that (i) none of the Indemnifying Parties develops the Property pursuant to this Agreement,and (ii)upon assignment of the Plans to City, City uses the Plans or causes such Plans to be used to develop the Property; 5. Any loss or damage to City resulting from any inaccuracy in or breach of any representation or warranty of Lessee, or resulting from any breach or default by Lessee, under this Agreement; and 6. Any and all actions, claims, damages, injuries, challenges and/or costs or liabilities arising from the approval of any and all entitlements or permits for the Improvements by the City. The foregoing indemnity obligations shall continue to remain in effect after the Completion, Lessee understands, acknowledges and agrees that nothing in this Section shall be deemed or interpreted as a limitation, modification or waiver of any other provisions of this Agreement independently requiring Lessee to defend, indemnify, and hold harmless the Cityand 18 its respective officers, employees, contractors and agents, except as to the active negligence or willful misconduct of their respective officers, employees,contractors and agents. b. Insurance Policies. 1. Commencing upon the Closing or Lessee's possession of the Property, whichever occurs first, and at all times prior to the issuance of the Release of Construction Covenants("the Term"), Lessee shall maintain in effect and deliver to City duplicate originals or appropriate certificates of the following insurance policies(the"Insurance Policies"): (a) All-Risk Policies: Lessee shall maintain or cause to be maintained coverage for builder's risk insurance for the completed value. Such insurance shall insure against direct physical loss or damage by fire, lightning, wind, storm, explosion, collapse, flood, vandalism,malicious mischief,glass breakage and such other causes as are covered by such form of insurance, excluding earthquake(s). Such policy shall include (1) coverage for demolition costs and debris removal, (2)Replacement cost coverage in amount sufficient to prevent Lessee from becoming a co-insurer under the terms of the policy, but in any event in an amount not less than 100% of the then full replacement cost. The replacement cost coverage shall be for work performed and equipment, supplies and materials furnished to the Property,or property stored in, or located in any bonded warehouse pending incorporation into the work, without deduction for physical depreciation; (b) Liability Insurance: Lessee shall maintain or cause to be maintained general liability insurance or an equivalent owner contractors protective policy, 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 on or about the Property and the business of Lessee on the Property, or in connection with the operation thereof, resulting directly or indirectly from any acts or activities of Lessee,or any person acting for Lessee,or under its respective control or direction,and also to protect against loss from liability imposed by law for damages to any property of any person occurring on or about the Property, or in connection with the operation thereof, caused directly or indirectly by or from acts or activities of Lessee or its tenants, or any person acting for Lessee, or under its control or direction. Such property damage and personal injury insurance shall also provide for and protect City against incurring any legal cost in defending claims for alleged loss. Such personal injury and property damage insurance shall be maintained in full force and effect during the Term in the following amounts: commercial general liability in a general aggregate amount of not less than Four Million Dollars ($4,000,000), Four Million Dollars ($4,000,000) Products and Completed Operations Aggregate, and Two Million Dollars ($2,000,000) each Occurrence. Lessee shall deliver to City a Certificate of Insurance evidencing such insurance coverage prior to the occurrence of the Closing. Lessee agrees that provisions of this paragraph 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 indemnification of City or the payment of damages to persons or property resulting from Lessee's activities, activities of its tenants or the activities of any other person or persons for which Lessee is otherwise responsible. To the extent that Lessee maintains increased or additional insurance coverage during the Term, in excess of the minimum coverage requirements prescribed by paragraphs (b)(l)(b) and (b)(1)(c) of this Section 309, 19 Lessee shall ensure that the additional insureds specified in paragraph (b)(3) of this Section 309 derive the benefit of such increased or additional insurance coverage. (c) Automobile Insurance: Lessee shall maintain or cause to be maintained automobile insurance on any automobiles owned by Lessee, maintained in full force and effect in an amount of not less than Two Million Dollars($2,000,000)per accident. (d) Workers' Compensation Insurance: Lessee shall maintain or cause to be maintained workers' compensation insurance, if required, for any employees of Lessee, issued by a responsible carrier authorized under the laws of the State of California to insure employers against liability for compensation under the workers' compensation laws now in force in California, or any laws hereafter enacted as an amendment or supplement thereto or in Iieu thereof. Such workers' compensation insurance shall cover all persons employed by Lessee in connection with the Property and shall cover liability within statutory limits 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 Property or the operation thereof by Lessee.Notwithstanding the foregoing,Lessee may, in compliance with the laws of the State of California and in lieu of maintaining such insurance, self-insure for workers' compensation in which event Lessee shall deliver to City evidence that such self-insurance has been approved by the appropriate State authorities. 2. All policies or certificates of insurance shall provide that such policies shall not be canceled,reduced in coverage or limited in any manner without at least ten(10)days prior written notice to City.All fire and liability insurance policies(not automobile and Workers' Compensation) may name the City and Lessee as insureds, additional insureds, and/or loss payable parties as their interests may appear. 3. The Insurance Policies shall name as additional insureds the following: "The City of Huntington Beach and its respective officers,employees, contractors,agents and attorneys." Lessee agrees to timely pay all premiums for such insurance and, at its sole cost and expense,to comply and secure compliance with all insurance requirements necessary for the maintenance of such insurance.Lessee agrees to submit binders or certificates evidencing such insurance to City prior to the Closing. Within thirty(30)days,if practicable,but in any event prior to expiration of any such policy,copies of renewal policies, or certificates evidencing the existence thereof, shall be submitted to City. All insurance herein provided for under this Section shall be provided by insurers licensed to do business in the State of California and rated A-VII or better. 4. If Lessee fails or refuses to procure or maintain insurance as required by this Agreement, City shall have the right, but not the obligation, at City's election, and upon ten (10)days prior notice to Lessee, to procure and maintain such insurance. The premiums paid by City shall be treated as a loan, due from Lessee, to be paid on the first day of the month following the date on which the premiums were paid. City shall give prompt notice of the payment of such premiums, stating the amounts paid and the name of the insured(s). 20 SECTION 310 Nondiscrimination Lessee shall not discriminate on the basis of race, gender, religion, national origin, ethnicity, sexual orientation, age or disability in the solicitation, selection, hiring or treatment of any contractors or consultants, to participate in subcontracting/subconsulting opportunities. Lessee understands and agrees that violation of this clause shall be considered a material breach of this Agreement and may result in termination, debarment or other sanctions. After the Effective Date, this language shall be incorporated into all contracts between Lessee and any contractor,consultant,subcontractor,subconsultants,vendors and suppliers. SECTION 311 Local, State and Federal Laws The Lessee shall carry out development and construction (as defined by applicable law) of the Improvements on the Property, including,without limitation, any and all public works, (as defined by applicable law), if any, in conformity with all applicable local, state and federal laws, including, without limitation, all applicable federal and state labor laws (including, without limitation, any applicable requirement to pay state prevailing wages). Lessee hereby agrees that Lessee shall have the obligation to provide any and all disclosures, representations, statements, rebidding, and/or identifications which may be required by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Lessee hereby agrees that Lessee shall have the obligation to provide and maintain any and all bonds to secure the payment of contractors (including the payment of wages to workers performing any public work) which may be required by the Civil Code, Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time,or any other provision of law. Lessee shall indemnify, protect, defend and hold harmless the City and its respective officers, employees, contractors and agents, with counsel reasonably acceptable to City, from and against any and all loss, liability, damage, claim, cost, expense, and/or "increased costs" (including labor costs,penalties, reasonable attorneys fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development and/or construction (as defined by applicable law) of the Improvements, including, without limitation, any and all public works (if any) (as defined by applicable law), results or arises in any way from any of the following: (1) the noncompliance by Lessee of any applicable local, state and/or federal law, including,without limitation, any applicable federal and/or state labor laws (including, without limitation, if applicable, the requirement to pay state prevailing wages); (2) the implementation of Chapter 804, Statutes of 2003; (3) the implementation of Sections 1726 and 1781 of the Labor Code, as the same may be enacted, adopted or amended from time to time, or any other similar law; (4) failure by Lessee to provide any required disclosure representation, statement, rebidding and/or identification which may be required by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law; and/or (5) failure by Lessee to provide and maintain any and all bonds to secure the payment of contractors (including the payment of wages to workers performing any public work)which may be required by the Civil Code, Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Lessee hereby expressly acknowledges and agrees that neither City nor its Redevelopment Agency has ever previously affirmatively represented to the Lessee or its contractor(s) for the Improvements in writing or otherwise, that the work to be covered by the bid or contract is not a"public work," as defined in Section 1720 21 of the Labor Code. It is agreed by the parties that, in connection with the development and construction (as defined by applicable law) of the Improvements, including, without limitation, any public work(as defined by applicable law), if any, Lessee shall bear all risks of payment or non-payment of state prevailing wages and/or the implementation of Chapter 804, Statutes of 2003 and/or Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, and/or any other provision of law. "Increased costs"as used in this Section shall have the meaning ascribed to it in Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time. The foregoing indemnity shall survive termination of this Agreement and shall continue after Completion and the recordation of the Release of Construction Covenants. SECTION 312 Notice of Non-Responsibility City shall, at any and all times during the term of this Agreement, have the right to post and maintain on the Property, and record against the Property, as required by law, any notice or notices of non-responsibility provided for by the mechanics' lien laws of the State of California; provided, however,that Lessee shall, on behalf of the City,as advised thereby,post and maintain on the Property,and record against the Property,all notices of non-responsibility provided for by the mechanics' lien laws of the State of California. SECTION 313 Permits Before commencement of demolition, construction or development of any buildings, structures or other work of improvement upon any portion of the Property, Lessee shall, at its own expense, secure or cause to be secured, any and all permits which may be required by the City or any other governmental agency with oversight for, or affected by, such construction, development or work. SECTION 314 Rights of Access Commencing upon the Closing,representatives of the City shall have the reasonable right of access to the Property, upon 24 hours' written notice to Lessee (except in the case of an emergency, in which case City shall provide such notice as may be practical under the circumstances), without charges or fees, at normal construction hours during the period of construction for the purposes of this Agreement, including, but not limited to, the inspection of the work being performed in constructing the Improvements. Such representatives of the City shall be those who are so identified in writing by the City Manager of the City. The Lessee has the right to designate representatives to accompany the City representatives on such inspections. The City agrees to coordinate with Lessee to schedule such inspections so that Lessee's representative may attend the inspections, in the discretion of Lessee. SECTION 315 Disclaimer of Responsibility by City The City neither undertakes nor assumes nor will have any responsibility or duty to Lessee or to any third party to review, inspect, supervise, pass judgment upon or inform Lessee 22 or any third party of any matter in connection with the development or construction of the Improvements, whether regarding the quality, adequacy or suitability of the plans, any labor, service, equipment or material furnished to the Property, any person furnishing the same, or otherwise. Lessee and all third parties shall rely upon its or their own.judgment regarding such matters,and any review, inspection, supervision,exercise of judgment or information supplied to Lessee or to any third party by the City in connection with such matter is for the public purpose of redeveloping the Property, and neither Lessee (except for the purposes set forth in this Agreement) nor any third party is entitled to rely thereon. The City shall not be responsible for any of the work of construction, improvement or development of the Property. SECTION 316 Taxes,Assessments,Encumbrances and Liens Commencing upon the Closing, Lessee shall pay when due all real estate taxes and assessments assessed and levied on or against the Property or any portion thereof. Lessee shall not place, or allow to be placed, against the Property or any portion thereof, any mortgage, trust deed,encumbrance or lien not authorized by this Agreement.In addition,Lessee shall remove, or shall have removed, any levy or attachment made on title to the Leasehold and/or Property (or any portion thereof), or shall assure the satisfaction thereof within a reasonable time but in any event prior to a sale thereunder. Under no circumstances whatsoever shall the Lessee allow any security instruments to be recorded against the City's fee interest in the Property. SECTION 317 Prohibition against Transfer a. Prior to Completion, Lessee shall not, except as permitted by this Agreement, including without limitation Sections 102(definition of"Permitted Transfer")and 107, assign or attempt to assign this Agreement or any right herein, nor make any total or partial sale,transfer, conveyance or assignment of the whole or any part of the Lessee's interest in the Leasehold or the Improvements thereon,without prior written approval of the City. This prohibition shall not be deemed to prevent the granting of easements or permits to facilitate the development of the Property,nor shall it prohibit Permitted Transfers. b. Except as permitted by paragraph a., in the event Lessee does assign this Agreement or any of the rights herein, or does sell, transfer, convey or assign the Lessee's interest in the Leasehold(or any portion thereof)prior to Completion without the approval of the City, subject to the notice and cure provisions of Section 501, the City shall have the right to terminate this Agreement. C. Prior to Completion, in the absence of a specific written agreement by the City, and except as otherwise provided in this Agreement, no such sale, transfer, conveyance or assignment of this Agreement or Lessee's interest in the Leasehold (or any portion thereof), or approval by the City of any such sale, transfer, conveyance or assignment, shall be deemed to relieve Lessee or any other party from any obligations under this Agreement. SECTION 318 No Encumbrances Except Permitted Mortgages upon and after the Closing,a. Notwithstanding Section 317, p g, Lessee shall have the 23 right to encumber the Leasehold with a Permitted Mortgage, but only for the purpose of securing loans of funds to be used for financing and refinancing the Acquisition and Development Costs and other expenditures necessary and appropriate to develop the Property under this Agreement, consistent with the amounts to be financed by Lessee per the Method of Financing ("Permitted Financing Purposes").Lessee has no authority to encumber the City's fee interest in the Property at any time and for any purpose,whatsoever. Prior to Completion: (1) Lessee shall not have any authority to encumber the Leasehold for any purpose other than for Construction Loans; (2) Lessee shall notify the City in advance of any proposed financing; and (3) Lessee shall not enter into any agreements requiring a conveyance of security interests in the Property without the prior written approval of the City.The maker of any loan approved by the City pursuant to this Section 318 shall not be bound by any amendment, implementation agreement or modification to this Agreement subsequent to its approval without such lender giving its prior written consent. b. In any event,Lessee shall promptly notify the City of any security interest created or attached to the Leasehold or Property whether by voluntary act of Lessee or otherwise. I I C. The words"security interest" and "deed of trust" as used herein include all other appropriate modes of financing real estate acquisition,construction and land development. d. Except for the provision that Lessee has no authority to encumber the City's fee interest in the Property at any time and for any purpose, whatsoever, the requirements of this Section 318 shall not apply following Completion. SECTION 319 Lender Not Obligated to Construct Improvements No lender shall be obligated by the provisions of this Agreement to construct or complete the Improvements or to guarantee such construction or completion. Nothing in this Agreement shall be deemed or construed to permit, or authorize any such lender to devote the Property to any uses, or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement and the Ground Lease. SECTION 320 Notice of Default to Lenders;Right of Lender to Cure Defaults Whenever the City shall deliver any notice or demand to Lessee with respect to any breach or default by Lessee in completion of construction of the Improvements,the City shall at the same time deliver the notice or demand to each Permitted Mortgagee that requests such notice or demand, in writing, from the City and provides its contact information for the notice or demand. Each such Permitted Mortgagee shall (insofar as the rights of the City are concerned) have the right at its option within ninety (90) days after the receipt of the notice, to cure or remedy, or commence to cure or remedy, any such default and to add the cost thereof to the security interest debt and the lien of its security interest. If such default shall be a default which ! can only be remedied or cured by such Permitted Mortgagee upon obtaining possession of the Leasehold, such Permitted Mortgagee shall seek to obtain possession with diligence and continuity through a receiver or otherwise, and shall remedy or cure such default within ninety (90) days after obtaining possession; provided that in the case of a default which cannot with diligence be remedied or cured, or the remedy or cure of which cannot be commenced within such ninety- (90) day period, such Permitted Mortgagee shall have such additional time as 24 reasonably necessary to remedy or cure such default with diligence and continuity not to exceed ninety (90) days; and provided further that such Permitted Mortgagee shall not be required to remedy or cure any non-curable default of Lessee. Any Permitted Mortgagee who forecloses on its Permitted Mortgage, or is assigned or otherwise succeeds to Lessee's rights under this Agreement, shall have the right to undertake or continue the construction or completion of the Improvements upon execution of a written agreement with the City by which such Permitted Mortgagee expressly assumes Lessee's rights and obligations under this Agreement, approval of which agreement shall not be unreasonably withheld by City. Any such Permitted Mortgagee properly completing such improvements shall be entitled,upon written request made to the City, to a Release of Construction Covenants from the City. SECTION 321 Failure of Lender to Complete Improvements In any case where, six (6) months after default by Lessee, the holder of any mortgage, deed of trust or other security interest creating a lien or encumbrance upon the Leasehold (or portion thereof) has not elected to complete construction of the Improvements, or, if it has elected to complete the Improvements, it has not proceeded diligently with construction,the City may purchase the mortgage, deed of trust or other security interest by payment to the holder of the full amount of the unpaid principal debt, plus any accrued and unpaid interest and other charges secured by the mortgage instrument approved by the City. SECTION 322 Right of the City to Cure Defaults In the event of a default or breach by Lessee of a Permitted Mortgage prior to Completion and prior to completion of a foreclosure by a Permitted Mortgagee,and the Permitted Mortgagee has not commenced to complete the development,the City may cure the default at any time prior to completion by a Permitted Mortgagee of any foreclosure under its security. In such event,the City shall be entitled to reimbursement from Lessee of all reasonable costs and expenses incurred by the City in curing the default. The City shall also be entitled to a lien upon the Leasehold to the extent of such costs and disbursements. SECTION 323 Right of the City to Satisfy Other Liens on the Property Prior to Completion and after Lessee has had a reasonable time to challenge, cure or satisfy any liens or encumbrances on its interest in the Property, the City shall have the right, without obligation, to satisfy any such liens or encumbrances. In such event,the City shall be entitled to reimbursement from Lessee of all reasonable costs and expenses incurred by the City in satisfying any such liens or encumbrances. The City shall also be entitled to a lien upon the Leasehold to the extent of such costs and expenses. SECTION 324 Release of Construction Covenants a. Promptly after Completion of the Improvements as required by this Agreement, City shall deliver to Lessee a Release of Construction Covenants, upon written request therefor by Lessee. City shall not unreasonably withhold any such Release of Construction Covenants. Such Release of Construction Covenants shall be, and shall so state, conclusive determination of satisfactory completion of the Scope of Development required by this Agreement. 25 b. The Release of Construction Covenants shall be substantially in the form attached hereto as Attachment No. 8 so as to permit it to be recorded in the Official Records. C. If City fails to deliver the Release of Construction Covenants within ten(10)days after written request from Lessee, City shall provide Lessee with a written statement of its reasons(the"Statement of Reasons")within that ten(10)-day period.The statement shall also set forth the steps Lessee must take to obtain the Release of Construction Covenants. If the reasons are confined to the immediate unavailability of specific items or materials for landscaping,or to so-called "punch list" items identified by City, City will issue the Release of Construction Covenants upon the posting of a bond by Lessee with City in an amount representing City's estimate of the cost to complete the work. Such Release of Construction Covenants shall not constitute evidence of compliance with or satisfaction of any obligation of Lessee to any Senior Lender, or any insurer of a mortgage securing money loaned to finance the Improvements, nor any part thereof. Such Release of Construction Covenants is not a Notice of Completion as referred to in Section 3093 of the California Civil Code. PART 4. USE OF THE PROPERTY SECTION 401 Uses a. Lessee covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, that Lessee, such successors and such assignees shall use the Property only for the uses specified in the Redevelopment Plan. No change in the use of the Property shall be permitted,without the prior written approval of City. b. Notwithstanding the generality of subsection (a), above, Lessee, its successors and assigns, shall use the Leased Premises and/or Improvements only for the following uses: operation and maintenance of a public skate park ("Skate Park"). Skate Park shall be free and open to the public from 10 a.m.to 10 p.m., Mondays through Sundays,except for special events occurring no more than twenty (20) calendar days per year, collectively, and agreed to, in writing, by Lessee and City. Nothing herein shall be deemed to supersede, waive, or modify any restrictions or prohibitions imposed by the City, in accordance with its zoning code. C. Subject to notice and cure rights herein, Lessee's failure to operate Skate Park in accordance with this Agreement for thirty(30) consecutive days shall be deemed a default of this Lease. SECTION 402 Maintenance Lessee shall maintain the Property in accordance with the requirements of the Ground Lease. SECTION 403 Obligation to Refrain from Discrimination Lessee covenants and agrees for itself, its successors and its assigns in interest to the 26 Property or any part thereof, that there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease,transfer,use, occupancy,tenure, or enjoyment of the land, nor shall the transferee itself or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees of the land. SECTION 404 Form of Nondiscrimination and Nonsegregation Clauses Lessee shall refrain from restricting the rental, sale or lease of the Property and/or Leasehold on the basis of sex, sexual orientation, marital status, race, color, creed, religion, ancestry or national origin of any person. All deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: a. In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision(a)or(d)of Section 12955 of the Government Code,as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed.The foregoing covenants shall run with the land." b. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph(1)of subdivision(p) of Section 12955,and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself,or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants,or vendees in the premises herein leased." C. In contracts: "There shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of 27 the Government Code, in the sale, lease,sublease,transfer,use,occupancy,tenure,or enjoyment of the land, nor shall the transferee itself or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees of the land." SECTION 405 Effect and Duration of Covenants The covenants established in this Agreement shall run with the land, without regard to technical classification and designation, and shall be for the benefit and in favor of and enforceable against the original Lessee and successors in interest by the City. Unless set forth otherwise, the covenants described in this Part 4 shall commence upon the Closing and shall be set forth in the Ground Lease. PART 5. DEFAULTS AND REMEDIES SECTION 501 Defaults-General a. Subject to the extensions of time set forth in Section 602, failure or delay by either party to perform any term or provision of this Agreement constitutes a default under this Agreement.The party who fails or delays must commence to cure,correct or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. b. The injured party shall give written notice of default to the party in default, specifying the default complained of by the injured party. Failure or delay in giving such notice shall not constitute a waiver of any default, nor shall it change the time of default. Except as otherwise expressly provided in this Agreement, any failures or delays by either party in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies.Delays by either party in asserting any of its rights and remedies shall not deprive either 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. C. If a monetary event of default occurs, prior to exercising any remedies hereunder, the injured party shall give the party in default written notice of such default.The party in default shall have a period of thirty(30) calendar days after such notice is received or deemed received ' within which to cure the default prior to exercise of remedies by the injured party. d. If a non-monetary event of default occurs, prior to exercising any remedies hereunder,the injured party shall give the party in default notice of such default. If the default is reasonably capable of being cured within thirty (30) calendar days after such notice is received or deemed received, the party in default shall have such period to effect a cure prior to exercise of remedies by the injured party. If the default is such that it is not reasonably capable of being cured within thirty (30) days after such notice is received, and the party in default (1) initiates corrective action within said period, and (2) diligently, continually, and in good faith works to effect a cure as soon as possible, then the party in default shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by the injured party, 28 but in any event no more than one hundred and eighty (180) days of receipt of such notice of default from the injured party. SECTION 502 Institution of Legal Actions In addition to any other rights or remedies (and except as otherwise provided in this Agreement), either party may institute legal action to cure, correct or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purpose of this Agreement. Such legal actions must be instituted in the Superior Court of the County of San Diego, State of California, in any other appropriate court of that county, or in the United States District Court for the Southern District of California. SECTION 503 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Agreement. SECTION 504 Acceptance of Service of Process a. In the event that any legal action is commenced by Lessee against the City, service of process on the City shall be made by personal service upon the City Manager, or in such other manner as may be provided by law. b. In the event that any legal action is commenced by the City against Lessee, service of process on Lessee shall be made by personal service upon Lessee(or upon the General Partner or General Partner's managing member, as applicable, or any officer of the General Partner or General Partner's managing member, as applicable) and shall be valid whether made within or without the State of California,or in such manner as may be provided by law. SECTION 505 Rights and Remedies Are Cumulative Except with respect to rights and remedies expressly declared to be exclusive in this Agreement,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. SECTION 506 Damages Subject to the notice and cure provisions of Section 501, if either party defaults with regard to any of the provisions of this Agreement, the non-defaulting party shall serve written notice of such default upon the defaulting party. If the default is not cured within the time provided in Section 501, the defaulting party shall be liable to the non-defaulting party for any damages caused by such default, and the non-defaulting party may thereafter (but not before) commence an action for damages against the defaulting party with respect to such default. Neither Lessee nor City shall be entitled to, and hereby waives, any right to seek special or consequential damages of any kind or nature arising out of or in connection with this Agreement. 29 SECTION 507 Specific Performance Subject to the notice and cure provisions of Section 501, if either party defaults with regard to any of the provisions of this Agreement, the non-defaulting party shall serve written notice of such default upon the defaulting party. If the default is not cured within the time provided in Section 501, the non-defaulting party, at its option, may thereafter (but not before) commence an action for specific performance of the terms of this Agreement pertaining to such default. SECTION 508 Reserved. SECTION 509 Termination by Lessee Prior to issuance of a Conditional Use Permit ("CUP") for the Lessee's operation of Skate Park on the Leased Premises, Lessee shall have the right to terminate this Agreement for convenience. After issuance of the CUP for the Lessee's operation of Skate Park on the Leased Premises and prior to Closing, subject to the notice and cure provisions of Section 501, Lessee shall have the right to terminate this Agreement, by providing written notice to the City, in the event of a default by City pursuant to this Agreement. SECTION 510 Termination by City a. Prior to the Closing,subject to the notice and cure provisions of Section 501,City shall have the right to terminate this Agreement, by providing written notice to the Lessee, in the event of a default by Lessee pursuant to this Agreement. b. After the Closing, but before Completion, and subject to the notice and cure provisions of Section 501, City shall have the additional right to terminate this Agreement in the event any of the following defaults shall occur: 1. Lessee fails to commence construction of the improvements as required by this Agreement and such breach is not cured within the time provided in Section 501 of this Agreement,provided that Lessee shall not have obtained an extension or postponement to which Lessee may be entitled pursuant to Section 602 hereof;or 2. Lessee abandons or substantially suspends construction of the Improvements and such breach is not cured within the time provided in Section 501 of this Agreement, provided Lessee has not obtained an extension or postponement to which Lessee may be entitled to pursuant to Section 602 hereof;or 3. Lessee assigns or attempts to assign this Agreement, or any rights herein, or transfer, or suffer any involuntary transfer of the Property, or any part thereof, in violation of this Agreement, and such breach is not cured within the time provided in Section 501 of this Agreement;or 4. Lessee otherwise materially breaches this Agreement, and such breach is not cured within the time provided in Section 501 of this Agreement. 30 PART 6. GENERAL PROVISIONS SECTION 601 Notices Formal notices, demands and communications between City and Lessee shall be deemed sufficiently given if dispatched by first class mail, registered or certified mail, postage prepaid, return receipt requested, or by electronic facsimile transmission followed by delivery of a"hard" copy, or by personal delivery (including by means of professional messenger service, courier service such as United Parcel Service or Federal Express, or by U.S. Postal Service), to the addresses of City and Lessee as set forth in Sections 105 and 106 hereof. 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 mail. Any notice that is transmitted by electronic facsimile transmission followed by delivery of a"hard"copy,shall be deemed delivered upon its transmission; any notice that is personally delivered (including by means of professional messenger service, courier service such as United Parcel Service or Federal Express, or by U.S. Postal Service), shall be deemed received on the documented date of receipt; and any notice that is sent by registered or certified mail, postage prepaid, return receipt required shall be deemed received on the date of receipt thereof. i SECTION 602 Enforced Delay: Extension of Time of Performance a. Performance by either party hereunder shall not be deemed to be in default where delays or defaults are due to war, insurrection, strikes, lock-outs, riots, floods, earthquakes, fires, casualties, acts of God, acts of the public enemy, epidemics, quarantine restrictions, freight j embargoes, lack of transportation, governmental restrictions or priority, litigation, unusually severe weather, inability to secure necessary labor, material or tools, delays of any contractor, sub-contractor or supplier, acts of the other party, acts or failure to act of the City or any other public or governmental agency or entity(except that acts or failure to act of City shall not excuse performance of City),or any causes beyond the control or without the fault of the party claiming an extension of time to perform. b. An extension of time for any such cause (a "Force Majeure Delay") shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to the other party within thirty (30) days of knowledge of the commencement of the cause.Notwithstanding the foregoing,none I of the foregoing events shall constitute a Force Majeure Delay unless and until the party claiming such delay and interference delivers to the other party written notice describing the event, its cause, when and how such party obtained knowledge, the date and the event i commenced, and the estimated delay resulting therefrom. Any party claiming a Force Majeure Delay shall deliver such written notice within thirty (30) days after it obtains actual knowledge of the event.Times of performance under this Agreement may also be extended in writing by the City and Lessee. i SECTION 603 Conflict of Interest a. No member, official, or employee of City shall have any personal interest, direct 1 or indirect, in this Agreement, nor shall any such member, official, or employee participate in 31 any decision relating to the Agreement which affects his or her personal interests or the interests of any corporation, partnership, or association in which he or she is, directly or indirectly, interested. b. Lessee warrants that it has not paid or given, and,will not pay or give, any third person any money or other consideration for obtaining this Agreement. SECTION 604 Nonliability of City Officials and Employees No member, official, agent, legal counsel or employee of City shall be personally liable to Lessee, or any successor in interest in the event of any default or breach by City or for any amount which may become due to Lessee or successor or on any obligation under the terms of this Agreement. SECTION 605 Inspection of Books and Records City shall have the right at all reasonable times to inspect and copy the books and records of Lessee pertaining to the Property as pertinent to the purposes of this Agreement. Subject to any litigation arising between the Lessee and City due to rights or obligations accorded under this Agreement and any obligations of the City under the California Public Records Act, City shall maintain as confidential any such materials inspected. SECTION 606 Approvals a. Except as otherwise expressly provided in this Agreement, approvals required of City or Lessee in this Agreement, including the attachments hereto, shall not be unreasonably withheld or delayed.All approvals shall be in writing.Failure by either party to approve a matter within the time provided for approval of the matter shall not be deemed a disapproval, and failure by either party to disapprove a matter within the time provided for approval of the matter shall not be deemed an approval. b. Except as otherwise expressly provided in this Agreement, approvals required of the City shall be deemed granted by the written approval of the City Manager. City agrees to provide notice to Lessee of the name of the City Manager's designee on a timely basis, and to provide updates from time to time.Notwithstanding the foregoing,the Executive Director may, in his or her sole discretion, refer to the governing body of the City any item requiring City approval;otherwise,"City approval"means and refers to approval by the City Manager. SECTION 607 Real Estate Commissions;Finder's Fee The City shall not be liable for any real estate commissions, brokerage fees or finder's fees which may arise from this Agreement. The City and Lessee each represent that neither has engaged any broker, agent or finder in connection with this transaction. SECTION 608 Construction and Interpretation of Agreement a. The language in all parts of this Agreement shall in all cases be construed simply, 32 as a whole and in accordance with its fair meaning and not strictly for or against any party. The parties hereto acknowledge and agree that this Agreement has been prepared jointly by the parties and has been the subject of arm's length and careful negotiation over a considerable period of time, that each party has been given the opportunity to independently review this Agreement with legal counsel,and that each party has the requisite experience and sophistication to understand, interpret, and agree to the particular language of the provisions hereof. Accordingly, in the event of an ambiguity in or dispute regarding the interpretation of this Agreement, this Agreement shall not be interpreted or construed against the party preparing it, and instead other rules of interpretation and construction shall be utilized. b. If any term or provision of this Agreement, the deletion of which would not adversely affect the receipt of any material benefit by any party hereunder, shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby and each other term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. It is the intention of the parties hereto that in lieu of each clause or provision of this Agreement that is illegal, invalid, or unenforceable, there be added as a part of this Agreement an enforceable clause or provision as similar in terms to such illegal,invalid,or unenforceable clause or provision as may be possible. C. The captions of the articles, sections and subsections herein are inserted solely for convenience and under no circumstances are they or any of them to be treated or construed as part of this instrument. d. References in this instrument to this"Agreement" mean, refer to and include this instrument as well as any riders, exhibits, addenda and attachments hereto (which are hereby incorporated herein by this reference) or other documents expressly incorporated by reference in this instrument. Any references to any covenant, condition, obligation, and/or undertaking "herein," "hereunder," or "pursuant hereto" (or language of like import) means, refer to, and include the covenants,obligations,and undertakings existing pursuant to this instrument and any riders, exhibits, addenda, and attachments or other documents affixed to or expressly incorporated by reference in this instrument. e. As used in this Agreement, and as the context may require,the singular includes the plural and vice versa, and the masculine gender includes the feminine and vice versa. SECTION 609 Time of Essence Time is of the essence with respect to the performance of each of the covenants and agreements contained in this Agreement. SECTION 610 No Partnership Nothing contained in this Agreement shall be deemed or construed to create a partnership,joint venture, or any other similar relationship between the parties hereto or cause City to be responsible in any way for the debts or obligations of Lessee or any other Person. 33 SECTION 611 Compliance with Law Lessee agrees to comply with all the requirements now in force, or which may hereafter be in force, of all municipal, county, state and federal authorities,pertaining to the development and use of the Property and the Improvements, as well as operations conducted thereon. The judgment of any court of competent jurisdiction, or the admission of Lessee or any lessee or permittee in any action or proceeding against them, or any of them, whether City be a party thereto or not, that Lessee, lessee or permittee has violated any such ordinance or statute in the development and use of the Property shall be conclusive of that fact as between City and Lessee. SECTION 612 Binding Effect This Agreement, and the terms, provisions, promises, covenants and conditions hereof, shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs,legal representatives,successors and assigns. SECTION 613 No Third Party Beneficiaries The parties to this Agreement acknowledge and agree that the provisions of this Agreement are for the sole benefit of City and Lessee, and not for the benefit, directly or indirectly, of any other person or entity, except for the City, the Senior Lenders and the Tax Credit Equity Investor,and as otherwise expressly provided herein. SECTION 614 Authority to Sign Lessee hereby represents that the persons executing this Agreement on behalf of Lessee have full authority to do so and to bind Lessee to perform pursuant to the terms and conditions of this Agreement. SECTION 615 Incorporation by Reference Each of the attachments and exhibits attached hereto is incorporated herein by this reference. SECTION 616 Counterparts This Agreement may be executed by each party on a separate signature page, and when the executed signature pages are combined,shall constitute one single instrument. PART 7. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS a. This Agreement is executed in three (3) duplicate originals, each of which is deemed to be an original. This Agreement, including all of the Attachments appended hereto, constitutes the entire understanding and agreement of the parties. b. This Agreement integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the parties with respect to all or any part of the subject matter hereof. 34 C. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of City or Lessee, and all amendments hereto must be in writing and signed by the appropriate authorities of City and Lessee. PART 8. TIME FOR ACCEPTANCE OF AGREEMENT BY CITY This Agreement, when executed by Lessee and delivered to City, must be authorized, executed and delivered by City within sixty (60) days after date of signature by Lessee or this Agreement may be terminated by Lessee upon written notice to City. IN WITNESS WHEREOF, City and Owner have signed this Agreement as of the dates set opposite their signatures. SIGNATURES ON NEXT PAGE i i I i I I 35 VF OUTDOOR INC., A DELAWARE CORPORATION, DBA "VANS" COUNTERPART Date: By: Kevin Bailey, President THE CITY OF HUNTINGTON BEACH (CITY) Date: B Y• Name, Mayor ATTEST: O E Ci lerk REVIEWED AND APPROVED AS TO FORM: City Attorney B Jennifer McGrath REVIEWED AND APPROVED AS TO FORM: KANE, BALLMER& BERKMAN By:_ City Speci 1 Counsel Murray O. Kane 36 VF OUTDOOR INC.,A DELAWARE CORPORATION,DBA"VANS" Date: t /-;Yo [/ By: v ailey, re iden THE CITY OF HUNTINGTON BEACH(CITY) Date: By: Name,Mayor ATTEST: -COUNTERPART City Clerk REVIEWED AND APPROVED AS TO FORM: City Attorney By: Jennifer McGrath REVIEWED AND APPROVED AS TO FORM: KANE,BALLMER&BERKMAN By: City Special Counsel Murray O.Kane I i 36 ATTACHMENT NO. 1 SITE MAP [behind this page] i i I I I i SITE MAP (APN 142-073-03) THIS AMP MAS PREPARED FOR ORANGE S££ SPECIAL PAGE 142-079 FOR FEE TITLE ASSESSMENT BELOW SURFACE 7 TCwrrNC ASSES ORRDEPT. DP OSESARA GASY. .S 112• SEC' 14. T 5 S� R 11 W 142 0 1 FOR OTS THER USES NOT TO VE AEPR�ICM PACE 1 Of 2 ALL RIGHTS RESERVED- 0 COPYRIGHT GRANGE COMTY ASSESSOR Z01D 0.(3 AC- ,.,,• 32 40 � la.y J NOTRE DAME 40 30 VERAKINT 31 r» STREET STREET STREET PLAN MCFADDEN 15UDAR AVENM AVENUE NORIZCWIAL SCALE:1'=160' »� 00 — / Ij 1;0 n.m' • cA01ArD L r»�'_J el9Ew0 : m.. 34'STDRN DRAIN ESM'T PROJECT SITE VERTELLECAALE: 1, 1W y P.N. 36722 '1 O Oi 'DETAIL A' 81UEB[MW£i D 35.76 AC. 25.48 A[. AC. 400' RIVE— J m PN 07 34 GOLDEN !VEST COLLEGE ; +g169 : O #_ ': O m Z.696 AC.; .� J � '.'� 1,NE• STREET CENTfA sg w-n.rrr�w. 1 � itCENTEA 3.23 AC. 16 N O72 W ,O. O xxO€�32 'AC. 33 y�9'" 3 ,n 4 $�r�2.3 4-2.3 4- 9.40 AC. 2f 1.0J3AC. '»•vC•- .u. lea »>,a' n: 27 4 1•.1r P.N. d5B-1 rI BREECAM7 SE£PAC£2 26 e L 1 AC. DRIVE— - a<.m• 37.10 AC. '� 13.47 AC. - 22 t9 W 44-11 P. N. 255-40 P.M.J2-48 PAR.? O73 If.66 AC. M."LA : N V a PO1 s O e 1 15.774 AC. 9.60AC. .>.y 5.6Z AC. +».w s P. N. 358-1 21 �. 9P. N. 255-4E0 4EDINGER b $ V ISNELTIERAVC•I-& i AVENUE x i. '•�S WF - 15 14 y PARKSfDE!AAA' 22 3 13 32 51 11 08 23 1+ MARCH 1962 PARCEL MAP P.M. 44-11. 255-40. 358-1 NOTE - ASSESSOR'S BLOCK A ASSESSOR'S MAP PARCEL NUMBERS BOOK 142 PAGE 07 SHOWN IN CIRCLES COUNTY OF ORANGE ATTACHMENT NO.2 LEGAL DESCRIPTION [behind this page] i i i EXHIBIT A Legal Description All that certain real property situated in the County of Orange, State of California,described as follows: Parcels 1 and 2 of Parcel Map No.90-327, in the City of Huntington Beach,County of Orange, State of California, as per map recorded in Book 279 Page 33 and 34 of Parcel Maps, in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 I I I i i i ATTACHMENT NO, 3 METHOD OF FINANCING [behind this page] ATTACHMENT NO.3 METHOD OF FINANCING This is the Method of Financing attached to the Ground Lease and Improvement Agreement ("GLIA") by and between the CITY OF HUNTINGTON BEACH (the "City") and VF OUTDOOR, INC., a Delaware Corporation, doing business as "Vans" (the "Developer") as of E, 201.pertaining to the development of a public skate park with ancillary uses, including retail skate shop, snack shop, restrooms, and seating areas ("the Project"). Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the GLIA. 1. Total Development Cost. The parties estimate that the cost of the development and construction of the Project will be approximately $2,897,866, to be provided as follows in Section 2 of this Method of Financing. 2. Sources of Financing. The parties anticipate that the costs of the development and construction of the Project (the"Development Costs") shall be financed with a combination of loans and Developer's equity,as set forth in the following chart: Source of Funds Construction Equity $2,897,866 TOTAL FINANCING $2,897,866 3. Project Budget. The parties anticipate that all estimated Development Costs for the Project shall be as set forth in the Project Budget ("Development Costs") attached to the GLIA as Attachment No. 3A (the"Project Budget"), incorporated herein by this reference. Any Material Change as hereinafter defined shall require the approval of the Executive Director or designee.For the purposes herein, a"Material Change"means any change that would(i)increase or decrease the total Project Budget or (ii) increase or decrease a line item by more than 10%. Except as provided in the previous sentence, the Executive Director or designee shall not unreasonably withhold approval of any requested Material Change if, within fifteen (15) working days after receipt of the request,Agency receives such explanation and/or back-up information in connection with its approval of the Material Change, and if the following conditions are satisfied: a. to the extent the Material Change is limited to a reallocation of budgeted funds among Project Budget line items without any increase in the total Project Budget, (i) the funds in the line items) to be reduced remain Attachment No. 3 Page 1 of 2 sufficient for completion of the Project,and (ii)the requested increase in one or more line item(s)is to be used to pay approved costs;and b. to the extent the Material Change involves an increase in the total Project Budget, (i) additional funds in an amount equal to the increase in the total Project Budget will be provided by Developer or other Permitted Mortgagee and (ii) the requested increase in the Project Budget is to be used to pay approved costs. Upon approval of any Material Change, the Project Budget shall be replaced by the approved revised Project Budget. 4. Evidence of Financinz. The sum of the sources of construction financing described in Section 2.1, above,shall be sufficient at all times to pay all Development Costs as set forth in the most recently approved Project Budget. Within the time provided therefor in the Schedule of Performance, Developer shall submit, for approval by the Executive Director or designee, evidence of construction financing. The Executive Director or designee shall not unreasonably withhold his or her approval. Developer shall provide written certification to the Agency that such construction financing documents are correct copies of the actual documents to be executed by Developer on or before the Closing Date. To the extent that the sum of the sources of funds described in Section 2.1,above, is insufficient to pay all Development Costs,Developer shall demonstrate the availability prior to the Closing of increased sources at least equal to the shortfall. 5. Subordination. Any deed of trust recorded to secure construction and/or permanent financing for the Project shall be subordinate to the Ground Lease. I i Attachment No. 3 Page 2 of 2 ATTACIB4ENT NO. 3A P,40JECT BUDGET [behind this page] I PROJECT BUDGET Acres SF SP perSF SP CubicYrd SLCubicYrd iiaw Acquisition AgencySlte 2.7 117,612.0 $0.00 $0 Edison Site - - $0.00 0 Off-site Work 117,612.0 $0.50 58,806 On-Site Work 117,612.0 $1.00 217,612 Building Shell(Restroom/Vend) 680.0 $85.00 57,800 Building Shell(Operations Facility) 3,500.0 $85.00 297,500 BuildingTI(Operations Facility) 3,500.0 $15.00 52,500 Skate Bowl Excavation 1,111.0 $13.00 14,443 Concrete 13,000.0 $4.00 52,000 Skate Plaza 14,000.0 $100.00 1,400,000 Parking (north lot) 26.0 $1,300.00 33,800 Parking B(south lot) 40.0 $300.00 12,000 Parking - $1,500.00 0 Event Seating/Bleachers Allowance 50,000 $2,146,461 Soft Cost 27.0% $579,788 Financing 8.0.10 171,717 Total $2,897,966 ATTACHMENT NO.4 SCOPE OF DEVELOPMENT [behind this page] i I I ATTACHMENT NO.4 SCOPE OF DEVELOPMENT I. GENERAL DESCRIPTION This is the Scope of Development attached to the Ground Lease and Improvement Agreement("GLIA")by and between the CITY OF HUNTINGTON BEACH(the"City")and VF OUTDOOR,INC.,a Delaware corporation(the"Lessee")pertaining to development ofthe Property. Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the GLIA. II. IMPROVEMENTS The skate park development would include construction of a 14,000 square foot skate park plaza area, 13,000 square feet of skate bowl area, 15,000 square feet of turf/walking area,a 3,500- square-foot operations building (includes but is not limited to concession stand and skate rental space,employee office space,employee restrooms and storage space),a 480-square-foot skate park restroom structure, a 200-square-foot skate park entrance kiosk, the main parking lot near the primary site access fronting Center Ave,and a secondary parking area off McFadden Ave to be used only for special events.The project would include extensive landscaping and turf areas,sidewalks, walkways, trash/recycling facilities, drinking fountains, and restrooms, all of which would be accessible to the public.Additionally,in order to allow for potential future development of a transit stop,the proposed project includes the dedication of a"Transit Reserve Area". The Project construction quality and design shall resemble that of other skate parks developed by other local municipalities. Design and construction details shall meet all state,county and local building codes. III. SIGNAGE Lessee may install prominent signage on the Leased Premises to brand Skate Park using Lessee's name, logo and trademarks, including, without limitation, street facing signage (collectively, "Signage"); provided, however that the Signage conforms to the City's codes and ordinances. Furthermore, nothing herein shall be interpreted as authorization to waive Lessee's obligations to apply for and obtain required permits before installing any Signage. Attachment No.4 Page 1 of 1 ATTACHMENT NO. 5 SCHEDULE OF PERFORMANCE [behind this page] I i ATTACHMENT NO. 5 SCHEDULE OF PERFORMANCE I. DEVELOPMENT 1. Submission - Schematic/Design Development Within fifteen(15)days after execution ofthis Drawings.Developer shall prepare and submit GLIA by the City and in any event prior to to City the schematic/design development Close of Escrow. drawings for the Project. 2. Approval - Schematic Drawings. City shall Within fifteen (5) business days after receipt approve or disapprove the schematic/design by City. development drawings for the Project. 3. Submission - Preliminary. Construction Within eight(8)months of City's approval of Drawings, and Preliminary Landscaping and the Schematic Drawings and in any event prior Grading Plans. Developer shall prepare and to Close of Escrow. submit to City preliminary construction drawings and preliminary landscaping and grading plans for the Property. 4. Approval — Preliminary Construction Within fifteen(15)business days after receipt Drawings, and Preliminary Landscaping and by City. Grading Plans. City shall approve or disapprove the preliminary construction drawings and preliminary landscaping and grading plans for the Property. 5. Submission-Final Construction Drawings and Within forty-five(45)days after City approval Landscaping and Finish Grading Plans. of the preliminary construction drawings and Developer shall prepare and submit the final in any event prior to Close of Escrow. construction drawings and the final landscaping and finish grading plans for the Property. 6. Approval - Final Construction Drawings and Within fifteen(15)business days after receipt Landscaping and Finish Grading Plans. City by City, shall approve or disapprove the final construction drawings and the final landscaping and finish grading plans for the Property. 7. Developer's Satisfaction to Conditions At least thirty (30) days prior to the Close of Precedent to Close of Financing. Developer Escrow. Attachment No. 5 Page 1 of 2 shall have satisfied all conditions required in accordance with Section 204.1 of the GLIA. S. Close of Escrow. Close of Escrow shall occur. No later than one hundred and twenty (120) days from the City's execution of the GLIA. 9. Commencement of Construction. Developer Within thirty(30)days of Close ofEscrow,but shall commence construction of the in no event prior to certification of site specific Improvements, in accordance with the GLIA Final Environmental Impact Report for the and Scope of Development. Improvements. 10. Completion of Construction. Developer shall On or before twenty-four (24) months after complete construction of the Improvements in commencement of construction. accordance with the GLIA and Scope of Development i I i i I I Attachment No. 5 Page 2 of 2 ATTACHMENT NO. 6 ENVIRONMENTAL INDEMNITY [behind this page] i i i i i i ATTACHMENT NO.6 ENVIRONMENTAL INDEMNITY THIS ENVIRONMENTAL INDEMNITY(this"Indemnity"),dated as of „ 2012, is made by VF Outdoor Inc., a Delaware a corporation, doing business as "Vans" (the "Lessee"), whose address for purposes of giving notices is 6550 Katella Avenue, Cypress, CA 90363-5102,in favor ofthe CITY OF HUNTINGTON BEACH,a public body,corporate and politic ("City"),whose address for purposes of giving notices is 2006 Main Street,Huntington Beach,CA 92648. WITNESSETH WHEREAS, City and Lessee entered into that certain Ground Lease and Improvement Agreement, dated , 2012 (the "GLIA"), pursuant to which Lessee agreed to construct a full service hotel on the Property (the "Project") in accordance with the terms and conditions of the GLIA; and WHEREAS, in furtherance of the GLIA,the City leased Property to Lessee,subject to the terms and conditions of that certain Ground Lease entered into by and between City and Lessee, dated ,2012("Ground Lease");and WHEREAS,Lessee has agreed to execute and deliver to the City this Indemnity to induce the City to enter into each Ground Lease and the GLIA;and NOW,THEREFORE, in consideration of the foregoing and in consideration of the mutual agreements hereinafter set forth,Lessee hereby agrees with the City as follows: SECTION 1. DEFINITIONS All capitalized terms used in this Indemnity shall have the meanings ascribed to them in the GLIA with the same force and effect as if set forth in full below. SECTION 2. COVENANTS AND INDEMNITY The following covenants and indemnities are hereby given and made by Lessee: 2.1 Covenants. (a) Lessee covenants that it shall(i) comply with any and all laws, regulations, and/or orders which may be promulgated,from time to time,with respect to the discharge and/or removal of Hazardous Materials,(ii)pay immediately when due the costs of the removal of,or any other action required by law with respect to, any such Hazardous Materials, and (iii) keep the i Attachment No. 6 Page 1 of 8 Property free of any lien imposed pursuant to any such laws,regulations, or orders. (b) Lessee covenants that the Property will not be used for any activities involving,directly or indirectly,the use,generation,treatment,storage,release,or disposal of any Hazardous Materials, except for de minimis quantities used at the Property in compliance with all applicable environmental laws and required in connection with the routine operation and maintenance of the Property(the"De Minimis Exception"). (c) Lessee further agrees that,except with respect to the De Minimis Exception, Lessee shall not release or dispose of any Hazardous Materials on the Property without the express written approval of the City and that any such release or disposal shall be effected in strict compliance with all applicable laws and all conditions, if any, established by the City. (d) The City shall have the right,at any time,to conduct an environmental audit ("City Audit"),at the City's expense,unless Hazardous Materials(other than in connection with the De Minimis Exception)are found,then at Lessee's sole cost and expense,and Lessee shall cooperate in the conduct of any such environmental audit but in no event shall such audit be conducted unless the City reasonably believes that such audit is warranted. Other than in an emergency, such audit shall be conducted only after prior notice has been given to Lessee and only in the presence of a representative of Lessee. The City Audit shall not interfere with occupancy or ongoing work. City shall obtain Lessee's prior approval of any work plan that involves invasive or destructive testing or work, with Lessee's approval to not be unreasonably withheld. City shall at its sole expense promptly repair and restore any damage to the Property caused by the City's entry.'If City believes it has found evidence of Hazardous Materials,City shall cooperate with the Lessee by providing the Lessee with complete information,including any inspection logs,reports,etc. (e) Lessee shall not install, or permit to be installed, on the Property friable asbestos or any substance containing asbestos and deemed hazardous by federal or state regulations respecting such material and with respect to such material Lessee shall remove or cause to be removed any such material.If Lessee shall fail to comply with this subsection within the cure period permitted under applicable law, regulation, or order, the City may do whatever is necessary to eliminate said substances from the premises or to otherwise comply with the applicable law, regulation,or order,and the reasonable costs thereof shall be added to the Obligations(as hereinafter defined)of Lessee under this Section 2. (f) Lessee shall immediately advise the City in writing of any of the following: (i) any pending or threatened environmental claim against Lessee or the Property or (ii) any condition or occurrence on the Property that (A) results in noncompliance by Lessee with any i applicable environmental law, (B) could reasonably be anticipated to cause the Property to be j subject to any restrictions on the ownership,occupancy,use or transferability of the Property under any environmental law,or(C)could reasonably be anticipated to form the basis of an environmental Attachment No.6 Page 2 of 8 claim against the Property or Lessee. 2.2 Indemnity. Except as to the active negligence or willful misconduct ofthe City or its employees, officers or agents,Lessee shall indemnify, protect,and hold the City harmless from and against any and all damages, losses, liabilities, obligations, penalties, claims, litigation, demands, defenses,judgments, suits, proceedings, costs, disbursements, or expenses (including, without limitation, attorneys' and experts' fees and disbursements) of any kind or of any nature whatsoever(collectively,the"Obligations")which may at any time be imposed upon,incurred by or asserted or awarded against the City and arising from or out of (a) The presence of any Hazardous Materials on,in,under,or affecting all or any portion of the Property or any surrounding areas; (b) The enforcement by the City of any of the provisions of this Section 2.2 or the assertion by Lessee of any defense to its obligations hereunder. SECTION 3. LESSEE'S UNCONDITIONAL OBLIGATIONS 3.1 Unconditional Obligations. Lessee hereby agrees that the Obligations will be paid and performed strictly in accordance with the terms of this Indemnity, regardless of any law, regulation,or order now or hereafter in effect in any jurisdiction affecting the GLIA or affecting any of the rights of the City with respect thereto.The obligations of Lessee hereunder shall be absolute and unconditional irrespective of: (a) The validity, regularity, or enforceability of the GLIA or any other instrument or document executed or delivered in connection therewith (collectively,the"GLIA Documents"); (b) Any alteration, amendment, modification, release, termination, or cancellation of any of the GLIA Documents, or any change in the time, manner,or place of payment of,or in any other term in respect of, all or any of the obligations of Lessee contained in any of the GLIA Documents; (c) Any waiver of,or consent to any departure from,any provision contained in the GLIA Documents; (d) Any exchange, addition, subordination, or release of, or non-perfection of any lien on or security interest in,any collateral for the GLIA Documents. (e) The insolvency or bankruptcy of Lessee,or of any indemnitor or guarantor under any other indemnity or guarantee given in respect of the GLIA Attachment No.6 Page 3 of 8 Documents;or (f) Any other circumstance that might otherwise constitute a defense available to, or a discharge of, Lessee or any other indemnitor or guarantor with respect to the GLIA Documents, or any or all of the Obligations. 3.2 Continuation. This Indemnity(a)is a continuing indemnity and shall remain in full force and effect until the satisfaction in full of all of the Obligations. SECTION 4. WAIVER Lessee hereby waives the following: (a) Promptness and diligence; (b) Notice of acceptance and notice of the incurrence of any obligation by Lessee; (c) Notice of any action taken by the City or any other interested party under this Indemnity and/or the GLIA Documents(but only to the extent it affects rights under this Indemnity), or under any other agreement or instrument relating thereto; (d) All other notices,demands, and protests, and all other formalities of every kind,in connection with the enforcement of the Obligations,the omission of or delay in which,but for the provisions of this Section 4, might constitute grounds for relieving Lessee of its Obligations hereunder; (e) Any requirement that the City protect,secure,perfect,or insure any security interest or lien in or on any property subject thereto; (f) Any requirement that the City exhaust any right or take any action against Lessee or any other person or collateral; and (g) Any defense that may arise by reason of: (1) The incapacity,lack of authority,death or disability of,or revocation hereof by,any person or persons;or (2) The failure of the City to file or enforce any claim against the estate (in probate,bankruptcy,or any other proceedings)of any person or persons. SECTION S. NOTICES Attachment No. 6 Page 4 of 8 Any notice,demand, statement,request,or consent made hereundcr shall be in writing and shall be personally served, mailed by first-class registered mail, return receipt requested, to the address set forth in the first paragraph of this Indemnity, above, or given by telecopier to the telecopier numbers stated below, with confirmations mailed by first class registered mail,return receipt requested to the address set forth above,ofthe party to whom such notice is to be given(or to such other address as the parties hereto,shall designate in writing): To City: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Stanley Smalewitz,Economic Development Director Phone: (714) 526-5582 Fax: (714) 375-5087 With a copy to: Kane,Ballmer&Berkman 515 S.Figueroa Street,Suite 1850 Los Angeles, California 90071 Attn: Susan Y.Cola Tel: 213-617-0480 Fax:213-625-0931 To Lessee: VF Outdoor,Inc.,a Delaware Corporation dba Vans 6550 Katella Avenue Cypress,CA 90363-5102 Attn: Doug Palladini Tel: (714) 889-6702 Fax: (714) With a copy to: Robert Frisbee,Esq. Connolly, Finkel&Gosselin LLP 601 S.Figueroa Street, Suite 2610 Los Angeles,Ca 90017-5704 Main Line: (213)452-6500 Direct Dial: (213)452-6506 Facsimile: (213) 622-2171 Any notice that is transmitted by electronic facsimile transmission followed by delivery of "hard" copy, shall be deemed delivered upon its transmission; any notice that is personally delivered (including by means of professional messenger service, courier service such as United Parcel Service or Federal Express,or by U.S.Postal Service),shall be deemed received on the documented Attachment No. 6 Page 5 of 8 date of receipt; and any notice that is sent by registered or certified mail, postage prepaid,return receipt required shall be deemed received on the date of receipt thereof. SECTION 6. MISCELLANEOUS 6.1 Lessee shall make any payment required to be made hereunder in lawful money of the United States of America, and in same day funds, to the City at its address specified in the first paragraph hereof. 6.2 No amendment of any provision of this Indemnity shall be effective unless it is in writing and signed by Lessee and the City,and no waiver of any provision of this Indemnity,and no consent to any departure by Lessee from any provision ofthis Indemnity,shall be effective unless it is in writing and signed by the City,and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 6.3 No failure on the part of the City to exercise, and no delay in exercising, any right hereunder or under the GLIA Documents(as it relates to rights under this Indemnity)shall operate as a waiver thereof,nor shall any single or partial exercise of any right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the City provided herein and in the GLIA Documents are cumulative and are in addition to,and not exclusive of,any rights or remedies provided by law. 6.4 Any provision of this Indemnity that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof and without affecting the validity or enforceability of such provision in any other jurisdiction. 6.5 This Indemnity shall be binding upon Lessee and Lessee's successors and assigns; provided, however, that from and after the effective date of a Transfer, the transferor shall be released from all obligations and shall release any rights it may have from the City under this Agreement.This Indemnity shall inure,together with all rights and remedies of the City hereunder, to the benefit ofthe City,its respective directors,officers,employees,and agents,any successors to the City's interest in the Property, any other person who acquires any portion of the Property at a foreclosure sale or otherwise through the exercise of the City's rights and remedies under the GLIA Documents,any successors to any such person,and all directors,officers,employees,and agents of all of the aforementioned parties. 6.6 Lessee hereby(a)irrevocably submits to the jurisdiction of any California or federal court sitting, in each instance, in Orange County in any action or proceeding arising out of or relating to this Indemnity, (b) waives any defense based on doctrines of venue or forum non convenient or similar rules or doctrines,and(c)irrevocably agrees that all claims in respect of any Attachment No.6 Page 6 of 8 such action or proceeding may be heard and determined in such California or federal court.Lessee irrevocably consents to the service of any and all process which may be required or permitted in any such action or proceeding to the address specified in the first paragraph of this Indemnity,above. Lessee agrees that a final judgment in any such action.or proceeding shall be inclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law. 6.7 The title of this document and the captions used herein are inserted only as a matter of convenience and for reference and shall in no way define,limit,or describe the scope or the intent of this Indemnity or any of the provisions hereof. 6.8 This Indemnity shall be governed by, and construed and interpreted in accordance with,the laws of the State of California applicable to contracts made and to be performed therein, except to the extent that the laws of the United States preempt the laws of the State of California. i 6.9 This Indemnity may be executed in any number of counterparts,each ofwhich shall constitute an original and all of which together shall constitute one agreement. IN WITNESS WHEREOF,Lessee has duly executed this Indemnity as of the date first set forth above. THE CITY OF HUNTINGTON BEACH(CITY) Date: Mayor ATTEST: lty erk i REVIEWED AND I APPROVED AS TO FORM: I Attachment No. 6 Page 7 of 8 City Attorney B Jennifer McGrath APPROVED AS TO FORM: KANE,BALLMER&BERKMAN I By: COUNTERPART City Special Counsel Murray O.Kane VF OUTDOOR INC.,A DELAWARE CORPORATION, Date: By: K ailey,Presidtj I I I Attachment No. 6 Page 8 of 8 City Attorney By: Jennifer McGrath APPROVED AS TO FORM: KANE, BALLMER& BERKMAN By'i c.,,vr ',%, ." T City Speciai Counsel Murray O. Kane VF OUTDOOR INC., A DELAWARE CORPORATION, Date: By: Kevin Bailey, President Attachment No. 6 Page 8 of 8 EXHIBIT"A" LEGAL DESCRIPTION All that certain real property situated in the County of Orange, State of California,described as follows: Parcels 1 and 2 of Parcel Map No.90-327, in the City of Huntington Beach, County of Orange, State of California,as per map recorded in Book 279 Page 33 and 34 of Parcel Maps, in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 i i I i i ATTACHMENT NO. 7 GROUND LEASE [behind this page] I ATTACHMENT NO. 7 i GROUND LEASE I by and between THE CITY OF HUNTINGTON BEACH, "Landlord" and VF OUTDOOR,INC.,a Delaware corporation doing business as"Vans" i "Tenant" i TABLE OF CONTENTS Page ARTICLE I DEFINITIONS........................................................................................................ 1 1.1 Additional Rent....................................................................................................... 1 1.2 Agreed Rate. ........................................................................................................... 1 1.3 Commencement Date..............................................................................................2 1.4 Covenant Period......................................................................................................2 1.5 Default(s) ...............................................................................................................2 1.6 Environmental Laws...............................................................................................2 1.7 Force Majeure Events.............................................................................................2 1.8 Governmental Restrictions. ....................................................................................2 1.9 Improvements.........................................................................................................2 1.10 Leased Premises......................................................................................................2 1.11 Leasehold Mortgage. ..............................................................................................2 1.12 Lease Year. .............................................................................................................2 1.13 Lender..............................,......................................................................................3 1.14 Losses and Liabilities..............................................................................................3 1.15 Mortgage.................................................................................................................3 1.16 Party or Parties........................................................................................................3 1.17 Permitted Exceptions..............................................................................................3 1.18 Rent.........................................................................................................................3 1.19 Representatives........................................................................................ .....3 .......... 1.20 Term......................... ..... .........3 1.21 Title Insurer.............................................................................................................3 1.22 Title Policy..............................................................................................................3 1.23 Transfer Documents................................................................................................4 1.24 Transfer/Transferee.................................................................................................4 1.25 Uncured Default(s). ................................................................................................4 ARTICLE 2 LEASED PREMISES.............................................................................................4 2.1 Leased Premises......................................................................................................4 2.2 Leased Premises;Condition of Premises;Zoning..................................................4 2.3 Designation as Point of Sale...................................................................................5 ARTICLE3 TERM......................................................................................................................6 3.1 Term........................................................................................................................6 3.2 Reserved..................................................................................................................6 3.3 Possession;Covenant of Quiet Enjoyment. ......................6 ARTICLE 4 RENT PAYMENTS................................................................................................7 4.1 Rent.........................................................................................................................7 4.2 Base Rent Amounts...................................... ..........................................................7 i 4.3 Additional Rent.......................................................................................................7 4.4 Miscellaneous.........................................................................................................7 4.5 Triple Net Lease;No Counterclaim,Abatement,etc..............................................7 ARTICLE 5 USE OF THE LEASED PREMISES, MAINTENANCE AND HAZARDOUS SUBSTANCES........................................................................................ .............. 8 5.1 Use of the Leased Premises.................................................................................... 8 5.2 No use of Hazardous Substances on the Leased Premises..................................... 8 5.3 Notice and Remediation by Tenant. .......................................................................9 5.4 Environmental Indemnity.......................................................................................9 5.5 Termination; Subtenants.........................................................................................9 ARTICLE 6 OWNERSHIP OF IMPROVEMENTS...................................................................9 ARTICLE 7 REPAIRS AND MAINTENANCE...................................................................... 10 7.1 Landlord's Nonresponsibility............................................................................... 10 7.2 Tenant's Duty to Maintain Premises. ................................................................... 10 7.3 Damage or Destruction......................................................................................... 10 ARTICLE 8 LEASEHOLD FINANCING................................................................................ 12 8.1 Conditions To Obtaining Leasehold Mortgage. ................................................... 12 8.2 Lender's Rights..................................................................................................... 12 8.3 Lender Cure Rights............................................................................................... 13 8.4 Obligations of Lender and Purchaser.................................................................... 14 8.5 New Lease............................................................................................................. 15 8.6 New Lease Priority. .............................................................................................. 15 8.7 Liability of New Tenant..................... 8.8 Reserved................................................................................................................ 16 8.9 Legal Proceedings................................................................................................. 16 8.10 Notices.................................................................................................................. 16 8.11 Encumbrance of Landlord's Fee Estate................................................................ 16 8.12 Landlord Right to Cure......................................................................................... 16 ARTICLE 9 ASSIGNMENT AND TRANSFER...................................................................... 17 9.1 Transfer of the Lease,the Leased Premises or the Improvements Thereon......... 17 9.2 Transfer of Tenant's Interest in Lease and Tenant's Ownership.......................... 18 ARTICLE 10 TAXES AND IMPOSITIONS.............................................................................. 18 , 10.1 Tenant To Pay Impositions................................................................................... 18 10.2 Proration of Impositions....................................................................................... 19 10.3 Payment Before Delinquency............................................................................... 19 10.4 Contest of Imposition............................................................................................ 19 10.5 Tax Returns And Statements. ...............................................................................20 10.6 Possessory Interest Taxes. .................20 ii i ARTICLE 11 UTILITY SERVICES...........................................................................................21 11.1 Tenant's Responsibility. .......................................................................................21 11.2 Landlord Has No Responsibility...........................................................................21 ARTICLE12 INSURANCE........................................................................................................21 12.1 Fire and Extended Coverage Insurance................................................................21 12.2 Commercial General Liability Insurance..............................................................21 12.3 Worker's Compensation Insurance-,.....................................................................22 12.4 Course of Construction Insurance.........................................................................22 12.5 Business Automobile Liability Insurance.............................................................22 12.6 Policy Form,Content And Insurer........................................................................22 12.7 Waiver of Subrogation..........................................................................................23 12.8 Indemnification.....................................................................................................24 ARTICLE 13 CONDEMNATION..............................................................................................25 13.1 General..................................................................................................................25 13.2 Award....................................................................................................................25 13.3 Taking for Temporary Use....................................................................................25 ARTICLE14 DEFAULT............................................................................................................26 14.1 Default...................................................................................................................26 14.2 Notice of Default;Tenant's Right to Cure............................................................26 14.3 Landlord's Right to Cure Tenant's Defaults.........................................................27 14.4 Notice of Landlord's Default;Tenant Waiver......................................................27 14.5 Landlord's Remedies............................................................................................28 14.6 Tenant Remedies;Remedies Cumulative.............................................................29 14.7 No Waiver.............................................................................................................30 14.8 Delays in Performance..........................................................................................30 ARTICLE 15 EXPIRATION;TERMINATION.........................................................................30 ARTICLE 16 NO DISCRIMINATION.......................................................................................31 ARTICLE 17 MISCELLANEOUS.............................................................................................32 17.1 Landlord's Representations and Warranties.........................................................32 17.2 Tenant's Representations and Warranties.............................................................33 17.3 Survival of Representations, Warranties and Covenants......................................33 17.4 Further Assurances .................................................................................34 17.5 Estoppel Certificate........................................................................................... ...34 17.6 Notices.......................................................................................:..........................34 17.7 Attorneys' Fees..........................................................................:..........................35 17.8 Headings. ..............................................................................................................35 17.9 Rights of Successors.............................................................................................35 17,10 Amendments in Writing 17.11 No Brokers............................................................................................................36 iii 17.12 Negation of Partnership. .......................................................................................36 17.13 Time of Essence....................................................................................................36 17.14 Interpretation.........................................................................................................36 17.15 Applicable Law; Severability...............................................................................37 17.16 Exhibits.................................................................................................................37 17.17 Short Form of Lease..............................................................................................37 17.18 Landlord's Rights of Inspection. ..........................................................................37 17.19 Nonmerger of Fee and Leasehold Estates............................................................. 37 17.20 Counterparts..........................................................................................................38 17.21 Interest On Past Due Obligations..........................................................................38 17.22 Holding Over. .......................................................................................................38 EXHIBITS EXHIBIT A - LEGAL DESCRIPTION EXHIBIT B - SITE MAP EXHIBIT C - MEMORANDUM OF LEASE EXHIBIT D - ESTOPPEL CERTIFICATE iv I i GROUND LEASE This Ground Lease("Lease")is dated for reference purposes as of the_day of , 2012,and is entered into by and between the following(collectively,the"Parties"): THE CITY OF HUNTINGTON BEACH, a public body corporate and politic ("City" or "Landlord"), and VF OUTDOOR, INC.,a Delaware corporation doing business as"Vans"("Tenant"). RECITALS A. The subject property (the "Property'D is located in the Huntington Beach Redevelopment Project Area, within the City of Huntington Beach, California, on certain real property located at[address]. B. This Ground Lease is entered into pursuant to that certain Ground Lease and Improvement Agreement by and between Landlord(as"City")and Tenant(as"Developer")dated as of , 2012 (the "GLIA') for the purpose of providing part of the financing for the redevelopment of the Property with a public skate park("the Project"),which shall be operated to meet certain criteria,as more specifically described herein and in the GLIA. GLIA as used herein shall mean,refer to and include the GLIA,as well as any riders,exhibits,addenda,implementation agreements, amendments and attachments thereto (which are hereby incorporated herein by this reference) or other documents expressly incorporated by reference in the GLIA. Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the GLIA. 3 NOW, THEREFORE, in consideration of the payments to be made hereunder and the covenants and agreements contained herein,Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the real property hereinafter defined as the "Leased Premises" upon the following terms and conditions. ARTICLE 1 DEFINITIONS 1.1 Additional Rent. The term"Additional Rent"means all sums of money required to be paid pursuant to the terms of this Lease other than Rent, including, but not limited to, unpaid utilities,unpaid maintenance,unpaid Impositions, or unpaid liens or encumbrances. 1.2 Agreed Rate. The term"Agreed Rate"as used herein shall mean an annual rate of interest equal to the lesser of(i)two percent(2%)above the rate of interest announced from time to time by the Bank of America,Downtown Huntington Beach,Main Branch,as the prime or reference rate(or,in the event said bank ceases to announce a prime or reference rate or is acquired or ceases operations and there is no successor bank, another established and financially secure commercial bank,having a headquarters in California,selected by Landlord),or(i i)the highest rate permitted by Attachment No.7 Page 1 of 40 law, if any. 1.3 Commencement Date. The Commencement Date is the date that the Memorandum of Ground Lease (Attachment No. 7A to the GLIA) is fully executed by Landlord and Tenant and recorded in the official records of Orange County, signifying the commencement of this Lease. 1.4 Covenant Period. The term"Covenant Period"means Term of this Lease. 1.5 Default(s). The term"Default(s)"as used herein shall have the meaning described in Section 14.1. 1.6 Environmental Laws. The term"Environmental Laws"means any federal,state or local environmental,health and/or safety-related law,rule,regulation,requirement,order,ordinance, directive,guideline,permit or permit condition,currently existing and as amended,enacted,issued or adopted in the future. The term Environmental Laws includes, but is not limited to, the Comprehensive Environmental Response,Compensation and Liability Act of 1980,as amended,and similar state or local laws. 1.7 Force Majeure Events. The term"Force Majeure Events" shall have the meaning described in Section 14.8. 1.8 Governmental Restrictions. The term"Governmental Restrictions"as used herein shall mean and include any and all laws,statutes,official policies,ordinances,codes,formal decrees, rulings,regulations,writs,injunctions,orders,rules,conditions of approval or authorizations ofany governmental entity,agency or political subdivision,now in force or hereafter adopted,which are applicable to the Leased Premises or the use thereof as of the date such term is being applied. 1.9 Improvements. The term "Improvements" shall mean and include all buildings, structures, fixtures, excavation, parking areas, walkways, drives, landscape areas, underground i installations and all other improvements of whatsoever character constructed on,around,under or over the Leased Premises. 1.10 Leased Premises. The term"Leased Premises"as used herein shall have the meaning described in Article 2 below. 1.11 Leasehold Mortgage. The term "Leasehold Mortgage" shall mean any mortgage, deed of trust,or other established method of securing real property financing,all of which shall be subject to the conditions and obligations in Articles 8, herein. ` 1.12 Lease Year. The term "Lease Year" as used herein shall mean each of the consecutive twelve (12) calendar month periods beginning on the first day of the first calendar month following the Commencement Date unless the Commencement Date falls on the first day of a Attachment No.7 Page 2 of 40 calendar month,in which event the Lease Year shall commence on the Commencement Date. As an example, "Lease Year 20" means the Lease Year commencing after the nineteenth (19th) anniversary of the Commencement Date. 1.13 Lender. The term"Lender" shall mean the owner and holder of any Mortgage or Leasehold Mortgage permitted by this Lease. 1.14 Losses and Liabilities. The term"Losses and Liabilities"as used herein shall mean all liabilities, claims, losses, causes of action, charges, penalties, damages, costs and expenses (including reasonable attorneys'fees and costs),ofwhatsoever character,nature and kind,whether to property or person, whether by direct or derivative action, and whether known or unknown, suspected or unsuspected, latent or patent. 1.15 Mortgage. The term "Mortgage" as used herein shall mean and include any mortgage,deed of trust, monetary lien,financing conveyance or other voluntary monetary lien of any kind and all appropriate modes of financing real estate ownership,which encumbers Landlord's fee estate. 1.16 Party or Parties. The term"Party"shall refer to one of Landlord or Tenant;the term "Parties"shall refer to both Landlord and Tenant. 1.17 Permitted Exceptions. The term"Permitted Exceptions"shall have the same meaning as set forth in Section 208 of the GLIA. 1.18 Rent. The term"Rent"as used herein shall have the meaning described in Section 4.1. 1.19 Representatives. The term"Representatives"as used herein shall mean the agents, contractors, employees (to the extent acting on behalf of such entity and within the scope of its employment or contract). 1.20 Term. The term"Term"as used herein shall mean the term of this Lease as described in Section 3.1 below. 1.21 Title Insurer. The term"Title Insurer"as used herein shall mean the Lawyers Title Insurance Company. 1.22 Title Policy. The term"Title Policy"as used herein shall mean and include the most current form of ALTA owner's policy of title insurance,dated as of the Commencement Date,and with liability in the amount ofthe value ofthe land and completed improvements,insuring Tenant as the owner of the leasehold estate under the Lease. Attachment No.7 Page 3 of 40 1.23 Transfer Documents. The term"Transfer Documents"as used herein shall have the meaning described in Section 9.1. 1.24 Transfer/Transferee. The term"Transfer"as used herein shall mean and include any conveyance,transfer, sale, assignment, lease, license, concession, franchise, gift, hypothecation, Mortgage,pledge,encumbrance,or the like,to any person or entity("Transferee"),excluding any Leasehold Mortgage which encumbers Tenant's leasehold estate created by this Lease. 1.25 Uncured Default(s). The term"Uncured Default(s)"as used herein shall have the meaning described in Section 14.2.4. ARTICLE 2 LEASED PREMISES 2.1 Leased Premises. The premises demised and leased hereunder("Leased Premises")consist of the real property located in the City of Huntington Beach("City"),County of Orange, State of California,and more particularly described in the Legal Description for that property attached hereto as Exhibit A, and depicted on the Site Map attached hereto as Exhibit B,together with all right,title and interest of Landlord in and to all rights of way or use,servitudes,licenses,easements,tenements,hereditaments and appurtenances now or hereafter belonging or pertaining to the use of such real property during the Term. The parties agree that Tenant alone shall be entitled to all federal tax attributes of ownership of the Improvements. 2.2 Leased Premises;Condition of Premises;Zoning. Prior to the Commencement Date,Tenant,at Tenant's sole expense,shall have investigated and approved the physical condition of, and the condition of title with respect to, the Leased Premises and the Improvements. Tenant acknowledges and agrees that Landlord makes no representation or warranty,express or implied,written or oral,with respect to the condition of the Leased Premises or the Improvements, or their fitness or availability for any particular use. Landlord shall provide the Title Policy(Landlord shall only pay for the CLTA portion of the Title Policy), insuring Tenant as the owner of the leasehold estate under the Lease, subject only to the Permitted Exceptions. 2.2.1 Landlord makes no representations,express or implied,with respect to the legality,fitness,or desirability of the Leased Premises for Tenant's intended use.If Tenant desires to do so,Tenant shall have the right to conduct its own investigation,to its satisfaction,with respect to any matters affecting Tenant's ability to use the Leased Premises for Tenant's intended use. Attachment No.7 Page 4 of 40 2.2.2 The Leased Premises shall be delivered from Landlord to Tenant in an"as is" physical condition, with no warranty, express or implied by Landlord as to the presence of Hazardous Substances,or the condition of the soil,its geology or the presence of known or unknown faults. If the condition of the Leased Premises is not in all respects entirely suitable for the use or uses to which such Leased Premises will be put,then it is the sole responsibility and obligation of Tenant to place the Leased Premises in all respects in a condition entirely suitable for the development thereof, solely at Tenant's expense. 2.2.3 Effective on the Commencement Date,Tenant agrees to indemnify,defend and hold harmless Landlord and City of Huntington Beach("City"),and their respective members, officers, agents, employees, contractors and consultants, in accordance with the Environmental Indemnity (Attachment No. 6 to the GLIA). 2.2.4 Effective on the Commencement Date,Tenant waives,releases and discharges the Landlord,the City and their respective members, 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 the Landlord's or Tenant's use, maintenance, ownership or operation of the Leased Premises, any Hazardous Substances on the Leased Premises, or the existence of Hazardous Substances contamination in any state on the Leased Premises,however the Hazardous Substances came to be placed there,except that arising out of the active negligence or willful misconduct of the Landlord or its employees,officers or agents. Tenant 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 or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor." To the extent of the release set forth in this Section 2.2.4, Tenant hereby waives and relinquishes all rights and benefits which it may have under Section 1542 of the California Civil Code. 2.3 Designation as Point of Sale Tenant and its successors and assigns shall maintain such licenses and permits as may be required by any governmental agency to conduct taxable sales arising from any project on the Property and,to the extent permitted by law,shall designate City of Huntington Beach as the"point of sale"for all taxable sales and lease transactions occurring from any project on the Property in all reports to the California State Board of Equalization in accordance with the Bradley-Burns Uniform Attachment No.7 Page 5 of 40 Sales and Use Tax Law (Revenue and Taxation Code 72000 et seq.), as it may be amended or substituted from time to time,and on sales tax returns to the State of California for all taxable sales occurring at any project on the Property. ARTICLE 3 TERM 3.1 Term The Term of this Lease shall be that period of time beginning on the Commencement Date and ending at midnight on the twentieth(20th)anniversary of the Commencement Date,unless the Term of this Lease is sooner terminated as provided for herein. Landlord and Tenant agree that during the period commencing from one year prior to the termination of the Term of this Lease and ending no later than sixty(60)days prior to the termination of the Term of this Lease,Tenant shall have an option to extend the Lease Term by ten(10)years, subject to the following conditions: (i) no default of this Agreement existing at the time of exercise of this Option; (ii) City's written consent, which may be conditioned upon or withheld in City's reasonable discretion, pending Tenant's completion of upgrades or deferred maintenance to the Improvements. 3.2 Reserved. 3.3 Possession;Covenant of Quiet Enjoyment. 3.3.1 Sole possession of the Leased Premises shall be delivered to Tenant on the Commencement Date free and clear of any other tenancies or rights of occupancy or use,and Tenant shall take possession as of that date. 3.3.2 Landlord covenants that,subject to the limitations expressly set forth herein, Tenant, upon Tenant's timely payment of the Rent and performance of Tenant's covenants and obligations under this Lease, may quietly have, hold, and enjoy the Leased Premises during the Term ofthis Lease,without hindrance or interruption by Landlord or anyone claiming by or through Landlord, subject to Landlord's right to enter upon the Leased Premises as expressly provided herein. Attachment No.7 Page 6 of 40 ARTICLE 4 RENT PAYMENTS 4.1 Rent. The Base Rent for the entire Term shall be payable in advance upon City's execution of this Lease. 4.2 Base Rent Amounts. The Base Rent shall be ONE DOLLAR AND NO CENTS($1.00)per Lease Year. 4.3 Additional Rent. Tenant shall pay any as Additional Rent any expenses incurred by the Landlord resulting from Tenant's failure to pay or cause to be paid any amounts owed to the Landlord under this Lease or any person or entity, including,but not limited to,unpaid utilities,unpaid maintenance, unpaid Impositions, or unpaid liens or encumbrances. 4.4 Miscellaneous. All payments of Rent shall be made to Landlord as they become due in lawful money of the United States of America in cash or by corporate check drawn on sufficient available funds,at such place as is designated herein by Landlord for the receipt of notices or such other place as shall be designated to Tenant by Landlord in writing from time to time. 4.5 Triple Net Lease;No Counterclaim,Abatement,etc. All Rent shall be paid absolutely net to Landlord,so that this Lease shall yield to Landlord the full amount of the installments of all Rent throughout the Term,and(unless otherwise expressly provided herein) shall be paid without assertion of any counterclaim,setoff, deduction or defense and, except as otherwise expressly provided herein, without abatement, suspension, deferment, diminution or reduction. Under no circumstances or conditions,whether now existing or hereafter arising,or whether beyond the present contemplation of the parties,shall Landlord be expected or required to make any payment of any kind whatsoever,including without limitation,any regular or special assessments levied against the Property,or be under any obligation or liability hereunder, except as herein expressly set forth. Landlord shall have no responsibility for any costs of repair, maintenance or replacement whatsoever. Except as otherwise expressly provided herein,this Lease shall continue in full force and effect,and the obligations of Tenant hereunder shall not be released, discharged or otherwise affected, by reason of. (a) any damage to or destruction of the Leased Premises or Improvements or any part thereof or any Taking of the Leased Premises or the Improvements or any part thereof;(b)any restriction or prevention of or interference with any use of Attachment No.7 Page 7 of 40 the Leased Premises or the Improvements or any part thereof which materially interferes with Tenant's possession or use of the Leased Premises(other than a breach of Landlord's covenant of quiet enjoyment set forth at Section 3.3); (c) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other proceeding relating to Landlord, or any action taken with respect to this Lease by any trustee or receiver of Landlord with respect to this Lease by any trustee or receiver of Landlord, or by any court, in any proceeding; (d) any claim which Tenant has or might have against Landlord; or(e) any failure on the part of Landlord to perform or comply with any of the terms hereof or of any other agreement with Tenant. Except as expressly provided in this Lease, the obligations of Tenant shall be separate and independent covenants and agreements. ARTICLE 5 USE OF THE LEASED PREMISES, MAINTENANCE AND HAZARDOUS SUBSTANCES 5.1 Use of the Leased Premises. 5.1.1 Tenant covenants and agrees for itself, its successors,its assigns and every successor in interest to the Property or any part thereof, that Tenant, such successors and such assignees shall use the Property only for the uses specified in the Redevelopment Plan. No change in the use of the Property shall be permitted without the prior written approval of City. 5.1.2 Notwithstanding the generality of Section 5.1.1,Tenant, its successors and assigns,shall use the Leased Premises and/or Improvements only for the following uses:operation and maintenance of a public skate park("Skate Park"). Skate Park shall be free and open to the public from 10 a.m.to 10 p.m.,Mondays through Sundays,except for special events occurring no more than twenty(20)calendar days per year,collectively,and agreed to,in writing,by Tenant and City.Nothing herein shall be deemed to supersede,waive,or modify any restrictions or prohibitions imposed by the City, in accordance with its zoning code. 5.1.3 Tenant may not use the Leased Premises for any retail or other ancillary use, provided however that a concession stand first approved in writing by the City Manager shall be permitted subject to the Tenant obtaining all necessary governmental permits and approvals therefor. 5.1.4 Subject to notice and cure rights herein, Tenant's failure to operate Skate Park in accordance with this Agreement for thirty (30) consecutive days shall be deemed a default of this Lease. 5.2 No use of Hazardous Substances on the Leased Premises. Tenant covenants and agrees that it shall not, and that any Lease shall provide that the subtenant shall not, treat, use, store, dispose, release, handle or otherwise manage Hazardous I Attachment No.7 j Page 8 of 40 Substances on the Leased Premises except in connection with any construction, operation, maintenance or repair of the Improvements or in the ordinary course of its business,and that such conduct shall be done in compliance with all applicable federal,state and local laws,including all Environmental Laws. Tenant's violation of the foregoing prohibition shall constitute a breach hereunder and Tenant shall indemnify,hold harmless and defend the Landlord for such violation as provided below. 5.3 Notice and Remediation by Tenant. Tenant shall promptly give the Landlord written notice of any reportable release of any Hazardous Substances,and/or any notices,demands,claims or orders received by Tenant from any governmental agency pertaining to Hazardous Substances which may affect the Leased Premises. 5.4 Environmental Indemnity. Tenant agrees to indemnify, defend and hold harmless City and its respective members, officers, agents, employees, contractors and consultants, in accordance with the Environmental Indemnity(Attachment No.6 to the GLIA).The indemnity provided in this Section shall survive the Termination of the Lease. 5.5 Termination; Subtenants. The agreements and obligations ofTenant under this Article 5 with regard to indemnification of Landlord shall survive the scheduled termination or sooner expiration ofthe Term for any reason, for five(5)years and all claims relating thereto must be delivered in writing to Tenant within such period. No action by any subtenant in violation of its Lease shall constitute a cause to terminate this Lease provided that Tenant diligently pursues its available remedies against such subtenant. ARTICLE 6 OWNERSHIP OF IMPROVEMENTS Notwithstanding anything that is or appears to be to the contrary herein, any and all Improvements erected on the Leased Premises as permitted by this Lease, as well as any and all alterations or additions thereto or any other Improvements or fixtures on the Leased Premises,shall be owned by Tenant until the expiration of the Term or sooner termination of this Lease in accordance with the terms hereunder. Upon the expiration or sooner termination of this Lease in accordance with' the terms hereunder, all Improvements and all alterations, additions or improvements thereto that are made to or placed on the Leased Premises by Tenant or any other person shall be considered part of the real property of the Leased Premises and shall remain on the Leased Premises and become the property of Landlord;provided that Tenant shall retain ownership of and shall be required to remove furniture, equipment,machinery,trade fixtures and removable personal property except as may be left on the Leased Premises with Landlord's prior written Attachment No.7 Page 9 of 40 i approval. Except as otherwise expressly provided in this Lease, any non-disturbance agreement approved by Landlord,any easement approved by Landlord,or any written instrument executed by Landlord which expressly states that Landlord is waiving its rights under this Article 6 to receive such Improvements free and clear of all other claims,said Improvements shall become Landlord's property free and clear of any and all rights to possession and all claims to or against them by Tenant or any third person or entity. ARTICLE 7 REPAIRS AND MAINTENANCE 7.1 Landlord's Nonresponsibility. During the Term of this Lease, Landlord shall not be required to maintain or make any repairs or replacements of any nature or description whatsoever to the Leased Premises or the Improvements thereon,except as expressly provided elsewhere herein. 7.2 Tenant's Duty to Maintain Premises. Except as expressly otherwise provided for herein,throughout the Term ofthis Lease,Tenant shall,at Tenant's sole cost and expense,maintain or cause to be maintained the Leased Premises and the Improvements now or hereafter located on the Leased Premises in good and clean condition and repair,free of debris,and in compliance with(i)all Governmental Restrictions and(ii)all applicable rules, orders, and regulations of any insurance company insuring all or any part of the Leased Premises or the Improvements thereon or both,and Tenant shall make or cause to be made whatever repairs and replacements are required by such enactments or provisions or future enactments or provisions. 7.3 Damage or Destruction. 7.3.1 In the event any of the Improvements are damaged by an insured casualty, Tenant promptly shall remove the debris resulting from such event, and within a reasonable time thereafter shall apply insurance proceeds to the repair or restoration of the Improvements so damaged to their condition immediately prior to such casualty, such repair or restoration to be performed in accordance with all provisions of this Lease. 7.3.2 In the event any ofthe Improvements are damaged by an uninsured casualty, or the insurance proceeds are insufficient to repair or restore the Improvements to their condition prior to the casualty,Tenant promptly shall remove the debris resulting from such event,and within a reasonable time thereafter shall either(i) repair or restore the Improvements so damaged to the extent economically feasible, such repair or restoration to be performed in accordance with all provisions ofthis Lease,or(ii)erect other Improvements in such location,provided all provisions of this Lease are complied with to the extent economically feasible,or(iii)if the damage occurs after i Attachment No.7 Page 10 of 40 the end of the Covenant Period,demolish the damaged portion of such Improvements,restore any remaining Improvements to an architectural whole,remove all rubbish,and pave or plant grass and otherwise restore the area to a neat,orderly,sanitary and attractive condition. Landlord shall have the option to choose among the aforesaid alternatives,subject to rights of permitted Lenders secured by the Lease, but Tenant shall be obligated to perform one of such alternatives, provided that nothing herein obligates Tenant to obtain financing exceeding the insurance proceeds, if any. Tenant shall give notice to Landlord within a reasonable time of which alternative it elects. Nothing contained in subsections 7.3.1 or 7.3.2 shall be construed as permitting the abatement or reduction of Rent, or the termination of this Lease. 7.3.3 Notwithstanding anything to the contrary contained in this Lease,if(i)there is damage to or destruction ofthe Improvements on the Leased Premises during the last five(5)years ofthe Term and the cost ofrepairing said damage or destruction exceeds the cost of demolishing and removing the remaining Improvements on the Leased Premises, or (ii) there is damage to or destruction ofthe Improvements on the Leased Premises which(1)arises from a cause which is not required to be insured against under any provision of this Lease,or(2)arises from a cause which is in fact insured against in compliance with the terms of this Lease, but for which the recoverable proceeds of such insurance are less than 90%ofthe cost to repair said damage or destruction,and(3) the cost to Tenant (which is not covered by insurance proceeds) of repairing said damage or destruction exceeds the cost of demolishing and removing the remaining Improvements on the Leased Premises, or (iii) there is damage to or destruction of the Improvements on the Leased Premises and the Governmental Restrictions then in effect with respect to the Leased Premises prohibit the construction of economically viable replacement Improvements with respect to a use which Tenant either has the right to engage in under this Lease or which Tenant desires to engage in and Landlord will permit to be engaged in,then Tenant shall have the option to terminate this Lease, subject to Tenant's satisfaction of all ofthe following requirements: (A)Tenant shall,within ninety (90)days after the event giving rise to such right to terminate, give Landlord written notice of its election to terminate("Notice of Election to Terminate");and(B)Tenant shall, at the election of Landlord(which election shall be communicated in writing to Tenant("Demolition Notice")within thirty(30)days of Landlord's receipt of the Notice of Election to Terminate),raze and remove the damaged or destroyed Improvements and any other Improvements on the Leased Premises that Landlord may designate in the Demolition Notice,and shall complete said demolition and removal and shall vacate the Improvements on the Leased Premises within ninety(90)days of Landlord's delivery ofthe Demolition Notice(which vacation date shall fix the termination date ofthis Lease); and (C) Tenant shall comply with all provisions of Article 15 of this Lease consistent with this Section 7.3 prior to or concurrent with Tenant's vacation of the Improvements on the Leased Premises. If Tenant fails to satisfy the requirements set forth in(B)or(C)above,the failure to meet such conditions shall not invalidate the termination of this Lease, although, in that event and notwithstanding anything else in this Lease that may be or appear to be to the contrary,Tenant shall remain liable to Landlord in damages for such breach. Any and all property damage insurance proceeds(exclusive of any proceeds applicable to Tenant's trade fixtures, equipment or personal Attachment No.7 Page 11 of 40 I property that would be retained by Tenant at the end of the Term)paid to Tenant as a result of the damage or destruction giving rise to the termination, shall be distributed to the Parties, and any Lender,as their interest are determined. i 7.3.4 Except as expressly provided in this Lease,no deprivation, impairment,or limitation of use resulting from any damage or destruction or event or work contemplated by this Section shall entitle Tenant to any offset,abatement,or reduction in Rent,nor to any termination or extension of the Term hereof. ARTICLE 8 LEASEHOLD FINANCING 8.1 Conditions To Obtaining Leasehold Mortgage. 8.1.1 Tenant shall not encumber the estate created by this Lease, except as expressly provided in this Article 8. 8.1.2 Tenant shall have the right, with Landlord's prior written consent, to encumber Tenant's estate created by this Lease with any Leasehold Mortgage;provided,that such Leasehold Mortgage shall meet each of the following terms,conditions and requirements: (i) The Leasehold Mortgage shall contain provisions requiring that copies of all notices of default under said Leasehold Mortgage must be sent to Landlord; (ii) The Leasehold Mortgage shall not permit or authorize, or be construed to permit or authorize, any Lender to devote the Leased Premises to any uses, or to construct any Improvements thereon,other than those uses and Improvements provided for and authorized by this Lease. Notwithstanding anything to the contrary set forth herein, City's consent shall not be required for any Leasehold Mortgage following a foreclosure so long as (i) it is made by an institutional lender,(ii)any loan secured thereby is fully amortized by the end of the Term of this Lease,and(iii)the loan to value,determined taking into consideration any applicable covenants,for any such loan shall not exceed seventy percent(70%). 8.2 Lender's Rights. So long as any Leasehold Mortgage permitted by this Lease exists, or any Lender(or its nominee)owns all or any portion of the leasehold estate created hereunder,and until such time as the lien (or estate) of any Leasehold Mortgage (or its holder) has been extinguished (which provisions shall be for the benefit of the Leasehold Mortgagee): Attachment No.7 Page 12 of 40 8.2.1 Following Lender's acquisition of Tenant's interest in this Lease pursuant to a foreclosure or an assignment in lieu of foreclosure,the Lender shall be entitled to assign its interest in this Lease without Landlord's prior consent,subject to compliance with the terms and conditions of this Article 8. All subsequent Transfers by the Transferee of Lender shall comply with the provisions of this Lease, including all restrictions on Transfer set forth in Article 9 hereof,and 8.2.2 If, in connection with securing by Tenant of any Leasehold Mortgage,the affected Lender requests an amendment with respect to the Lender protection rights set forth in this Article 8, Landlord agrees not to unreasonably withhold its consent to any such amendment; provided, that Landlord shall not be required to consent to such an amendment if it would, in Landlord's reasonable determination, materially impair any of Landlord's rights or materially increase any of Landlord's obligations under this Lease. 8.2.3 Default Notice. Landlord, upon providing Tenant with any "Notice of Default"(as defined below)under this Lease,shall,at the same time,provide a copy of such notice to every Lender who has given written notice to Landlord of its interest in the leasehold estate.From and after such notice has been given to a Lender, such Lender shall have the same period for remedying the Default complained of as the cure period provided to Tenant pursuant to Section 14.2, plus the additional period provided to such Lender as specified below. Landlord shall accept performance by or at the instigation of such Lender as if the same had been done by Tenant. 8.3 Lender Cure Rights. Notwithstanding anything to the contrary contained in this Lease,Landlord shall have'no right to terminate this Lease on account of an Uncured Default of Tenant unless, following expiration ofTenant's applicable cure period,Landlord first provides each Lender not less than sixty (60)days notice of its intent to terminate,if Tenant's Default can be cured by the payment ofmoney (a "Monetary Default"), and not less than ninety (90) days notice of its intent to terminate, if Tenant's Default is of any other type(a"Non-monetary Default"),and each Lender fails to cure such Monetary Default within sixty(60)days after receipt of such notice or each Lender fails to cure or, in good faith and with reasonable diligence and continuity,commence to cure such Non-monetary Default within said ninety (90) day period. If such Non-monetary Default cannot reasonably be cured by such Lender within said ninety(90)day period(or is such that possession of the Leased Premises is necessary for Lender to obtain possession and to remedy the Default), the date for termination shall be extended for such period oftime as may be reasonably required to remedy such Default,if(a)Lender shall have fully cured any default in the payment of any monetary obligations of Tenant under this Lease within sixty(60)days after its receipt of notice of Landlord's intent to terminate,and shall continue to pay currently such monetary obligations as and when the same are due, and (b) Lender continues its good faith and diligent efforts to remedy such nonmonetary Default(including its acquisition of possession of the Leased Premises if necessary to the cure of such Default); provided, however, that in no event shall the City be precluded from exercising i Attachment No.7 Page 13 of 40 remedies if its rights become or are about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the Lender's first notice of default is given. Nothing in this Section 8.3 shall be construed to require a Lender to continue any foreclosure proceeding it may have commenced against Tenant after all Defaults have been cured by Lender or Tenant, and if such Defaults shall be cured and the Lender shall discontinue such foreclosure proceedings,this Lease shall continue in full force and effect as if Tenant had not defaulted under this Lease. 8.4 Obligations of Lender and Purchaser. 8.4.1 No Lender, acting in such capacity, shall be deemed to be an assignee or transferee ofthis Lease or ofthe leasehold estate hereby created so as to require such Lender,in that capacity,to assume the performance of any of the terms,covenants or conditions on the part of the Tenant to be performed hereunder, unless and until it acquires the interest of Tenant hereunder. Upon acquiring Tenant's leasehold,a Lender may,without the consent of Landlord,sell and assign the leasehold estate on such terms and to such persons and entities as are acceptable to such Lender and thereafter be relieved of all obligations on the part of Tenant first arising under this Lease after the date of such sale or assignment;provided,that such assignee ofthe Lender shall have delivered to Landlord an assumption agreement as provided by Section 9.1.1(iv) of this Lease. Any such assignee of Lender or any other assignee of this Lease or ofthe leasehold estate created hereby by a conveyance in lieu of foreclosure or any purchaser at any foreclosure sale of this Lease or of the leasehold estate hereby created (other than, in any case, the Lender), shall be deemed to be a Transferee of this Lease,and shall be deemed to have agreed to perform all of the terms,covenants and conditions on the part of the Tenant to be performed hereunder from and after the date of such purchase and assignment and,from and after such date,shall be subject to all the terms ofthis Lease, including all restrictions on further Transfer set forth in Article 9. 8.4.2 Notwithstanding any other provision ofthis Lease,any bona fide sale of this Lease and of the leasehold estate hereby created in any proceedings for the foreclosure of any Leasehold Mortgage or a bona fide assignment or transfer of this Lease and of the leasehold estate hereby created in lieu of foreclosure of a Leasehold Mortgage(collectively,"Proceedings")shall be deemed to be a permitted sale,transfer or assignment ofthis Lease and ofthe leasehold estate hereby created so long as City is given timely notice of any default of Tenant and of any such Proceeding and is afforded the cure periods specified in Section 8.3 and so long as any such deed in lieu of foreclosure has not been undertaken for the purpose or with the intent of circumventing any otherwise applicable restrictions upon Transfers of Tenant's interest under this Lease. Notwithstanding the foregoing,any transfer by foreclosure or deed in lieu of foreclosure to Tenant or any Affiliate of Tenant shall not be deemed a permitted sale,transfer or assignment ofthis Lease and the leasehold estate created hereby. Attachment No.7 j Page 14 of 40 i I i I 8.5 New Lease. Except as expressly provided in the last sentence of this Section,in the event of a termination of this Lease for any reason including,without limitation,by reason of any Default or the rejection or disaffirmance of this Lease pursuant to bankruptcy law or other law affecting creditors rights, Landlord shall give prompt notice thereof to any Lenders who have requested notice from Landlord in writing and furnished their names and addresses to Landlord. Landlord shall,on written request of any such Lender, made at any time within ninety (90) days after the giving of such notice by Landlord,enter into a new lease of the Leased Premises with such Lender within twenty(20)days after the receipt of such request,which new lease shall be effective as of the date of such termination of this Lease and shall be for the remainder of the Term of this Lease,at the rent provided for herein, and upon the same terms,covenants,conditions and agreements as are herein contained;provided that such Lender shall:(i)pay to Landlord at the time of the execution and delivery of said new lease any and all sums for Rent payable by Tenant hereunder to and including the date thereof,less the net amount(i.e.,net of all reasonable expenses)ofall sums received by Landlord from any subtenants in occupancy of any part or parts of the Leased Premises and/or Improvements up to the date of commencement of such new lease; (ii)pay all reasonable costs resulting from the preparation and execution of such new lease; and(iii) on or prior to the execution and delivery of said new lease, agree in writing that promptly following the delivery of such new lease,such Lender will perform or cause to be performed all of the other covenants and agreements herein contained on Tenant's part to be performed to the extent that Tenant shall have failed to perform the same to the date of delivery of such new lease. Nothing herein contained shall be deemed to impose any obligation on the part of Landlord to deliver physical possession of the Leased Premises to such Lender unless Landlord at the time of the execution and delivery of such new lease shall have obtained physical possession thereof. Notwithstanding anything contained in this Section 8.6 to the contrary,Lender's leasehold interest in the Leased Premises pursuant to the new lease shall be subject to any claims by Tenant that it has a right to possession of the Leased Premises. 8.6 New Lease Priority. 8.6.1 It is the intent of the Parties that any new lease made pursuant to Section 8.5 shall have the same priority with respect to any lien,charge or encumbrance on the fee ofthe Leased Premises as did this Lease and that the Tenant under such new lease shall have the same right,title and interest in and to the Lcased Premises as Tenant had under this Lease. 8.6.2 The provisions of this Section 8.6 and Sections 8.4 and 8.5 shall survive the termination, rejection or disaffirmance of this Lease and shall continue in full force and effect thereafter to the same extent as if Sections 8.4, 8.5 and this Section 8.6 were a separate and independent contract made by Landlord,Tenant and such Lender. 8.7 Liability of New Tenant. Attachment No.? ' Page 15 of 40 The Lender which becomes the tenant under any such new lease made pursuant to Sections 8.4 or 8.5 shall be liable to perform the obligations imposed on the tenant by such new lease as well as those arising under Sections 8.4 or 8.5 to the same extent as a Lender which acquires Tenant's estate under this Lease by the foreclosure thereof. 8.8 Reserved. 8.9 Legal Proceedings. Landlord shall give each Lender who has given written notice of its interest in the leasehold estate to Landlord prompt notice of any legal proceedings between Landlord and Tenant involving obligations under this Lease. Each said Lender shall have the right to intervene in any such proceeding to protect its interest and be made a party thereto, and the parties hereto do hereby consent to such intervention. In the event that any such Lender shall not elect to intervene or become a party to any such proceedings,Landlord shall give such Lender notice of,and a copy of, any award or decision made in any such proceedings, which shall be binding on all Lenders not intervening after receipt of notice of the legal proceeding. 8.10 Notices. Notices from Landlord to any Lender shall be mailed to the address ofthe Lender set forth in the Leasehold Mortgage furnished to Landlord or at such other address as may have been furnished to Landlord by such Lender. All notices from the Lender to Landlord shall be mailed to the address designated pursuant to the provisions of Section 17.6 or such other address as Landlord may designate in writing from timc to time. All notices to a Lender or to Landlord shall be given in the manner described in Section 17.6 and shall in all respects be governed by the provisions of such Section. 8.11 Encumbrance of Landlord's Fee Estate. Neither Tenant nor any Lender or Leasehold Mortgagee has any rights to encumber or any interest in Landlord's fee estate in the Property. 8.12 Landlord Right to Cure. Notwithstanding anything to the contrary contained in this Lease,Lender shall have no right to complete a foreclosure on account of an uncured default of Tenant("Uncured Loan Default") unless Lender, following expiration of Tenant's applicable cure period under the Leasehold Mortgage,first provides Landlord not less than sixty (60) days notice of its intent to foreclose, if Tenant's Uncured Loan Default can be cured by the payment of money ("Tenant Monetary Default"), and not less than ninety(90)days notice of its intent to terminate, if Tenant's Uncured Loan Default is of any other type("Tenant Non-monetary Default"),and Landlord fails to cure such Attachment No.7 j Page 16 of 40 i Tenant Monetary Default within sixty(60)days after receipt of such notice or Landlord fails to cure such Tenant Non-monetary Default within a period of ninety days(90)days. If all Uncured Loan Defaults have been cured by Landlord in accordance with this Section,the Leasehold Mortgage shall be reinstated in accordance with California Civil Code Section 2924c. Nothing herein shall be construed or deemed as an obligation by Landlord to cure any Uncured Loan Default. ARTICLE 9 ASSIGNMENT AND TRANSFER 9.1 Transfer of the Lease,the Leased Premises or the Improvements Thereon. (i) Transfer(s)occurring prior to Completion shall be made in accordance with Section 107 of the GLIA. Transfer(s) occurring after Completion shall be subject to the prior written consent of Landlord, which consent will not be unreasonably withheld or delayed; provided, however,that notwithstanding anything to the contrary herein,Tenant may Transfer its interest in the Lease to Permitted Transferees under the same terms and conditions as set forth under Section 107 of the GLIA. (ii) For Transfers to a Person other than a Permitted Transferee,Landlord shall have the right to consider the following factors(among others Landlord reasonably determines are necessary to consider in evaluating the proposed Transferee)in determining whether or not to consent to any proposed Transfer of Tenant's rights under or interest in this Lease,the Leased Premises, or the Improvements constructed thereon: (1)The financial condition of the proposed Transferee and its ability to perform all of the financial and other obligations of Tenant under this Lease,(2)the Transferee's business reputation, and (3) the Transferee's ability to demonstrate its capability to manage or provide for the management of the Improvements located on the Leased Premises. (iii) Upon any approved or Permitted Transfer of this Lease or the Leased Premises(other than for security purposes), said Transferee shall expressly assume in writing liability for all of Tenant's obligations accruing under this Lease after the date of such Transfer. Except as to any Permitted Transferee(as defined in the GLIA),Tenant shall not be released of its obligations under this Lease unless either (A) pursuant to the process described in subparagraph (ii) immediately above,Tenant has demonstrated to Landlord's reasonable satisfaction that Transferee's net worth at the time of the Transfer is equal to or greater than the net worth of Tenant as of the Commencement Date(adjusted to correspond to any changes in the CPI since the Commencement Date),or(B)an individual(s)or an entity(ies)with substantially equal or greater net worth than that of Tenant,has guaranteed Tenant's obligations under this Lease. If Transferee's net worth satisfies the foregoing test,then Tenant(as well as former Tenants still liable hereunder)shall be released of all liability under this Lease accruing after the date of such Transfer. (iv) At any time Tenant desires to effect a Transfer which requires Landlord's consent Attachment No.7 Page 17 of 40 pursuant to clause(ii)or(iii)above,Tenant shall request consent from Landlord in writing and shall submit to Landlord in connection with such request all proposed agreements and documents (collectively, the "Transfer Documents") memorializing, facilitating and/or evidencing such proposed Transfer, as well as all other information Tenant reasonably believes is necessary for Landlord to properly evaluate the proposed Transferee pursuant to the criteria set forth in Section 9.1.1(a)(ii) and, if applicable, Section 91.1(a)(iii) above. Landlord agrees to advise Tenant in writing of its decision on Tenant's request for consent to such Transfer,as promptly as possible,and, in any event,not later than thirty(30)days after Landlord receives all of the items required by the preceding sentence. If such request is denied,Landlord shall state the reasons for such denial in its notice of denial of Tenant's request. If Landlord fails to respond to Tenant's request within thirty (30) days after its receipt of all of the items required above, Tenant's request shall be deemed disapproved.Upon a deemed disapproval,Tenant may deliver a notice to Landlord which states that there has been a deemed disapproval, requesting that Landlord consent to the proposed Transfer, stating that Landlord must consent to or deny the proposed Transfer within thirty (30)days after Landlord's receipt of this notice, and that failure by Landlord to either consent to or deny such Transfer within such 30 day period will result in deemed consent.If Landlord fails to consent to or deny the proposed Transfer within such second thirty (30) day period, the Transfer shall then be deemed approved by Landlord. 9.2 Transfer of Tenant's Interest in Lease and Tenant's Ownership. The restrictions on Transfer contained in this Article 9 shall be binding on any successors, heirs or permitted Transferees of Tenant. The provisions of this Article 9 shall apply to each successive Transfer and Transferee in the same manner as initially applicable to Tenant under the terms set forth herein. ARTICLE 10 TAXES AND IMPOSITIONS i 10.1 Tenant To Pay Impositions. 10.1.1 In addition to the Rent and other payments required to be paid under this Lease,Tenant shall pay or cause to be paid any and all taxes(including possessory interest taxes) and assessments(collectively,"Impositions")levied or assessed from the Commencement Date until the termination of this Lease by any governmental agency or entity on or against the Leased Premises or any portion thereof,or on or against any interest in the Leased Premises(including the leasehold interest created by this Lease),or any Improvements or other property in or on the Leased Premises. The timely payment of the Impositions is a material term of this Lease,and,to the extent the above-rcferenced items are payable to Landlord or its successors or assigns,they shall constitute Additional Rent hereunder. I i Attachment No.7 Page 18 of 40 i 10.1.2 If,bylaw,any such Imposition is payable,or may,at the option ofTenant be paid, in installments, Tenant may pay the same,together with any accrued interest on the unpaid balance of such Imposition,in such installments as those installments respectively become due and before any fine, penalty, interest, or cost may be added thereto for the nonpayment of any such installment and interest. 10.2 Proration of Impositions. All Impositions levied or assessed on or against the Leased Premises shall be prorated,based on a 365-day year,between Landlord and Tenant as of the Commencement Date of this Lease,and as of the expiration or earlier termination of this Lease. On service of written request by Landlord, Tenant shall promptly pay to Landlord Tenant's share of such Impositions paid by Landlord on Tenant's behalf and,on service ofwritten request by Tenant,Landlord shall promptly pay to Tenant Landlord's share of such Impositions paid by Tenant on Landlord's behalf. 10.3 Payment Before Delinquency. Subject to Section 10.4,any and all Impositions and installments of Impositions required to be paid by Tenant under this Lease shall be paid by Tenant prior to delinquency, and, upon Landlord's written request,copies of the official and original receipt for the payment of each such Imposition or installment thereof or other reasonably satisfactory evidence of payment shall promptly be given to Landlord. 10.4 Contest of Imposition. Tenant shall refrain from appealing,challenging or contesting in any manner the validity or amount of any tax assessment,encumbrance or lien on the Leased Premises;provided,however,that such prohibition shall not apply to an appeal, challenge or contesting of the erroneous initial assessment for property tax purposes of the Leased Premises in the fiscal year of the completion of the Improvements to be constructed pursuant to the Agreement, and further provided that in the absence oftransfer of ownership or new construction Tenant shall not be prohibited from appealing, challenging or contesting any increases in assessment of the Leased Premises for property tax purposes over and above the current 2%per annum permitted amount. Tenant agrees that any such permitted proceedings shall be begun without undue delay after any contested item is imposed and shall be prosecuted to final adjudication with reasonable dispatch. Tenant shall give City prompt notice in writing of any such contest at least ten(10) days before filing any contests,except for related to the welfare exemption.Tenant 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 Leasehold and/or improvements,or any part thereof,to satisfy the same,and only ifTenant shall,prior to the date such imposition is due and i Attachment No.7 Page 19 of 40 payable,have given such reasonable security as may be required by City from time to time in order to insure the payment of such imposition to prevent any sale,foreclosure or forfeiture of the Leased Premises,or any part thereof,by reason of such nonpayment. In the event of any such contest and the final determination thereof adversely to Tenant,Tenant 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 Tenant and,after such payment and discharge by Tenant, City will promptly return to Tenant such security as City shall have received in connection with such contest. City shall cooperate reasonably in any such contest permitted by this Section 10.4,and shall execute any documents or pleadings reasonably required for such purpose. Any such proceedings to contest the validity or amount of Imposition or to recover back any Imposition paid by Tenant shall be prosecuted by Tenant at Tenant's sole cost and expense; and Tenant shall indemnify and save harmless City against any and all loss, cost or expense of any kind, including,but not limited to, reasonable attorneys' fees and expenses, which may be imposed upon or incurred by City in connection therewith. 10.5 Tax Returns And Statements. Tenant shall, as between Landlord and Tenant, have the duty of attending to, preparing, making,and filing any statement,return,report,or other instrument required or permitted by law in connection with the determination,equalization,reduction,or payment of any Imposition that is or may be levied on or assessed against the Leased Premises, or any portion thereof, or any interest therein,or any Improvements or other property on the Leased Premises. 10.6 Possessory Interest Taxes. Landlord is a public entity,and as such,Landlord's underlying fee in the Leased Premises is, or may be, exempt from property tax assessments. In accordance with California Revenue and Taxation Code Section 107.6(a), Landlord states that by entering into this Lease, a Possessory interest in Tenant subject to property taxes will be created. Tenant or any other party in whom the Possessory interest is vested may be subject to the payment of property taxes levied on such interest. In addition, pursuant to Health and Safety Code Section 33673, the Leased Premises shall be assessed and taxed in the same manner as privately owned property,and Tenant shall pay taxes upon the assessed value of the entire Leased Premises and not merely the assessed value of its leasehold interest;provided however,that Landlord recognizes that Tenant will apply for and may receive a welfare exemption for all or a portion of the Improvements. I i Attachment No.7 Page 20 of 40 ARTICLE 11 UTILITY SERVICES 11.1 Tenant's Responsibility. During the Term of this Lease,Tenant shall pay, or cause to be paid,and shall indemnify, defend and hold Landlord and the property ofLandlord harmless from all charges for water,sewage, gas,heat,air conditioning,light,power,steam,telephone service and all other services and utilities used,rendered or supplied to,on or in the Leased Premises during the Term. 11.2 Landlord Has No Responsibility. Landlord shall not be required to furnish to Tenant or any other occupant of the Leased Premises during the Term of this Lease,any water,sewage,gas,heat,air conditioning,light,power, steam, telephone, or any other utilities, equipment, labor, materials or services of any kind whatsoever. ARTICLE 12 j INSURANCE i I 12.1 Fire and Extended Coverage Insurance. I Throughout the term of this Lease,Tenant,at no cost or expense to Landlord,shall keep or cause to be kept,for the mutual benefit of Landlord and Tenant,a policy of standard fire insurance, with extended coverage and vandalism and malicious mischief endorsements,excluding earthquake insurance. The amount of insurance required hereunder shall in no event be less than one hundred percent(100%)ofthe full replacement cost ofthe Improvements on the Leased Premises(exclusive of foundations and footings),including tenant improvements or betterments. Tenant shall not be obligated to obtain flood insurance as part of the extended coverage required hereunder. Coverage shall be"property broad form"and shall include rent interruption insurance,which insurance shall also cover all real estate taxes and insurance costs for the purposes of continuing rental payments to the landlord for the duration of the Lease. Coverage shall not include a coinsurance penalty provision. 12.2 Commercial General Liability-Insurance. Tenant, commencing on the Commencement Date and continuing throughout the Term hereof,shall maintain or cause to be maintained,at no cost or expense to Landlord,comprehensive broad form commercial general liability insurance or an equivalent owner contractor protective policy insuring against claims and liability for personal injury, death,or property damage arising from the use, occupancy or condition of the Leased Premises, the Improvements thereon, which Attachment No.7 Page 21 of 40 i insurance shall provide combined single limit protection of at least Four Million Dollars ($4,000,000) for bodily injury or death to one or more persons, and at least Four Million Dollars ($4,000,000)for property damage,which limits shall be increased by Tenant from time to time based upon Tenant's reasonable assessment of the limits carried by prudent and responsible property owners of similar property in the geographic area of the Leased Premises. 12.3 Worker's Compensation Insurance. Tenant shall carry worker's compensation insurance for any employees it has as required by the State of California, and employer's liability insurance with a liability insurance minimum of $1,000,000 per accident for bodily injury or disease. 12.4 All-Risk Policies. Tenant shall maintain or cause to be maintained coverage for builder's risk insurance for the completed value. Such insurance shall insure against direct physical loss or damage by fire, lightning,wind,storm,explosion,collapse,flood,vandalism,malicious mischief,glass breakage and such other causes as are covered by such form of insurance,excluding earthquake(s). Such policy shall include(1)coverage for demolition costs and debris removal,(2)Replacement cost coverage in amount sufficient to prevent Tenant from becoming a co-insurer under the terms ofthe policy,but in any event in an amount not less than 100%of the then full replacement cost.The replacement cost coverage shall be for work performed and equipment, supplies and materials furnished to the Property,or property stored in,or located in any bonded warehouse pending incorporation into the work, without deduction for physical depreciation. Nothing in this Article, however, shall be construed to relieve the Tenant of full responsibility for loss of or damage to materials not yet incorporated in the work or the Tenant's tools and equipment used to perform the work,whether on the project site or elsewhere,or to relieve the Tenant of any other responsibility under the Lease. If the Landlord is damaged by the failure of the Tenant to purchase or maintain such insurance, the Tenant shall bear all losses attributable thereto and indemnify the Landlord therefrom. 12.5 Business Automobile Liability Insurance. If not covered by its other insurance policies,Tenant shall carry business liability insurance on an occurrence form covering owned, hired, leased and non-owned automobiles used by or on behalf of the Tenant and providing insurance for bodily injury, property damage and contractual liability. 12.6 Policy Form,Content And Insurer. 12.6.1 All insurance required by the provisions of this Lease shall be carried only with insurance companies licensed to do business in this state with Best's Financial Rating ofA VI1 or better or otherwise acceptable to Landlord. I Attachment No.7 ' Page 22 of 40 12.6.2 All such policies required by the provisions of this Lease shall be nonassessable and shall contain language to the effect that (i) the policies are primary and noncontributing with any insurance that may be carried by Landlord, (ii) the policies cannot be canceled or materially changed except after thirty(30)days notice by the insurer to Landlord and (iii)Landlord shall not be liable for any premiums or assessments. The insurer under the policy of property insurance for the Leased Premises shall also waive its rights of subrogation against Landlord and Landlord's Representatives. 12.6.3 All deductibles or self-insured retentions shall be commercially reasonable for companies of similar net worth as Tenant. 12.6.4 Upon Tenant's execution and delivery of this Lease,Tenant shall deliver to Landlord certificates of insurance evidencing the insurance coverages specified in this Article. Tenant shall thereafter deliver to Landlord original certificates and amendatory endorsements evidencing the insurance coverages required by this Article upon renewal of any insurance policy. Full copies of the policies shall be made available to Landlord upon request. Tenant may provide any insurance required under this Lease by blanket insurance covering the Leased Premises and any other location or locations,provided that the specific policy of blanket insurance proposed by Tenant provides the coverages required by this Lease taking into account the other properties,persons and risks covered by such blanket policy. All policies shall name Landlord and each Lender as an ! additional insured as their interests may appear, and shall contain the following special endorsements: "The City of Huntington Beach and its officers,employees and agents,are hereby declared to be additional insureds under the terms of this policy as to the activities of Landlord,Tenant and its subtenants, if any. "This insurance policy will not be canceled without 30 days prior written notice to the Trustees and the Corporation. The City of Huntington Beach is not liable for the payment of premiums or assessments on this policy." 12.6.5 For any claims related to this project,the Tenant's insurance coverage shall be primary insurance as respects the Landlord. Any insurance or self-insurance maintained by the Landlord shall be excess of the Tenant's insurance and shall not contribute with it. 12.6.6 Tenant shall include all subcontractors as insured under its policies or shall furnish separate certificates and endorsements for each subcontractor. All coverages for subcontractors shall be subject to all requirements stated herein. I 12.7 Waiver of Subrogation. Landlord and Tenant hereby release the other and its Representatives from any and all Attachment No.7 Page 23 of 40 liability or responsibility to the other or anyone claiming through or under them by way of subrogation or otherwise for any insured loss or damage to the Leased Premises,any Improvements thereon,or any of Landlord's or Tenant's property thereon caused by or arising from a fire or any other event even if such fire or other casualty shall have been caused by the fault or negligence of the other party,or anyone for whom such party may be responsible. 12.8 Indemnification. 12.8.1 Tenant shall indemnify,defend and hold harmless the Landlord,the City and their respective members,officers,employees,agents,contractors and consultants,and the property of Landlord,including the Leased Premises,from and against any and all Losses and Liabilities of every nature arising out of or in connection with the use, occupancy or enjoyment of the Leased Premises by Tenant or any person thereon or holding under Tenant arising from any action,inaction, events or facts occurring during the Term from any cause;provided, that nothing in this Section 12.8.1 or this Lease shall be construed to require Tenant to rebuild the Improvements or to pay charges to Landlord in connection therewith as a result of damage to or destruction of the Improvements or any Taking of the Improvements except to the extent expressly provided in the other Sections ofthis Lease. The above indemnification includes,without limitation,any Losses and Liabilities arising by reason of (1) The death or injury of any person,including Tenant or any person who is an employee or agent of Tenant,or damage to or destruction of any property,including property owned by Tenant or by any person who is an employee or agent of Tenant,from any cause whatever while such person or property is in or on the Leased Premises; (2) The death or injury of any person,including Tenant or any person who is an employee or agent of Tenant,or damage to or destruction of any property,including property owned by Tenant or any person who is an employee or agent of Tenant, caused or allegedly caused by either(A) the condition of the Leased Premises or some Improvements on said premises, or(B) some act or omission on the Leased Premises by Tenant or any person in,on,or about the Leased Premises with the permission and consent of Tenant; (3) Any work performed on the Leased Premises or materials furnished to said premises at the insistence or request of Tenant or any person or entity acting for or on behalf of Tenant;or (4) Tenant's failure to perform any provision of this Lease or to comply with any Governmental Restriction. I However,the foregoing indemnification shall not extend to any Loss or Liability to the extent it arises out of the active negligence or intentional or willful misconduct of Landlord or its f Attachment No.7 Page 24 of 40 Representatives. ARTICLE 13 CONDEMNATION 13.1 General. If any portion of or interest in the Leased Premises shall be condemned(including,without limitation,inverse condemnation)or taken by any public authority or by any other person or entity with the power of condemnation,by eminent domain or by purchase in lieu thereof(a"Taking"),and such Taking-renders the Leased Premises unsuitable in the commercially reasonable judgment of Tenant for Tenant's business operations, Tenant may terminate this Lease by giving notice to Landlord,such termination to be effective as of the date specified in such notice.If this Lease is not terminated,Tenant's condemnation award shall be used for the purpose of repairing or restoring the Improvements in accordance with Section 7.3. 13.2 Award. Whether or not this Lease is terminated as a result of any Taking,Landlord and Tenant shall together make one claim for an award for their combined interests in the Leased Premises including an award for severance damages if less than the whole shall be so taken. The condemnation proceeds shall be distributed to Landlord and Tenant as their respective interests appear. Both parties shall have the right to appear in and defend against-such action as they deem proper in accordance with their own interests at their own expense. To the extent possible,the parties shall cooperate to maximize the condemnation proceeds payable by reason of the condemnation. Issues between Landlord and Tenant required to be resolved pursuant to this Article shall be joined in any such condemnation proceeding to the extent permissible under then applicable procedural rules of such court of law or equity for the purpose of avoiding multiplicity of actions and minimizing the expenses of the parties. If this Lease is not terminated pursuant to this Article, it shall continue, except that commencing with the date on which Tenant is deprived of the use of any portion of the Leased Premises or of any rights under this Lease,Rent shall be abated or reduced according to the extent to which Tenant is deprived of the use or benefit of the Leased Premises or of any rights under this Lease. If the Taking occurs in the last five (5) years of the Term, either Landlord or Tenant,by written notice to the other,may terminate this Lease,such termination to be effective as of the date that the condemnor acquires title to all or a portion of the Leased Premises. i 13.3 Taking for Temporary Use. If there is a Taking of the Leased Premises for temporary use for a period equal to or less than eight(8) months, this Lease shall continue in fall force and effect, Tenant shall continue to comply with Tenant's obligations under this Lease not rendered physically impossible by such Attachment No.7 i Page 25 of 40 Taking,neither the Term nor the Rent shall be reduced or affected in any way,but the Rent shall continue at the level of the last Rent paid prior to the Taking(including any subsequent increases in such Rent provided for under this Lease),and Tenant shall be entitled to any and all Awards for the ' use or estate taken. If any such Taking is for a period extending beyond such eight(8)month period, the Taking shall be treated as a total,substantial or partial taking, as appropriate. ARTICLE 14 DEFAULT 14.1 Default. The occurrence of any one or more of the following events shall, after the giving of the Notice of Default required by Section 14.2 or 14.4 and subject to any applicable cure period, constitute a default("Default(s)")under this Lease by Tenant or Landlord,as applicable: 14.1.1 any failure by Tenant to pay the Rent or make any other payment required to be made by Tenant hereunder, on the date the payment is due; or 14.1.2 any breach by Tenant of its obligations under the Specific Plan, 2007 Development Agreement,or GLIA,including,without limitation,failure t o construct the Project in accordance with the Schedule of Performance or the Scope of Development, and the failure to cure such default under the terms of such documents;or 14.1.3 any breach by Tenant of its obligations under Section 5.1 of this Lease, including,without limitation,the Tenant's failure to continuously operate the Hotel; or 14.1.4 a failure by Tenant or Landlord to observe and perform any other condition, restriction,covenant,obligation or provision ofthis Lease to be observed or performed by Tenant or Landlord, as applicable. 14.2 Notice of Default;Tenant's Right to Cure. 14.2.1 IfTenant has committed or permitted to exist a breach of any provision ofthis Lease or has committed or permitted any other breach described above in Section 14.1,Landlord shall give notice of said breach("Notice of Default")to Tenant. 14.2.2 Tenant shall be in default hereunder from Landlord if Rent for the prior calendar year is not paid by the twentieth(20th)day of July of each year of the Term or Extended Term,ifapplicable(or ifthe twentieth day falls on a Saturday or Sunday,the first Monday following the twentieth(20th)day of July). 14.2.3 If the alleged Default is nonpayment of Rent,Additional Rent,Impositions or Attachment No.7 Page 26 of 40 other sums to be paid by Tenant as provided in this Lease,Tenant shall have thirty(30)days after the Notice of Default is given to cure the Default. For any other Default, Tenant shall, after the Notice of Default,promptly and diligently commence curing the Default and shall have thirty(30) days after the Notice of Default to complete the cure of said Default;provided,however,that if the nature of said Default is such that the same cannot reasonably be cured within said thirty(30)day period,Tenant shall have such additional time as is reasonably necessary to cure such Default,but in any event no more than one hundred and eighty(180)days of receipt of the Notice of Default. 14.2.4 As used in this Lease,the term"Uncured Default"shall mean any Default by Tenant which continues uncured, following the giving of a Notice of Default as required by this Lease, for the entire cure period applicable to that Default under the provisions of this Lease. 14.2.5 Cures offered on behalf of Tenant by the limited partner of Tenant shall be received by Landlord as if offered by Tenant itself hereunder. 14.3 Landlord's Right to Cure Tenant's Defaults. After expiration of the applicable time granted to Tenant for curing a particular Default and upon not less than five (5) business days' notice (unless a longer period of time is otherwise expressly provided by this Lease, in which case such longer period shall apply),Landlord may, at Landlord's election,make any payment(other than Rent payable to Landlord)required of Tenant under this Lease or perform or comply with any covenant or condition imposed on Tenant under this Lease,and the amount so paid,plus the reasonable cost of any such performance or compliance,plus interest on such sum at the Agreed Rate,from the date ofpayment,performance,or compliance until the date of repayment by Tenant, shall be due and payable by Tenant on the first day of the next calendar month following any such payment,performance or compliance by Landlord as Additional Rent hereunder. No such act shall constitute a waiver of any Default or of any remedy for Default or render Landlord liable for any loss or damage resulting from any such act(except to the extent such loss or damage arises from Landlord's or Landlord's Representatives' active negligence or j intentional or willful misconduct). 14.4 Notice of Landlord's Default;Tenant Waiver. 14.4.1 If Landlord has committed a breach under this Lease,as described in Section 14.1,Tenant shall deliver a Notice of Default to Landlord. Each Notice of Default shall specify the alleged Default. 14.4.2 Landlord shall, after notice,promptly and diligently commence curing the Default and shall have sixty (60) days after notice is given to complete the cure of said Default; provided,however,that if(i)the nature of said Default is such that the same cannot reasonably be cured within said sixty(60)day period, and(ii)Landlord shall have in good faith commenced and Attachment No.7 Page 27 of 40 diligently and continuously pursued such cure,then Landlord shall have such time as is reasonably necessary to complete the cure of said Default. If it is determined that Landlord is liable to Tenant for damages pursuant to this Lease Landlord shall pay such damages to Tenant in accordance with such judgment within 30 days after such determination. Tenant shall have no right to offset any amount of damages owed by Landlord to Tenant against the Rent owed by Tenant to Landlord under this Lease. If any amount owed to the Tenant by Landlord is not paid when due,interest shall accrue on such amount at the Agreed Rate from the date due until the date that such amount is paid. After expiration of the applicable time for Landlord to cure a particular Default and upon not less than five (5) business days' notice (unless a longer period of time is otherwise expressly provided by this Lease, in which case such longer period shall apply),Tenant may, at Tenant's election,make any payment required of Landlord under this Lease or perform or comply with any covenant or condition imposed on Landlord under this Lease,and the amount so paid,plus the reasonable cost of any such performance or compliance,plus interest on such sum at the Agreed Rate,from the date of payment, performance, or compliance until the date of repayment by Landlord,shall be due and payable by . Landlord on the first day of the next calendar month following any such payment,performance or compliance by Tenant. No such act shall constitute a waiver of any Default or of any remedy for Default or render Tenant liable for any loss or damage resulting from any such act(except to the extent such loss or damage arises from Tenant's or Tenant's Representatives' negligence or intentional or willful misconduct). 14.5 Landlord's Remedies. 14.5.1 In the event of any Uncured Default,then,subject to the rights of a Lender expressly set forth in this Lease,Landlord shall have the immediate option to terminate this Lease and all rights of Tenant hereunder by giving written notice of such termination,in which event the Parties shall have no further obligation to one another under this Lease. 14.5.2 Notwithstanding the provisions of this Article 14 above to the contrary, if, within twenty-one (21) days of Tenant's receipt of a Notice of Default with respect to a Non- monetary Default by Tenant,Tenant shall in good faith notify Landlord in writing that it disputes the existence of such Non-monetary Default and that it requests a determination ofthe existence or non- existence of such Non-monetary Default,then Landlord may not exercise its right to terminate this Lease pursuant to this Article 14 on account of such Non-monetary Default of Tenant until the expiration of the applicable cure period measured as if such cure period commenced upon the earlier of(i) the date of the determination that such Non-monetary Default exists, or (ii) the failure by Tenant to diligently and continuously pursue the legal proceeding.Subject to the rights of Lenders, if there is no express cure period for the default set forth in the Notice of Default, then the cure periods shall be the same as those provided in Section 14.2.3 herein. The exercise of Tenant's rights pursuant to this paragraph shall not impair or delay the ability of Landlord to exercise any rights or remedies other than to delay Landlord's right to terminate this Lease. Attachment No.7 Page 28 of 40 14.5.3 In the event the Uncured Default consists of Tenant's failure to pay Rent to Landlord,Landlord shall also have the right to pursue all of its legal and equitable remedies against Tenant for collection of such amounts, including without limitation the remedy described in California Civil Code Section 1951.4 which provides that a lessor may continue a lease in effect after Tenant's breach and abandonment and recover rent as it becomes due, if the Tenant has the right to sublet or assign, subject only to reasonable limitations. 14.5.4 Tenant hereby acknowledges that late payment by Tenant to Landlord ofRent and other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease,the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to,processing and accounting charges and late charges which may be imposed on Landlord by the terms of any mortgage,deed of trust,or bonded indebtedness. Accordingly,if any installment of Rent shall not be received by Landlord or its designee within ten(10)days after Rent is due,or if any Additional Rent or Impositions shall not be received by Landlord within twenty(20)days after the Notice of Default is given,then without any requirement for notice to Tenant,Tenant shall pay to Landlord a late charge equal to five percent(5%)of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. Acceptance of such late charge to Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount,nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. 14.6 Tenant Remedies;Remedies Cumulative. Except as otherwise expressly provided in this Lease, Tenant shall have all rights and remedies at law or equity upon the occurrence of an Uncured Default by Landlord hereunder including, but not limited to, the remedies provided under California Civil Code Sections 1951.2 (pursuant to California Civil Code Section 1951.2, the damages Landlord may recover against Tenant 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 Term after the time of award,exceeds the amount of such rental loss for the same period that the Tenant proves could be reasonably avoided). Each right and remedy of Landlord and Tenant provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease except as otherwise limited by this Lease,and'the exercise or the beginning ofthe exercise by Landlord or Tenant of any one or more of the rights or remedies provided for in this Lease,except as otherwise limited by this Lease,shall not preclude the simultaneous or later exercise by Landlord or Tenant of any or all other rights or remedies provided for in this Lease, except as otherwise limited by this Lease. i Attachment No.7 Page 29 of 40 i 14.7 No Waiver. Landlord's or Tenant's failure to enforce any provision of this Lease with respect to a Default hereunder shall not constitute a waiver of Landlord's or Tenant's right to enforce such provision or any other provision with respect to any future Default. The acceptance of Rent by Landlord shall not be deemed a waiver of Landlord's right to enforce any term or provision hereof. The waiver of any term or condition of this Lease shall not be deemed to be a waiver of any other term or condition hereof or of any subsequent failure of any term or condition hereof 14.8 Delays in Performance. The time within which the Parties hereto shall be required to perform any obligation under this Lease shall be extended by a period of time equal to the number of days during which performance of such act is delayed due to an act of God,strikes, lockouts,fire, earthquake,flood, explosion, war, invasion, insurrection, riot, mob violence, acts of the public enemy, epidemics, quarantine restrictions,freight embargoes,unusually severe weather, application of governmental restrictions, regulations or controls not contemplated by this Lease or otherwise reasonably foreseeable, court order,delays or inaction of independent contractors,remediation of Hazardous Substances located upon the Leased Premises, litigation brought against the Leased Premises or a Party without that Party's consent,or other like events which are completely and strictly beyond a Party's control (the "Force Majeure Events"). The additional grace period or extension of time provided above shall be equal to the period of delay caused by the above-described event,which period shall commence to run from the time of the commencement of the cause for delay and shall terminate upon termination of that cause. A Party wishing to invoke this Section must notify in writing the other Party to this Lease of that intention within sixty(60)days ofthe commencement of any such cause for delay and shall,at that time,specify the reasons therefor,the specific provision of this Lease which will be delayed as a result, and the period of such extension, if known,or if not known,a reasonable estimate thereof. ARTICLE 15 EXPIRATION;TERMINATION At the expiration or earlier termination of this Lease, Tenant shall surrender to Landlord possession of the Leased Premises free and clear of all liens, encumbrances and Mortgages other than those, if any, created by Landlord, those which both extend beyond the Term or Extended Term, if applicable, of this Lease and were expressly approved in writing by Landlord, or those which encumbered the Leased Premises prior to the Commencement Date of this Lease. Tenant shall leave the Leased Premises and any other property surrendered in its then existing "as is' condition. As provided above at Article 6, all property that Tenant is required to surrender shall become Landlord's property at termination or expiration of this Lease. In addition,Tenant shall surrender to Landlord all residential leases, and all records related to the residential leases and Attachment No.7 Page 30 of 40 compliance with the Agreement Affecting Real Property. All property that Tenant is not required to surrender but that Tenant does abandon by failure to remove said property within sixty (60)days after the expiration or earlier termination of this Lease shall, at Landlord's election, become Landlord's property. At Landlord's request Tenant shall execute and deliver to Landlord assignments of leases and a quitclaim deed,both in commercially reasonable form and as prepared by Landlord. By the quitclaim deed Tenant shall quitclaim any right,title or interest which Tenant may have or claim to have in the Improvements. ARTICLE 16 NO DISCRIMINATION 16.1 Tenant herein covenants by and for itself, its heirs, executors, administrators and assigns,and all persons claiming under or through them,and this Lease is made and accepted upon and subject to the following conditions: There shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision(a)or(d)of Section 12955 of the Government Code,as those bases are defined in Sections 12926, 12926.1,subdivision (m)and paragraph(1)of subdivision(p)of Section 12955,and Section 12955.2 of the Government Code,in the sale,lease,sublease,transfer,use,occupancy,tenure,or enjoyment ofthe Property,nor shall the transferee itself or any person claiming under or through him or her,establish or permit any such practice or practices of discrimination or segregation with reference to the selection,location, number,use,or occupancy,of tenants,Tenants,sublessees,subtenants,or vendees of the Property. 16.2 Tenant, its successors and assigns, shall refrain from restricting the rental, sale,or lease of the Property or any portion thereof,on the basis of race,color,creed, religion,sex,sexual orientation,marital status,national origin,or ancestry of any person. Every deed,lease,and contract entered into with respect to the Property,or any portion thereof, after the date of this Lease shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (1) In deeds:"The grantee herein covenants by.and for himself or herself,his or her heirs, executors,administrators, and assigns,and all persons claiming under or through them,that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision(a)or(d)of Section 12955 of the Government Code,as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision(p) of Section 12955,and Section 12955.2 of the Government Code, in the sale,lease,sublease,transfer, use,occupancy,tenure,or enjoyment of the premises herein conveyed,nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection,location,number,use or occupancy of tenants,Tenants,subtenants,sublessees,or vendees in the premises herein conveyed.The foregoing covenants shall run with the land." (2) In leases:"The Tenant herein covenants by and for himself or herself,his or her heirs, Attachment No.7 Page 31 of 40 executors,administrators,and assigns,and all persons claiming under or through him or her,and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons,on account of any basis listed in subdivision(a)or(d)of Section 12955 of the Government Code,as those bases are defined in Sections 12926, 12926.1,subdivision(m)and paragraph(1)of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing,transferring,use,occupancy,tenure,or enjoyment ofthe premises herein leased nor shall the Tenant himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location,number,use,or occupancy,of tenants,Tenants,sublessees, subtenants,or vendees in the premises herein leased." (3) In contracts:There shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision(a)or(d)of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph(1)of subdivision(p)of Section 12955,and Section 12955.2 ofthe Government Code,in the sale, lease, sublease, transfer, use, occupancy,tenure, or enjoyment of the land, nor shall the transferee itself or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number,use,or occupancy, of tenants,Tenants, sublessees,subtenants,or vendees of the land." ARTICLE 17 MISCELLANEOUS 17.1 Landlord's Representations and Warranties. Landlord covenants, represents and warrants to Tenant, as of the date of execution of this Lease,as follows: l 7.1.1 Landlord is a public body corporate and politic under the laws ofthe state of its incorporation,has full legal right,power,and authority to enter into this Lease and to carry out and consummate all transactions contemplated by this Lease, and by appropriate corporate action has duly authorized the execution and delivery of this Lease. Further, Landlord will take those actions required to remain in good standing under the laws ofthe state of its incorporation during the term of this Lease. 17.1.2 To Landlord's actual knowledge,the execution,delivery and performance of this Lease by Landlord does not result in a material violation of, or constitute a material default under,any provision of any existing agreement,judgment or court order. 17.1.3 Except as revealed in writing by Landlord to Tenant,Landlord has not been Attachment No.7 Page 32 of 40 served with any pending,and knows of no threatened,litigation or claims against the Leased Premises or against Landlord in connection with the Leased Premises which would have an adverse effect on the transactions contemplated herein. 17.1.4 Copies of all documents heretofore delivered by Landlord to Tenant are true, correct and complete copies of such documents in all material respects. 17.1.5 Landlord makes no representation or warranty as to the condition of the title to the Leased Premises except as provided in Section 208 of the GLIA. 17.2 Tenant's Representations and Warranties. Tenant covenants,represents and warrants to Landlord,as of the date of execution of this Lease,as follows: 17.2.1 Tenant is a limited partnership or corporation duly formed and in good standing under the laws of the State of California,has full legal right,power,and authority to enter into this Lease and to carry out and consummate all transactions contemplated by this Lease,and by appropriate action has duly authorized the execution and delivery of this Lease. Further,Tenant will take those actions required to remain in good standing under the laws of the state of California during the term of this Lease. 17.2.2 The representatives of Tenant executing this Lease are fully authorized to execute the same. 17.2.3 This Lease has been duly authorized,executed,and delivered by Tenant,and will constitute a legal,valid,and binding agreement of Tenant. 17.2.4 Except as may be revealed in writing by Tenant to Landlord,Tenant has not been served with any pending,and knows of no threatened,litigation or claims against Tenant which would have an adverse effect on the transactions contemplated herein. 17.2.5 Copies of all documents heretofore delivered by Tenant to Landlord are true, correct and complete copies of such documents in all material respects; 17.3 Survival of Representations,Warranties and Covenants. The respective representations,warranties and covenants contained herein shall survive the Commencement Date and continue throughout the Term. Attachment No.7 Page 33 of 40 17.4 Further Assurances Each party hereto will promptly execute and deliver without further consideration such additional agreement,assignments,endorsements and other documents as the other party hereto may reasonably request to carry out the purposes of this Lease. 17.5 Estoppel Certificate. Within thirty(30)days after request by Landlord or Tenant(which request may be from time to time as often as reasonably required by Landlord or Tenant)Landlord or Tenant shall execute and deliver to the other,without charge,a statement(the"Estoppel Certificate")in the form of Exhibit D attached hereto or in such other similar form as Landlord or Tenant may reasonably request. Any such statement may be conclusively relied upon by any Lender,Sublessees or prospective purchaser of the Leased Premises. 17.6 Notices. All notices,requests,demands and other communications under this Lease shall be in writing and shall be deemed to have been given on(a)the date of service if served personally on the Party to whom notice is to be given, (b)the date of actual or attempted delivery provided such attempted delivery is made on a business day, if served by Federal Express, Express Mail or another like overnight delivery service, (c)the date of actual delivery as shown by the addressee's registry or certification ofreceipt or the date of addressee's refusal to accept delivery,if mailed to the person to whom notice is to be given,by first class U.S.mail,registered or certified,postage prepaid,return receipt requested and properly addressed as follows(or to such other address as either Party may from time to time direct by written notice given in the manner herein prescribed),or(d)(except for Permitted Lenders)one day after receipt of a confirmed facsimile transmission provided any such communication is concurrently given by one of the above methods: If to Landlord: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Kellee Fritzal, Economic Development Tel: (714) 526-5582 Fax: (714)375-5087 With a copy to: Kane,Ballmer&Berkman 515 S.Figueroa Street,Suite 1850 Los Angeles,California 90071 Attn: Susan Y.Cola Attachment No.7 I Page 34 of 40 Tel:213-617-0480 Fax:213-625-0931 and,if to Tenant: VF Outdoor,Inc., a Delaware Corporation dba Vans 6550 Katella Avenue Cypress,CA 90363-5102 Attn: Doug Palladini Tel:(714)889-6702 Fax: (714) With a copies to: Robert Frisbee,Esq. Connolly, Finkel&Gosselin LLP 601 S.Figueroa Street,Suite 2610 Los Angeles,Ca 90017-5704 Main Line: (213)452-6500 Direct Dial: (213)452-6506 Facsimile: (213)622-2171 17.7 Attorneys' Fees. In the event that either Party hereto brings any action or files any proceeding in connection with the enforcement of its respective rights under this Lease or as a consequence of any breach by the other party of its obligations under this Lease,the prevailing party in such action or proceeding shall be entitled to have its reasonable attorneys' fees(including allocable costs for any in-house counsel)and out-of-pocket expenditures paid by the losing Party. The attorneys'fees so recovered shall include fees for prosecuting or defending any appeal and shall be awarded for any supplemental proceedings until the final judgment is satisfied in full. In addition to the foregoing award of attorneys' fees to the prevailing party,the prevailing party in any lawsuit on this Lease shall be entitled to its attorneys'fees incurred in any post judgment proceedings to collect or enforce the judgment. This provision is separate and several and shall survive the merger ofthis Lease into any judgment on this Lease. 17.8 Headings. i The headings used in this Lease are inserted for reference purposes only and do not affect the interpretation of the terms and conditions hereof. 17.9 Rights of Successors. All of the rights and obligations of the Parties under this Lease shall bind and inure to the benefit of their respective heirs, successors and assigns; provided, however, that nothing in this Section 17.9 shall be construed to limit or waive the provisions concerning restrictions on Transfer Attachment No.7 Page 35 of 40 set forth in Article 9 hereof. 17.10 Amendments in Writing. This Lease cannot be orally amended or modified. Any modification or amendment hereof must be in writing and signed by the Party to be charged. 17.11 No Brokers, Each Party shall defend,indemnify,and hold the other harmless from all costs and expenses, including attorneys' fees, arising out of any and all claims for broker's agent's or finder's fees or commissions in connection with the negotiation, execution or consummation of this transaction incurred as a result of any statement, representation or agreement alleged to have been made or entered into by the indemnifying Party. Neither Tenant nor Landlord is entitled to receive any brokerage commission as a consequence of this transaction. 17.12 Negation of Partnership. Nothing in this Lease shall be construed to render Landlord, a partner,joint venturer, or associate in any relationship or for any purpose with Tenant,other than that of Landlord and Tenant, nor shall this Lease be construed to authorize either to act as agent for the other. 17.13 Time of Essence. Time is of the essence of each provision in this Lease,subject to delays caused by any of the force majeure events set forth in Section 14.8. 17.14 Interpretation. When the context and construction so require,all words used in the singular herein shall be deemed to have been used in the plural,and the masculine shall include the feminine and neuter and vice versa. The term"Person"as used in this Lease means a natural person, corporation, limited liability company, association, partnership, organization, business, trust, individual, or a governmental authority, agency, instrumentality or political subdivision, and whenever the word "day"or"days"is used herein,such shall refer to calendar day or days,unless otherwise specifically provided herein. Whenever a reference is made herein to a particular Section of this Lease,it shall mean and include all subsections and subparts thereof. The word"include" or"including" shall describe examples of the antecedent clause, and shall not be construed to limit the scope of such clause. Attachment No.7 Page 36 of 40 17.15 Applicable Law; Severability. The interpretation and enforcement of this Lease shall be governed by the laws of the State of California. Should any part,term,portion or provision of this Lease,or the application thereofto any person or circumstances be held to be illegal or in conflict with any Governmental Restrictions, or otherwise be rendered unenforceable or ineffectual,the validity of the remaining parts,terms, portions or provisions,or the application thereof to other persons or circumstances,shall be deemed severable and the same shall remain enforceable and valid to the fullest extent permitted by law. 17.16 Exhibits. All exhibits referred to in this Lease are attached hereto and incorporated herein by reference. 17.17 Short Form of Lease. Prior to City's conveyance of the Leased Premises to Tenant,the Parties shall execute and thereafter record with the County Recorder of Orange County a Memorandum of Lease, attached hereto as Exhibit C,giving notice of the existence of this Lease and the Term hereof. 17.18 Landlord's Rights of Inspection. Landlord and its authorized Representatives shall have the right during business hours,upon not less than twenty-four(24)hours' oral or written notice to Tenant(except that in the case of an emergency,the existence of which shall be determined by Landlord in its reasonable discretion,no advance notice shall be required)to enter upon the Leased Premises for purposes of inspecting the same and exercising its rights under this Lease, provided that such inspections shall not unreasonably interfere with Tenant's or its subtenant's construction or business activities.Tenant has the right to designate representatives to accompany the Landlord's representatives on such inspections.Landlord agrees to coordinate with Tenant to schedule such inspections so that Tenant's representatives may attend the inspections, in the discretion of such Tenant. 17.19 Nonmerger of Fee and Leasehold Estates. If both Landlord's and Tenant's estates in the Leased Premises become vested in the same owner(other than by termination of this Lease following an Uncured Default hereunder,subject to the rights,if any,of a Lender pursuant to Article 8 above),this Lease shall not be terminated by application of the doctrine of merger except at the express election of Landlord and with the consent of each Lender holding a Leasehold Mortgage. Attachment No.7 I Page 37 of 40 17.20 Counterparts. This Lease may be executed in any number of counterparts,each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 17.21 Interest On Past Due Obligations. Except where another rate of interest is specifically provided for in this Lease,any amount due from either Party to the other under this Lease which is not paid within ten (10) days after receipt of written notice that such amount is due(or in the case of Rent,within three(3)days after such Rent is due),shall bear interest at the Agreed Rate from the date such amount was originally due to and including the date of payment. 17.22 Holding Over. Any holding over by Tenant after the expiration ofthe Term shall be construed as a tenancy from month to month and shall be subject to all of the terms and conditions which are provided for in this Lease except that the Rent shall be in an amount equal to 150% of the Rent in effect immediately prior to the expiration of the Term. IN WITNESS WHEREOF,the parties have executed this Lease as of the date first above written. SIGNATURES ON NEXT PAGE Attachment No.7 Page 38 of 40 TENANT: VF OUTDOOR INC.,A DELAWARE CORPORATION,DBA"VANS" Date: By: LANDLORD: THE CITY OF HUNTINGTON BEACH(City) 0311 ,E Date. By� Mayor ATTEST: 6�ceilerk REVIEWED AND APPROVED AS TO FORM: Ci Attorney B Jennifer M Grath REVIEWED AND APPROVED AS TO FORM: i I . Attachment No.7 Page 39 of 40 KANE, BALLMER& BERKMAN By, City Special unsel Murray O. Kane Attachment No.7 Page 40 of 40 EXHIBIT A LEGAL DESCRIPTION OF THE LEASED PREMISES All that certain real property situated in the County of Orange, State of California, described as follows: Parcels 1 and 2 of Parcel Map No.90-327,in the City of Huntington Beach,County of Orange,State of California,as per map recorded in Book 279 Page 33 and 34 of Parcel Maps,in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 EXHIBIT B SITE MAP I i SITE MAP (APN 142-073-03) THIS MAP WAS PREPARED FOR ORANGE SEE SPECIAL PAGE 142-079 FOR FEE TITLE ASSESSAcNT BELON SURFACE _ -7 7�ASSESSOR WE$NO�RANTEE�ASYTO S 112• SEC. 14. T 5 S. R 11 N � 142 0 1 ITS ACCURACY NOR ASSUMES ANY LIABILITY FOR OTHER USES. NOT TO BE REPRODUCED. PAGE I OF 2 ALL RIGNIS RESERVED. 40 COPYRIGHT ORANGE COUNTY ASSESSOR 2010 0.076 AC. !. 32 30 31 40 n\ " I �»•»' J NOW DARE I I VASSAR f VERMONT L A u F STREET STREf I l STREET 5' PLAN ACFADDEN /SUGAR AVEA4IEI AVENUE (� HMIZOVIAC SCALE:1'=r00' ajx W +:„+•'0 0 34' .STORM DRAIN ESM'T.I11 =?$ .V G6yLO6B0N a 36.9.9INGW1 1 y PROJECT SITE VERTE�EW`uT10N tro Q 11 O O 'DETAIL A' BL fEBOMVEi 35.76 AC. ?5.48 AC. AC. Q \ 1"=400 DRIVE-- P.M. 07 34 soy GaDEN WEST COLLEGE rO, ,. o'c^�o P.696 AC. -' to CENTER '�• STREET CENTER a. 71 s• ;y 15 33.233 AC. .0 g 16 QD i N 'A' 3 1 0.40 AC. N d r;#l4AC. �` u' �• 'Q F'4y —', S 1V.S3 Ir.ff y+ y ,ee.w SEf P. M. 358-1 \ N DETAIL 23 h ,a. BRE£LAND A" q 1. 9n r C oalvc— 5O SEE PAGE? 26 - = Ac. w r»w 37.10 AC. 4 N' 1, AC. 22 19 W 44-t1 P. M. _255-40 073 Q P.N. 3?-48 PAR•? 1Lb6 AC. ».• N v k PAR.1 ? 8O f 31 20 ,, Y 1 - 6 15.774 AC. O AC. a• 9.66 AC. Q v " S.00. xa.w• 3 i P. M. 358-1 21 m iw• y P. N. 255.-40 ,•sr '+fD1NGER § 8 LSNEL 7ZER AVE.'I.S. AVENUE = — a�0'. 5 14 ? 3 PARXSIOf LANE 14113 13 32 51 6 ^�Qe z3 24 MARCH 1962 PARCEL MAP P.M. 44-11. 255-40, J58-1 NOTE - ASSESSOR'S BLOCK 6 ASSESSOR'S MAP PARCEL NUMBERS BOOK 142 PACE 07 SHOWN IN CIRCLES COUN7T OF ORANGE EXHIBIT B-1 FUTURE RAILROAD PLATFORM RESERVATION PROPERTY LINE RAILROAD CL - - - -- - 20'-0' I 1 I j 1 I j \ I I � � 1 ) � \ I I � I I EXHIBIT B-1 FUTURE RAJLROAD PLATFORM RESERVATION i EXHIBIT C MEMORANUM OF LEASE i This Document was electronically recorded by City of Huntington Beach Recorded in Official Records, Orange County Hugh Nguyen, Clerk-Recorder 11111111111111111111111111111 IIIIIINO FEE - - - 2013000366987 09:10am 06/18/13 63 405 M11 5 GOVERNMENT BUSINESS 0 00 0 00 0 00 0 00 12 00 0 00 0 00 0 00 Free Recording Requested(Govt.Code§6103) Recording Requested by and When Recorded Return to: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Economic Development Director SPACE ABOVE LINE FOR RECORDER'S USE APN: 142-073-03 MEMORANDUM OF LEASE THIS MEMORANDUM OF LEASE ("Memorandum") is entered into by and between the CITY OF HUNTINGTON BEACH ("City") and VF OUTDOOR, INC., a Delaware corporation doing business as"Vans"("Lessee"). RECITALS A. City and Lessee have entered into that certain Ground Lease dated for reference purposes January 27 , 2012 (the "Lease") pursuant to which City leased to Lessee and Lessee leased from City certain real property more particularly described in Exhibit "A" and incorporated herein by reference(the"Property"). B. City and Lessee desire to execute this Memorandum to provide constructive notice of the Lease to third parties. i OPERATIVE PROVISIONS 1. Lease Commencement/Term. City leases the Property to Lessee for a term commencing onJaauary 27 , 2012 and continuing thereafter for twenty (20) years (with two 10-year options to renew, as provided therein), unless earlier terminated as provided in the Lease. 2. Lease Terms. The terms and provisions of the Lease are hereby incorporated into this Memorandum of Lease by this reference. 3 Assignment. Lessee's rights under the Lease shall not be assigned except in compliance with the terms of the Lease. Attachment 7A Page 1 of 2 4. Successors and Assigns. This Memorandum of Lease and the Lease shall bind and inure to the benefit of the parties and their respective, permitted heirs, successors in interest and assigns, subject, however, to the terms of the Lease concerning assignment. The provisions of this Memorandum of Lease are solely for the purpose of providing notice of the Lease and, in the event of any conflict between the provisions of this Memorandum of Lease and the provisions of the Lease,the provisions of the Lease shall prevail. IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease as of the date below. TENANT• VF OUTDOOR INC,A DELAWARE CORPORATION,DBA"VANS" Date By e * alley,Presl ent LANDLORD. THE CITY OF HUNTINGTON BEACH(City) i Date: ? By: Mayor ATTEST: y erk RE IEWED AND APPROVED AS TO FORM Ci;Jenni Attorney i i r McGrath . f� Attachment 7A I Page 2 of 2 State of California ) County of el 0 ) On UC�—M 2O12 before me, (here insert natbe and title of the officer),personally Appeared r, \ who proved to me on the basis of satisfactory evidence to be the person(#) whose names) is/aw subscribed to the within j instrument and acknowledged to me that he/sWticy executed the same in his/hgr/twr authorized capacity(ig§),and that by his/her/their signature(i)on the instrument the person(f), or the entity upon behalf of which the person($)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) JENNIfER MILLER BERNER Commission*1862436 Notary Public•California Orange County -My Comm•Expires Ait 23 2013 I I ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) ss COUNTY OF ORANGE ) On June 17, 2013, before me, P. L. Esparza, Notary Public, personally appeared Joan L. Flynn and Connie Boardman who proved to me on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons 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. P L ESPARZA WITNESS my hand and official seal. Commission# 1857021 -a Notary Public-California Z Orange County My Comm Ex fires Au 4,2018 (Seal) otary S gna re) EXHIBIT A Legal Description All that certain real property situated in the County of Orange,State of California, described as follows: Parcels 1 and 2 of Parcel Map No.90-327, in the City of Huntington Beach, County of Orange, State of California,as per map recorded in Book 279 Page 33 and 34 of Parcel Maps, in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 I I EXHIBIT D ESTOPPEL CERTIFICATE EXHIBIT D ESTOPPEL CERTIFICATE The undersigned, as Tenant under that lease dated (the "Lease") made between THE CITY OF HUNTINGTON BEACH, a public body corporate and politic ("City" or "Landlord"), and VF OUTDOOR, INC., a Delaware corporation doing business as"Vans"("Tenant"),hereby certifies as follows: (1) That Tenant has entered into occupancy of the premises described in said lease (the"Leased Premises"); (2) That the Lease is in full force and effect and has not been assigned, modified, supplemented or amended in any way, except as follows: (3) That the Commencement Date of the Lease is ; (4) That there is an unexpired term thereunder of years; (5) That to the knowledge of the undersigned there are no defaults by either Tenant or Landlord thereunder, except as follows: (6) That no rents have been prepaid,other than as provided in the Lease. EXECUTED THIS day of , TENANT: VF OUTDOOR INC.,A DELAWARE CORPORATION, DBA"VANS" Date: By: Kevin Bailey,President SIGNATURES CONTINUED ON NEXT PAGE i THE CITY OF HUNTINGTON BEACH Date: By:. Mayor ATTEST: City Clerk REVIEWED AND APPROVED AS TO FORM: City Attorney By: Jennifer McGrath REVIEWED AND APPROVED AS TO FORM: KANE,BALLMER&BERKMAN By: City Special Counsel Murray Kane ATTACHMENT NO. 8 RELEASE OF CONSTRUCTION COVENANTS [behind this page] � � I 1flCITY OF HUNTINGTON BEACH INTERDEPARTMENTAL COMMUNICATION CONFIDENTIAL LAWYER-CLIENT COMMUNICATION TO: Kellee Fntzal,Office of Business Development FROM- Michael E.Gates,City Attorney DATE: January 19,2016 SUBJECT: Vans Skate Park Release of Construction Covenants(RLS 15-5040) BACKGROUND The Vans Skate Park Project was completed and opened for operation in 2014 The Ground Lease and Improvement Agreement(GLIA.)requires the City to execute and record a "Release of Construction Covenants," which evidences the City's approval and concurrence that the GLIA Improvements were substantially completed The City executed but has been unable to record the Release after several attempts(electronically and in person)through the City Clerk's office and Orange County Recorder's Office Apparently,the GLIA was never recorded,and therefore,the Recorder has rejected the Release because there is nothing of record to release Staff has presented several alternative solutions that would accomplish the City's goal of providing Vans with the construction release contemplated under the GLIA, and requested review and consideration of the various options. Our preferred alternatives are set forth below. FIRST PREFERRED ALTERNATIVE The first preferred alternative is to provide the fully executed Release to Vans with a cover letter explaining why the City was unable to record the Release. The letter should indicate that the City is acknowledging through the execution of the Release that all"Improvements" under GL1A have been substantially completed 15-5040/130507 n I r Re:Vans Skate Park Release of Construction Covenants(RLS 15-5040) January 19,2016 Page 2 SECOND PREFERRED ALTERNATIVE If Vans does not accept the first preferred alternative,the City should either record the GLIA or re-record the Memo of Lease with the GLIA as an attachment. Once this action has been completed,the Release could then be revised to cite and refer to the specific document number and recording date of the recorded GLIA or Memo of Lease,and the City could again attempt to record the Release. CONCLUSION If neither of the above two alternatives are successful,please contact me at your earliest convenience for cussions regarding this matter MICHAEL E_ GATES City Attorney cc* Duran Villegas,Office of Business Development 15-5040/130507 City of Huntington Beach r 2000-MAIN STREET CALIFORNIA 92648-2702 OFFTCF OF BUSINESS DEVELOPMENT vff 111 1901 40 7E4 536 5582 www huntingtonbeachca tTcry fax - 714 375 5087 January 28, 2016 Doug Palladmi Vice President of Marketing VF Outdoor, Inc 6550`Katella Ave Cypress, CA 90630-5102 Subject. Release of Construction Covenants (APN 142-073-03) Dear Mr Palladini Enclosed is the fully executed copy of the Release of Construction Covenants ("Release") This Release is required by the Groundlease and Improvement Agreement ("GLIA") between the City of Huntington Beach and VF Outdoor, Inc. dated January-27, 2012 The City submitted the Release to the Orange County Recorder's Office for recording. However, the County Recorder would not-record the Release because the GLIA is not recorded The County said that they cannot record'a document that refers to an unrecorded document, the GLIA is unrecorded' Therefore, the Release was filed-with the-City Clerk-and a copy is enclosed for your records If you have any questions, please contact Micheal Green at 714-526-5224 Sincerely, �ellee Fretzal Deputy Director Attachment— Copy of Release of'Construction Covenants OFFICIAL BUSINESS Document entitled to free recording per Government Code Section 6103 Recording Requested By and When Recorded Mail to City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention Econoin,c DevLlopment Director SPACE ABOVC THIS LINE FOR RECORDER'S USE RELEASE OF CONSTRUCTION COVENANTS (APN: 142-073-03) WHEREAS, VI{ OUTDOOR, INC, A DELAWARE CORPORATION DOING BUSINESS AS "VANS"(the "Developer") is the lessee of certain real property situated in the City of Huntington Beach, California, described in Exhibit "A" which is attached hereto and made a part hereof(the "Property"), and has agreed to construct certain improvements thereon (the"Improvements"), and WHEREAS, pursuant to the GROUNDLEASE AND DAPROVEMENT AGREEMENT ("GLIA") entered into by and between the CITY OF HUNTINGTON BEACH (the "City") and VF OUTDOOR, 1NC,, A CALIFORNIA CORPORATION ("Developer" therein) dated j-1 in %�L a ir.-_2 7 ,2012,the City has agreed to furnish the Developer with a Release of Construction Covenants("Release")upon the completion of construction and development of the Improvements, and such certificate is to be in such form as to permit it to be rccorded in the Recorder's Office of Oiange County, and WHEREAS, the GLIA states that the Release sbail be conclusive determination of satisfactory completion of the construction and development of the Improvements as required by the GLIA;and WHEREAS, the City has determined that the construction and development of the Improvements on the Property as required by the GLIA has been satisfactorily completed NOW THEREFORE, it is hereby acknowledged and agreed by the parties hereto that }'tft document is solely for the off txlt9koa of the C4 of Huntington, gs contemplated under ( y ztrt@;1i Ccdu sue' 6IS-4 :!A zt,mo b s nx ctaaG trmc ut ci'iergs I The City hereby certifies that the construction and development of the Improvements on the Property has been fully and satisfactorily performed and completed as required by the GLIA 2 Nothing contained in this instrument shall modify any provisions of the GLIA IN WITNESS WHEREOF, the City has executed this Release this ./2=7// day of THE CITY OF HUNTINGTON BEACH(City) ,Date 0WAcyl, /2, 2,64 By f ' Mayoi ATTEST C lerk " �j REVIEWED AND APPROVED AS TO FORM City Attorney By.� rt APPROVED AS TO FORM. KANE,`BALLMER&BERKMAN City SpeciaUCounsel Murray-O -Kane [SIGNATURE CONTINUED ON NEXT PAGE] i VF OUTDOOR INC,A DELAWARE CORPORATION,DBA"VANS" r Date: / IS By: Kev ey,Presidents i CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT CIVIL CODE§ 1189 .!'�rr�Pnran.v.:�.Tw.•_..n�,r rr.ws-r.ce`f"-r.e�'-..r.�rwse+�sN%.v..�.—_ter _faY^+,w�.�'+nr_w.^v. n;�^- �ur.vr_.-rr_.v�.n'_-•. -�rw._ A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which-this certificate is attached,and not the truthfulness,accuracy,or validity of that document State of California } County of } Ong�, ?�TnA before me, a Date Here Insert Name and Title of the bfflcer personally appeared kba" Nam (s)of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(a) whose name(a) is/qe subscribed to the within instrument and acknowledged to me that he/skre/tAey executed the same to his/her/their authorized capacity(ies),and that by his/her/t*ir signature(&)on the instrument the person(;), or the entity upon behalf of which the per"son(s)acted,executed the instrument. I cerbfy 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. JENNIF-'R MILLER BERNEA Commission 0 2034769 z Signaturow z -: Rotary Public-California z z Orange County �' Signat re f Notary Public iN Comm E hies Au 23 2©17+ Place Notary Seal Above OPTIONAL Though this section is optional, completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document Description of Attached Document Title or Type of Document Document Date. Number of Pages Signer(s) Other Than Named Above. Capacity(ies)Claimed by Signer(s) Signer's Name: Signer's Name. ❑Corporate Officer — Title(s) ❑Corporate-Officer —Title(s): ❑Partner — ®Limited ❑General ©Partner— ©Limited ©General I—'Individual p Attorney in Fact ❑Individual ©Attomey in Fact ❑Trustee ❑Guardian or Conservator ❑Trustee ❑Guardian or Conservator C Other- ❑ Other Signer Is Representing. Signer Is Representing. - 02014 National Notary Association•www,NationaiNotary.org•1-800-US NOTARY(1-800-876-6827) Item#5907 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to `,which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. ACKNOWLEDGMENT STATE OF CALIFORNIA ) ) ss COUNTY OF ORANGE ) On October 12, 2015, before me,P. L. Esparza, Notary Public, personally appeared Joan L. Flynn and Jill Hardy who proved to me on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons 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. P L ESPARZA WITNESS my hand and official seal. Commission 0 2032750 a LO notary Pubic-California v Omnso"County - O 7 - - - .Comm f ros Aug4.2017 ` (Seal) (Notary Signature EXHIBIT A Legal Description All that certain real property situated in the County of Orange,State of California,described as follows, Parcels I and 2 of Parcel Map No. 90-327, in the City of Huntington Beach,County of Orange, State of California, as per map recorded in Book 279 Page 33 and 34 of Parcel Maps,in the Office of the County Recorder of said County Assessor's Parcel Number 142-073-03 ATTACHMENT NO. 8 OFFICIAL BUSINESS Document entitled to free recording per Government Code Section 6103 Recording Requested By and When Recorded Mail to: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Economic Development Director SPACE ABOVE THIS LINE FOR RECORDER'S USE RELEASE OF CONSTRUCTION COVENANTS (APN: 142-073-03) WHEREAS, VF OUTDOOR, INC., A DELAWARE CORPORATION DOING BUSINESS AS "VANS" (the "Developer") is the lessee of certain real property situated in the City of Huntington Beach, California, described in Exhibit "A" which is attached hereto and made a part hereof(the "Property"), and has agreed to construct certain improvements thereon (the"Improvements");and WHEREAS, pursuant to the GROUNDLEASE AND IMPROVEMENT AGREEMENT ("GLIA") entered into by and between the CITY OF HUNTINGTON BEACH (the "City") and VF OUTDOOR, INC., A CALIFORNIA CORPORATION ("Developer" therein) dated ,2012,the City has agreed to furnish the Developer with a Release of Construction Covenants("Release")upon the completion of construction and development of the Improvements, and such certificate is to be in such form as to permit it to be recorded in the Recorder's Office of Orange County;and WHEREAS, the GLIA states that the�Release shall be conclusive determination of satisfactory completion of the construction and development of the Improvements as required by the GLIA;and WHEREAS, the City has determined that the construction and development of the Improvements on the Property as required by the GLIA has been satisfactorily completed. f NOW THEREFORE, it is hereby acknowledged and agreed by the parties hereto that: i Attachment No. 8 Pagel of 3 1. The City hereby certifies that the construction and development of the Improvements on the Property has been fully and satisfactorily performed and completed as required by the GLIA. 2. Nothing contained in this instrument shall modify any provisions of the GLIA. IN WITNESS WHEREOF, the City has executed this Release this day of THE CITY OF HUNTINGTON BEACH(City) Date: By: Mayor ATTEST: City Clerk REVIEWED AND APPROVED AS TO FORM: City Attorney By: Jennifer McGrath APPROVED AS TO FORM: KANE,BALLMER&BERKMAN By: City Special Counsel Murray O.Kane [SIGNATURE CONTINUED ON NEXT PAGE] i Attachment No. 8 Page 2 of 3 VP OUTDOOR INC.,A DELAWARE CORPORATION,DBA"VANS" f \ r Date: �I Z Zi By: IIIL--- Key' iley,Presid t z fi I Attachment No. 8 Page 3 of 3 STATE OF CALIFORNIA ) COUNTY OF �C-- On ` �Cl.l o '2-o1Z before me, (here insert name and title of the officer),personally a geared_ Y-)e-),l\n -V)ck- -R� ,who proved to me on the basis of satisfactory evidence to be the person(& whose name() is/av subscribed to the within instrument and acknowledged to me that he/s11te/they executed the same in his/hlor/tbreir authorized capacity(*s), and that by his/her/tMr signature(g)on the instrument the person(&, or the entity upon behalf of which the person( 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) JENMFERO R BERNER I L Commission N 1862436 Notary Pink-C811fomis Oran"county my Comm. 23 20f3 i i EXHIBIT A Legal Description All that certain real property situated in the County of Orange, State of California,described as follows: Parcels 1 and 2 of Parcel Map No.90-327, in the City of Huntington Beach,County of Orange, State of California,as per map recorded in Book 279 Page 33 and 34 of Parcel Maps, in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 I i v ,r i Council/Agency Meeting Held: ��,���p ,? Deferred/Continued to: �kAppr ved� ❑ Conditionally Approved ❑ Denied dSi�. ' CitAlerk's,9ignatu Council Meeting Date: January 27, 2012 Department ID Number: ED 12-007 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Fred A. Wilson, City Manager PREPARED BY: Bob Hall, Deputy City Manager/Director of Economic Development SUBJECT: Ground Lease and Improvement Agreement with VF Outdoor, Inc. (Vans) a Delaware Corporation (Lessee) for the development of a Skate Park on City owned property Statement of Issue: The City is asked to approve a Ground Lease and Improvement Agreement with VF Outdoor, Inc. (Vans) for the development, operation and maintenace of a skate park on a 2.7 acre City owned property located on Center Avenue, near Gothard Street, Assessor Parcel Number 142-073-03. Financial Impact: No Fiscal Impact Recommended Action: Motion to: A) Approve a Ground Lease and Improvement Agreement with VF Outdoor, Inc. (Vans) a Delaware Corporation (Lessee) for the development, operation and maintenance of a skate park on a 2.7 acre City owned property located on Center Avenue near Gothard Street, and, B) Authorize the City Manager and City Clerk to sign all necessary documents to execute the Agreement. Alternative Action(s): Do not approve the Agreement and direct staff accordingly. HB -111- Item 3. - I REQUEST FOR COUNCIL ACTION MEETING DATE: 1/27/2012 DEPARTMENT ID NUMBER: ED 12-07 Analysis: The City is entering into a Ground Lease and Improvement Agreement (GLIA) with VF Outdoor, Inc. (Lessee) for the development, operation, and maintenance of a skate park on a 2.7 acre City owned property located on Center Avenue near Gothard Street, Assessor Parcel Number 142-073-03. Terms of the lease agreement include the following: • Lessee shall develop a world class skate park; • Lessee shall pay for all associated park improvements, operations, and maintenance costs; • Skate park shall be free and open to the public at all times except for major events (up to 20 calendar days per year); • Lease terms includes a 20-year ground lease with two 10-year extension option; and • Lessee shall pay annual rent to the City in the amount of $1.00 per year for the entire lease period. The proposed project would include approximately 14,000 square feet of skate park plaza area, 13,000 square feet of skate bowl area, a 3,500-square-foot skate shop/concession/restroom building, 15,000 square feet of turf/walking area, a 480 square foot skate park restroom structure, a 200-square-foot skate park entrance kiosk. The main parking lot near the primary site access fronting Center Ave and a secondary parking area off McFadden Avenue to be used only for special events. The project would include extensive landscaping and turf areas, sidewalks, walkways, trash/recycling facilities, drinking fountains, and restrooms - all of which would be accessible to the public. Additionally, in order to allow for potential future development of a transit stop, the proposed project includes the dedication of a "Transit Reserve Area." For comparative purposes, development details of two Southern California public skate parks are provided below: Volcom Skate Park of Etnies Skate Park of Lake Costa Mesa Forest Park Size 15,000 S.F. 2 acres (approximate) Skate Area 13,000 S.F. 40,000 S.F. Admission Free Free Staffed No City Operated By City City Park Development Cost $2.0 million $4.2 million Sponsorship/Grants Approximately $300,000 BOA donated land and Received over 10 years for naming Sole Technology (Etnies) rights donated $250,000 for naming rights City Development Cost $1.7 million $3.95 million approximate approximate Annual City Operating $50,000 annual $300,000 annual Cost approximate Item 3. - 2 HB -112- REQUEST FOR COUNCIL ACTION MEETING DATE: 1/27/2012 DEPARTMENT ID NUMBER: ED 12-07 Both skate park projects described above required a substantial initial investment and ongoing investment commitment on behalf of their respective cities. In the case of the proposed Vans skate park project, the City's contribution is limited to a discounted land lease. Environmental Status: In 1996, the City Council approved Huntington Beach Redevelopment Plan, merging the Huntington Beach Center, Main-Pier, Oakview, Talbert- Beach, and Yorktown-Lake Redevelopment project areas and adopted Resolution Number 96-100, which certified the Program Environmental Impact Report (EIR) for the Huntington Beach Redevelopment Plan. The 1996 Program EIR identifies the potential of public infrastructure projects that promote recreational opportunities and community facilities that meet the needs of the community's resident. For the purpose of the lease approval, the Huntington Beach Redevelopment Plan Program EIR meets the environmental review requirements. Additionally, City is currently processing a Project Specific EIR. Project entitlements shall be contingent on final approval of the Project Specific EIR. Strategic Plan Goal: Enhance Economic Development Attachment(s): MM E 1 pGroundease and Improvement Agreement ("GLIA") (Skate Park) by and between City of Huntington Beach, City and VF Outdoor Inc., a Delaware corporation, doing business as "Vans", Lessee 2 Project Summary Analysis Report on Ground Lease and improvement Agreement (33433) xB -113- Item 3. - 3 AT TACHMENT #1 C GROUND LEASE AND IMPROVEMENT AGREEMENT("GLIA") (Skate Park) by and between CITY OF HUNTINGTON BEACH, CITY and VF OUTDOOR INC., a Delaware corporation, doing business as"Vans", LESSEE TABLE OF CONTENTS Page PART 1. SUBJECT OF AGREEMENT.................................................................................1 SECTION 101 Purpose of the Agreement............................................................................I SECTION102 Definitions....................................................................................................I SECTION 103 The Redevelopment Plan.............................................................................4 SECTION 104 The Property.................................................................................................4 SECTION105 City...............................................................................................................5 SECTION106 Lessee...........................................................................................................5 SECTION 107 Assignments and Transfers..........................................................................6 PART 2. DISPOSITION OF LEASEHOLD..........................................................................7 SECTION 201 City's Lease of the Property to Lessee ........................................................7 SECTION 202 Conditions Precedent City's Conveyance of Leasehold to Lessee..............7 SECTION203 Escrow..........................................................................................................9 SECTION 204 Recordation of Documents ........................................................................I I SECTION 206 Condition of Title.......................................................................................I I SECTION 207 Title Insurance ...........................................................................................I I SECTION 207.1 Leasehold Title Policy......................................................................I I SECTION 208 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Property.......................................................................I I SECTION 209 Contests......................................................................................................12 SECTION 210 Condition of the Property...........................................................................13 SECTION 210.1 Hazardous Substances.......................................................................13 SECTION 210.2 Suitability of the Property.................................................................13 SECTION 211 Method of Financing..................................................................................14 SECTION 212 Evidence of Financing...............................................................................14 SECTION 213 Designation as Point of Sale......................................................................15 PART 3. DEVELOPMENT OF THE PROPERTY..............................................................15 SECTION 301 Land Use Approvals ..................................................................................15 SECTION 302 Scope of Development...............................................................................15 SECTION 303 Basic Concept Drawings............................................................................15 SECTION 304 Landscaping and Grading Plans.................................................................16 SECTION 305 Construction Drawings and Related Documents.......................................16 SECTION 306 City Approval of Plans...............................................................................16 SECTION 307 Cost of Construction..................................................................................17 SECTION 308 Schedule of Performance...........................................................................17 SECTION 309 Indemnification and Insurance...................................................................18 SECTION 310 Nondiscrimination......................................................................................21 SECTION 311 Local, State and Federal Laws...................................................................21 SECTION 312 Notice of Non-Responsibility....................................................................22 SECTION 313 Permits .......................................................................................................22 SECTION 314 Rights of Access........................................................................................22 i SECTION 315 Disclaimer of Responsibility by City.........................................................22 SECTION 316 Taxes, Assessments, Encumbrances and Liens .........................................23 SECTION 317 Prohibition against Transfer.......................................................................23 SECTION 318 No Encumbrances Except Permitted Mortgages.......................................23 SECTION 319 Lender Not Obligated to Construct Improvements....................................24 SECTION 320 Notice of Default to Lenders; Right of Lender to Cure Defaults ..............24 SECTION 321 Failure of Lender to Complete Improvements...........................................25 SECTION 322 Right of the City to Cure Defaults.............................................................25 SECTION 323 Right of the City to Satisfy Other Liens on the Property...........................25 SECTION 324 Release of Construction Covenants...........................................................25 PART 4. USE OF THE PROPERTY....................................................................................26 SECTION401 Uses............................................................................................................26 SECTION 402 Maintenance...............................................................................................26 SECTION 403 Obligation to Refrain from Discrimination................................................26 SECTION 404 Form of Nondiscrimination and Nonsegregation Clauses.........................27 SECTION 405 Effect and Duration of Covenants..............................................................28 PART 5. DEFAULTS AND REMEDIES ............................................................................28 SECTION 501 Defaults - General......................................................................................28 SECTION 502 Institution of Legal Actions.......................................................................29 SECTION 503 Applicable Law..........................................................................................29 SECTION 504 Acceptance of Service of Process..............................................................29 SECTION 505 Rights and Remedies Are Cumulative.......................................................29 SECTION 506 Damages.....................................................................................................29 SECTION 507 Specific Performance.................................................................................30 SECTION 508 Reserved.....................................................................................................30 SECTION 509 Termination by Lessee...............................................................................30 SECTION 510 Termination by City...................................................................................30 PART 6. GENERAL PROVISIONS ....................................................................................31 SECTION601 Notices.......................................................................................................31 SECTION 602 Enforced Delay: Extension of Time of Performance.................................31 SECTION 603 Conflict of Interest.....................................................................................31 SECTION 604 Nonliability of City Officials and Employees ...........................................32 SECTION 605 Inspection of Books and Records ..............................................................32 SECTION606 Approvals...................................................................................................32 SECTION 607 Real Estate Commissions; Finder's Fee ....................................................32 SECTION 608 Construction and Interpretation of Agreement..........................................32 SECTION 609 Time of Essence.........................................................................................33 SECTION 610 No Partnership .................33 SECTION 611 Compliance with Law................................................................................34 SECTION 612 Binding Effect............................................................................................34 SECTION 613 No Third Party Beneficiaries.....................................................................34 SECTION 614 Authority to Sign........................................................................................34 SECTION 615 Incorporation by Reference........................................................................34 ii SECTION 616 Counterparts...............................................................................................34 PART 7. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS.............................34 PART 8. TIME FOR ACCEPTANCE OF AGREEMENT BY CITY.................................35 PART 1. SUBJECT OF AGREEMENT.................................................................................I SECTION 101 Purpose of the Agreement............................................................................I SECTION 102 Definitions....................................................................................................1 SECTION 103 The Redevelopment Plan.............................................................................4 SECTION 104 The Property.................................................................................................4 SECTION105 City...............................................................................................................5 SECTION106 Lessee...........................................................................................................5 SECTION 107 Assignments and Transfers..........................................................................6 PART 2. DISPOSITION OF LEASEHOLD..........................................................................7 SECTION 201 City's Lease of the Property to Lessee ........................................................7 SECTION 202 Conditions Precedent City's Conveyance of Leasehold to Lessee..............7 SECTION203 Escrow..........................................................................................................9 SECTION 204 Recordation of Documents ........................................................................I I SECTION 206 Condition of Title.......................................................................................I I SECTION 207 Title Insurance ...........................................................................................I I SECTION 207.1 Leasehold Title Policy......................................................................I I SECTION 208 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Property.......................................................................I I SECTION 209 Contests......................................................................................................12 SECTION 210 Condition of the Property...........................................................................13 SECTION 210.1 Hazardous Substances.......................................................................13 SECTION 210.2 Suitability of the Property.................................................................13 SECTION 211 Method of Financing..................................................................................14 SECTION 212 Evidence of Financing...............................................................................14 SECTION 213 Designation as Point of Sale......................................................................15 PART 3. DEVELOPMENT OF THE PROPERTY..............................................................15 SECTION 301 Land Use Approvals ..................................................................................15 SECTION 302 Scope of Development...............................................................................15 SECTION 303 Basic Concept Drawings............................................................................15 SECTION 304 Landscaping and Grading Plans.................................................................16 SECTION 305 Construction Drawings and Related Documents.......................................16 SECTION 306 City Approval of Plans...............................................................................16 SECTION 307 Cost of Construction..................................................................................17 SECTION 308 Schedule of Performance...........................................................................17 SECTION 309 Indemnification and Insurance...................................................................18 SECTION 310 Nondiscrimination......................................................................................21 SECTION 311 Local, State and Federal Laws...................................................................21 SECTION 312 Notice of Non-Responsibility....................................................................22 SECTION313 Permits.......................................................................................................22 iii SECTION 314 Rights of Access ........................................................................................22 SECTION 315 Disclaimer of Responsibility by City.........................................................22 SECTION 316 Taxes, Assessments, Encumbrances and Liens .........................................23 SECTION 317 Prohibition against Transfer.......................................................................23 SECTION 318 No Encumbrances Except Permitted Mortgages.......................................23 SECTION 319 Lender Not Obligated to Construct Improvements....................................24 SECTION 320 Notice of Default to Lenders; Right of Lender to Cure Defaults ..............24 SECTION 321 Failure of Lender to Complete Improvements...........................................25 SECTION 322 Right of the City to Cure Defaults.............................................................25 SECTION 323 Right of the City to Satisfy Other Liens on the Property...........................25 SECTION 324 Release of Construction Covenants...........................................................25 PART 4. USE OF THE PROPERTY....................................................................................26 SECTION401 Uses............................................................................................................26 SECTION 402 Maintenance...............................................................................................26 SECTION 403 Obligation to Refrain from Discrimination................................................26 SECTION 404 Form of Nondiscrimination and Nonsegregation Clauses.........................27 SECTION 405 Effect and Duration of Covenants..............................................................28 PART 5. DEFAULTS AND REMEDIES ............................................................................28 SECTION 501 Defaults - General......................................................................................28 SECTION 502 Institution of Legal Actions.......................................................................29 SECTION503 Applicable Law..........................................................................................29 SECTION 504 Acceptance of Service of Process..............................................................29 SECTION 505 Rights and Remedies Are Cumulative.......................................................29 SECTION506 Damages.....................................................................................................29 SECTION 507 Specific Performance.................................................................................30 SECTION508 Reserved.....................................................................................................30 SECTION 509 Termination by Lessee...............................................................................30 SECTION 510 Termination by City...................................................................................30 PART 6. GENERAL PROVISIONS ....................................................................................31 SECTION 601 Notices.......................................................................................................31 SECTION 602 Enforced Delay: Extension of Time of Performance.................................31 SECTION 603 Conflict of Interest.....................................................................................31 SECTION 604 Nonliability of City Officials and Employees ...........................................32 SECTION 605 Inspection of Books and Records ..............................................................32 SECTION 606 Approvals...................................................................................................32 SECTION 607 Real Estate Commissions; Finder's Fee ....................................................32 SECTION 608 Construction and Interpretation of Agreement..........................................32 SECTION 609 Time of Essence.........................................................................................33 SECTION 610 No Partnership ...........................................................................................33 SECTION 611 Compliance with Law................................................................................34 SECTION 612 Binding Effect............................................................................................34 SECTION 613 No Third Party Beneficiaries.....................................................................34 SECTION 614 Authority to Sign........................................................................................34 iv SECTION 615 Incorporation by Reference........................................................................34 SECTION 616 Counterparts...............................................................................................34 PART 7. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS.............................34 PART 8. TIME FOR ACCEPTANCE OF AGREEMENT BY CITY.................................35 ATTACHMENTS ATTACHMENT NO. 1 - SITE MAP ATTACHMENT NO. 2 - LEGAL DESCRIPTION ATTACHMENT NO. 3 - METHOD OF FINANCING ATTACHMENT NO. 3A - PROJECT BUDGET ATTACHMENT NO. 4 - SCOPE OF DEVELOPMENT ATTACHMENT NO. 5 - SCHEDULE OF PERFORMANCE ATTACHMENT NO. 6 - ENVIRONMENTAL INDEMNITY ATTACHMENT NO. 7 - GROUND LEASE ATTACHMENT NO. 7A - MEMORANDUM OF GROUND LEASE ATTACHMENT NO. 8 - RELEASE OF CONSTRUCTION COVENANTS v GROUND LEASE AND IMPROVEMENT AGREEMENT THIS GROUND LEASE AND IMPROVEMENT AGREEMENT (the "Agreement" or "GLIA") is entered into by and between the CITY OF HUNTINGTON BEACH (the "City") and VF Outdoor, Inc., a Delaware corporation, (the "Lessee") as of , 20-M. City and Lessee agree as follows: PART 1. SUBJECT OF AGREEMENT SECTION 101 Purpose of the Agreement The City is the owner of an approximately 118,400 square foot site located at 7541 Center Avenue, in the City of Huntington Beach, California, 92647 ("Property"). The purpose of this Agreement is to effectuate the Redevelopment Plan for the Huntington Beach Redevelopment Project Area by providing for the City's leasing of the Property to Lessee in accordance with the Ground Lease in consideration for the Lessee's construction of a public skate park ("the Project"), in accordance with this Agreement. The development and use of the Property pursuant to this Agreement, and the fulfillment generally of this Agreement, are in the vital and best interests of the City of Huntington Beach and the health, safety, and welfare of its residents, and in accord with the public purposes and provisions of applicable federal, state, and local laws and requirements. SECTION 102 Definitions For purposes of this Agreement, the following capitalized terms shall have the following meanings: "Acquisition and Development Costs" means the total cost of acquiring the leasehold interest in the Property and developing and constructing the Improvements thereon. "Affiliate" means (1) any Person directly or indirectly controlling, controlled by or under common control with another Person; (2) any Person owning or controlling ten percent (10%) or more of the outstanding voting securities of such other Person; or (3) if that other Person is an officer, director, member or partner, any company for which such Person acts in any such capacity. The term "control" as used in the immediately preceding sentence, means the power to direct the management or the power to control election of the board of directors. It shall be a presumption that control with respect to a corporation or limited liability company is the right to exercise or control, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the controlled corporation or limited liability company, and, with respect to any individual, partnership, trust, other entity or association, control is the possession, indirectly or directly, of the power to direct or cause the direction of the management or policies of the controlled entity. "City"means the City of Huntington Beach, California. "Closing" means the point in time when all conditions precedent to close of escrow for 1 City's conveyance of the Leasehold to Lessee have been satisfied, and all Recorded Documents, as set forth in Section 206, have been recorded. "Closing Date"means the date on which the Closing has occurred. "Completion" means the point in time when all of the following shall have occurred: (1) issuance of a certificate of occupancy by the City; (2) recordation of a Notice of Completion by Lessee or its contractor; (3) certification or equivalent by the project architect that construction of the Improvements (with the exception of minor "punchlist" items) has been completed in a good and workmanlike manner and substantially in accordance with the approved plans and specifications; (4) payment, settlement or other extinguishment, discharge, release, waiver, bonding or insuring against any mechanic's liens that have been recorded or stop notices that have been delivered; and (5) the Property has been developed in accordance with this Agreement, the Scope of Development and plans approved by the City pursuant to this Agreement. "Construction Lender" means the maker of any Construction Loan or beneficiary of any Construction Loan deed of trust. "Construction Loan" means, collectively, the Source of Financing in the form of a loan made to the Lessee at the time of the Closing for construction of the Improvements, secured against the Leasehold by the Construction Loan Deed of Trust. "Construction Loan Deed of Trust" means the deed of trust securing the Construction Loan. "Conversion" means the date upon which the Construction Loan is converted to the Permanent Loan. "Effective Date"means the date when this Agreement has been executed by the City. "Environmental Indemnity" means an instrument substantially in the form attached to this Agreement as Attachment No. 6. "Escrow Agent" means an escrow agent mutually acceptable to City and Lessee. "City Manager" refers to the City Manager of the City of Huntington Beach or designee. "Ground Lease" means the ground lease to be executed by City and Lessee substantially in the form as attached to this Agreement as Attachment No. 7. "Hazardous Substances" shall have the meaning set forth in Section 212.1 and the Environmental Indemnity. "Improvements" means the improvements more particularly described in the Scope of Development. 2 "Leasehold" or "Leased Premises" means that leasehold estate in the Property created by the execution of the Ground Lease. "Leasehold Permitted Exceptions" refers to those permitted exceptions to title as agreed to by Lessee and City for the Leasehold. "Legal Description" means the legal description of the Property attached to this Agreement as Attachment No. 2. "Memorandum of Ground Lease" means that document substantially in form attached hereto as Attachment 7A. "Method of Financing" means Attachment No. 3 to this Agreement. "Notice of Completion" shall have the same definition as set forth in California Civil Code section 3093. "Official Records" means the Official Records of the Office of the County Recorder for Orange County, California. "Permanent Lender" means the maker of any Permanent Loan or beneficiary of any Permanent Loan deed of trust. "Permanent Loan" means the Source of Financing in the form of a permanent loan to be made to the Lessee at Conversion, secured against the Leasehold by the Permanent Loan Deed of Trust. "Permanent Loan Deed of Trust"means the deed of trust securing the Permanent Loan. "Permitted Mortgage" means a mortgage approved by the City as a Source of Financing for the Project. "Permitted Mortgagee" means the holder of a Permitted Mortgage, including the Construction Lender or Permanent Lender. "Permitted Transfer" means any of the following: A conveyance of a security interest in the Leasehold in connection with any Permitted Mortgage and any transfer of title by foreclosure, deed or other conveyance in lieu of foreclosure in connection therewith; A conveyance of the Leasehold to any Affiliate of Lessee; or Subleasing or operation of the any concession stand or other related operation permitted on the Leased Premises by a third party operator approved by Lessee and the City. Any transfer described above shall be subject to the reasonable approval of documentation by the City Manager for conformance with this Agreement. 3 "Permitted Transferee"means the transferee of a Permitted Transfer. "Person" means an individual, partnership, limited partnership, trust, estate, association, corporation, limited liability company, or other entity, domestic or foreign. "Project"refers to the construction of the Improvements on the Property. "Project Budget" means the schedule of sources and uses attached to this Agreement as Attachment No. 3A. "Property"means the real property described in Section 104 of this Agreement. "Release of Construction Covenants" means the certificate, substantially in form attached hereto as Attachment No. 8, to be to be issued by the City upon Completion in accordance with Section 324 of this Agreement. "Schedule of Performance" means the document attached to this Agreement as Attachment No. 5. "Scope of Development" means the document attached to this Agreement as Attachment No. 4. "Site Map" means the document which is attached to this Agreement as Attachment No. 1. "Source of Financing" means a source of financing the Project which has been approved by the City, as more specifically described in the Method of Financing. "Title Company" means Lawyers Title Company or another title insurance company mutually acceptable to City and Lessee. "Title Insurance Policy" means and includes any of the following, as appropriate: (i) a leasehold policy of title insurance in favor of Lessee with respect to the Leasehold in an amount as reasonably requested by Lessee (the "Leasehold Title Policy"). SECTION 103 The Redevelopment Plan This Agreement is authorized by and made in furtherance of the Redevelopment Plan, which was approved and adopted by the City Council of the City of Huntington Beach on December 16, 1996, by Ordinance No. 3343, and lawfully amended thereafter. SECTION 104 The Property The "Property" is located at 7541 Center Avenue, in the City of Huntington Beach, California. The Property is depicted on the Site Map attached hereto as Attachment No. 1. The legal description of the Property is set forth in the Legal Description attached hereto as Attachment No. 2. In the event that Lessee subdivides the Property into a vertical subdivision, each parcel within the vertical subdivision shall be subject to the rights and obligations under this 4 Agreement, and the Legal Description referenced herein for the Property shall be modified to reflect the legal descriptions associated with each vertical parcel. SECTION 105 City a. City is a municipal corporation, exercising governmental functions and powers, and organized and existing under and by virtue of the Constitution and laws of the State of California. b. The address of the City for purposes of receiving notices pursuant to this Agreement shall be: City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: Kellee Fritzal, Economic Development Tel: (714) 526-5582 Fax: (714) 375-5087 With a copy to: Kane, Ballmer& Berkman 515 S. Figueroa Street, Suite 1850 Los Angeles, California 90071 Attn: Murray O. Kane Tel: 213-617-0480 Fax: 213-625-0931 C. "City" as used in this Agreement includes the City of Huntington Beach and any assignee or successor to its rights, powers and responsibilities. SECTION 106 Lessee a. Lessee is VF Outdoor Inc., a Delaware corporation, doing business as "Vans". The address of Lessee for purposes of receiving notices pursuant to this Agreement is as follows: VF Outdoor, Inc., a Delaware Corporation dba Vans 6550 Katella Avenue Cypress, CA 90363-5102 Attn: Doug Palladini Tel: (714) 889-6702 Fax: (714) With a copy to:: Robert Frisbee, Esq. Connolly, Finkel &Gosselin LLP 601 S. Figueroa Street, Suite 2610 5 Los Angeles, CA 90017-5704 Main Line: (213) 452-6500 Direct Dial: (213)452-6506 Facsimile: (213) 622-2171 b. Whenever the term "Lessee" is used herein, such term means and include the Lessee as of the date hereof, and any assignee of or successor to its rights, powers and responsibilities permitted by this Agreement. SECTION 107 Assignments and Transfers a. Lessee represents and agrees that its undertakings pursuant to this Agreement are for the purpose of redeveloping the Property as a public skate park, and not for speculation in land holding. Lessee further recognizes that the qualifications and identity of Lessee are of particular concern to the City, in light of the following: (1)the importance of the development of the Property to the general welfare of the community; (2) the public assistance that has been made available by law and by the government for the purpose of making such redevelopment possible; and (3) the fact that a change in ownership or control of Lessee or any other act or transaction involving or resulting in a significant change in ownership or control of Lessee, is for practical purposes a transfer or disposition of the property then owned by Lessee. Lessee further recognizes that it is because of such qualifications and identity that the City is entering into the Agreement with Lessee. Therefore, no voluntary or involuntary successor in interest of Lessee shall acquire any rights or powers under this Agreement except as expressly permitted herein. b. Prior to Completion, Lessee shall not assign all or any part of this Agreement, or any interest herein, without the prior written approval of the City. Subject to review of documentation effectuating any such proposed assignment or transfer, the City agrees to reasonably give such approval if the assignment is a Permitted Transfer. C. For the reasons cited above, Lessee represents and agrees for itself and any successor in interest that prior to Completion, without the prior written approval of the City, there shall be no significant change in the ownership of Lessee or in the relative proportions thereof, or with respect to the identity of the parties in control of Lessee or the degree thereof, by any method or means, except Permitted Transfers. d. Any assignment or transfer of this Agreement or any interest herein or significant change in ownership of Lessee, other than certain Permitted Transfers, shall require the approval of the City, which shall not be unreasonably withheld. To the extent City approval of an assignment or transfer is required by this Agreement, in granting or withholding its approval, City shall base its decision upon the relevant experience, financial capability and reputation of the proposed assignee or transferee and the effect, if any, of such proposed transfer on the public purposes of this Agreement. In addition, City shall not approve any assignment or transfer of this Agreement or any interest herein or significant change in ownership of Lessee that results in payment of consideration to any Person prior to the issuance of the Release of Construction Covenants and that is not conditioned upon the issuance of the Release of Construction Covenants. 6 e. Lessee shall promptly notify the City of any and all changes whatsoever in the identity of the parties in control of Lessee or the degree thereof, of which it or any of its officers have been notified or otherwise have knowledge or information. Except for Permitted Transfers, this Agreement may be terminated by the City if there is any significant change (voluntary or involuntary) in membership, management or control, of Lessee (other than such changes occasioned by the death or incapacity of any individual) prior to Completion. f. . Permitted Transfers and any other assignments or transfers approved by the City in conformance with this Agreement shall be evidenced by the Lessee's, assignee's, and City's execution of an Assignment and Assumption Agreement. g. The restrictions of this Section 107 shall terminate upon Completion. PART 2. DISPOSITION OF LEASEHOLD SECTION 201 City's Lease of the Property to Lessee Subject to the conditions precedent set forth in Section 202, herein, City shall convey the Leasehold to Lessee in consideration for and on such terms and conditions as are contained in the Ground Lease. Lessee understands, acknowledges and agrees that nothing herein authorizes the Lessee, Permitted Mortgagee, or any Person, to pledge the City's fee interest as security for any purpose whatsoever. SECTION 202 Conditions Precedent City's Conveyance of Leasehold to Lessee For the benefit of the City, the City's conveyance of the Leasehold is conditioned upon the occurrence of each of the following conditions on or prior to the scheduled Closing Date as set forth in the Schedule of Performance: a. Final Construction Drawings. Lessee shall have submitted and City shall have approved Final Construction Drawings, in accordance with Section 305, herein. b. Project Budget. Lessee shall have delivered to the City final revisions to the Project Budget, which have been approved by the City Manager and certified by Lessee's Construction Lender, demonstrating to the satisfaction of the City the availability of sufficient funds to pay all Acquisition and Development Costs("Final Project Budget"). C. Construction Contract. Lessee shall have delivered to the City a general construction contract between the Lessee and a licensed general contractor, covering all construction required by this Agreement and the approved Final Construction Drawings, in an amount that is consistent with the Final Project Budget, together with a construction schedule showing a detailed trade-by trade breakdown of the estimated periods of commencement and completion of construction and complete fixturization of the Project, and demonstrating that construction will be completed within the time provided in the Schedule of Performance. d. Evidence of Financing. Lessee shall have submitted and the City Manager shall have approved evidence relating to all Sources of Financing, and all documents required to be 7 executed in connection with such financing shall have been duly executed, acknowledged and delivered. Such evidence shall include: (1) a copy of all loan documents relating to the Construction Loan, certified by Lessee to be a true and correct copy or copies thereof, (2) a copy of loan commitments evidencing that Permanent Loan(s) will be available at Project completion, certified by Lessee to be a true and correct copy or copies thereof, (3) a copy of any other financing commitments evidencing that Lessee has obtained the financing necessary for the acquisition and development of the Property in accordance with this Agreement, certified by Lessee to be a true and correct copy or copies thereof. e. Insurance. Lessee shall have submitted to the City evidence of the insurance policies required by Section 309, herein. f. Permits. Lessee shall have delivered to the City a list of all permits required for the construction of the Improvements. g. Lessee's Formation Documents. Lessee shall have delivered documentation relating to the corporate, partnership, limited liability or other similar status of Lessee and its general partner(s), including, without limitation and as applicable: limited partnership agreements and any amendments thereto; articles of incorporation; Limited Liability Company Articles of Incorporation (LLC-1); Statement of Information and Operating Agreement (including any amendments thereto); copies of all resolutions or other necessary actions taken by such entity to authorize the execution of this Agreement and related documents; a certificate of status issued by the California Secretary of State; and a copy of any Fictitious Business Name Statement, if any, as published and filed with the Clerk of Orange County. h. Recording Instructions. Escrow Agent shall have approved such supplemental recording instructions as may have been prepared on behalf of the City. i. Documents. City, Lessee and/or other parties, as appropriate, shall have executed, and filed or recorded as appropriate, the following documents: (1) Ground Lease (Attachment No. 7) and Memorandum of Ground Lease (Attachment No. 7A), to be signed and acknowledged by City and Lessee; (2) Environmental Indemnity (Attachment No. 6), to be signed by Lessee; j. Closing Certificate. When all conditions precedent have been satisfied to the satisfaction of the City Manager, the City Manager shall execute and submit to the Escrow Agent a certificate stating that all conditions precedent to recording of the documents have been satisfied or waived, if such be the case. 8 k. No default. Lessee shall not be in default of this Agreement. SECTION 203 Escrow City agrees to open an escrow in the County of Orange for the City's conveyance of the Leasehold to Lessee with Title Company or such other escrow company, escrow department of a bank, or escrow department of a title insurance company first approved by City and Lessee (the "Escrow Agent"), no later than the applicable dates established in the Schedule of Performance. Sections 201 through 209 (inclusive) of this Agreement shall constitute the joint escrow instructions of City and Lessee with respect to the City's conveyance of the Leasehold to Lessee, and a duplicate original of this Agreement shall be delivered to the Escrow Agent upon the opening of the escrow. City and Lessee shall provide such additional escrow instructions as shall be necessary to close the escrow with respect to the purchase of the Property and conveyance of the Leasehold, consistent with this Agreement. The Escrow Agent hereby is empowered to act under such instructions, and upon indicating its acceptance thereof in writing, delivered to City and to Lessee within five (5) days after the opening of the escrow, shall carry out its duties as Escrow Agent hereunder. Upon receipt by the Escrow Agent of all executed and acknowledged documents, as required by Section 204, herein, the Escrow Agent shall record all documents in accordance with Section 206 of this Agreement when the fee interest of the Property can be vested in the City and the Leasehold can be vested in Lessee in accordance with the terms and provisions of this Agreement. The Escrow Agent shall buy, affix and cancel any transfer stamps required by law. Any insurance policies governing the Property or any portion thereof are not to be transferred. Lessee shall pay in escrow to the Escrow Agent the following fees, charges and costs promptly after the Escrow Agent has notified Lessee of the amount of such fees, charges and costs, but not earlier than three(3) days prior to the Closing Date: a. Escrow fee; b. Recording fees; C. Notary fees; d. Premiums for the Title Insurance ordered by Lessee as set forth in Section 209 of this Agreement. e. Costs necessary to place the title in the condition required by the provisions of this Agreement; g. Ad valorem taxes and any other taxes, assessments or impositions of any kind, if any, attributable to the Property prior to conveyance of the Leasehold. h. State, county, city or other documentary stamps and transfer taxes, if any. 9 The Escrow Agent is authorized to: 1. Pay, and charge City and Lessee, respectively, for any fees, charges and costs payable under this Section 205. Before such payments are made, the Escrow Agent shall notify Lessee of such fees, charges and costs; 2. Disburse funds and deliver all documents to the parties entitled thereto when the conditions of the escrow have been fulfilled by City and Lessee; and 3. Record any instruments delivered through the escrow if necessary or proper to vest the applicable interests in Lessee and City in accordance with the terms and provisions of this Agreement. All funds received in the escrow shall be deposited by the Escrow Agent in an interest bearing account for the benefit of the depositing party as directed by the depositing party. If any escrow is not in condition to close on or before the Closing Date, either party who then shall have fully performed the acts to be performed before the Closing Date may, in writing, demand the return of its money, papers or documents. No demand for return shall be recognized until ten (10) days after the Escrow Agent shall have mailed copies of such demand to the other party at the address of its principal place of business. Objections, if any, shall be raised by written notice to the Escrow Agent and to the other party within the ten- (10) day period. If any objections are raised within the ten- (10) day period, the Escrow Agent is authorized to hold the money, paper and documents until instructed by mutual agreement of the parties or, upon failure thereof, by a court of competent jurisdiction. Notwithstanding the foregoing, the termination rights of City and Lessee and other rights and remedies on default are governed by Sections 501 through 510, inclusive, of this Agreement, and no demand for such return shall affect such rights or remedies. If no such demands are made,the escrow shall be closed as soon as possible. The Escrow Agent shall not be obligated to return any such money, papers or documents except upon the written instructions of both City and Lessee affected thereby, or until the party entitled thereto has been determined by a final decision of a court of competent jurisdiction. Any amendments to these escrow instructions shall be in writing and signed by both City and Lessee. At the time of any amendment the Escrow Agent shall agree to carry out its duties as escrow agent under such amendment. All communications from the Escrow Agent to City or Lessee shall be directed to the addresses and in the manner established in Section 601 of this Agreement for notices, demands and communications between City and Lessee. The liability of the Escrow Agent under this Agreement is limited to performance of the obligations imposed upon it under Sections 201 through 209, inclusive of this Agreement. 10 SECTION 204 Recordation of Documents City and Lessee, respectively, agree to perform all acts necessary to achieve recordation and delivery of documents in sufficient time for escrow to be closed in accordance with the foregoing provisions. a. The following documents shall be recorded in the following order ("Recorded Documents"): ORDER OF DOCUMENT NAME RECORDATION 1 Memorandum of Ground Lease (Attachment No. 7A) 2 Construction Loan Security Instruments b. All documents to be recorded shall be recorded in the Official Records. SECTION 205 Possession of Leasehold Upon Close of Escrow Possession of the Leasehold shall be delivered to Lessee concurrently with Close of Escrow. SECTION 206 Condition of Title The Leasehold shall be conveyed free of any possession or right of possession except that of Lessee, unless waived in writing by Lessee. SECTION 207 Title Insurance SECTION 207.1 Leasehold Title Policy Concurrently with the recordation of the Memorandum of Ground Lease, Title Company shall provide and deliver to Lessee a Title Insurance Policy, issued by Title Company, insuring that the Leasehold is vested in Lessee in the condition required by Section 208 of this Agreement, together with any endorsements as the Lessee may reasonably require ("Leasehold Title Policy"). The Title Company shall provide City and Lessee with a copy of the Leasehold Title Policy. If Title Company is unable or unwilling to deliver the Leasehold Title Policy consistent with the provisions of this Agreement, then in addition to any other rights or remedies of Lessee,Lessee may terminate this Agreement pursuant to Section 509. SECTION 208 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Property In accordance with California Revenue and Taxation Code section 107.6(a) and California Health and Safety Code section 33673, City states that by entering into the Ground Lease, a possessory interest subject to property taxes shall be created. Lessee and/or its successors or other party(ies) in whom the possessory interest is vested shall be subject to the 11 payment of property taxes, liens or encumbrances levied on such interest, unless an exemption is otherwise available. Lessee acknowledges and agrees that the Leasehold and/or the Improvements thereon, and any possessory interest therein, shall at all times after the commencement of the Ground Lease, be subject to ad valorem taxes levied, assessed or imposed on such property, and that Lessee shall pay taxes upon the assessed value of the entire property unless exempt, and not merely upon the assessed value of its leasehold interest. SECTION 209 Contests a. Lessee shall refrain from appealing, challenging or contesting in any manner the validity or amount of any tax assessment, encumbrance or lien on the Property; provided, however, that such prohibition shall not apply to an appeal, challenge or contesting of the erroneous initial assessment for property tax purposes of the Property in the fiscal year of the completion of the Improvements to be constructed pursuant to the Agreement, and further provided that in the absence of transfer of ownership or new construction Lessee shall not be prohibited from appealing, challenging or contesting any increases in assessment of the Property for property tax purposes over and above the current 2%per annum permitted amount. b. Lessee agrees that any such permitted proceedings shall be begun without undue delay after any contested item is imposed and shall be prosecuted to final adjudication with reasonable dispatch. Lessee shall give City prompt notice in writing of any such contest at least ten (10) days before filing any contests. 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 Property, 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 by City from time to time in order to insure the payment of such imposition to prevent any sale, foreclosure or forfeiture of the Property, 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, City will promptly return to Lessee such security as City shall have received in connection with such contest. C. City shall cooperate reasonably in any such contest permitted by this Section 211, and shall execute any documents or pleadings reasonably required for such purpose. Any such proceedings to contest the validity or amount of Imposition or to recover back any Imposition paid by Lessee shall be prosecuted by Lessee at Lessee's sole cost and expense; and Lessee shall indemnify and save harmless City against any and all loss, cost or expense of any kind, including, but not limited to, reasonable attorneys' fees and expenses, which may be imposed upon or incurred by Agency in connection therewith. 12 SECTION 210 Condition of the Property SECTION 210.1 Hazardous Substances a. "Hazardous Substance," as used in this Agreement means 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. "Hazardous Substances" do not include materials customarily used in the construction, development, operation or maintenance of real estate, provided such substances are used in accordance with all laws. b. Lessee hereby represents and warrants that the development, construction and uses of the Leasehold permitted under this Agreement (i) will comply with all applicable environmental laws; and (ii) do not require the presence of any Hazardous Substance on the Property. C. Within five (5) days of request by City, Lessee shall deliver to City, if not previously delivered, all documents relevant to the condition of the Property within the Lessee's possession or control, including, without limitation, a preliminary title report with underlying exceptions, environmental reports, studies, surveys, and all other relevant documents within the City's possession or control (collectively referenced as "Documents"). SECTION 210.2 Suitability of the Property a. The Leasehold shall be delivered to Lessee in an "as is" physical condition, with no warranty, express or implied by City as to the presence of Hazardous Substances, or the condition of the soil, its geology or the presence of known or unknown faults. If the condition of the Leasehold is not in all respects entirely suitable for the use or uses to which such Leasehold 13 will be put, then it is the sole responsibility and obligation of Lessee to place the Leasehold in all respects in a condition entirely suitable for the development thereof, solely at Lessee's expense. b. Effective upon Closing, Lessee agrees to indemnify, defend and hold harmless City and its respective members, officers, agents, employees, contractors and consultants, in accordance with the Environmental Indemnity. C. On and after the Effective Date of this Agreement, Lessee hereby waives, releases and discharges the City and its respective members, 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 the use, maintenance, ownership or operation of the Property or any portion thereof, any Hazardous Substances on the Property, or the existence of Hazardous Substances contamination in any state on the Property, however the Hazardous Substances came to be placed there, except that arising out of the active negligence or willful misconduct of the City or its employees, officers or agents. 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 or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor." To the extent of the release set forth in this Section 212.2, Lessee hereby waives and relinquishes all rights and benefits which it may have under Section 1542 of the California Civil Code. SECTION 211 Method of Financing The Acquisition and Development Costs shall be financed with a combination of Sources of Financing as provided in the Method of Financing. SECTION 212 Evidence of Financing a. Not later than fifteen (15) days prior to the scheduled Closing Date and in no event later than as provided in the Schedule of Performance, Lessee shall submit to the City evidence satisfactory to the City Manager that Lessee has obtained the financing necessary for the acquisition and development of the Property in accordance with this Agreement. Such evidence of financing shall include all items referenced under subsections (a) through (k) of Section 204.1, herein. b. The City Manager shall approve or disapprove such evidence of financing within the time established in the Schedule of Performance (Attachment No. 5). Such approval shall not be unreasonably withheld. If the City shall disapprove any such evidence of financing, the City shall do so by written notice to Lessee stating the reasons for such disapproval. 14 SECTION 213 Designation as Point of Sale Lessee and its successors and assigns shall maintain such licenses and permits as may be required by any governmental agency to conduct taxable sales arising from any project on the Property and, to the extent permitted by law, shall designate City as the "point of sale" for all taxable sales and lease transactions occurring from any project on the Property in all reports to the California State Board of Equalization in accordance with the Bradley-Burns Uniform Sales and Use Tax Law (Revenue and Taxation Code 72000 et seq.), as it may be amended or substituted from time to time, and on sales tax returns to the State of California for all taxable sales occurring at any project on the Property. PART 3. DEVELOPMENT OF THE PROPERTY SECTION 301 Land Use Approvals It is the responsibility of Lessee, without cost to City, to ensure that zoning of the Property and all applicable City land use requirements will permit development of the Property and construction of the Improvements and the use, operation and maintenance of such Improvements in accordance with the provisions of this Agreement. The following shall be conditions of the Closing and shall be accomplished by the date set forth in the Schedule of Performance: (A) Lessee shall submit and City Manager shall approve complete Final Construction Drawings; (B) Lessee shall obtain all entitlements, approvals, variances and permits necessary for the construction of the Improvements and (C) Lessee shall satisfy all other conditions precedent to the Closing as set forth in the Method of Financing. Nothing contained herein shall be deemed to entitle Lessee to any City permit or other City approval necessary for the development of the Property, or waive any applicable City requirements relating thereto. This Agreement does not (a) grant any land use entitlement to Lessee, (b) supersede, nullify or amend any condition which may be imposed by the City in connection with approval of the development described herein, (c) guarantee to Lessee or any other party any profits from the development of the Property, or (d) amend any City laws, codes or rules. This is not a Development Agreement as provided in Government Code Section 65864. SECTION 302 Scope of Development The Property shall be developed in accordance with and within the parameters established in the Scope of Development. SECTION 303 Basic Concept Drawings a. Lessee shall prepare and submit basic concept and schematic drawings and related documents for the development of the Property to the City for review and written approval within the time established in the Schedule of Performance. Basic concept and schematic drawings shall include a site plan, elevations and sections of the Improvements as they are to be developed and constructed on the Property. Lessee shall consult with and seek the recommendations of property management and community service providers with experience relating to similar developments before submission of the basic concept and schematic drawings to the City. 15 b. The Property shall be developed as established in the basic concept and schematic drawings and related documents except as changes may be mutually agreed upon between Lessee and the City Manager. Any such changes shall be within the limitations of the Scope of Development. SECTION 304 Landscaping and Grading Plans a. Lessee shall prepare and submit to the City for its approval preliminary and final landscaping and preliminary and finish grading plans for the Property. These plans shall be prepared and submitted within the times established in the Schedule of Performance. b. The landscaping plans shall be prepared by a professional landscape architect and the grading plans shall be prepared by a licensed civil engineer. Such landscape architect and/or civil engineer may be the same firm as Lessee's architect. Within the times established in the Schedule of Performance, Lessee shall submit to the City for approval the name and qualifications of its architect, landscape architect and civil engineer. SECTION 305 Construction Drawings and Related Documents a. Lessee shall prepare and submit construction drawings and related documents (collectively called the "Plans") to the City for review (including but not limited to architectural review), and written approval in the times established in the Schedule of Performance. Such construction drawings and related documents shall be submitted as 50% and Final Construction Drawings. Final Construction Drawings are hereby defined as those in sufficient detail to obtain a building permit. b. Approval of progressively more detailed Plans will be promptly granted by the City Manager if developed as a logical evolution of Plans theretofore approved. Any items so submitted and approved by the City Manager shall not be subject to subsequent disapproval. C. During the preparation of all Plans, the City Manager and Lessee shall hold regular progress meetings to coordinate the preparation of, submission to, and review of Plans and related documents by the City Manager. The City Manager and Lessee shall communicate and consult informally as frequently as is necessary to insure that the formal submittal of any documents to the City can receive prompt and speedy consideration. d. If any revisions or corrections of Plans approved by the City shall be required by any government official, agency, department, or bureau having jurisdiction over the development of the Property, Lessee and the City Manager shall cooperate in efforts to obtain waiver of such requirements or to develop a mutually acceptable alternative. SECTION 306 City Approval of Plans a. Subject to the terms of this Agreement, the City shall have the right to review (including without limitation architectural review) and approve or disapprove all Plans and submissions, including any proposed substantial changes to any such Plans or submissions approved by City. Upon receipt of any disapproval, Lessee shall revise the Plans, and shall 16 resubmit to the City Manager as soon as possible after receipt of the notice of disapproval. The City shall reasonably approve or disapprove the Plans referred to in Sections 303, 304 and 305 of this Agreement within the times established in the Schedule of Performance. Any disapproval shall state in writing the reasons for disapproval and the changes which the City Manager requests to be made. Such reasons and such changes must be consistent with the Scope of Development and any items previously approved hereunder. Lessee, upon receipt of a disapproval based upon powers reserved by the City hereunder shall revise the Plans, and shall resubmit to the City Manager as soon as possible after receipt of the notice of disapproval. b. If Lessee desires to make any substantial change in the Final Construction Drawings after their approval, such proposed change shall be submitted to the City Manager for approval. For purposes of this Section, "Substantial" shall mean any material change in building materials or equipment, specifications, or the structural or architectural design or appearance of the Project. Nothing herein shall be interpreted as altering, modifying, waiving, amending, or reducing any requirements of any governmental permit required by any local, state or federal permitting authority for the development contemplated herein. SECTION 307 Cost of Construction The cost of demolishing any improvements on the Property and developing the Property and constructing the Improvements, including any offsite or onsite improvements required by the City in connection therewith, shall be the responsibility of Lessee, without any cost to City. SECTION 308 Schedule of Performance a. Each party to this Agreement shall perform the obligations to be performed by such party pursuant to this Agreement within the respective times provided in the Schedule of Performance, and if no such time is provided, within a reasonable time consistent with the Schedule of Performance. The Schedule of Performance shall be subject to amendment from time to time upon the mutual agreement of the City and Lessee. b. After the Closing, the certification of the site specific Final Environmental Impact Report for the Improvements, and the approval of the construction of the Improvements by the City pursuant to such Final Environmental Impact Report, Lessee shall promptly begin and thereafter diligently prosecute to completion the construction of the Improvements as provided herein and in the Scope of Development. C. During periods of construction, Lessee shall submit to the City a written report of the progress of construction when and as reasonably requested by the City, but not more frequently than once every quarter. The report shall be in such form and detail as may be reasonably required by the City and shall include a reasonable number of construction photographs (if requested) taken since the last report by Lessee. If City utilizes the services of a construction monitor, Lessee shall reasonably cooperate with the City's monitor to coordinate inspections. 17 SECTION 309 Indemnification and Insurance a. Lessee's Indemnity. To the maximum extent permitted by law, and in addition to any other provisions of this Agreement independently requiring Lessee to defend, indemnify, and hold harmless the City and its respective officers, employees, contractors and agents, including, without limitation, the Environmental Indemnity and the Ground Lease, Lessee agrees to and shall defend, indemnify and hold harmless City and its respective officers, employees, contractors and agents from and against all claims, liability, loss, damage, costs or expenses (including reasonable attorneys' fees and court costs) arising from or as a result of the death of any person or any accident, injury, loss or damage whatsoever caused to any person or the property of any person resulting or arising from or in any way connected with the following, provided Lessee shall not be responsible for (and such indemnity shall not apply to) any active negligence or willful misconduct of the City, City, or their respective officers, employees, contractors or agents: 1. The existence, release, presence or disposal on, in, or under the Property of any Hazardous Substances resulting from the acts or omissions of Lessee, its contractors, subcontractors, agents or other persons acting on Lessee's behalf (individually, "Indemnifying Party," and collectively, "Indemnifying Parties"); 2. The development, construction, marketing, use, operation or condition of the Property and the Improvements by any Indemnifying Party; 3. Any accident, personal injury or casualty on the Property or the Improvements resulting from the acts or omissions of any Indemnifying Party; 4. Any plans or designs for Improvements (collectively, "Plans") prepared by or on behalf of any Indemnifying Party, including without limitation any errors or omissions with respect to such plans or designs, except in the event that (i) none of the Indemnifying Parties develops the Property pursuant to this Agreement, and (ii) upon assignment of the Plans to City, City uses the Plans or causes such Plans to be used to develop the Property; 5. Any loss or damage to City resulting from any inaccuracy in or breach of any representation or warranty of Lessee, or resulting from any breach or default by Lessee, under this Agreement; and 6. Any and all actions, claims, damages, injuries, challenges and/or costs or liabilities arising from the approval of any and all entitlements or permits for the Improvements by the City. The foregoing indemnity obligations shall continue to remain in effect after the Completion. Lessee understands, acknowledges and agrees that nothing in this Section shall be deemed or interpreted as a limitation, modification or waiver of any other provisions of this Agreement independently requiring Lessee to defend, indemnify, and hold harmless the Cityand 18 its respective officers, employees, contractors and agents, except as to the active negligence or willful misconduct of their respective officers, employees, contractors and agents. b. Insurance Policies. 1. Commencing upon the Closing or Lessee's possession of the Property, whichever occurs first, and at all times prior to the issuance of the Release of Construction Covenants ("the Term"), Lessee shall maintain in effect and deliver to City duplicate originals or appropriate certificates of the following insurance policies (the"Insurance Policies"): (a) All-Risk Policies: Lessee shall maintain or cause to be maintained coverage for builder's risk insurance for the completed value. Such insurance shall insure against direct physical loss or damage by fire, lightning, wind, storm, explosion, collapse, flood, vandalism, malicious mischief, glass breakage and such other causes as are covered by such form of insurance, excluding earthquake(s). Such policy shall include (1) coverage for demolition costs and debris removal, (2) Replacement cost coverage in amount sufficient to prevent Lessee from becoming a co-insurer under the terms of the policy, but in any event in an amount not less than 100% of the then full replacement cost. The replacement cost coverage shall be for work performed and equipment, supplies and materials furnished to the Property, or property stored in, or located in any bonded warehouse pending incorporation into the work, without deduction for physical depreciation; (b) Liability Insurance: Lessee shall maintain or cause to be maintained general liability insurance or an equivalent owner contractors protective policy, 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 on or about the Property and the business of Lessee on the Property, or in connection with the operation thereof, resulting directly or indirectly from any acts or activities of Lessee, or any person acting for Lessee, or under its respective control or direction, and also to protect against loss from liability imposed by law for damages to any property of any person occurring on or about the Property, or in connection with the operation thereof, caused directly or indirectly by or from acts or activities of Lessee or its tenants, or any person acting for Lessee, or under its control or direction. Such property damage and personal injury insurance shall also provide for and protect City against incurring any legal cost in defending claims for alleged loss. Such personal injury and property damage insurance shall be maintained in full force and effect during the Term in the following amounts: commercial general liability in a general aggregate amount of not less than Four Million Dollars ($4,000,000), Four Million Dollars ($4,000,000) Products and Completed Operations Aggregate, and Two Million Dollars ($2,000,000) each Occurrence. Lessee shall deliver to City a Certificate of Insurance evidencing such insurance coverage prior to the occurrence of the Closing. Lessee agrees that provisions of this paragraph 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 indemnification of City or the payment of damages to persons or property resulting from Lessee's activities, activities of its tenants or the activities of any other person or persons for which Lessee is otherwise responsible. To the extent that Lessee maintains increased or additional insurance coverage during the Term, in excess of the minimum coverage requirements prescribed by paragraphs (b)(1)(b) and (b)(1)(c) of this Section 309, 19 Lessee shall ensure that the additional insureds specified in paragraph (b)(3) of this Section 309 derive the benefit of such increased or additional insurance coverage. (c) Automobile Insurance: Lessee shall maintain or cause to be maintained automobile insurance on any automobiles owned by Lessee, maintained in full force and effect in an amount of not less than Two Million Dollars ($2,000,000) per accident. (d) Workers' Compensation Insurance: Lessee shall maintain or cause to be maintained workers' compensation insurance, if required, for any employees of Lessee, issued by a responsible carrier authorized under the laws of the State of California to insure employers against liability for compensation under the workers' compensation laws now in force in California, or any laws hereafter enacted as an amendment or supplement thereto or in lieu thereof. Such workers' compensation insurance shall cover all persons employed by Lessee in connection with the Property and shall cover liability within statutory limits 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 Property or the operation thereof by Lessee. Notwithstanding the foregoing, Lessee may, in compliance with the laws of the State of California and in lieu of maintaining such insurance, self-insure for workers' compensation in which event Lessee shall deliver to City evidence that such self-insurance has been approved by the appropriate State authorities. 2. All policies or certificates of insurance shall provide that such policies shall not be canceled, reduced in coverage or limited in any manner without at least ten (10) days prior written notice to City. All fire and liability insurance policies (not automobile and Workers' Compensation) may name the City and Lessee as insureds, additional insureds, and/or loss payable parties as their interests may appear. 3. The Insurance Policies shall name as additional insureds the following: "The City of Huntington Beach and its respective officers, employees, contractors, agents and attorneys." Lessee agrees to timely pay all premiums for such insurance and, at its sole cost and expense, to comply and secure compliance with all insurance requirements necessary for the maintenance of such insurance. Lessee agrees to submit binders or certificates evidencing such insurance to City prior to the Closing. Within thirty (30) days, if practicable, but in any event prior to expiration of any such policy, copies of renewal policies, or certificates evidencing the existence thereof, shall be submitted to City. All insurance herein provided for under this Section shall be provided by insurers licensed to do business in the State of California and rated A-VII or better. 4. If Lessee fails or refuses to procure or maintain insurance as required by this Agreement, City shall have the right, but not the obligation, at City's election, and upon ten (10) days prior notice to Lessee, to procure and maintain such insurance. The premiums paid by City shall be treated as a loan, due from Lessee, to be paid on the first day of the month following the date on which the premiums were paid. City shall give prompt notice of the payment of such premiums, stating the amounts paid and the name of the insured(s). 20 SECTION 310 Nondiscrimination Lessee shall not discriminate on the basis of race, gender, religion, national origin, ethnicity, sexual orientation, age or disability in the solicitation, selection, hiring or treatment of any contractors or consultants, to participate in subcontracting/subconsulting opportunities. Lessee understands and agrees that violation of this clause shall be considered a material breach of this Agreement and may result in termination, debarment or other sanctions. After the Effective Date, this language shall be incorporated into all contracts between Lessee and any contractor, consultant, subcontractor, subconsultants, vendors and suppliers. SECTION 311 Local, State and Federal Laws The Lessee shall carry out development and construction (as defined by applicable law) of the Improvements on the Property, including, without limitation, any and all public works, (as defined by applicable law), if any, in conformity with all applicable local, state and federal laws, including, without limitation, all applicable federal and state labor laws (including, without limitation, any applicable requirement to pay state prevailing wages). Lessee hereby agrees that Lessee shall have the obligation to provide any and all disclosures, representations, statements, rebidding, and/or identifications which may be required by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Lessee hereby agrees that Lessee shall have the obligation to provide and maintain any and all bonds to secure the payment of contractors (including the payment of wages to workers performing any public work) which may be required by the Civil Code, Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Lessee shall indemnify, protect, defend and hold harmless the City and its respective officers, employees, contractors and agents, with counsel reasonably acceptable to City, from and against any and all loss, liability, damage, claim, cost, expense, and/or "increased costs" (including labor costs, penalties, reasonable attorneys fees, court and litigation costs, and fees of expert witnesses) which, in connection with the development and/or construction (as defined by applicable law) of the Improvements, including, without limitation, any and all public works (if any) (as defined by applicable law), results or arises in any way from any of the following: (1) the noncompliance by Lessee of any applicable local, state and/or federal law, including, without limitation, any applicable federal and/or state labor laws (including, without limitation, if applicable, the requirement to pay state prevailing wages); (2) the implementation of Chapter 804, Statutes of 2003; (3) the implementation of Sections 1726 and 1781 of the Labor Code, as the same may be enacted, adopted or amended from time to time, or any other similar law; (4) failure by Lessee to provide any required disclosure representation, statement, rebidding and/or identification which may be required by Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law; and/or (5) failure by Lessee to provide and maintain any and all bonds to secure the payment of contractors (including the payment of wages to workers performing any public work) which may be required by the Civil Code, Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Lessee hereby expressly acknowledges and agrees that neither City nor its Redevelopment Agency has ever previously affirmatively represented to the Lessee or its contractor(s) for the Improvements in writing or otherwise, that the work to be covered by the bid or contract is not a "public work," as defined in Section 1720 21 of the Labor Code. It is agreed by the parties that, in connection with the development and construction (as defined by applicable law) of the Improvements, including, without limitation, any public work (as defined by applicable law), if any, Lessee shall bear all risks of payment or non-payment of state prevailing wages and/or the implementation of Chapter 804, Statutes of 2003 and/or Labor Code Sections 1726 and 1781, as the same may be enacted, adopted or amended from time to time, and/or any other provision of law. "Increased costs" as used in this Section shall have the meaning ascribed to it in Labor Code Section 1781, as the same may be enacted, adopted or amended from time to time. The foregoing indemnity shall survive termination of this Agreement and shall continue after Completion and the recordation of the Release of Construction Covenants. SECTION 312 Notice of Non-Responsibility City shall, at any and all times during the term of this Agreement, have the right to post and maintain on the Property, and record against the Property, as required by law, any notice or notices of non-responsibility provided for by the mechanics' lien laws of the State of California; provided, however, that Lessee shall, on behalf of the City, as advised thereby, post and maintain on the Property, and record against the Property, all notices of non-responsibility provided for by the mechanics' lien laws of the State of California. SECTION 313 Permits Before commencement of demolition, construction or development of any buildings, structures or other work of improvement upon any portion of the Property, Lessee shall, at its own expense, secure or cause to be secured, any and all permits which may be required by the City or any other governmental agency with oversight for, or affected by, such construction, development or work. SECTION 314 Rights of Access Commencing upon the Closing, representatives of the City shall have the reasonable right of access to the Property, upon 24 hours' written notice to Lessee (except in the case of an emergency, in which case City shall provide such notice as may be practical under the circumstances), without charges or fees, at normal construction hours during the period of construction for the purposes of this Agreement, including, but not limited to, the inspection of the work being performed in constructing the Improvements. Such representatives of the City shall be those who are so identified in writing by the City Manager of the City. The Lessee has the right to designate representatives to accompany the City representatives on such inspections. The City agrees to coordinate with Lessee to schedule such inspections so that Lessee's representative may attend the inspections, in the discretion of Lessee. SECTION 315 Disclaimer of Responsibility by City The City neither undertakes nor assumes nor will have any responsibility or duty to Lessee or to any third party to review, inspect, supervise, pass judgment upon or inform Lessee 22 or any third party of any matter in connection with the development or construction of the Improvements, whether regarding the quality, adequacy or suitability of the plans, any labor, service, equipment or material furnished to the Property, any person furnishing the same, or otherwise. Lessee and all third parties shall rely upon its or their own judgment regarding such matters, and any review, inspection, supervision, exercise of judgment or information supplied to Lessee or to any third party by the City in connection with such matter is for the public purpose of redeveloping the Property, and neither Lessee (except for the purposes set forth in this Agreement) nor any third party is entitled to rely thereon. The City shall not be responsible for any of the work of construction, improvement or development of the Property. SECTION 316 Taxes, Assessments, Encumbrances and Liens Commencing upon the Closing, Lessee shall pay when due all real estate taxes and assessments assessed and levied on or against the Property or any portion thereof. Lessee shall not place, or allow to be placed, against the Property or any portion thereof, any mortgage, trust deed, encumbrance or lien not authorized by this Agreement. In addition, Lessee shall remove, or shall have removed, any levy or attachment made on title to the Leasehold and/or Property (or any portion thereof), or shall assure the satisfaction thereof within a reasonable time but in any event prior to a sale thereunder. Under no circumstances whatsoever shall the Lessee allow any security instruments to be recorded against the City's fee interest in the Property. SECTION 317 Prohibition against Transfer a. Prior to Completion, Lessee shall not, except as permitted by this Agreement, including without limitation Sections 102 (definition of"Permitted Transfer") and 107, assign or attempt to assign this Agreement or any right herein, nor make any total or partial sale, transfer, conveyance or assignment of the whole or any part of the Lessee's interest in the Leasehold or the Improvements thereon, without prior written approval of the City. This prohibition shall not be deemed to prevent the granting of easements or permits to facilitate the development of the Property, nor shall it prohibit Permitted Transfers. b. Except as permitted by paragraph a., in the event Lessee does assign this Agreement or any of the rights herein, or does sell, transfer, convey or assign the Lessee's interest in the Leasehold (or any portion thereof) prior to Completion without the approval of the City, subject to the notice and cure provisions of Section 501, the City shall have the right to terminate this Agreement. C. Prior to Completion, in the absence of a specific written agreement by the City, and except as otherwise provided in this Agreement, no such sale, transfer, conveyance or assignment of this Agreement or Lessee's interest in the Leasehold (or any portion thereof), or approval by the City of any such sale, transfer, conveyance or assignment, shall be deemed to relieve Lessee or any other party from any obligations under this Agreement. SECTION 318 No Encumbrances Except Permitted Mortgages a. Notwithstanding Section 317, upon and after the Closing, Lessee shall have the 23 right to encumber the Leasehold with a Permitted Mortgage, but only for the purpose of securing loans of funds to be used for financing and refinancing the Acquisition and Development Costs and other expenditures necessary and appropriate to develop the Property under this Agreement, consistent with the amounts to be financed by Lessee per the Method of Financing ("Permitted Financing Purposes"). Lessee has no authority to encumber the City's fee interest in the Property at any time and for any purpose, whatsoever. Prior to Completion: (1) Lessee shall not have any authority to encumber the Leasehold for any purpose other than for Construction Loans; (2) Lessee shall notify the City in advance of any proposed financing; and (3) Lessee shall not enter into any agreements requiring a conveyance of security interests in the Property without the prior written approval of the City. The maker of any loan approved by the City pursuant to this Section 318 shall not be bound by any amendment, implementation agreement or modification to this Agreement subsequent to its approval without such lender giving its prior written consent. b. In any event, Lessee shall promptly notify the City of any security interest created or attached to the Leasehold or Property whether by voluntary act of Lessee or otherwise. C. The words "security interest" and "deed of trust" as used herein include all other appropriate modes of financing real estate acquisition, construction and land development. d. Except for the provision that Lessee has no authority to encumber the City's fee interest in the Property at any time and for any purpose, whatsoever, the requirements of this Section 318 shall not apply following Completion. SECTION 319 Lender Not Obligated to Construct Improvements No lender shall be obligated by the provisions of this Agreement to construct or complete the Improvements or to guarantee such construction or completion. Nothing in this Agreement shall be deemed or construed to permit, or authorize any such lender to devote the Property to any uses, or to construct any improvements thereon, other than those uses or improvements provided for or authorized by this Agreement and the Ground Lease. SECTION 320 Notice of Default to Lenders; Right of Lender to Cure Defaults Whenever the City shall deliver any notice or demand to Lessee with respect to any breach or default by Lessee in completion of construction of the Improvements, the City shall at the same time deliver the notice or demand to each Permitted Mortgagee that requests such notice or demand, in writing, from the City and provides its contact information for the notice or demand. Each such Permitted Mortgagee shall (insofar as the rights of the City are concerned) have the right at its option within ninety (90) days after the receipt of the notice, to cure or remedy, or commence to cure or remedy, any such default and to add the cost thereof to the security interest debt and the lien of its security interest. If such default shall be a default which can only be remedied or cured by such Permitted Mortgagee upon obtaining possession of the Leasehold, such Permitted Mortgagee shall seek to obtain possession with diligence and continuity through a receiver or otherwise, and shall remedy or cure such default within ninety (90) days after obtaining possession; provided that in the case of a default which cannot with diligence be remedied or cured, or the remedy or cure of which cannot be commenced within such ninety- (90) day period, such Permitted Mortgagee shall have such additional time as 24 reasonably necessary to remedy or cure such default with diligence and continuity not to exceed ninety (90) days; and provided further that such Permitted Mortgagee shall not be required to remedy or cure any non-curable default of Lessee. Any Permitted Mortgagee who forecloses on its Permitted Mortgage, or is assigned or otherwise succeeds to Lessee's rights under this Agreement, shall have the right to undertake or continue the construction or completion of the Improvements upon execution of a written agreement with the City by which such Permitted Mortgagee expressly assumes Lessee's rights and obligations under this Agreement, approval of which agreement shall not be unreasonably withheld by City. Any such Permitted Mortgagee properly completing such improvements shall be entitled, upon written request made to the City, to a Release of Construction Covenants from the City. SECTION 321 Failure of Lender to Complete Improvements In any case where, six (6) months after default by Lessee, the holder of any mortgage, deed of trust or other security interest creating a lien or encumbrance upon the Leasehold (or portion thereof) has not elected to complete construction of the Improvements, or, if it has elected to complete the Improvements, it has not proceeded diligently with construction, the City may purchase the mortgage, deed of trust or other security interest by payment to the holder of the full amount of the unpaid principal debt, plus any accrued and unpaid interest and other charges secured by the mortgage instrument approved by the City. SECTION 322 Right of the City to Cure Defaults In the event of a default or breach by Lessee of a Permitted Mortgage prior to Completion and prior to completion of a foreclosure by a Permitted Mortgagee, and the Permitted Mortgagee has not commenced to complete the development, the City may cure the default at any time prior to completion by a Permitted Mortgagee of any foreclosure under its security. In such event, the City shall be entitled to reimbursement from Lessee of all reasonable costs and expenses incurred by the City in curing the default. The City shall also be entitled to a lien upon the Leasehold to the extent of such costs and disbursements. SECTION 323 Right of the City to Satisfy Other Liens on the Property Prior to Completion and after Lessee has had a reasonable time to challenge, cure or satisfy any liens or encumbrances on its interest in the Property, the City shall have the right, without obligation, to satisfy any such liens or encumbrances. In such event, the City shall be entitled to reimbursement from Lessee of all reasonable costs and expenses incurred by the City in satisfying any such liens or encumbrances. The City shall also be entitled to a lien upon the Leasehold to the extent of such costs and expenses. SECTION 324 Release of Construction Covenants a. Promptly after Completion of the Improvements as required by this Agreement, City shall deliver to Lessee a Release of Construction Covenants, upon written request therefor by Lessee. City shall not unreasonably withhold any such Release of Construction Covenants. Such Release of Construction Covenants shall be, and shall so state, conclusive determination of satisfactory completion of the Scope of Development required by this Agreement. 25 b. The Release of Construction Covenants shall be substantially in the form attached hereto as Attachment No. 8 so as to permit it to be recorded in the Official Records. C. If City fails to deliver the Release of Construction Covenants within ten (10) days after written request from Lessee, City shall provide Lessee with a written statement of its reasons (the"Statement of Reasons")within that ten(10)-day period. The statement shall also set forth the steps Lessee must take to obtain the Release of Construction Covenants. If the reasons are confined to the immediate unavailability of specific items or materials for landscaping, or to so-called "punch list" items identified by City, City will issue the Release of Construction Covenants upon the posting of a bond by Lessee with City in an amount representing City's estimate of the cost to complete the work. Such Release of Construction Covenants shall not constitute evidence of compliance with or satisfaction of any obligation of Lessee to any Senior Lender, or any insurer of a mortgage securing money loaned to finance the Improvements, nor any part thereof. Such Release of Construction Covenants is not a Notice of Completion as referred to in Section 3093 of the California Civil Code. PART 4. USE OF THE PROPERTY SECTION 401 Uses a. Lessee covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, that Lessee, such successors and such assignees shall use the Property only for the uses specified in the Redevelopment Plan. No change in the use of the Property shall be permitted without the prior written approval of City. b. Notwithstanding the generality of subsection (a), above, Lessee, its successors and assigns, shall use the Leased Premises and/or Improvements only for the following uses: operation and maintenance of a public skate park ("Skate Park"). Skate Park shall be free and open to the public from 10 a.m. to 10 p.m., Mondays through Sundays, except for special events occurring no more than twenty (20) calendar days per year, collectively, and agreed to, in writing, by Lessee and City. Nothing herein shall be deemed to supersede, waive, or modify any restrictions or prohibitions imposed by the City, in accordance with its zoning code. C. Subject to notice and cure rights herein, Lessee's failure to operate Skate Park in accordance with this Agreement for thirty (30) consecutive days shall be deemed a default of this Lease. SECTION 402 Maintenance Lessee shall maintain the Property in accordance with the requirements of the Ground Lease. SECTION 403 Obligation to Refrain from Discrimination Lessee covenants and agrees for itself, its successors and its assigns in interest to the 26 Property or any part thereof, that there shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the land, nor shall the transferee itself or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees of the land. SECTION 404 Form of Nondiscrimination and Nonsegregation Clauses Lessee shall refrain from restricting the rental, sale or lease of the Property and/or Leasehold on the basis of sex, sexual orientation, marital status, race, color, creed, religion, ancestry or national origin of any person. All deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: a. In deeds: "The grantee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision (a) or(d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the premises herein conveyed, nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees in the premises herein conveyed. The foregoing covenants shall run with the land." b. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns, and all persons claiming under or through him or her, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of any basis;listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the premises herein leased nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the premises herein leased." C. In contracts: "There shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of 27 the Government Code, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the land, nor shall the transferee itself or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, lessees, sublessees, subtenants, or vendees of the land." SECTION 405 Effect and Duration of Covenants The covenants established in this Agreement shall run with the land, without regard to technical classification and designation, and shall be for the benefit and in favor of and enforceable against the original Lessee and successors in interest by the City. Unless set forth otherwise, the covenants described in this Part 4 shall commence upon the Closing and shall be set forth in the Ground Lease. PART 5. DEFAULTS AND REMEDIES SECTION 501 Defaults - General a. Subject to the extensions of time set forth in Section 602, failure or delay by either party to perform any term or provision of this Agreement constitutes a default under this Agreement. The party who fails or delays must commence to cure, correct or remedy such failure or delay and shall complete such cure, correction or remedy with reasonable diligence. b. The injured parry shall give written notice of default to the party in default, specifying the default complained of by the injured party. Failure or delay in giving such notice shall not constitute a waiver of any default, nor shall it change the time of default. Except as otherwise expressly provided in this Agreement, any failures or delays by either party in asserting any of its rights and remedies as to any default shall not operate as a waiver of any default or of any such rights or remedies. Delays by either party in asserting any of its rights and remedies shall not deprive either 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. C. If a monetary event of default occurs, prior to exercising any remedies hereunder, the injured party shall give the party in default written notice of such default. The party in default shall have a period of thirty (30) calendar days after such notice is received or deemed received within which to cure the default prior to exercise of remedies by the injured parry. d. If a non-monetary event of default occurs, prior to exercising any remedies hereunder, the injured party shall give the parry in default notice of such default. If the default is reasonably capable of being cured within thirty (30) calendar days after such notice is received or deemed received, the parry in default shall have such period to effect a cure prior to exercise of remedies by the injured party. If the default is such that it is not reasonably capable of being cured within thirty (30) days after such notice is received, and the party in default (1) initiates corrective action within said period, and (2) diligently, continually, and in good faith works to effect a cure as soon as possible, then the party in default shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by the injured parry, 28 but in any event no more than one hundred and eighty (180) days of receipt of such notice of default from the injured party. SECTION 502 Institution of Legal Actions In addition to any other rights or remedies (and except as otherwise provided in this Agreement), either party may institute legal action to cure, correct or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purpose of this Agreement. Such legal actions must be instituted in the Superior Court of the County of San Diego, State of California, in any other appropriate court of that county, or in the United States District Court for the Southern District of California. SECTION 503 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Agreement. SECTION 504 Acceptance of Service of Process a. In the event that any legal action is commenced by Lessee against the City, service of process on the City shall be made by personal service upon the City Manager, or in such other manner as may be provided by law. b. In the event that any legal action is commenced by the City against Lessee, service of process on Lessee shall be made by personal service upon Lessee (or upon the General Partner or General Partner's managing member, as applicable, or any officer of the General Partner or General Partner's managing member, as applicable) and shall be valid whether made within or without the State of California, or in such manner as may be provided by law. SECTION 505 Rights and Remedies Are Cumulative Except with respect to rights and remedies expressly declared to be exclusive in this Agreement, 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. SECTION 506 Damages Subject to the notice and cure provisions of Section 501, if either party defaults with regard to any of the provisions of this Agreement, the non-defaulting party shall serve written notice of such default upon the defaulting party. If the default is not cured within the time provided in Section 501, the defaulting party shall be liable to the non-defaulting party for any damages caused by such default, and the non-defaulting party may thereafter (but not before) commence an action for damages against the defaulting party with respect to such default. Neither Lessee nor City shall be entitled to, and hereby waives, any right to seek special or consequential damages of any kind or nature arising out of or in connection with this Agreement. 29 SECTION 507 Specific Performance Subject to the notice and cure provisions of Section 501, if either party defaults with regard to any of the provisions of this Agreement, the non-defaulting party shall serve written notice of such default upon the defaulting party. If the default is not cured within the time provided in Section 501, the non-defaulting party, at its option, may thereafter (but not before) commence an action for specific performance of the terms of this Agreement pertaining to such default. SECTION 508 Reserved. SECTION 509 Termination by Lessee Prior to issuance of a Conditional Use Permit ("CUP") for the Lessee's operation of Skate Park on the Leased Premises, Lessee shall have the right to terminate this Agreement for convenience. After issuance of the CUP for the Lessee's operation of Skate Park on the Leased Premises and prior to Closing, subject to the notice and cure provisions of Section 501, Lessee shall have the right to terminate this Agreement, by providing written notice to the City, in the event of a default by City pursuant to this Agreement. SECTION 510 Termination by City a. Prior to the Closing, subject to the notice and cure provisions of Section 501, City shall have the right to terminate this Agreement, by providing written notice to the Lessee, in the event of a default by Lessee pursuant to this Agreement. b. After the Closing, but before Completion, and subject to the notice and cure provisions of Section 501, City shall have the additional right to terminate this Agreement in the event any of the following defaults shall occur: 1. Lessee fails to commence construction of the Improvements as required by this Agreement and such breach is not cured within the time provided in Section 501 of this Agreement, provided that Lessee shall not have obtained an extension or postponement to which Lessee may be entitled pursuant to Section 602 hereof, or 2. Lessee abandons or substantially suspends construction of the Improvements and such breach is not cured within the time provided in Section 501 of this Agreement, provided Lessee has not obtained an extension or postponement to which Lessee may be entitled to pursuant to Section 602 hereof, or 3. Lessee assigns or attempts to assign this Agreement, or any rights herein, or transfer, or suffer any involuntary transfer of the Property, or any part thereof, in violation of this Agreement, and such breach is not cured within the time provided in Section 501 of this Agreement; or 4. Lessee otherwise materially breaches this Agreement, and such breach is not cured within the time provided in Section 501 of this Agreement. 30 PART 6. GENERAL PROVISIONS SECTION 601 Notices Formal notices, demands and communications between City and Lessee shall be deemed sufficiently given if dispatched by first class mail, registered or certified mail, postage prepaid, return receipt requested, or by electronic facsimile transmission followed by delivery of a"hard" copy, or by personal delivery (including by means of professional messenger service, courier service such as United Parcel Service or Federal Express, or by U.S. Postal Service), to the addresses of City and Lessee as set forth in Sections 105 and 106 hereof. 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 mail. Any notice that is transmitted by electronic facsimile transmission followed by delivery of a"hard" copy, shall be deemed delivered upon its transmission; any notice that is personally delivered (including by means of professional messenger service, courier service such as United Parcel Service or Federal Express, or by U.S. Postal Service), shall be deemed received on the documented date of receipt; and any notice that is sent by registered or certified mail, postage prepaid, return receipt required shall be deemed received on the date of receipt thereof. SECTION 602 Enforced Delay: Extension of Time of Performance a. Performance by either party hereunder shall not be deemed to be in default where delays or defaults are due to war, insurrection, strikes, lock-outs, riots, floods, earthquakes, fires, casualties, acts of God, 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, material or tools, delays of any contractor, sub-contractor or supplier, acts of the other party, acts or failure to act of the City or any other public or governmental agency or entity (except that acts or failure to act of City shall not excuse performance of City), or any causes beyond the control or without the fault of the party claiming an extension of time to perform. b. An extension of time for any such cause (a "Force Majeure Delay") shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to the other party within thirty (30) days of knowledge of the commencement of the cause. Notwithstanding the foregoing, none of the foregoing events shall constitute a Force Majeure Delay unless and until the party claiming such delay and interference delivers to the other party written notice describing the event, its cause, when and how such party obtained knowledge, the date and the event commenced, and the estimated delay resulting therefrom. Any party claiming a Force Majeure Delay shall deliver such written notice within thirty (30) days after it obtains actual knowledge of the event. Times of performance under this Agreement may also be extended in writing by the City and Lessee. SECTION 603 Conflict of Interest a. No member, official, or employee of City shall have any personal interest, direct or indirect, in this Agreement, nor shall any such member, official, or employee participate in 31 any decision relating to the Agreement which affects his or her personal interests or the interests of any corporation, partnership, or association in which he or she is, directly or indirectly, interested. b. Lessee warrants that it has not paid or given, and will not pay or give, any third person any money or other consideration for obtaining this Agreement. SECTION 604 Nonliability of City Officials and Employees No member, official, agent, legal counsel or employee of City shall be personally liable to Lessee, or any successor in interest in the event of any default or breach by City or for any amount which may become due to Lessee or successor or on any obligation under the terms of this Agreement. SECTION 605 Inspection of Books and Records City shall have the right at all reasonable times to inspect and copy the books and records of Lessee pertaining to the Property as pertinent to the purposes of this Agreement. Subject to any litigation arising between the Lessee and City due to rights or obligations accorded under this Agreement and any obligations of the City under the California Public Records Act, City shall maintain as confidential any such materials inspected. SECTION 606 Approvals a. Except as otherwise expressly provided in this Agreement, approvals required of City or Lessee in this Agreement, including the attachments hereto, shall not be unreasonably withheld or delayed. All approvals shall be in writing. Failure by either party to approve a matter within the time provided for approval of the matter shall not be deemed a disapproval, and failure by either party to disapprove a matter within the time provided for approval of the matter shall not be deemed an approval. b. Except as otherwise expressly provided in this Agreement, approvals required of the City shall be deemed granted by the written approval of the City Manager. City agrees to provide notice to Lessee of the name of the City Manager's designee on a timely basis, and to provide updates from time to time. Notwithstanding the foregoing, the Executive Director may, in his or her sole discretion, refer to the governing body of the City any item requiring City approval; otherwise, "City approval"means and refers to approval by the City Manager. SECTION 607 Real Estate Commissions;Finder's Fee The City shall not be liable for any real estate commissions, brokerage fees or finder's fees which may arise from this Agreement. The City and Lessee each represent that neither has engaged any broker, agent or finder in connection with this transaction. SECTION 608 Construction and Interpretation of Agreement a. The language in all parts of this Agreement shall in all cases be construed simply, 32 as a whole and in accordance with its fair meaning and not strictly for or against any party. The parties hereto acknowledge and agree that this Agreement has been prepared jointly by the parties and has been the subject of arm's length and careful negotiation over a considerable period of time, that each party has been given the opportunity to independently review this Agreement with legal counsel, and that each party has the requisite experience and sophistication to understand, interpret, and agree to the particular language of the provisions hereof. Accordingly, in the event of an ambiguity in or dispute regarding the interpretation of this Agreement, this Agreement shall not be interpreted or construed against the party preparing it, and instead other rules of interpretation and construction shall be utilized. b. If any term or provision of this Agreement, the deletion of which would not adversely affect the receipt of any material benefit by any party hereunder, shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby and each other term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. It is the intention of the parties hereto that in lieu of each clause or provision of this Agreement that is illegal, invalid, or unenforceable, there be added as a part of this Agreement an enforceable clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible. C. The captions of the articles, sections and subsections herein are inserted solely for convenience and under no circumstances are they or any of them to be treated or construed as part of this instrument. d. References in this instrument to this "Agreement" mean, refer to and include this instrument as well as any riders, exhibits, addenda and attachments hereto (which are hereby incorporated herein by this reference) or other documents expressly incorporated by reference in this instrument. Any references to any covenant, condition, obligation, and/or undertaking "herein," "hereunder," or "pursuant hereto" (or language of like import) means, refer to, and include the covenants, obligations, and undertakings existing pursuant to this instrument and any riders, exhibits, addenda, and attachments or other documents affixed to or expressly incorporated by reference in this instrument. e. As used in this Agreement, and as the context may require, the singular includes the plural and vice versa, and the masculine gender includes the feminine and vice versa. SECTION 609 Time of Essence Time is of the essence with respect to the performance of each of the covenants and agreements contained in this Agreement. SECTION 610 No Partnership Nothing contained in this Agreement shall be deemed or construed to create a partnership, joint venture, or any other similar relationship between the parties hereto or cause City to be responsible in any way for the debts or obligations of Lessee or any other Person. 33 SECTION 611 Compliance with Law Lessee agrees to comply with all the requirements now in force, or which may hereafter be in force, of all municipal, county, state and federal authorities, pertaining to the development and use of the Property and the Improvements, as well as operations conducted thereon. The judgment of any court of competent jurisdiction, or the admission of Lessee or any lessee or permittee in any action or proceeding against them, or any of them, whether City be a party thereto or not, that Lessee, lessee or permittee has violated any such ordinance or statute in the development and use of the Property shall be conclusive of that fact as between City and Lessee. SECTION 612 Binding Effect This Agreement, and the terms, provisions, promises, covenants and conditions hereof, shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. SECTION 613 No Third Party Beneficiaries The parties to this Agreement acknowledge and agree that the provisions of this Agreement are for the sole benefit of City and Lessee, and not for the benefit, directly or indirectly, of any other person or entity, except for the City, the Senior Lenders and the Tax Credit Equity Investor, and as otherwise expressly provided herein. SECTION 614 Authority to Sign Lessee hereby represents that the persons executing this Agreement on behalf of Lessee have full authority to do so and to bind Lessee to perform pursuant to the terms and conditions of this Agreement. SECTION 615 Incorporation by Reference Each of the attachments and exhibits attached hereto is incorporated herein by this reference. SECTION 616 Counterparts This Agreement may be executed by each party on a separate signature page, and when the executed signature pages are combined, shall constitute one single instrument. PART 7. ENTIRE AGREEMENT, WAIVERS AND AMENDMENTS a. This Agreement is executed in three (3) duplicate originals, each of which is deemed to be an original. This Agreement, including all of the Attachments appended hereto, constitutes the entire understanding and agreement of the parties. b. This Agreement integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the parties with respect to all or any part of the subject matter hereof. 34 C. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of City or Lessee, and all amendments hereto must be in writing and signed by the appropriate authorities of City and Lessee. PART 8. TIME FOR ACCEPTANCE OF AGREEMENT BY CITY This Agreement, when executed by Lessee and delivered to City, must be authorized, executed and delivered by City within sixty (60) days after date of signature by Lessee or this Agreement may be terminated by Lessee upon written notice to City. IN WITNESS WHEREOF, City and Owner have signed this Agreement as of the dates set opposite their signatures. SIGNATURES ON NEXT PAGE 35 VF OUTDOOR INC., A DELAWARE CORPORATION, DBA"VANS" Date: By: Kevin Bailey, President THE CITY OF HUNTINGTON BEACH (CITY) Date: By: Name, Mayor ATTEST: City Clerk REVIEWED AND APPROVED AS TO FORM: City Attorney By: Jennifer McGrath REVIEWED AND APPROVED AS TO FORM: KANE, BALLMER&BERKMAN By: City Special Counsel Murray O. Kane 36 ATTACHMENT NO. 1 SITE MAP [behind this page] SITE MAP (APN 142-073-03) THIS MAP WAS PREPARED FOR ORANGE SEE SPECIAL PAGE 142-079 FOR FEE TITLE ASSESSMENT BELOW SURFACE COUTY ASSESOR ET. PURPOSES THEN ASSESSORSMAKESPNO GUARANTEEOASY TO S 112. SEC. 14. T 5 S• R 1 1 W 14 2 O - NE 7 ITS ACCURACY NOR ASSUMES ANY LIABILITY PAGE 1 Of 2 FOR OTHER USES. NOT TO BE REPRODUCED. ALL RIGHTS RESERVED. O COPYRIGHT ORANGE COUNTY ASSESSOR 2010 0.0— AL. 40 30 31 32 J 10IRETDARF STREET SLREOTI �zssr \\\ PL AN MCFADDEN (SUGAR AVENUE) AVENUE RDalzaxraL suLE: 1"=rao' cg GROUND ELEVATION 50 4 GROUND �s'0� 'z c+36.469'( v079/ ~ zss.ev sz NG v q ly —3A'zSTORM DRAIN f5M'T ti PROJECT SITE VERTICAL ti 1CAC SCALE: 1"=100' N P.M. 367-22 i 0 3 DETAIL A" 11 O BLUEBONNET 35.I6 AC. 25.48 AC. -ti~ $AC. A Q• O 1"=400' DRIVE-- y \ m p P..U. 0 34 �4y GOL DEN WES T COL L EGE 69 0 rs iF ^=2.696 AC• o o 7 ' 1m CENTERS a LVE• STREET CENTER sec i4e-3o-araw. 1 1 Nt,Dn 072 O3 WB�0,' _ o ax14s—ue AL"., 62.334r-- 16 3. a c. 1R8p 32 T9FF a 9.40 AC. ].033AC. 1e3 „AC."' .-- o zrss• ,, \ N ~ DET I—- P. M. 358 — 1 I " AL 23 ° 711.1-1 BREELAN Z6 D $ O SEE PAGE 2 A" = 1.O r ry o OR1VE—� AC. Z 37.10 AC. 140 P.M.'a 13.47 AC. _ 11.66 AC. 22 19 WO 44-11 P. Id. 255—40 na. 073 — zss.ss P.M. 12-48 PAR•7 p p 31 �j PAR.1 O 9 20 sr Z N O 15.774 AC. 9.66 AC. A°c s, V 2.C. Q v 5.62 AC. P. M. 358 — 1 21 m 9 P. M. 255-40Ij - o- s EDINGER $ rSMELTZER AVE?I5- — AVENUE 15 14 Q PARKSIDE LANE 4 13 2223 13 32 51 � 11 � 08 232' MARCH 1962 PARCEL MAP P.M. 44-11. 255-40. 358-1 NOTE - ASSESSOR'S BLOCK A ASSESSOR'S MAP PARCEL NUMBERS BOOK 142 PAGE 07 SHOWN IN CIRCLES COUNTY OF ORANGE ATTACHMENT NO. 2 LEGAL DESCRIPTION [behind this page] EXHIBIT A Legal Description All that certain real property situated in the County of Orange, State of California, described as follows: Parcels l and 2 of Parcel Map No. 90-327, in the City of Huntington Beach, County of Orange, State of California, as per map recorded in Book 279 Page 33 and 34 of Parcel Maps, in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 ATTACHMENT NO. 3 METHOD OF FINANCING [behind this page] ATTACHMENT NO. 3 METHOD OF FINANCING This is the Method of Financing attached to the Ground Lease and Improvement Agreement ("GLIA") by and between the CITY OF HUNTINGTON BEACH (the "City") and VF OUTDOOR, INC., a Delaware Corporation, doing business as "Vans" (the "Developer") as of , 2010, pertaining to the development of a public skate park with ancillary uses, including retail skate shop, snack shop, restrooms, and seating areas ("the Project"). Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the GLIA. 1. Total Development Cost. The parties estimate that the cost of the development and construction of the Project will be approximately $2,897,866, to be provided as follows in Section 2 of this Method of Financing. 2. Sources of Financing. The parties anticipate that the costs of the development and construction of the Project (the "Development Costs") shall be financed with a combination of loans and Developer's equity, as set forth in the following chart: Source of Funds Construction Equity $2,897,866 TOTAL FINANCING $2,897,866 3. Proiect Budget. The parties anticipate that all estimated Development Costs for the Project shall be as set forth in the Project Budget ("Development Costs") attached to the GLIA as Attachment No. 3A (the "Project Budget"), incorporated herein by this reference. Any Material Change as hereinafter defined shall require the approval of the Executive Director or designee. For the purposes herein, a"Material Change"means any change that would (i) increase or decrease the total Project Budget or (ii) increase or decrease a line item by more than 10%. Except as provided in the previous sentence, the Executive Director or designee shall not unreasonably withhold approval of any requested Material Change if, within fifteen (15) working days after receipt of the request, Agency receives such explanation and/or back-up information in connection with its approval of the Material Change, and if the following conditions are satisfied: a. to the extent the Material Change is limited to a reallocation of budgeted funds among Project Budget line items without any increase in the total Project Budget, (i) the funds in the line item(s) to be reduced remain Attachment No. 3 Page 1 of 2 sufficient for completion of the Project, and (ii) the requested increase in one or more line item(s) is to be used to pay approved costs; and b. to the extent the Material Change involves an increase in the total Project Budget, (i) additional funds in an amount equal to the increase in the total Project Budget will be provided by Developer or other Permitted Mortgagee and (ii) the requested increase in the Project Budget is to be used to pay approved costs. Upon approval of any Material Change, the Project Budget shall be replaced by the approved revised Project Budget. 4. Evidence of Financing. The sum of the sources of construction financing described in Section 2.1, above, shall be sufficient at all times to pay all Development Costs as set forth in the most recently approved Project Budget. Within the time provided therefor in the Schedule of Performance, Developer shall submit, for approval by the Executive Director or designee, evidence of construction financing. The Executive Director or designee shall not unreasonably withhold his or her approval. Developer shall provide written certification to the Agency that such construction financing documents are correct copies of the actual documents to be executed by Developer on or before the Closing Date. To the extent that the sum of the sources of funds described in Section 2.1, above, is insufficient to pay all Development Costs, Developer shall demonstrate the availability prior to the Closing of increased sources at least equal to the shortfall. 5. Subordination. Any deed of trust recorded to secure construction and/or permanent financing for the Project shall be subordinate to the Ground Lease. Attachment No. 3 Page 2 of 2 ATTACHMENT NO. 3A PROJECT BUDGET [behind this page] PROJECT BUDGET Acres SF SP per SF SP CubicYrd CubicYrd Total Acquisition Agency Site 2.7 117,612.0 $0.00 $0 Edison Site - - $0.00 0 Off-site Work 117,612.0 $0.50 58,806 On-Site Work 117,612.0 $1.00 117,612 Building Shell(Restroom/Vend) 680.0 $85.00 57,800 Building Shell(Operations Facility) 3,500.0 $85.00 297,500 Building TI(Operations Facility) 3,500.0 $15.00 52,500 Skate Bowl Excavation 1,111.0 $13.00 14,443 Concrete 13,000.0 $4.00 52,000 Skate Plaza 14,000.0 $100.00 1,400,000 Parking A(north lot) 26.0 $1,300.00 33,800 Parking B(south lot) 40.0 $300.00 12,000 ParkingC - $1,500.00 0 Event Seating/Bleachers Allowance 50,000 $2,146,461 Soft Cost 27.0% $579,788 Financing 8.0% 171,717 Total $2,897,966 ATTACHMENT NO. 4 SCOPE OF DEVELOPMENT [behind this page] ATTACHMENT NO. 4 SCOPE OF DEVELOPMENT I. GENERAL DESCRIPTION This is the Scope of Development attached to the Ground Lease and Improvement Agreement("GLIA")by and between the CITY OF HUNTINGTON BEACH(the"City")and VF OUTDOOR, INC.,a Delaware corporation(the"Lessee")pertaining to development of the Property. Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the GLIA. II. IMPROVEMENTS The skate park development would include construction of a 14,000 square foot skate park plaza area, 13,000 square feet of skate bowl area, 15,000 square feet of turf/walking area, a 3,500- square-foot operations building (includes but is not limited to concession stand and skate rental space,employee office space,employee restrooms and storage space),a 480-square-foot skate park restroom structure, a 200-square-foot skate park entrance kiosk, the main parking lot near the primary site access fronting Center Ave,and a secondary parking area off McFadden Ave to be used only for special events.The project would include extensive landscaping and turf areas, sidewalks, walkways, trash/recycling facilities, drinking fountains, and restrooms, all of which would be accessible to the public.Additionally, in order to allow for potential future development of a transit stop, the proposed project includes the dedication of a"Transit Reserve Area". The Project construction quality and design shall resemble that of other skate parks developed by other local municipalities. Design and construction details shall meet all state, county and local building codes. III. SIGNAGE Lessee may install prominent signage on the Leased Premises to brand Skate Park using Lessee's name, logo and trademarks, including, without limitation, street facing signage (collectively, "Signage"); provided, however that the Signage conforms to the City's codes and ordinances. Furthermore, nothing herein shall be interpreted as authorization to waive Lessee's obligations to apply for and obtain required permits before installing any Signage. Attachment No. 4 Page 1 of 1 ATTACHMENT NO. 5 SCHEDULE OF PERFORMANCE [behind this page] ATTACHMENT NO. 5 SCHEDULE OF PERFORMANCE L DEVELOPMENT 1. Submission - Schematic/Design Development Within fifteen(15)days after execution of this Drawings. Developer shall prepare and submit GLIA by the City and in any event prior to to City the schematic/design development Close of Escrow. drawings for the Project. 2. Approval - Schematic Drawings. City shall Within fifteen (5) business days after receipt approve or disapprove the schematic/design by City. development drawings for the Project. 3. Submission - Preliminary_ Construction Within eight (8) months of City's approval of Drawings, and Preliminary Landscaping and the Schematic Drawings and in any event prior Grading Plans. Developer shall prepare and to Close of Escrow. submit to City preliminary construction drawings and preliminary landscaping and grading plans for the Property. 4. Approval — Preliminary Construction Within fifteen (15)business days after receipt Drawings, and Preliminary Landscaping and by City. Grading Plans. City shall approve or disapprove the preliminary construction drawings and preliminary landscaping and grading plans for the Property. 5. Submission-Final Construction Drawings and Within forty-five(45)days after City approval Landscaping and Finish Grading Plans. of the preliminary construction drawings and Developer shall prepare and submit the final in any event prior to Close of Escrow. construction drawings and the final landscaping and finish grading plans for the Property. 6. Approval - Final Construction Drawings and Within fifteen (15)business days after receipt Landscaping and Finish Grading Plans. City by City. shall approve or disapprove the final construction drawings and the final landscaping and finish grading plans for the Property. 7. Developer's Satisfaction to Conditions At least thirty (30) days prior to the Close of Precedent to Close of Financing. Developer Escrow. Attachment No. 5 Page 1 of 2 shall have satisfied all conditions required in accordance with Section 204.1 of the GLIA. 8. Close of Escrow. Close of Escrow shall occur. No later than one hundred and twenty (120) days from the City's execution of the GLIA. 9. Commencement of Construction. Developer Within thirty(30)days of Close of Escrow,but shall commence construction of the in no event prior to certification of site specific Improvements, in accordance with the GLIA Final Environmental Impact Report for the and Scope of Development. Improvements. 10. Completion of Construction. Developer shall On or before twenty-four (24) months after complete construction of the Improvements in commencement of construction. accordance with the GLIA and Scope of Development Attachment No. 5 Page 2 of 2 ATTACHMENT NO. 6 ENVIRONMENTAL INDEMNITY [behind this page] ATTACHMENT NO. 6 ENVIRONMENTAL INDEMNITY THIS ENVIRONMENTAL INDEMNITY (this"Indemnity"), dated as of 2012, is made by VF Outdoor Inc., a Delaware a corporation, doing business as "Vans" (the "Lessee"), whose address for purposes of giving notices is 6550 Katella Avenue, Cypress, CA 90363-5102,in favor of the CITY OF HUNTINGTON BEACH,a public body,corporate and politic ("City"),whose address for purposes of giving notices is 2000 Main Street,Huntington Beach,CA 92648. WITNESSETH WHEREAS, City and Lessee entered into that certain Ground Lease and Improvement Agreement, dated yAgV AT, 2012 (the "GLIA"), pursuant to which Lessee agreed to construct a full service hotel on the Property (the "Project") in accordance with the terms and conditions of the GLIA; and WHEREAS, in furtherance of the GLIA,the City leased Property to Lessee, subject to the terms and conditions of that certain Ground Lease entered into by and between City and Lessee, dated��t�/��P , 2012 ("Ground Lease"); and WHEREAS, Lessee has agreed to execute and deliver to the City this Indemnity to induce the City to enter into each Ground Lease and the GLIA; and NOW,THEREFORE, in consideration of the foregoing and in consideration of the mutual agreements hereinafter set forth, Lessee hereby agrees with the City as follows: SECTION 1. DEFINITIONS All capitalized terms used in this Indemnity shall have the meanings ascribed to them in the GLIA with the same force and effect as if set forth in full below. SECTION 2. COVENANTS AND INDEMNITY The following covenants and indemnities are hereby given and made by Lessee: 2.1 Covenants. (a) Lessee covenants that it shall (i) comply with any and all laws,regulations, and/or orders which may be promulgated, from time to time, with respect to the discharge and/or removal of Hazardous Materials, (ii)pay immediately when due the costs of the removal of,or any other action required by law with respect to, any such Hazardous Materials, and (iii) keep the Attachment No. 6 Pagel of 8 Property free of any lien imposed pursuant to any such laws, regulations, or orders. (b) Lessee covenants that the Property will not be used for any activities involving, directly or indirectly,the use, generation,treatment, storage,release, or disposal of any Hazardous Materials, except for de minimis quantities used at the Property in compliance with all applicable environmental laws and required in connection with the routine operation and maintenance of the Property (the"De Minimis Exception"). (c) Lessee further agrees that,except with respect to the De Minimis Exception, Lessee shall not release or dispose of any Hazardous Materials on the Property without the express written approval of the City and that any such release or disposal shall be effected in strict compliance with all applicable laws and all conditions, if any, established by the City. (d) The City shall have the right,at any time,to conduct an environmental audit ("City Audit"),at the City's expense,unless Hazardous Materials(other than in connection with the De Minimis Exception)are found,then at Lessee's sole cost and expense,and Lessee shall cooperate in the conduct of any such environmental audit but in no event shall such audit be conducted unless the City reasonably believes that such audit is warranted. Other than in an emergency, such audit shall be conducted only after prior notice has been given to Lessee and only in the presence of a representative of Lessee. The City Audit shall not interfere with occupancy or ongoing work. City shall obtain Lessee's prior approval of any work plan that involves invasive or destructive testing or work, with Lessee's approval to not be unreasonably withheld. City shall at its sole expense promptly repair and restore any damage to the Property caused by the City's entry. If City believes it has found evidence of Hazardous Materials,City shall cooperate with the Lessee by providing the Lessee with complete information, including any inspection logs, reports, etc. (e) Lessee shall not install, or permit to be installed, on the Property friable asbestos or any substance containing asbestos and deemed hazardous by federal or state regulations respecting such material and with respect to such material Lessee shall remove or cause to be removed any such material.If Lessee shall fail to comply with this subsection within the cure period permitted under applicable law, regulation, or order, the City may do whatever is necessary to eliminate said substances from the premises or to otherwise comply with the applicable law, regulation,or order,and the reasonable costs thereof shall be added to the Obligations(as hereinafter defined) of Lessee under this Section 2. (f) Lessee shall immediately advise the City in writing of any of the following: (i) any pending or threatened environmental claim against Lessee or the Property or (ii) any condition or occurrence on the Property that (A) results in noncompliance by Lessee with any applicable environmental law, (B) could reasonably be anticipated to cause the Property to be subject to any restrictions on the ownership,occupancy,use or transferability of the Property under any environmental law,or(C)could reasonably be anticipated to form the basis of an environmental Attachment No. 6 Page 2 of 8 claim against the Property or Lessee. 2.2 Indemnity. Except as to the active negligence or willful misconduct of the City or its employees, officers or agents, Lessee shall indemnify, protect, and hold the City harmless from and against any and all damages, losses, liabilities, obligations, penalties, claims, litigation, demands, defenses,judgments, suits, proceedings, costs, disbursements, or expenses (including, without limitation, attorneys' and experts' fees and disbursements) of any kind or of any nature whatsoever(collectively,the"Obligations")which may at any time be imposed upon,incurred by or asserted or awarded against the City and arising from or out of: (a) The presence of any Hazardous Materials on,in,under,or affecting all or any portion of the Property or any surrounding areas; (b) The enforcement by the City of any of the provisions of this Section 2.2 or the assertion by Lessee of any defense to its obligations hereunder. SECTION 3. LESSEE'S UNCONDITIONAL OBLIGATIONS 3.1 Unconditional Obligations. Lessee hereby agrees that the Obligations will be paid and performed strictly in accordance with the terms of this Indemnity, regardless of any law, regulation,or order now or hereafter in effect in any jurisdiction affecting the GLIA or affecting any of the rights of the City with respect thereto.The obligations of Lessee hereunder shall be absolute and unconditional irrespective of: (a) The validity, regularity, or enforceability of the GLIA or any other instrument or document executed or delivered in connection therewith (collectively, the"GLIA Documents"); (b) Any alteration, amendment, modification, release, termination, or cancellation of any of the GLIA Documents, or any change in the time, manner,or place of payment of, or in any other term in respect of, all or any of the obligations of Lessee contained in any of the GLIA Documents; (c) Any waiver of,or consent to any departure from,any provision contained in the GLIA Documents; (d) Any exchange, addition, subordination, or release of, or non-perfection of any lien on or security interest in, any collateral for the GLIA Documents. (e) The insolvency or bankruptcy of Lessee, or of any indemnitor or guarantor under any other indemnity or guarantee given in respect of the GLIA Attachment No. 6 Page 3 of 8 Documents; or (f) Any other circumstance that might otherwise constitute a defense available to, or a discharge of, Lessee or any other indemnitor or guarantor with respect to the GLIA Documents, or any or all of the Obligations. 3.2 Continuation. This Indemnity(a) is a continuing indemnity and shall remain in full force and effect until the satisfaction in full of all of the Obligations. SECTION 4. WAIVER Lessee hereby waives the following: (a) Promptness and diligence; (b) Notice of acceptance and notice of the incurrence of any obligation by Lessee; (c) Notice of any action taken by the City or any other interested party under this Indemnity and/or the GLIA Documents(but only to the extent it affects rights under this Indemnity), or under any other agreement or instrument relating thereto; (d) All other notices, demands, and protests, and all other formalities of every kind, in connection with the enforcement of the Obligations,the omission of or delay in which, but for the provisions of this Section 4, might constitute grounds for relieving Lessee of its Obligations hereunder; (e) Any requirement that the City protect, secure,perfect,or insure any security interest or lien in or on any property subject thereto; (f) Any requirement that the City exhaust any right or take any action against Lessee or any other person or collateral; and (g) Any defense that may arise by reason of. (1) The incapacity,lack of authority,death or disability of,or revocation hereof by, any person or persons; or (2) The failure of the City to file or enforce any claim against the estate (in probate, bankruptcy, or any other proceedings) of any person or persons. SECTION 5. NOTICES Attachment No. 6 Page 4 of 8 Any notice, demand, statement,request, or consent made hereunder shall be in writing and shall be personally served, mailed by first-class registered mail, return receipt requested, to the address set forth in the first paragraph of this Indemnity, above, or given by telecopier to the telecopier numbers stated below, with confirmations mailed by first class registered mail, return receipt requested to the address set forth above,of the party to whom such notice is to be given(or to such other address as the parties hereto, shall designate in writing): To City: City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: Stanley Smalewitz, Economic Development Director Phone: (714) 526-5582 Fax: (714) 375-5087 With a copy to: Kane, Ballmer&Berkman 515 S. Figueroa Street, Suite 1850 Los Angeles, California 90071 Attn: Susan Y. Cola Tel: 213-617-0480 Fax: 213-625-0931 To Lessee: VF Outdoor, Inc., a Delaware Corporation dba Vans 6550 Katella Avenue Cypress, CA 90363-5102 Attn: Doug Palladini Tel: (714) 889-6702 Fax: (714) With a copy to: Robert Frisbee, Esq. Connolly, Finkel& Gosselin LLP 601 S. Figueroa Street, Suite 2610 Los Angeles, Ca 90017-5704 Main Line: (213)452-6500 Direct Dial: (213)452-6506 Facsimile: (213) 622-2171 Any notice that is transmitted by electronic facsimile transmission followed by delivery of a"hard" copy, shall be deemed delivered upon its transmission; any notice that is personally delivered (including by means of professional messenger service, courier service such as United Parcel Service or Federal Express,or by U.S.Postal Service),shall be deemed received on the documented Attachment No. 6 Page 5 of 8 date of receipt; and any notice that is sent by registered or certified mail, postage prepaid, return receipt required shall be deemed received on the date of receipt thereof. SECTION 6. MISCELLANEOUS 6.1 Lessee shall make any payment required to be made hereunder in lawful money of the United States of America, and in same day funds, to the City at its address specified in the first paragraph hereof. 6.2 No amendment of any provision of this Indemnity shall be effective unless it is in writing and signed by Lessee and the City,and no waiver of any provision of this Indemnity,and no consent to any departure by Lessee from any provision of this Indemnity,shall be effective unless it is in writing and signed by the City, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 6.3 No failure on the part of the City to exercise, and no delay in exercising, any right hereunder or under the GLIA Documents(as it relates to rights under this Indemnity) shall operate as a waiver thereof,nor shall any single or partial exercise of any right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the City provided herein and in the GLIA Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law. 6.4 Any provision ofthis Indemnity that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof and without affecting the validity or enforceability of such provision in any other jurisdiction. 6.5 This Indemnity shall be binding upon Lessee and Lessee's successors and assigns; provided, however, that from and after the effective date of a Transfer, the transferor shall be released from all obligations and shall release any rights it may have from the City under this Agreement.This Indemnity shall inure,together with all rights and remedies of the City hereunder, to the benefit of the City,its respective directors,officers,employees,and agents,any successors to the City's interest in the Property, any other person who acquires any portion of the Property at a foreclosure sale or otherwise through the exercise of the City's rights and remedies under the GLIA Documents,any successors to any such person,and all directors,officers,employees,and agents of all of the aforementioned parties. 6.6 Lessee hereby(a)irrevocably submits to the jurisdiction of any California or federal court sitting, in each instance, in Orange County in any action or proceeding arising out of or relating to this Indemnity, (b) waives any defense based on doctrines of venue or forum non convenient or similar rules or doctrines, and(c)irrevocably agrees that all claims in respect of any Attachment No. 6 Page 6 of 8 such action or proceeding may be heard and determined in such California or federal court.Lessee irrevocably consents to the service of any and all process which may be required or permitted in any such action or proceeding to the address specified in the first paragraph of this Indemnity, above. Lessee agrees that a final judgment in any such action or proceeding shall be inclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law. 6.7 The title of this document and the captions used herein are inserted only as a matter of convenience and for reference and shall in no way define,limit,or describe the scope or the intent of this Indemnity or any of the provisions hereof. 6.8 This Indemnity shall be governed by, and construed and interpreted in accordance with,the laws of the State of California applicable to contracts made and to be performed therein, except to the extent that the laws of the United States preempt the laws of the State of California. 6.9 This Indemnity may be executed in any number of counterparts,each of which shall constitute an original and all of which together shall constitute one agreement. IN WITNESS WHEREOF, Lessee has duly executed this Indemnity as of the date first set forth above. THE CITY OF HUNTINGTON BEACH (CITY) Date: By: Mayor ATTEST: City Clerk REVIEWED AND APPROVED AS TO FORM: Attachment No. 6 Page 7 of 8 City Attorney By: Jennifer McGrath APPROVED AS TO FORM: KANE, BALLMER& BERKMAN By: City Special Counsel Murray O. Kane VF OUTDOOR INC., A DELAWARE CORPORATION, Date: By: Kevin Bailey,President Attachment No. 6 Page 8 of 8 EXHIBIT"A" LEGAL DESCRIPTION All that certain real property situated in the County of Orange, State of California, described as follows: Parcels 1 and 2 of Parcel Map No. 90-327, in the City of Huntington Beach, County of Orange, State of California, as per map recorded in Book 279 Page 33 and 34 of Parcel Maps, in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 ATTACHMENT NO. 7 GROUND LEASE [behind this page] ATTACHMENT NO. 7 GROUND LEASE by and between THE CITY OF HUNTINGTON BEACH, "Landlord" and VF OUTDOOR,INC.,a Delaware corporation doing business as "Vans" "Tenant" TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS........................................................................................................ 1 1.1 Additional Rent....................................................................................................... 1 1.2 Agreed Rate. ........................................................................................................... 1 1.3 Commencement Date..............................................................................................2 1.4 Covenant Period......................................................................................................2 1.5 Default(s)................................................................................................................2 1.6 Environmental Laws...............................................................................................2 1.7 Force Majeure Events.............................................................................................2 1.8 Governmental Restrictions. ....................................................................................2 1.9 Improvements. ........................................................................................................2 1.10 Leased Premises......................................................................................................2 1.11 Leasehold Mortgage. .............................................................................................. 2 1.12 Lease Year. .............................................................................................................2 1.13 Lender. .................................................................................................................... 3 1.14 Losses and Liabilities.............................................................................................. 3 1.15 Mortgage................................................................................................................. 3 1.16 Party or Parties........................................................................................................ 3 1.17 Permitted Exceptions.............................................................................................. 3 1.18 Rent......................................................................................................................... 3 1.19 Representatives....................................................................................................... 3 1.20 Term........................................................................................................................ 3 1.21 Title Insurer............................................................................................................. 3 1.22 Title Policy.............................................................................................................. 3 1.23 Transfer Documents................................................................................................4 1.24 Transfer/Transferee.................................................................................................4 1.25 Uncured Default(s). ................................................................................................4 ARTICLE2 LEASED PREMISES.............................................................................................4 2.1 Leased Premises......................................................................................................4 2.2 Leased Premises; Condition of Premises; Zoning..................................................4 2.3 Designation as Point of Sale................................................................................... 5 ARTICLE3 TERM...................................................................................................................... 6 3.1 Term........................................................................................................................ 6 3.2 Reserved.................................................................................................................. 6 3.3 Possession; Covenant of Quiet Enjoyment............................................................. 6 ARTICLE4 RENT PAYMENTS................................................................................................ 7 4.1 Rent......................................................................................................................... 7 4.2 Base Rent Amounts................................................................................................. 7 i 4.3 Additional Rent....................................................................................................... 7 4.4 Miscellaneous. ........................................................................................................ 7 4.5 Triple Net Lease;No Counterclaim, Abatement, etc.............................................. 7 ARTICLE 5 USE OF THE LEASED PREMISES, MAINTENANCE AND HAZARDOUS SUBSTANCES....................................................................................................... 8 5.1 Use of the Leased Premises. ................................................................................... 8 5.2 No use of Hazardous Substances on the Leased Premises. .................................... 8 5.3 Notice and Remediation by Tenant. .......................................................................9 5.4 Environmental Indemnity. ...................................................................................... 9 5.5 Termination; Subtenants......................................................................................... 9 ARTICLE 6 OWNERSHIP OF IMPROVEMENTS...................................................................9 ARTICLE 7 REPAIRS AND MAINTENANCE...................................................................... 10 7.1 Landlord's Nonresponsibility............................................................................... 10 7.2 Tenant's Duty to Maintain Premises. ................................................................... 10 7.3 Damage or Destruction......................................................................................... 10 ARTICLE 8 LEASEHOLD FINANCING................................................................................ 12 8.1 Conditions To Obtaining Leasehold Mortgage. ................................................... 12 8.2 Lender's Rights..................................................................................................... 12 8.3 Lender Cure Rights............................................................................................... 13 8.4 Obligations of Lender and Purchaser.................................................................... 14 8.5 New Lease............................................................................................................. 15 8.6 New Lease Priority. .............................................................................................. 15 8.7 Liability of New Tenant........................................................................................ 15 8.8 Reserved................................................................................................................ 16 8.9 Legal Proceedings................................................................................................. 16 8.10 Notices. ................................................................................................................. 16 8.11 Encumbrance of Landlord's Fee Estate................................................................ 16 8.12 Landlord Right to Cure......................................................................................... 16 ARTICLE 9 ASSIGNMENT AND TRANSFER...................................................................... 17 9.1 Transfer of the Lease, the Leased Premises or the Improvements Thereon......... 17 9.2 Transfer of Tenant's Interest in Lease and Tenant's Ownership.......................... 18 ARTICLE 10 TAXES AND IMPOSITIONS.............................................................................. 18 10.1 Tenant To Pay Impositions................................................................................... 18 10.2 Proration of Impositions. ...................................................................................... 19 10.3 Payment Before Delinquency............................................................................... 19 10.4 Contest of Imposition............................................................................................ 19 10.5 Tax Returns And Statements. ............................................................................... 20 10.6 Possessory Interest Taxes. ....................................................................................20 ii ARTICLE 11 UTILITY SERVICES...........................................................................................21 11.1 Tenant's Responsibility. .......................................................................................21 11.2 Landlord Has No Responsibility...........................................................................21 ARTICLE 12 INSURANCE........................................................................................................21 12.1 Fire and Extended Coverage Insurance. ...............................................................21 12.2 Commercial General Liability Insurance..............................................................21 12.3 Worker's Compensation Insurance.......................................................................22 12.4 Course of Construction Insurance.........................................................................22 12.5 Business Automobile Liability Insurance.............................................................22 12.6 Policy Form, Content And Insurer........................................................................22 12.7 Waiver of Subrogation..........................................................................................23 12.8 Indemnification..................................................................................................... 24 ARTICLE13 CONDEMNATION..............................................................................................25 13.1 General..................................................................................................................25 13.2 Award....................................................................................................................25 13.3 Taking for Temporary Use....................................................................................25 ARTICLE 14 DEFAULT ............................................................................................................26 14.1 Default...................................................................................................................26 14.2 Notice of Default; Tenant's Right to Cure............................................................26 14.3 Landlord's Right to Cure Tenant's Defaults.........................................................27 14.4 Notice of Landlord's Default; Tenant Waiver......................................................27 14.5 Landlord's Remedies............................................................................................28 14.6 Tenant Remedies; Remedies Cumulative.............................................................29 14.7 No Waiver............................................................................................................. 30 14.8 Delays in Performance.......................................................................................... 30 r ARTICLE 15 EXPIRATION;TERMINATION......................................................................... 30 ARTICLE 16 NO DISCRIMINATION....................................................................................... 31 ARTICLE 17 MISCELLANEOUS ............................................................................................. 32 17.1 Landlord's Representations and Warranties......................................................... 32 17.2 Tenant's Representations and Warranties............................................................. 33 17.3 Survival of Representations, Warranties and Covenants...................................... 33 17.4 Further Assurances ............................................................................................... 34 17.5 Estoppel Certificate............................................................................................... 34 17.6 Notices. ................................................................................................................. 34 17.7 Attorneys' Fees..................................................................................................... 35 17.8 Headings. .............................................................................................................. 35 17.9 Rights of Successors............................................................................................. 35 17.10 Amendments in Writing........................................................................................ 36 17.11 No Brokers............................................................................................................ 36 iii 17.12 Negation of Partnership. .......................................................................................36 17.13 Time of Essence....................................................................................................36 17.14 Interpretation......................................................................................................... 36 17.15 Applicable Law; Severability. ..............................................................................37 17.16 Exhibits. ................................................................................................................37 17.17 Short Form of Lease.............................................................................................. 37 17.18 Landlord's Rights of Inspection. .......................................................................... 37 17.19 Nonmerger of Fee and Leasehold Estates............................................................. 37 17.20 Counterparts.......................................................................................................... 38 17.21 Interest On Past Due Obligations..........................................................................38 17.22 Holding Over. .......................................................................................................38 EXHIBITS EXHIBIT A - LEGAL DESCRIPTION EXHIBIT B - SITE MAP EXHIBIT C - MEMORANDUM OF LEASE EXHIBIT D - ESTOPPEL CERTIFICATE iv GROUND LEASE This Ground Lease("Lease")is dated for reference purposes as ofthe_day of , 2012,and is entered into by and between the following(collectively,the"Parties"): THE CITY OF HUNTINGTON BEACH, a public body corporate and politic ("City" or "Landlord"), and VF OUTDOOR, INC., a Delaware corporation doing business as"Vans" ("Tenant"). RECITALS A. The subject property (the "Property") is located in the Huntington Beach Redevelopment Project Area, within the City of Huntington Beach, California, on certain real property located at [address]. B. This Ground Lease is entered into pursuant to that certain Ground Lease and Improvement Agreement by and between Landlord(as"City")and Tenant(as"Developer")dated as of , 2012 (the "GLIA") for the purpose of providing part of the financing for the redevelopment of the Property with a public skate park("the Project"), which shall be operated to meet certain criteria, as more specifically described herein and in the GLIA. GLIA as used herein shall mean,refer to and include the GLIA,as well as any riders,exhibits,addenda, implementation agreements, amendments and attachments thereto (which are hereby incorporated herein by this reference) or other documents expressly incorporated by reference in the GLIA. Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the GLIA. NOW, THEREFORE, in consideration of the payments to be made hereunder and the covenants and agreements contained herein, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the real property hereinafter defined as the "Leased Premises" upon the following terms and conditions. ARTICLE I DEFINITIONS 1.1 Additional Rent. The term"Additional Rent"means all sums of money required to be paid pursuant to the terms of this Lease other than Rent, including, but not limited to, unpaid utilities, unpaid maintenance, unpaid Impositions, or unpaid liens or encumbrances. 1.2 Agreed Rate. The term"Agreed Rate" as used herein shall mean an annual rate of interest equal to the lesser of(i)two percent(2%)above the rate of interest announced from time to time by the Bank of America,Downtown Huntington Beach,Main Branch,as the prime or reference rate(or, in the event said bank ceases to announce a prime or reference rate or is acquired or ceases operations and there is no successor bank, another established and financially secure commercial bank,having a headquarters in California,selected by Landlord),or(ii)the highest rate permitted by Attachment No.7 Page 1 of 40 law, if any. 1.3 Commencement Date. The Commencement Date is the date that the Memorandum of Ground Lease (Attachment No. 7A to the GLIA) is fully executed by Landlord and Tenant and recorded in the official records of Orange County, signifying the commencement of this Lease. 1.4 Covenant Period. The term "Covenant Period" means Term of this Lease. 1.5 Default(s). The term"Default(s)"as used herein shall have the meaning described in Section 14.L 1.6 Environmental Laws. The term"Environmental Laws"means any federal, state or local environmental,health and/or safety-related law,rule,regulation,requirement,order,ordinance, directive, guideline,permit or permit condition,currently existing and as amended,enacted, issued or adopted in the future. The term Environmental Laws includes, but is not limited to, the Comprehensive Environmental Response,Compensation and Liability Act of 1980,as amended,and similar state or local laws. 1.7 Force Majeure Events. The term "Force Majeure Events" shall have the meaning described in Section 14.8. 1.8 Governmental Restrictions. The term"Governmental Restrictions" as used herein shall mean and include any and all laws,statutes,official policies,ordinances,codes,formal decrees, rulings,regulations,writs, injunctions,orders,rules,conditions of approval or authorizations of any governmental entity, agency or political subdivision, now in force or hereafter adopted, which are applicable to the Leased Premises or the use thereof as of the date such term is being applied. 1.9 Improvements. The term "Improvements" shall mean and include all buildings, structures, fixtures, excavation, parking areas, walkways, drives, landscape areas, underground installations and all other improvements of whatsoever character constructed on, around, under or over the Leased Premises. 1.10 Leased Premises. The term"Leased Premises"as used herein shall have the meaning described in Article 2 below. 1.11 Leasehold Mortgage. The term "Leasehold Mortgage" shall mean any mortgage, deed of trust, or other established method of securing real property financing, all of which shall be subject to the conditions and obligations in Articles 8, herein. 1.12 Lease Year. The term "Lease Year" as used herein shall mean each of the consecutive twelve (12) calendar month periods beginning on the first day of the first calendar month following the Commencement Date unless the Commencement Date falls on the first day of a Attachment No.7 Page 2 of 40 calendar month, in which event the Lease Year shall commence on the Commencement Date. As an example, "Lease Year 20" means the Lease Year commencing after the nineteenth (19th) anniversary of the Commencement Date. 1.13 Lender. The term "Lender" shall mean the owner and holder of any Mortgage or Leasehold Mortgage permitted by this Lease. 1.14 Losses and Liabilities. The term"Losses and Liabilities"as used herein shall mean all liabilities, claims, losses, causes of action, charges, penalties, damages, costs and expenses (including reasonable attorneys' fees and costs),of whatsoever character,nature and kind,whether to property or person, whether by direct or derivative action, and whether known or unknown, suspected or unsuspected, latent or patent. 1.15 Mortgage. The term "Mortgage" as used herein shall mean and include any mortgage, deed of trust, monetary lien, financing conveyance or other voluntary monetary lien of any kind and all appropriate modes of financing real estate ownership,which encumbers Landlord's fee estate. 1.16 Party or Parties. The term"Party"shall refer to one of Landlord or Tenant;the term "Parties" shall refer to both Landlord and Tenant. 1.17 Permitted Exceptions. The term"Permitted Exceptions"shall have the same meaning as set forth in Section 208 of the GLIA. 1.18 Rent. The term "Rent" as used herein shall have the meaning described in Section 4.1. 1.19 Representatives. The term"Representatives"as used herein shall mean the agents, contractors, employees (to the extent acting on behalf of such entity and within the scope of its employment or contract). 1.20 Term. The term"Term"as used herein shall mean the term of this Lease as described in Section 3.1 below. 1.21 Title Insurer. The term"Title Insurer"as used herein shall mean the Lawyers Title Insurance Company. 1.22 Title Policy. The term"Title Policy"as used herein shall mean and include the most current form of ALTA owner's policy of title insurance,dated as of the Commencement Date,and with liability in the amount of the value of the land and completed improvements,insuring Tenant as the owner of the leasehold estate under the Lease. Attachment No.7 Page 3 of 40 1.23 Transfer Documents. The term"Transfer Documents"as used herein shall have the meaning described in Section 9.1. 1.24 Transfer/Transferee. The term"Transfer"as used herein shall mean and include any conveyance, transfer, sale, assignment, lease, license, concession, franchise, gift, hypothecation, Mortgage,pledge,encumbrance, or the like,to any person or entity("Transferee"), excluding any Leasehold Mortgage which encumbers Tenant's leasehold estate created by this Lease. 1.25 Uncured Default(s). The term "Uncured Default(s)" as used herein shall have the meaning described in Section 14.2.4. ARTICLE 2 LEASED PREMISES 2.1 Leased Premises. The premises demised and leased hereunder("Leased Premises")consist of the real property located in the City of Huntington Beach("City"),County of Orange, State of California,and more particularly described in the Legal Description for that property attached hereto as Exhibit A, and depicted on the Site Map attached hereto as Exhibit B, together with all right,title and interest of Landlord in and to all rights of way or use,servitudes,licenses,easements,tenements,hereditaments and appurtenances now or hereafter belonging or pertaining to the use of such real property during the Term. The parties agree that Tenant alone shall be entitled to all federal tax attributes of ownership of the Improvements. 2.2 Leased Premises; Condition of Premises; Zoning. Prior to the Commencement Date,Tenant,at Tenant's sole expense, shall have investigated and approved the physical condition of, and the condition of title with respect to, the Leased Premises and the Improvements. Tenant acknowledges and agrees that Landlord makes no representation or warranty, express or implied,written or oral, with respect to the condition of the Leased Premises or the Improvements, or their fitness or availability for any particular use. Landlord shall provide the Title Policy(Landlord shall only pay for the CLTA portion of the Title Policy), insuring Tenant as the owner of the leasehold estate under the Lease, subject only to the Permitted Exceptions. 2.2.1 Landlord makes no representations, express or implied, with respect to the legality,fitness,or desirability of the Leased Premises for Tenant's intended use.If Tenant desires to do so,Tenant shall have the right to conduct its own investigation,to its satisfaction,with respect to any matters affecting Tenant's ability to use the Leased Premises for Tenant's intended use. Attachment No.7 Page 4 of 40 2.2.2 The Leased Premises shall be delivered from Landlord to Tenant in an"as is" physical condition, with no warranty, express or implied by Landlord as to the presence of Hazardous Substances,or the condition of the soil,its geology or the presence of known or unknown faults. If the condition of the Leased Premises is not in all respects entirely suitable for the use or uses to which such Leased Premises will be put,then it is the sole responsibility and obligation of Tenant to place the Leased Premises in all respects in a condition entirely suitable for the development thereof, solely at Tenant's expense. 2.2.3 Effective on the Commencement Date, Tenant agrees to indemnify, defend and hold harmless Landlord and City of Huntington Beach("City"),and their respective members, officers, agents, employees, contractors and consultants, in accordance with the Environmental Indemnity (Attachment No. 6 to the GLIA). 2.2.4 Effective on the Commencement Date,Tenant waives,releases and discharges the Landlord, the City and their respective members, 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 the Landlord's or Tenant's use, maintenance, ownership or operation of the Leased Premises, any Hazardous Substances on the Leased Premises, or the existence of Hazardous Substances contamination in any state on the Leased Premises,however the Hazardous Substances came to be placed there,except that arising out of the active negligence or willful misconduct of the Landlord or its employees, officers or agents. Tenant 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 or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor." To the extent of the release set forth in this Section 2.2.4, Tenant hereby waives and relinquishes all rights and benefits which it may have under Section 1542 of the California Civil Code. 2.3 Designation as Point of Sale Tenant and its successors and assigns shall maintain such licenses and permits as may be required by any governmental agency to conduct taxable sales arising from any project on the Property and,to the extent permitted by law,shall designate City of Huntington Beach as the"point of sale"for all taxable sales and lease transactions occurring from any project on the Property in all reports to the California State Board of Equalization in accordance with the Bradley-Burns Uniform Attachment No.7 Page 5 of 40 Sales and Use Tax Law (Revenue and Taxation Code 72000 et seq.), as it may be amended or substituted from time to time,and on sales tax returns to the State of California for all taxable sales occurring at any project on the Property. ARTICLE 3 TERM 3.1 Term The Term of this Lease shall be that period of time beginning on the Commencement Date and ending at midnight on the twentieth(20th)anniversary of the Commencement Date,unless the Term of this Lease is sooner terminated as provided for herein. Landlord and Tenant agree that during the period commencing from one year prior to the termination of the Term of this Lease and ending no later than sixty(60)days prior to the termination of the Term of this Lease,Tenant shall have an option to extend the Lease Term by ten (10)years, subject to the following conditions: (i) no default of this Agreement existing at the time of exercise of this Option; (ii) City's written consent, which may be conditioned upon or withheld in City's reasonable discretion, pending Tenant's completion of upgrades or deferred maintenance to the Improvements. 3.2 Reserved. 3.3 Possession; Covenant of Quiet Enjoyment. 3.3.1 Sole possession of the Leased Premises shall be delivered to Tenant on the Commencement Date free and clear of any other tenancies or rights of occupancy or use,and Tenant shall take possession as of that date. 3.3.2 Landlord covenants that, subject to the limitations expressly set forth herein, Tenant, upon Tenant's timely payment of the Rent and performance of Tenant's covenants and obligations under this Lease, may quietly have, hold, and enjoy the Leased Premises during the Term of this Lease,without hindrance or interruption by Landlord or anyone claiming by or through Landlord, subject to Landlord's right to enter upon the Leased Premises as expressly provided herein. Attachment No.7 Page 6 of 40 ARTICLE 4 RENT PAYMENTS 4.1 Rent. The Base Rent for the entire Term shall be payable in advance upon City's execution of this Lease. 4.2 Base Rent Amounts. The Base Rent shall be ONE DOLLAR AND NO CENTS ($1.00)per Lease Year. 4.3 Additional Rent. Tenant shall pay any as Additional Rent any expenses incurred by the Landlord resulting from Tenant's failure to pay or cause to be paid any amounts owed to the Landlord under this Lease or any person or entity, including, but not limited to, unpaid utilities, unpaid maintenance, unpaid Impositions, or unpaid liens or encumbrances. 4.4 Miscellaneous. All payments of Rent shall be made to Landlord as they become due in lawful money of the United States of America in cash or by corporate check drawn on sufficient available funds,at such place as is designated herein by Landlord for the receipt of notices or such other place as shall be designated to Tenant by Landlord in writing from time to time. 4.5 Triple Net Lease;No Counterclaim, Abatement, etc. All Rent shall be paid absolutely net to Landlord, so that this Lease shall yield to Landlord the full amount of the installments of all Rent throughout the Term,and(unless otherwise expressly provided herein) shall be paid without assertion of any counterclaim, setoff, deduction or defense and, except as otherwise expressly provided herein, without abatement, suspension, deferment, diminution or reduction. Under no circumstances or conditions,whether now existing or hereafter arising, or whether beyond the present contemplation of the parties, shall Landlord be expected or required to make any payment of any kind whatsoever, including without limitation,any regular or special assessments levied against the Property, or be under any obligation or liability hereunder, except as herein expressly set forth. Landlord shall have no responsibility for any costs of repair, maintenance or replacement whatsoever. Except as otherwise expressly provided herein,this Lease shall continue in full force and effect,and the obligations of Tenant hereunder shall not be released, discharged or otherwise affected, by reason of. (a) any damage to or destruction of the Leased Premises or Improvements or any part thereof or any Taking of the Leased Premises or the Improvements or any part thereof;(b)any restriction or prevention of or interference with any use of Attachment No.7 Page 7 of 40 the Leased Premises or the Improvements or any part thereof which materially interferes with Tenant's possession or use of the Leased Premises (other than a breach of Landlord's covenant of quiet enjoyment set forth at Section 3.3); (c) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other proceeding relating to Landlord, or any action taken with respect to this Lease by any trustee or receiver of Landlord with respect to this Lease by any trustee or receiver of Landlord, or by any court, in any proceeding; (d) any claim which Tenant has or might have against Landlord; or (e) any failure on the part of Landlord to perform or comply with any of the terms hereof or of any other agreement with Tenant. Except as expressly provided in this Lease, the obligations of Tenant shall be separate and independent covenants and agreements. ARTICLE 5 USE OF THE LEASED PREMISES, MAINTENANCE AND HAZARDOUS SUBSTANCES 5.1 Use of the Leased Premises. 5.1.1 Tenant covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, that Tenant, such successors and such assignees shall use the Property only for the uses specified in the Redevelopment Plan. No change in the use of the Property shall be permitted without the prior written approval of City. 5.1.2 Notwithstanding the generality of Section 5.1.1, Tenant, its successors and assigns, shall use the Leased Premises and/or Improvements only for the following uses: operation and maintenance of a public skate park ("Skate Park"). Skate Park shall be free and open to the public from 10 a.m.to 10 p.m., Mondays through Sundays, except for special events occurring no more than twenty(20)calendar days per year,collectively,and agreed to,in writing,by Tenant and City.Nothing herein shall be deemed to supersede,waive,or modify any restrictions or prohibitions imposed by the City, in accordance with its zoning code. 5.1.3 Tenant may not use the Leased Premises for any retail or other ancillary use, provided however that a concession stand first approved in writing by the City Manager shall be permitted subject to the Tenant obtaining all necessary governmental permits and approvals therefor. 5.1.4 Subject to notice and cure rights herein, Tenant's failure to operate Skate Park in accordance with this Agreement for thirty (30) consecutive days shall be deemed a default of this Lease. 5.2 No use of Hazardous Substances on the Leased Premises. Tenant covenants and agrees that it shall not, and that any Lease shall provide that the subtenant shall not, treat, use, store, dispose, release, handle or otherwise manage Hazardous Attachment No.7 Page 8 of 40 Substances on the Leased Premises except in connection with any construction, operation, maintenance or repair of the Improvements or in the ordinary course of its business, and that such conduct shall be done in compliance with all applicable federal, state and local laws, including all Environmental Laws. Tenant's violation of the foregoing prohibition shall constitute a breach hereunder and Tenant shall indemnify,hold harmless and defend the Landlord for such violation as provided below. 5.3 Notice and Remediation by Tenant. Tenant shall promptly give the Landlord written notice of any reportable release of any Hazardous Substances,and/or any notices,demands,claims or orders received by Tenant from any governmental agency pertaining to Hazardous Substances which may affect the Leased Premises. 5.4 Environmental Indemnity. Tenant agrees to indemnify, defend and hold harmless City and its respective members, officers, agents, employees, contractors and consultants, in accordance with the Environmental Indemnity(Attachment No.6 to the GLIA).The indemnity provided in this Section shall survive the Termination of the Lease. 5.5 Termination; Subtenants. The agreements and obligations of Tenant under this Article 5 with regard to indemnification of Landlord shall survive the scheduled termination or sooner expiration of the Term for any reason, for five(5)years and all claims relating thereto must be delivered in writing to Tenant within such period. No action by any subtenant in violation of its Lease shall constitute a cause to terminate this Lease provided that Tenant diligently pursues its available remedies against such subtenant. ARTICLE 6 OWNERSHIP OF IMPROVEMENTS Notwithstanding anything that is or appears to be to the contrary herein, any and all Improvements erected on the Leased Premises as permitted by this Lease, as well as any and all alterations or additions thereto or any other Improvements or fixtures on the Leased Premises,shall be owned by Tenant until the expiration of the Term or sooner termination of this Lease in accordance with the terms hereunder. Upon the expiration or sooner termination of this Lease in accordance with the terms hereunder, all Improvements and all alterations, additions or improvements thereto that are made to or placed on the Leased Premises by Tenant or any other person shall be considered part of the real property of the Leased Premises and shall remain on the Leased Premises and become the property of Landlord;provided that Tenant shall retain ownership of and shall be required to remove furniture, equipment, machinery, trade fixtures and removable personal property except as may be left on the Leased Premises with Landlord's prior written Attachment No.7 Page 9 of 40 approval. Except as otherwise expressly provided in this Lease, any non-disturbance agreement approved by Landlord,any easement approved by Landlord,or any written instrument executed by Landlord which expressly states that Landlord is waiving its rights under this Article 6 to receive such Improvements free and clear of all other claims, said Improvements shall become Landlord's property free and clear of any and all rights to possession and all claims to or against them by Tenant or any third person or entity. ARTICLE 7 REPAIRS AND MAINTENANCE 7.1 Landlord's Nonresponsibility. During the Term of this Lease, Landlord shall not be required to maintain or make any repairs or replacements of any nature or description whatsoever to the Leased Premises or the Improvements thereon, except as expressly provided elsewhere herein. 7.2 Tenant's Duty to Maintain Premises. Except as expressly otherwise provided for herein,throughout the Term of this Lease,Tenant shall,at Tenant's sole cost and expense,maintain or cause to be maintained the Leased Premises and the Improvements now or hereafter located on the Leased Premises in good and clean condition and repair,free of debris,and in compliance with(i)all Governmental Restrictions and(ii)all applicable rules, orders, and regulations of any insurance company insuring all or any part of the Leased Premises or the Improvements thereon or both,and Tenant shall make or cause to be made whatever repairs and replacements are required by such enactments or provisions or future enactments or provisions. 7.3 Damage or Destruction. 7.3.1 In the event any of the Improvements are damaged by an insured casualty, Tenant promptly shall remove the debris resulting from such event, and within a reasonable time thereafter shall apply insurance proceeds to the repair or restoration of the Improvements so damaged to their condition immediately prior to such casualty, such repair or restoration to be performed in accordance with all provisions of this Lease. 7.3.2 In the event any of the Improvements are damaged by an uninsured casualty, or the insurance proceeds are insufficient to repair or restore the Improvements to their condition prior to the casualty,Tenant promptly shall remove the debris resulting from such event,and within a reasonable time thereafter shall either (i) repair or restore the Improvements so damaged to the extent economically feasible, such repair or restoration to be performed in accordance with all provisions of this Lease,or(ii)erect other Improvements in such location,provided all provisions of this Lease are complied with to the extent economically feasible, or(iii)if the damage occurs after Attachment No.7 Page 10 of 40 the end of the Covenant Period, demolish the damaged portion of such Improvements,restore any remaining Improvements to an architectural whole,remove all rubbish,and pave or plant grass and otherwise restore the area to a neat, orderly, sanitary and attractive condition. Landlord shall have the option to choose among the aforesaid alternatives,subject to rights of permitted Lenders secured by the Lease, but Tenant shall be obligated to perform one of such alternatives, provided that nothing herein obligates Tenant to obtain financing exceeding the insurance proceeds, if any. Tenant shall give notice to Landlord within a reasonable time of which alternative it elects. Nothing contained in subsections 7.3.1 or 7.3.2 shall be construed as permitting the abatement or reduction of Rent, or the termination of this Lease. 7.3.3 Notwithstanding anything to the contrary contained in this Lease,if(i)there is damage to or destruction of the Improvements on the Leased Premises during the last five(5)years of the Term and the cost of repairing said damage or destruction exceeds the cost of demolishing and removing the remaining Improvements on the Leased Premises, or (ii) there is damage to or destruction of the Improvements on the Leased Premises which(1)arises from a cause which is not required to be insured against under any provision of this Lease,or(2)arises from a cause which is in fact insured against in compliance with the terms of this Lease, but for which the recoverable proceeds of such insurance are less than 90%of the cost to repair said damage or destruction,and(3) the cost to Tenant (which is not covered by insurance proceeds) of repairing said damage or destruction exceeds the cost of demolishing and removing the remaining Improvements on the Leased Premises, or (iii) there is damage to or destruction of the Improvements on the Leased Premises and the Governmental Restrictions then in effect with respect to the Leased Premises prohibit the construction of economically viable replacement Improvements with respect to a use which Tenant either has the right to engage in under this Lease or which Tenant desires to engage in and Landlord will permit to be engaged in,then Tenant shall have the option to terminate this Lease, subject to Tenant's satisfaction of all of the following requirements: (A)Tenant shall,within ninety (90) days after the event giving rise to such right to terminate, give Landlord written notice of its election to terminate ("Notice of Election to Terminate"); and(B) Tenant shall, at the election of Landlord(which election shall be communicated in writing to Tenant("Demolition Notice")within thirty(30)days of Landlord's receipt of the Notice of Election to Terminate),raze and remove the damaged or destroyed Improvements and any other Improvements on the Leased Premises that Landlord may designate in the Demolition Notice,and shall complete said demolition and removal and shall vacate the Improvements on the Leased Premises within ninety (90) days of Landlord's delivery of the Demolition Notice(which vacation date shall fix the termination date of this Lease); and (C) Tenant shall comply with all provisions of Article 15 of this Lease consistent with this Section 7.3 prior to or concurrent with Tenant's vacation of the Improvements on the Leased Premises. If Tenant fails to satisfy the requirements set forth in(B)or(C)above,the failure to meet such conditions shall not invalidate the termination of this Lease, although, in that event and notwithstanding anything else in this Lease that may be or appear to be to the contrary,Tenant shall remain liable to Landlord in damages for such breach. Any and all property damage insurance proceeds (exclusive of any proceeds applicable to Tenant's trade fixtures, equipment or personal Attachment No.7 Page 1 I of 40 property that would be retained by Tenant at the end of the Term)paid to Tenant as a result of the damage or destruction giving rise to the termination, shall be distributed to the Parties, and any Lender, as their interest are determined. 7.3.4 Except as expressly provided in this Lease, no deprivation, impairment, or limitation of use resulting from any damage or destruction or event or work contemplated by this Section shall entitle Tenant to any offset,abatement,or reduction in Rent,nor to any termination or extension of the Term hereof. ARTICLE 8 LEASEHOLD FINANCING 8.1 Conditions To Obtaining Leasehold Mortgage. 8.1.1 Tenant shall not encumber the estate created by this Lease, except as expressly provided in this Article 8. 8.1.2 Tenant shall have the right, with Landlord's prior written consent, to encumber Tenant's estate created by this Lease with any Leasehold Mortgage; provided,that such Leasehold Mortgage shall meet each of the following terms, conditions and requirements: (i) The Leasehold Mortgage shall contain provisions requiring that copies of all notices of default under said Leasehold Mortgage must be sent to Landlord; (ii) The Leasehold Mortgage shall not permit or authorize, or be construed to permit or authorize, any Lender to devote the Leased Premises to any uses, or to construct any Improvements thereon,other than those uses and Improvements provided for and authorized by this Lease. Notwithstanding anything to the contrary set forth herein, City's consent shall not be required for any Leasehold Mortgage following a foreclosure so long as (i) it is made by an institutional lender, (ii) any loan secured thereby is fully amortized by the end of the Term of this Lease,and(iii)the loan to value,determined taking into consideration any applicable covenants,for any such loan shall not exceed seventy percent(70%). 8.2 Lender's Rights. So long as any Leasehold Mortgage permitted by this Lease exists, or any Lender (or its nominee) owns all or any portion of the leasehold estate created hereunder, and until such time as the lien (or estate) of any Leasehold Mortgage (or its holder) has been extinguished (which provisions shall be for the benefit of the Leasehold Mortgagee): Attachment No.7 Page 12 of 40 8.2.1 Following Lender's acquisition of Tenant's interest in this Lease pursuant to a foreclosure or an assignment in lieu of foreclosure,the Lender shall be entitled to assign its interest in this Lease without Landlord's prior consent,subject to compliance with the terms and conditions of this Article 8. All subsequent Transfers by the Transferee of Lender shall comply with the provisions of this Lease, including all restrictions on Transfer set forth in Article 9 hereof; and 8.2.2 If, in connection with securing by Tenant of any Leasehold Mortgage, the affected Lender requests an amendment with respect to the Lender protection rights set forth in this Article 8, Landlord agrees not to unreasonably withhold its consent to any such amendment; provided, that Landlord shall not be required to consent to such an amendment if it would, in Landlord's reasonable determination, materially impair any of Landlord's rights or materially increase any of Landlord's obligations under this Lease. 8.2.3 Default Notice. Landlord, upon providing Tenant with any "Notice of Default"(as defined below)under this Lease, shall,at the same time,provide a copy of such notice to every Lender who has given written notice to Landlord of its interest in the leasehold estate.From and after such notice has been given to a Lender, such Lender shall have the same period for remedying the Default complained of as the cure period provided to Tenant pursuant to Section 14.2, plus the additional period provided to such Lender as specified below. Landlord shall accept performance by or at the instigation of such Lender as if the same had been done by Tenant. 8.3 Lender Cure Rights. Notwithstanding anything to the contrary contained in this Lease, Landlord shall have no right to terminate this Lease on account of an Uncured Default of Tenant unless, following expiration of Tenant's applicable cure period,Landlord first provides each Lender not less than sixty (60)days notice of its intent to terminate, if Tenant's Default can be cured by the payment of money (a "Monetary Default"), and not less than ninety (90) days notice of its intent to terminate, if Tenant's Default is of any other type(a"Non-monetary Default"),and each Lender fails to cure such Monetary Default within sixty(60)days after receipt of such notice or each Lender fails to cure or, in good faith and with reasonable diligence and continuity, commence to cure such Non-monetary Default within said ninety (90) day period. If such Non-monetary Default cannot reasonably be cured by such Lender within said ninety (90) day period (or is such that possession of the Leased Premises is necessary for Lender to obtain possession and to remedy the Default), the date for termination shall be extended for such period of time as may be reasonably required to remedy such Default,if(a)Lender shall have fully cured any default in the payment of any monetary obligations of Tenant under this Lease within sixty(60) days after its receipt of notice of Landlord's intent to terminate,and shall continue to pay currently such monetary obligations as and when the same are due, and (b) Lender continues its good faith and diligent efforts to remedy such nonmonetary Default (including its acquisition of possession of the Leased Premises if necessary to the cure of such Default); provided, however, that in no event shall the City be precluded from exercising Attachment No.7 Page 13 of 40 remedies if its rights become or are about to become materially jeopardized by any failure to cure a default or the default is not cured within one hundred eighty (180) days after the Lender's first notice of default is given. Nothing in this Section 8.3 shall be construed to require a Lender to continue any foreclosure proceeding it may have commenced against Tenant after all Defaults have been cured by Lender or Tenant, and if such Defaults shall be cured and the Lender shall discontinue such foreclosure proceedings,this Lease shall continue in full force and effect as if Tenant had not defaulted under this Lease. 8.4 Obligations of Lender and Purchaser. 8.4.1 No Lender, acting in such capacity, shall be deemed to be an assignee or transferee of this Lease or of the leasehold estate hereby created so as to require such Lender,in that capacity,to assume the performance of any of the terms,covenants or conditions on the part of the Tenant to be performed hereunder, unless and until it acquires the interest of Tenant hereunder. Upon acquiring Tenant's leasehold,a Lender may,without the consent of Landlord,sell and assign the leasehold estate on such terms and to such persons and entities as are acceptable to such Lender and thereafter be relieved of all obligations on the part of Tenant first arising under this Lease after the date of such sale or assignment;provided,that such assignee of the Lender shall have delivered to Landlord an assumption agreement as provided by Section 9.1.1(iv) of this Lease. Any such assignee of Lender or any other assignee of this Lease or of the leasehold estate created hereby by a conveyance in lieu of foreclosure or any purchaser at any foreclosure sale of this Lease or of the leasehold estate hereby created (other than, in any case, the Lender), shall be deemed to be a Transferee of this Lease,and shall be deemed to have agreed to perform all of the terms,covenants and conditions on the part of the Tenant to be performed hereunder from and after the date of such purchase and assignment and,from and after such date,shall be subject to all the terms of this Lease, including all restrictions on further Transfer set forth in Article 9. 8.4.2 Notwithstanding any other provision of this Lease,any bona fide sale of this Lease and of the leasehold estate hereby created in any proceedings for the foreclosure of any Leasehold Mortgage or a bona fide assignment or transfer of this Lease and of the leasehold estate hereby created in lieu of foreclosure of a Leasehold Mortgage(collectively,"Proceedings")shall be deemed to be a permitted sale,transfer or assignment of this Lease and of the leasehold estate hereby created so long as City is given timely notice of any default of Tenant and of any such Proceeding and is afforded the cure periods specified in Section 8.3 and so long as any such deed in lieu of foreclosure has not been undertaken for the purpose or with the intent of circumventing any otherwise applicable restrictions upon Transfers of Tenant's interest under this Lease. Notwithstanding the foregoing,any transfer by foreclosure or deed in lieu of foreclosure to Tenant or any Affiliate of Tenant shall not be deemed a permitted sale,transfer or assignment of this Lease and the leasehold estate created hereby. Attachment No.7 Page 14 of 40 8.5 New Lease. Except as expressly provided in the last sentence of this Section, in the event of a termination of this Lease for any reason including, without limitation, by reason of any Default or the rejection or disaffirmance of this Lease pursuant to bankruptcy law or other law affecting creditors rights, Landlord shall give prompt notice thereof to any Lenders who have requested notice from Landlord in writing and furnished their names and addresses to Landlord. Landlord shall, on written request of any such Lender, made at any time within ninety (90) days after the giving of such notice by Landlord, enter into a new lease of the Leased Premises with such Lender within twenty(20)days after the receipt of such request,which new lease shall be effective as of the date of such termination of this Lease and shall be for the remainder of the Term of this Lease,at the rent provided for herein, and upon the same terms, covenants, conditions and agreements as are herein contained;provided that such Lender shall:(i)pay to Landlord at the time of the execution and delivery of said new lease any and all sums for Rent payable by Tenant hereunder to and including the date thereof,less the net amount(i.e.,net of all reasonable expenses)of all sums received by Landlord from any subtenants in occupancy of any part or parts of the Leased Premises and/or Improvements up to the date of commencement of such new lease; (ii) pay all reasonable costs resulting from the preparation and execution of such new lease; and (iii) on or prior to the execution and delivery of said new lease, agree in writing that promptly following the delivery of such new lease, such Lender will perform or cause to be performed all of the other covenants and agreements herein contained on Tenant's part to be performed to the extent that Tenant shall have failed to perform the same to the date of delivery of such new lease. Nothing herein contained shall be deemed to impose any obligation on the part of Landlord to deliver physical possession of the Leased Premises to such Lender unless Landlord at the time of the execution and delivery of such new lease shall have obtained physical possession thereof. Notwithstanding anything contained in this Section 8.6 to the contrary,Lender's leasehold interest in the Leased Premises pursuant to the new lease shall be subject to any claims by Tenant that it has a right to possession of the Leased Premises. 8.6 New Lease Priority. 8.6.1 It is the intent of the Parties that any new lease made pursuant to Section 8.5 shall have the same priority with respect to any lien,charge or encumbrance on the fee of the Leased Premises as did this Lease and that the Tenant under such new lease shall have the same right,title and interest in and to the Leased Premises as Tenant had under this Lease. 8.6.2 The provisions of this Section 8.6 and Sections 8.4 and 8.5 shall survive the termination, rejection or disaffirmance of this Lease and shall continue in full force and effect thereafter to the same extent as if Sections 8.4, 8.5 and this Section 8.6 were a separate and independent contract made by Landlord, Tenant and such Lender. 8.7 Liability of New Tenant. Attachment No.7 Page 15 of 40 The Lender which becomes the tenant under any such new lease made pursuant to Sections 8.4 or 8.5 shall be liable to perform the obligations imposed on the tenant by such new lease as well as those arising under Sections 8.4 or 8.5 to the same extent as a Lender which acquires Tenant's estate under this Lease by the foreclosure thereof. 8.8 Reserved. 8.9 Legal Proceedings. Landlord shall give each Lender who has given written notice of its interest in the leasehold estate to Landlord prompt notice of any legal proceedings between Landlord and Tenant involving obligations under this Lease. Each said Lender shall have the right to intervene in any such proceeding to protect its interest and be made a party thereto, and the parties hereto do hereby consent to such intervention. In the event that any such Lender shall not elect to intervene or become a party to any such proceedings,Landlord shall give such Lender notice of, and a copy of, any award or decision made in any such proceedings, which shall be binding on all Lenders not intervening after receipt of notice of the legal proceeding. 8.10 Notices. Notices from Landlord to any Lender shall be mailed to the address of the Lender set forth in the Leasehold Mortgage furnished to Landlord or at such other address as may have been furnished to Landlord by such Lender. All notices from the Lender to Landlord shall be mailed to the address designated pursuant to the provisions of Section 17.6 or such other address as Landlord may designate in writing from time to time. All notices to a Lender or to Landlord shall be given in the manner described in Section 17.6 and shall in all respects be governed by the provisions of such Section. 8.11 Encumbrance of Landlord's Fee Estate. Neither Tenant nor any Lender or Leasehold Mortgagee has any rights to encumber or any interest in Landlord's fee estate in the Property. 8.12 Landlord Right to Cure. Notwithstanding anything to the contrary contained in this Lease,Lender shall have no right to complete a foreclosure on account of an uncured default of Tenant ("Uncured Loan Default") unless Lender, following expiration of Tenant's applicable cure period under the Leasehold Mortgage, first provides Landlord not less than sixty (60) days notice of its intent to foreclose, if Tenant's Uncured Loan Default can be cured by the payment of money ("Tenant Monetary Default"), and not less than ninety (90) days notice of its intent to terminate, if Tenant's Uncured Loan Default is of any other type("Tenant Non-monetary Default"),and Landlord fails to cure such Attachment No.7 Page 16 of 40 Tenant Monetary Default within sixty(60)days after receipt of such notice or Landlord fails to cure such Tenant Non-monetary Default within a period of ninety days (90) days. If all Uncured Loan Defaults have been cured by Landlord in accordance with this Section,the Leasehold Mortgage shall be reinstated in accordance with California Civil Code Section 2924c. Nothing herein shall be construed or deemed as an obligation by Landlord to cure any Uncured Loan Default. ARTICLE 9 ASSIGNMENT AND TRANSFER 9.1 Transfer of the Lease, the Leased Premises or the Improvements Thereon. (i) Transfer(s)occurring prior to Completion shall be made in accordance with Section 107 of the GLIA. Transfer(s) occurring after Completion shall be subject to the prior written consent of.Landlord, which consent will not be unreasonably withheld or delayed; provided, however,that notwithstanding anything to the contrary herein,Tenant may Transfer its interest in the Lease to Permitted Transferees under the same terms and conditions as set forth under Section 107 of the GLIA. (ii) For Transfers to a Person other than a Permitted Transferee,Landlord shall have the right to consider the following factors(among others Landlord reasonably determines are necessary to consider in evaluating the proposed Transferee) in determining whether or not to consent to any proposed Transfer of Tenant's rights under or interest in this Lease, the Leased Premises, or the Improvements constructed thereon: (1)The financial condition of the proposed Transferee and its ability to perform all of the financial and other obligations of Tenant under this Lease, (2)the Transferee's business reputation, and (3) the Transferee's ability to demonstrate its capability to manage or provide for the management of the Improvements located on the Leased Premises. (iii) Upon any approved,or Permitted Transfer of this Lease or the Leased Premises(other than for security purposes), said Transferee shall expressly assume in writing liability for all of Tenant's obligations accruing under this Lease after the date of such Transfer. Except as to any Permitted Transferee(as defined in the GLIA),Tenant shall not be released of its obligations under this Lease unless either (A) pursuant to the process described in subparagraph (ii) immediately above,Tenant has demonstrated to Landlord's reasonable satisfaction that Transferee's net worth at the time of the Transfer is equal to or greater than the net worth of Tenant as of the Commencement Date(adjusted to correspond to any changes in the CPI since the Commencement Date), or(B)an individual(s) or an entity(ies)with substantially equal or greater net worth than that of Tenant,has guaranteed Tenant's obligations under this Lease. If Transferee's net worth satisfies the foregoing test, then Tenant (as well as former Tenants still liable hereunder) shall be released of all liability under this Lease accruing after the date of such Transfer. (iv) At any time Tenant desires to effect a Transfer which requires Landlord's consent Attachment No.7 Page 17 of 40 pursuant to clause(ii)or(iii)above,Tenant shall request consent from Landlord in writing and shall submit to Landlord in connection with such request all proposed agreements and documents (collectively, the "Transfer Documents") memorializing, facilitating and/or evidencing such proposed Transfer, as well as all other information Tenant reasonably believes is necessary for Landlord to properly evaluate the proposed Transferee pursuant to the criteria set forth in Section 9.1.1(a)(ii) and, if applicable, Section 9.1.1(a)(iii) above. Landlord agrees to advise Tenant in writing of its decision on Tenant's request for consent to such Transfer,as promptly as possible,and, in any event, not later than thirty (30) days after Landlord receives all of the items required by the preceding sentence. If such request is denied,Landlord shall state the reasons for such denial in its notice of denial of Tenant's request. If Landlord fails to respond to Tenant's request within thirty (30) days after its receipt of all of the items required above, Tenant's request shall be deemed disapproved.Upon a deemed disapproval,Tenant may deliver a notice to Landlord which states that there has been a deemed disapproval, requesting that Landlord consent to the proposed Transfer, stating that Landlord must consent to or deny the proposed Transfer within thirty (30) days after Landlord's receipt of this notice, and that failure by Landlord to either consent to or deny such Transfer within such 30 day period will result in deemed consent.If Landlord fails to consent to or deny the proposed Transfer within such second thirty (30) day period, the Transfer shall then be deemed approved by Landlord. 9.2 Transfer of Tenant's Interest in Lease and Tenant's Ownership. The restrictions on Transfer contained in this Article 9 shall be binding on any successors, heirs or permitted Transferees of Tenant. The provisions of this Article 9 shall apply to each successive Transfer and Transferee in the same manner as initially applicable to Tenant under the terms set forth herein. ARTICLE 10 TAXES AND IMPOSITIONS 10.1 Tenant To Pay Impositions. 10.1.1 In addition to the Rent and other payments required to be paid under this Lease, Tenant shall pay or cause to be paid any and all taxes(including possessory interest taxes) and assessments(collectively,"Impositions")levied or assessed from the Commencement Date until the termination of this Lease by any governmental agency or entity on or against the Leased Premises or any portion thereof, or on or against any interest in the Leased Premises(including the leasehold interest created by this Lease),or any Improvements or other property in or on the Leased Premises. The timely payment of the Impositions is a material term of this Lease,and,to the extent the above-referenced items are payable to Landlord or its successors or assigns,they shall constitute Additional Rent hereunder. Attachment No.7 Page 18 of 40 10.1.2 If,by law,any such Imposition is payable,or may,at the option of Tenant be paid, in installments, Tenant may pay the same, together with any accrued interest on the unpaid balance of such Imposition, in such installments as those installments respectively become due and before any fine, penalty, interest, or cost may be added thereto for the nonpayment of any such installment and interest. 10.2 Proration of Impositions. All Impositions levied or assessed on or against the Leased Premises shall be prorated,based on a 365-day year,between Landlord and Tenant as of the Commencement Date of this Lease,and as of the expiration or earlier termination of this Lease. On service of written request by Landlord, Tenant shall promptly pay to Landlord Tenant's share of such Impositions paid by Landlord on Tenant's behalf and,on service of written request by Tenant,Landlord shall promptly pay to Tenant Landlord's share of such Impositions paid by Tenant on Landlord's behalf. 10.3 Payment Before Delinquency. Subject to Section 10.4,any and all Impositions and installments of Impositions required to be paid by Tenant under this Lease shall be paid by Tenant prior to delinquency, and, upon Landlord's written request, copies of the official and original receipt for the payment of each such Imposition or installment thereof or other reasonably satisfactory evidence of payment shall promptly be given to Landlord. 10.4 Contest of Imposition. Tenant shall refrain from appealing,challenging or contesting in any manner the validity or amount of any tax assessment,encumbrance or lien on the Leased Premises;provided,however,that such prohibition shall not apply to an appeal, challenge or contesting of the erroneous initial assessment for property tax purposes of the Leased Premises in the fiscal year of the completion of the Improvements to be constructed pursuant to the Agreement, and further provided that in the absence of transfer of ownership or new construction Tenant shall not be prohibited from appealing, challenging or contesting any increases in assessment of the Leased Premises for property tax purposes over and above the current 2%per annum permitted amount. Tenant agrees that any such permitted proceedings shall be begun without undue delay after any contested item is imposed and shall be prosecuted to final adjudication with reasonable dispatch. Tenant shall give City prompt notice in writing of any such contest at least ten (10) days before filing any contests,except for related to the welfare exemption.Tenant 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 Leasehold and/or Improvements,or any part thereof,to satisfy the same,and only if Tenant shall,prior to the date such imposition is due and Attachment No.7 Page 19 of 40 payable,have given such reasonable security as may be required by City from time to time in order to insure the payment of such imposition to prevent any sale,foreclosure or forfeiture of the Leased Premises, or any part thereof, by reason of such nonpayment. In the event of any such contest and the final determination thereof adversely to Tenant,Tenant 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 Tenant and, after such payment and discharge by Tenant, City will promptly return to Tenant such security as City shall have received in connection with such contest. City shall cooperate reasonably in any such contest permitted by this Section 10.4,and shall execute any documents or pleadings reasonably required for such purpose. Any such proceedings to contest the validity or amount of Imposition or to recover back any Imposition paid by Tenant shall be prosecuted by Tenant at Tenant's sole cost and expense; and Tenant shall indemnify and save harmless City against any and all loss, cost or expense of any kind, including, but not limited to, reasonable attorneys' fees and expenses, which may be imposed upon or incurred by City in connection therewith. 10.5 Tax Returns And Statements. Tenant shall, as between Landlord and Tenant, have the duty of attending to, preparing, making,and filing any statement,return,report,or other instrument required or permitted by law in connection with the determination, equalization,reduction,or payment of any Imposition that is or may be levied on or assessed against the Leased Premises, or any portion thereof, or any interest therein, or any Improvements or other property on the Leased Premises. 10.6 Possessory Interest Taxes. Landlord is a public entity,and as such,Landlord's underlying fee in the Leased Premises is, or may be, exempt from property tax assessments. In accordance with California Revenue and Taxation Code Section 107.6(a), Landlord states that by entering into this Lease, a Possessory interest in Tenant subject to property taxes will be created. Tenant or any other party in whom the Possessory interest is vested may be subject to the payment of property taxes levied on such interest. In addition, pursuant to Health and Safety Code Section 33673, the Leased Premises shall be assessed and taxed in the same manner as privately owned property,and Tenant shall pay taxes upon the assessed value of the entire Leased Premises and not merely the assessed value of its leasehold interest; provided however, that Landlord recognizes that Tenant will apply for and may receive a welfare exemption for all or a portion of the Improvements. Attachment No.7 Page 20 of 40 ARTICLE 11 UTILITY SERVICES 11.1 Tenant's Responsibility. During the Term of this Lease,Tenant shall pay, or cause to be paid, and shall indemnify, defend and hold Landlord and the property of Landlord harmless from all charges for water,sewage, gas,heat,air conditioning, light,power,steam,telephone service and all other services and utilities used, rendered or supplied to, on or in the Leased Premises during the Term. 11.2 Landlord Has No Responsibility. Landlord shall not be required to furnish to Tenant or any other occupant of the Leased Premises during the Term of this Lease,any water,sewage,gas,heat,air conditioning,light,power, steam, telephone, or any other utilities, equipment, labor, materials or services of any kind whatsoever. ARTICLE 12 INSURANCE 12.1 Fire and Extended Coverage Insurance. Throughout the term of this Lease,Tenant,at no cost or expense to Landlord, shall keep or cause to be kept, for the mutual benefit of Landlord and Tenant,a policy of standard fire insurance, with extended coverage and vandalism and malicious mischief endorsements,excluding earthquake insurance . The amount of insurance required hereunder shall in no event be less than one hundred percent(100%)of the full replacement cost of the Improvements on the Leased Premises(exclusive of foundations and footings), including tenant improvements or betterments. Tenant shall not be obligated to obtain flood insurance as part of the extended coverage required hereunder. Coverage shall be"property broad form"and shall include rent interruption insurance,which insurance shall also cover all real estate taxes and insurance costs for the purposes of continuing rental payments to the landlord for the duration of the Lease. Coverage shall not include a coinsurance penalty provision. 12.2 Commercial General Liability Insurance. Tenant, commencing on the Commencement Date and continuing throughout the Term hereof,shall maintain or cause to be maintained,at no cost or expense to Landlord,comprehensive broad form commercial general liability insurance or an equivalent owner contractor protective policy insuring against claims and liability for personal injury, death, or property damage arising from the use, occupancy or condition of the Leased Premises, the Improvements thereon, which Attachment No.7 Page 21 of 40 insurance shall provide combined single limit protection of at least Four Million Dollars ($4,000,000) for bodily injury or death to one or more persons, and at least Four Million Dollars ($4,000,000)for property damage,which limits shall be increased by Tenant from time to time based upon Tenant's reasonable assessment of the limits carried by prudent and responsible property owners of similar property in the geographic area of the Leased Premises. 12.3 Worker's Compensation Insurance. Tenant shall carry worker's compensation insurance for any employees it has as required by the State of California, and employer's liability insurance with a liability insurance minimum of $1,000,000 per accident for bodily injury or disease. 12.4 All-Risk Policies. Tenant shall maintain or cause to be maintained coverage for builder's risk insurance for the completed value. Such insurance shall insure against direct physical loss or damage by fire, lightning,wind,storm,explosion,collapse,flood,vandalism,malicious mischief,glass breakage and such other causes as are covered by such form of insurance, excluding earthquake(s). Such policy shall include(1)coverage for demolition costs and debris removal,(2)Replacement cost coverage in amount sufficient to prevent Tenant from becoming a co-insurer under the terms of the policy,but in any event in an amount not less than 100%of the then full replacement cost.The replacement cost coverage shall be for work performed and equipment, supplies and materials furnished to the Property,or property stored in,or located in any bonded warehouse pending incorporation into the work, without deduction for physical depreciation. Nothing in this Article, however, shall be construed to relieve the Tenant of full responsibility for loss of or damage to materials not yet incorporated in the work or the Tenant's tools and equipment used to perform the work,whether on the project site or elsewhere,or to relieve the Tenant of any other responsibility under the Lease. If the Landlord is damaged by the failure of the Tenant to purchase or maintain such insurance, the Tenant shall bear all losses attributable thereto and indemnify the Landlord therefrom. 12.5 Business Automobile Liability Insurance. If not covered by its other insurance policies,Tenant shall carry business liability insurance on an occurrence form covering owned, hired, leased and non-owned automobiles used by or on behalf of the Tenant and providing insurance for bodily injury, property damage and contractual liability. 12.6 Policy Form, Content And Insurer. 12.6.1 All insurance required by the provisions of this Lease shall be carried only with insurance companies licensed to do business in this state with Best's Financial Rating of A VII or better or otherwise acceptable to Landlord. Attachment No.7 Page 22 of 40 12.6.2 All such policies required by the provisions of this Lease shall be nonassessable and shall contain language to the effect that (i) the policies are primary and noncontributing with any insurance that may be carried by Landlord, (ii) the policies cannot be canceled or materially changed except after thirty(30) days notice by the insurer to Landlord and (iii)Landlord shall not be liable for any premiums or assessments. The insurer under the policy of property insurance for the Leased Premises shall also waive its rights of subrogation against Landlord and Landlord's Representatives. 12.6.3 All deductibles or self-insured retentions shall be commercially reasonable for companies of similar net worth as Tenant. 12.6.4 Upon Tenant's execution and delivery of this Lease,Tenant shall deliver to Landlord certificates of insurance evidencing the insurance coverages specified in this Article. Tenant shall thereafter deliver to Landlord original certificates and amendatory endorsements evidencing the insurance coverages required by this Article upon renewal of any insurance policy. Full copies of the policies shall be made available to Landlord upon request. Tenant may provide any insurance required under this Lease by blanket insurance covering the Leased Premises and any other location or locations,provided that the specific policy of blanket insurance proposed by Tenant provides the coverages required by this Lease taking into account the other properties,persons and risks covered by such blanket policy. All policies shall name Landlord and each Lender as an additional insured as their interests may appear, and shall contain the following special endorsements: "The City of Huntington Beach and its officers, employees and agents, are hereby declared to be additional insureds under the terms of this policy as to the activities of Landlord, Tenant and its subtenants, if any. "This insurance policy will not be canceled without 30 days prior written notice to the Trustees and the Corporation. The City of Huntington Beach is not liable for the payment of premiums or assessments on this policy." 12.6.5 For any claims related to this project,the Tenant's insurance coverage shall be primary insurance as respects the Landlord. Any insurance or self-insurance maintained by the Landlord shall be excess of the Tenant's insurance and shall not contribute with it. 12.6.6 Tenant shall include all subcontractors as insured under its policies or shall furnish separate certificates and endorsements for each subcontractor. All coverages for subcontractors shall be subject to all requirements stated herein. 12.7 Waiver of Subrogation. Landlord and Tenant hereby release the other and its Representatives from any and all Attachment No.7 Page 23 of 40 liability or responsibility to the other or anyone claiming through or under them by way of subrogation or otherwise for any insured loss or damage to the Leased Premises,any Improvements thereon, or any of Landlord's or Tenant's property thereon caused by or arising from a fire or any other event even if such fire or other casualty shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible. 12.8 Indemnification. 12.8.1 Tenant shall indemnify,defend and hold harmless the Landlord,the City and their respective members,officers,employees,agents,contractors and consultants,and the property of Landlord, including the Leased Premises, from and against any and all Losses and Liabilities of every nature arising out of or in connection with the use, occupancy or enjoyment of the Leased Premises by Tenant or any person thereon or holding under Tenant arising from any action,inaction, events or facts occurring during the Term from any cause; provided, that nothing in this Section 12.8.1 or this Lease shall be construed to require Tenant to rebuild the Improvements or to pay charges to Landlord in connection therewith as a result of damage to or destruction of the Improvements or any Taking of the Improvements except to the extent expressly provided in the other Sections of this Lease. The above indemnification includes,without limitation,any Losses and Liabilities arising by reason of: (1) The death or injury of any person, including Tenant or any person who is an employee or agent of Tenant,or damage to or destruction of any property, including property owned by Tenant or by any person who is an employee or agent of Tenant,from any cause whatever while such person or property is in or on the Leased Premises; (2) The death or injury of any person, including Tenant or any person who is an employee or agent of Tenant,or damage to or destruction of any property,including property owned by Tenant or any person who is an employee or agent of Tenant, caused or allegedly caused by either (A) the condition of the Leased Premises or some Improvements on said premises, or (B) some act or omission on the Leased Premises by Tenant or any person in, on, or about the Leased Premises with the permission and consent of Tenant; (3) Any work performed on the Leased Premises or materials furnished to said premises at the insistence or request of Tenant or any person or entity acting for or on behalf of Tenant; or (4) Tenant's failure to perform any provision of this Lease or to comply with any Governmental Restriction. However, the foregoing indemnification shall not extend to any Loss or Liability to the extent it arises out of the active negligence or intentional or willful misconduct of Landlord or its Attachment No.7 Page 24 of 40 Representatives. ARTICLE 13 CONDEMNATION 13.1 General. If any portion of or interest in the Leased Premises shall be condemned(including,without limitation, inverse condemnation)or taken by any public authority or by any other person or entity with the power of condemnation,by eminent domain or by purchase in lieu thereof(a"Taking"),and such Taking renders the Leased Premises unsuitable in the commercially reasonable judgment of Tenant for Tenant's business operations, Tenant may terminate this Lease by giving notice to Landlord,such termination to be effective as of the date specified in such notice.If this Lease is not terminated,Tenant's condemnation award shall be used for the purpose of repairing or restoring the Improvements in accordance with Section 7.3. 13.2 Award. Whether or not this Lease is terminated as a result of any Taking,Landlord and Tenant shall together make one claim for an award for their combined interests in the Leased Premises including an award for severance damages if less than the whole shall be so taken. The condemnation proceeds shall be distributed to Landlord and Tenant as their respective interests appear. Both parties shall have the right to appear in and defend against such action as they deem proper in accordance with their own interests at their own expense. To the extent possible, the parties shall cooperate to maximize the condemnation proceeds payable by reason of the condemnation. Issues between Landlord and Tenant required to be resolved pursuant to this Article shall be joined in any such condemnation proceeding to the extent permissible under then applicable procedural rules of such court of law or equity for the purpose of avoiding multiplicity of actions and minimizing the expenses of the parties. If this Lease is not terminated pursuant to this Article, it shall continue, except that commencing with the date on which Tenant is deprived of the use of any portion of the Leased Premises or of any rights under this Lease,Rent shall be abated or reduced according to the extent to which Tenant is deprived of the use or benefit of the Leased Premises or of any rights under this Lease. If the Taking occurs in the last five (5) years of the Term, either Landlord or Tenant,by written notice to the other,may terminate this Lease, such termination to be effective as of the date that the condemnor acquires title to all or a portion of the Leased Premises. 13.3 Taking for Temporary Use. If there is a Taking of the Leased Premises for temporary use for a period equal to or less than eight (8) months, this Lease shall continue in full force and effect, Tenant shall continue to comply with Tenant's obligations under this Lease not rendered physically impossible by such Attachment No.7 Page 25 of 40 Taking, neither the Term nor the Rent shall be reduced or affected in any way, but the Rent shall continue at the level of the last Rent paid prior to the Taking(including any subsequent increases in such Rent provided for under this Lease),and Tenant shall be entitled to any and all Awards for the use or estate taken. If any such Taking is for a period extending beyond such eight(8)month period, the Taking shall be treated as a total, substantial or partial taking, as appropriate. ARTICLE 14 DEFAULT 14.1 Default. The occurrence of any one or more of the following events shall, after the giving of the Notice of Default required by Section 14.2 or 14.4 and subject to any applicable cure period, constitute a default("Default(s)") under this Lease by Tenant or Landlord, as applicable: 14.1.1 any failure by Tenant to pay the Rent or make any other payment required to be made by Tenant hereunder, on the date the payment is due; or 14.1.2 any breach by Tenant of its obligations under the Specific Plan, 2007 Development Agreement,or GLIA, including,without limitation,failure t o construct the Project in accordance with the Schedule of Performance or the Scope of Development, and the failure to cure such default under the terms of such documents; or 14.1.3 any breach by Tenant of its obligations under Section 5.1 of this Lease, including, without limitation, the Tenant's failure to continuously operate the Hotel; or 14.1.4 a failure by Tenant or Landlord to observe and perform any other condition, restriction,covenant,obligation or provision of this Lease to be observed or performed by Tenant or Landlord, as applicable. 14.2 Notice of Default; Tenant's Right to Cure. 14.2.1 If Tenant has committed or permitted to exist a breach of any provision of this Lease or has committed or permitted any other breach described above in Section 14.1, Landlord shall give notice of said breach("Notice of Default") to Tenant. 14.2.2 Tenant shall be in default hereunder from Landlord if Rent for the prior calendar year is not paid by the twentieth (20th) day of July of each year of the Term or Extended Term,if applicable(or if the twentieth day falls on a Saturday or Sunday,the first Monday following the twentieth(20th) day of July). 14.2.3 If the alleged Default is nonpayment of Rent,Additional Rent,Impositions or Attachment No.7 Page 26 of 40 other sums to be paid by Tenant as provided in this Lease, Tenant shall have thirty(30) days after the Notice of Default is given to cure the Default. For any other Default, Tenant shall, after the Notice of Default, promptly and diligently commence curing the Default and shall have thirty(30) days after the Notice of Default to complete the cure of said Default;provided, however,that if the nature of said Default is such that the same cannot reasonably be cured within said thirty(30) day period,Tenant shall have such additional time as is reasonably necessary to cure such Default,but in any event no more than one hundred and eighty(180) days of receipt of the Notice of Default. 14.2.4 As used in this Lease,the term"Uncured Default"shall mean any Default by Tenant which continues uncured, following the giving of a Notice of Default as required by this Lease, for the entire cure period applicable to that Default under the provisions of this Lease. 14.2.5 Cures offered on behalf of Tenant by the limited partner of Tenant shall be received by Landlord as if offered by Tenant itself hereunder. 14.3 Landlord's Right to Cure Tenant's Defaults. After expiration of the applicable time granted to Tenant for curing a particular Default and upon not less than five (5) business days' notice (unless a longer period of time is otherwise expressly provided by this Lease, in which case such longer period shall apply), Landlord may, at Landlord's election, make any payment(other than Rent payable to Landlord) required of Tenant under this Lease or perform or comply with any covenant or condition imposed on Tenant under this Lease,and the amount so paid,plus the reasonable cost of any such performance or compliance,plus interest on such sum at the Agreed Rate,from the date of payment,performance,or compliance until the date of repayment by Tenant, shall be due and payable by Tenant on the first day of the next calendar month following any such payment,performance or compliance by Landlord as Additional Rent hereunder. No such act shall constitute a waiver of any Default or of any remedy for Default or render Landlord liable for any loss or damage resulting from any such act(except to the extent such loss or damage arises from Landlord's or Landlord's Representatives' active negligence or intentional or willful misconduct). 14.4 Notice of Landlord's Default; Tenant Waiver. 14.4.1 If Landlord has committed a breach under this Lease,as described in Section 14.1,Tenant shall deliver a Notice of Default to Landlord. Each Notice of Default shall specify the alleged Default. 14.4.2 Landlord shall, after notice, promptly and diligently commence curing the Default and shall have sixty (60) days after notice is given to complete the cure of said Default; provided, however,that if(i)the nature of said Default is such that the same cannot reasonably be cured within said sixty(60)day period, and(ii) Landlord shall have in good faith commenced and Attachment No.7 Page 27 of 40 diligently and continuously pursued such cure,then Landlord shall have such time as is reasonably necessary to complete the cure of said Default. If it is determined that Landlord is liable to Tenant for damages pursuant to this Lease Landlord shall pay such damages to Tenant in accordance with such judgment within 30 days after such determination. Tenant shall have no right to offset any amount of damages owed by Landlord to Tenant against the Rent owed by Tenant to Landlord under this Lease. If any amount owed to the Tenant by Landlord is not paid when due,interest shall accrue on such amount at the Agreed Rate from the date due until the date that such amount is paid. After expiration of the applicable time for Landlord to cure a particular Default and upon not less than five (5) business days' notice (unless a longer period of time is otherwise expressly provided by this Lease, in which case such longer period shall apply), Tenant may, at Tenant's election, make any payment required of Landlord under this Lease or perform or comply with any covenant or condition imposed on Landlord under this Lease,and the amount so paid,plus the reasonable cost of any such performance or compliance,plus interest on such sum at the Agreed Rate,from the date of payment, performance, or compliance until the date of repayment by Landlord, shall be due and payable by Landlord on the first day of the next calendar month following any such payment, performance or compliance by Tenant. No such act shall constitute a waiver of any Default or of any remedy for Default or render Tenant liable for any loss or damage resulting from any such act(except to the extent such loss or damage arises from Tenant's or Tenant's Representatives' negligence or intentional or willful misconduct). 14.5 Landlord's Remedies. 14.5.1 In the event of any Uncured Default, then, subject to the rights of a Lender expressly set forth in this Lease, Landlord shall have the immediate option to terminate this Lease and all rights of Tenant hereunder by giving written notice of such termination, in which event the Parties shall have no further obligation to one another under this Lease. 14.5.2 Notwithstanding the provisions of this Article 14 above to the contrary, if, within twenty-one (21) days of Tenant's receipt of a Notice of Default with respect to a Non- monetary Default by Tenant,Tenant shall in good faith notify Landlord in writing that it disputes the existence of such Non-monetary Default and that it requests a determination of the existence or non- existence of such Non-monetary Default, then Landlord may not exercise its right to terminate this Lease pursuant to this Article 14 on account of such Non-monetary Default of Tenant until the expiration of the applicable cure period measured as if such cure period commenced upon the earlier of(i) the date of the determination that such Non-monetary Default exists, or (ii) the failure by Tenant to diligently and continuously pursue the legal proceeding.Subject to the rights of Lenders, if there is no express cure period for the default set forth in the Notice of Default, then the cure periods shall be the same as those provided in Section 14.2.3 herein. The exercise of Tenant's rights pursuant to this paragraph shall not impair or delay the ability of Landlord to exercise any rights or remedies other than to delay Landlord's right to terminate this Lease. Attachment No.7 Page 28 of 40 14.5.3 In the event the Uncured Default consists of Tenant's failure to pay Rent to Landlord,Landlord shall also have the right to pursue all of its legal and equitable remedies against Tenant for collection of such amounts, including without limitation the remedy described in California Civil Code Section 1951.4 which provides that a lessor may continue a lease in effect after Tenant's breach and abandonment and recover rent as it becomes due, if the Tenant has the right to sublet or assign, subject only to reasonable limitations. 14.5.4 Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent and other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease,the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to,processing and accounting charges and late charges which may be imposed on Landlord by the terms of any mortgage,deed of trust,or bonded indebtedness. Accordingly,if any installment of Rent shall not be received by Landlord or its designee within ten(10)days after Rent is due,or if any Additional Rent or Impositions shall not be received by Landlord within twenty(20)days after the Notice of Default is given,then without any requirement for notice to Tenant,Tenant shall pay to Landlord a late charge equal to five percent(5%)of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. Acceptance of such late charge to Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. 14.6 Tenant Remedies; Remedies Cumulative. Except as otherwise expressly provided in this Lease, Tenant shall have all rights and remedies at law or equity upon the occurrence of an Uncured Default by Landlord hereunder including, but not limited to, the remedies provided under California Civil Code Sections 1951.2 (pursuant to California Civil Code Section 1951.2, the damages Landlord may recover against Tenant 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 Term after the time of award, exceeds the amount of such rental loss for the same period that the Tenant proves could be reasonably avoided). Each right and remedy of Landlord and Tenant provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease except as otherwise limited by this Lease,and the exercise or the beginning of the exercise by Landlord or Tenant of any one or more of the rights or remedies provided for in this Lease,except as otherwise limited by this Lease,shall not preclude the simultaneous or later exercise by Landlord or Tenant of any or all other rights or remedies provided for in this Lease, except as otherwise limited by this Lease. Attachment No.7 Page 29 of 40 14.7 No Waiver. Landlord's or Tenant's failure to enforce any provision of this Lease with respect to a Default hereunder shall not constitute a waiver of Landlord's or Tenant's right to enforce such provision or any other provision with respect to any future Default. The acceptance of Rent by Landlord shall not be deemed a waiver of Landlord's right to enforce any term or provision hereof. The waiver of any term or condition of this Lease shall not be deemed to be a waiver of any other term or condition hereof or of any subsequent failure of any term or condition hereof. 14.8 Delays in Performance. The time within which the Parties hereto shall be required to perform any obligation under this Lease shall be extended by a period of time equal to the number of days during which performance of such act is delayed due to an act of God, strikes, lockouts, fire, earthquake, flood, explosion, war, invasion, insurrection, riot, mob violence, acts of the public enemy, epidemics, quarantine restrictions, freight embargoes, unusually severe weather, application of governmental restrictions, regulations or controls not contemplated by this Lease or otherwise reasonably foreseeable, court order, delays or inaction of independent contractors, remediation of Hazardous Substances located upon the Leased Premises, litigation brought against the Leased Premises or a Party without that Party's consent, or other like events which are completely and strictly beyond a Party's control (the "Force Majeure Events"). The additional grace period or extension of time provided above shall be equal to the period of delay caused by the above-described event, which period shall commence to run from the time of the commencement of the cause for delay and shall terminate upon termination of that cause. A Party wishing to invoke this Section must notify in writing the other Party to this Lease of that intention within sixty(60)days of the commencement of any such cause for delay and shall,at that time,specify the reasons therefor,the specific provision of this Lease which will be delayed as a result, and the period of such extension, if known, or if not known, a reasonable estimate thereof. ARTICLE 15 EXPIRATION; TERMINATION At the expiration or earlier termination of this Lease, Tenant shall surrender to Landlord possession of the Leased Premises free and clear of all liens, encumbrances and Mortgages other than those, if any, created by Landlord, those which both extend beyond the Term or Extended Term, if applicable, of this Lease and were expressly approved in writing by Landlord, or those which encumbered the Leased Premises prior to the Commencement Date of this Lease. Tenant shall leave the Leased Premises and any other property surrendered in its then existing "as is" condition. As provided above at Article 6, all property that Tenant is required to surrender shall become Landlord's property at termination or expiration of this Lease. In addition, Tenant shall surrender to Landlord all residential leases, and all records related to the residential leases and Attachment No.7 Page 30 of 40 compliance with the Agreement Affecting Real Property. All property that Tenant is not required to surrender but that Tenant does abandon by failure to remove said property within sixty (60) days after the expiration or earlier termination of this Lease shall, at Landlord's election, become Landlord's property. At Landlord's request Tenant shall execute and deliver to Landlord assignments of leases and a quitclaim deed,both in commercially reasonable form and as prepared by Landlord. By the quitclaim deed Tenant shall quitclaim any right,title or interest which Tenant may have or claim to have in the Improvements. ARTICLE 16 NO DISCRIMINATION 16.1 Tenant herein covenants by and for itself, its heirs, executors, administrators and assigns, and all persons claiming under or through them, and this Lease is made and accepted upon and subject to the following conditions: There shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or(d) of Section 12955 of the Government Code,as those bases are defined in Sections 12926, 12926.1, subdivision (m)and paragraph(1)of subdivision(p)of Section 12955,and Section 12955.2 of the Government Code,in the sale, lease,sublease,transfer,use,occupancy,tenure,or enjoyment of the Property,nor shall the transferee itself or any person claiming under or through him or her,establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number,use,or occupancy,of tenants,Tenants, sublessees, subtenants,or vendees of the Property. 16.2 Tenant, its successors and assigns, shall refrain from restricting the rental, sale, or lease of the Property or any portion thereof, on the basis of race, color, creed,religion, sex, sexual orientation,marital status,national origin,or ancestry of any person. Every deed,lease,and contract entered into with respect to the Property, or any portion thereof, after the date of this Lease shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: (1) In deeds:"The grantee herein covenants by and for himself or herself,his or her heirs, executors, administrators, and assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of any basis listed in subdivision(a) or(d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph (1) of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the sale, lease, sublease,transfer, use,occupancy,tenure,or enjoyment of the premises herein conveyed,nor shall the grantee or any person claiming under or through him or her, establish or permit any practice or practices of discrimination or segregation with reference to the selection,location,number,use or occupancy of tenants,Tenants,subtenants,sublessees,or vendees in the premises herein conveyed.The foregoing covenants shall run with the land." (2) In leases:"The Tenant herein covenants by and for himself or herself,his or her heirs, Attachment No.7 Page 31 of 40 executors,administrators,and assigns,and all persons claiming under or through him or her,and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons,on account of any basis listed in subdivision(a)or(d)of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision(m) and paragraph (1)of subdivision (p) of Section 12955, and Section 12955.2 of the Government Code, in the leasing, subleasing,transferring,use,occupancy,tenure,or enjoyment of the premises herein leased nor shall the Tenant himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, Tenants, sublessees, subtenants,or vendees in the premises herein leased." (3) In contracts:There shall be no discrimination against or segregation of any person or group of persons, on account of any basis listed in subdivision (a) or (d) of Section 12955 of the Government Code, as those bases are defined in Sections 12926, 12926.1, subdivision (m) and paragraph(1)of subdivision(p)of Section 12955,and Section 12955.2 of the Government Code,in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the land, nor shall the transferee itself or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of tenants, Tenants, sublessees, subtenants, or vendees of the land." ARTICLE 17 MISCELLANEOUS 17.1 Landlord's Representations and Warranties. Landlord covenants, represents and warrants to Tenant, as of the date of execution of this Lease, as follows: 17.1.1 Landlord is a public body corporate and politic under the laws of the state of its incorporation, has full legal right,power, and authority to enter into this Lease and to carry out and consummate all transactions contemplated by this Lease, and by appropriate corporate action has duly authorized the execution and delivery of this Lease. Further, Landlord will take those actions required to remain in good standing under the laws of the state of its incorporation during the term of this Lease. 17.1.2 To Landlord's actual knowledge,the execution,delivery and performance of this Lease by Landlord does not result in a material violation of, or constitute a material default under, any provision of any existing agreement,judgment or court order. 17.1.3 Except as revealed in writing by Landlord to Tenant,Landlord has not been Attachment No.7 Page 32 of 40 served with any pending, and knows of no threatened, litigation or claims against the Leased Premises or against Landlord in connection with the Leased Premises which would have an adverse effect on the transactions contemplated herein. 17.1.4 Copies of all documents heretofore delivered by Landlord to Tenant are true, correct and complete copies of such documents in all material respects. 17.1.5 Landlord makes no representation or warranty as to the condition of the title to the Leased Premises except as provided in Section 208 of the GLIA. 17.2 Tenant's Representations and Warranties. Tenant covenants, represents and warrants to Landlord, as of the date of execution of this Lease, as follows: 17.2.1 Tenant is a limited partnership or corporation duly formed and in good standing under the laws of the State of California,has full legal right,power, and authority to enter into this Lease and to carry out and consummate all transactions contemplated by this Lease,and by appropriate action has duly authorized the execution and delivery of this Lease. Further,Tenant will take those actions required to remain in good standing under the laws of the state of California during the term of this Lease. 17.2.2 The representatives of Tenant executing this Lease are fully authorized to execute the same. 17.2.3 This Lease has been duly authorized,executed,and delivered by Tenant,and will constitute a legal, valid, and binding agreement of Tenant. 17.2.4 Except as may be revealed in writing by Tenant to Landlord,Tenant has not been served with any pending,and knows of no threatened, litigation or claims against Tenant which would have an adverse effect on the transactions contemplated herein. 17.2.5 Copies of all documents heretofore delivered by Tenant to Landlord are true, correct and complete copies of such documents in all material respects; 17.3 Survival of Representations, Warranties and Covenants. The respective representations,warranties and covenants contained herein shall survive the Commencement Date and continue throughout the Term. Attachment No.7 Page 33 of 40 17.4 Further Assurances Each party hereto will promptly execute and deliver without further consideration such additional agreement,assignments,endorsements and other documents as the other party hereto may reasonably request to carry out the purposes of this Lease. 17.5 Estoppel Certificate. Within thirty(30)days after request by Landlord or Tenant(which request may be from time to time as often as reasonably required by Landlord or Tenant)Landlord or Tenant shall execute and deliver to the other,without charge,a statement(the"Estoppel Certificate")in the form of Exhibit D attached hereto or in such other similar form as Landlord or Tenant may reasonably request. Any such statement may be conclusively relied upon by any Lender,Sublessees or prospective purchaser of the Leased Premises. 17.6 Notices. All notices,requests,demands and other communications under this Lease shall be in writing and shall be deemed to have been given on(a)the date of service if served personally on the Party to whom notice is to be given, (b) the date of actual or attempted delivery provided such attempted delivery is made on a business day, if served by Federal Express, Express Mail or another like overnight delivery service, (c) the date of actual delivery as shown by the addressee's registry or certification of receipt or the date of addressee's refusal to accept delivery, if mailed to the person to whom notice is to be given, by first class U.S. mail, registered or certified, postage prepaid, return receipt requested and properly addressed as follows (or to such other address as either Party may from time to time direct by written notice given in the manner herein prescribed),or(d)(except for Permitted Lenders) one day after receipt of a confirmed facsimile transmission provided any such communication is concurrently given by one of the above methods: If to Landlord: City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: Kellee Fritzal, Economic Development Tel: (714) 526-5582 Fax: (714) 375-5087 With a copy to: Kane, Ballmer& Berkman 515 S. Figueroa Street, Suite 1850 Los Angeles, California 90071 Attn: Susan Y. Cola Attachment No.7 Page 34 of 40 Tel: 213-617-0480 Fax: 213-625-0931 and, if to Tenant: VF Outdoor, Inc., a Delaware Corporation dba Vans 6550 Katella Avenue Cypress, CA 90363-5102 Attn: Doug Palladini Tel: (714) 889-6702 Fax: (714) With a copies to: Robert Frisbee,Esq. Connolly, Finkel&Gosselin LLP 601 S. Figueroa Street, Suite 2610 Los Angeles,Ca 90017-5704 Main Line: (213)452-6500 Direct Dial: (213)452-6506 Facsimile: (213)622-2171 17.7 Attorneys' Fees. In the event that either Party hereto brings any action or files any proceeding in connection with the enforcement of its respective rights under this Lease or as a consequence of any breach by the other party of its obligations under this Lease,the prevailing party in such action or proceeding shall be entitled to have its reasonable attorneys' fees (including allocable costs for any in-house counsel)and out-of-pocket expenditures paid by the losing Party. The attorneys' fees so recovered shall include fees for prosecuting or defending any appeal and shall be awarded for any supplemental proceedings until the final judgment is satisfied in full. In addition to the foregoing award of attorneys' fees to the prevailing party, the prevailing party in any lawsuit on this Lease shall be entitled to its attorneys'fees incurred in any post judgment proceedings to collect or enforce the judgment. This provision is separate and several and shall survive the merger of this Lease into any judgment on this Lease. 17.8 Headings. The headings used in this Lease are inserted for reference purposes only and do not affect the interpretation of the terms and conditions hereof. 17.9 Rights of Successors. All of the rights and obligations of the Parties under this Lease shall bind and inure to the benefit of their respective heirs, successors and assigns; provided, however, that nothing in this Section 17.9 shall be construed to limit or waive the provisions concerning restrictions on Transfer Attachment No.7 Page 35 of 40 set forth in Article 9 hereof. 17.10 Amendments in Writing. This Lease cannot be orally amended or modified. Any modification or amendment hereof must be in writing and signed by the Party to be charged. 17.11 No Brokers. Each Party shall defend, indemnify,and hold the other harmless from all costs and expenses, including attorneys' fees, arising out of any and all claims for broker's agent's or finder's fees or commissions in connection with the negotiation, execution or consummation of this transaction incurred as a result of any statement, representation or agreement alleged to have been made or entered into by the indemnifying Party. Neither Tenant nor Landlord is entitled to receive any brokerage commission as a consequence of this transaction. 17.12 Negation of Partnership. Nothing in this Lease shall be construed to render Landlord, a partner,joint venturer, or associate in any relationship or for any purpose with Tenant,other than that of Landlord and Tenant, nor shall this Lease be construed to authorize either to act as agent for the other. 17.13 Time of Essence. Time is of the essence of each provision in this Lease,subject to delays caused by any of the force majeure events set forth in Section 14.8. 17.14 Interpretation. When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural, and the masculine shall include the feminine and neuter and vice versa. The term "Person" as used in this Lease means a natural person, corporation, limited liability company, association, partnership, organization, business, trust, individual, or a governmental authority, agency, instrumentality or political subdivision, and whenever the word "day"or"days"is used herein,such shall refer to calendar day or days,unless otherwise specifically provided herein. Whenever a reference is made herein to a particular Section of this Lease, it shall mean and include all subsections and subparts thereof. The word "include" or "including" shall describe examples of the antecedent clause, and shall not be construed to limit the scope of such clause. Attachment No.7 Page 36 of 40 17.15 Applicable Law; Severability. The interpretation and enforcement of this Lease shall be governed by the laws of the State of California. Should any part,term,portion or provision of this Lease,or the application thereof to any person or circumstances be held to be illegal or in conflict with any Governmental Restrictions, or otherwise be rendered unenforceable or ineffectual, the validity of the remaining parts, terms, portions or provisions,or the application thereof to other persons or circumstances,shall be deemed severable and the same shall remain enforceable and valid to the fullest extent permitted by law. 17.16 Exhibits. All exhibits referred to in this Lease are attached hereto and incorporated herein by reference. 17.17 Short Form of Lease. Prior to City's conveyance of the Leased Premises to Tenant, the Parties shall execute and thereafter record with the County Recorder of Orange County a Memorandum of Lease, attached hereto as Exhibit C, giving notice of the existence of this Lease and the Term hereof. 17.18 Landlord's Rights of Inspection. Landlord and its authorized Representatives shall have the right during business hours,upon not less than twenty-four(24) hours' oral or written notice to Tenant(except that in the case of an emergency,the existence of which shall be determined by Landlord in its reasonable discretion,no advance notice shall be required)to enter upon the Leased Premises for purposes of inspecting the same and exercising its rights under this Lease, provided that such inspections shall not unreasonably interfere with Tenant's or its subtenant's construction or business activities. Tenant has the right to designate representatives to accompany the Landlord's representatives on such inspections.Landlord agrees to coordinate with Tenant to schedule such inspections so that Tenant's representatives may attend the inspections, in the discretion of such Tenant. 17.19 Nonmerger of Fee and Leasehold Estates. If both Landlord's and Tenant's estates in the Leased Premises become vested in the same owner(other than by termination of this Lease following an Uncured Default hereunder, subject to the rights, if any, of a Lender pursuant to Article 8 above),this Lease shall not be terminated by application of the doctrine of merger except at the express election of Landlord and with the consent of each Lender holding a Leasehold Mortgage. Attachment No.7 Page 37 of 40 17.20 Counterparts. This Lease may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. 17.21 Interest On Past Due Obligations. Except where another rate of interest is specifically provided for in this Lease, any amount due from either Party to the other under this Lease which is not paid within ten (10) days after receipt of written notice that such amount is due (or in the case of Rent,within three(3)days after such Rent is due), shall bear interest at the Agreed Rate from the date such amount was originally due to and including the date of payment. 17.22 Holding Over. Any holding over by Tenant after the expiration of the Term shall be construed as a tenancy from month to month and shall be subject to all of the terms and conditions which are provided for in this Lease except that the Rent shall be in an amount equal to 150% of the Rent in effect immediately prior to the expiration of the Term. IN WITNESS WHEREOF, the parties have executed this Lease as of the date first above written. SIGNATURES ON NEXT PAGE Attachment No.7 Page 38 of 40 TENANT: VF OUTDOOR INC., A DELAWARE CORPORATION, DBA"VANS" Date: By: Doug Palladini, Vice President of Marketing LANDLORD: THE CITY OF HUNTINGTON BEACH(City) Date: By: Mayor ATTEST: City Clerk REVIEWED AND APPROVED AS TO FORM: City Attorney By: Jennifer McGrath REVIEWED AND APPROVED AS TO FORM: Attachment No.7 Page 39 of 40 KANE, BALLMER& BERKMAN By: City Special Counsel Murray O. Kane Attachment No.7 Page 40 of 40 EXHIBIT A LEGAL DESCRIPTION OF THE LEASED PREMISES All that certain real property situated in the County of Orange, State of California, described as follows: Parcels 1 and 2 of Parcel Map No.90-327,in the City of Huntington Beach,County of Orange,State of California, as per map recorded in Book 279 Page 33 and 34 of Parcel Maps, in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 EXHIBIT B SITE MAP SITE MAP (APN 142-073-03) THIS MAP WAS PREPARED FOR ORANGE SEE SPECIAL PAGE 142-079 FOR FEE TITLE ASSESSMENT BELOW SURFACE COUNTY ASSESSOR DEPT, PURPOSES ONLY. $ 1/2. SEC. 14. T S S. R 11 W 142 0 7 THE ASSESSOR MAKES NO GUARANTEE AS TO ITS ACCURACY NOR ASSUMES ANY CIA8ILITY PACE 1 OF 2 FOR OTHER USES, NOT TO BE REPRODUCED. ALL RIGHTS RESERVED, 0.076 AC. O COPYRIGHT ORANGE COUNTY ASSESSOR 2D10 32 s 7.1s"� 40 30 31 r J NO THE DAME VASSAR I VERMONT ry STREET STREET I\ -1 TREE rj- PLAN MCFADDEN (SUGAR AVENUE) AVENUE HORIZONTAL SCALE: 1"=190' S:�Se sea � � CROUNO ELEVATION GROI/NO 36.969'lNGV0291 lV �1'a' —34',STORM ORAIN ESM'T e ELEVATION P.M. 367-22 o PROJECT SITE VERTICAL SCALE: 1'=Too' O O 3 OETAIC A" J i t 2 4.11 2. ti BC UEBONNET 35.76 AC. 25.48 AC. AC- d 7°=4GG Q ORI VE-- q 8 7 \ m 'P P.M. 0 1 4 34 �qy GOL OEN WEST COL L EGE 69' o O ^a2.696 AG m m - I o / `---� 17 am CENIERn u tlpVE• 5TREET CENTER sec ioa-ao-arcatn. Il AD. 16 N O72 W 1 sns.sec�.e�'076.i6. 1 O 32 AC. 33 - 18 �F- 9.40 AC. 1.033AC._ry ie s -AC.'" �— a se-ss sr \ N o SEE L P. h1. 358 - 1 i �n "Of TAIL ti BREELANO 3 O SEE PAGE 2 A` 1A�9 6,.�1 0 OHIVE 26 9 37.70 AC. w p zM:1° 13.47 AC. N O 3 _ 22 2 44-17 P. M. 255 -40 a 11.66 AC. P.M. 32-48 PAR.2 - zss.ns lP 4 PAR.1 _O_A 37 20 696, Z N O e•2.229 u t5.774 AC. 9.66 AC. U AC. W 5.62 AC. a P. M. 358 - 1 21 CD c ` A a1' A 9 P. M. 255 -40 1.goo _ �" 115.11 } s EDINGER 8s rsMELTZER AVE.)- — m AVENUE � o 15 14 ? PARK$lOE CANE !4 13 22,23 13 32 51 11 08 23 z4 MARCH 1962 PARCEL MAP P.M. 44-11, 255-40. 358-1 NOTE - ASSESSOR'S BLOCK & ASSESSOR'S MAP PARCEL NUMBERS BOOK 142 PAGE 07 SHOWN /N CIRCLES COUNTY OF ORANGE EXHIBIT B-1 FUTURE RAILROAD PLATFORM RESERVATION PROPERTY LINE RAILROAD CL 300'-0" 20'-0" I 1 1 . - . _ . - . _ - . _ . - . - _ . - - . _ . - . - . - . . I \ 1 EXHIBIT B-'I FUTURE RAILROAD PLATFORM RESERVATION EXHIBIT C MEMORANUM OF LEASE ATTACHMENT NO. 7A GOVERNMENT BUSINESS Free Recording Requested (Govt. Code §6103) Recording Requested by and When Recorded Return to: City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: Economic Development Director SPACE ABOVE LINE FOR RECORDER'S USE APN: 142-073-03 MEMORANDUM OF LEASE THIS MEMORANDUM OF LEASE ("Memorandum") is entered into by and between the CITY OF HUNTINGTON BEACH ("City") and VF OUTDOOR, INC., a Delaware corporation doing business as"Vans" ("Lessee"). RECITALS A. City and Lessee have entered into that certain Ground Lease dated for reference purposes , 2012 (the "Lease") pursuant to which City leased to Lessee and Lessee leased from City certain real property more particularly described in Exhibit "A" and incorporated herein by reference (the"Property"). B. City and Lessee desire to execute this Memorandum to provide constructive notice of the Lease to third parties. OPERATIVE PROVISIONS 1. Lease Commencement/Term. City leases the Property to Lessee for a term commencing on , 2012 and continuing thereafter for twenty (20) years (with two 10-year options to renew, as provided therein), unless earlier terminated as provided in the Lease. 2. Lease Terms. The terms and provisions of the Lease are hereby incorporated into this Memorandum of Lease by this reference. 3. Assignment. Lessee's rights under the Lease shall not be assigned except in compliance with the terms of the Lease. Attachment 7A Page I of 2 4. Successors and Assigns. This Memorandum of Lease and the Lease shall bind and inure to the benefit of the parties and their respective, permitted heirs, successors in interest and assigns, subject, however, to the terms of the Lease concerning assignment. The provisions of this Memorandum of Lease are solely for the purpose of providing notice of the Lease and, in the event of any conflict between the provisions of this Memorandum of Lease and the provisions of the Lease, the provisions of the Lease shall prevail. IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease as of the date below. TENANT: VF OUTDOOR INC., A DELAWARE CORPORATION, DBA "VANS" Date: By: Kevin Bailey, President LANDLORD: THE CITY OF HUNTINGTON BEACH (City) Date: By: Mayor ATTEST: City Clerk REVIEWED AND APPROVED AS TO FORM: City Attorney By: Jennifer McGrath Attachment 7A Page 2 of 2 EXHIBIT A Legal Description All that certain real property situated in the County of Orange, State of California, described as follows: Parcels 1 and 2 of Parcel Map No. 90-327, in the City of Huntington Beach, County of Orange, State of California, as per map recorded in Book 279 Page 33 and 34 of Parcel Maps, in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 State of California ) County of ) On before me, (here insert name and title of the officer), 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 ) On before me, (here insert name and title of the officer), 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) EXHIBIT D ESTOPPEL CERTIFICATE EXHIBIT D ESTOPPEL CERTIFICATE The undersigned, as Tenant under that lease dated (the "Lease") made between THE CITY OF HUNTINGTON BEACH, a public body corporate and politic ("City" or "Landlord"), and VF OUTDOOR, INC., a Delaware corporation doing business as "Vans" ("Tenant"), hereby certifies as follows: (1) That Tenant has entered into occupancy of the premises described in said lease (the "Leased Premises"); (2) That the Lease is in full force and effect and has not been assigned, modified, supplemented or amended in any way, except as follows: (3) That the Commencement Date of the Lease is ; (4) That there is an unexpired term thereunder of years; (5) That to the knowledge of the undersigned there are no defaults by either Tenant or Landlord thereunder, except as follows: (6) That no rents have been prepaid, other than as provided in the Lease. EXECUTED THIS day of , TENANT: VF OUTDOOR INC., A DELAWARE CORPORATION, DBA "VANS" Date: By: Kevin Bailey, President SIGNATURES CONTINUED ON NEXT PAGE THE CITY OF HUNTINGTON BEACH Date: By: Mayor ATTEST: City Clerk REVIEWED AND APPROVED AS TO FORM: City Attorney By: Jennifer McGrath REVIEWED AND APPROVED AS TO FORM: KANE, BALLMER& BERKMAN By: City Special Counsel Murray Kane ATTACHMENT NO. 7A MEMORANDUM OF GROUND LEASE [behind this page] ATTACHMENT NO. 7A GOVERNMENT BUSINESS Free Recording Requested (Govt. Code §6103) Recording Requested by and When Recorded Return to: City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: Economic Development Director SPACE ABOVE LINE FOR RECORDER'S USE APN: 142-073-03 MEMORANDUM OF LEASE THIS MEMORANDUM OF LEASE ("Memorandum") is entered into by and between the CITY OF HUNTINGTON BEACH ("City") and VF OUTDOOR, INC., a Delaware corporation doing business as"Vans" ("Lessee"). RECITALS A. City and Lessee have entered into that certain Ground Lease dated for reference purposes , 2012 (the "Lease") pursuant to which City leased to Lessee and Lessee leased from City certain real property more particularly described in Exhibit "A" and incorporated herein by reference (the"Property"). B. City and Lessee desire to execute this Memorandum to provide constructive notice of the Lease to third parties. OPERATIVE PROVISIONS 1. Lease Commencement/Term. City leases the Property to Lessee for a term commencing on , 2012 and continuing thereafter for twenty (20) years (with two 10-year options to renew, as provided therein), unless earlier terminated as provided in the Lease. 2. Lease Terms. The terms and provisions of the Lease are hereby incorporated into this Memorandum of Lease by this reference. 3. Assignment. Lessee's rights under the Lease shall not be assigned except in compliance with the terms of the Lease. Attachment 7A Page 1 of 2 4. Successors and Assigns. This Memorandum of Lease and the Lease shall bind and inure to the benefit of the parties and their respective, permitted heirs, successors in interest and assigns, subject, however, to the terms of the Lease concerning assignment. The provisions of this Memorandum of Lease are solely for the purpose of providing notice of the Lease and, in the event of any conflict between the provisions of this Memorandum of Lease and the provisions of the Lease, the provisions of the Lease shall prevail. IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease as of the date below. TENANT: VF OUTDOOR INC., A DELAWARE CORPORATION, DBA"VANS" Date: By: Kevin Bailey, President LANDLORD: THE CITY OF HUNTINGTON BEACH (City) Date: By: Mayor ATTEST: City Clerk REVIEWED AND APPROVED AS TO FORM: City Attorney By: Jennifer McGrath Attachment 7A Page 2 of 2 EXHIBIT A Legal Description All that certain real property situated in the County of Orange, State of California, described as follows: Parcels 1 and 2 of Parcel Map No. 90-327, in the City of Huntington Beach, County of Orange, State of California, as per map recorded in Book 279 Page 33 and 34 of Parcel Maps, in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 State of California ) County of ) On before me, (here insert name and title of the officer), 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 ) On before me, (here insert name and title of the officer), 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) ATTACHMENT NO. 8 RELEASE OF CONSTRUCTION COVENANTS [behind this page] ATTACHMENT NO. 8 OFFICIAL BUSINESS Document entitled to free recording per Government Code Section 6103 Recording Requested By and When Recorded Mail to: City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: Economic Development Director SPACE ABOVE THIS LINE FOR RECORDER'S USE RELEASE OF CONSTRUCTION COVENANTS (APN: 142-073-03) WHEREAS, VF OUTDOOR, INC., A DELAWARE CORPORATION DOING BUSINESS AS "VANS" (the "Developer") is the lessee of certain real property situated in the City of Huntington Beach, California, described in Exhibit "A" which is attached hereto and made a part hereof(the "Property"), and has agreed to construct certain improvements thereon (the"Improvements"); and WHEREAS, pursuant to the GROUNDLEASE AND IMPROVEMENT AGREEMENT ("GLIA") entered into by and between the CITY OF HUNTINGTON BEACH (the "City") and VF OUTDOOR, INC., A CALIFORNIA CORPORATION ("Developer" therein) dated � p —.3:?- , 2012, the City has agreed to furnish the Developer with a Release of Construction Covenants ("Release") upon the completion of construction and development of the Improvements, and such certificate is to be in such form as to permit it to be recorded in the Recorder's Office of Orange County; and WHEREAS, the GLIA states that the Release shall be conclusive determination of satisfactory completion of the construction and development of the Improvements as required by the GLIA; and WHEREAS, the City has determined that the construction and development of the Improvements on the Property as required by the GLIA has been satisfactorily completed. NOW THEREFORE, it is hereby acknowledged and agreed by the parties hereto that: Attachment No. 8 Page 1 of 3 I. The City hereby certifies that the construction and development of the Improvements on the Property has been fully and satisfactorily performed and completed as required by the GLIA. 2. Nothing contained in this instrument shall modify any provisions of the GLIA. IN WITNESS WHEREOF, the City has executed this Release this day of THE CITY OF HUNTINGTON BEACH(City) Date: By: Mayor ATTEST: City Clerk REVIEWED AND APPROVED AS TO FORM: City Attorney By: Jennifer McGrath APPROVED AS TO FORM: KANE, BALLMER&BERKMAN By: City Special Counsel Murray O. Kane [SIGNATURE CONTINUED ON NEXT PAGE] Attachment No. 8 Page 2 of 3 VF OUTDOOR INC., A DELAWARE CORPORATION, DBA "VANS" Date: By: Kevin Bailey, President Attachment No. 8 Page 3 of 3 EXHIBIT A Legal Description All that certain real property situated in the County of Orange, State of California, described as follows: Parcels I and 2 of Parcel Map No. 90-327, in the City of Huntington Beach, County of Orange, State of California, as per map recorded in Book 279 Page 33 and 34 of Parcel Maps, in the Office of the County Recorder of said County. Assessor's Parcel Number 142-073-03 STATE OF CALIFORNIA ) COUNTY OF ) On before me, (here insert name and title of the officer), 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 ) On before me, (here insert name and title of the officer), 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) ATTACHMENT #2 PROJECT SUMMARY ANALYSIS REPORT ON THE GROUND LEASE AND BUROVEMENT AGREEMENT (THE "AGREEMENT") by and between the CITY OF HUNTINGTON BEACH (THE "CITY") and VF OUTDOOR, INC., A DELAWARE CORPORATION, DOING BUSINESS AS VANS (THE "LESSEE") AS OF JANUARY 27, 2012 INTRODUCTION The following Project Summary Analysis Report ("Report") has been prepared for consideration at a public hearing in a format which outlines, evaluates and summarizes the agreement to lease properties from the City of Huntington Beach (the "City") to the VF OUTDOOR, INC., a Delaware corporation, doing business as VANS ("Lessee"). The City of Huntington Beach ("City") is entering into a Ground Lease and Development Agreement ("Lease") with VF Outdoor, Inc., a Delaware corporation, dba "VANS" ("Lessee") as the lessee of 2.7 acre City-owned property ("Property"). The Property will be leased for one dollar ($1.00) per year for a period of twenty (20) year with two (2) ten (10) year options for the purpose of developing a skate park. Description of Tenant VF Corporation, parent company of Vans, Inc., is an American apparel corporation. VF Corporation sells sports apparel, jeans wear, intimate apparel, daypacks, and work wear. Corporate headquarters are in Greensboro, North Carolina. VF is a $9.0 billion apparel and footwear company with a diverse, international portfolio of brands and products that reach consumers. Vans, Inc., part of the VF family of companies, is a premier manufacturer of shoes and apparel for a target group of young,and active consumers with annual sales of$340 million. Given the attraction of the Vans8 brand to skaters, cyclist, surf and snowboarders nationally and internationally, the brand has become a major icon in the world of outdoor sports. Vans has forged a unique niche in the booming youth sportswear market through event sponsorships and a chain of skateboarding parks, which is one being proposed in Huntington Beach. Events range from music concerts to extreme outdoor sporting events. OTIERRAWEST ADVISORS Site Identification and Location The Property is City owned and referenced as assessor parcel number 142-073-03. The parcel is approximately 2.7 acres and the skate park will encompass the entire site. It is located on Center Avenue, adjacent to Old World Village to the East and the Orange County Transit Authority ("OCTA") Bus Transportation Center to the West, approximately 500 feet east of Gothard Street. Further to the east are the Bella Terra shopping mall and the Towers at Bella Terra. Further to the West is Golden West College (Attachment A parcel map). The project would include extensive landscaping and turf areas, sidewalks, walkways, trash/recycling facilities, drinking fountains, and restrooms, all of which would be accessible to the public. Additionally, in order to allow for potential future development of a transit stop, the proposed project includes the dedication of a "Transit Reserve Area. The proposed development program will facilitate the creation of surface parking lots and permanent bench seating will be installed throughout the park to accommodate daily visitors. This Report addresses the following major issues: I. Summary of the salient Points of the Proposed Agreement: This section includes a description of the Project and the major responsibilities imposed on the Lessee and the City by the proposed Agreement. II. Economic development: This section includes a description of the economic development opportunities that could be realized as a result of the Project. III. Job Creation: This section includes a description of the potential job creation component of the Project. IV. Net Benefit of the Agreement to the City: This section details the differential in total net cost and revenue to the City associated with implementing the terms of the proposed Agreement. V. Estimated Value of the Interests to be Conveyed: This section summarizes the estimated value of the interests to be conveyed with the conditions and covenants required by the Agreement. VI. Consideration Received and Comparison with Established Value: This section describes the total revenue to be received by the City, and explains any difference between the total revenue and the established value of the site. V TIERRAWEST A 1) V I S O R S VII. Blight Elimination: This section describes the existing blighting conditions on the development Site, and explains how the Project will assist in alleviating blight. V1II. Project Consistent with City's Goals and documents: This section describes how this. project will further the goals adopted in the City's long range planning documents. I. SUMMARY OF THE TERMS OF THE PROPOSED AGREEMENT A. Project Description Site Description The subject Property is owned by the City. The Property is approximately 2.7 acres and the skate park will encompass the entire site. It is located on Center Avenue, adjacent to Old World Village to the East and the Huntington Beach Bus Transportation Center to the West, approximately 500 feet east of Gothard Street. Further to the east are the Bella Terra shopping mall and the Towers at Bella Terra. Further to the West is Golden West College. Project Proposal The skate park development would include construction of a 14,000 square foot skate park plaza area, 13,000 square feet of skate bowl area, 15,000 square feet of turf/walking area, a 3,500- square-foot operations building (includes but is not limited to concession stand and skate rental space, employee office space, employee restrooms and storage space), a 480-square-foot skate park restroom structure, a 200-square-foot skate park entrance kiosk, the main parking lot near the primary site access fronting Center Ave, and a secondary parking area off McFadden Ave to be used only for special events. The project would include extensive landscaping and turf areas, sidewalks, walkways, trash/recycling facilities, drinking fountains, and restrooms, all of which would be accessible to the public. Additionally, in order to allow for potential future development of a transit stop, the proposed project includes the dedication of a "Transit Reserve Area". The skate park would occupy the majority of the project site. The skate plaza area would be a paved area with flat concrete surfaces, a portion of which would be at-grade, and a raised portion that would be four (4) feet above grade. Walkway ramps on the east and west edges of the skate plaza area would slope down from the raised portion of the plaza at a ratio of 1:20 (vertical:horizontal) to allow for safe pedestrian access between the raised and at-grade portion of the plaza area. The skate bowl area would also be constructed of concrete and would be located to the north of the skate plaza area, the primary surface elevation of which would be four (4) feet above grade, with the three (3) skate "bowls" extending down to ground level. Three turf areas would be located within the site: one above-grade turf area between the skate plaza area and skate bowl area, one at-grade turf area to the south of the skate plaza area, and TIERRAWEST A 1) V 1 S 0 K 5 one sloping turf area north of the skate bowl area that slopes down from the raised skate bowl area surface to ground level at the north secondary parking area. The 480-square-foot skate park restroom structure would be located at the center of the skate park, adjacent to the central turf area. The skate park restroom structure would serve skate park users and visitors, and would include a drinking fountain. Permanent bench seating for visitors would be provided throughout the skate park walkway areas. The entrance kiosk would be a small wood-framed structure with roll-up metal window for skate park check-in and would be staffed full-time during operating hours. The entire skate park would be lighted for nighttime use by four pole-mounted light structures 60 feet in height, which would be similar to lighting for sports fields. Additionally, in order to control access and maintain safety, the skate park portion of the site would be surrounded by a perimeter fence approximately six feet in height, constructed of wrought iron or chain link fencing, with various access gates around the skate park perimeter. The fence would control skate park access, while allowing visual access for safety and security. The perimeter fence would be located along the east and west boundaries of the skate park area, and along the edges of the turf areas at the north and south ends of the skate park. Additionally, a three- to five- foot-high retaining wall constructed of concrete or cinder blocks would be installed along the eastern edge of the skate park in order to support the above-grade portions of the park. The primary skate park access point would be provided at the main entry kiosk at the south end of the skate park, while other alternate/emergency access gates are located at the southeast, northeast, and northwest corners of the skate park. The proposed project would include both a paved main parking lot with a minimum of 24 regular stalls and two handicapped-accessible stalls, as well as a temporary gravel parking lot that can accommodate approximately 40 normal passenger vehicles. Based on the nature of the skate park/retail store and associated users/patrons, it is expected that the majority of park visitors would be youth who would typically utilize non-vehicular transportation or be dropped off by others. As such, the parking supply provided in the main parking lot is anticipated to adequately meet normal day-to-day demands. During special events, comprising up to approximately 15 event days a year, park visitation and associated traffic and parking would dramatically increase compared to day-to-day operations. A significant number of guests for these events are expected to be local youth with most expected to be dropped off, or to arrive by foot or other non-vehicular forms of transportation, such as bikes and skateboards. Guests arriving by vehicle would be directed to the surface parking lots at the Huntington Beach Sports Complex, located approximately 2.8 miles south of the project site, which has a total of 850 parking stalls. Guests would access this parking area via the Sports Complex's eastern entrance off Gothard Street at Talbert Avenue, and then would be transported to and from the skate park via shuttle buses. The skate park shall be developed, managed and maintained by the Vans Company. The skate park would be open to the public and operate seven days a week, from 10 A.M. to 10 P.M., and V T'IERRAWEST A D V ! S 0 R S would be supervised during these hours. The supervision of the facility and its users by on-site skate park staff would help to maintain a safe and controlled environment. Skate park staff would enforce the use of safety equipment such as helmets and pads by all skaters. The skate park would also be a 100-percent fenced facility ensuring that people do not use the park and create noise after the 10 P.M. closing time. B. Proposed Business Terms and responsibilities The analysis of the proposed Agreement assumes the following major business terms will be included in the final executed Agreement and that the City will utilize its rights under the Agreement to review and either approve or disapprove the various development program components as described in the Schedule of Performance ("SOP") The Lease proposes the following major business terms and requires the City and Lessee to complete the following activities: City Obligations o City shall enter into Ground Lease for parcel 142-073-03 located on Center Avenue, adjacent to Old World Village and the Southern California Edison Easement property with the Lessee for the development of 50,000 square feet skate park. o City shall review all applications, plans and submittals, including but not limited to site and building plans, construction drawings, and signage plans during the entitlement process. o City Council shall approve any sub-lease on the site not approved as part of this lease. Lessee Obligations o Lessee shall enter into a twenty (20) year Ground Lease for parcel 142-073-03 located on Center Avenue, adjacent to Old World Village and the Southern California Edison Easement property with the City.There will be an option for two (2) ten (10) year extensions. o Lessee shall construct a skate park that is approximately 50,000 square feet. Exact acreage and size will be determined during the entitlement process. o Lessee shall maintain use at the site as a Skate Park and associated ancillary uses including but not limited to restrooms, and seating areas throughout the duration of the lease. o Lessee shall maintain Skate Park as free and open to the public at all times except for events agreed to by both parties. o Lessee shall execute a Ground Lease with a commencement date that is contingent on Lessee's obtainment of project entitlements. o Lessee may terminate any Agreement prior to construction if Project is not economically feasible. Any costs incurred by the termination will be paid for by Lessee. O TIERRAWEST A 1) V I S O R S o Lessee shall pay annual rent to the City in an amount $1.00 per year for the entire twenty(20) year period the City-owned property. There will be an option for two (2) ten (10) year extensions. o Lessee shall pay for all costs associated with project planning, development and operation, which include but are not limited to: • Environmental review and entitlements; • Site design; • Site development including, but not limited to, concrete, skate ramps, landscape areas, benches, trash cans, drinking fountains and other amenities; • Public improvements as determined through entitlement process; and • Park operations and maintenance o Lessee shall comply with all applicable State, County and City land use regulations, codes and ordinances. o Lessee shall comply with all City Insurance Requirements. II. ECONOMIC DEVELOPMENT Growing popularity and increased demand of extreme sports has garnered the need for customized venues for which to engage in the sporting activities. Vans, Inc. is one of the front runners in developing venues such as skate parks for extreme sports enthusiast. These skate parks similar to traditional public parks and open spaces have not been significant revenue generators. However, for the Vans organization the skate park serves as a marketing opportunity as well as, an opportunity to host world class special events for Extreme Sport athletes. Given the focus and attention the special events attract both nationally and. internationally. A state of the art skate park venue is likely to attract significant and major notoriety from spectators and enthusiast worldwide which includes media coverage and exposure for the City of Huntington Beach business community, and the success of the venue itself. Given the location near beach shorelines and nature of the development project, it is conceivable that substantial notoriety from special event planning could render the project as a "destination" further enhancing the economic success of the Bella Terra Project and other business existing and proposed within the Beach Boulevard and Edinger Avenue corridors. III. JOB CREATION The skate park will be developed, managed, and maintained by the Vans Company. The park is open to the public, operating 10 A.M. to 10 P.M., seven (7) days a week; with supervision, provided during all hours of operation. Based on empirical data from similar projects in Southern California, it is anticipated that the skate park would have an average of 75 visitors daily, with a peak of approximately 130 visitors (as high as nearly 40,000 visitors annually). With this in mind, Tierra West has estimated there would be new employment opportunities for one (1) park general manager, two (2) full-time employees, three (3) part-time employees to �TIERRAWEST A 3) V 1 S 0 R $ operate the day-to-day skate rental and concessions stand activities, two (2) full-time and five (5) part-time employees to oversee park operations and maintenance. Employee hourly rates range from approximately $14.00 per hour to $36.00 per hour. IV. NET BENEFIT AND COST OF THE AGREEMENT TO THE CITY The City originally purchased the Parcel in 1987 for approximately $1.0 million. The City has incurred additional expenses for legal counsel, financial consultant, and staff time to complete the terms of the agreement in the approximate amount of $100,000. It is estimated that total, City cost is approximately $1.1 million. It is anticipated that there would be no further project related costs to the City associated with the pursuit of the proposed lease and development; however, there will be benefits to be accrued by the City and City. Assuming an annual lease payment of $1.00 for the entire twenty (20) year period, the City's estimated collection of lease payments to date would be $20. Should the lease be extended by ten (10) or twenty (20) years through the use of the two (2) ten (10) year options, an additional $10.00 or $20.00, respectively, would be paid to the City. It is expected that the project will generate annual possessory tax increment payments over the next twenty (20) years in the amount of$5,200 per year or approximately $105,400 over the initial term of the lease. Should the lease be extended by ten (10) or twenty (20) years, possessory tax increment payments would total $158,151 or$210,868, respectively. In addition to possessory tax increment revenue, the City is expected to receive approximately $3,700 per year in sales tax revenue or $74,000 over the initial term of the lease. Should the lease be extended by ten (10) or twenty (20) years, sales tax revenue would total approximately $111,000 or $148,000, respectively. It is anticipated that sales tax revenue would be generated through special event ticket and temporary concession stand sales and well as daily vending machine sales. The possessory interest tax and sales tax revenue ("Public Revenue") is estimated over a period of twenty (20) years with consideration given to two (2) ten (10) year options. To determine the value of these cash flows in current dollars, the revenue streams were discounted at a rate of 6.0% resulting in a net present value of$60,000 for the possessory interest cash flow and $42,000 for a total net present value of approximately $102,000 in consideration of the initial twenty (20) year period. Should the lease be extended by ten (10) or (20) years, the net present value of the possessory interest cash flow combined with the sales tax cash flow would be approximately $123,000 or $13 5,000, respectively. Public Revenue will assist with the cost to the City by reducing the amount required in the development of the proposed project. Thus the net cost to the City for the Lease and Development Agreement would be nearly $1,000,000. di° TIERRAWEST A 1) V I S O R S Estimated Cost of the Agreement 20Year Lease 30 Year Lease 40Year Lease Land Purchase $1,000,000 $1,000,000 $1,000,000 Total Land Acquisition Costs $1,000,000 $1,000,000 $1,000,000 Administrative Costs(staff,Consult,Lgl.) $100,000 100 00 $100,000 Agency Total Costs $1,300,000 $1,300,000 $1,100,000 Estimated Proper yTax Revenue Lease Payment Collected $20 $30 $40 Possessory Interest Tax $60,000 $73,000 $79,000 Estimated Sales Tax Revenue Retail Sales Tax $42,000 $51,000 $56,000 Estimated Total Public Revenue $102,020 $124,030 $135,040 Estimated Total Public Revenue $102,020 $124,030 $135,040 Estimated Total Costs (11100,000) (11100,000) (11100,000) Net Public Revenue/(Cost of the Agreement to the City) ($964, 6f1 Though the Agreement would result in a Net Cost of approximately $1 million to the City, the Project provides for the construction and operation of a public service by a private contractor. The benefit to the City of this arrangement is that the Skate Park is expected to operate in the red on an annual basis (Construction costs, annual interest and annual operating costs will exceed annual project income). Were the City to construct and operate a similar park; the net cost over a twenty (20) year period would be far greater as the cost of development as well as the annual operating deficit would be the City's general fund burden as opposed to a contractor such as the Developer. Tierra West estimates hard construction costs of approximately $2.15 million, financing costs of approximately $170,000 and an additional $430,000 in soft costs for a total construction cost of approximately $2,750,000. In addition to the initial cost of development, Tierra West estimates an annual operating budget of approximately $847,000 would be necessary to maintain and operate the Property; annual revenues are expected to be approximately $373,000; resulting in an annual general fund deficit of approximately$474,000. Operating Expenses attributed to a publicly operated Skate Park are expected to be approximately $370,000 higher as compared to operating estimates for a private operation due to the inclusion of such items as insurance, benefits, and retirement contributions for public employee wages. Assuming that a similar event schedule could be generated, a revenue stream of approximately $373,000 could be achieved. The resulting $474,411 deficit would require an operating budget of approximately $847,000 in order not to impact the general fund and break even. O TIERRAWEST A 1) V I S 0 R S 112, In Income Event Ticket Sales $254,500 Concession Sales $118,500 Total Income $373,000 Expenses Employment $719,040 Utilities $36,000 Maintenance $24,000 Security $45,000 Reserves $23,371 Total Expenses $847,411 ;Net Operating Income ;' {$474411 Based upon the prescribed conditions, covenants, and restrictions in the Agreement to use the site as a Skate Park, provide free entrance on a daily basis with limited entrance fees for special events, limited parking revenue and minimal retail development for twenty (20) years, the Agreement does not provide for a development condition that is economically viable or feasible for any lessee or developer. As such, it is anticipated that a Skate Park constructed and operated by a private contractor such as the Developer would provide the City with a lower net cost than were the City to develop and operate the Skate Park unilaterally. The City would also gain significant public benefits in the form of: o Community participation; o Removal of a blighting condition through the development of a difficult irregular site that has remained undeveloped for over fifty (50) years; and, o National and world wide exposure of the City of Huntington Beach through the events held at the Skate Park. o Community Service provided cost effectively with no fiscal impact to the general fund. low T1ERRAWEST A I) V I S 0 K S V. ESTIMATED VALUE OF THE INTERESTS TO BE CONVEYED DETERMINED AT THE HIGHEST USE PERMITTED This section presents an analysis of the fair market value of the subject property at the highest and best use. Under current market conditions it is assumed that a retail use would be the highest and best use of the site. In appraisal terminology, the highest and best use can be defined as the legal use (i.e., uses allowed under the Development and General Plan) that will yield the highest value to the land. Therefore, the definition of highest and best use is based solely on the value created and not on whether it enhances or carries out the development goals and policies established by the City. The City intends to enter into a lease for approximately 2.7 acres (or 117,612 square feet) of City-owned land with the Lessee. The Comparable Sales Approach was used, which consists of researching, reviewing and analyzing recent land sales with property characteristics similar to that of the property under study. This approach was used to determine the value of land. Utilizing research information obtained, a land value of $30 per square foot was identified. Based on the land area of 117,612 square feet, the value of the City-owned land is estimated at $3.52 million (117,612 square feet multiplied by $30). Assuming a typical industry lease rate factor ranging from 6.0% to 8.0% of the land value, the current market lease rate for the City- owned site considering the highest and best use permitted under the development plan would range from $211,702 to $282,269 annually. The development costs of the Skate Park are estimated at over $2.7 million. The Lessee is proposing to pay for all development costs associated with the Skate Park as well as operating costs from company capital reserves and not a new construction loan. The projected Skate Park annual operating deficit would preclude the project from supporting a third party construction loan. Assuming the Lessee amortizes the development capital costs over a twenty (20) year period at an interest rate of 8.0%the annual debt service would be approximately $236,000. Tierra West analyzed the operation of the Skate Park based upon the assumptions of: o No daily entrance fees, o Entrance fees only for special events, o Parking revenue for only special events, and o Net income derived from possible vending machine operations will go towards off setting the cost of operating the Skate Park. The operating pro forma of the Skate Park indicates that the anticipated net operating revenues would be less than the annual operating costs incurred by the Lessee in operating the Skate Park (operating deficit of over $104,000). The Skate Park is not expected to develop any positive net �TIERRAWEST A 1) V I S O R S income or annual profit. Consequently, the Lessee will be fully burdened with the cost of absorbing the amortization for the development costs of the Skate Park and any operating deficit. It is anticipated that the Lessee will absorb or incur an annual net operating cost of approximately $340,000 ($236,000 in debt service and almost $104,000 in operating deficit) to develop and operate the Skate Park. Based upon the prescribed conditions, covenants, and restrictions in the Agreement to use the site as a Skate Park, provide free entrance on a daily basis with limited entrance fees for special events, limited parking revenue and minimal retail development for twenty (20) years does not provide for a development condition that is economically viable or feasible for any lessee or developer. Therefore, the reuse value of the 2.7 acre site, given these limitations does not provide the economic incentive for the prescribed use in the Agreement to attribute any land value to the proposed development site. Consequently, it is Tierra West's opinion that the reuse value of the Site, given the conditions, covenants, and restrictions, placed on the parcel render the fair reuse lease value as one dollar ($1.00) per year for the duration of the initial lease term as well as any extensions of the initial term. VI. ESTIMATED VALUE OF THE INTERESTS TO BE CONVEYED Based on the land value analyses described above, the value of the Site at the highest use permitted by the City Planning Documents is estimated at $3.52 million. Assuming a market rate lease value for the property ranging from $211,702 to $282,269 annually, the proposed lease payment of $1.00 per year for twenty (20) years with two (2) ten (10) year options is less than the expected fair market lease value at highest and best use. However, given that this property must be developed with the conditions, covenants, restrictions and development cost requirements prescribed by the City, the Lessee will incur approximately a $296,000 expense per year for the duration of the lease term. This annual expense amount is approximately $57,731 to $128,298 greater then the current fair market lease value. VII. BLIGHT ELIMINATION The actions contemplated under the Lease will develop a property that is currently vacant and underutilized. Development of the proposed project at the intended Site will create jobs, provide local economic development, and eliminate blight at this location by replacing underutilized land with a new state of the art development. Currently, the City has no large scale skate parks within its boundaries. With the increase in popularity of extreme sporting activities and the growing demand for facilities of this nature, the proposed Project can prove to be a viable public asset which meets the desires of the community while at the same time satisfying the goals of the City's long range planning efforts. Given the location near beach shorelines and nature of �TIERRAWEST A p v I 5 0 R 5 the development project, it is conceivable that substantial notoriety from special event planning could render the project as a "destination" further enhancing the economic success of the Bella Terra Project and other business existing and proposed within the Beach Boulevard and Edinger Avenue corridors. Furthermore, the City's leasing of the Site to the Lessee, and the Lessee's additional improvements to the Site pursuant to the terms of this Agreement, are in the vital and best interest of the City and the health, safety, morals and welfare of its residents, and in accord with the public purposes and provisions of applicable state and local laws and requirements under which the development of the project has been undertaken. VIII. JOB CREATION, ECONCOMIC DEVELOPMENT AND CONFORMANCE WITH THE GENERAL PLAN AND OTHER LOCAL PLANNING DOCUMENTS The General Plan sand other local planning documents specify that the City will accomplish goals through the implementation of activities as directed by the City of Huntington Beach. The Site is depicted in Attachment A. Specific to the development of this Site is the following set of goals: 1) Eliminate and prevent the spread of blight by creating new development on underutilized land; 2) Stimulate economic growth by increasing general fund, sales tax; 3) Promote local job opportunities; 4) Protect local businesses by encouraging the cooperation and participation of businesses in the development of the Project Area. The Agreement implements these goals and actions. A copy of the Agreement is attached to this Report and is available for review at City offices, located at the City of Huntington Beach, 2000 Main Street, Huntington Beach, California. The Agreement will be the subject of a public hearing by the City and City Council on January 27, 2012, at 8:30 a.m. at the Huntington Beach Central Library Rooms C and D, 711 Talbert Avenue. TIERRAWEST A 1) V I S 0 R S ATTACH ME NT A OTIERRAWEST A D V 1 S 0 R S !wn Na+Ru NNP.arA rd aA.Nx SEE SPECIAL PAGE 142-079 FUR rEE TITLE ASSESSACNT &FLOW SURFACE �rtizsissw�rlr[i'io ww.ir�n�rc S f/2• SEC. 14. T 5 S. R I1 W 142-07 I IS A C cr MAI Alf s ar I all q vare 1 6 I AIMM 4NS. A.. rC N Mff16L[1L. kt kt R16M/5 AIYMTL. O<IWMId.puNS[W�r tiS Si.:u�,'�. G•OrL K. I 40 30 31 17 11N� k m-'r, PLAN > MCTAMN iSutM AI{a4, A WIN, f 1pM lY/N r5Y'I r' N ELEVATIM i M 1.L W IF A "rmm irul:r'.IW' N Y+ll L• f rEA?vAl A.MC n.OR d/H— 41 GLaOEN WEST COLLEGE \ 'o �f4)j iA z ASA rt- \ ll/l •\CENNN GA �fIRLr_ QNRR / N\•.v nw. \\ [R . N (0 7 � (� 14 12 K'L 11 MCI W 05 5rr PAGr 2 IC O .. �� R. a �5 a• 073 N � tpa If."I u. r >.Ar Ir. •. a nR Pl ��`� C �-Ic • +E01AYsER - - 1 9 ,sr<rrtR.rt.:i i • a rs_7 .. ANFMGt - > tf r. a+wsaa e.\t uLj r 13 32 T 51 11 Of Mon 1*2 PARCEL INP PLO. 44-11. 75S-40. $58-1 NOl£ - +55[55 'S &A;A d A55r55CR'5 NAP PARQL NOWMRS 811f 14? PAGE 07 $HOMY rN CIRrl TS =N'Y W L4IAAGL Southern California Redevelopment City v T[ERRAWEST A D V I S O R S ATTACHMENT B O TIERRAWEST A 1) V I S O R S r�v�.a;cr�.r rr�swn s�c..�•r*,r f - ... sa L. m�u.KwAv i:..ca coa:v; 1 wn� Y Ts:- a Ncx,.� raar s«uasz.,a.w.ru-vi � 01 I 'r'- -vrfc�orca�c+n.x>- � IhiT_L'L.: •'�-ate= Lrsc 1� rn�vw- L:,va�-. -,w v� r_w: �ou�m• �,r�a+cr `-a=.n � x; ®j 0.a iL`.tiA^�APYGN:Nr f.YN�y•::•• TIL'a 'r-m—uX P_.1"�T.=i4 nRe r\ -7�i+dfU/C 'a6s'sti £?rMV:W:RC P.]iY.l` ' -1Y�. aaaiaPura.wra �wa+ns.��r��asra�nu,: cxocrn=nws.� :��:Yxc.va 1 G®THAR®ST L-.-.-.------ -.-.-------.-.-.-.-. -. .t �xxx BI,ESG.PMT#G2008-XXXXXX K1,1408-XXX 1.4 08.XXX REVISIONS REFERENCES PRppCSMMPLANVANS Rw7E�� tt GOTHARD STREET%CENTER AVENUE cNwnncan ct HUNTIVGTON BEACH,CA 92847 53 PROOF OF PUBLICATION AFFIDAVIT OF PUBLICATION STATE OF CALIFORNIA, ) ) ss. County of Orange ) I am a citizen of the United States and a resident of the County aforesaid; I am over the age of Proof of Publication of eighteen years, and not a party to or interested in the above entitled matter. I am the principal clerk of The Orange County Register, a newspaper CITY OF HUNTINGTON BEACH of general circulation, published in the city of NOTICE OF A PUBLIC HEARING ON THE LEASE OF CITY OWNED PROPERTY ENTER/GOTHARO(APH#1 2-0 3-03► i Santa Ana, County of Orange, and which news- NOTICE IS HEREBY GIVEN that the City Council will hold a public hearing on Friday,January 27,2012 at 8:00 paper has been adjudged to be a newspaper of a.m.or soon thereafter in the Central Library,located at 7111 (Talbert Avenue, Huntington Beach, California,to consider, the lease of the vacant property located on the northeast general Circulation by the Superior Court Of the (quadrant of Center Avenue and Gothard Street(APN#142- 1073-03). County of Orange State of California under the q y As required b Health and Safe Code(Section 33433),a report on the lease is available or public inspection in the date Of November 19, 1905, Case No. A-21046, Department of Economic Development. The report ti mma- ted rizes the costs of the agreement to the City,the estimated value of the property to be leased to VF Outdoor, Inc.as' determined at the highest and best uses permitted under that the notice, Of which the annexed IS a true State law,and an explanation of why the lease of the prop-I erty will assist in the elimination of blight,with reference to all supporting facts and materials relied upon in making this printrented copy, been published m each regular explanation.Interested persons may inspect and,upon pay- ed p g merit of the costs of reproduction, obtain copies of the and entire issue of said newspaper and not in any 133433 Report and lease documents. ALL INTERESTED PERSONS are invited to attend said hear- ing and express opinions or submit to the City Clerk written Supplement thereof on the following dates, to evidence for or against the application as outlined above. If i you challenge the City Council action in court,you may be limited to raising only those issues that you or someone wit: else raised at the public hearing described in this notice or in written correspondence delivered to the City at,or prior to,the public hearing.-If there are any further questions, please call Mr. Luis Gomez, Economic Development De- partment,at(714)536-55,44. Direct your written communi- cation to: January 17,23,2012 JOAN L.FLYNN,CITY CLERK CITY OF'HUNTINGTON BEACH 2000.MAIN STREET-2ND FLOOR HUNTINGTON BEACH,CALIFORNIA 92648 "I certify (or declare) under the penalty of (714)536-5227 Publication Dates: January 17,2012 and January 23,2012 perjury under the laws of the State of California Published:orange county Register. R-64 9443946 that the foregoing is true and correct": Executed at Santa Ana, Orange County, California,on Date: ' r' January 23,2012 Sign ure The Orang ounty Regist 625 N Grand Ave. Santa na,CA 92701 (714)796-7000 ext.3002